Business principles Module 1&2 test

Technological drivers

-Advances in computers and communications technology permit an increased flow of ideas and information across borders -Smaller companies may find barriers reduced for being able to communicate and serve customers abroad. -Computer-based communication may enhance virtual integration

market drivers

-As firms internationalize, they also become global customers -Firms may go abroad to protect business in their home market, so that foreign suppliers do not replace them with customers. -Mature home country markets may encourage companies to consider nations with rising GDP/capita, population growth, and higher rates of GDP growth.

Political Drivers

-Trends toward the unification and socialization of the global community -Preferential trading arrangements that group several nations into a single market -Potential protectionism by host country markets

foreign affiliates

A company controlled by another company that is located in a foreign land, and this control may be exercised by a variety of means, both those involving stock ownership and those involving nonownership mechanisms

international company

A company with operations in multiple nations

which country currently exports the most to the U.S

China

The three nations that exported the largest amount of goods to the United States in 2017 were

China, Canada, and Mexico

competitive drivers

Competition continues to increase intensity. New firms, many newly industrialized and developing countries have entered world markets. (Global competition)

Which element is included in Porter's diamond model of national advantage?

Demand conditions

FDI

Foreign Direct Investment - Investment made by a foreign company in the economy of another country

Five Drivers of Globalization

Politics, Technology, Markets, Costs, Competition

The theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market is known as

internalization theory

The theory of overlapping demand suggests that

international trade in manufactured goods will be more common between countries with similar levels of income.

According to the international product life cycle, which country has the largest population of high-income consumers and as a result, intense competition for their patronage?

The U.S

Which regions accounted for an average of 49 percent of all inward FDI for 2015-2019?

The U.S and the European union

International business

all business activities that involve exchanges across national boundaries

domestic environment

all the uncontrollable forces originating in the home country that surround and influence the firm's life and development

The argument that free trade is the best strategy for advancing the world's economic development is considered A) one of the most contentious issues associated with economic globalization. B) one that has very little support in research studies. C) a proposition with which most economists agree. D)the basis for much protectionist legislation in emerging markets.

c

The term globalization was first coined in a Harvard Business Review article in which the author maintained that A) new technologies were creating opportunities for creating mass customization of products. B) governments would be threatened by the emergence of global companies and would limit their development. C) the future belonged to global companies that sold the same things the same way, everywhere. D) increased differentiation of products would mean that costs of production would become a steadily declining proportion of the selling price.

c

foreign business

denotes the operations of a company outside its home or domestic market

currently the U.S is the largest exporter in the world

false

Trade Theory

shows why it is beneficial for a country to engage in international trade even for products it is able to produce for itself

U.S.-based Good For You Coffee Company introduced its line of herbal coffees to the international market two years ago. They were well received, and now foreign competitors are starting to export similar products. Which stage of the product life cycle is the product currently in?

stage 3

The theory suggesting that rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage is known as

strategic behavior theory

The theory of overlapping demand explains

that a nation's per capita income determines the kinds of goods it will need.

trade deficit

the amount by which the cost of a country's imports exceeds the value of its exports.

trade surplus

the amount by which the value of a country's exports exceeds the cost of its imports.

exchange rate

the price of one nation's currency in terms of another nation's currency

direct investment

the purchase of sufficient stock in a firm to obtain significant management control.

Overall, what has occurred with the dollar volume of service exports worldwide?

there has been an absolute increase

A small gourmet food company operates solely within its own country's borders. As such, it need only be concerned with the domestic market.

true

Opponents of free trade point out that globalization has contributed to a decline in environmental and health conditions.

true

self reference criterion

unconscious reference to one's own cultural values, experiences, and knowledge as a basis for decisions

foreign environment

uncontrollable forces originating outside the home country that surround and influence the firm

International business really began

when Phoenician and Greek merchants sent representatives abroad to sell goods

World trade is dominated with exchanges _______

within geographic regions

cost drivers

•Going abroad can frequently lower the cost of goods sold. -Globalization of product lines reduce development, production, and inventory costs. -Some governments offer investment incentives to foreign business.

Environmental Forces

All businesses subject to external and internal forces •Domestic businesses mostly deal with the domestic environment •International businesses must consider domestic, foreign, and global environments •Forces operate within each of these environments

Mercantilism

An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought

absolute advantage

Exists when a country can produce a good or service at a lower cost than other countries.

International Environment

Interaction between domestic and foreign environmental forces or between sets of foreign environmental forces

uncontrollable forces

The external forces that management has no direct control over

portfolio investment

The purchase of stocks and bonds to obtain a return on the funds invested

comparitive advantage

The situation where someone can produce a good at lower opportunity cost than someone else can

who is credited being the first person to coin the term globalization

Theodore Levitt

perfect competition

a market structure in which a large number of firms all produce the same product

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

An international company (IC) is a company headquartered in another nation.

false

Lobbyists who advocate for new laws that will affect the production standards of a business are an example of an internal force.

false

The foreign environment consists of the interactions between the domestic environmental forces and the foreign environmental forces, as well as interactions between the foreign environmental forces of two countries.

false