MGT 4240

The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery. What is this an example of?

An ethical dilemma. The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery, and therefore unethical, particularly if the gifts are substantial. This is a business-oriented example of an ethical dilemma.

The naive immoralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.

False. A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

A subsidy is a

government payment to a domestic producer. A subsidy is a government payment to a domestic producer. Subsidies take many forms, including cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms.

The term _____ refers to the values and norms that are shared among employees of an organization.

organizational culture

An import quota is a specific tax levied on imports.

False. An import quota is a direct restriction on the quantity of some good that may be imported into a country.

By limiting imports through quotas, governments decrease the attractiveness of FDI and licensing.

False. By limiting imports through quotas, governments increase the attractiveness of FDI and licensing.

Governments always act in the national interest of their countries when they intervene in the economy.

False. Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.

In the 1986 Uruguay Round, GATT members sought to write rules for promoting which of the following?

GATT's monitoring and enforcement mechanisms. In the Uruguay Round, member countries sought to extend GATT rules to cover trade in services. They also sought to write rules governing the protection of intellectual property, to reduce agricultural subsidies, and to strengthen the GATT's monitoring and enforcement mechanisms.

_____ is also known as the market imperfections theory.

Internalization theory. Internalization theory is also known as the market imperfections approach. It seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.

Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are _____ and performance requirements.

ownership restraints. Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are ownership restraints and performance requirements. The other items listed are all common forms of incentives governments offer to foreign firms to invest in their countries.

Moral imagination refers to

standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder. Stakeholder analysis involves a certain amount of what has been called moral imagination. This means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.

General Motors' stand against apartheid in South Africa was based upon what came to be known as _____.

the Sullivan principles. GM adopted what came to be called the Sullivan principles, named after Leon Sullivan, a black Baptist minister and a member of GM's board of directors. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as two conditions were fulfilled. First, the company should not obey the apartheid laws in its own South African operations (a form of passive resistance). Second, the company should do everything within its power to promote the abolition of apartheid laws.

As a philosophy for business ethics, utilitarianism focuses attention on the need to

weigh carefully all of the social benefits and costs of a business action. Utilitarian approaches to ethics hold that the moral worth of actions or practices is determined by their consequences. As a philosophy for business ethics, it focuses attention on the need to weigh carefully all of the social benefits and costs of a business action and to pursue only those actions where the benefits outweigh the costs.

_____ argues that a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that boosts national income at the expense of other countries.

Paul Krugman. Krugman argues that a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that boosts national income at the expense of other countries. A country that attempts to use such policies will probably provoke retaliation.

_____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

Strategic trade policy. According to the strategic trade policy argument, a government should use subsidies to support promising firms that are active in newly emerging industries.

Direct effects arise when a foreign MNE employs a number of host-country citizens.

True. Direct effects arise when a foreign MNE employs a number of host-country citizens.

A code of ethics is a formal statement of the ethical priorities that a business follows.

True. Many companies now draft a code of ethics, which is a formal statement of the ethical priorities a business adheres to. Often, the code of ethics draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy.

The GATT was a multilateral agreement whose objective was to liberalize trade.

True. The GATT was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade.

True. The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade. This justification challenges the rationale for unrestricted free trade found in the work of classic trade theorists such as Adam Smith and David Ricardo.

In which of the following situations would FDI deteriorate the current account of the host country's balance of payments?

When a foreign subsidiary imports a substantial number of its inputs from abroad. A concern arises when a foreign subsidiary imports a substantial number of its inputs from abroad, which results in a debit on the current account of the host country's balance of payments.

The lack of progress in the Doha Round negotiations has resulted in countries

forging ahead with their own bilateral agreements. In response to the apparent failure of the Doha Round negotiations to progress, many nations have pushed forward with bilateral trade agreements. These include the United States and the EU, which in 2013 launched bilateral talks aimed at reducing trade barriers between them.

_____ are controls over the behavior of the MNE's local subsidiary. The most common of these are related to local content, exports, technology transfer, and local participation in top management.

Performance requirements. Performance requirements are controls over the behavior of the MNE's local subsidiary. The most common performance requirements are related to local content, exports, technology transfer, and local participation in top management.

Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior.

True. Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward people who engage in ethical behavior and sanction those who do not.

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics.

True. Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics.

Dumping is viewed as a method by which firms unload excess production in foreign markets.

True. In the context of international trade, dumping is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. Dumping is viewed as a method by which firms unload excess production in foreign markets.

Offshore production refers to FDI undertaken to serve the home market.

True. The term offshore production refers to DFI 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.

The Foreign Corrupt Practices Act was amended to

allow for "facilitating payments." The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business. Some U.S. businesses immediately objected that the act would put U.S. firms at a competitive disadvantage (there is no evidence that has occurred). The act was subsequently amended to allow for "facilitating payments."

According to the _____, international production should be distributed among countries according to the theory of comparative advantage.

free market view. The free market view argues that international production should be distributed among countries according to the theory of comparative advantage. Countries should specialize in the production of those goods and services that they can produce most efficiently.

Ad valorem tariffs are

levied as a proportion of the value of the imported good. 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.

The threat of antidumping action affects a firm by

limiting its ability to use aggressive pricing to gain market share in a country. The threat of antidumping action limits the ability of a firm to use aggressive pricing to gain market share in a country. Firms in a country also can make strategic use of antidumping measures to limit aggressive competition from low-cost foreign producers.

If General Electric, a U.S. based corporation, purchases a 12 percent interest in a company in Italy, that purchase would be an example of a(n) _____.

minority acquisition. Acquisitions can be a minority (where the foreign firm takes a 10 percent to 49 percent interest in the firm's voting stock), majority (foreign interest of 50 percent to 99 percent), or full outright stake (foreign interest of 100 percent).

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are

not always clear-cut. The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are not always clear-cut.

Five airlines control 90 percent of the aviation sector of a country. The aviation industry in the country would be an example of a(n) _____.

oligopoly. An oligopoly is an industry composed of a limited number of large firms (e.g., an industry in which four firms control 80 percent of a domestic market would be defined as an oligopoly).

A lobbyist from California argues that the U.S. government needs to protect the U.S. semiconductor industry from foreign competition. She argues that semiconductors are now such important components of defense products that it would be dangerous to rely primarily on foreign producers for them. This is an example of a(n) _____ argument for government intervention.

political. Countries sometimes argue that it is necessary to protect certain industries because they are important for national security. Defense-related industries often get this kind of attention (e.g., aerospace, advanced electronics, and semiconductors). Although not as common as it used to be, this political argument is still made. Those in favor of protecting the U.S. semiconductor industry from foreign competition, for example, argue that semiconductors are now such important components of defense products that it would be dangerous to rely primarily on foreign producers for them.

Most economists would probably argue that the best interests of international business are served by

a free trade stance. Most economists would probably argue that the best interests of international business are served by a free trade stance, but not a laissez-faire stance. It is probably in the best long-run interests of the business community to encourage the government to aggressively promote greater free trade by, for example, strengthening the WTO. Business probably has much more to gain from government efforts to open protected markets to imports and foreign direct investment than from government efforts to support certain domestic industries in a manner consistent with the recommendations of strategic trade policy.

An American executive of a multinational home-furnishings chain finds that one of the company's production units in Philippines employs children to work in its factories. However, most of the children employed at the factory are orphans who will be sold as forced labor or pushed into prostitution, if they lose their jobs. The executive finds that all the available alternatives seem ethically unacceptable. In this example, the American executive faces

an ethical dilemma. Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

From an international business perspective, some argue that what is ethical

depends on one's cultural perspective. From an international business perspective, some argue that what is ethical depends on one's cultural perspective.

To make sure that a business behaves in an ethical manner, a number of companies have hired _____, who are responsible for making sure the company's code of ethics is followed in every business decision.

ethics officers. To make sure that a business behaves in an ethical manner, a number of firms now have ethics officers. These individuals are responsible for making sure that all employees are trained to be ethically aware, that ethical considerations enter the business decision-making process, and that the company's code of ethics is followed.

The _____ is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost.

pragmatic nationalist view. The pragmatic nationalist view is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost. When a foreign company rather than a domestic company produces products, the profits from that investment go abroad. Many countries are also concerned that a foreign-owned manufacturing plant may import many components from its home country, which has negative implications for the host country's balance-of-payments position.

Which of the following is true with respect to multinational firms?

Because of their pivotal role in international trade, firms can and do exert a strong influence on government policy toward trade. Because of their pivotal role in international trade, firms can and do exert a strong influence on government policy toward trade. This influence can encourage protectionism, or it can encourage the government to support the WTO and push for open markets and freer trade among all nations. Government policies with regard to international trade can have a direct impact on business.

_____ are the accepted principles of right or wrong governing the conduct of businesspeople.

Business ethics. Business ethics are the accepted principles of right or wrong governing the conduct of businesspeople, and an ethical strategy is a strategy, or course of action, that does not violate these accepted principles.

The _____ benefits inefficient farmers and the politicians who rely on the farm vote, but not consumers in the European Union, who end up paying more for their foodstuffs.

Common Agricultural Policy (CAP). The European Union's support for the Common Agricultural Policy (CAP), which arose because of the political power of French and German farmers, is an example. The CAP benefits inefficient farmers and the politicians who rely on the farm vote, but not consumers in the EU, who end up paying more for their foodstuffs.

Which account keeps track of the export and import of goods and services in a country?

Current account. The current account tracks the export and import of goods and services.

Economic arguments for intervention are concerned with protecting the interests of certain groups within a nation, often at the expense of other groups, or with achieving some objective that lies outside the sphere protecting the environment or human rights.

False. Political arguments for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers), or with achieving some political objective that lies outside the sphere of economic relationships, such as protecting the environment or human rights. Economic arguments for intervention are typically concerned with boosting the overall wealth of a nation (to the benefit of all, both producers and consumers).

The infant industry argument relies on an assumption that firms can make efficient long-term investments by borrowing money from the domestic or international capital market.

False. The infant industry argument relies on an assumption that firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market. Consequently, governments have been required to subsidize long-term investments.

Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). Which of the following is a likely consequence of these barriers?

This may put a firm at a competitive disadvantage to indigenous competitors in that country. Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). This may put a firm at a competitive disadvantage to indigenous competitors in that country.

What is the purpose of a greenfield investment?

To establish a new operation in a foreign country. Foreign direct investment takes on two main forms. The first is a greenfield investment, which involves the establishment of a new operation in a foreign country. The second involves acquiring or merging with an existing firm in the foreign country.

A Chinese petroleum company sets up a crude oil refining facility in Vietnam. This is an example of a greenfield investment.

True. A greenfield investment involves the establishment of a new operation in a foreign country.

According to the radical view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

True. According to the radical view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

Identify the correct statement regarding the direction of FDI inflows.

Developed nations still account for the largest share of FDI inflows. Even though developed nations still account for the largest share of FDI inflows, FDI into developing nations has increased.

Kantian ethics hold that the moral worth of actions or practices is determined by their consequences.

False. Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others. People have dignity and need to be respected as such.

The fast-food industry is a good example of a business sector where licensing is a poor option for FDI.

False. Licensing tends to be more common, and more profitable, in fragmented, low-technology industries in which globally dispersed manufacturing is not an option. A good example is the fast-food industry. McDonald's has expanded globally by using a franchising strategy, which is essentially the service-industry version of licensing. With franchising, the firm licenses its brand name to a foreign firm in return for a percentage of the franchisee's profits.

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states to make facilitating payments made to expedite routine government action a criminal offense.

False. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states and other signatories to make the bribery of foreign public officials a criminal offense. The convention excludes facilitating payments made to expedite routine government action from the convention.

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

False. 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.

Using Hofstede's dimensions of social culture, research has shown that companies headquartered in cultures where masculinity and power distance are important attributes were more likely to emphasize the importance of behaving ethically.

False. Using Hofstede's dimensions of social culture, the study found that enterprises headquartered in cultures where individualism and uncertainty avoidance are strong were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures where masculinity and power distance are important culture attributes. Such analysis suggests that enterprises headquartered in a country such as Russia, which scores high on masculinity and power distance measures, and where corruption is endemic, are more likely to engage in unethical behavior than enterprises headquartered in Scandinavia.

The WTO argues that by removing all tariff barriers and subsidies to agriculture, which of the following would occur?

Global economic growth would rise. The net effect of high tariff barriers and significant subsidies is to raise prices to consumers, reduce the volume of agricultural trade, and encourage the overproduction of products that are heavily subsidized. The WTO argues that removing tariff barriers and subsidies could significantly boost the overall level of trade, lower prices to consumers, and raise global economic growth by freeing consumption and investment resources for more productive uses.

Which of the following is a home-country policy aimed at limiting outward FDI flow?

Limiting capital outflows. Virtually all investor countries, including the United States, have exercised some control over outward FDI from time to time. One policy has been to limit capital outflows out of concern for the country's balance of payments.

_____ help establish the culture of an organization and set the example that others follow.

Leaders. Leaders help to establish the culture of an organization, and they set the example that others follow.

_____ involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold.

Licensing. Licensing involves granting a foreign entity (the licensee) the right to produce and sell the firm's product in return for a royalty fee on every unit sold.

Which of the following statements is true about the righteous moralist approach to ethics?

The righteous moralist approach is typically associated with managers from developed nations. A righteous moralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries. This approach is typically associated with managers from developed nations.