International Business Final Exam Review
Dropbox began its internationalization by analyzing the attractiveness of foreign markets, before starting to export to the most promising ones.
False
In "free market" economies like the US, companies can safely ignore the political environment, because government and business are strictly separated.
False
QUIZ 2: I recently adopted two cats: Victoria ("Vic) and Catherine the Grey ("Cat"). Vic's body weight increases by 3% a month. Cat gains weight at a rate of 7% per month. Assume both cats will keep growing at these rates. According to the "rule of 70", Vic will double her weight every
23 months, while Cat will double her weight every 10 months.
QUIZ 13: Which two of the following statements about the General Data Protection Regulation (GDPR) are true?
Aims at protecting the personal data and privacy of individuals in the EU.** Includes a "right to be forgotten".** Applies only to companies that have physical offices or foreign subsidiaries in the EU. Prohibits non-European firms from providing digital services in the EU.
QUIZ 4: Many BITs include so-called Investor-State Dispute Settlement clauses that stipulate that any dispute between a company and a government will be adjudicated by...
An independent arbitration panel** mutual consensus the supreme court of the country which is being accused of wrongdoing an administrative court in the home country of the company
Internationalization is particularly difficult for service companies because services cannot be exported.
False
Shein's business model is sometimes described as ...
B2B C2M C2C (Consumer to Manufacturer)** PaaS
Some important characteristics of intangible digital products (e.g., mobile apps) include...
Because of low variable costs, they tend to exhibit strong economies of scale** They are not subject to government regulation and taxation Transportation costs are minimal** Companies selling digital products are automatically international, a.k.a. born global
Rank the following country according to their overall ranking on the World Bank's "Doing Business" ranking (also called the "Ease of Doing Business" ranking - see link on Canvas and in the slides).
Best Ranked Singapore Denmark United States Germany China Worst Ranked
QUIZ 11: Which are the top 3 countries from which the US imports (goods imports only)?
Canada, China, Mexico
Which are the top 3 countries to which the US exports (goods exports only)?
Canada, China, Mexico
You are planning to backpack around Europe for a month. If the Euro depreciates against the USD, this is going to make your trip cheaper or more expensive? (assuming your income & savings are in USD)
Cheaper
In which country does Facebook have the most users?
China India** Indonesia USA
According to one prediction we saw this week, which will be the three largest economies in the world by 2030? (starting with the largest)
China, Russia, India USA, Japan, Germany China, India, USA** USA, China, Japan
US companies operating in China often complain about Chinese protectionism or argue that they are not competing on a "level playing field". An example of this would be:
Chinese consumers being very demanding and having different tastes than what US companies are used to. The Chinese government giving special tax breaks or cheap loans to Chinese companies, but not to US companies operating in China.**
What are the two main reasons why the Chinese telecoms company Huawei is controversial in the US business and political community?
Concerns regarding data security** Concerns about low-quality made-in-China equipment Concerns about unfair competition due to state subsidies** Concerns that Huawei's technology is outdated
Netflix is an example of how internet-based companies are automatically internationalized, because their products are available in all markets globally from day one.
False
QUIZ 5: Because Islamic law prohibits lenders from charging interest, Islamic banks cannot lend money to individuals or companies.
False
One of the readings discussed several ways companies can try to manage or minimize political risk. Which of the following were mentioned? (Check all that apply)
Consider staying away from countries that appear too risky** Consult a fortune teller Before investing in a country, thoroughly research the political risks (or hire consultants to do this for you)** Purchase insurance**
What is the main lesson we can draw from Ricardo's theory of comparative advantage?
Countries should use tariffs to protect strategically important industries Countries should maximize their exports and minimize their imports Trade is a zero-sum game, i.e. when one country gains the other one loses Trade can make all countries better off, even if one country has lower absolute production costs for all products**
Some people argue that US consumers and companies should buy only US-made products (rather than imports) whenever possible. While the economic merits of this argument are dubious, let's assume for a moment that everyone in the US actually starts following this "Buy American" philosophy and replaces imported goods with domestically produced ones. Holding everything else constant, what would be the impact on the US dollar?
Demand for USD would decrease, causing the USD to depreciate against other currencies Supply of USD would decrease, causing the USD to appreciate against other currencies** Demand for USD would decrease, causing the USD to appreciate against other currencies Supply of USD would decrease, causing the USD to depreciate against other currencies
What are some of the arguments in support of sweatshops made in the article by the Adam Smith Institute? (select all that apply)
Even though the wage rates paid by sweatshops may seem very low to us, by local standards they are generally above the local average** Working in sweatshops is often better than the alternatives available to people in poor countries** Automation will soon make sweatshops irrelevant Sweatshops can contribute to the economic development of poor countries**
The growth of emerging markets has been accompanied by a dramatic ___________ of the global middle class.
Expansion
In its dispute with the Indian government, Cairn Energy was finally able to receive compensation because of...
FCPA Political risk insurance IP protection BIT**
If international shipping costs increase, companies relying on which entry mode will be most affected?
FDI Exporting** Licensing
A BIT is a treaty between two companies that aims to reduce the risk of intellectual property theft
False
Companies that sell purely digital products, such as apps or digital content, are automatically global because their products are available everywhere over the internet.
False
Selling the same product in different countries (the "one size fits all" approach) is never a good idea, because countries differ too much in terms of consumer preferences, regulations, and economic conditions.
False
The concept of "power distance" describes the inherent power differential between different countries, for example in military and economic terms.
False
Under the Bretton Woods system, most major currencies used __________________ .Since the 1970s, many major currencies have moved to ___________________________
Fixed Exchange Rates, Floating Exchange Rates
One of the required readings discusses the numerous shortcomings of GDP as a measure of prosperity and well-being. Which of the following is NOT among the shortcomings listed in the article?
GDP does not include agricultural products** By aggregating data into one number, GDP obscures inequalities GDP does not measure non-monetary transactions, such as unpaid household work, childcare, volunteer services GDP tends to measure the quantity but not the quality of what is being produced
Which of the following measures is best suited for comparing the average standard of living across different countries?
GDP per capita at PPP** GDP per capita GNI Real GDP growth
Which of the following strategies is likely to maximize economies of scale and avoid costly duplication of corporate functions?
Global Standardization
Which of these strategies is least vulnerable to an increase in trade barriers (such as the US-China 'trade war')?
Global standardization strategy Transnational strategy Multidomestic strategy**
What kind of cat does former Chinese leader Deng Xiaoping prefer?
He was more of a dog person A black cat A cat that catches mice** A white cat
If a country has a high Gini coefficient, what does this indicate?
High income inequality** Economic development is geographically uneven Low income inequality Watch out for flying carpets!
Assume the US decides to impose a 25% import tariff on French wine. What are some likely outcomes? (Check all that apply)
Higher prices for US wine consumers** Lower profit margins for US-based wine importers/retailers** None, Mexico will pay for the tariff. Lower sales for French wine producers (through lost volume or price concessions)**
According to this week's lecture, which of the following is one reason why Canada has not adopted higher carbon taxes to fight climate change?
If Canada unilaterally adopts higher carbon taxes, carbon-intensive industries might relocate from Canada to the US** Foreign investors lobbied the Canadian government not to increase carbon taxes QAnon told the Canadians that climate change is an invention of the radical left and/or Bill Gates, so there is no need to act on it Canada has already eliminated all of its carbon emissions, removing the need for carbon taxes
QUIZ 15: According to the Kuznets Curve, what is the relationship between standard of living (GDP per capita) and environmental pollution?
In general, as GDP per capita increases, pollution first increases then decreases** In general, as GDP per capita increases, pollution first decreases then increases In general, as GDP per capita increases, pollution decreases In general, as GDP per capita increases, pollution increases
Over the past 30 years, corporate tax rates in most parts of the world have....
Increased decreased** stayed about the same
Many products today are made from components sourced from multiple companies based in many different countries. This complex division of labor is often referred to as...
International business Global value chains** International production partnerships Cross-border manufacturing alliances
The adoption of many new technologies follows what kind of curve?
Inverted U-curve U-curve J-curve S-curve**
Why did Uber acquire Careem? (check all that apply)
It was an opportunity to quickly gain a market presence across the Middle East** Islamic law does not allow western companies to operate in most Middle Eastern countries To access Careem's local knowledge and expertise** To reduce capital expenditures relative to WOS
Previously, we have read about Impossible Foods' plan to expand across Asia. Assume the company is planning to pursue FDI in China to serve the local market there. The company's top management is debating whether to establish a wholly-owned subsidiary (WOS) in China or to form a Joint Venture (JV) with a Chinese company. Why might it be a good idea for Impossible Foods to form a JV instead of a WOS? (Check all that apply)
JV allows them to produce locally, WOS does not JV allows them to access the partner's knowledge of Chinese market** JV provides stronger protections for the company's intellectual property than WOS JV reduces capital requirements for Impossible Foods**
It takes Japan 4 workers to produce 1000 shoes, and 1 worker to produce 1000 refrigerators. It takes Malaysia 5 workers to produce 1000 shoes, and 4 workers to produce 1000 refrigerators. Which country has the absolute advantage in making refrigerators?
Japan
It takes Japan 4 workers to produce 1000 shoes, and 1 worker to produce 1000 refrigerators. It takes Malaysia 5 workers to produce 1000 shoes, and 4 workers to produce 1000 refrigerators. Which country has the absolute advantage in making shoes?
Japan
It takes Japan 4 workers to produce 1000 shoes, and 1 worker to produce 1000 refrigerators. It takes Malaysia 5 workers to produce 1000 shoes, and 4 workers to produce 1000 refrigerators. Which country has the comparative advantage in making refrigerators?
Japan
QUIZ 6: A surprise frost destroys the orange crop in Florida. The supply curve for orange juice shifts...
Left
You work for a software startup in the US. Your company offers a subscription-based software product, priced at USD149/month. Many of your customers are from outside of the US. These customers simply go to your US website and pay for the product in USD, using their credit cards. If the USD appreciates against the Euro, does this make your product more affordable or less affordable for European customers?
Less Affordable
QUIZ 9: "High Tech Widget Corporation" has developed a technologically advanced product based on the company's own research & development (R&D). It is now considering selling this product in various emerging markets. Their top priority is protecting their intellectual property. Which of these entry modes should they probably avoid?
Licensing** FDI Exporting
The HDI does NOT include which of the following information
Life expectancy at birth Per capita income adjusted for PPP Education/literacy Average caloric intake per adult**
What is the primary reason for Impossible Foods' aggressive expansion plans in Asia?
Low labor costs Lower taxes than in the US Low liability of foreignness Large and growing demand**
In many cultures, communication is a lot less direct and less explicit than in the US. People are expected to "read between the lines" to understand what is being communicated. These cultures are often referred to as...
Low-context cultures High-context cultures** High-contact cultures Low-contact cultures
It takes Japan 4 workers to produce 1000 shoes, and 1 worker to produce 1000 refrigerators. It takes Malaysia 5 workers to produce 1000 shoes, and 4 workers to produce 1000 refrigerators. Which country has the comparative advantage in making shoes?
Malaysia
People are more likely to be on time for meetings and value punctuality in _________ cultures.
Monochronic
Compared to Dropbox, Spotify's internationalization is best described as_____________
More gradual
QUIZ 10: Bakery International Group (BIG) is a multinational company that produces and sells baked goods (breads, pastries, etc) in 15 different countries around the world. BIG's corporate management team believes that people's tastes in baked goods are very different from country to country. Therefore, they have appointed "country managers" to each market and given them broad responsibilities to develop, produce, and market products that best meet the tastes of local consumers. BIG is following which type of strategy?
Multidomestic Strategy
A US engineering company is bidding for a contract to build several new power plants in South Africa. A senior official at the South African Department of Energy demands a bribe and indicates that any company not paying the bribe will not even be considered for the contract. If the US company agrees and pays the bribe, this potentially violates which laws?
Neither FCPA nor local South African law FCPA and local South African law** FCPA only. Most countries outside the US (including South Africa) do not have anti-bribery laws, as corruption is a culturally accepted business practice. South African law only. FCPA does not apply because the company did not initiate the bribe - it was blackmailed by the official.
Your company exports high-end clothing (made in the US) from the US to Canada. The US and Canadian governments get into a trade dispute over softwood lumber. The WTO rules in Canada's favor and authorizes Canada to impose countervailing duties on American products. Should you be concerned?
No, countervailing duties can only be imposed on the sector involved in the dispute, i.e. lumber and related products. Yes, there is a possibility that Canada will levy countervailing duties on our clothing exports to the Canadian market.**
Britian, like several other countries, has recently introduced a digital services tax on large digital companies (Facebook, Google, ...). This tax is levied on the companies'______________
Revenues from British users
What explains the tremendous growth in global trade over the 20th century?
The invention of TikToK Reduced transportation costs** Reduced communication costs** Policy changes such as tariff reductions**
Compared to China's economy, India's economy is much more dependent on _______________ and has a much smaller _____________________
Services, Manufacturing Sector
QUIZ 3: China's economy today is best described as...
State capitalism, i.e. a mix of market-driven private sector, SOEs, and interventionist government** A pure "free market" economy A centrally-planned communist economy
In a standard supply and demand diagram, the ___________________ slopes upwards and the ______________________ slopes downward.
Supply Curve, Demand Curve
According to a recent survey, the primary reason US companies invest in China these days is to...
Take advantage of low manufacturing costs in China in order to export goods to the US and other developed countries Serve the domestic Chinese market**
Voluntary export restraints are most similar to...
Tariff-rate quotas non-tariff barriers tariffs quotas**
Many multinational companies minimize their tax obligations by shifting profits to low-tax jurisdictions, using foreign subsidiaries and shell companies. Many of the strategies are legal and there fore represent __________________ but not_______________
Tax avoidance, Tax evasion
Between 2012 and mid-2015, the exchange rate between the Japanese Yen (JPY) and US Dollar (USD) changed from approximately 80 JPY per USD to approximately 120 JPY per USD.
The JPY depreciated** against the USD and the USD appreciated** against the JPY.
In a globalized economy, heavily polluting companies can relocate to countries where environmental regulations are weak, thereby avoiding more stringent regulations in their home country. We referred to this in class as...
The environmental Kuznets curve The pollution haven hypothesis** Regulatory avoidance strategy Environmental arbitrage
According to the "Make in India" article, the major obstacle faced by foreign companies seeking to establish manufacturing operations in the country is...
The high exchange rate volatility of the Indian Rupee currently makes investments too risky The number of people in the high income bracket is still quite small** The Indian government is not supportive of foreign manufacturers in the country There is a lack of technical and engineering talent
Your company is about to open its first factory in Mexico. The government-mandated fire safety inspection has been completed and you are sure that everything is up to code. The inspector seems satisfied but says that it may take him 8 to 10 weeks to issue the official paperwork, which you need to open your factory. You have a feeling that a small payment could convince the inspector to speed up his paperwork significantly and let you open shop sooner.
This constitutes a bribe under FCPA and is definitely illegal Under certain conditions, this type of payment might be permissible under the FCPA**
In recent years, many western countries have ________________ restrictions of foreign takeovers (acquisitions).
Tightened
Dropbox internationalized using both exporting and FDI.
True
India has the second-largest Muslim population of any country in the world.
True
One reason some countries adopt a fixed exchange rate is to create stability and predictability for international business.
True
When a company enters a new foreign market, it is often at a disadvantage compared to local firms, because it needs to learn how to operate in this new and unfamiliar country. The technical term for this in international business is...
Uncertainty avoidance Liability of foreignness** Knowledge problem Entry cost
Dumping is a pricing strategy that uses ________________ in a foreign market in order to _________________
Very low prices, Drive local producers out of business
On average, populations in most emerging markets are ____________ than in Europe and the United States.
Younger
Companies with high fixed costs often expand into foreign markets in order to...
achieve economies of scale** conduct Foreign Direct Investment avoid the liability of foreignness saturate their home market
A drug company sells a drug for $1000 in the US, but charges only $10 for the same drug in Central America. This company engages in...
charity price discrimination** arbitrage money laundering
Under a territorial tax system, ...
multinational companies pay taxes in the country where their headquarters is located, but not in the countries where they do business and report profits multinational companies pay taxes in each country where they do business, based on the profits they report in that country.**
Ecommerce platforms such as Alibaba, Amazon Marketplace, or Etsy make international business more accessible to smaller companies by reducing...
taxes competition calories transaction costs**
Geert Hofstede, the pioneering social psychologist in the area of cross-cultural studies, famously described culture as...
the collective programming of the mind** opiate for the masses shared identity between people the values and social conventions of a society