Int'l Management- ch 10

Which of the following statements is true about expropriation?

Firms at the greatest risk of expropriation are in extractive, agricultural, or infrastructural industries such as utilities and transportation

Which of the following is an external economic relations factor that multinational companies may use to evaluate political risk?

Freedom to set up or engage in partnerships

Ownership-control risks

Government policies or actions that inhibit ownership or control of local operations

Which of the following is not a critical business issue for successful termination of international alliances?

Rights over sales territories and obligations to customers

most corrupt nation according to the 2012 Transparency International Corruption Perceptions Index

Somalia

Uncertainty avoidance

a cultural difference that tends to be more disruptive for international joint ventures than the others

According to relative bargaining power

a multinational company works to maintain a stronger bargaining power position than that of the host country.

Over the past two decades, political risk has become

a vital area for multinational companies to manage

Benefits of proactive political strategies include all of the following except

providing support for national and sub-central governments in transitional economies

Some multinational corporations attempt to manage political risk by simultaneously analyzing a range of variables to derive an overall rating of the degree of political risk in a given jurisdiction. This is referred to as a

quantification process

When host governments do not require alliances as a condition for entry, many multinational companies

find that having an alliance is advantageous to their entry and expansion

A salient feature of vertical investments is that they

include the production of raw materials or intermediate goods that are to be processed into final products

Price controls, financing restrictions, export commitments, taxes, and local-sourcing requirements are examples of

operational risks

Foreign ownership limitations, pressure for local participation, confiscation, expropriation, and abrogation of property rights are examples of

ownership-control risks

Not all MNCs are confident about international investment in countries

political unrest

In their attempts to forestall harm in risky venues, multinational companies must thoroughly evaluate the political environment, install modern security systems, compile a crisis handbook, and

prepare employees for situations that may arise

Macro political risk analysis

reviews major political decisions that are likely to affect all business conducted in a particular country.

The ratings factors that are quantified for multinational companies to manage political risk reflect all of the following except

social conditions

A true statement about horizontal investments is that they are

unlikely to be takeover targets because these investments typically are made with an eye toward satisfying the host country's market demands.

The following are listed as techniques for responding to political risks except

realistic bargaining power analysis

Multinational companies can minimize their chances of expropriation by

acquiring an affiliate that depends on the parent company for key areas of operation

Political risks can be broken down into three basic categories

-Transfer risks -Operational risks -Ownership-control risks

tends to occur once and often has poorly defined objectives, and therefore members are not as committed.

Amateur Terrorism

Which of the following statements is true of the impact of domestic and international political developments on multinational companies

As government policies change, it is imperative that multinational companies be willing and able to adjust their strategies and practices to accommodate new perspectives

Which of the following is not an example of risk factors for a multinational company?

Complying with contractual terms of agreement

An example of transfer risks

Dividend remittance

Which of the following is an example of a protective and defensive technique for responding to a political risk?

Doing as little local manufacturing as possible conducting all research and development outside the country

Which of the following criteria involves maximum political risk?

Effectiveness of public administration

Identify a true statement about classic terrorism

It entails a specific, well-defined objective pursued by well-trained, professional underground members

True statement of the impact of terrorism within a country on multinational companies in the macro sense:

It is extremely difficult to guarantee that companies can fully avoid harm from terrorism, but political risk analysis and preparation may forestall it

The economies of China, Russia, India, and Vietnam present (macro/micro) political risk for multinational companies.

Macro

China's government policies regarding investment in the telecommunications industry fall into the (micro/macro)

Micro political risk

least corrupt nation according to the Transparency International Corruption Perceptions Index

New Zealand

A true statement about protective strategies for responding to political risks

Organizations with an emphasis on innovative technology prefer a protective technique as a way to safeguard against actions such as counterfeiting

Which of the following is not a critical legal issue for successful termination of international alliances?

People-related issues

expropriation

The seizure of businesses by a host country with little, if any, compensation to the owners

A salient feature of horizontal investments

They involve the production of goods or services that are the same as those produced at home

risks that stem from government policies that limit the transfer of capital, payments, production, people, and technology in or out of a country.

Transfer risk

The primary sector of economic activity includes

agriculture, forestry, and mineral exploration and extraction

Integrative techniques

are designed to help the overseas operation become part of the host country's infrastructure.

Indigenization laws

are laws that require that nations hold a majority interest in the operation

All of the following actions raise the political risk of doing business in China except

concerns on safety and reliability of product quality

a type of high-risk investment in which goods or services produced are different from those produced at home

conglomerate investment

Which of the following is an example of an integrative technique for responding to political risk?

creating joint ventures and hiring local people to manage and run operations

Examples of proactive political strategies include all of the following except

downsizing and transferring business elsewhere

Micro risk issues often take forms such as

industry regulation, taxes on specific types of business activity, and various restrictive local laws.

proactive political strategies may include

leveraging bilateral, regional, and international trade and investment agreements, drawing on bilateral and multilateral financial support, and using project finance structures to separate project exposure from overall firm risk.

In recent years, (macro/micro) risk analysis has become of increasing concern to multinational companies because of the growing number of countries that are finding their economies in trouble as in Southeast Asia or, even worse, unable to make the transition to a market-driven economy.

macro

China's decision regarding restrictions on foreign exchange transactions is a (macro/micro) political risk

macro- because it affects all multinational companies

The industrial sector of economic activity includes

manufacturing operations