Introduction to Business - Chapter 3

The ____________ Economic Community was established in 1967 in Thailand to create economic cooperation among its five original members (Indonesia, Malaysia, Philippines, Singapore, and Thailand).

AESAN

Which of the following are common markets?

AESAN Mercosur EU

When entering foreign markets, what do successful businesses do to ensure a product will be successful?

Adapt products to fit the wants and needs of foreign customers

Which of the following are functions of export trading (or export-management companies) that assist companies engaged in indirect exporting?

Assistance in establishing trading relationships Match buyers and sellers Help with foreign custom offices

Which of the following are ways the World Trade Organization (WTO) promotes global bysiness?

By mediating trade disputes among nations

The North American Free Trade Agreement (NAFTA) created a free-trade area among the United states, ____________, and ______________.

Canada; Mexico

The development of a common market changes the way goods and services are traded within that market. Which of the following are examples of such changes?

Common external tariff Coordinated laws to facilitate exchange among members No internal tariffs

Why is it important to analyze the local technological and physical forces in the business environment before doing global business in a given market?

Communication systems may be inadequate Transportation systems may be affected by weather

Which strategies should a business use when it wants to experiment with a new market without incurring heavy start-up costs?

Contract manufacturing Exporting Licensing

Which of the following countries are members of the Central American Free Trade Agreement (CAFTA)?

Costa Rica Honduras Guatemala Nicaragua

_____________ is a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services.

Countertrading

Which of the following countries are under a U.S. embargo?

Cuba

Workers in Latin America believe managers have to make decisions about the well-being of their workers. When a new American manager tried to "empower" his workers, he was perceived as incompetent. What is the most likely cause behind the manager's failure?

Cultural differences

Exchange rates and labor costs both affect trading in global markets. What category of forces affecting global trade do they fall under?

Economic and financial

Which of the following are original objectives of the North American Free Trade Agreement (NAFTA)?

Eliminate trade barriers and facilitate cross-border movement of goods and services Promote conditions of fair competition Increase investment opportunities

What was the primary benefit for the European Union (EU) of adopting the euro in 1999?

Eliminating currency conversions

True or false: Licensing is a contractual agreement whereby someone with a good idea for a business sells others the rights to use the business name to sell a product or service in a given territory in a specified manner.

False

What law prohibits "questionable" or "dubious" payments to foreign officials to secure business contracts?

Foreign Corrupt Practices Act of 1978

In 1948, government leaders from 23 nations formed a global forum for reducing trade restrictions on goods, services, ideas, and cultural programs. What was the title of this forum?

General Agreement on Tariffs and Trade (GATT)

Which of the following are functions of export assistance centers (EACs)?

Hands-on exporting assistance Trade-finance support

Which of the following are considered benefits of contract manufacturing?

It can be used to temporarily meet an unexpected increase in orders. Labor costs in foreign market may be lower than the labor costs in the firm's host country. It enables a producer to business to experiment in a new market without incurring heavy start-up costs.

Rank the strategies for reaching global markets according to the level of risk and commitment. Place the strategy with the lowest level of risk and commitment on top.

Licensing Exporting Franchising Contract manufacturing Joint Ventures and Strategic Alliances Foreign Direct Investment

Which of the following are functions of export trading (or export-management companies) that assist companies engaged in indirect exporting?

Match buyers and sellers Assistance in establishing trading relationships Help with foreign customs offices

Distribution in many developing countries is difficult because of the lack of reliable transportation infrastructure due to natural disasters. This is an example of what type of forces affecting global trade?

Physical and environmental forces

What is an example of an informal, non-tariff barrier?

Restrictive standards

Which of the following are negative effects associated with the establishment of NAFTA?

Safety conditions for workers in Mexico continue to be poor U.S. manufacturing jobs were lost

Which of the following is an effective way to deal with foreign laws and regulations?

Seek the cooperation of local business people

Which of the following are disadvantages of international joint ventures?

Shared technology may become obsolete The joint venture may become too large and inflexible

What size of businesses do export assistance centers work with?

Small- and medium- sized

Which of the following are changes induced by NAFTA?

The trade volume among the United States, Canada, and Mexico more then triples. The values of U.S. exports to NAFTA partners has increased.

Which of the following are reasons why some governments establish trade protectionism?

To allow domestic producers to survive grow To guard against dumping To save local jobs

_________ ____________ leads to less imported goods and services; its reasoning rests with the hope that domestic producers are given a better opportunity to survive and grow, which eventually leads to more local jobs.

Trade protectionism

Which of the following are situations where working with an export-trading company, or export-management company, would be helpful?

When the culture and governmental policies of the foreign market are unfamiliar

Which of the following are situations where working with an export-trading company, or export-management company, would be helpful?

When the culture and governmental policies of the foreign markets are unfamiliar

An independent entity whose purpose it is to oversee cross-border trade issues and global business practices is called the _________ ___________ ___________.

World Trade Organization

The organization established in 1986 by the Uruguay Round of the GATT, whose purpose is to mediate trade disputes among nations is called:

World Trade Organization (WTO)

What was the organization that replaced the General Agreement on Tariffs and Trade (GATT), and was assigned the duty to mediate trade disputes among nations?

World Trade Organizations (WTO)

An embargo:

bans all trade of a certain product bans all trade with a particular country

Countertrading is considered to be a complex form of:

bartering

When franchising internationally, deciding not to adapt a product or service to local conditions can lead to:

business failure

The benefits associated with strategic alliances is that they provide broad access to:

capital markets technical expertise

When a company wants to enter the global markets without incurring heavy start-up costs, creating a successful brand and penetrating a new market with low risk, they are engaging in:

contract manufacturing

A Hong Kong Kentucky Fried Chicken franchise owner was disappointed by low sales. The local consultant told her that locals found eating greasy chickens with their hands too messy. This is an example of how different _________ can affect global business.

cultural forces

If the United States government were to devalue the dollar, it would _____________ the cost of American goods abroad.

decrease

The definition of _____________ states: lowering the values of a nation's currency relative to other currencies.

devaluation

Selling products in a foreign country at a lower price than what is charged in the producing country is called ____________.

dumping

A(n) ____________ is a complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

embargo

When conducting global business, it is important to analyze the local physical environmental to:

ensure local distribution is possible

U.S. businesspeople are often accused of _____________, an attitude that your own culture is superior to other cultures.

ethnocentricity

The ________ ____________ is the value of one nation's currency relative to the currencies of other countries.

exchange rate

The definition of ____________ _____________ ___________ states: the buying of permanent properties or businesses in foreign nations.

foreign direct investment

The owner of Twisted Throttle, a motorcycle parts manufacturing company, has noticed an increase in the demand for his products in Australia. Instead of continuing exporting parts of Australia he decided to buy Aussie Cycles, an existing Australian company. This is an example of:

foreign direct investment

The possibility of having all foreign assets expropriated is a disadvantage of ____________ ___________ ______________.

foreign direct investment

Contract manufacturing is a type of outsourcing when a __________ company produces private-label goods which a _____________ company then markets under its own brand name.

foreign; domestic

A subsidiary must observe the legal requirements of both the country where the parent firm is located, called the _________ country, and the foreign country where the subsidiary is located, called the __________ country.

home; host

Shared technology and risk, shared marketing and management expertise, and entry into markets where foreign companies are often non allowed are all benefits of ______________ ____________ _____________.

international joint ventures

The definition of ___________ ____________ states: a partnership in which two or more companies, often from different countries, join to undertake a major project.

joint venture

One drawback of an international _____________ ______________ is that one partner can learn the other's technology and business practices and then use what it has learned to its own advantage.

joint ventures

A ______________ ______________ shares profits and losses, while a ______________ __________________ is a long term partnership that does not.

joint ventures; strategic alliances

Culture can include which of the following:

language religion values and attitudes

Problems arising from differences in antitrust rules, labor relations, patents, copyrights, taxes, and other issues are all considered examples of __________ and regulatory forces within a global market.

legal

Free trade allows labor to be outsourced to other markets where it may be less expensive. This negative consequence of free trade most commonly created a loss for domestic:

manufacturing jobs

The main purpose of the World Trade Organization is to:

mediate trade disputes among nations

A(n) ____________ corporation is an organization that manufactures and markets its products in many different countries and has managers and stockholders from many countries.

multinational

Benefits of being a member of a common market, or "trading bloc" include:

no internal tariffs

A common market, also called a trading bloc, is a regional group of control with:

no internal tariffs a common external tariff

The definition of contract manufacturing states: a foreign country's production of private-label goods to which a domestic company then attaches its brand name or trademark; contract manufacturing is a part of the broad category of ___________.

outsourcing

The outcome of FDI (foreign direct investment) is a foreign subsidiary, a company located in a foreign country that is owned by another company, called the ______________ company.

parent

A foreign subsidiary is a company owned in a foreign country by another company called the:

parent company

A weak transportation infrastructure results in a(n) ____________ barrier to global business.

physical

Some developing countries have primitive transportation and storage systems, in addition to unclean water and poor sewer systems. That is why it is important to analyze the _________ and __________ forces before entering the market.

physical; environmental

The firms often better prepared to leap into global markets and react quickly to opportunities are:

small and medium businesses

Investment funds controlled by governments holding large stakes in foreign companies are called:

sovereign wealth funds

The definition of ___________ _____________ states: a long-term partnership between two or more companies establishes to help each company build competitive market advantages.

strategic alliance

A foreign subsidiary operates like a normal domestic firm, with production, distribution, promotion, pricing, and other business function under the control of the:

subsidiary's management

Common markets are also called __________ ______________.

trading blocs

Which of the following are considered to be sociocultural forces that affect global trade:

values religion social structures