IB Test 2

A. By freeing home-country resources to concentrate on activities where the home country has a comparative advantage

2. How can FDI undertaken to serve the home market stimulate economic growth in the home country? A. By freeing home-country resources to concentrate on activities where the home country has a comparative advantage B. By importing more goods and services than it is exporting C. By increasing trade barriers that may have prevented direct exports in the past D. By reducing demand for home-country exports of capital equipment, intermediate goods, and complementary products

9. _____ strategy is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences, and where cost pressures are not too intense. A. Localization B. Transnational C. Global standardization D. International

A. Localization

4. Which of the following is a home-country policy aimed at limiting outward FDI flow? A. Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings B. Implementation of government-backed insurance programs to cover major types of foreign investment risk C. Eliminating double taxation of foreign income D. Persuading host countries to relax their restrictions on inbound FDI

A. Taxing domestic companies' foreign earnings at a higher rate than their domestic earnings

15. A(n) _____ is one in which prices do not reflect all available information. A. inefficient market B. speculative market C. efficient market D. externally convertible market

A. inefficient market

13. Behavioral scientists have long argued that people are willing to give more to their jobs when they have a greater degree of individual freedom and control over their work. This suggests that A. motivational research favors decentralization. B. centralization can facilitate coordination. C. centralization can ensure that decisions are consistent with organizational objectives. D. decentralization reduces accountability.

A. motivational research favors decentralization.

5. Why is it said that not all the new jobs created by FDI represent net additions in employment? A. Because of the uncertainty of the overall economic environment B. Because most of the job creation is indirect in nature C. Because jobs created by an investment may be offset by the jobs lost in domestic companies D. Because the unemployment rate more or less remains constant over the short term

C. Because jobs created by an investment may be offset by the jobs lost in domestic companies

1. Firms entering a market via a wholly owned subsidiary must bear all the costs and risks associated with the venture.

True

3. Enterprises that pursue an international strategy tend to decentralize control over marketing and product strategies.

FALSE Ultimately, in most firms that pursue an international strategy, the head office retains fairly tight control over marketing and product strategy.

20. Which of the following decisions is typically centralized at a firm's headquarters? A. Production decisions B. Human resource management C. Marketing decisions D. Overall firm strategy

D. Overall firm strategy

17. Which of the following is true of firms that compete in the global marketplace? A. They must employ a transnational policy in order to have a competitive edge. B. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs. C. They must employ a domestic policy in order to have a competitive edge. D. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may reduce costs.

B. Because differentiation across countries can involve significant duplication and a lack of product standardization, it may raise costs.

12. Which of the following is less likely to add to the pressure for a firm to be locally responsive? A. Host-government demands B. Switching costs for consumers C. Differences in infrastructure and traditional practices D. National differences in consumer tastes and preferences

B. Switching costs for consumers

7. Lenovo's ThinkPad laptop computers is designed in the United States, the case, keyboard, and hard drive are made in Thailand; the display screen and memory in South Korea; the built-in wireless card in Malaysia; and the microprocessor in the United States. In each case, these components are manufactured and sourced from the optimal location given current factor costs. In this example, Lenovo has: A. vertical integration advantages B. a global web of value creation activities C. learning effects D. high local responsiveness

B. a global web of value creation activities

18. Moving down the experience curve: A. increases the cost of a firm's raw material. B. allows a firm to reduce its cost of creating value. C. decreases a firm's profitability. D. increases the research and development expenditure of a firm.

B. allows a firm to reduce its cost of creating value.

6. Assume that the law of one price holds. A shirt that retails for $120 in New York sells for £60 in London. The exchange rate between the British pound and the dollar is £1 = $1.50. Assuming away transportation costs and trade barriers, this creates a profit-making opportunity called ____. A. currency swap B. arbitrage C. carry trade D. straddle

B. arbitrage

16. A lag strategy involves: A. attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate. B. delaying collection of foreign currency receivables if that currency is expected to appreciate. C. paying foreign currency payables before they are due when a currency is expected to appreciate. D. delaying collection of foreign currency receivables if that currency is expected to depreciate.

B. delaying collection of foreign currency receivables if that currency is expected to appreciate.

10. A firm benefits by basing each value creation activity it performs at that location where economic, political, and cultural conditions, including relative factor costs, are most conducive to the performance of that activity. Firms that pursue such a strategy can realize: A. differentiation. B. location economies. C. vertical integration. D. horizontal integration.

B. location economies.

19. In a _____, individual managers belong to two hierarchies (a divisional hierarchy and an area hierarchy) and have two bosses (a divisional boss and an area boss). A. worldwide product division structure B. matrix structure C. worldwide area structure D. performance structure

B. matrix structure

11. Centralization and decentralization differ because: A. centralization hinders coordination, while decentralization facilitates coordination. B. centralization prevents top-level managers from making required organizational changes, while decentralization gives top-level managers greater power to make organizational changes. C. centralization ensures that decisions are consistent with organizational objectives, while decentralization can result in decisions at variance with organizational goals. D. centralization promotes flexibility, while decentralization reduces flexibility.

C. centralization ensures that decisions are consistent with organizational objectives, while decentralization can result in decisions at variance with organizational goals.

8. Which of the following is NOT true regarding a worldwide area structure? A. It tends to be favored by firms with a low degree of diversification B. It facilitates local responsiveness C. It tends to be favored by firms with a domestic structure based on functions D. Decision-making responsibilities are centralized

D. Decision-making responsibilities are centralized

1. Licensing would be a good option for firms in which of the following industries? A. High-technology industries in which protecting firm-specific expertise is of paramount importance. B. Global oligopolies, in which competitive interdependence requires that multinational firms maintain tight control over foreign operations. C. Industries in which intense cost pressures require that multinational firms maintain tight control over foreign operations. D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.

D. In fragmented, low-technology industries in which globally dispersed manufacturing is not an option.

3. When contemplating FDI, why do firms apparently prefer to acquire existing assets rather than undertake greenfield investments? A. Greenfield investments are characterized by reduced management control B. Mergers and acquisitions are preferred because most greenfield investments fail. C. It is easier and less risky for a firm to build strategic assets than acquire similar assets. D. Mergers and acquisitions are quicker to execute than greenfield investments.

D. Mergers and acquisitions are quicker to execute than greenfield investments.

14. It is often difficult to "unfreeze" an organization because A. it is difficult to get lower level workers to make the bold kinds of changes needed. B. too large of a change at one time is rarely successful. C. upper level managers are always anxious to employ the big bang theory of change. D. those whose power is threatened by change can too easily resist incremental change.

D. those whose power is threatened by change can too easily resist incremental change.

2. The PPP theory tells us that a country with a high inflation rate will see an appreciation in its currency exchange rate.

FALSE The PPP theory tells us that a country with a high inflation rate will see depreciation in its currency exchange rate.

4. Performance ambiguity lowers the cost of control.

FALSE The costs of control can be defined as the amount of time top management must devote to monitoring and evaluating subunits' performance. This is greater when the amount of performance ambiguity is greater.