Chapter 3

Which of the following is a major disadvantage of customizing products to suit local markets?

Customization is likely to increase the costs and operational complexity. Customization can help companies accommodate the lifestyles and habits of local target markets. However, it can increase costs and operational complexity.

________ is the tendency to judge all other groups according to one's own group's standards, behaviors, and customs.

Ethnocentrism Ethnocentrism is the tendency to judge all other groups according to one's own group's standards, behaviors, and customs.

Which of the following is an example of a trading bloc?

European Union Trading blocs, or common markets, are regional organizations that promote trade among member nations. European Union is one such trading bloc.

________ are a form of financial assistance in which producers receive enough money from the government to allow them to lower their prices.

Export subsidies Export subsidies are a form of financial assistance in which producers receive enough money from the government to allow them to lower their prices in order to compete more effectively in the world market.

A country's balance of trade is the total value of its imports less the total value of its exports.

False

International travel would be more expensive for U.S. residents if the dollar is strong.

False

The North American Free Trade Agreement was formed by twelve North American countries.

False

Which of the following acts outlaws payments with the intent of getting government officials to break the laws of their own countries?

Foreign Corrupt Practices Act All U.S. companies are bound by the Foreign Corrupt Practices Act (FCPA), which outlaws payments with the intent of getting government officials to break the laws of their own countries.

________ refers to buying goods or services from a supplier in another country

Importing Importing refers to the buying of goods or services from a supplier in another country and is a practice that has existed for centuries.

The ________ was established to foster international financial cooperation and its primary functions include providing short-term loans to countries that are unable to meet their financial obligations and working to alleviate poverty in developing economies.

International Monetary Fund The International Monetary Fund (IMF) was established in 1945 to foster international financial cooperation. Its primary functions are monitoring global financial developments, providing technical advice and training, providing short-term loans to countries that are unable to meet their financial obligations, and working to alleviate poverty in developing economies.

________ agreements entitle one company to use some or all of another firm's intellectual property in exchange for a royalty payment.

Licensing Licensing is a popular approach to international business. License agreements entitle one company to use some or all of another firm's intellectual property (patents, trademarks, brand names, copyrights, or trade secrets) in return for a royalty payment.

The North American Free Trade Agreement (NAFTA) was formed by the United States, Canada, and ________.

Mexico In 1994, the United States, Canada, and Mexico formed the North American Free Trade Agreement (NAFTA), paving the way for the free flow of goods, services, and capital within the bloc through the phased elimination of tariffs and quotas.

refers to assigning a wide range of generalized (and often superficial or even false) attributes to an individual on the basis of membership in a particular culture or social group.

Stereotyping Stereotyping refers to assigning a wide range of generalized (and often superficial or even false) attributes to an individual on the basis of membership in a particular culture or social group

________ are long-term partnerships between two or more companies to jointly develop, produce, or sell products.

Strategic alliances Strategic alliances are long-term partnerships between two or more companies to jointly develop, produce, or sell products. They can be used to reach the global marketplace.

Charles Associates is a U.S. company and has a central production plant in the U.S. (Currency: U.S. dollar). It imports capital equipments and raw materials from Italy and Germany (Currency: Euro). The company exports its products to China (Currency: Renminbi), Japan (Currency: Yen), and India (Currency: Rupee). Which of the following changes in the exchange market is beneficial to Charles Associates?

The U.S. dollar has strengthened against the Euro. If the U.S. dollar strengthens against the Euro, the company can obtain supplies at lower cost. This is beneficial to the company.

An embargo is a complete ban on the import or export of certain products or even all trade between certain countries.

True

On a vacation to Italy, you exchange $100 to get 70 Euros in return. This amount is significantly lower than what you received last year. This indicates that the ________.

U.S. dollar has weakened in the past year The value of the dollar depreciated in this case. A currency is called weak when its rate is lower than normal. Hence, the U.S. dollar has weakened in the past year.

________ is a permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes among its more than 150 member countries.

World Trade Organization The World Trade Organization (WTO) is a permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes among its more than 150 member countries.

Brazil is said to have a(n) ________ in coffee beans because it can produce coffee beans more efficiently than other countries.

comparative advantage A nation is said to have comparative advantage in those areas that it can produce more efficiently than other countries.

An embargo is a ________.

complete ban on the import or export of certain products An embargo is a complete ban on the import or export of certain products or even all trade between certain countries.

Multinational corporations are companies that ________.

establish a physical presence in multiple countries through FDI Companies that establish a physical presence in multiple countries through FDI are called multinational corporations (MNCs).

The number of units of one currency that must be exchanged for a unit of the second currency is known as the ________ between the currencies.

exchange rate The number of units of one currency that must be exchanged for a unit of the second currency is known as the exchange rate between the currencies.

John, a jewelry maker in Montana, receives international orders through his website. He ships the products from the production plant at Montana after receiving confirmed orders. This scenario is an example of ________.

exporting Exporting is the selling of products outside the country in which they are produced. The given scenario is an example of this.

Almex is a U.S. based transportation company. In order to enter the Brazilian transportation market, the company purchases one of the leading transporters in Brazil. This strategy is known as ________.

foreign direct investing Many firms prefer to enter international markets through partial or whole ownership and control of assets in foreign countries like Almex is doing in this case. This approach is known as foreign direct investment (FDI).

Quiznos has sold individual owners the rights to use its trademark and business system. Quiznos has opened restaurants in 21 foreign countries in this fashion. This is an example of ________.

franchising Franchising involves selling the right to use a business system, including brand names, business processes, trade secrets, and other assets. The given scenario is an example of franchising.

Trade that takes place without governmental interferences is known as ________.

free trade Trade that takes place without governmental interferences, such as subsidies and tariffs, is known as free trade.

In a(n)________ strategy, managerial control is highly centralized and major decisions for the company's international operations are made at the company's headquarters in the home country.

global In the global strategy, a company embraces the notion of economic globalization by viewing the world as a single integrated market. Managerial control with the global strategy is highly centralized, with headquarters in the home country making all major decisions.

Which of the following is a main feature of protectionism?

governmental intervention in trade When a government believes that free trade is not in the best interests of its national security, domestic industries, workforce, or consumers, it can intervene in a number of ways. Some of these methods are collectively known as protectionism because they seek to protect a specific industry or groups of workers.

Which of the following is an objective of protectionism?

guard specific industries in a nation When a government believes that free trade is not in the best interests of its national security, domestic industries, workforce, or consumers, it can intervene in a number of ways. Some of these methods are collectively known as protectionism because they seek to protect a specific industry or groups of workers.

The U.S. restricts the import of peanuts to a maximum of 1.7 million pounds per year to protect the price that domestic producers can charge. This is an example of a(n) ________.

import quota Import quotas limit the amount of particular goods that countries allow to be imported during a given year. In the given case, an import quota is used.

Dumping ________.

involves selling a product at a price lower than the cost of production The practice of selling large quantities of a product at a price lower than the cost of production or below what the company would charge in its home market is called dumping.

In a(n)________, two or more firms bond together to create a new business entity that is legally separate and distinct from its parents.

joint venture A joint venture is an arrangement in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents. It is an alternative to a strategic alliance

Electrobox is a firm that manufactures commercial kitchen equipment. The firm decides to enter China and bonds with a Chinese firm to form a new company named Electrokitchen. This is an example of a(n) ________. 0/1 pts

joint venture A joint venture is an arrangement in which two or more firms join together to create a new business entity that is legally separate and distinct from its parents. It is an alternative to a strategic alliance.

A company benefits from economies of scale when it ________.

manufactures and distributes products in higher quantities Purchasing, manufacturing, and distributing higher quantities will enable companies to produce goods and services at lower costs. This occurrence is referred to as economies of scale.

Drobex Technologies is a manufacturer of electronic home appliances. The company has operations in 17 countries. The company operates as an independent unit in each of these countries and the head of operations in each unit makes decisions themselves. Drobex is following a(n) ________ strategy.

multidomestic In the multidomestic strategy, a company creates highly independent operating units in each new country, giving local managers a great deal of freedom to run their operations almost as though they are independent companies.

Trading blocs are ________.

regional organizations that promote trade among member nations Trading blocs, or common markets, are regional organizations that promote trade among member nations.

Theocratic law is found in Iran and Pakistan and is based on ________. 1/1 pts

religious principles Theocratic law is law based on religious principles and it predominates in such countries as Iran and Pakistan.

The classic theory of comparative advantage suggests that each country should ________.

specialize in those areas where it can produce more efficiently than other countries The classic theory of comparative advantage suggests that each country should specialize in those areas where it can produce more efficiently than other countries, and it should trade for goods and services that it can't produce as economically.

China imposes duties on automobiles imported to China. This is an example of a(n) ________.

tariff Taxes, surcharges, or duties levied against imported goods are known as tariffs. The given situation exemplifies tariffs.

Taxes, surcharges, or duties levied against imported goods are known as ________.

tariffs Taxes, surcharges, or duties levied against imported goods are known as tariffs. Tariffs can be levied to generate revenue, to restrict trade, or to punish other countries for disobeying international trade laws.

In the ________ strategy, a company uses a hybrid approach as it attempts to reap the benefits of international scale while being responsive to local market dynamics.

transnational In the transnational strategy, a company uses a hybrid approach as it attempts to reap the benefits of international scale while being responsive to local market dynamics

Foreign direct investment (FDI) ________.

typically gives companies greater control FDI typically gives companies greater control, but it carries much greater economic and political risk and is more complex than any other form of entry in the global marketplace.

A country has a trade surplus when the ________.

value of its exports exceeds the value of its imports When the value of goods and services exported by a country exceeds the value of goods and services it imports, the country has a positive balance of trade, or a trade surplus.

A country has a trade deficit when the ________.

value of its imports exceeds the value of its exports When the value of goods and services imported by a country exceeds the value of goods and services it exports, the country has a negative balance of trade, or a trade deficit.