C211 Ch 1, Globalizing Business

Gross domestic product (GDP) is the sum of value added by resident firms, households, and governments operating in an economy. a. true b. false

a. true

Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties because of their non-native status. a. true b. false

a. true

On the global economic pyramid, the Triad refers to developed economies consisting of North America, Western Europe, and Japan. a. true b. false

a. true

Overall, the focus on firm performance around the globe defines the field of global business more than anything else. a. true b. false

a. true

Purchasing power parity (PPP) is a conversion that determines the equivalent amount of goods and services different currencies can purchase. a. true b. false

a. true

Reverse innovation is an example of bottom up innovation. a. true b. false

a. true

The Group of 20 includes the European Union (EU)—a regional bloc. a. true b. false

a. true

The current state of globalization around the world is that of semi-globalization. a. true b. false

a. true

The institution-based view places emphasis on the external factors that could affect a firm. a. true b. false

a. true

The term "base of the pyramid" represents economies where individuals make less than $2,000 a year. a. true b. false

a. true

The term "emerging markets" refers to all markets other than the developed markets. a. true b. false

a. true

Elaborate on the three prevalent views of globalization.

Think about it...

Explain the benefits of gaining international business experience and working as an expat.

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Explain the pendulum view of globalization.

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Explain the role of nongovernmental organizations (NGOs) in globalization.

Think about it...

Explain the success and failure of global firms based on institution- and resource-based views.

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How is reverse innovation helping emerging economies?

Think about it...

The global economy may be viewed as a pyramid. The growing number of opportunities at the base of the pyramid highlights the role this bottom tier will play in the years to come. How can MNEs take advantage of this often-ignored level?

Think about it...

What is the relationship between gross domestic product (GDP) and purchasing power parity (PPP)?

Think about it...

Which of the following countries would be characterized as an emerging economy? a. Brazil b. USA c. Germany d. Japan

a. Brazil

Approximately _____ people are employed by foreign-owned firms throughout the world. a. 80 million b. 40 million c. 18 million d. 1 million

a. 80 million

What are some possible benefits to studying global business? a. All of these reasons. b. If you go to work for a multinational, you will be better prepared for expatriate assignments abroad. c. You will be more competent to interact with foreign suppliers and partners on behalf of the company you work for. d. Your depth of understanding of the global economy will make you more employable.

a. All of these reasons.

Which of the following is true of the Group of 20 (G-20)? a. It only has 19 member countries. b. It doesn't represent any European nation. c. It meets annually to discuss environmental issues. d. It includes many regional blocs.

a. It only has 19 member countries.

Which of the following would be an example of a top down innovation? a. Lowering prices and features of existing products to meet emerging market needs b. Launching a product in and for emerging economies c. Adopting an innovation first in emerging economies and then diffusing it around the world d. Introducing products from emerging markets into developed markets

a. Lowering prices and features of existing products to meet emerging market needs

The gross domestic product plus the income from non-resident sources abroad gives the ____. a. gross national product b. per capita income c. purchasing power parity d. net national income

a. gross national product

The _____ view suggests that the success and failure of firms are largely determined by their environments. a. institution-based b. stakeholder-based c. resource-based d. capability-based

a. institution-based

A conversion that determines the equivalent amount of goods and services that different currencies can buy is known as _____. a. purchasing power parity b. foreign exchange rate c. country's deficit d. gross domestic product

a. purchasing power parity

The _____ view of global business focuses on internal factors that can help a firm overcome its external environment. a. resource-based b. industry-based c. socio-cultural d. institution-based

a. resource-based

A _____ is defined as an innovation that is adopted first in emerging economies and then diffused around the world. a. reverse innovation b. reverse-engineered innovation c. top down innovation d. traditional innovation

a. reverse innovation

Without adjusting for PPP, emerging economies contribute about 26% of the global GDP. Adjusting for PPP, they now contribute approximately 45% of the global GDP. The reason there is a huge difference between the two measures is because: a. the cost of living in emerging economies tends to be lower than that in developed economies. b. the purchasing power parity is much higher in emerging countries. c. the population in emerging economies is much higher than that in developed economies. d. the deficit spending in emerging economies is much larger than that in developed economies.

a. the cost of living in emerging economies tends to be lower than that in developed economies.

People who live in the Triad countries comprise the _____ of the global economic pyramid. a. top tier b. second tier c. base d. outlier

a. top tier

A dragon multinational is a name given to MNEs from emerging markets. a. true b. false

a. true

A multinational enterprise is a firm that engages in foreign direct investment by directly managing value-added activities in other countries. a. true b. false

a. true

An institution-based view suggests that the success and failure of firms are enabled and constrained by business norms of the host nation. a. true b. false

a. true

An international premium is a significant pay raise awarded to expatriate employees working abroad. a. true b. false

a. true

Approximately 80 million people worldwide are employed by foreign-owned firms. a. true b. false

a. true

Emerging markets contribute about 26% of global GDP without adjusting for purchasing power parity (PPP). a. true b. false

a. true

Focusing on a firm's internal resources and capabilities is the main emphasis of the resource-based view. a. true b. false

a. true

Formal institutions include laws, regulations, and rules. a. true b. false

a. true

What is the definition of an institution-based view of global business? a. An institution-based view suggests that the success and failure of firms are enabled and constrained by institutions, meaning the human and natural resources available in the firms' home countries. b. An institution-based view suggests that the success and failure of firms are enabled and constrained by institutions, also known as the rules of the game, such as regulations, laws, cultures, ethics, and norms. c. An institution-based view looks at how firms use the services of financial institutions to expand their business internationally. d. An institution-based view studies how firms must overcome the constraints controlled by institutions, also known as the rules of the game.

b. An institution-based view suggests that the success and failure of firms are enabled and constrained by institutions, also known as the rules of the game, such as regulations, laws, cultures, ethics, and norms.

Which of the following groups is primarily composed of emerging economies? a. The Triad b. BRIC c. Group of Eight (G8) d. NAFTA

b. BRIC

Choose the set of countries that are all emerging economies. a. France, Germany, United Kingdom b. India, China, Thailand, Malaysia c. Poland, Bulgaria, Czech Republic d. Canada, United States, Mexico

b. India, China, Thailand, Malaysia

Which of the following is true of semi-globalization? a. It is a type of globalization that adopts a strategy of treating the entire world as one market. b. It is a type of globalization that lies between total isolation and total globalization. c. It is a form of globalization that treats each country as a unique market. d. It is a form of globalization that considers each nation in isolation when conducting business.

b. It is a type of globalization that lies between total isolation and total globalization.

Which of the following countries is included in BRIC? a. Belgium b. Russia c. Italy d. Canada

b. Russia

Which of the following regions in the global economic pyramid would comprise developed nations? a. The base b. The Triad c. The second tier d. The outlier

b. The Triad

What is the definition of a resource-based view of global business? a. The resource-based view focuses on a firm's external resources and capabilities. b. The resource-based view focuses on a firm's internal resources and capabilities. c. None of these answers d. The resource-based view focuses on a firm's internal and external resources and capabilities.

b. The resource-based view focuses on a firm's internal resources and capabilities.

Globalization can be viewed as: a. a new force sweeping through the world in recent times. b. all of these c. a long-run historical evolution since the dawn of human history. d. a pendulum that swings from one extreme to another from time to time.

b. all of these

The term "emerging economies" has replaced the term _____. a. developed countries b. developing countries c. Triad markets d. first-world markets

b. developing countries

According to the pendulum view of globalization, globalization is a relatively new phenomenon triggered by the information revolution of early 1990s. a. true b. false

b. false

All the countries of the BRIC belong to the top tier of the global economic pyramid. a. true b. false

b. false

Globalization has driven up the salaries of low-level jobs. a. true b. false

b. false

Majority of the global GDP is contributed by the emerging markets. a. true b. false

b. false

More than half the GDP produced by emerging markets comes from outside the BRIC countries. a. true b. false

b. false

Most opponents of globalization view globalization as a long-run historical evolution since trade began. a. true b. false

b. false

Purchasing power parity (PPP) is calculated as the sum of value added by resident firms, households, and governments operating in an economy. a. true b. false

b. false

Reverse innovations are innovations that are adopted first in the Triad-based multinationals and then diffused around the world. a. true b. false

b. false

Scenario planning is a technique to prepare and plan exclusively for high risk scenarios. a. true b. false

b. false

Semi-globalization calls for adopting one way of doing business for all conditions. a. true b. false

b. false

Semi-globalization is primarily caused by the practice of total isolation. a. true b. false

b. false

Standardization of markets would lead to a state of semi-globalization. a. true b. false

b. false

The emerging markets of the world are placed at the top of the global economic pyramid. a. true b. false

b. false

The global economic pyramid does not represent countries that have a per capita annual income of less than $2,000. a. true b. false

b. false

The second tier of the global economic pyramid is made up of countries with a per capita annual income of more than $20,000. a. true b. false

b. false

The strategy of treating the entire world as one market is known as localization. a. true b. false

b. false

The liability of foreignness is the inherent disadvantage faced by _____. a. domestic firms against other domestic firms that have engaged in global business b. foreign firms in host nations due to their non-native status c. domestic firms from foreign firms setting up in their country d. foreign firms from their home country governments

b. foreign firms in host nations due to their non-native status

People who earn _____ a year comprise the base of the global economic pyramid. a. between $2,000 to $20,000 b. less than $2,000 c. between $20,000 to $40,000 d. more than $40,000

b. less than $2,000

The _____ view of global business focuses on external factors that affect a firm's performance. a. resource-based b. asset-based c. capability-based d. institution-based

d. institution-based

Semi-globalization suggests: a. that some countries fight against globalization and try to isolate themselves. b. that there are barriers to market integration at borders which are high but not high enough to insulate countries from each other completely. c. that globalization is a passing trend. d. that the some economies prefer to buy local.

b. that there are barriers to market integration at borders which are high but not high enough to insulate countries from each other completely.

From an institution-based view, a government's legal requirement for a business to pay taxes would be an example of: a. a political resource. b. the influence of a formal institution. c. the influence of an informal institution. d. a core perspective.

b. the influence of a formal institution.

The size of the global economy at the beginning of the 21st century (measured by total GDP) is approximately: a. $100 trillion. b. $50 billion. c. $60 trillion. d. $250 billion.

c. $60 trillion.

Which are the three views of globalization? a. Economic, political, and geographic b. Profits, losses, and total sales c. A recent force, a long-running evolution, and a pendulum d. Past, present, and future

c. A recent force, a long-running evolution, and a pendulum

Which of the following is true of globalization according to the "pendulum view" perspective? a. Globalization is being interrupted by artificial barriers to the flows of goods, services, capital, and knowledge. b. Globalization is a Western ideology focused on exploiting and dominating the world through MNEs. c. Globalization is a not a one-directional phenomenon. d. Globalization is a recent phenomenon of human trade.

c. Globalization is a not a one-directional phenomenon.

Which of the following countries is represented in the Triad of the global economic pyramid? a. India b. China c. Japan d. Russia

c. Japan

_____ is the strategy of treating the entire world as one market. a. Total isolation b. Semi-globalization c. Standardization d. Localization

c. Standardization

Which of the following is true of economies in the base of the global economic pyramid? a. They are composed of developed economies. b. They are composed of people from North America, Western Europe, and Japan. c. They are largely ignored by MNEs. d. They attract the largest FDI from MNEs.

c. They are largely ignored by MNEs.

Which of the following would lead to the standardization of world markets? a. Semi-globalization b. Localization c. Total globalization d. Total isolation

c. Total globalization

The fundamental question in global business is: a. What determines the success and failure of firms' foreign entry? b. What determines the success and failure of firms' new product globalization? c. What determines the success and failure of firms around the globe? d. What determines the success and failure of firms based in the US?

c. What determines the success and failure of firms around the globe?

Purchasing power parity is: a. an adjustment made to the GDP to reflect differences in populations. b. an adjustment made to the GDP to reflect differences in time zones. c. an adjustment made to the GDP to reflect differences in the cost of living. d. an adjustment made to the GDP to reflect differences in exchange rates.

c. an adjustment made to the GDP to reflect differences in the cost of living.

The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____. a. postulates the ideology of localization b. supports the ideology of total globalization c. focuses on the internal strengths on the firm d. advocates adopting a single method for achieving globalization

c. focuses on the internal strengths on the firm

The _____ is measured as the sum of value added by resident firms, households, and governments operating in an economy. a. gross national product b. gross national income c. gross domestic product d. national reserve

c. gross domestic product

The _____ of globalization suggests that globalization is neither recent nor one-directional. a. new-force view b. long-run historical view c. pendulum view d. colonial view

c. pendulum view

Imagine your manufacturing plant gets most of its raw materials from suppliers along the Gulf Coast of the United States. However, you have alternate suppliers from other parts of the country lined up, just in case the Gulf Coast is hit with a devastating hurricane or other debilitating disaster and your suppliers there can't deliver the raw goods. You have engaged in: a. semi-globalization. b. resource planning. c. scenario planning. d. a formal institution.

c. scenario planning.

The concept of _____ suggests that barriers to market integration at borders are high, but not high enough to completely insulate countries from each other. a. localization b. technocapitalism c. semi-globalization d. total globalization

c. semi-globalization

The strategy of treating each country as a unique market and in total isolation is referred to as _____. a. total globalization b. standardization c. semi-globalization d. localization

d. localization

What is an important reason to study global business? a. To gain competence in interacting with foreign suppliers, customers, and partners. b. To prepare for an expatriate assignment. c. To advance your career in a global economy. d. All of these

d. All of these

More than half of all GDP of emerging economies comes from _____. a. the Four Asian Tigers (Hong-Kong, Singapore, South Korea, and Taiwan) b. MIKT (Mexico, Indonesia, South Korea, Turkey) c. the Commonwealth of Independent States d. BRIC (Brazil, Russia, India, and China)

d. BRIC (Brazil, Russia, India, and China)

Which of the following would be an example of a product undergoing reverse innovation on the global economic pyramid? a. Triad nation to Triad nation b. Triad nation to second tier nation c. Second tier to base tier nation d. Base tier nation to Triad nation

d. Base tier nation to Triad nation

BRIC is an acronym for the emerging economies of: a. Belgium, Romania, Indonesia, and Chile. b. Brazil, Romania, India, and Chile. c. Britain, Russia, India, and China. d. Brazil, Russia, India, and China.

d. Brazil, Russia, India, and China.

What is the difference between the traditional definition of International Business and this text's definition of global business? a. In many cases, international business refers to domestic firms expanding into international (cross-border) economic activities; here, global business focuses exclusively on domestic firms' strategies for competing against foreign firms entering their home territory. b. International business traditionally refers to firms that start in one country and then expand internationally, while global business refers to firms that are designed to do business internationally from the beginning. c. There is no difference between the two terms; they can be used interchangeably. d. In many cases, international business refers to domestic firms expanding into international (cross-border) economic activities; here, global business also includes domestic firms' strategies for competing against foreign firms entering their home territory.

d. In many cases, international business refers to domestic firms expanding into international (cross-border) economic activities; here, global business also includes domestic firms' strategies for competing against foreign firms entering their home territory.

Which of the following is true of globalization according to the "new force" perspective? a. It is a process of trade integration that has both advantages and disadvantages. b. It is a phenomenon that is technologically out of sync. c. It is a historical aspect of human trade. d. It is a western ideology focused on exploiting and dominating the world through MNEs.

d. It is a western ideology focused on exploiting and dominating the world through MNEs.

Which of the following would be regarded as a dragon MNE? a. MNEs from developed countries b. MNEs belonging to the Triad economies c. MNEs coming exclusively from the European Union d. MNEs from emerging markets

d. MNEs from emerging markets

Viewing the global economy as a pyramid, the Triad refers to _____. a. Taiwan, Hong Kong, and South Korea b. US, the EU, and China c. Brazil, India, and China d. North America, Western Europe, and Japan

d. North America, Western Europe, and Japan

Which of the following does the institution-based view of global business lay emphasis on? a. Acquiring resources that belong to the host nation b. Consolidating the internal assets of a firm c. Focusing on the capabilities of the firm's headquarters d. Understanding the laws and values of the firm's host nation

d. Understanding the laws and values of the firm's host nation

A multinational enterprise (MNE) is: a. a firm that engages in exports. b. a firm that engages in imports. c. a firm that engages in outsourcing. d. a firm that engages in foreign direct investments

d. a firm that engages in foreign direct investments

The Group of 20 (G-20) is: a. a group of 20 countries whose leaders meet to solve global economic problems. b. a group of 20 countries plus the European Union whose leaders meet to solve global economic problems. c. a group of 20 countries whose leaders meet to solve global hunger problems. d. a group of 19 countries plus the European Union whose leaders meet to solve global economic problems.

d. a group of 19 countries plus the European Union whose leaders meet to solve global economic problems.

A group of activists, known for their objection to globalization, is picketing the headquarters of a very large, international coffee distributor and retail operation. The activists believe this large firm does not pay fair prices to coffee growers in South America, Africa, and other developing regions. In general, they are picketing because of: a. the extremely large size of the firm. b. the location of the firm in one of the largest and most affluent countries in the world. c. the power the country derives in part from being home to this firm. d. all of these

d. all of these

If you were an entrepreneur designing a new product targeted at people earning a per capita annual income around $5,000, you would find your customers: a. in the top two tiers of the global economic pyramid. b. in the base of the global economic pyramid. c. in global economies. d. in the second tier of the global economic pyramid.

d. in the second tier of the global economic pyramid.

The liability of foreignness is: a. the inherent advantage that firms experience in home countries because of their native status. b. the inherent disadvantage that firms experience in home countries because of their native status. c. the inherent advantage that foreign firms experience in host countries because of their non-native status. d. the inherent disadvantage that foreign firms experience in host countries because of their non-native status.

d. the inherent disadvantage that foreign firms experience in host countries because of their non-native status.