Chapter 6
Why is it important for foreign companies to understand the standpoints of the major political parties in the country they would like to do business with?
Because political parties in power shape trade policy.
Identify a way in which multinationals can reduce their political vulnerability and risk when doing business in host countries.
By engaging multiple investors and banks in the investment
Identify the true statements regarding political risk assessment. (Check all that apply.)
It helps managers identify and assess political events. It is an attempt to predict political instability.
Identify a true statement regarding the risks of international marketing.
It remains challenging to assess which products and companies are politically vulnerable
nongovernmental organizations (NGOs)
Large advocacy organizations, usually not-for-profit, often multinational, and run by citizens rather than companies or governments. Prominent examples are Green Peace, Amnesty International, and the Red Cross.
According to Steven Pinker, which of the following reasons explain lower rates of violence on the planet? (Check all that apply.)
Laws and governance An increase in the involvement of women in the government
Which of the following best explains why foreign companies may encounter hostile political environments?
Many believe foreign companies care only about profit and exploit their nation's resources.
Identify a true statement regarding international marketing.
Marketing products that are politically sensitive in a host country should be avoided if possible.
political and social activists (PSAs)
PSAs are individuals who participate in efforts to change the practices and behaviors of corporations and governments, with tactics that can range from peaceful protest to terrorism.
When a country requires that any product marketed in the country must include a certain percentage of local material, it as
a local-content law
domestication
a process by which a host country gradually transfers foreign investments to national control and ownership through a series of government decrees mandating local ownership and greater national involvement in company management
Identify the issue that may affect the stability of a government.
an extremist party gaining power
nationalism
an intense feeling of national pride and unity; an awakening of a nation's people to price in their country. Nationalism can take on an antiforeign business bias
Political payoffs
are against the law in the United States, but they are common practice in certain countries.
Why are trade sanctions considered largely ineffective?
because traders from other major nations ignore them
Genrapay Inc., a multinational firm, has a branch of operations in a country. Due to rampant militant nationalism, the government seized Genrapay's assets without any form of reimbursement and proceeded to nationalize the firm. This scenario best exemplifies _____.
confiscation
_____ is the most drastic political risk that foreign investors face.
confiscation
Which of the following is a cause of political risk in international marketing?
contentious trade disputes
Multinationals can reduce their political vulnerability by _____.
creating joint ventures with the host country or a third country
Following the collapse of colonialism, _____ was seen as the best solution to all the criticisms of government.
democracy
A sovereign state can do which of the following?
determine its geographical borders make deals with other sovereign nations
What is a major liability for international marketers?
failure of the host country's government
What may happen o foreign investors when a host country's currency is devalued?
financial loss
When multinationals include several investors and banks in financing an investment in a host country, they can be protected from government takeover if the _____.
financing banks have made loans to the host country
democracy
government by the people
Joint ventures _________.
increase positive feelings toward multinational companies
A multinational company can improve relations with the government of a host country by
increasing the host country's exports.
Planned domestication means _____.
involving the host country's citizens in all aspects of company functions
For an international business, the best type of sovereign state to do business with is one that
is receptive to foreign investment. has a stable government.
Identify a strategy that may drastically minimize the political vulnerability of an MNC in situations where a company has an exclusive technology.
licensing
In the context of conditions for investment, some countries may mandate
local content to make up a portion of any product sold within a country
True or false: One government may both encourage and discourage international marketing.
true
True or false: Surprising and/or extreme political shifts in government policy deter foreign investment.
true
What causes a country to exercise exchange control?
too much money leaving the country
Identify a risk related to international marketing.
A country or group of countries may boycott businesses from a specific country
monarchy
A government in which power is in the hands of a single person
Identify a true statement regarding Steven Pinker's arguments about warfare, strife, and violence on the planet.
At this point in time, humanity has less to fear regarding violence than in previous eras.
Identify a way in which feelings of nationalism make themselves evident
Citizens purchase only items made within their country
Which of the following is a threat to international marketing?
Cyber attacks
Identify the problems related to cyberterrorism. (Check all that apply.)
Determining the nature of the cyberattack is not easy. Tracing the crime back to the cyberterrorists and criminals is difficult.
Which of the following products are most likely to be categorized as politically sensitive?
Products that symbolize the company's home country
Identify a characteristic feature of political and social activists (PSAs)
They are an important political force that should not be dismissed
Which of the following statements is true about political and social activists (PSAs)?
They can be a strong force in marshaling public opinion.
Identify a risk to MNCs that stems from their use of licensing to reduce political vulnerability.
They risk losing money if a licensee discontinues paying the licensing fee
A batch of automobiles produced by the overseas manufacturing unit of a multinational automobile manufacturer was recalled due to defects in engine transmission. Instead of blaming faulty manufacturing, the MNC decided to fix its design and inspection routines and publicly admitted its guilt in the matter. Identify the strategy used by the MNC to avoid political risks in its overseas operations.
political bargaining
Which of the following is the least recommended approach to avoiding political vulnerability and risk?
political payoffs
A feature of planned domestication is that it _____.
reduces political vulnerability
Which of the following helps reduce disruptions to international trade?
seeking resolutions to trade disputes
Feelings of nationalism are often exhibited through _____.
strict control over foreign investment
The countries of Vanadia and Bardemia have an agreement to trade various perishable products. Vanadia noticed a decline in the sale of its products in Bardemia. However, perishables from other countries were doing well. Marketers from Vanadia found that the problem stemmed from Bardemians' distrust of Vanadia due to previous military conflict. This scenario exemplifies _____.
targeted fear and animosity
Countries attract international investment in certain high-priority sectors by offering
tax breaks exemption from exchange controls
aristocracy
the highest class in certain societies, especially those holding hereditary titles or offices.
sovereignty
the powers exercised by a state in relation to other countries as well as the supreme powers of a state as exercised over its own inhabitants
confiscation
the seizing of a company's assets without payment. Prominent examples involving U.S. companies occurred in Cuba and Iran
Expropriation
the seizure of an investment by a government in which some reimbursement is made to the investment owner; often seized investment becomes nationalized
Why should a government support foreign investment?
to accelerate the development of its economy