International Business - Test 1
society
A group of people sharing a common set of values and norms
1. Manufacturing jobs move to low wage countries. 2. Lack of adequate regulations to protect the environment. 3. Economic power shifts from nations to international institutions. 4. The gap between the rich and the poor nations of the world has gotten wider.
Argument against Globalization
1. Increased efficiency of the whole economy. 2. Tougher environmental regulations follow economic progress. 3. Real power resides with nation-states. 4. Living standards improve.
Argument for Globalization
Political entities in the government expect to receive what may be considered bribes, in order to be able to get the necessary business licenses and permits.
Evaluate Costs
The laws on business practices are evolving, but you see potential problems in ensuring contract disputes are resolved fairly.
Evaluate Costs
Social unrest has been triggered by rising prices for food and essentials. The government, which already has a large debt burden, may need to borrow more.
Evaluate Risks
The current leader of the country has been in power for decades, but his health is failing. Social unrest may affect the leadership transition, and there are several opposition groups.
Evaluate Risks
Foreign Corrupt Practices Act (FCPA)
Illegal to bribe a foreign government official to obtain or maintain business over which that foreign official has authority.
Which of the following statements pertaining to changes in the global economy of the 21st century is true?
The world is moving toward an economic system that is more favorable for international business.
Private action
Theft, piracy, blackmail by private individuals or groups
As much as 70 percent of its work is devoted to establishing higher standards of living, full employment, and conditions of economic and social progress and development.
UN
Primarily responsible for policing world trade system.
WTO
According to LEGO's Chief Executive Niels Christiansen, many children and parents in China have never played with LEGO blocks. If companies like LEGO can quickly move to develop a market where competitors have not yet built a presence, companies can
accrue first mover advantages.
Foreign direct investment occurs when a firm invests resources in
business activities outside its home country.
The commercial jet aircraft market
can best be described as a global market.
Boeing's 787 aircraft is produced by 50 suppliers spread around the world, a huge increase in global outsourcing as compared to the past. Boeing's strategy, like that of other multinational companies, suggests that
declining barriers to trade and investment are facilitating global production strategies.
rapid FDI growth and new production opportunities and new markets
declining investment barriers
lower tariffs and increased international trade in goods and services
declining trade barriers
Which of the following actions was implemented in the Uruguay Round, finalized in December 1993?
establishment of the World Trade Organization
Copyrights
exclusive legal rights of authors, composers, playwrights, artists, and publishers
Righteous moralist
home-country standards of ethics should be followed in foreign countries
Power distance
how a society deals with the fact that people are unequal in physical and intellectual capabilities
Naïve immoralist
if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either
Patent
inventor's exclusive rights for a defined period
Uncertainty avoidance
measures the extent to which different cultures socialized their members into accepting ambiguous situations and tolerating uncertainty
globalization of markets
merging of historically distinct and separate national markets into one huge global marketplace.
Globalization critics argue that the decline in unskilled wage rates is due to the
migration of low-wage manufacturing jobs offshore.
Hinduism
moral force in society requires the acceptance of certain responsibilities - dharma; Caste System
The purpose of the U.N.'s Millennium Development Goals that were established in 2000 was to
reduce the number of people living in extreme poverty.
explosive growth of high-power, low-cost computing and growth in services
technology: computing and communication
faster and cheaper shipping and optimal production
technology: transportation
Ethnocentrism
the belief in the superiority of one's own ethnic group or culture
noblesse oblige
the inferred responsibility of privileged people to act with generosity and nobility toward those less privileged.
collectivism
the needs of society as a whole are generally viewed as being more important than individual freedoms
In 1989 Japan was an economic superpower; it was
the second-largest economy.
The stock of foreign direct investment refers to
the total cumulative value of foreign investments as a percentage of the country's GDP.
ethical systems
A set of moral principles, or values, that are used to guide and shape behavior
Religion
A system of shared beliefs and rituals concerned with the realm of the sacred.
culture
A system of values and norms shared among a group of people and that when taken together constitute a design for living
market economy
All productive activities are privately owned
individualism
An individual should have freedom in economic and political pursuits
Which of the following expresses one of the reasons why managing an international business is different from managing a purely domestic business?
An international business must find ways to work within the limits imposed by government intervention in the international trade and investment system.
civil law
Based on detailed laws organized into codes
theocratic law
Based on religious teachings
common law
Based on tradition, precedent, custom
Utilitarian
Best decisions are those that produce the greatest good for the greatest number of people
The IMF and World Bank were created in 1944 by 44 nations that met to maintain order in the international monetary system and promote economic growth.
Bretton Woods Institutions
Based on the information in the case, which statement is true?
Capitalism and a market economy are associated with greater economic progress.
United Nations Convention on Contracts for the International Sale of Goods (CISG)
Establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations.
Property rights seem to be well protected as part of a total system that shows few signs of state control of key sectors.
Evaluate Benefits
You are looking at a country's population growth. You are concerned not only about the total population, but also about the growth of the middle class and its consumers.
Evaluate Benefits
You see an opportunity to establish a strong market presence before your competitors, and you will be able to set product standards.
Evaluate Benefits
Distribution systems are not well developed, and you may have to create your own. While this could create a competitive advantage, it is expensive to set up.
Evaluate Costs
Finance ministers and central bank governors of major economies coordinate policy on global financial crises.
G2O
A series of treaties that reduced barriers to trade.
GATT
command economy
Government plans the goods and services, quantity and price, then allocates them for "the good of society."
confucianism
High morals, ethical conduct, and loyalty to others.
values
Ideas about what a group believes to be good, right, and desirable
India, China, and Indonesia have all focused on improving their education systems and implementing market reforms. Which of the following is true about education and economic development?
India, China, and Indonesia should rank higher on the Human Development Index as compared to countries that have not invested in education.
The ________ is often seen as the lender of last resort.
International Monetary Fund
Pseudo-democracy
Lie between pure democracies and complete totalitarianism systems
Fukuyama: A noted author suggests the war of ideas may be at an end, and liberal democracy will be the way of the future. It is a vision of a harmonious world.
New World Order and Terrorism
Huntington: A noted author envisioned a world split into different civilizations with different value systems and ideologies. This vision suggests a world hazardous to business with global terrorism.
New World Order and Terrorism
straw men
Offer inappropriate guidelines for ethical decision making
Kantian ethics
People should be treated as ends and never purely as means to the ends of others; people have dignity and need to be respected
Public action
Public officials extort income, resources, or property
Socialism
Public ownership of the means of production for the common good
China, India, and Indonesia are all expected to grow faster than the United States in the next few decades. ________ allows us to better understand cost of living differences between these countries.
Purchasing power parity
norms
Social rules and guidelines that prescribe appropriate behavior in particular situations
mixed economy
Some sectors are privately owned, some are government owned
globalization of production
Sourcing goods to take advantage of differences in cost and quality of factors of production
Emergence of middle and working classes: Once citizens experience new freedoms that come with increasing prosperity and dispassionate enforcement of contracts, they push for democratic reform.
Spread of Democracy
New information and communication technologies: These technologies have created new conduits for the spread of democratic ideals and information from free societies.
Spread of Democracy
Totalitarianism failure: Brutal regimes have found citizens protesting, rebelling, and at times removing leaders of the country.
Spread of Democracy
Deregulation: Price controls are replaced by supply and demand. Restrictions on private enterprise are removed, and restrictions on foreign investment and trade are eased.
Spread of Market-Based Systems
Legal system protecting property rights: Private property rights must be protected, and an enforcement mechanism put into place. Commercial codes must be improved, and courts must be made effective.
Spread of Market-Based Systems
Privatization: The economy and former state monopolies must be opened to competition. Governance must also change from state to private owners and managers.
Spread of Market-Based Systems
Buddhism
Stresses spiritual growth and the afterlife, rather than achievement while in this world
Toyota rapidly increased its investment in auto production facilities in the United States and Europe in the late 1980s and early 1990s.
The Changing FDI Picture
One of the world's largest real estate companies, the Dalian Wanda Group, hopes to become a world class multinational by 2020. Already, the company, which began in China in 1988, has assets in the United States, the United Kingdom, Australia, and Spain.
The Changing Nature of the Multinational Enterprise
China continues to move toward greater free market reforms. If this continues for two more decades, China may move from third-world to industrial superpower more rapidly than Japan did.
The Changing World Order
It is estimated that today's developing nations may account for more than 60 percent of world economic activity by 2025, while rich nations' activity, currently at 55 percent, may decline to 38 percent.
The Changing World Output and World Trade Picture
Given what you know about regional differences in unemployment and the ability of people to now move freely between the former East and West German states, which scenario is most likely?
The gap in the standard of living between the former East and West German states will continue to widen.
If the level of economic development in the former West Germany is higher than the level of economic development in the former East Germany, then which of the following is likely to occur?
The population in West German territories will increase.
In 1989, East Germany's population was about 16 million. Today, that number has shrunk to just 12.5 million. In contrast, West Germany has seen its population grow from about 60 million in 1989 to about 65 million today. Using the information from the text about levels of economic development, which response best describes the reason for this phenomenon?
There is greater economic development in West Germany as compared to East Germany.
Which best explains LEGO's decision to build its presence in India?
Within the next decade, the number of middle-class children in India is expected to surpass 100 million.
The ________ was created in 1944 by 44 nations that met in Bretton Woods, New Hampshire to promote economic development.
World Bank
Opponents of globalization argue that falling trade barriers
allow firms to move manufacturing activities to countries with lower wage rates.
Multinational enterprise (MNE)
any business that has productive activities in two or more countries.
An international business is defined as
any firm that engages in international trade.
Deflation occurs when consumers expect prices to
be lower tomorrow than today.
LEGO's decision to invest in India and China, despite both countries having a lower per capita income and living standard than the company's traditional markets in Western Europe and the United States, is an example of why it is important to _______ when making investment decisions.
consider the size of a market and its future buying power
Which of the following factors contributed to the Great Depression of the 1930s?
countries progressively raising trade barriers against each other
Globalization has enabled organizations to reduce their costs of production by
creating manufacturing units in developing countries.
The Japanese government has tried to stimulate the economy by
cutting interest rates to zero.
Japan and other market-based economies enjoy economic growth, but also face greater risks due to
deregulation
In 2019, LEGO will be opening 170 stores around the world, 80 of which will be China. Suppose LEGO is worried that China's trade war with the United States will cause the Chinese economy to falter and that the business environment in China will sour. LEGO is worried about
economic risk.
Markets move more freely, and private enterprise grows in a supportive environment.
economic trend
Privatization is a way to stimulate growth and efficiency by offering private investors the incentive of profits. Privatization can mean increases in productivity, entering new markets, and leaving losing ones.
economic trend
States choose their levels of participation in the economic system. The number of centrally planned economies—centrally planned by the state—is declining.
economic trend
Global tragedy of the commons
enhanced by corporations that move production locations where they are free to pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons
Individualism versus collectivism
focuses on the relationship between the individual and his or her fellows
As economies move toward greater privatization, there is a greater likelihood of facing the phenomenon that Japan faced due to the stock market collapse. Privatization transfers assets
from state to private owners.
democracy
government is by the people, exercised either directly or through elected representatives
Which indicator would give you the best understanding of whether East Germany is closing the gap with West Germany in terms of economic development levels?
gross domestic product for each territory bloc
China, India, and Indonesia are expected to be among the world's seven largest economies by 2050. Economic development in a country can be measured using
gross national income.
Until now, LEGO has focused its international efforts mainly in markets in developed countries with strong intellectual property laws. If LEGO invests in China where intellectual property laws are not as strong or well enforced, it must account for ________, the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.
legal risk
Masculinity versus femininity
looks at the relationship between gender and work roles
The major cause of the economic problems that Japan faces is the
low birthrate and more retired people.
Christianity
most widely-practiced religion
mandarin (chinese)
mother tongue of the largest number of people
Tragedy of the commons
occurs when a resource held in common by all but owned by no one is overused by individuals, resulting in its degradation
trademarks
officially registered designs and names used to differentiate products.
totalitarianism
one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties
Business leaders are pressing for more accountable and open government.
political trend
The end of the Cold War ushered in a "new world order."
political trend
Moore's law
predicts that the power of microprocessor technology doubles and its cost of production falls in half every 18 months.
By 2050, India will be one of the largest economies in the world. A disadvantage of using data such as GNI and PPP to understand the attractiveness of India as an export or investment market is that they
provide a static picture of development.
The growth of trade as a percentage of global GDP
reflects the globalization of markets.
Boeing produced just 5 percent of its original 737 and 747 outside the United States but produces 65 percent of its newer 787 in foreign locations. Boeing's production strategy
reflects the globalization of production.
Islam
second largest religion; allah
home
where money is coming from
host
where money is going
