Globalization and International Business Answer Key Part 1

International Business Chapter 1 Globalization and International Business 1) The broadening set of interdependent relationships among people from different parts of the world is known as ________. A) globalization B) offshoring C) franchising D) outsourcing Answer: A 2) Which of the following best defines international business? A) It includes all economic flows between two or more countries. B) It includes all private economic flows between two or more countries. C) It includes all business transactions involving two or more countries. D) It includes all business transactions in countries other than your home country. Answer: C 3) Which of the following is NOT a likely reason to study international business? A) Global events affect almost all companies. B) Differences among countries in physical, social, and competitive conditions may cause companies to alter their operating methods from country to country. C) Business conducted outside the confines of any one country is inexplicably on the decline. D) Firms may be better able to obtain better or less expensive resources by operating internationally. Answer: C 4) In terms of international business, it is most accurate to say that ________. A) there is a universal "best way" to conduct business B) global competition affects large companies but not small ones C) most firms depend either on foreign markets and supplies or compete against companies that do D) government regulation of international business has little effect on a company's profits Answer: C 5) Devon, an accounts manager at a large electronics firm, does not have any direct international responsibilities. However, Devon would most likely benefit from studying international business issues so that he can ________. A) conduct better job interviews B) better understand how foreign operations affect the company's competitive position C) supervise and evaluate subordinates who have global assignments D) understand the legalities of importing and exporting products overseas Answer: B 6) The shifting of national borders has most likely created which of the following situations for international business? A) It has left rural residents more isolated from technology. B) It has complicated the understanding of behavioral factors affecting business. C) It has increased physical barriers to exporting. D) It has slowed communications between a company's headquarters and foreign operations. Answer: C 7) Which of the following is an indication of the increased globalization of business since the end of World War II? A) Foreign trade has largely replaced foreign ownership as a means of conducting international business. B) World trade has grown more rapidly than world production. C) Globally, consumers now depend on foreign output for more than half their consumption. D) Countries have increased their import restrictions to counter the rising tide of imports. Answer: B 8) Most of the world's goods and services are sold ________. A) in international markets B) in the countries where they are produced C) through exports to small countries D) through exports to large countries Answer: B 9) According to the A.T. Kearny/Foreign Policy Globalization Index, countries ________. A) tend to be ranked similarly on all four dimensions B) are more globalized on the political dimension than on personal contact C) that are large in land mass and population are less globalized than small countries D) sometimes rank high on one dimension and low on another Answer: D 10) Which of the following has NOT been a major force increasing globalization in recent decades? A) liberalization of cross-border trade B) increase in and expansion of technology C) growing pressure from consumers D) decreasing prices of natural resources. Answer: D 11) Institutional development of services by business and government has aided the expansion of international business by ________. A) providing a universally agreed upon language for conducting international transactions B) removing immigration restrictions so that global firms can move personnel easily C) developing means to ease the flow of goods among countries D) spurring competition among domestic producers Answer: C 12) Which of the following has MOST influenced consumers to demand access to foreign-made products? A) Declining global affluence has caused consumers to seek out lower-priced products from abroad. B) Consumers have become more efficient in using media and technologies to compare prices worldwide. C) Fearing that their governments will enact restrictive policies on imports, consumers are stocking up on foreign products before restrictions are put in place. D) Expectations of rising prices of foreign products have caused consumers to seek foreign products before their prices become prohibitive. Answer: B 13) Which of the following best explains why international business has grown rapidly in the past few decades? A) the end of the political schism between the Communist and non-Communist blocs B) greater income equality in most countries C) growing concern about climate change D) increased concerns about terrorism Answer: A 14) Advanced communication systems have contributed to growth in international business by ________. A) enabling better oversight of global operations B) reducing the effects of global competition C) decreasing the cost of cargo transportation D) reducing export regulations Answer: A 15) Imported flowers are now a stronger competitor to U.S. grown flowers in the U.S. market. Which of the following is likely the MOST important factor for this increase in imports? A) more effective production techniques B) advances in communication systems C) advances in transportation D) cross-national cooperation Answer: C 16) Because consumers want a greater variety of goods and services at lower prices, many governments have ________. A) reduced their restrictions on the international movement of goods and services B) acted to tax most imports at a lower rate than domestic products C) sought to eliminate reciprocal advantages negotiated through international organizations and treaties D) increased their participation in multinational problem-solving efforts Answer: A 17) Which of the following best explains recent governmental relaxation of restrictions on cross-border trade or resource movements? A) Most countries face shortages of workers, so they seek immigrants who can help them produce more. B) Governments believe that this will decrease the need to make their own companies more innovative. C) Consumers increasingly want to buy goods and services produced in their own countries, making restrictions less necessary. D) Governments believe that domestic producers will become more efficient as a result of foreign competition. Answer: D 18) A company starting out with a global focus, usually because of the international experience of its founders, is called a ________. A) multinational enterprise B) transnational company C) strategically allied company D) born-global company Answer: D 19) In a strategy known as ________, many new companies locate themselves near competitors and suppliers. A) offshoring B) franchising C) clustering D) exporting Answer: C 20) Assume an enterprise is considering establishment of a foreign production facility. Which of the following best supports this decision? A) Its foreign competitors have higher production costs than it has. B) Its main competitor successfully opened a foreign plant. C) Its suppliers follow an agglomeration strategy. D) None of its competitors have foreign production facilities. Answer: B 21) When a company successfully responds to foreign production and market opportunities, ________. A) other companies will likely emulate its successful practices B) it likely has a long-term advantage over competitors C) it will downsize its domestic operations D) its home government likely raises taxes on the company Answer: A 22) Which of the following is NOT one of the three main reasons affecting international business for governments to cooperate with each other? A) to attack problems jointly that one country acting alone cannot solve B) to deal with issues that lie outside the territory of any nation C) to gain reciprocal advantages D) to establish a common language Answer: D 23) Governments have signed treaties to protect foreign-owned property rights, such as investments and patents. A primary reason for doing so is to ________. A) gain reciprocal advantages B) reduce the domestic effects of other countries' economic policies C) deal with areas of concern outside the territory of any one country D) reduce national conflicts leading to violent political demonstrations Answer: A 24) All of the following are areas in which commercial activities take place outside the territory of any nation EXCEPT ________. A) noncoastal areas of the oceans B) the Panama and Suez Canals C) outer space D) Antarctica Answer: B 25) What is the most likely reason that governments cooperate with each other through treaties, agreements, and consultations? A) to gain an advantageous division of labor B) to be in compliance with United Nations' requirements C) to attack problems jointly that one country acting alone cannot solve D) to assure that all countries get an equitable share of taxes from multinational enterprises Answer: C 26) Which of the following is the LEAST likely reason that small countries worry about overdependence caused by globalization? A) A large country on whom they depend may pressure them on political matters. B) A large international firm may dictate its terms of operations in a small country. C) A large company may exploit legal loopholes to avoid tax payments. D) A large country may substantially increase its demand for the small country's production. Answer: D 27) Which of the following statements would most likely be made by a supporter of globalization? A) Globalization encourages the adoption of uniform and superior standards for combating environmental problems. B) Economic growth created by globalization is largely in services, which involves the use of few nonrenewable resources. C) Global competition discourages resource-saving technologies, which are costly. D) Air pollution and toxic runoff problems increase with global economic growth. Answer: A 28) Curtailment of logging in the Amazon region is generally viewed as environmentally beneficial for the planet as a whole. However, unemployed Brazilian workers have felt that job creation inside Brazil is more important than climate protection outside Brazil. This example best illustrates which of the following? A) why smaller countries are concerned that large international companies are powerful enough to dictate operating terms B) why globalization is needed to foster uniform standards for combating environmental problems C) how cultural homogeneity threatens the cultural foundation of smaller nations D) how global interests can conflict with a country's local interests Answer: D 29) Although globalization may bring economic growth, critics nevertheless contend that ________. A) the growth is too fast B) the inequality of gains puts some people in a relatively worse economic situation C) this growth is mainly for the future, thus ignoring present economic growth needs D) the cultural foundations of sovereignty are supported by globalization Answer: B 30) The process of shifting production from a domestic to a foreign location is best known as ________. A) offshoring B) outsourcing C) licensing D) joint venturing Answer: A 31) Which of the following statements would most likely NOT be supported by an advocate of offshoring? A) Offshoring increases the number of high-value jobs in the home countries of offshoring companies. B) Offshoring is fundamentally better for workers than the introduction of labor-saving technologies. C) Workers displaced due to offshoring are able to find new jobs as easily as those displaced by technology. D) There are upper limits to offshoring because of the lack of skilled workers willing to work permanently for low wages. Answer: B 32) A major criticism of offshoring is that it ________. A) increases production costs B) exchanges good jobs for bad jobs C) threatens the sovereignty of larger countries D) allows companies to avoid payment of any taxes Answer: B 33) Critics of offshoring claim all EXCEPT which of the following? A) Cost savings are seldom passed on to final consumers. B) Offshoring reduces the incomes of people in low-wage countries. C) Incomes of workers in countries whose companies offshored production have gone down as a percentage of national income. D) Many workers who have been displaced by offshoring do not have the skills needed for higher-value jobs. Answer: B 34) Assume that company executives at the firm would like to increase sales by expanding into an international market. Which of the following factors, if true, best supports a decision to expand sales globally? A) It can offshore most of its production. B) It can obtain all of its resources for the same price overseas. C) Its costs of making additional sales would not increase disproportionately. D) The foreign market has higher real interest rates. Answer: C 35) Kevin, marketing manager of the North American Bowling League, has decided to televise major bowling competitions to viewers in multiple countries rather than only in Canada and the U.S. Which of the following goals would this most likely help Kevin accomplish? A) acquiring new resources B) minimizing corporate risks C) increasing sales and profits D) obtaining competitive advantages Answer: C 36) A firm is currently seeking resources from foreign countries. Which of the following is the LEAST likely reason for doing so? A) manufacturing products at a lower cost B) gaining knowledge about a specific market C) following a customer into the global market D) differentiating its products from the competition Answer: C 37) Which of the following BEST explains how a firm reduces risk by operating internationally? A) taking advantage of business-cycle differences among countries B) buying competitive risk insurance unavailable domestically C) preventing competitors from operating in the countries it has entered D) operating in less competitive environments than those at home Answer: A 38) An example of a U.S. merchandise import is an automobile made in ________ and sold ________. A) the United States by a Japanese company; in the United States B) the United States by a Japanese company; outside the United States C) Japan by a Japanese company; in the United States D) Japan by a U.S. company; outside the United States Answer: C Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets 39) Visible exports and imports are ________. A) merchandise imports and exports B) the sum total of goods and services traded C) international transactions paid for in money rather than barter D) typically a country's least common international economic transactions Answer: A 40) An example of a Japanese service export is a visit by a ________. A) Japanese citizen to Disneyland in the United States B) Japanese citizen to the Japan Pavilion at Epcot Center in the United States C) U.S. citizen to the Japan Pavilion at Epcot Center in the United States D) U.S. citizen to Tokyo Disneyland in Japan Answer: D 41) Reebok pays a royalty to the German Soccer League to use the team's logo on t-shirts that it sells. Reebok and the German Soccer League most likely have a ________. A) turnkey operation contract B) licensing agreement C) portfolio investment D) joint venture Answer: B 42) A foreign direct investment occurs when ________. A) a company owns at least 25% of a foreign firm B) a company has a controlling interest in a foreign company C) foreign ownership is in private rather than government securities D) a foreign firm agrees to a licensing agreement with a large conglomerate Answer: B 43) Which term refers to two or more companies that share ownership of an FDI? A) turnkey operation B) transnational firm C) joint venture D) franchise Answer: C 44) A multinational enterprise (MNE) is best defined as a firm ________. A) that is a member of the Fortune 500 B) with foreign business partners C) involved in global franchising D) with foreign direct investments Answer: D 45) The term used by the United Nations as a synonym for multinational enterprise is ________. A) multinational corporation B) transnational company C) international firm D) born-global Answer: B 46) Politics, law, culture, and economy are all examples of ________ factors that can affect the ways in which companies produce and sell their products in foreign markets. A) social B) physical C) competitive D) political Answer: A 47) Managers who are knowledgeable about ________ are better able to identify the location, quantity, quality, and availability of the world's natural resources. A) political factors B) geographic factors C) competitive factors D) cultural factors Answer: B 48) Although the U.S. film industry depends heavily on revenue in foreign countries, revenue from international markets is usually low for a sports-themed film. This is most likely due to ________ factors. A) political B) geographic C) behavioral D) legal Answer: C 49) In addition to understanding the laws affecting business in countries where their companies operate, it is most important for managers to understand the ________. A) methods for appointing local judges B) ethical rationale behind the laws C) history of the local legal system D) degree of law enforcement Answer: D 50) Some key ________ factors in a company's international business external environment are its product strategy and access to resources. A) geographic B) political C) competitive D) behavioral Answer: C 51) The same automobile company produces Fiats and Ferraris. The company builds an engine plant in China with low production costs for Fiats but not Ferraris. The probable reason is that ________. A) Fiat competes mainly on a focus strategy, whereas Ferrari competes mainly on a mass-market strategy B) Fiat competes mainly on a mass-market strategy, whereas Ferrari competes mainly on a focus strategy C) Ferrari faces global competitors in China, whereas Fiat competes in China mainly against Chinese competitors D) although Ferrari did not build an engine plant, it will use the same Fiat engines in its models Answer: B 52) A computer firm has high foreign sales in Asia and wants to expand sales into Europe. Which of the following statements provides the most appropriate advice for Elway executives? A) Although countries' market sizes differ, companies usually face about the same number of competitors in each national market. B) In most industries, companies face the same competitors in each country where they operate. C) It takes about the same amount of resources to gain national distribution in one country versus another. D) Being a leader in one country does not guarantee market leadership in another country. Answer: D 53) When companies face the same competitors in almost all countries where they operate, ________. A) what they learn about each other in one country is useful in predicting the other's strategies and actions elsewhere B) the market leader is the same everywhere C) there is less need to understand the physical and societal factors of each country D) they are less likely to enter joint ventures with other companies Answer: A 54) The view that globalization is inevitable is most likely based on the belief that ________. A) international organizations will replace nation-states B) protesters against globalization will be persuaded to change their views C) people want more global homogeneity of cultures D) technical advances in transportation and communications are highly pervasive Answer: D