Global Environment

Trade agreements, which detail the terms of trade between countries or trading block members, vary in the amount of free trade they allow among members and with nonmembers. Which of the following trade agreements comes the closest to the idea of global economic integration?

economic unions

Businesses intending to market their products globally should:

educate themselves to use cultural differences to their advantage

The U.S. currently does not allow import of the world's best cigars from Cuba, because the U.S. trade restrictions with Cuba constitute an:

embargo

The role of the IMF is to promote global trade by:

shaping and managing economic policy at national and global macroeconomic levels

Foreign direct investments FDI can take one of two forms: a "greenfield" (new) venture or a merger with or acquisition of an existing foreign business. Relative to other strategies for entering a foreign market, using foreign direct investments is considered to be a ________ option.

strategic choice in the sense of control and long-term potential

A manufacturing company located in China that uses children and pays them less than the minimum wage, is considered by the U.S. Government Accounting Office to be a(n):

sweatshop

The key drivers advancing globalization are:

technical, cultural, and economic advances

In global finance the term IMF refers to:

the International Monetary Fund

Economists use the PPP measurement to compare countries' varying standards of living to:

the cost of living in the US

There are a number of strategies a business can use to gain access to foreign markets. Exporting is considered to be ________ means of entering a new market.

the fastest and least expensive

Jack has become a franchisee of a Sonic in his local community. This has enabled him to have access to ________, in order to sell the products under the Sonic name.

the knowledge, processes, and trademarks of Sonic

Bribery is one of ________ examples of a corporation engaged in unethical behavior.

the most common

Balance of trade and balance of payments are both ways of measuring the impact of global trade on a country's economy. What differentiates the two measures is that balance of trade is ________ and balance of payments is ________.

the net of exports minus imports; net of money inflow minus money outflow

The international monetary community created both the IMF and the World Bank because:

the two organizations create an important division of labor

A country is said to have a trade deficit when:

the value of its imports exceeds the value of its exports

When more goods and services are exported than imported it is known as a:

trade surplus

Trade tariffs and quotas are designed to protect:

Domestic producers

The role of government in creating a climate that's conducive to global trade extends from the economic environment to the legal environment. Which of the following laws would contribute the most to creating a favorable environment for global trade?

trademark registration and enforcement

An agreement to purchase output from a foreign plant in exchange for providing capital and expertise to build the plant, is an example of:

buyback countertrade

When countries engage in trade, they specialize in the production of the goods in which they have a ________ advantage. Goods and services are produced where the opportunity cost is ________.

competitive; lowest

Tariff and nontariff restrictions:

contribute to economic growth and prosperity

Exchanging goods or services in lieu of currency transactions is known as:

countertrade

Displaying uncovered arms or legs in product packaging pictures is considered offensive in Mid-Eastern countries that observe Islamic law. This is an example of:

cultural customs and taboos

Marketing communications are subject to which laws?

decency, censorship and freedom of expression

absolute advantage

1. It is the only source of a particular product, good, or service. 2. An entity is also considered to have an absolute advantage if it is able to produce more of something than another entity while using the same amount of resources (factors of production).

In your global woodworking business you can produce 100 birdhouses, or 10 pieces of fine furniture for the same amount of resources. Therefore, each piece of fine furniture is worth:

10 birdhouses

A country's political economy has a significant impact on its ability to attract foreign businesses and investment. Which of the following factors contribute to a country's value as a new market?

A developing economy with a high growth rate

Measuring global trade

A nation has a comparative advantage at producing something if it can produce it at a lower cost than another. A competitive advantage is a term describing attributes that allows a nation to outperform competing nations. These attributes may include access to natural resources, such as high-grade ores or inexpensive power, highly skilled personnel, geographic location, high entry barriers, etc.

Joint ventures and foreign strategic alliances are approaches used with large-scale, capital-intensive projects in global markets. Which of the following situations best reflects a joint venture?

A new business is established with equal ownership where one party has in-country experience

comparative advantage

An entity (country, region, company, or individual) is considered to have a comparative advantage over another in producing a particular good or service if it can produce the good or service at a lower relative opportunity cost.

Companies seeking to expand their products to global emerging markets will likely pursue:

Brazil, Russia, India and China

Ethical Challenges in the Global Environment

Culture plays a big role in shaping and defining ethical behavior. As a result, what may be considered ethical in one country may be seen as unethical in another. In a global business context, such ethical challenges often arise in the form of corruption and labor abuse.

Global trade forces

Firms desiring to enter international business face a variety of barriers. Common barriers to effective global business are cultural, social, and political barriers, and tariffs and trade restrictions.

If a bribe has been paid to a foreign government official to obtain or retain business, then it is a violation of the:

Foreign Corrupt Practices Act

There are many ways that a business can reach the global market, the most intensive approach is through:

Foreign Direct Investment

An example of a regional trade agreement is:

North American Free Trade Agreement (NAFTA)

Which organization seeks to provide capital investments for economic growth and infrastructure projects:

International Monetary Fund

Your business plans to market its all-natural ingredient dog food to a foreign country. The shelf life of the product is a short 6 months from date of manufacture. Which of the following infrastructure considerations is a primary concern?

Storage facilities

As an evolution of international trade, globalization involves:

a shift toward a more integrated world economy

In your country rubber trees are abundant and you can trade them very profitably for technology products, which you cannot produce profitably in your country. Your abundant rubber trees give you:

absolute advantage

Global Trade Agreements and Organizations

The goal of the GATT is to make trade freer, and thus the promises countries make must involve reductions in trade barriers. The WTO's main purpose is to monitor the trade liberalization agreements reached by GATT-member countries in the Uruguay Round. The most important "power" of the WTO is its ability to adjudicate disputes between member countries regarding compliance with the agreements. The IMF's key roles are the following: promote international monetary cooperation; facilitate the expansion and balanced growth of international trade; promote exchange stability; and assist in the establishment of a multilateral system of payments. The World Bank has one central purpose: to promote economic and social progress in developing countries by helping raise productivity so that their people can live a better and fuller life.

Global Business Strategies

The main strategies that companies use to enter the global market are exporting/importing, outsourcing/offshoring, licensing and franchising, joint ventures/strategic alliances, and foreign direct investment (FDI). Each has different advantages and disadvantages that must be weighed carefully.

Import quotas:

set limits on the quantity or value of imports

Which of the following has as its primary purpose promoting economic and social progress in developing countries:

The world bank

The equation for balance of payments is:

Total inflow of money-total outflow of money

Which of the following best represents the impact of sociocultural forces on global trade?

Values differ across countries and can influence consumer perceptions and purchasing behavior

Which of the following establishes a new business that is jointly owned by two or more otherwise independent businesses?

a joint venture

Countertrade is a way of facilitating trade in circumstances when currency isn't a viable form of payment. Countertrade transactions are settled with:

exchange of goods or services

A company produces goods or products locally and sells them in foreign markets. This is called:

exporting

The role of the WTO is to promote global trade by:

facilitating negotiations and settlement of trade disputes among nations

The FCPA applies only to bribes paid (or offered) to ________ to obtain or retain business or to develop an unfair competitive advantage.

foreign government officials

In both licensing and franchising situations, the licensee and franchisee:

gain a competitive advantage

A company acquires goods or products from another country and sells them in domestic markets. This is an example of:

importing

Physical and environmental factors can have a significant impact on a company's ability to do business in a foreign country. A lack of which of the following factors would represent the greatest barrier to global trade?

infrastructure such as roads, railways and port systems

Physical and environmental factors can have a significant impact on a company's ability to do business in a foreign country. A lack of which of the following factors would represent the greatest barrier to global trade?

infrastructure such as roads, railways or ports

License agreements usually cover property that is ________, such as trademarks, images, patents, or production techniques.

intangible

Licensing and franchising are two options for gaining access to global markets. Licensing is generally used with ________; franchising is generally used to "export" ________.

intangible goods; branded product or service

Increasingly, businesses are getting their products and services into global markets via:

licensing and franchise agreements

One of the main responsibilities of the World Trade Organization is to:

provide a forum for negotiations, agreements and settling disputes among nations

The World Bank is an international financial institution that promotes global economic development by:

providing loans and grants to provide education, infrastructure and public health projects in developing countries

Comparative and absolute advantage are competitive advantage concepts that determine production and trading decisions. Absolute advantage is based on ________; comparative advantage is based on ________.

resources exclusivity or factor productivity; relative opportunity cost

Managing multiple and varying currencies is a(n) ________ challenge in a global business environment.

services, foreign investments, loans and foreign aid, financial capital, and financial transfers

The U.S. Government Accounting Office defines a sweatshop as any manufacturing facility that is guilty of ________ labor abuses such as unsafe working conditions, employment of children, mandatory overtime, payment of less than the minimum wage, abusive discipline, sexual harassment, or violation of labor laws and regulations.

two or more

When marketing products globally, businesses should:

understand and conform to the laws of the countries in which they operate

The equation for balance of trade is:

value of exports - value of imports