MGT 3600 Final Exam

Companies with a regional strategic approach can use a polycentric staffing policy, employing a variety of host-country nations (HCNs) and third-country nationals (TCNs).

False

Companies with a transnational strategic orientation follow a global staffing policy, selecting the best person for each job without considering national origin and generally having consistent HRM strategy across all subsidiaries.

False

If a firm decides to become involved in overseas manufacturing it has two options: (1) wholly owned subsidiary and (2) joint venture.

False

In a joint venture, a management contract is often used as a non-ownership-based control mechanism by any of the firms when an agreement cannot be reached.

False

Under a polycentric staffing orientation, ICs primarily hire host-country nations (HCNs) for subsidiaries and PCNs for headquarters' positions and movement from the local subsidiaries to headquarters' positions is common.

False

The functional currency is

The primary currency of a business

Generally, management prefers global product standardization because

There are lower costs due to longer production runs, design efficiencies, and marketing-related efficiencies—all of which lower costs.

Companies with a primarily international strategic orientation may adopt an ethnocentric staffing policy.

True

Direct exporting is an excellent means of getting a feel for international business without committing a great amount of human or financial resources.

True

Licensing refers to a contractual agreement in which the licensor grants access to its patents, trade secrets, or technology for a fee paid by the licensee.

True

Parent company nationals (PCNs) commonly encounter difficulty overcoming the biases of their own cultural experience and being able to understand and perform effectively within a new operating context.

True

Producing a factory ready to operate is similar to producing a "turnkey project."

True

Some firms grant licenses to other firms in order to reduce the competitive level of a potential rival, especially in the fashion industry.

True

The licensee generally pays a fixed sum when signing a license agreement and then royalties over the life of the contract.

True

Turnkey projects export technology, management expertise, and capital equipment.

True

he principal ingredient that a franchiser exports is

a brand name, marketing strategy, and procedures.

A joint venture may be

a corporate entity formed between an international firm and local owners.

The balance of payments account is a record of

a country's transactions with the rest of the world.

By means of a licensing agreement,

a foreign company receives products made for it by another company.

A policy of hiring and promoting based on ability and experience without considering race or citizenship is

a geocentric policy

A policy of hiring and promoting based on the specific local context in which the subsidiary operates is

a polycentric policy

Among the promotional mix elements, __________ changes the least around the world.

advertising

the promotional mix is communicated through public relations, publicity, personal selling, promotion, and _________________.

advertising

Guest workers

are temporary economic immigrants.

Management would prefer global standardization of the marketing mix

because each market demands it.

The U.S. current account deficit can be explained partially by

citizens of other nations wanting to hold dollars, and invest in the U.S.

In Gray's study of culture in accounting, values of secrecy or privacy and ___________ correlate.

conservativism

The rule of thumb on capital structure choices is that

debt financing is less expensive than equity financing.

Transfer pricing may be used to

decrease IC taxes

In an inflationary economy the following conditions may be present:

demand exceeds supply. money supply is increasing. prices are rising.

Trends in inflation, exchange rates, and interest rates are part of

economic and financial forces

The three kinds of FX exposure are translation, transaction, and

economics

ADRs function to

eliminate a foreign firm's need for a broker in the U.S. and make currency exchanges.

Europeans, especially the French, want sophisticated advertisements, while the U.S. shoppers react to more ___________ appeals.

emotional

A high volume of orders, commands, and advice to subsidiaries is associated with

ethnocentric staffing and home replication strategy.

The Triffin paradox suggests that:

eventually, reserve currencies will run deficits, which will lead to lack of confidence in the currency.

The impact of blocked funds includes

exploration of transfer pricing options

Swap contracts are used to hedge

foreign currency exposure.

Transfer pricing is a way to move funds

from high tax, weak currency environments, or ones where profit repatriation is controlled.

The law of one price says that

in an efficient market, like goods will have like prices.

Translation risk

is a currency exchange risk resulting from translating values in foreign currencies to the home-country currency.

Transaction exposure

is a currency exchange risk that arises when future payment in a foreign currency is involved.

A forward market hedge

is accomplished by a contract in the foreign exchange market.

Multilateral netting

is using IC open positions in two currencies that are expected to balance each other.

Franchising is a form of

licensing

_____________ is a contract in which a firm grants access to its patents, trade secrets, or technology to another firm.

licensing

Average growth rate in commercial energy use plus real growth rate in GDP compose the _____________ index.

market growth rate

Size of the urban population and electricity consumption are part of the __________ index.

market size

A polycentric staffing policy

may confront the problem of having the best people pirated away by local firms or other IC subsidiaries.

The money market hedge

may involve borrowing money in a foreign currency and immediately converting it to dollars.

A currency option hedge

offers great flexibility in currencies hedged, as well as in amounts and settlement dates

The forward market hedge

offers great flexibility in currencies hedged, as well as in amounts and settlement dates.

In Gray's study of culture in accounting, transparency, and _________ correlate and are shared by Anglo and Nordic countries.

optimism

A value-added tax is actually a sales tax that is

paid in stages along the process from raw materials to consumer, and then credited after final sale.

A turnkey project includes

plant design and technology supply.

Entry barriers, profit remittance barriers, and policy stability are all part of the

political and legal forces

The international Fisher effect says that interest rate differentials

predict exchange rate movement.

Balance of payments data

reveal demand for a country's currency.

If the Japanese yen is strengthening against the U.S. dollar, and the Japanese government wanted to boost exports, the Central Bank of Japan (CBJ) might well

sell massive amounts of Japanese yen in the FX markets.

The SDR is

special drawing rights, an international reserve asset.

The two methods of currency translation are

temporal and current.

An ethnocentric staffing policy

tends to be used by companies with an international strategic orientation.

The product is

the central focus of the marketing mix.

The international Fisher effect says that the interest rate differentials in any two currencies reflect

the expected change in their exchange rates.

Purchasing power parity is a way to compare

the purchasing power of several currencies.

The inflation rate determines

the real price of borrowing in capital markets.

If a U.S. industrial subsidiary in France sells in dollars for European sales

the subsidiary will not be able to use the local debt markets.

Countries put limitations on the convertibility of their currency when they are concerned that

their foreign reserves could be depleted.

A polycentric staffing policy is appropriate when

there are low levels of pressure for cost reduction and high levels for localization

An advantage of using home-country citizens abroad is that

they expand their experience, enhancing their potential for promotion at home.

Brain drain affects developing countries because

they lose talent to migration, and this impacts their development

The cost of transferring funds is the ______________.

transaction cost

Currency fluctuations create risks categorized as

transaction, translation, and economic exposures.

Consolidation is the process of

translating results into one financial statement.

In spite of the advantages of global standardization, many firms find it necessary to

use the domestic marketing mix overseas.

When the law of one price is applied to interest rates, it suggests that

varying interest rates take into account anticipated differences in inflation rates.