MGT 4380
74) The Paris Union was established for the purpose of ________.
A) enforcing contract laws B) reducing trade barriers C) protecting patents D) reducing pollution Answer: C
22) Creating Shared Value (CSV) creates ________.
A) economic value by creating shared value B) social value by increasing shared value C) economic value by creating social value D) social value by increasing market value Answer: C
4) The European Union currently consists of how many nations?
A) 12 B) 27 C) 34 D) 46 Answer: B
60) An international agreement which regulates international business by spelling out the rights and obligations of the seller and buyer is known as ________.
A) Agreement to Technical Barriers to Trade B) International Standards on Accounting and Reporting C) General Agreement on Tariffs and Trade D) Contracts for International Sale of Goods Answer: D
64) In the context of doing business in Asia, what is meant by the phrase "the contract is in the relationship, not on the paper"?
A) Asian contracts are not legally binding for MNCs. B) Contracts are ceremoniously destroyed after they are written. C) Managers risk being offensive to Asians by requiring contracts. D) Managers should nurture the relationship to ensure the reliability of the contract. Answer: D
6) Which of the following countries is today known as the world's services supplier, providing highly skilled and educated workers to foreign companies?
A) China B) Brazil C) Mexico D) India Answer: D
59) According to the international codes of conduct, the MNE behavior toward the host government is related to ________.
A) economic and developmental policies, laws and regulations, and political involvement B) political involvement, technology transfer, and environmental protection C) political involvement, communication practices, and laws and regulations D) laws and regulations, technology transfer, and communication practices Answer: A
82) Internet is a completely open platform and it does not have to abide by any laws.
Answer: FALSE
9) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following, if true, undermines the argument to build a new Emerson facility in China?
A) China has committed over $500 billion to infrastructure projects. B) U.S. firms continue outsourcing service jobs despite the economy. C) Fuel costs in China have risen sharply and are not expected to drop. D) China is the world's largest exporter of manufactured goods. Answer: C
58) Which of the following best explains why many foreign companies find operating in China a difficult experience from a business perspective?
A) China lacks the financial and legal systems needed to support the country's foreign trade. B) China's local market is not large enough to support its extensive exporting to the United States. C) China's government mandates that workers receive high wages and benefits. D) China's exchange rate changes too frequently for U.S. businesses to compete. Answer: A
30) ________ includes the initiation of joint ventures with nationals (individuals or those in firms, labor unions, or government) to reduce political risks.
A) Development assistance B) Equity sharing C) Localization of the operation D) Participative management Answer: B
2) ________ results from the lessening of trade barriers and the increased flow of goods and services, capital, labor, and technology around the world.
A) Economic integration B) Nationalization C) Protectionism D) Mercantilism Answer: A
76) Robert is a technology officer in an Umerian firm and he manages the firm's operations at its facility in Elador. Robert is considering the idea of installing new technology in the facility that would significantly improve productivity and reduce labor costs. Which of the following undermines the argument that Robert should install the new technology?
A) Elador's government leaders encourage firms to install the most modern machinery available. B) The high school graduation rate in Elador is higher than in neighboring countries. C) Elador is currently experiencing a very high rate of unemployment. D) The firm's competitors recently installed the same technology. Answer: C
24) Which of the following is a policy of the Electronic Industry Code of Conduct (EICC)?
A) Excessive overtime can be propagated if it benefits the company. B) Child labor can be allowed when there is a shortage of employees. C) Contract manufacturers should follow some basic environmental requirements. D) Factory inspection should be limited to the headquarters. Answer: C
17) ________ is the chance that political forces may change a country's business environment in ways that lead investors to lose some or all of the value of their investment or be forced to accept a lower-than-projected rate of return.
A) Governmental risk B) Operating risk C) Transaction risk D) Political risk Answer: D
10) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following questions is LEAST relevant to Emerson's decision regarding where to build a new facility?
A) How will China's underdeveloped infrastructure affect Emerson's ability to manufacture and ship products? B) How is China's political and economic agenda likely to affect Emerson's investment? C) What is the likelihood of expropriation occurring to Emerson if it builds in China? D) How will e-commerce affect Emerson's ability to export products from China? Answer: D
3) In which of the following groups of trade blocs does most of today's world trade take place?
A) Middle East, China, and India B) North America, Africa, and Canada C) Western Europe, Asia, and the Americas D) Saudi Arabia, Western Europe, and the Gulf Answer: C
11) To which of the following free-trade agreements do Mexico, Canada and the United States all belong?
A) NAFTA B) ASEAN C) CAFTA D) MERCOSUR Answer: A
36) ________ poses a severe and random political risk to company personnel and assets, and interrupts the conduct of business.
A) Plagiarism B) An election C) Privatization D) Terrorism Answer: D
25) Primo is a multinational enterprise based in California that manufactures and sells affordably priced athletic shoes in retail stores around the world. A Primo manufacturing subsidiary in China employs over 20,000 locals. Primo executives recently learned of human rights violations at the firm's China subsidiary. Workers had been forced to work more than 60 hours each week and minimum wage laws were regularly ignored. As a result, Primo executives need to decide if operations in China should be discontinued. Which of the following, if true, would best support a decision by Primo to remain in China?
A) Primo becomes SA8000 certified. B) Sales of Primo's competitors drop sharply. C) U.S. manufacturing jobs decrease in number. D) More service sector jobs become available in China. Answer: A
7) Which is the fourth largest trading bloc after the EU, NAFTA, and ASEAN and established in 1991?
A) SAARC B) ASEAN C) NAFTA D) MERCOSUR Answer: D
34) Which of the following prohibits U.S. companies from making illegal payments or other gifts or political contributions to foreign government officials for the purposes of influencing them in business transactions?
A) Sherman Antitrust Act B) Robinson-Patman Act C) Wagner Corruption Act D) Foreign Corrupt Practices Act Answer: D
6) Social responsibility, ethical behavior, and interdependence are important concerns to be built into ________.
A) economic control B) management control C) corporate sustainability D) moral idealism Answer: B
27) Expropriation of corporate assets without prompt and adequate compensation is an example of ________.
A) economic risk B) political risk C) legal risk D) cultural risk Answer: B
8) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air-conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following, if true, supports the argument to build a new Emerson facility in China?
A) The Chinese courts recently ruled in favor of an MNC in an intellectual property rights lawsuit. B) The Chinese Commonwealth network is investing large amounts of capital in China. C) China has increased Internet controls and blocked most international search sites. D) China is revoking its membership from the World Trade Organization. Answer: A
5) Which of the following is a true statement about China?
A) The Chinese government's shift from communism to capitalism has led to an increase in FDI. B) China attracts FDI because the government has eliminated elaborate bureaucracies. C) The Chinese government manipulates market activities for political purposes. D) China lacks an educated pool of employees due to slowly developing industrialization. Answer: C
61) ________ is based on a comprehensive set of laws organized into a code.
A) Theocratic law B) Civil law C) Common law D) Contract law Answer: B
22) Which of the following is an example of a macropolitical risk event?
A) a terrorist attack B) forced sale of equity to host-country nationals C) expropriation of corporate assets without prompt and adequate compensation D) barriers to repatriation of funds Answer: A
31) Which of the following means of political risk reduction is best suited for firms that decide a high-risk environment is worth the potential returns?
A) avoidance B) adaptation C) hedging D) dependency Answer: B
23) Zagreb Inc., a transnational energy company, negotiates a multimillion-dollar contract with the government to provide electricity to Pilladia. The government is voted out of power shortly after. The new government cancels all contracts it has with all oil companies but not contracts with firms in other industries. This is an example of ________.
A) barriers to repatriation B) protectionism C) confiscation D) micropolitical risk Answer: D
62) Which of the following terms refers to an agreement by the parties concerned to establish a set of rules for governing a business transaction?
A) charter B) policy C) contract D) license Answer: C
59) Past court decisions serve as precedents to the interpretation of the law under ________.
A) civil law B) common law C) theocratic law D) contract law Answer: B
63) Under which law system must the details of the promises be written into a contract in order for it to be enforced?
A) common law B) theocratic law C) civil law D) company law Answer: A
1) Which of the following is characterized by networks of international linkages that bind countries, institutions, and people in an interdependent economy?
A) communism B) nationalization C) socialism D) globalization Answer: D
41) John, an American national, works as a manager at his firm's subsidiary in Indonesia. A local government official tells John that materials could be delivered to the firm's facility more quickly if John pays an extra fee to the port supervisor. What should be John's first action?
A) consult his supervisor in the United States B) discuss the issue with his local agent C) refer to the company's code of ethics D) consult both American and Indonesian laws Answer: D
39) Which of the following is the first step of making an ethical decision?
A) consulting the International Codes of Conduct for MNEs B) consulting the superiors if clarification is sought C) consulting the company's code of ethics and established norms D) consulting the laws of both the host and the home countries Answer: D
40) Which of the following is the last step of making an ethical decision?
A) consulting your superiors if you still need clarification B) following your own conscience and moral code C) consulting the company's code of ethics and established norms D) weighing stakeholders' rights Answer: B
17) Moral universalism is the need for a moral standard that is accepted by all ________.
A) corporations B) governments C) cultures D) employees Answer: C
23) Which of the following creates shared value?
A) creating social value by creating economic value B) disabling local cluster development C) reconceiving products and markets D) creating economic value by creating social value Answer: C
24) Intelligentia is attempting to do business in Bazania, but the Bazanian government purposely delays granting Intelligentia the necessary licenses and permissions required to conduct business in the country. Which of the following best describes this situation?
A) creeping expropriation B) nationalization C) barriers to repatriation D) confiscation Answer: A
32) Tokens of appreciation and grease money are considered ________.
A) cultural reward systems B) questionable payments C) sales commissions D) business expenses Answer: B
3) Which of the following significantly increases the complexity of social responsibility and ethical behavior of MNCs?
A) distance between the headquarters and the subsidiaries B) difficulties posed in training managers from different cultures C) additional stakeholders associated with the firm's activities D) international laws, regulations, and moral principles Answer: C
33) The Foreign Corrupt Practices Act of 1977 was primarily established to ________.
A) distinguish between harmless customs and actual bribery B) combat corruption initiated by electronics firms and their subsidiaries C) provide managers with anonymous methods for reporting bribery D) prosecute international extortionists under the U.S. legal system Answer: A
78) The term ________ refers directly to the marketing and sales process via the Internet.
A) e-commerce B) virtualization C) peer production D) database management Answer: A
9) Social responsibility deals with decisions and interactions mostly on an individual level.
Answer: FALSE
32) Which of the following strategies is a firm most likely to use, if it initiates a joint venture with a local company in a foreign country, as a way of adapting to risk?
A) equity sharing B) participative management C) localization of the operation D) development assistance Answer: A
33) Which of the following means of adaptation to political risk requires that a firm actively involve nationals in the management of its subsidiary?
A) equity sharing B) participative management C) localization of the operation D) development assistance Answer: B
39) Which of the following is a form of hedging?
A) expatriate control in key positions B) development assistance C) local debt financing D) localization of the operation Answer: C
28) For autonomous international subsidiaries, most of the impact from political risks will be in which of the following areas?
A) financial operations B) ownership and control C) marketing and sales operations D) managerial strategy and policy-making Answer: B
37) Which of the following shows that employees have understood, and signed off on, the legal obligations regarding bribery and corruption in the countries where they do business?
A) having global interdependence B) having a global compliance system C) adhering to globalization D) adhering to commercialization Answer: B
71) Which of the following is a method of hedging?
A) home country debt financing B) localization of the operation C) political risk insurance D) maintaining control over technology Answer: D
77) Which of the following terms refers to the integration of systems, processes, organizations, value chains, and entire markets using Internet-based technologies?
A) horizontal integration B) e-business C) vertical integration D) technological leapfrogging Answer: B
20) A company subscribing to ethical relativism would implement the morality of the ________.
A) host country B) shareholders C) legal system D) home country Answer: A
18) With an ethnocentric approach, a company applies the morality used in its ________.
A) host nation B) industry C) general society D) home country Answer: D
29) Which of the following is considered the primary problem for MNCs attempting to define their corporate-wide ethics?
A) inconsistencies among international laws B) variations in ethical standards around the world C) corruption within legal organizations D) differences in worldwide religions Answer: B
1) In recent years, which of the following has lessened the criticisms of MNCs?
A) increasing economic differences among countries B) greater emphasis on social responsibility by MNCs C) limited emphasis on social responsibility and ethical behavior D) dissolution of MNCs in developing countries Answer: B
38) Political risk insurance and local debt financing are both forms of ________.
A) input control B) adaptation C) equity sharing D) hedging Answer: D
27) Transparency International is best described as a(n) ________.
A) international committee that monitors electronic data privacy laws B) nongovernmental organization that fights corruption C) nonprofit organization that argues for workplace equality D) nonprofit group that raises awareness about human rights violations Answer: B
26) Recently, the level of ________ in Europe, for example, was a great concern around the world, in particular regarding concerns in the eurozone brought about by debt problems in Greece.
A) legal risk events B) political risk events C) cultural risk events D) economic risk events Answer: D
37) If a foreign-based firm borrows money from a host country bank as a hedge against being forced out of operation without adequate compensation, the firm is managing political risk with ________.
A) local debt financing B) position control C) development assistance D) adaptation Answer: A
79) Which of the following is an advantage of e-business?
A) lower cost of production B) easy availability of technology C) convenience in conducting business worldwide D) increased availability of information Answer: C
2) Which of the following concepts includes the expectation that MNCs should be concerned with the social and economic effects of their decisions?
A) macropolitical interdependence B) international social responsibility C) corporate technoglobalism D) moral idealism Answer: B
4) Sundew, an American soda company, opened a number of manufacturing units in a developing country. It employed people from the host country to work in the new units. This move radically lowered the poverty rate in the developing country. In this scenario, Sundew is ________.
A) making questionable payments B) following moral guidelines C) making a foreign investment D) adopting local customs Answer: C
21) Which of the following often forces the MNC to act in accordance with ethnocentric value systems?
A) moral universalism B) environmental policies in the home country C) public pressure in the home country D) media pressure Answer: C
19) McDonald's, a fast-food chain headquartered in the United States, applies the morality it practices in the United States to all foreign countries in which it operates. McDonald's is adhering to ________.
A) moral universalism B) ethical relativism C) ethnocentrism D) geocentrism Answer: C
25) Micropolitical risk events are those that affect ________.
A) multiple industries and companies B) several other nations in the same region C) one industry or company or a few companies D) domestic industries or companies Answer: C
20) Expropriation is most likely to occur in a country that has ________.
A) numerous MNCs in operation B) constant political upheaval and change C) a capitalistic economic system in place D) stable economic growth and political consistency Answer: B
16) Which of the following terms refers to an integration of the business environments in which firms currently operate, resulting from a dissolution of traditional boundaries and from increasing links among MNCs?
A) operative culture B) global corporate culture C) corporate integration D) moral universalism Answer: B
18) Which of the following best describes nationalization?
A) outsourcing of governmental functions to private entities B) hiring preferences given to locals rather than expatriates C) government's gradual and subtle actions against a firm D) forced sale of an MNC's assets to local buyers Answer: D
29) For global corporations, the primary impact of political risks is likely to be on the firm's ________.
A) ownership and control B) hiring and recruiting policies C) transfers of money or products D) managerial strategy and policy-making Answer: C
35) Which of the following is a form of protectionist policies?
A) patents B) quotas C) foreign direct investment D) bribes Answer: B
73) Which type of country is most likely to use its investment laws to acquire appropriate technology?
A) post-industrial country B) newly industrializing country C) less-developed country D) highly developed country Answer: C
21) The government of Jonovia seizes all assets of Refresh, a world-famous, soft-drink brand in Jonovia, and offers compensation to the company. This action by the government of Jonovia is an example of ________.
A) private action B) repatriation C) privatization D) expropriation Answer: D
19) Expropriation occurs when a local government seizes and provides inadequate compensation for the foreign-owned assets of an MNC; when no compensation is provided, it is ________.
A) privatization B) confiscation C) private action D) repatriation Answer: B
75) Some countries rigorously enforce employee secrecy agreements in order to ________.
A) protect a firm's intellectual property B) limit the influence of organized labor C) avoid litigation between competing firms D) strengthen international contract laws Answer: A
36) One of the primary complaints about the Foreign Corrupt Practices Act is that the legislation ________.
A) puts U.S. firms at a competitive disadvantage B) fails to enforce equal punishments on U.S. firms C) encourages U.S. managers to hire local agents D) requires U.S. firms to adhere to host country laws Answer: A
45) The ________ approach to analyzing economic risk relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the creditworthiness of the country.
A) qualitative B) checklist C) quantitative D) systemic Answer: B
44) Representatives of a multinational firm seek an interview with local government leaders in the Department of Commerce in Argonia with a view to assess the types of policies likely to be implemented. According to Mathis, this is an example of ________.
A) qualitative approach B) quantitative approach C) checklist approach D) systemic approach Answer: A
34) In addition to avoidance and adaptation, two other means of risk reduction available to managers are ________ and ________.
A) qualitative approach; quantitative approach B) dependency; hedging C) checklisting; blocklisting D) protectionist approach; stability approach Answer: B
42) The ________ method of analyzing economic risk attempts to measure statistically a country's ability to honor its debt obligation by assigning different weights to economic variables.
A) quantitative B) qualitative C) checklist D) objective Answer: A
26) Which of the following is one of the standards of SA8000?
A) reducing environmental footprints B) providing a safe work environment C) not allowing workers to unionize D) regularly require more than 48-hour workweeks Answer: B
28) Which of the following is a primary focus of the research that is carried out by Transparency International?
A) relative prevalence of bribery in various spheres of people's lives B) existence of child labor in various developing countries C) relative prevalence of dictatorship in various countries D) existence of bonded labor in various countries Answer: A
60) According to the international codes of conduct, MNEs should ________.
A) resolve disputes according to the domestic law of the home country B) dominate the capital markets in which their operations are based C) use inexpensive, imported sources for components and raw materials D) conduct research and development activities in developing countries Answer: D
15) Which of the following is a business benefit from corporate social responsibility?
A) revenue decreases B) cost increases C) increase in brand value D) risk assessment Answer: C
31) Payments to expedite routine transactions are often referred to as ________.
A) slotting fees B) grease money C) gray funds D) expropriation Answer: B
40) A country's ability or intention to meet its financial obligations determines its ________.
A) technological risk B) legal risk C) political risk D) economic risk Answer: D
30) Which of the following is dedicated to monitoring issues of data privacy in Europe?
A) the Telecommunications Data Protection directive B) the EU Data Retention Directive C) the EU Directive of Data Protection D) the Privacy and Electronic Communications EC Directive Answer: C
43) Which two factors are primarily assessed when using the qualitative approach to measure a country's economic risk?
A) the country's natural resources and its long-term national debt B) the competence of the country's leader and the economic policy direction C) the probability of terrorism and the likelihood that the country's debts will be repaid D) the country's purchasing power overseas and the consistency of the country's leadership Answer: B
41) Which of the following is analyzed through the quantitative approach, qualitative approach, and the checklist approach?
A) the legal risks of a country B) the creditworthiness of a country C) the political risks of a country D) the cultural atmosphere of a country Answer: B
72) The appropriability of technology is best defined as ________.
A) the potential of a firm's technology to become obsolete within a few years B) the likelihood that a firm's technology will generate long-term debts C) the degree of ease with which new technology can be learned and used by host-nation employees D) the ability of a firm to protect its technology from competitors and to profit from that technology Answer: D
38) The FCPA allows "grease" payments to facilitate business in a foreign country, if ________.
A) the purpose of payment is beneficial to the home country B) the purpose of payment is beneficial to the company C) those payments are lawful in that country D) those payments are a small amount compared to the revenue generated Answer: C
5) The Anti-Sweatshop Code of Conduct requires companies to provide a healthy and safe work environment and ________.
A) to differentiate on the basis of gender B) to pay the prevailing local minimum wage C) to reduce environmental footprints D) to employ forced labor when the situation demands it Answer: B
35) Which of the following was the primary purpose of the Organization for Economic Cooperation and Development Convention on Bribery?
A) to establish bribery laws B) to quantify global corruption C) to combat corporate corruption D) to protect corporate bribery whistleblowers Answer: C
80) Experts suggest that firms wanting to globalize through e-commerce must first localize, which means firms need to ________.
A) use local suppliers, vendors, and distributors to manufacture products for the local market B) modify their products and services to meet the needs and interests of local cultures C) sell their products in a brick-and-mortar store before selling them through an e-market D) test their products and services in local markets before selling them over the Internet Answer: B
13) What is the difference between ethics and social responsibility? What are some of the social responsibility issues that MNCs must consider?
Answer: Ethics deals with decisions and interactions on an individual basis, while social responsibility deals with broader decisions that affect the entire corporation. Issues of social responsibility for MNCs continue to center on the poverty and lack of equal opportunity around the world, the environment, consumer concerns, and employee safety and welfare.
54) How does the phenomenon of ethnicity affect the international manager?
Answer: Ethnicity is a driving force of political instability around the world. Many uprisings and conflicts are expressions of differences in ethnic groupings, and religious disputes often lie at the heart of those differences. Managers must understand the ethnic and religious composition of the host country in order to anticipate problems of general instability as well as those of an operational nature-such as effects on their workforce, on production and access to raw materials, and also the market as a whole.
12) The increased complexity regarding the social responsibility and ethical behavior of firms across borders is brought about by the distance between the headquarters and its subsidiaries.
Answer: FALSE
13) SAARC is an agreement that came into force to bring faster growth, more jobs, better working conditions, and a cleaner environment for all as a result of increased exports and trade.
Answer: FALSE
14) NAFTA is an agreement that came into force to lower tariffs to 25 percent within three to five years, and to eliminate them within seven years.
Answer: FALSE
43) Ethnocentric culture is an integration of the business environments in which firms currently operate.
Answer: FALSE
44) The term "moral idealism" is used to address the need for a moral standard that is accepted by all cultures.
Answer: FALSE
46) Confiscation occurs when a local government seizes and provides inadequate compensation for the foreign-owned assets of an MNC.
Answer: FALSE
46) In a globalized market economy, CSR does not have to be part of modern business.
Answer: FALSE
47) Creating Shared Value (CSV) leverages the unique resources and expertise of the company to create social value by creating economic value.
Answer: FALSE
47) Expropriation occurs when a local government seizes and does not provide any compensation for the foreign-owned assets of an MNC.
Answer: FALSE
48) Privatization refers to the forced sale of an MNC's assets to local buyers with some compensation to the firm, perhaps leaving a minority ownership with the MNC.
Answer: FALSE
49) An event that affects all foreign firms doing business in a country or region is called a micropolitical risk event.
Answer: FALSE
49) Global corporate culture refers to the business conduct or morals of MNCs in their relationships with individuals and entities.
Answer: FALSE
50) An event that affects one industry or company or only a few companies is called a macropolitical risk event.
Answer: FALSE
51) Political risk insurance and local debt financing are forms of dependency.
Answer: FALSE
51) The Foreign Corrupt Practices Act (FCPA) allows U.S. companies from making illegal payments, other gifts, or political contributions to foreign government officials for the purpose of influencing them in business transactions.
Answer: FALSE
52) The quantitative approach evaluates a country's economic risk by assessing the competence of its leaders and analyzing the types of policies they are likely to implement.
Answer: FALSE
65) Under civil law, past court decisions act as precedents to the interpretation of the law and to common custom.
Answer: FALSE
66) Common law is based on a comprehensive set of laws organized into a code.
Answer: FALSE
67) Under common law, it is assumed a contract reflects promises that will be enforced without specifying the details in the contract.
Answer: FALSE
68) Differences in laws and regulations from country to country are very few and simple.
Answer: FALSE
81) Firms use e-business to help build new relationships between businesses and retailers.
Answer: FALSE
83) What is globalization? What is the relationship between globalization and information technology?
Answer: Globalization is defined as global competition characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy. Information technology, more than anything else, is making those networks of international linkages more possible by boosting the efficiency of that "connectedness." The Internet is propelling electronic commerce around the world. Companies around the world are linked electronically with employees, customers, distributors, suppliers, and alliance partners in many countries making the world a global marketplace.
69) What is the difference between common law, Islamic law, and civil law?
Answer: In common law, past court decisions act as precedents to the interpretation of law. Civil law is based on a comprehensive set of laws organized into a code. Interpretations of civil law are based on reference to codes and statutes. In Islamic countries, such as Saudi Arabia, the dominant legal system is Islamic law; based on religious beliefs; it dominates all aspects of life. Islamic law is followed in approximately 27 countries and combines, in varying degrees, civil, common, and indigenous law.
55) According to the international codes of conduct, how should MNEs handle technology transfer overseas?
Answer: MNEs should cooperate with governmental authorities in assessing the impact of transfers of technology to developing countries and in enhancing the technological capacities of developing countries. MNEs should develop and adapt technologies to the needs and characteristics of the countries in which they operate. MNEs should conduct research and development activities in developing countries, using local resources and personnel to the greatest extent possible.
56) What employment practices should MNEs follow abroad according to the international codes of conduct?
Answer: MNEs should cooperate with host governments' efforts to create employment opportunities in particular localities. MNEs should work to increase employment opportunities and standards in the countries in which they operate. MNEs should give advance notice of plant closures and mitigate the resultant adverse effects. MNEs should provide standards of employment equal to or better than those of comparable employers in the countries in which they operate. MNEs should pay, at minimum, basic living wages.
14) What level of social responsibility is expected from domestic firms? What level is expected from international firms?
Answer: Opinions on the level of social responsibility that a domestic firm should demonstrate range from one extreme-the only responsibility of a business is to make a profit, within the confines of the law, in order to produce goods and services and serve its shareholders' interests-to another extreme-companies should anticipate and try to solve problems in society. The stance toward social responsibility that a firm should take in its international operations, however, is much more complex-ranging perhaps from assuming some responsibility for economic development in a subsidiary's host country to taking an active role in identifying and solving world problems.
55) What is political risk? Give an example of how political risk can affect an MNC
Answer: Political risks are any government action or politically motivated event that could adversely affect the long-run profitability or value of the firm. For example, Bolivia nationalized its natural gas industry ordering foreign companies to give up control of fields and accept much tougher operating terms within six months or leave the country.
58) What are questionable payments? Why are they problematic for international managers?
Answer: Questionable payments are business payments that raise significant questions of appropriate moral behavior either in the host nation or in other nations. Such questions arise out of differences in laws, customs, and ethics in various countries, whether the payments in question are political payments, extortion, bribes, sales commissions, or "grease money"—payments to expedite routine transactions. The dilemma for Americans operating abroad is how much to adhere to their own ethical standards in the face of foreign customs, or how much to follow local ways to be competitive.
16) What is SAARC?
Answer: SAARC stands for South Asia Association of Regional Cooperation—an association of seven developing South Asian nations. According to the Agreement that was effective January 1, 2006, the countries will lower tariffs by 25% within three to five years and eliminate them within seven years. Trade in South Asia is estimated at $14 billion, although the majority of that trade will take place between India and Pakistan, the two largest members.
10) Decisions about ethics tend to be made at a local level, affect more people, and reflect a general stance taken by a company or a number of decision makers.
Answer: TRUE
11) The sales, debts, and resources of some of the largest multinational firms exceed the gross national product, the public and private debt, and the resources, respectively, of some nations.
Answer: TRUE
12) Small- and medium-sized enterprises contribute to their national economies by creating new jobs.
Answer: TRUE
42) Improved customer attraction and retention; improved reputation; and improved employee recruitment, motivation, and retention are business benefits of corporate social responsibility.
Answer: TRUE
45) Ethical relativism adopts the local moral code of the country in which it is operating.
Answer: TRUE
48) Globalization has increased the ethical problems facing organizations.
Answer: TRUE
50) The biggest single problem for MNCs in their attempt to define a corporate-wide ethical posture is the great variation of ethical standards around the world.
Answer: TRUE
53) The checklist approach relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the creditworthiness of the country.
Answer: TRUE
7) Global interdependence creates demands on international managers to take a positive stance on issues of social responsibility and ethical behavior.
Answer: TRUE
8) Ethnocentric firms typically uses the same business practices in all cultures and markets.
Answer: TRUE
15) What is the European Union (EU)? Discuss how the EU affects both Europe and international managers working in Europe.
Answer: The EU now comprises a 27-nation, unified market of over 400 million people. Since the euro became a legally tradable currency, Europe's business environment has been transformed. The vast majority of legislative measures have been adopted to create an internal market with free movement of goods and people among the EU countries. The elimination of internal tariffs and customs, as well as financial and commercial barriers, has not eliminated national pride. Global managers face two major tasks in the EU. One is strategic: how firms outside of Europe can deal with the implications of the EU and of what some have called a "Fortress Europe"—that is, a market giving preference to insiders. The other task is cultural: how to deal effectively with multiple sets of national cultures, traditions, and customs within Europe, such as differing attitudes about how much time should be spent on work versus leisure activities.
84) How does the Internet facilitate both e-commerce and business-to-business transactions?
Answer: The Internet and e-business provide a number of uses and advantages in business-to-consumer transactions: (1) convenience in conducting business worldwide-facilitating communication across borders contributes to the shift toward globalization and a global market; (2) an electronic meeting and trading place, which adds efficiency in conducting business sales; (3) a corporate Intranet service, merging internal and external information for enterprises worldwide; (4) power to consumers as they gain access to limitless options and price differentials; and (5) a link and efficiency in distribution. Although most early attention was on e-commerce, experts now believe the real opportunities are in business-to-business (B2D) transactions where the Internet offers assistance with supply chain, procurement, and distribution channels.
57) What is the primary problem for MNCs that try to define organizational ethics?
Answer: The biggest single problem for MNCs in their attempt to define a corporate-wide ethical posture is the great variation of ethical standards around the world. Many practices that are considered unethical or even illegal in some countries are accepted ways of doing business in others.
52) What is the relationship between global corporate culture and moral universalism?
Answer: The emergence of a global corporate culture (i.e., the integration of the business environments in which businesses operate) is leading towards global consensus about social responsibility (i.e., moral universalism). Despite this trend, however, there are regional variations in how companies respond to corporate social responsibility.
54) What are the proposed global labor standards of SA8000?
Answer: The five proposed global labor standards include: (1) do not use child or forced labor, (2) provide a safe working environment, (3) respect workers' right to unionize, (4) do not regularly require more than 48-hour work weeks, and (5) pay wages sufficient to meet workers' basic needs.
56) Identify and describe four means of political risk adaptation.
Answer: The four means of political risk adaptation are: (1) equity sharing-shared ownership or partial ownership with nationals; (2) participative management-actively involving nationals in the management of the firm; (3) localization of operations-modifications to the company's management style, company name, etc., to accommodate national issues; and (4) development assistance-corporate aid for infrastructure development.
70) What methods are used by MNCs to protect intellectual property rights?
Answer: The most common methods of protecting proprietary technology are the use of patents, trademarks, trade names, copyrights, and trade secrets. Various international conventions afford some protection in participating countries; more than 80 countries adhere to the International Convention for the Protection of Industrial Property, often referred to as the Paris Union, for the protection of patents. However, restrictions and differences in the rules in some countries not signatory to the Paris Union, as well as industrial espionage, pose continuing problems for firms trying to protect their technology.
57) What is currency translation exposure? Provide an example to illustrate your answer.
Answer: The risk of exchange-rate volatility results in currency translation exposure to the firm when the balance sheet of the entire corporation is consolidated, and may cause a negative cash flow from the foreign subsidiary. Currency translation exposure occurs when the value of one country's currency changes relative to that of another. When exchange-rate changes are radical, repercussions are felt around the world. For example, a U.S. company operating in Mexico at the time of the peso devaluation in the late 1990s meant that the company's assets in that country were worth less when translated into U.S. dollars. The company's liabilities, however, were also less.
53) Explain the differences between moral universalism, ethnocentrism, and ethical relativism. Which approach is best?
Answer: When using the ethnocentric approach, the company applies the morality of its home country. In contrast, a company using ethical relativism adopts the moral code of the country in which it is doing business. Moral universalism is different in that it neither applies a moral code that is based on the home or host country, but rather uses a set of universal standards or codes that are derived from international codes of conduct. Ethics researcher Bowie argues that moral universalism is preferable to ethnocentrism and relativism as a guide for ethical decision making.