MBA 270 Global Biz MGMT - Midterm Exam 1 (Ch. 1 - 8)

Caputo Fine Chemicals, a U.S. company, invested in a manufacturing facility in Mexico. The production from the Mexican facility was entirely used to serve the company's U.S. customers. Caputo Fine Chemicals' activity is called

B - offshore production. The term offshore production refers to FDI undertaken to serve the home market. Far from reducing home-country employment, such FDI may actually stimulate economic growth (and hence employment) in the home country by freeing home-country resources to concentrate on activities where the home country has a comparative advantage.

Which of the following conditions is most likely to act as a deterrent for foreign firms willing to do business with former communist nations of Eastern Europe and central Asia?

B - signs of growing unrest and totalitarian tendencies seen in these countries. Disturbing signs of growing unrest and totalitarian tendencies continue to be seen in several Eastern European and Central Asian states. Thus, the risks involved in doing business in such countries are high, but so may be the returns.

In the past two decades, the majority of Latin American countries have

B - sold state-owned enterprises to private investors.In the past two decades, much has changed in Latin America. Debt and inflation are down, governments have sold state-owned enterprises to private investors, foreign investment is welcomed, and the region's economies have expanded.

The location-specific advantages argument associated with John Dunning helps explain why firms prefer FDI to licensing or to exporting.

False - The implications of the theories of FDI for business practice are straightforward. First, the location-specific advantages argument associated with John Dunning does help explain the direction of FDI. However, the location-specific advantages argument does not explain why firms prefer FDI to licensing or to exporting.

The purchasing power parity for different countries is adjusted (up or down) dpeending upon whether a country's cost of living is lower or higher than the cost of living in the United States.

True - To account for differences in the cost of living, one can adjust GNI per capita by purchasing power. The base for the adjustment is the cost of living in the United States. The PPP for different countries is then adjusted (up or down) depending upon whether the cost of living is lower or higher than in the United States.

Individual firms should invest substantial financial resources in trying to build a first-mover advantage, even if that means several years of losses before a new venture becomes profitable.

Ture - Individual firms should realize that it pay to invest substantial financial resources in trying to build a first-mover or early-mover advantage even if that means several years of losses before a new venture becomes profitable.

Econometric studies show a hump-shaped relationship between income levels and pollution levels. Which of these statements reflects that relationship?

A - As an economy grows and income levels rise, initially pollution levels also rise. However, past some point, rising income levels lead to demands for greater environmental protection, and pollution levels then fall.

The North American Free Trade Agreement (NAFTA) was formed in 1994 among

A - Canada, Mexico, and the United States. The North American Free Trade Agreement (NAFTA) was formed in 1994 among Canada, Mexico, and the United States.

Which statement reflects the changing demographics of the global economy?

A - U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports. Over the past 30 years, U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries such as South Korea and China have taken a larger share of world exports.

Which of the following countries has seen a relative decline in its share of world output between 1960 and 2014?

A - United States. In the early 1960s, the United States was still by far the world's dominant industrial power. In 1960, the United States accounted for 38.3 percent of world output, measured by gross domestic product (GDP). By 2014, the United States accounted for 22.4 percent of world output, still the world's largest industrial and commercial power but down significantly in relative size. This change in the U.S. position was not an absolute decline because the U.S. economy grew significantly between 1960 and 2014 (the economies of Germany, France, and the United Kingdom also grew during this time).

Which of the following identifies the motivation for much of the foreign direct investment by non-U.S. firms?

A - desire to disperse production activities to optimal locations. The motivation for much of the foreign direct investment by non-U.S. firms was the desire to disperse production activities to optimal locations and to build a direct presence in major foreign markets.

Which of the following terms, developed by Rawls, indicates that inequalities are justified if they benefit the position of the least-advantaged members of society?

A - difference principle. John Rawls accepts that inequalities can be just if the system that produces inequalities is to the advantage of everyone. More precisely, he formulates what he calls the difference principle, which is that inequalities are justified if they benefit the position of the least-advantaged person.

The minimum that a firm has to do to engage in international business is to

A - export or import products from other countries. All a firm has to do to engage in international business is export or import products from other countries.

Globalization critics argue that the decline in unskilled wage rates in advanced economies is due to the

A - migration of low-wage manufacturing jobs offshore. Globalization critics argue that the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers.

When social unrest and disorder in a country causes drastic changes in its business environment that adversely affect the profit and other goals of a business enterprise, the business enterprise is said to be facing which of the following type of risk?

A - political. Political risk has been defined as the likelihood that political forces will cause drastic changes in a country's business environment that adversely affect the profit and other goals of a business enterprise. Social unrest typically finds expression in strikes, demonstrations, terrorism, and violent conflict.

Automobile companies promote different car models in different countries depending on a range of factors such as demographics, local taste, local fuel costs, income levels, traffic congestion, and cultural values. This most likely demonstrates that

A - significant differences still exist among national markets. Significant differences still exist among national markets along many relevant dimensions, including consumer tastes and preferences, distribution channels, culturally embedded value systems, business systems, and legal regulations. These differences frequently require companies to customize marketing strategies, product features, and operating practices to best match conditions in a particular country.

A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power toward

A - supranational organizations such as the World Trade Organization. A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power away from national governments and toward supranational organizations such as the World Trade Organization, the European Union, and the United Nations.

States that limit the freedom of religious expression with laws based on religious principles most likely follow the political system of

A - theocractic tolatarianism. A political system in which political power is monopolized by a party, group, or individual that governs according to religious principles is referred to as theocratic totalitarianism.

According to globalization opponents, which of the following has increased in wealthy advanced economies as a result of globalization?

A - unemployment. One concern frequently voiced by globalization opponents is that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies such as the United States and western Europe. In the past few years, the same fears have been applied to services, which have increasingly been outsourced to nations with lower labor costs. The popular feeling is that when corporations such as Dell, IBM, or Citigroup outsource service activities to lower-cost foreign suppliers—as all three have done—they are "exporting jobs" to low-wage nations and contributing to higher unemployment and lower living standards in their home nations (in this case, the United States).

Why are supranational organizations, such as the World Trade Organization and the United Nations, criticized?

A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power away from national governments and toward supranational organizations such as the World Trade Organization, the European Union, and the United Nations. As perceived by critics, unelected bureaucrats now impose policies on the democratically elected governments of nation-states, thereby undermining the sovereignty of those states and limiting the nation's ability to control its own destiny.

What is a multinational enterprise? What have been the two most notable trends in the demographics of the multinational enterprise since the 1960s?

A multinational enterprise is any business that has productive activities in two or more countries. The two most notable trends in multinational enterprises since the 1960s have been (1) the rise of non-U.S. multinationals and (2) the growth of mini-multinationals. The globalization of the world economy has resulted in a relative decline in the dominance of U.S. firms in the global marketplace. Another trend in international business has been the growth of medium-size and small multinationals (mini-multinationals). Although most international trade and investment is still conducted by large firms, many medium-size and small businesses are becoming increasingly involved in international trade and investment.

Discuss the concerns voiced by critics of globalization regarding labor policies and the environment.

A source of concern for critics of globalization is that free trade encourages firms from advanced nations to move manufacturing facilities to less developed countries that lack adequate regulations to protect labor and the environment from abuse by the unscrupulous. Globalization critics often argue that adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises and puts them at a competitive disadvantage in the global marketplace vis-à-vis firms based in developing nations that do not have to comply with such regulations. Firms deal with this cost disadvantage, the theory goes, by moving their production facilities to nations that do not have such burdensome regulations or that fail to enforce the regulations they have.

Growing income inequality between the skilled and unskilled workers in advanced nations, such as the United States, is a result of the

A. wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted. Growing income inequality is a result of the wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted.

Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery and electrical equipment.

Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industires (e.g. aluminum and steel), chemicals, plastics, and machinery and electricl equipment. These sectors account for some 70 percent of all antidumping actions reported to the WTO.

Royal Teas, a U.K.-based company employing just 30 people worldwide, generates $1.5 million in revenues of which 60 percent comes from exports to Asian countries. In this context, Royal Teas is most likely classified as a

B - mini-multinational firm. A trend in international business has been the growth of medium-size and small multinationals (mini-multinationals).

Which of the following statements supports the claim that the gap between the rich and poor nations of the world has gotten wider because of globalization?

B - A quarter of the countries with a GDP per capita of less than $1,000 in 1960 had growth rates of less than zero from 1960 to 1995.While recent history has shown that some of the world's poorer nations are capable of rapid periods of economic growth—witness the transformation that has occurred in some Southeast Asian nations such as South Korea, Thailand, and Malaysia—there appear to be strong forces for stagnation among the world's poorest nations. A quarter of the countries with a GDP per capita of less than $1,000 in 1960 had growth rates of less than zero from 1960 to 1995, and a third had growth rates of less than 0.05 percent. Critics argue that if globalization is such a positive development, the divergence between the rich and poor should not have occurred.

A decade ago the government of Weinsland decided to liberalize the country's economy. As a result, today the country is experiencing rapid economic advancement and societal changes that are favorable for international business. Which of the following changes is most likely to occur in Weinsland?

B - As the country gets richer, there will be a shift in the society from "traditional" to "secular rational" values. As countries get richer, there seems to be a shift from "traditional" to "secular rational" values, and from "survival values" to "well-being" values—values that stress the importance of diversity, belonging, and participation in political processes.

Which of the following is NOT a concern for managers in international business?

B - Perceived distance between home country and operating nations. In sum, managing an international business is different from managing a purely domestic business for at least four reasons: (1) countries are different, (2) the range of problems confronted by a manager in an international business is wider and the problems themselves more complex than those confronted by a manager in a domestic business, (3) an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system, and (4) international transactions involve converting money into different currencies.

ABC Company, which is headquartered in the United States, has production plants in Mexico and Vietnam. According to this information, ABC company is

B - a multinational enterprise. A multinational enterprise (MNE) is any business that has productive activities in two or more countries.

A charge of 15-20% was levied by the government of Cadmia on the value of automobile accessories imported from a neighboring country. This increased the price of those imported car accessories for the consumers in Cadmia. Which of the following instruments of trade policy is being used by the government of Cadmia?

B - ad valorem tariff. Ad valorem tariffs are levied as a proportion of the value of the imported good. In most cases, tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods.

In the context of the environment, globalization critics argue that

B - adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises. Globalization critics often argue that adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises and puts them at a competitive disadvantage in the global marketplace vis-à-vis firms based in developing nations that do not have to comply with such regulations.

Which of the following steps in ethical decision making is most likely to help businesspeople know if their decision process is working and if changes should be made to ensure greater compliance with a code of ethics?

B - auditing past decisions. Step five, the last step in a stakeholder analysis, requires the business to audit its decisions, reviewing them to make sure they were consistent with ethical principles, such as those stated in the company's code of ethics. This final step is critical and often overlooked. Without auditing past decisions, businesspeople may not know if their decision process is working and if changes should be made to ensure greater compliance with a code of ethics.

An argument in support of the falling barriers to international trade and investment is that the falling barriers

B - drive the global economy toward greater prosperity. Many influential economists, politicians, and business leaders argue that falling barriers to international trade and investment are the twin engines driving the global economy toward greater prosperity.

Supporters of globalization insist that dislocation in the form of lost jobs is a trade-off that will ultimately lead to the economy being better off. Which of the following is being justified in this case?

B - free trade of goods and services. Supporters of globalization argue that when a country embraces free trade, there is always some dislocation, but the whole economy is better off as a result.

Globalization opponents argue that "exporting jobs" to low-wage nations has contributed to

B - higher unemployment in wealthy advanced economies such as the United States. The popular feeling is that when corporations outsource service activities to lower-cost foreign suppliers they are "exporting jobs" to low-wage nations and contributing to higher unemployment and lower living standards in their home nations.

The government of Nerumbia wants to open the country's economy to international business, and increase its overall attractiveness as a potential market or investment site. Which of the following will facilitate this decision of the Nerumbian government?

B - investing in infrastructure and in the required supporting businesses. With regard to economic factors, one of the most important variables is the sophistication of a country's economy. It may be more costly to do business in relatively primitive or undeveloped economies because of the lack of infrastructure and supporting businesses. At the extreme, an international firm may have to provide its own infrastructure and supporting business, which obviously raises costs.

MedPlus Incorporated, based in the United States, hesitates to enter into a joint venture with Azpak Limited, a Sri Lankan company, due to inadequate protection of intellectual property rights. MedPlus is trying to avoid what type of risk?

B - legal. When legal risks in a country are high, an international business might hesitate entering into a long-term contract or joint-venture agreement with a firm in that country.

In both China and India, the shift toward a command-based economic system has produced large gains despite weak property rights and endemic corruption.

Both China and India have achieved high growth rates despite relatively weak property rights regimes and high levels of corruption. In both countries, the shift toward a market-based economic ssytem has produced large gains despite weak property rights and endemic corruption.

Which of the following statements reflects the nature of the global economy of the twenty-first century?

C - Countries have extensively adopted liberal economic policies. The move toward a global economy has been strengthened by the widespread adoption of liberal economic policies by countries that had firmly opposed them for two generations or more.

Which of the following is the most appropriate solution to the problem of rising carbon dioxide emissions in developed economies?

C - Get the nations of the world to agree to policies designed to limit pollutant emissions. The solution to the problem of increasing carbon dioxide emissions with higher income levels is probably not to roll back the trade liberalization efforts that have fostered economic growth and globalization, but to get the nations of the world to agree to policies designed to limit carbon emissions.

What is the shift toward a more integrated and interdependent world economy called?

C - Globalization. Globalization refers to the shift toward a more integrated and interdependent world economy. Globalization has several facets, including the globalization of markets and the globalization of production.

According to the product life-cycle theory, the locus of global production initially switches from the United States to other advanced nations and then from those nations to developing countries. Which of the following is most likely to be a consequence of these trends?

C - Over time, the United States switches from being an exporter of a product to an importer of the product. The consequence of the trends for the pattern of world trade, as determined by the product life-cycle theory, is that over time the United States switches from being an exporter of the product to an importer of the product as production becomes concentrated in lower-cost foreign locations.

The WTO's Agreement on which of the following is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules?

C - Trade-Related Aspects of Intellectual Property Rights (TRIPS). The WTO acts as an umbrella organization that encompasses the GATT along with two new sister bodies, one on services and the other on intellectual property. The WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules.

When interacting with a Japanese business counterpart, Lorraine made it very clear that her culture was superior. Lorraine is demonstrating

C - ethnocentrism. Ethnocentrism is a belief in the superiority of one's own ethnic group or culture. Hand in hand with ethnocentrism goes a disregard or contempt for the culture of other countries.

In what type of economy are all businesses state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals?

C - pure command. In a pure command economy, all businesses are state owned, the rationale being that the government can then direct them to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.

The advent of containerization has

C - significantly lowered the cost of shipping goods over long distances. Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances.

Which of the following refers to the total cumulative value of foreign investments?

C - stock of foreign direct investment. The stock of foreign direct investment refers to the total cumulative value of foreign investments.

As a result of globalization, companies rarely need to customize marketing strategies, product features, and operating practices in different countries.

False - Significant differences still exist among national markets along many relevant dimensions, including customer tastes and preferences, distribution channels, culturally embedded value systems, business systems, and legal regulations. These differences frequently require companies to customize marketing strategies, product features, and operating practices to best match conditions in a particular country.

Which of the following has been reduced as a result of globalization?

D - Differences in material culture. We are moving toward a world in which barriers to cross-border trade and investment are declining; perceived distance is shrinking due to advances in transportation and telecommunications technology; material culture is starting to look similar the world over; and national economies are merging into an interdependent, integrated global economic system.

Which of the following is a power of the WTO?

D - It can issue a ruling instructing a member-state to change trade policies that violate GATT regulations. The WTO arbitrates trade disputes between its 162 member states. The arbitration panel of the WTO can issue a ruling instructing a member state to change trade policies that violate GATT regulations. If the violator refuses to comply with the ruling, the WTO allows other states to impose appropriate trade sanctions on the transgressor.

Which of the following has been excluded from the agenda for the Doha round of WTO talks that began in 2001?

D - attempts to tie trade to labor standards in a country. The agenda for the Doha round of WTO talks that began in late 2001 includes cutting tariffs on industrial goods and services, phasing out subsidies to agricultural producers, reducing barriers to cross-border investment, and limiting the use of antidumping laws. Excluded from the agenda is any language pertaining to attempts to tie trade to labor standards in a country.

Hofstede's fifth dimension of Confucian dynamism captures

D - attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors. In 1991 Hofstede expanded his original research to include a fifth dimension that he argued captured additional cultural differences. He said that in practical terms the dimension refers to a long-term versus short-term orientation and captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors.

Due to the changing economic geography, many of tomorrow's economic opportunities are most likely to be found in the

D - developing nations of the world such as China, India, and Brazil. Many of tomorrow's economic opportunities may be found in the developing nations of the world, and many of tomorrow's most capable competitors will probably also emerge from these regions.

Silicon Valley in California is the world center for the computer and semiconductor industry and has many of the world's major computer and semiconductor companies located close to each other, thus offering the location-specific advantage of

D - externalities. Silicon Valley is the world center for the computer and semiconductor industry. Many of the world's major computer and semiconductor companies, such as Apple Computer, Hewlett-Packard, Oracle, Google, and Intel, are located close to each other here. According to Dunning, Silicon Valley has a location-specific advantage in the generation of knowledge related to the computer and semiconductor industries. Economists refer to such knowledge "spillovers" as externalities, and a well-established theory suggests that firms can benefit from such externalities by locating close to their source.

Which of the following helps a firm to preempt available demand, gain cost advantages related to volume, and build an enduring brand ahead of later competitors?

D - first-mover advantages. For the individual firm, the clear message is that it pays to invest substantial financial resources in trying to build a first-mover or early-mover advantage even if that means several years of losses before a new venture becomes profitable. The idea is to preempt the available demand, gain cost advantages related to volume, build an enduring brand ahead of later competitors, and, consequently, establish a long-term sustainable competitive advantage.

Free trade alone, some argue, is a necessary but not sufficient prerequisite to help "highly indebted poorer countries" (HIPCs) bootstrap themselves out of poverty. They also recommend implementing

D - large scale debt relief. Free trade alone is a necessary, but not sufficient prerequisite to help HIPCs bootstrap themselves out of poverty. Instead, large-scale debt relief is needed for the world's poorest nations to give them the opportunity to restructure their economies and start the long climb toward prosperity.

What are mini-multinationals?

D - medium-sized and small multinationals. Medium-size and small multinationals are called mini-multinationals.

Silver Fire Electric Inc., a U.S.-based company, has productive activities in more than two countries. As a result, it would be most appropriate to refer to Silver Fire Electric as what type of enterprise?

D - multinational. A multinational enterprise (MNE) is any business that has productive activities in two or more countries.

Which of the following theories states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises?

D - new trade. The new trade theory states that in those industries where the output required to attain economies of scale represents a significant proportion of total world demand, the global market may be able to support only a small number of enterprises

Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments. This benefit of FDI falls into the category of

D - resource transfer effects. Foreign direct investment can make a positive contribution to a host economy by supplying capital, technology, and management resources that would otherwise not be available and thus boost that country's economic growth rate. Foreign managers trained in the latest management techniques can often help to improve the efficiency of operations in the host country, whether those operations are acquired or greenfield developments, thus rendering benefits through a resource transfer effect.

Straight Arrow unloaded two tankers worth of toxic waste at an important port in the country of Urithmea. A hundred workers worked two days in their shorts and sandals to unload the barrels from the tankers for $5 a day. They were not told about the content of the barrels. Some observers felt that it was the obligation of not just the government of Urithmea but also of Straight Arrow to ensure that no harm was done to the workers. These observers are most likely

D - rights theorists. Rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. Rights establish a minimum level of morally acceptable behavior.

Which of the following has seen a positive change from 1960 to 2014?

D - the share of world output accounted for by developing nations In 1960, the United States accounted for 38.3 percent of world output, measured by gross domestic product (GDP). By 2014, the United States accounted for 22.4 percent of world output, down significantly in relative size. The United States was not the only developed nation to see its relative standing slip. The same occurred to Germany, France, and the United Kingdom—all nations that were among the first to industrialize. This change in the U.S. position was not an absolute decline. Rather, it was a relative decline, reflecting the faster economic growth of several other economies, particularly in Asia.

Explain the factors that led to the Great Depression of the 1930s.

During the 1920s and 1930s, many of the world's nation-states erected formidable barriers to international trade and foreign direct investment. Many of the barriers to international trade took the form of high tariffs on imports of manufactured goods. The typical aim of such tariffs was to protect domestic industries from foreign competition. One consequence, however, was "beggar thy neighbor" retaliatory trade policies, with countries progressively raising trade barriers against each other. Ultimately, this depressed world demand and contributed to the Great Depression of the 1930s.

Which of the following statements is a general implication of globalization?

E - As a result of globalization, a severe crisis in one region of the world can affect the entire globe. During 2008-2009 a crisis that started in the financial sector of America, where banks had been too liberal in their lending policies to homeowners, swept around the world and plunged the global economy into its deepest recession since the early 1980s, illustrating once more that in an interconnected world a severe crisis in one region can affect the entire globe.

Ryan is the executive general manager of a U.S.-based multinational corporation. Veronica is a manager in a similar position, but works for an American company that operates only in the U.S. and does not engage in international business. In this context, which of the following business functions will be most typically exclusive to Ryan?

E - Choosing an appropriate mode for entering a particular foreign country. The managers in an international business must decide which foreign markets to enter and which to avoid. They must choose the appropriate mode for entering a particular foreign country.

Which of the following statements reflects an important trend in the changing nature of multinational enterprises?

E - International business is conducted not just by large firms but also by medium-size and small enterprises.

Which of the following is most likely to be observed in today's global economy?

E - continued rise in the share of world output accounted for by developing nations such as China and India Most forecasts now predict a continued rise in the share of world output accounted for by developing nations such as China, India, Russia, Indonesia, Thailand, South Korea, Mexico, and Brazil, and a commensurate decline in the share enjoyed by rich industrialized countries such as Great Britain, Germany, Japan, and the United States.

Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprises, whereas the laws enacted by governments in democratic states, where individualism is the dominant political philosophy, tend to be pro-private enterprise and pro-consumer. This indicates that the

E - the legal framework of a country reflects the rulers' dominant political ideology. The government of a country defines the legal framework within which firms do business, and often the laws that regulate business reflect the rulers' dominant political ideology. For example, collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprise, whereas the laws enacted by governments in democratic states where individualism is the dominant political philosophy tend to be pro-private enterprise and pro-consumer.

Briefly trace the history of the G20 and describe its current role in international business.

Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank. Originally established to formulate a coordinated policy response to financial crises in developing nations, in 2008 and 2009 it became the forum through which major nations attempted to launch a coordinated policy response to the global financial crisis that started in America and then rapidly spread around the world, ushering in the first serious global economic recession since 1981.

As a result of globalization, international businesses can avoid the haggle of currency exchanges during cross-border transactions.

False - Cross-border transactions require that money be converted from the firm's home currency into a foreign currency and vice versa. Because currency exchange rates vary in response to changing economic conditions, managers in an international business must develop policies for dealing with exchange rate movements.

Today, outsourcing efforts are confined to manufacturing activities.

False - Early outsourcing efforts were primarily confined to manufacturing activities. Increasingly, however, companies are taking advantage of modern communications technology, particularly the internet, to outsource service activities to low-cost producers in other nations.

In a pure command economy, the goods and services that a country produces, the quantity in which they are produced and the prices at which they are sold are all dicatated by the interaction of demand and supply.

False - In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all planned by the government.

One of the tents of collectivisim is that the welfare of society is best served by leeting people pursue their own economic self-interest.

False - In collectivist societies, an individual's right to do something may be restricted on the grounds that it rounds counter to the "Good of society" or to "the common good". However, individualism holds that the welfare of society is best served by letting people pursue their own economic self-interest, as opposed to some collective body (such as government) dicating what is in society's best interest.

The shift toward deregulation has been easier for former command economics than for mixed economies.

False - In mixed economies, the role of the state was more limited; but here too, in certain sectors the state set prices, owned businesses, limited private enterprise, restricted investment by foreigners, and restricted international trade. For these countries, deregulation has involved the same kind of initiatives that we have seen in former command economies, although the transformation has been easier because these countries often had a vibrant private sector.

As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities.

False - Over the past five decades, a fundamental shift has been occuring in the world economy. We have been moving away from a world in which national economies were relatively self-contained entities, isolated from each other by barriers to cross-border trade and investment; by distance, time zones, and language; and by national differences in government regulation, culture, and business systems.

Mercantilsim, propagated in the sixteenth and seventeeth centuries, advocated that countries should simultaneously encourage both imports and exports.

False - Propagated in the sixteenth and seventeeth centuries, mercantilism advocated that countries should simultaneously encourage exports and discourage imports.

Explain the concepts of "globalization of markets" and "globalization of production."

Globalization has several facets, including the globalization of markets and the globalization of production.The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital). By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively.

Discuss the arguments for and against globalization regarding jobs and income.

Globalization opponents argue that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies such as the United States and Western Europe. Falling barriers allow firms to move manufacturing activities to countries where wage rates are much lower. Because of this, wage rates of poorer Americans have fallen significantly over the past quarter of a century. Supporters of globalization argue that free trade will result in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently.

What is globalization? Explain, with examples, how global companies can facilitate the creation of a global market.

Globalization refers to the shift toward a more integrated and interdependent world economy. One facet, the globalization of markets, refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. Consumer products such as Citigroup credit cards, Coca-Cola soft drinks, Sony PlayStation video games, McDonald's hamburgers, Starbucks coffee, IKEA furniture, and Apple iPhones are frequently held up as prototypical examples of this trend; they are also facilitators of it. By offering the same basic product worldwide, they help to create a global market.

What are some of the challenges faced by managers of an international business?

Managing an international business is challenging in many ways and involves a great deal of complexity. The managers of an international business must decide where in the world to site production activities to minimize costs and to maximize value added. They must decide whether it is ethical to adhere to the lower labor and environmental standards found in many less developed nations. Then they must decide how best to coordinate and control globally dispersed production activities. The managers in an international business also must decide which foreign markets to enter and which to avoid. They must choose the appropriate mode for entering a particular foreign country. These managers must also deal with government restrictions on international trade and investment. They must find ways to work within the limits imposed by specific governmental interventions.

How is managing an international business different from managing a purely domestic business?

Managing an international business is different from managing a purely domestic business for at least four reasons: (1) countries are different, (2) the range of problems confronted by a manager in an international business is wider and the problems themselves are more complex than those confronted by a manager in a domestic business, (3) an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system, and (4) international transactions involve converting money into different currencies.

In the context of international trade and investment, describe how the former communist nations of Europe and Asia have been changing.

Many of the former communist nations of Europe and Asia seem to share a commitment to democratic politics and free market economics. For half a century, these countries were essentially closed to Western international businesses. Now, they present a host of export and investment opportunities. The economies of many of the former communist states are still relatively undeveloped, and their continued commitment to democracy and free market economics cannot be taken for granted. Disturbing signs of growing unrest and totalitarian tendencies continue to be seen in several Eastern European and Central Asian states, including Russia, which has shown signs of shifting back toward greater state involvement in economic activity and authoritarian government. Thus, the risks involved in doing business in such countries are high, but so may be the returns.

What are the various reasons for economic stagnation in many of the world's poorest countries?

Many of the world's poorest countries have suffered from totalitarian governments, economic policies that destroyed wealth rather than facilitated its creation, endemic corruption, scant protection for property rights, and prolonged civil war. Such factors help explain why countries such as Afghanistan, Cuba, Haiti, Iraq, Libya, Nigeria, Sudan, and North Korea have failed to improve the economic lot of their citizens during recent decades. A complicating factor is the rapidly expanding populations in many of these countries. Without a major change in government, population growth may exacerbate their problems.

Porter's theory suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production.

Porter's theory suggests that it is in the best interest of business for a firm to invest in upgrading advanced factors of production; for example, to invest in better training for its employees and to increase its commitment to research and development.

What are the roles of the International Monetary Fund (IMF) and the World Bank? Which of these institutions is more controversial? Why?

The International Monetary Fund (IMF) and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. The IMF was established to maintain order in the international monetary system; the World Bank was set up to promote economic development. The IMF is the more controversial of the two sister institutions. The IMF is often seen as the lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value against those of other nations. IMF loans come with strings attached, however; in return for loans, the IMF requires nation-states to adopt specific economic policies aimed at returning their troubled economies to stability and growth. These requirements have sparked controversy. Some critics charge that the IMF's policy recommendations are often inappropriate; others maintain that by telling national governments what economic policies they must adopt, the IMF is usurping the sovereignty of nation-states. On the other hand, the World Bank has focused on making low-interest loans to cash-strapped governments in poor nations that wish to undertake significant infrastructure investments (such as building dams or roads).

Briefly discuss the ways in which technological change has affected globalization.

The lowering of trade barriers made globalization of markets and production a theoretical possibility. Technological change has made it a tangible reality. Since the end of World War II, the world has seen major advances in communication, information processing, and transportation technology, including the explosive emergence of the Internet. Over the past 30 years, global communications have been revolutionized by developments in satellite, optical fiber, wireless technologies, and the Internet. These technologies rely on the microprocessor to encode, transmit, and decode the vast amount of information that flows along these electronic highways.Viewed globally, the Internet has emerged as an equalizer. It rolls back some of the constraints of location, scale, and time zones. The Internet makes it much easier for buyers and sellers to find each other, wherever they may be located and whatever their size. It allows businesses, both small and large, to expand their global presence at a lower cost than ever before. Just as important, it enables enterprises to coordinate and control a globally dispersed production system in a way that was not possible 25 years ago. In economic terms, the most important are probably the development of commercial jet aircraft and superfreighters and the introduction of containerization, which simplifies transshipment from one mode of transport to another. Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances.

Elaborate on why globalization is not inevitable.

The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from the recent commitment to liberal economic ideology if their experiences do not match their expectations. There are clear signs, for example, of a retreat from liberal economic ideology in Russia. If Russia's hesitation were to become more permanent and widespread, the liberal vision of a more prosperous global economy based on free market principles might not occur as quickly as many hope. Clearly, this would be a tougher world for international businesses.

By adopting the Contracts for the International Sale of Goods (CIGS), a nation signals to other adopters that it will treat the convention's rules as part of its law.

True - By adopting the CIGS, a nation signals to other adopters that it will treat the convention's rules as part of its law. The CIGS applies automatically to all contracts for the sale of goods between different firms based in countries that have ratified the conveniton.

To strengthen the moral courage of employees, companies should not retaliate agains those employees who complain about unethical actions.

True - Companies can stregnthen the moral courage of employees by committing themselves to not retaliate against employees who exercise moral courage, say no to superiors, or otherwise complain about unethical actions.

Confucianism is not concerned with the supernatural and has little to say about the concept of a supreme being or an afterlife.

True - Confucianism is built around a comprehensive ethical code that sets down guidelines for relationships with others. High moral and ethical conduct and loyalty are central to Confucianism. Unlike other relgions, Confucianism is not concerned with the supernatural and has little to say about the concept of a supreme being or an afterlife.

A firm's bargaining power is low when the host government places a low value on what the firm has to offer.

True - From the perspective of a firm negotiating the terms of an investment with a host government, the firm's bargaining power is high when the host government places a high value on what the firm has to offer, the number of comparable alternatives open to the firm is greater, and the firm has a long time in which to complete the negotiations. The converse also holds. The firm's bargaining power is low when the host government places a low value on what the firm has to offer, the number of comparable alternatives open to the firm is fewer, and the firm has a short time in which to complete the negotiations.

Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors.

True - Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors. Intervention is dangerous; it may invite retaliation and trigger a trade war. Intervention is unlikely to be well executed, given the opportunity for such a policy to be captured by special-interest groups.

Business leaders should use every relevant opportunity to stress the importance of business ethics and make sure that key business decisions not only make good economic sense but also are ethical.

True - Leaders in the business must give life and meaning to words in a code of ethics by repeatedly emphasizing their importance and then acting on them. This means using every relevant opportunity to stress the importance of business ethics and making sure that key business decisions not only make good economic sense but are also ethical.

Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk like the risks of expropriation (nationalization), war losses, and the inability to transfer profits back home.

True - Many investor nations now have government-backed insurance programs to cover major types of foreign investment risk. The types of risks insurable through these programs include the risks of expropriation (nationalization), war losses, and the inability to transfer profits back home. Such programs are particularly useful in encouraging firms to undertake investments in politically unstable countries.

According to Friedman's doctrine, the only social responsibility of business is to increase profits, so long as the company stays within the rules of law.

True - Milton Friedman's basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law. He explicitely rejects the idea that businesses should undertake social expenditures beyond those mandated by the law and required for the efficient running of a business.

Under the Islamic banking method of mudarabah, when an islamic bank lends money to a business, rather than charging that business interest on the loan, it takes a share in the profits that are derived from the investment.

True - The Islamic banking method of the mudarabah contract is similar to a profit-sharing scheme. Under mudarabah, when an Islamic bank lends money to a business, rather than taking business interest on the loan, it takes a share in the profits that are derived from the investment.

According to the World Values Survey, as countries get richer, a shift occurs away from "traditional values" linked to regligion, family, and country and toward "secular rational" values.

True - The World Values Survey has documented how values change. The study linked these changes in values to changes in a coutnry's level of economic development. According to the survey, as countries get richer, a shift occurs away from "traditional values" linked to religion, family, and country, and toward "secular rational" values.

According to Alexander Hamilton, governments must temporarily support new industries until they have grown strong enough to meet international competition.

True - The infant industry argument is by far the oldest economic argument for government intervention. Alexander Hamilton proposed it in 1792. According to this argument, many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with established industries in developed countries. To allow manufacturing to get a toehold, the argument is that governments should temporarily support new industries (with tariffs, import quotas, and subsidies) until they have grown strong enough to meet international competition.

What were the results of the Uruguay Round? What are the implications of these results for international business?

Under the umbrella of GATT, eight rounds of negotiations among member states worked to lower barriers to the free flow of goods and services. The most recent negotiations to be completed, known as the Uruguay Round, were finalized in December 1993. The Uruguay Round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization to police the international trading system. This has contributed to both the globalization of markets and the globalization of production. The lowering of barriers to international trade enables firms to view the world, rather than a single country, as their market. At the same time, it helps companies source goods and services from optimal locations.

SYMLOG dimensions

X-axis: unfriendly to friendly; Y-axis: opposing to accepting authority; size of circle: submissive to dominant