IB: Midterm
Individualism
The belief that the needs of the most important than the needs of society
Gross Domestic Product
The value of finished goods and services produced within a country's borders
Your 7-year-old sister and 5 of her friends open a lemonade stand every summer. This past summer, they made $40 per day for 45 days. The divided the money evenly between themselves. None of them paid taxes on their money. What was her contribution to annual national GDP?
$0
Sam bought a new car in 2011 for $20,000. In 2015, Sam sold his car to Joe for $12,000. What contributions did the sale of the car make in 2011 and 2015 respectively?
$20,000; $0
Democracy
A political system characterized by citizen participation in the political system
Individualism
Gives preference to individual freedoms, liberties, and right
Which of the following is true of the G20?
It consists of finance ministers and central bank governors of the 19 largest economies in the world.
Capitalism
an economic system in which factors of trade and production are controlled by private owners rather than by the state
Property rights
- the rights of companies and individuals to own resources, make decisions about how to use it, and reap the returns or looses of business activities
Imagine that the exchange rate for trading Shealton Sheas for Rosmanian Ros is 0.75 Ros to 1 Sheas. Given that Sheas is the domestic currency, estimate the exchange rate for trading Sheas to Ros.
0.75 Ros
Rule of Law
1. The rule of law typically supports individual liberties, democracy, and economic prosperity 2. The rule of law puts a check on governmental power 3. The rule of law codifies and clarifies business property rights and builds institutions such as courts, public records offices, and patent offices that protect those rights
Apricot Inc., an American food and beverage company, is devising strategies to expand its business in Austria. Jonathan, a manager at Apricot, believes that a PEST analysis is the best way to get a picture of the competitive landscape in Austria. Which of the following statements supports his belief?
A PEST analysis can be used to implement appropriate practices from local Austrian cultures while avoiding problematic ones.
Uncertainty avoidance
A business- related aspect of culture that measures how persons deal with an unknown future
Investment
A company planned to build a new plant in Industrial Town, but civil unrest in the area has delayed their plans indefinitely. This directly affects which variable of GDP?
Cognitive
A corporate cultural training specialist is hired to train management who will be working in a new country about the local culture. This specialist has been tasked to prepare them with a program highlighting the similarities and differences between their cultures, so that they can implement strategies to become effective managers in the new location. This type of training would be considered which type of cultural intelligence quotient?
In the context of money, identify a true statement about fiat currencies.
A country can undermine the value of its fiat currency, rendering it valueless.
The Heritage Foundation
A country's internal laws can affect foreign firms Indirect consequences of political freedom can also affect international business
Which of the following BEST describes high-context culture?
A culture that uses more implicit messaging and contextual elements to convey information
Expropriation
A government's seizure of assets as a result of political action
the captured pirates can be prosecuted under the law of the sea.
A group of pirates from Sukleis, a country in Southern Europe, seized an oil tanker for ransom, off the Mediterranean Sea. The oil tanker belonged to Kidero, another country in Southern Europe. The pirates were captured by the navy of Kidero. In the context of international law, it can be said that:
Causes of Globalization
A radical change began in the 1800s in which countries began to assert their independence from the world-spanning empires in order to become independent, sovereign nations This shift toward sovereignty allowed for increased trade and business between countries with strong cultural and political differences
Gross National Product
A second way to measure the opportunities for international businesses present in a foreign country is a measure that considers the international income of a country The total value of final goods and services provided by a country; it equals the gross domestic product plus the net payment outflors of a country It counts the output that domestic companies make abroad GNP=GDP+NR-NP NR=net receipts NP= Net payment outflows
Political Ideology
A set of principles, ideas, and doctrines used to organize and administer social order
Values
A society's values are its backbone, the shared assumptions that identify when its members believe is good, right, and desirable
Market
A virtual or physical setting where people exchange goods and services
political system
A(n) _____ consists of the principles, laws, and procedures relating to a particular form of government.
Ether Inc., a British telecommunications services company, uses PEST analysis to identify and assess the technological factors that are likely to affect its business operations in India. Which of the following is a technological factor that Either is most likely to examine in its PEST analysis?
Advancement of infrastructure in India
Culture, which is society's unique set of values and norms that govern how people live and interact, is often compared to an iceberg for what reason?
An iceberg can be seen above water (i.e., visual aspects), while part of it is hidden under the water (i.e., influences more difficult to discern).
Imagine you are a foreign exchange currency trader trying to predict exchange rate shifts. Which of the following is likely to result in domestic currency appreciation?
An increase in foreign direct investment and an equivalent decrease in the supply of its currency.
intellectual property
Any creation of the human mind is known as _____.
Other Measures of Prosperity and Opportunity
Because of the disconnect between GDP and actual well- being, several alternative measures of prosperity are also useful to international businesses Human Development Index (HDI)- a measure used to tank countries into tiers of human development, composed of factors including life expectancy, education, and per capita income
Collectivism
Belief that people should prioritize the good of society above the advancement of the individual
round world
Bianca is a student of international business at the University of Phoenix. She is of the opinion that the world is not fully connected. She believes that the global financial markets are controlled only by a few cities and that most businesses still operate in domestic markets. Bianca's views are consistent with the _____ argument.
Which of the following is a similarity between the ideal of dharma and the Protestant work ethic?
Both focus on a person's moral obligation to contribute to the greater good of society.
Somchai, a Thai, follows a religion that does not worship any god—it promotes interconnectedness among all living creatures. His religion represents the middle way between capitalism and socialism and proclaims that spiritual liberation can be achieved by avoiding extremes. In this context, Somchai is most likely a _____.
Buddhist
Which of the following is true of international business?
By diversifying the places where its products are made, a company can soften the impact of price increases or supply shortages that may occur in any one country.
Waldorf Inc., an oil company, is faced with an ethical dilemma of whether or not to continue to use the process of hydraulic fracturing to drill petroleum from thousands of feet below the surface of the Earth. The company is facing social pressures from environmental groups to discontinue the process of hydraulic fracturing as it has adverse effects on the environment. Waldorf Inc. wants to use a proactive approach to deal with these social pressures. In which of the following ways can Waldorf Inc. improve its reputation as a highly ethical company?
By engaging in corporate social responsibility (CSR) initiatives
Amanda, a marketing manager at Xenon Inc., believes that the company should engage in international business as it will benefit the company in multiple ways. However, Kyle, an operations manager of the company, feels that it should concentrate on conducting business domestically. Which of the following statements supports Amanda's beliefs?
By engaging in international business, Xenon can acquire new resources and knowledge.
Autocratic
Characterized by concentrated power in the hands of a leader or small group of leaders with centralized power who are not constitutionally responsible to citizens for their actions
Internal Environment
Companies need to consider several internal management factors Mode of entry into new countries (country entry) Overall strategy for reason for entering the country (strategy) Company's organizational structure (organization) Leadership capabilities (leadership)
_____ are electronic currencies that are monitored by distributed peer networks that simultaneously keep track of currency ownership and trades.
Cryptocurrencies
An American manager at a subsidiary office in Brazil has a Brazilian employee, João, who is always very punctual. The rest of his Brazilian employees are not punctual like João, which, although he is not surprised, upsets him. This is an example of a manager with a high level of which factor(s) of cultural intelligence?
Cognitive but not behavioral CQ
Communism
Collective ownership of the factors of production and allocation of goods and services to workers according to their needs, argue for revolutionary means to establish a communal society
What is the FIRST step a company should take when considering opening operations in a foreign country with potentially high political risk?
Conduct a political risk analysis
Three Different Levels of Law
Constitutional Law Criminal Law Commercial Law
Globalization makes it easy for employers to move jobs to cheaper locations.
Cora, an American citizen, is a critic of globalization. She believes that globalization has done more harm than good. She contends that globalization has detrimental effects on developed markets. Which of the following statements supports her contention?
Internal Management Factors
Country Entry- Choosing the best method for entertaining a foreign market Exporting and Importing Turnkey Projects Licensing Franchising Joint Venture Wholly Owned Subsidiary Strategy-Companies need to develop a strategy for international operations Organization-Structuring the global organization around the strategy Vertical structuring Horizontal structuring Leadership- Four specific competencies are critical: strong corporate vision, functional excellence, industry expertise, and market savy
Which of the following is an example of a multinational corporation?
Crayola Inc., an American smartphone company, operates in 36 countries across the globe.
Which of the following is a society's unique set of values and norms that govern how people live and interact with each other?
Culture
Globalization
Dasom Inc., a South Korean smartphone manufacturer, sells its smartphones in 64 countries around the world and has offices in 36 counties. Dasom's business expansion best exemplifies _____.
The United States government realizes that consumption is falling, which may lead to a recession. They make a change in their fiscal policy. This may include which of the following?
Decrease taxes
Which of the following is a difference between developed markets and emerging markets?
Developed markets experience average economic growth of around 2 percent/year, whereas emerging markets experience economic growth of at least 4 percent/year.
Direct and Indirect Effects of Political Risk
Direct effects result from political actions that target or regulate a specific entity Indirect effects are those experienced by any business that is not the specific target of a political action
In the context of managing exchange rate risks, which of the following statements is true of an option?
Even after purchasing an option, it is not an obligation to buy a certain amount of currency at a given exchange rate.
Effects of Globalization
Events in countries worldwide now have long reaching, long lasting effects even for people who never visit those countries 1990s- Open trade in Russia 1990s- China began free market reforms, stock markets opened in Shanghai & Shenzhen 1990- India was in serious economic crisis 1991- Democratic government made major reforms to allow for trade of goods and services with other countries 1994- Brazilian Central Government introduced Plano Real
In the United States, the _____ regulates all forms of online advertising, data collection, and sales, and imposes penalties for companies making false claims or violating customers' rights.
Federal Trade Commission
Which of the following BEST describes "recentering"?
Finding or creating shared ground, or areas of overlap between old and new behaviors and understanding
Reactive versus Proactive Response to Ethical Dilemmas
Firms that are reactive seeks to build capabilities that let them quickly respond to social pressures and engage in actions that attempt to minimize the damage to the firm Firms that are proactive seek to build capabilities that build a reputation for ethical conduct. Actions by proactive firms seek to maximize their reputation. Some of the tools that proactive firms use to increase their reputation as highly ethical companies include engaging in corporate social responsibility (CSR) initiatives Employment practices, Environmental practices, and Human rights
Four Main Types of government policy that affect currency valuations and foreign exchange rates
Float Managed Float Peg Dollarization
The _____ is a law signed by President Jimmy Carter in 1977 that made it illegal to pay foreign government officials for their assistance in obtaining or retaining business.
Foreign Corrupt Practices Act
_____ is the permission to use another company's trademarks, patents, copyrights, and expertise according to a strict template setting out the way it does business.
Franchising
Real (inflation-adjusted) GDP
GDP that has been adjusted to account for the effect of the inflation on its value
Nominal GDP
GDP that has not been adjusted to account for inflation
Globalized Markets
Globalization makes it easier to buy and sell internationally Over time, ease of exchange from globalization means that preferences and tastes across the world start to converge Companies benefit from convergence The global spread of products such as Coca- Cola and McDonalds
An international business that specializes in military jets will be most interested in which category of output?
Government spending
Extremism
Holding extreme political or religious views
What is total factor productivity?
How efficiently labor and capital work together
property rights
In Chiresia, a country in Western Africa, the government controls the right to mine all the minerals under the surface of land irrespective of who owns the land. This scenario illustrates that the government of Chiresia has denied _____ to land owners.
theocratic law
In Jiledina, a country in Southern Europe, laws are based on Christian doctrines. The laws of the country govern crime, politics, business contracts, and religious observances. Given this information, it can be said that Jiledina operates under _____.
constitutional law
In Kiserk, a country in Central America, a body of law sets the bounds of government and governmental procedures, including creating the authorities that establish laws. Given this information, it can be said that this body of law is the _____.
Which of the following is a difference between individualistic cultures and collectivist cultures?
In collectivist cultures, job security is a principal motivator, whereas in individualistic cultures, the opportunity to overcome challenges and grow is often a main motivator for employees.
Shinzo Abe is the president of Japan and has asked you for advice on his fiscal and monetary policy. He wants to do each of the following to help break Japan out of its deflationary cycle. Which of the following do you recommend that he NOT do?
Increase taxes
A country is transitioning from a command to a market economy through deregulation of industries. How will this decision impact the market?
Increased competition
Objective
Increased sales, New resources and knowledge, reduced risk
The three ways in which crime and corruption affect international business are:
Increasing wealth through regulatory changes Product liability Property rights and intellectual property
In a recent speech, a political candidate talked about democracy and human rights. The candidate said that the "average citizen knows what's best for him...the government doesn't need to design or plan his life..." These musings are MOST likely indicative of which political ideology?
Individualism
According to author Thomas Friedman, which of the following is true of the flat world?
Individuals in poor countries with limited infrastructure are able to compete with people in rich, well-developed countries.
Which of the following is true of globalization?
It builds on the principle of sovereignty to strengthen the relationships that connect us.
Which of the following is true of the World Trade Organization?
It came about as a result of negotiations in the 1990s.
Identify a true statement about the World Trade Organization.
It ensures that member nations impose the minimal number of restrictions on each other.
Which of the following is true of a joint venture?
It ensures that neither of the two original companies is directly harmed by failure.
Which of the following is true of globalization of production?
It helps companies take advantage of national differences in cost and quality.
Which of the following is true of arbitrage?
It involves searching for deals on production factors across geographic boundaries.
In the context of foreign exchange rates, which of the following statements best describes the process of dollarization?
It is the process of a country abandoning its currency and using another currency instead.
Which of the following is true of horizontal structuring?
It reflects the way a company decides to subdivide itself.
Which of the following is true of the United Nations?
It was established as a way to get countries to resolve their differences through diplomacy, with the goal of maintaining and promoting global peace.
the rule of law
Julio is a popular movie star in Gisonia, a country in Southern Europe. He was recently involved in a bar fight and was charged with battery. Julio faced the same consequences for the crime he committed as the rest of the country's general population. This scenario exemplifies _____.
International Law
Laws agreed on by nations; these laws are binding on nations and supersede their national laws
civil law
Liberis, a country in East Africa, operates under a system of law that aims to prevent litigation and promote confidence in transactions. The law has ancient Roman origins. Under this law, judges in Liberis are bound not by earlier rulings, but by a written constitution and detailed statutory code that is always binding. Given this information, it can be said that Liberis operates under _____.
Neon Inc. wants to engage in international business to increase its sales. Travis, a manager at Neon, feels that licensing is the best way through which the company can enter a foreign market. However, Isaac, another manager at the company, is skeptical of licensing. Which of the following statements supports Isaac's skepticism?
Licensing can result in lost opportunities for parent companies.
In the country of Losan, majority of the population is employed in the manufacturing sector. However, as the nation's overall income is low, little demand exists within Losan for the manufactured products. Yet, the government of Losan keeps its currency valuation quite low to ensure that:
Losanian goods are comparatively cheaper in the world market.
Derian Inc., a national investment firm, has a culture that encourages collaboration between managers and employees. Managers at the firm take inputs from their team members before making any decisions. The employees of the firm feel that they are on an equal footing with their managers. As a result, they prefer working in groups and rely on the firm for training and socialization. In this context, which of the following pairs of characteristics most likely describes the work culture of Derian Inc.?
Low power distance and high collectivism
flat world
Maya Inc., an Indian apparel company, now sells its apparels in the United States, Canada, Australia and New Zealand. Derek, the CEO of Maya Inc., believes that free access to markets, few barriers to competition, and uniform trade regulations have enabled Maya Inc. to expand its business operations internationally. Derek’s beliefs are consistent with Thomas Friedman’s theory of the _____.
The three major functions of money are:
Medium of Exchange Unit of Account Store of Value
In the context of foreign exchange rates, which of the following scenarios exemplifies dollarization?
Melton, a country facing serious crisis, uses the currency of Alarodo as legal tender for conducting transactions.
Consumer Products
Nebula Inc. is an American smartphone manufacturer that sells smartphones in 36 countries across the globe. Nebula makes both low-end and high-end smartphones to cater to the needs of different markets across the world. There is a high demand for Nebula’s low-end smartphones chiefly in developing nations. Its high-end smartphones have buyers mostly in developed nations. One of the challenges that Nebula faces is planning its sales strategy to suit different markets. Given this information, it can be said that Nebula’s smartphones are an example of _____.
factors of production
Niall is an assembly-line worker in a car-manufacturing firm in Detroit. Assembly-line workers like Niall constitute the _____ of the car-manufacturing firm.
legal but unethical
Octagon Inc., is an American oil company. It uses the process of hydraulic fracturing for drilling natural gas from several thousands of feet below the surface of the Earth. Although hydraulic fracturing complies with business regulations, Octagon Inc. has faced angry protests from environmental groups who claim that this process adversely affects the environment. Given this information, it can be said that Octagon Inc.'s actions are:
arbitration
Omega Inc., an American semiconductor company, made a contract with Delta Inc., a Canadian computer manufacturing company, on 25th September 2017, to manufacture and deliver 1,000 chipsets on 3rd October 2017. However, Omega Inc. failed to deliver the chipsets on the agreed date. Omega Inc. wants to avoid a lawsuit and reach a settlement outside the courts. Delta Inc. agrees to consult a third party to reach a binding decision. Given this information, it can be said that Omega Inc. and Delta Inc. are engaged in _____.
Which of the following best defines the 10% presumption?
Only about 10 percent of activity is conducted globally; the remaining 90 percent is domestic.
Which of the following is NOT one of the imperfections of GDP and GNP?
Only applicable to capitalist economies
A U.S. firm would like to enter a foreign market but wants to avoid exposure to political instability that could limit ownership of assets. The firm's priority is accessing the increasing number of consumers who value foreign products like the goods it sells, but it must be positioned as a regional entity. Which approach to market entry should the firm use for large-scale product adoption?
Operate in adjacent country and sell to target market
A country will host national elections to choose its legislative body of government. These elected officials will form a cabinet amongst themselves. This is MOST likely reflective of which political system?
Parliamentary government
PEST analysis
Political Economic Sociocultural Technological
Nebula Inc. is an American multinational software development company, and it has operations in Orvetia. It has a working hours policy of nine hours a day. However, in Orvetia, a country in Eastern Europe, the labor laws specify that employees should work only eight hours a day. Which of the following external factors is affecting Nebula's operations in Orvetia?
Political factors
__________ refers to the principles, laws, and procedures relating to a particular form of government.
Political system
The Political Spectrum
Political systems tend to be shaped not only by the political ideologies that support the system but also by the cultural and religious values, history, and economic system of the country Individualism Anarchists Collectivism Democracy Representative Presidential Parliamentary Social Autocratic Authoritarian Totalitarianism Theocratic Terrorist organizations Communism & Socialism
External Factors
Political, Economic, Sociocultural, Technological
The Components of GDP
Private Consumption Business Investment Government Spending Net Exports
How can governments change their involvement?
Privation, Policies and Property Rights, Deregulation
Factors of Production
Production of a product or service requires different component parts, skill sets, or information
The three R's of managing cultural difference
Recognize differences Reconcile differences Respect differences
Volkswagen Group China, which was a joint venture established in 1984 as the Shanghai Volkswagen Automotive Co., had to adapt from German cultural aspects in terms of management and operations to a Chinese cultural approach. As Germany tends to have a low power distance culture and China would be considered to have a high power distance culture, what was the MOST likely adaptation that Volkswagen had to take into consideration when they opened a manufacturing facility in China with local employees?
Recognize that China is a high-power distance culture and little consultation is expected between managers and subordinates.
multilateral organization
Sanctity is a non-profit group that works toward increasing female literacy globally. It strives to promote women’s education in developing nations. Its members are engaged in providing training and advisory services to schools and colleges in developing nations. Sanctity is funded and managed by several governments worldwide. Given this information, it can be said that Sanctity is a _____.
Kelly is a manager in a multinational firm. She manages a culturally diverse team of five employees. She realizes that to build a cohesive team, she needs to understand the key cultural differences among her team members. Therefore, she reads about the culture of each of her team members and understands how cultural differences among them could impact business interactions. In the context of managing cultural differences, which of the following is the immediate next step that Kelly should take?
She should decenter and then recenter.
Customs
Socially approved standards of behavior that are not morally significant
FP Mining Company was founded with public funds in 1977, and it generates more than $4B profit each year. The government owns 85% of the company's stock and the rest of the shares are held by investors. When it was founded, the company was wholly owned by the state. This company is an example of which form of corporation?
State-owned enterprise
Which of the following is a difference between high power distance and low power distance?
Unlike high power distance, low power distance results in a more collaborative environment.
Improving Cultural Intelligence
Step 1: Identify CQ Strengths and Weaknesses Step 2: Select and Apply Training to Focus on Weaknesses Step 3: Organize Daily Tasks to Align with Training
Examples of political risk include all the following EXCEPT:
Stock market crash
Management Activities
Strategy, Structure, Marketing, Human Resources, Supply- chain & Operations, Finance & Accounting
Social mores
Strict norms that control moral and ethical behavior in a culture
Sue lives in New York City and makes six times as much as Margaret, who lives in upstate New York and works a similar job. To determine who has a higher standard of living, what information is needed?
Sue's PPP and Margaret's PPP
Which of the following best illustrates global convergence?
Swedish company IKEA that sells and manufactures its bookshelves in many countries.
Which of the following examples best illustrates the globalization of production?
Tanner Inc., an American publishing company, outsources writing services to India.
Vermilion Inc. is an American business consulting company. The company is planning to open its office in Argentina. Jensen, a manager at Vermilion, suggests that the company should conduct a PEST analysis before taking this step. Which of the following is a political factor that Vermilion should take into consideration in its PEST analysis?
Tax rates in Argentina
Collectivism
The belief that the needs of society are more important than the needs of the individual
Globalized Market
The Commerce Coalition (CC) is an intergovernmental organization operating in South Asia that consists of seven member nations. The CC was established to enable free trade across these seven countries of South Asia. A citizen of any of the member nations can easily purchase goods produced in another member nation without paying additional taxes. Given this information, it can be said that the large market created by the CC is an example of a(n) _____.
While many laws exist, the laws listed below have a substantial impact on international businesses:
The Foreign Corrupt Practices Act e-Commerce and Data Privacy
Literia, a country in Asia, is experiencing a financial crisis. Its currency has lost much of its value, and the country's currency reserves are depleting. In this scenario, which of the following multilateral organizations is most likely to provide loans to Literia to rescue it from its financial crisis?
The International Monetary Fund
common law
The United Kingdom, the United States, and Australia are examples of countries that rely on _____.
10% Presumption
The balance between foreign and domestic sources of investment hovers around 10 percent for most economic activities in the United States
Future orientation
The degree to which a culture chooses future rather than immediate results
Power Distance
The degree to which subordinates in an organization accept that power is distributed
Mantonian franc is the currency of Mantonia, a country with a floating exchange rate system. The government of Mantonia does not directly intervene in the currency exchange. Hence, it has no direct influence on the price of the nation's currency. However, it is involved in other indirect actions such as buying currencies of other countries. Which of the following statements supports the fact that the act of buying currencies of other countries can affect the floating exchange rate?
The demand for the domestic currency of Mantonia decreases.
Exchange Rates
The formula is simple: e=P*IP where e is the exchange rat, P* represents the price of the foreign currency, and P is the price of the domestic currency
Flat world
a world with free access to markets, few barriers to competition, and consistent enforcement of regulations
Political Systems
The principles, laws, and procedures relating to a particular form of government
Political Risk
The risk that political conditions in a host country might change, negatively affecting foreign businesses
Bella, a professor at the University of California, believes that the rule of law promotes international business. Which of the following statements supports her beliefs?
The rule of law puts a check on governmental power in a country.
Norms
The social rules that govern people's interactions
Rhombus Inc. is a German consumer electronics company. It is planning to start its operations in India. Which of the following is an economic factor that Rhombus should consider before starting its operations in India?
The stability of trade cycles in India
A U.S. multinational firm with operations in Africa records its assets in local market currencies daily. During a period of economic instability in one of the firm's African markets, the country's central bank decides to lower interest rates by printing currency to make more available to its citizens. How will the central bank's decision affect the U.S. firm in this African market?
The value of firm property in country will decrease.
Which of the following is true of political systems?
They directly affect the opportunities available to international businesses.
Identify a true statement about political systems.
They influence the economic, sociocultural, and technological climate in a given country.
Conducting a PEST Analysis
To conduct a PEST analysis, first identify the specific environment factors you need to consider and assess Next, assess how these factors affect your company's international operations, as shown in the PEST analysis tool PEST analysis tool- a spreadsheet that allows you to quantify the different PEST threats and opportunities to determine which countries are most attractive This tool can be expanded to include other factors as you explore PEST
Recenter
To find or create shared ground between old and new behavior and understanding
Three Major Objectives
To increase sales To acquire new resources and knowledge To reduce the risk of operating in just one market
Decenter
To take what you have learned about another's culture and use that knowledge to adapt one's own behavior and thinking
A nation implements a policy that restricts licenses and permits for all firms that want to enter its market and establish short-term operations without foreign direct investment. What type of adverse action is this policy MOST likely to create?
Trade controls
Privatization
Transfer or sale of ownership of a certain property or industry by a government to the private sector
In the context of social stratification, which of the following is a difference between U.S. culture and Japanese culture?
U.S. culture values accomplishment and achievement regardless of age, whereas Japanese culture values the wisdom and experience of age.
The spot exchange rate
US$1=1,150KW. This is the wholesale rate, or the rate at which banks exchange currency
Which of the following is a difference between customs and social mores?
Unlike customs, social mores are deeply, morally significant.
An iceberg can be seen above water (i.e., visual aspects), while part of it is hidden under the water (i.e., influences more difficult to discern).
Values; norms
Theocratic government
What is a form of totalitarian autocratic government in which leaders rule by a mandate from God by interpreting religious law?
Cultural intelligence
What is the knowledge to function effectively across cultural contexts?
Expropriation
What term is BEST described as a government's seizure of assets as a result of political action?
The Effect of the Enforcement of Laws on International Business
With so many different legal systems and country-specific variants in effect, it can be challenging to understand how international laws will affect specific international businesses Global regulations affect international business is through laws governing foreign ownership and operations of businesses It is difficult for multinational companies to establish businesses in foreign countries, it is also challenging for them to obtain and enforce contracts across borders
Genevieve is a manager at Titanium Inc., an American apparel company. Before opening its manufacturing units in China, Genevieve believes that Titanium should analyze different contextual environments to understand long-term trends in China and assess how they might affect Titanium's business there. Which of the following is an economic factor that Titanium should take into consideration in its PEST analysis?
Workforce productivity in China
Imagine that Belseria, a developing country in South America, recently became a member of a multilateral organization that works toward preventing war by promoting economic development in poor countries. The organization assists poor countries in building their infrastructure by providing them with heavily subsidized loans. Given this information, it can be said that Belseria most likely became a member of the _____.
World Bank
In the context of managing exchange rate risks, which of the following best exemplifies a company that is engaged in forward exchange rate transactions?
XYZ Corp. reaches an agreement with Iond bank to trade currency at a future date at the rate agreed to and specified at the time of the deal.
Facilitation payments
_____ are payments made to speed up the actions that government officials are already bound to perform.
Ethics
_____ are the moral principles of right and wrong that guide personal and organizational decision making.
Criminal law
_____ describes laws and punishments that regulate social conduct and provide personal, property, and human rights protections.
Commercial law
_____ describes laws specifying the rights and duties of individuals in their business dealings, how businesses are created and organized, and how business is transacted.
Multinational Corporation
a company with operations in more than one country
Host Country
a country in which an international business operates
Depreciation-
a decrease in the value of one currency relative to another currency
globalized market
a large market created by combining separate national markets
State-owned enterprises
a legal entity created by a government or a representative to engage directly in commercial activities on behalf of the government
Common Law
a legal system in which judges interpret law and set precedent for subsequent interpretation and usage
Mixed legal systems
a legal system that combines two or more of the following types of law; customary, theocratic, common, or civil law
Total factor productivity (TFP)
a measure of the efficiency with which labor and capital are utilized together
Purchasing power parity (PPP)
a measure that compares the costs of common products and services in terms of one currency
World Bank
a multilateral organization designed to provide financing, advice, and research to developing nations to aid their economic advancement
Recession
a period of GDP contraction that lasts for at least two consecutive quarters
Capital
a resource that can serve to generate wealth, such as factories, equipment, investment accounts, software, land and education
Depression
a severe, sustained period of economic contraction in one or more economies
Civil law
a system of law that provides a comprehensive code of written law that judges translate into legal principles and regulatory statutes
Theocratic law
a system of law that relies on religious doctrine and belief
Law of sea
allows countries to seize and prosecute pirates who commit crimes in international waters
Macro Political Risk
adverse political actions that affect all foreign investments and operations in a host country
Micro Political Risk
affect only a specific sector, firm, or project
Macro political risk differs from micro political risk because it affects all foreign investments and operations, while micro political risk ________.
affects a specific firm, sector, or project
Market-based economy
an economic system in which factors of trade and production are controlled by private owners rather than by the state, also known as capitalism
Float
an exchange rate system where the price of the currency is defined by the supply and demand of the currency in the foreign exchange market
Appreciation
an increase in the value of one currency relative to another currency
World Economic Forum
an independent non-profit organization designated to improve global economic and social conditions
Consumer Price Index (CPI)
an index that tracks the price of a specific set of consumer goods across time to identify general price increases or decreases
G20
an international forum for governments from 19 major economies to discuss policy issues related to internals financial stability
David belongs to a faction of individualists who believe that individuals should be free from any system of control. This faction believes that individuals should have the right to govern themselves without the need of any system of government. Given this information, it can be said that this faction is most likely a group of _____.
anarchists
Law of one price- assumptions
any given good or service would carry the same price everywhere is allowed free movement across national boarders
In the context of money, unlike fiat currencies, cryptocurrencies:
are not controlled by intermediaries.
Round World
argument insists that the world is not as connected as we might think
Motivation CQ
assesses your level of interest, drive, and energy to adapt cross- culturally; this can come from both an innate (intrinsic) desire as well as external (extrinsic) forces.
Sienna Inc., a cosmetics company, recently started its business in the United States. It has experienced fast growth in the first eight months. To continue its success in the international market, Sienna has decided to open its branches in Europe. Given this information, it can be said that Sienna is a _____ firm.
born global
In the context of managing cultural differences, once you have recognized cultural differences, the next step is to:
change and adapt your own views of the world to better appreciate the elements of another culture.
Integrated technology platforms
common operating systems that can be used across multiple computer connected through the internet
Hexagram Inc., an American car-manufacturer, recently started its operations in India. To successfully carry out its operations in India, Hexagram should:
consider all the assumptions and culture-specific knowledge about India.
The country of Ghathan has been in serious foreign debt for quite some time. It has large amounts of debt denominated in dollars, euros, and pounds. In the given scenario, the government of Ghathan is most likely to:
consider overvaluing the national currency.
Emerging Markets
countries moving toward economic policies of open trade and free markets
Sovereign nations
countries that govern themselves rather than being controlled by a foreign power
The people of Jirasta, a European country, believe that individuals should lie face down on the ground and join their hands while greeting others. This is an example of a _____ in Jirasta.
custom
Increasing tuition at universities ________.
decreases the supply and efficiency of labor
In the context of the foreign exchange market, _____ is defined as a decrease in the value of one currency relative to another currency.
depreciation
Ervetia is a country in Europe, which has recently adopted a new economic policy. The government of Ervetia has now opened doors to foreign investments and free trade relations with other countries. The number of private companies in Ervetia has also started increasing at a fast pace. Given this information, it can be said that Ervetia is most likely a(n) _____.
emerging market
Market-based economies ________.
encourage individuals and businesses to determine their investment in the economy
United Nations
established in 1945 to get countries to resolve their differences through diplomacy, with the goal of maintaining and promoting global peace
ABC Corp., a U.S.-based company, is signing a business deal with Syphed Inc., a company based in the country of Yanghor. The base currency for the deal is the U.S. dollar. The counter currency for the transactions between the two companies is Yang, the official currency of Yanghor. To be able to conduct business in Yanghor, ABC Corp. should identify how much of U.S. dollars will be required to buy an equivalent amount of purchasing power in Yang. In short, ABC Corp. needs to identify the _____ of the currency of Yanghor.
exchange rate
Political
external factors including labor laws, property rights, and patent processes
Sociocultural
external factors including method and style of communications, religions, values and ideologies, education standards, and social structure
Economic
external factors including strength or weakness of markets, stability of trade cycles, specific industry conditions, customer preference and government's economic policies
Technological
external factors pertaining to the technological infrastructure in a country, including intellectual infrastructure and investments, information systems, manufacturing equipment, and consumer access to technology
Gross Domestic Product is a measure of ________.
finished goods and services produced within a country's borders, regardless of whether they are made by domestic or foreign companies
The fluctuation of exchange rates is a significant risk factor for Sedantha Inc., a company based in Velezland that imports miniature grape vines from the country of Highlands. The company usually purchases these vines during early fall and decides to pay for them after a few months. This could be termed as a risky exchange because the true cost of the vines can swing dramatically with currency shifts. In this scenario, Sedantha Inc. can eliminate currency risk by using _____ to lock in an exchange rate.
forward contracts
During the 1950s, Ghajna, a developing nation, used currency whose value was determined based on the value of gold. People in Ghajna could present currency worth of 10Gaj, Gaj being the currency of Ghajna, to a government-approved bank and receive 10Gaj worth of gold in return. The nation used gold as the base to value its currency. In this scenario, we can say that the nation of Ghajna had the _____ in place during the 1950s.
gold standard
Currency Trade Controls
government action to regulate the amount of currency and goods that can be traded for purchases
Fiscal policy
government actions intended to spark or diminish consumption
In the context of institutions that make foreign exchange happen, nonfinancial customers include:
governments and businesses.
According to Amartya Sen, a Nobel Prize—winning economist, globalization:
has enriched the world scientifically and culturally.
Taverna is a manufacturing-dependent nation. The Taverna government plans to increase the supply of the national currency by a major proportion in an effort to devalue the currency in international markets. In this scenario, the Tavernan government prefers to have its currency undervalued in an effort to:
help drive exports.
An American manager complains to his boss about one of his employees, who is Chinese. "She never chimes in during meetings or tells me what she thinks of the direction we are taking the division when asked." This manager likely misunderstands the
high power distance in China.
Shyam, a manager in a company, prefers using straightforward and concise messages to convey information to his subordinates. He does not believe in providing much background information and believes that direct communication gives him more control over a situation and allows him to take responsibility for his actions. In this scenario, Shyam most likely belongs to a:
high-assertion and low-context culture.
As part of its business, Casper Inc., an Australian smartphone company, has opened its manufacturing plant in Sao Paulo, Brazil. In this scenario, Brazil is the _____.
host country
Mauve Inc., an American chain of cosmetics stores, purchases makeup applicators from China and sells them in its stores across the United States. Given this information, it can be said that Mauve is engaged in _____.
importing
Germanium Inc., a software company, uses common operating systems for all its computers connected through the Internet. Given this information, it can be said that these operating systems are _____.
integrated technology platforms
Supranational law
international law that limits the rights of sovereign governments
Chris is the global operations manager at Asterisk Inc., a Canadian apparel company. The company is planning to start operations in Brazil and Japan. Chris believes that Asterisk has the potential to boost its overall sales by setting up operations in Brazil and Japan if:
it can persuade people in these two countries to buy its products.
Franchising is similar to licensing in that:
it requires the franchisee to pay a royalty in return for using the franchiser's intellectual property and receiving managerial support.
Customary Law
laws derived from experience, practice, collective, wisdom, and shared philosophy to set the boundaries and rights that define relationships between community members
Private international law
laws that establish international legal jurisdiction and procedures for people and organizations
Public International Law
laws that governs interactions of nation-states
If the Mexican peso is considered overvalued relative to the U.S. dollar, dollar denominated debt held by the Mexican government is MOST likely
less expensive than it should be if the currency was appropriately valued.
In contrast to undervalued currencies, overvalued currencies:
make it easier for a country to pay down foreign debts.
Monetary Policy
manipulations in the interest rates, the banking rules, and the volume of currency in a country, with a goal to spark or diminish consumption
World Trade Organization
multilateral organization designated to foster the rules of trade nations
The Freedom House and Heritage Foundation Measures
organizations that collect and compile data about the level of freedom in different countries
Multilateral Organizations
organizations worldwide that establish and enforce guidelines governing the interactions of individuals, businesses, and governments in a globalized world
Cognitive CQ
our level of understanding about how cultures are similar and different
If a Big Mac costs SFr6.50 in Switzerland and US$5.67 in the United States, and the current spot exchange rate is 0.97 (U.S. dollar is the domestic currency), the Swiss franc is
overvalued.
In an effort to reassure the market and foreign investors, the Hong Kong government "fixes it currency," or holds the price steady in relation to the U.S. dollar. This is referred to as a
peg.
The government of Kuseria, a country in West Asia, has formulated a set of principles, ideas, and doctrines to establish and control social order in the country. Given this information, it can be said that the government of Kuseria has created a(n) _____.
political ideology
The increased promotion of free-market policies in China refocused national investment toward sectors that are strategically important to the country's economic stability. The result has been
privatization of state-owned enterprises.
In the context of managing cultural differences, the term _____ refers to finding or creating shared ground, or areas of overlap between old and new behaviors and understanding.
recentering
Raising the reserve requirement ________.
reduces the availability of credit for businesses
FreeMart is an online fashion store that readily accepts payments in the form of cryptocurrencies. These digital currencies can be sent directly by a consumer to the store's wallet. This enables faster processing of a consumer's order. In this scenario, these currencies:
refer to electronic currencies.
Product
refers to the process of manufacturing or providing any good or service
Deregulation affects international business by _______.
removing a regulatory burden
Rule of law
rule of governing whereby all individuals are accountable to well-defined and established laws that are fairly enforces
Rule of the individual
rule of governing whereby one individual is the ultimate authority and has discretion to set and enforce laws
In the context of international business, unlike firms that are reactive, firms that are proactive _____.
seek to build capabilities that build a reputation for ethical conduct
Motivational cultural intelligence quotient (CQ) measures an individual's:
sense of desire to function effectively in different cultural settings.
Consumer products
serve individuals in large, diverse communities across the world, and the cultural and economic differences between these communities make consumer products slow to spread
Industrial products
serve the production and other needs of massive companies and conglomerates in manufacturing, mining, utilities, and agriculture, and power generation
Micro-Multinational Corporations
small, web-wired start-ups that are using social media to recruit the best talent from around the world and leverage it for immediate innovation and impact
In many parts of Yugrastia, an Asian country, marrying one's cousin is considered unethical. The people of Yugrastia frown upon this kind of incest to the extent that this norm has been codified into law. Such offenses are punishable by up to 5 years in prison. In this scenario, the norm that prohibits marriage to a family member is an example of a _____.
social more
The globalization of production
sourcing land, labor, and capital from different nations rather than obtaining everything locally
In the context of foreign exchange, the difference between the buy and sell price for a currency is referred to as a _____.
spread
Many organizations are now turning to practices that reduce waste, recycle metal, glass, plastics, and electronics, and cut greenhouse gas emissions. These practices are called _____ business practices.
sustainable
Under socialism ________, while under communism ________.
the central government plans the economy; workers organize the economy
Globalization
the evolution of an integrated and interdependent world economy
Deflation
the general decline in prices in an economy
Inflation
the general rise in prices in an economy
Privatization is the process in which ________.
the government converts government resources to private resources
In a greenfield venture, _____.
the parent company builds new plants or offices and then hires employees when it enters the market
Industrialized
the process of building businesses and manufacturing on a large scale
Arbitration
the process of reaching a binding decision through an arbitrator (a third party) outside the courts
Arbitrage
the search for deals on production factors across geographic boundaries
Global Convergence
the spread of common preferences across borders
Exchange rate
the value of one currency when being converted to another currency
The Gini coefficient measures ________.
the wealth distribution
In Japan, employees are motivated by competition and group success. As such, managers are MOST likely to
work long hours in an effort to improve production efficiency.
