MGMT 425 Ch 3 SB

To determine which country is attractive for potential investments, companies need to balance which three considerations?

Benefits Risks Costs

What is one of the steps that pave the way for a shift toward a market-based economic system?

Creation of a legal system to safeguard property rights

What is an example of an entrepreneur?

Peter, the CEO and founder of Maxwell Inc., an online pharmaceutical company

______ risk is the possible risk that an investment's returns can suffer as a result of instability or changes in a country's governance.

Political

What is an accurate description of political risk?

Political risk tends to be greater when countries face social unrest and disorder.

______ is one of the steps necessary for a country to shift toward a market-based economic system.

Privatization

______ is seen as a transfer of ownership of a business, property or enterprise from the public sector to the private sector.

Privatization

What statement accurately describes the effects of social unrest on a country?

Social unrest can result in abrupt changes in government which tend to have negative economic implications.

Which statement characterizes the changes in the political and economic systems of the world?

The battle between the ideologies of collectivism and individualism is less distinct.

What is Hernando de Soto's main concern with regard to property rights?

The inability of property owners to establish legal title to their intellectual property.

What is an indicator of economic mismanagement?

The rate of inflation in a country

What is the assumption of Jeffrey Sachs's argument?

There is a strong correlation between favorable geography and the likelihood that a society may develop a market-based economic system

What is an accurate depiction of the changes in the political systems of nations since the late 1980s?

Totalitarian governments failed and were replaced by democratically elected governments usually supportive of free market capitalism.

What is an accurate depiction of totalitarian states compared to democratic states?

Totalitarian states are detrimental to progress.

True or False Peruvian development economist Hernando de Soto argued for the importance of business and property rights in relationship to receiving the benefits of capitalism.

True

Which factor is a cause of legal risks?

Violation of property rights

An international firm, entering a country's market early, may achieve a significant payback if that country

achieves sustained high economic growth rates.

A "shadow economy" would be present in a country where _____.

certain cash transactions are not recorded

The initial push of deregulation was in response to the

collapse of communism.

Huntington's views on the global political system are considered _____.

controversial

Political costs of doing business in a country would include _____.

corruption

With regard to the overall attractiveness of a country as a potential market, it can be said that the

costs and risks associated with doing business in a foreign country are lower in economically advanced and politically stable democratic nations.

The rationale for economic transformation has been consistent throughout the world and is based on the idea that

countries adopting market-based systems had more continuous economic growth than those adopting command economies.

Economic freedom _____ equate with political freedom.

does not

The long-run monetary benefits of doing business in a country are MOST influenced by the

purchasing power of consumers.

The ______ adjustment helps to minimize misleading international comparisons of GNI.

purchasing power parity

A country is embracing deregulation when it _____.

removes legal restrictions to the free play of markets

Many of the world's newer democratic states may struggle and fail especially if they are confronted with

severe economic setbacks.

According to Samuel Huntington's thesis, global terrorism is caused by _____.

the clash of value system

What are the three measures of the Human Development Index?

1. average income sufficient to meet basic needs 2. life expectancy at birth 3. educational attainment

In which type of country is the cost-benefit-risk trade-off likely to be MOST favorable?

A country with a free market system

What statement is accurate with regard to a country's development?

A country's investment in education and subsequent growth rates result in a more productive population.

What is one of the risks associated with a change in the political economy?

A multipolar world, controlled by a number of civilizations, could replace the bipolar world.

If current growth rates continue, it is anticipated that _____ will become the world's largest economy sometime during the next decade.

China

There are still countries that have a high percentage of industries dominated by state ownership. Which of these countries has 40% of its GDP accounted for by state owned companies?

China

What is an accurate depiction of the economic prospects in a country?

Countries with free market economies in which property rights are protected tend to achieve greater economic growth rates than other economies.

______ involves removing or reducing government regulations, typically in the economic sphere.

Deregulation

What is a characteristic of deregulation?

Deregulation abolishes laws regulating the establishment and operation of private enterprises.

What is an accurate depiction of Amartya Sen's arguments regarding development?

Development should focus on expanding the capabilities of and opportunities available to people.

True or false: The economies of China and India are currently growing more rapidly than those of many advanced nations.

True

According to Map 3.1 in the text, which three countries have high gross national income (GNI) per capita (based on 2018 data)?

United States Japan Switzerland

Which situation can make measuring economic activity differences difficult?

Unrecorded cash transactions activity

When assessing whether or not to invest in a production facility overseas, Hyberson Hydraulics immediately rejected those countries with aging populations because the company needed access to a larger labor pool. What is the company basing this decision on?

demographics

Amartya Sen would agree that

development should address basic health care and education needs.

Inadequately enforced property rights in a nation would tend to _____ entrepreneurial activity.

diminish

What three reasons are said to account for the spread of democracy?

1. Advances in communication technology 2. Failure of totalitarian regimes to provide economic progress to the majority of their citizens 3. Increasing prosperity in the middle class

What two trends have been noted based on the radical change in the political economy of many nations since the late 1980s?

1. There has been a move toward more free market economies. 2. There has been a wave of democratic revolutions.

First-mover advantages are accrued by those who enter ____ into a market.

Early

______ are those who first commercialize new products and processes.

Entrepreneurs

True or False: Democracy is always considered to be the cause of initial economic progress.

False

True or False: Economic risks are independent of political risks.

False

True or false: The base for the adjustment when applying purchasing power parity is the cost of living in the poorest economic sector.

False

The privatization movement started in

Great Britain in the 1980s with the sale of British Telecom.

What is Francis Fukuyama's argument regarding the "new world order?"

He argued that liberal democracy has triumphed and will become the final form of human government.

While they are listed as the top two states in the Heritage Foundation Index, _____ cannot be classified as politically free.

Hong Kong and Singapore

Identify the TRUE statement about legal systems in various countries throughout the world.

Institutional weaknesses can subvert contract enforcement.

Which statement BEST represents the cost of doing business in a country with regard to economic factors?

It may be more expensive to do business in relatively undeveloped economies.

Due to the economic freedom associated with it, the business environment that provides the strongest base for innovation and entrepreneurial activity is a _____ economy.

Market

Which economic system is considered the MOST conducive to innovation and entrepreneurial activity?

Market economies

Kendrick lives in a country in which his basic freedoms are denied and the political process is tightly controlled. This country is an example of a _____ country in terms of political freedom.

Not Free

Gross national income (GNI) per person figures can be misunderstood because they

don't factor in the cost of living.

When comparing early and late entrants doing business in a country, it can be said that

early entrants build brand loyalty and gain experience in a country's business practices.

A(n) ______ risk is the chance that conditions like fluctuating exchange rates affect an investment.

economic

Gross national income is used as a measure of a nation's _______.

economic activity

It has been asserted that the nations that invest more in ______ will have higher growth rates because a literate population is a more productive population.

education

Jeffrey Sachs argued that ______ can have an impact on economic development.

geography

According to Huntington, ______ is a conflict that results from the strong ideological boundaries separating civilizations from one another.

global terrorism

A country's economic system and property rights regime are _____ predictors of economic prospects.

good

The measure of the total annual income received by residents of a nation is called _____.

gross national income

Late-mover disadvantages refer to the _____ that a company might incur.

handicaps

Mallory's company was the first to introduce fresh-food meal kits in a box that are delivered directly to consumers who put the meal together at home. Since her company was the first to introduce this idea, it is an example of _____.

innovation

The development of new products, new processes, new organizations, new management practices and new strategies is called ______

innovation

A(n) ______ risk is the risk that arises from failure to follow statutory or regulatory obligations and, therefore, one that can impact a trading partner.

legal

Without a legal system that protects property rights, and the machinery that enforces those rights, there is substantially _____ incentive to engage in economic activity.

less

One factor used to measure the Human Development Index is

life expectancy at birth.

While Japan was considered one of the most dynamic economies in the world in the 1970s and 1980s, economic growth has been hindered since then. What is considered the reason for this downturn?

low birthrates and an aging population

Huntington's views on the global political system with regards to business suggests that

many countries may be difficult places to do business in.

The Heritage Foundation's index measures the degree of economic freedom in the nations -- in other words, the degree of shift to ______ economic systems.

market based

Emergence of prosperity in the _____ class has helped to push democratic reforms in many nations.

middle

Studies show that the process of privatization fails to perform as expected when

newly privatized firms are protected from foreign competition.

Economic progress can be characterized as

often leading to adoption of a democratic government.

A country in which some restrictions are placed on political rights and civil liberties would be labeled _____.

partly free

When Hugo Chavez took over power in Venezuela, he railed against American imperialism. Western enterprises doing business in that country were concerned how this would affect their interactions with Venezuela. This demonstrates how ______ can impact the economics of a country.

political change

South Korea was considered an impoverished country in 1960. Yet in 2017, it was the world's fifth largest economy. This demonstrates how international businesses must consider future potential as well as the

present wealth of the consumers.

In order to protect businesses and individuals from the expropriation of their innovative efforts, it is imperative that _____.

there is legal protection of property rights

With regards to the new world order, Samuel Huntington would argue that

there is no universal civilization based on acceptance of Western democratic ideals.

True or False: For privatization to work, it must be accompanied by a more general deregulation and opening of the economy.

true

What is one thing that the fastest-growing economies of China, South Korea, Taiwan, Singapore, and Hong Kong had in common at the start of their economic growth?

undemocratic governments