Exam 2

Assume that the exchange rate between the euro and the dollar is € 1.00 = $1.20. An american tourist in Germany is buying a product whose price is€ 80. How much in U.S. dollars would the tourist have to pay to buy the product? a. $120 b. $75 c. $33 d. $150 e. $60

a. $120

The ultimate controlling authority with the EU is the a. European Council b. European Commission c. Court of Justice d. European Community e. European Parliament

a. European Council

One form of FDI is _____, which involves the establishment of a new operation in a foreign country. a. a greenfield investment b. licensing c. an acquisition d. merging e. a joint venture

a. a greenfield investment

A(n) _____ has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency. a. common market b. economic union c. free trade area d. customs union e. political union

a. common market

A(n)______ refers to the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates a. currency swap b. carry trade c. hedge d. option trade e. forward exchange

a. currency swap

A push strategy will be used by a company that wants to a. emphasize personal selling b. focus on mass media advertising c. reach as many people as possible very quickly d. require very little involvement of sales force e. rely heavily on online advertising

a. emphasize personal selling

A channel that is difficult for outsiders to access is called a(n) a. exclusive channel b. high-quality channel c. short channel d. intensive channel e. concentrated channel

a. exclusive channel

It is one of Garrett's job responsibilities to report the amount of foreign direct investment undertaken by the government over a one-year time period. Garrett reports the _____ of FDI a. flow b. portfolio c. ratio d. bundle c. stock

a. flow

Which form of entry into a foreign market is a specialized form of licensing? a. franchising b. acquisition c. greenfield venture d. exporting e. turnkey project

a. franchising

Sleep-Sound Company sells its products in France through an import agent, which then sells to a wholesaler. In turn, the wholesaler sells to several retailers that ultimately sell to the consumer. In this example, the amount of intermediaries between the producer and the consumer suggests that the channel is a. long b. wide c. selective d. short e. concentrated

a. long

In terms of the communication strategy of a company, which factor favors a pull strategy? a. long distribution channels b. industrial products c. few print or electronic media available d. low degree of consumer sophistication e. complex new products

a. long distribution channels

The marketing ream at Kaiser Electronics decided to use Facebook to reach its millennial buyers and traditional newspaper advertising to reach baby boomers. the company would use ____ to identify these two distinct buying groups. a. market segmentation b. logistics c. mass customization d. JIY inventory e. market positioning

a. market segmentation

In the context of achieving operation integration and collaboration within a global supply chain, which operational objective refers to a global firm's ability to satisfy customers' requirements across global supply chain functions in a timely manner? a. responsiveness b. life-cycle support c. variance reduction d. quality e. inventory reduction

a. responsiveness

The process of dollarization occurs when a country abandons its own currency and adopts another currency - typically the U.S. dollar a. true b. false

a. true

Carson Components Inc., based in Missouris, decided to set up a new operation in Belgium. This is a greenfield venture, which is a form of which entry mode? a. wholly owned subsidiary b. exporting c. licensing d. joint venture e. turnkey contract

a. wholly owned subsidiary

Quadrangel Corporation, and american high-tech company, wants to set up operations in a foreign country. They company needs to select an entry mode that offers protection of its proprietary technology. Which entry mode is most suitable for the company? a. wholly owned subsidiary b. turnkey project c. franchising d. joint venture e. strategic alliance

a. wholly owned subsidiary

Assuming all other elements are the same, what would most likely lead a global firm to purchase an item from an outside supplier? a. there is proprietary technology involved in making the product that should not be shared with other parties b. quality control is important to the global firm c. the global firm wants to have control over certain elements of the production process d. the product to be made is a nonessential item that has little effect on the global firm's core competencies and customer expectations e. the global firm has excess capacity that otherwise would not be productively used.

d. the product to be made is a nonessential item that has little effect on the global firm's core competencies and customer expectations

_____ refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market a. price skimming b. multipoint pricing c. predatory pricing d. price discrimination e. bundling

b. multipoint pricing

The main role of an offshore factory is to a. gather intelligence b. produce component parts or finished goods at a lower cost than possible at home or in any other market c. test new ideas and products d. create new processes, products, and technologies that can be used throughout the global firm in all parts of the world e. overcome intangible and tangible barriers in the global marketplace

b. produce component parts or finished goods at a lower cost than possible at home or in any other market

Which factor favors decentralization of production? a. trade barriers are low b. product's value-to-weight ratio is low c. product serves universal needs d. exchange rates are expected to remain stable e. high fixed costs of production technology

b. product's value-to-weight ratio is low

The United States imports sugar from several nations. If the NAFTA agreement caused the U.S. to import sugar only from Canada, even though it cost more to do so, it would be an example of a. dumping b. trade diversion c. trade creation d. retaliatory trade action e. a political union

b. trade diversion

_____ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future. a. a currency swap b. carry trade c. a forward exchange d. currency speculation e. a spot exchange

c. a forward exchange

A country is said to be in _____ when the income its residents earn from exports is equal to the money its residents pay to other countries for imports a. fiscal fault b. trade imbalance c. balance-of-trade equilibrium d. a trade surplus e. a recession

c. balance-of-trade equilibrium

Carolina Furniture Inc. is concerned with the possibility of high transportation costs and the threat of tariff barriers when entering into a foreign market. Based on this, which entry mode should the furniture company avoid? a. franchising b. turnkey contract c. exporting d. licensing e. joint ventures

c. exporting

TickTock Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale there. Based on this information, TickTock In. is involved in a. outsourcing b. licensing c. exporting d. using a greenfield investment e. franchising

c. exporting

The institutional arrangements that govern exchange rates are called the a. generally accepted accounting principles b. general agreement on tariffs and trade c. international monetary system d. general agreement on trade in services e. financial management information system

c. internation monetary system

Mexico agreed to NAFTA after it was determined that the country's oil industry would be controlled by Mexico. Why did Mexico fight for this right? a. it wanted to undermine oil producers in the U.S. b. it believed that without this control, all oil-related jobs would be moved to Canada c. it wanted to maintain national sovereignty d. it wanted to share in the specialization of production of goods and services e. it was the only export the country shared with three European nations

c. it wanted to maintain national sovereignty

Which form of entry into a foreign market is more likely to provide a company with access to a local partner's knowledge? a. turnkey project b. exporting c. joint venture d. licensing e. franchising

c. joint venture

Geronimo Organics has had the luxury of charging high prices in the United States because there weren't any competitors for its products. Now it plans to enter the foreign market and can use pricing from U.S. sales to subsidize an aggressive lower pricing policy in Europe. What type of pricing is the company using? a. price skimming b. price discrimination c. predatory pricing d. multipoint pricing e. bundling

c. predatory pricing

Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination? a. pragmatic nationalism b. planned economy c. radical view d. free market e. mercantilism

c. radical view

_____ is the process of moving inventory from the point of consumption to the point of origin in supply chains for the purpose of recapturing a proper disposal. a. distribution b. purchasing c. reverse logistics d. inventory management e. packaging

c. reverse logistics

The movement of traders like a herd, all in the same direction and at the same time, in response to each other's perceived actions, is called a. the sullivan principle b. capital flight c. the bandwagon effect d. the fisher effect e. the spot effect

c. the bandwagon effect

Centex systems sources cables and wires from the Wrapper Corp. In this situation, the Wrapper Corp. is part of the _____ portion of the global supply chain a. downstream b. marketing c. upstream d. differential e. process

c. upstream

The Bretton Woods agreement created which two multinational institutions? a. United Nations and the World Bank b. World Trade Organization and the International Monetary Fund c. World Bank and the G20 d. International Monetary Fund and the World Bank e. United Nations and the World Trade Organization

d. International Monetary Fund and the World Bank

The investment manager at AllRight Time Inc. reminds the board that the foreign exchange market is a mixed system. The investment manager wants the board to realize that rates are driven by a. dynamic competitive forces b. supply and demand c. the interplay of big business and Western practices d. a combination of government intervention and speculative activity e. the globalization of developing nations

d. a combination of government intervention and speculative activity

What is a common reason for the failure of an acquisition? a. possibility of being preempted by aggressive global competitors b. inability to realize location and experience curve economies c. high degree of uncertainty associated with revenue and profits d. clash between the cultures of the acquiring and acquired firms e. lack of control over technology and quality of product offerings.

d. clash between the cultures of the acquiring and acquired firms

What is an example of a "hidden" cost associated with basing production in a foreign location? a. border tariffs b. component parts c. returns and recycling d. employee turnover e. competitor value

d. employee turnover

An advantage of exporting is a. it helps avoid high tariffs b. it is preferred for selling bulk products globally c. it prevents firms from achieving experience curve and location economies d. it avoids the costs of establishing manufacturing operations in the hist country e. it lowers distribution costs and minimizes distribution networks.

d. it avoids the costs of establishing manufacturing operations in the hist country

Carlos is the manager of an american company. He expects the value of the British pound to appreciate in the near future and so delays the collection of payments from British customers until the next month. Which tactic is Carlos using to minimize the foreign exchange exposure? a. spot exchange rate contracts b. buying swaps c. lead strategy d. lag strategy e. forecast strategy

d. lag strategy

Which process allows companies to produce a wider variety of products at a cost that previously could only be achieved through mass production of a standardized product? a. TQM b. JIT c. Six Sigma d. lean production e. minimum efficient scale

d. lean production

_____ refers to the choices about product attributes, distribution strategy, communication strategy, and pricing strategy that a firm offers it targeted markets a. segmentation b. supply chain c. logistics d. marketing mix e. media plan

d. marketing mix

The currency of Panama, the balboa, is fixed relative to the U.S. dollar. As a result, the U.S. dollar exchange rate determines the exchange rate between the Panama balboa and other currencies. This is an example of a ______ exchange rate a. dirty-float b. flexible c. floating d. pegged e. fixed

d. pegged

Licensing is a good option to enter a foreign market when a. trade barriers between countries are trivial in nature b. the technical know to be shared is extremely valuable c. transportation costs are minor d. tight control of the foreign operation is not required e. the competitive advantage of a firm is based upon managerial knowledge that is embedded in the routines of the firm

d. tight control of the foreign operation is not required

The stock of FDI refers to the a. the inflows of FDI into a country b. the net position of FDI flows after comparing inflows and outflows during a period c. the outflows of FDI from a country d. total accumulated value of foreign-owned assets at a given time e. amount of FDI undertaken over a given time period

d. total accumulated value of foreign-owned assets at a given time

Fast Fleet Trucking, and American company, is planning to enter South Korea. While the company has operation abroad, it has no experience with Asian markets. Fast Fleet Trucking needs a type of entry that allows the company to collect information and learn about the South Korean market while limiting its exposure. What is the most suitable form of entry for Fast Fleet Trucking? a. rapid entry b. large-scale entry c. early entry d. small-scale entry e. significant entry

d. small-scale entry

The rate at which a foreign exchange dealer converts one currency into another currency on a particular day is the a. future exchange rate b. forward exchange rate c. fixed exchange rate d. spot exchange rate e. floating exchange rate

d. spot exchange rate

Two eastern European countries formed a free trade agreement. As a result, one of the countries that used to produce its own plastic bottles at a higher cost now imports them from the other country at a lower cost. This is an example of a. trade diversion b. dumping c. retaliatory trade action d. trade creation e. a political union

d. trade creation

____ is a pact among Argentina, Brazil, Paraguay, and Uruguay to establish a free trade area a. Central America Free Trade Agreement b. Andean Community c. Central American Common Market d. CARICOM e. Mercosur

e. Mercosur

One argument against standardized advertising is a. it increases the costs of value creation b. one large effort often produces worse results than 50 smaller efforts c. global campaigns tend to confuse consumers in terms of brand image d. the scarcity of local creative talent make standardized advertising difficult to execute. e. advertising regulations may block implementation of standardized advertising.

e. advertising regulations may block implementation of standardized advertising.

A company would adopt a pull strategy when it wants to a. speak one-on-one with the customer b. rely on personal selling c. sell industrial products d. limit television advertising e. emphasize mass media advertising

e. emphasize mass media advertising

The exchange rate for converting the U.S. dollar into other currencies is continuously adjusted depending on the laws of supply and demand. This illustrated a _____ exchange rate. a. flexible b. pegged c. dirty-float d. fixed e. floating

e. floating

A factory that can be viewed as an intelligence-gathering unit is called a(n) a. offshore factory b. server factory c. lead factory d. source factory e. outpost factory

e. outpost factory

Under the fixed exchange rate regime established at Bretton Woods, _____ served as the reference point for all other currencies a. the British pound b. gold c. the Mexican peso d. silver e. the U.S. dollar

e. the U.S. dollar

A currency is considered freely convertible when a. both residents and nonresidents are allowed to purchase a limited amount of a foreign currency with it b. only residents may convert it into a foreign currency without any limitations c. only nonresidents may convert it into a foreign currency without and limitations d. neither residents nor nonresidents are allowed to convert it into a foreign currency e. the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it

e. the country's government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it

A country that imports more goods than it exports experiences a a. factor endowment b. current account surplus c. late-mover advantage d. fist-mover advantage e. trade deficit

e. trade deficit

In which mode of market entry does a contractor agree to handle every detail of the operation for a foreign client, and hand over the operation once it is fully functional? a. franchising b. licensing c. exporting d. joint venture e. turnkey project

e. turnkey project

In which of these companies is centralized production most appropriate? a. Company A, which sells a products that serves universal needs, but trade barriers are high. b. Company B, which sells a product with a high value-to-weight ratio, and operates in an industry where location externalities are important. c. Company C, which sells a unique product and operates in an industry where location externalities are not important. d. Company D, which sells a product with a low value-to-weight ration and expects exchange rates to remain relatively stable e. Company E, which sells a product that does not serve universal needs, and operates in an industry where location externalities are not important.

b. Company B, which sells a product with a high value-to-weight ratio, and operates in an industry where location externalities are important.

Concrete Forms International needs immediate access to steel in order to produce a new product line. It cannot afford to wait and establish a new operation in a foreign country where steel is prevalent, so it decides to purchase an existing company instead. Why did Concrete Forms decide to make this purchase? a. It is easier and less risky for a firm to build up through a greenfield investment rather than through acquisitions b. Mergers and acquisitions are quicker to execute than greenfield investments c. A greenfield investment will provide quickest access to the steel forms d. The higher percentage of mergers and acquisitions in developing nations compared to developed nations indicate the low valuation of target firms in developing countries. e. FDI flows are similar between developed and developing nations

b. Mergers and acquisitions are quicker to execute than greenfield investments

One risk associated with a joint venture is that a. in a joint venture, one firm owns 100 percent of the stock b. a firm that enters into a joint venture risks giving control of its technology to its partner c. a joint venture reduces the chances of management conflict d. a joint venture gives one firm a tight control over operations e. there is a high risk of being subject to nationalization, compared to wholly owned subsidiaries.

b. a firm that enters into a joint venture risks giving control of its technology to its partner

Rae feels it is best for her company to pay their foreign supplier in Panama this month even though they will receive product for another six months. She recently learned that the currency in Panama is expected to appreciate and, by paying the supplier now, her company will save money. This is an example of a. a lag strategy b. a lead strategy c. buying swaps d. a forecast strategy e. a spot exchange rate contract

b. a lead strategy

A customs union differs from a free trade area because it allows for a. removal of barriers to the trade of goods and services among member countries b. adoption of a common external trade policy c. mobility of factors of production among member countries d. harmonization of tax rates of member countries e. adoption of a common monetary and fiscal policy among member countries

b. adoption of a common external trade policy

A(n) _____ system refers to one in which a country's currency is nominally allowed to float freely against other currencies but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value a. fixed float b. dirty-float c. floating exchange rate d. pegged exchange rate e. clean float

b. dirty-float

The U.S. dollar, EU euro, Japanese yen, and British pound are all free to float against each other, which means their exchange rates never fluctuate a. true b. false

b. false

The ______ view argues that international production should be distributed among countries according to the theory of comparative advantage and countries should specialize in the production of goods they can produce most efficiently. a. pragmatic nationalist b. free market c. radical d. mercantilist e. conservatist

b. free market

Identify the correct sequence of economic integration starting from the least integrated to the most integrated. a. free trade area, customs union, economic union, political union, common market b. free trade area, customs union, common market, economic union, political union c. common market, free trade area, customs union, economic union, political union d. free trade area, common market, customs union, economic union, political union e. common market, free trade area, customs union, political union, economic union

b. free trade area, customs union, common market, economic union, political union

Jacob is the chief financial officer for RinseAll Detergent products. His company is interested in investing in a facility in Indonesia, but he is worried about unpredictable fluctuations in future exchange rates, which could cost his company millions of dollars. One way to ensure against this exchange risk is for Jacob to use a. forecasting b. hedging c. currency speculation d. countertrade e. arbitrage

b. hedging

One reason the British electorate voted to exit the European Union is because of an increase in _____ within Europe a. human rights violations b. immigration c. entrepreneurism d. agriculture prices e. commodities

b. immigration

Translation exposure refers to the a. extent to which the money supply increases faster than output increases b. impact of currency exchange rate changes on the reported financial statements of a company c. extent to which income from individual transactions is affected by fluctuations in foreign exchange values d. extent to which the government allows residents and nonresidents to convert a currency into a foreign currency e. extent to which a firm's future international earning power is affected by changed in exchange rates

b. impact of currency exchange rate changes on the reported financial statements of a company

One disadvantage of licensing as a mode of entry into foreign markets is that a. it is uneconomical due to the high transportation costs. b. it can cause the firm to quickly lose control over its technology c. it is the most costly method of serving a foreign market from a capital investment standpoint d. it is very risky due to the threat of tariff barriers by the host-country government e. it can lead to problems with local marketing agents

b. it can cause the firm to quickly lose control over its technology

Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the United States in return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, what is being done by Royal Chocolatier? a. outsourcing b. licensing c. insourcing d. franchising d. exporting

b. licensing