Chapter 4 Managing in a Global Environment True/False Questions 1. Wal-Mart is a well-established company with a global interest who is facing minimal challenges in developing a successful international business. Answer: False 2. Type: F Level: 2 Page: 119 Type: F Level: 2 Page: 120 Type: A Level: 1 Page: 120 Type: F The second stage in the process of globalization is the international stage, where the company usually adopts a multidomestic approach. Answer: True 7. Page: 118 To deal with the marketing of products in several countries individually, a company in the international stage often uses an international division. Answer: True 6. Level: 1 ABC Manufacturing is in the domestic stage. It has its market potential open to the countries that border its home country. Answer: False 5. Type: F The reality of today's borderless companies also means that consumers can easily identify from which country they are buying. Answer: False 4. Page: 118 Large companies such as America Online and Yahoo have proven that Internet development is rapidly expanding and has fewer difficulties than traditional business operations. Answer: False 3. Level: 2 Level: 2 Page: 120 Type: F The multinational stage of corporate international development transcends any single home country. The ownership, control, and top management tend to be dispersed among several nationalities. Answer: False Level: 1 Page: 121 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 90 8. As the number of stateless corporations increases, the awareness of national borders increases as well. Answer: False 9. Page: 122 Type: F Level: 1 Page: 122 Type: F Level: 2 Page: 123 Type: F Level: 2 Page: 123 Type: F Level: 1 Page 125 Type: F The countries experiencing political, ethnic, and religious stability face the greatest threat of violence. Answer: False 16. Level: 2 Changes in the exchange rates can have major implications for the profitability of international operations. Answer: True 15. Type: F Because of cheap labor, most international business firms are headquartered in the less developed countries of Asia and South America. Answer: False 14. Page: 121 LDC's are less developed countries and tend to be found in the Southern Hemisphere including Africa, Asia and South America. Answer: True 13. Level: 1 Some economic environments of business include resource and product markets, language, religion, and per capita income. Answer: False 12. Type: F The sub-divisions of the international environment are the economic, the sociocultural, and the legal-political environments. Answer: True 11. Page: 121 Whether a company operates domestically or internationally, the basic management functions of planning, organizing, leading, and controlling are the same. Answer: True 10. Level: 2 Level: 1 Page: 125 Type: F The belief in the right to vote, the right of choice and equal rights is part of the beliefs, values and ways of thinking that defines our society's culture. Answer: True Level: 2 Page: 127 Type: A Chapter Four * Managing in a Global Environment Test Bank * Page 91 17. Countries that value high power distances normally have cities that are geographically separated and so have the need to transport electrical energy over large distances. Answer: False 18. Page: 128 Type: F Level: 1 Page: 128 Type: F Level: 2 Page: 128 Type: F Level: 1 Page: 130 Type: F Level: 2 Page: 131 Type: F The most familiar nation clause, calls for each member country to grant to every other member country the most familiar treatment it accords to any country with respect to imports and exports. Answer: False 25. Level: 1 The primary tools GATT uses to increase trade are tariff enhancements, coercion, and most favored nation clause. Answer: False 24. Type: F A tendency to regard their own culture as superior and to downgrade other cultures reflects an attitude called geocentric. Answer: False 23. Page: 128 The fifth dimension of Hofstede’s social values is preliminary-term orientation and extended-term orientation. Answer: False 22. Level: 1 Collectivism means a preference for a tightly knit social framework in which individuals look after one another and organizations protect their members’ interests. Answer: True 21. Type: A In countries with strong masculine social values including Austria and Japan, both men and women subscribe to the dominant masculine value. Answer: True 20. Page: 127 The social value of uncertainty avoidance is evident in countries like Japan which support beliefs that provide stability and conformity among its citizenry. Answer: True 19. Level: 2 Level: 2 Page: 131 Type: F An organization developed for the purpose of eliminating tariffs in trading between Canada and the United States is called The North American Freedom of Tariffs Administration (NAFTA). Answer: False Level: 2 Page: 135 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 92 26. An example of global sourcing is seen when Gap, Inc uses low-cost Caribbean labor to cheaply produce their clothing, and then finish off and sell their clothing in the United States. Answer: True 27. Page: 139 Type: F Level: 2 Page: 139 Type: F Level: 2 Page: 139 Type: A Level: 1 Page: 139 Type: F Level: 2 Page: 140 Type: F When a company builds a subsidiary from scratch in a foreign country it is called a greenfield venture. Answer: True 34. Level: 1 Joint venture is the most risky type of direct investment. Answer: False 33. Type: F A form of direct investment is franchising. Answer: False 32. Page: 138 When Harbor Trades, a Korean-based company, makes resources including technology, managerial skills, and patent and trademark rights available to Nano Technologies, a Russian company whereby allowing Nano to make products similar to CBA, it is engaging in a countertrade agreement. Answer: False 31. Level: 2 An estimated 55 percent of world trade is countertrade. Answer: False 30. Type: A Countertrade is the barter of products for products rather than the sale of products for currency. Answer: True 29. Page: 137 With exporting, the corporation transfers its products for sale and its production facilities in foreign countries. Answer: False 28. Level: 2 Level: 1 Page: 140 Type: F Multinational corporations typically receive more than 35 percent of its total sales revenues from operations outside the parent’s home country. Answer: False Level: 3 Page: 141 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 93 35. Large international firms typically are called multinational corporations. Answer: True 36. Level: 1 Page: 141 Type: F Level: 2 Page: 141 Type: F Most managers, given the trend toward globalization, do not need preparation to work in foreign cultures. Answer: False 39. Type: F The primary emphasis of polycentric companies is on their home countries. Answer: False 38. Page: 141 An MNC is managed as an integrated worldwide business system. Answer: True 37. Level: 1 Level: 2 Page: 142 Type: F Managers in Latin America must show respect for employees as individuals with needs and interests outside of work. Answer: True Level: 3 Page: 143 Type: F Multiple Choice Questions 1. Wal-Mart’s challenges in Germany stem from a difference in __________ culture. a. b. c. d. e. business marketing shopping European American Answer: c 2. Level: 2 Page: 117 Type: F Wal-Mart has embarked on a crusade to bring “everyday low prices” to which emerging market? a. b. c. d. e. China Taiwan Brazil Japan El Salvador Answer: c Level: 2 Page: 105 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 94 3. Which of the following companies rely on international business for a substantial portion of sales and profits? a. b. c. d. e. IBM Coca-Cola Kellogg Texas Instruments All of the above Answer: e 4. Level: 3 d. e. International business is more important than the study of management. International business is less important than the study of management. Since the management functions are universal, international business in not important to the study of management. If you are not thinking international, you are not thinking business management. International business has noting to do with the study of management. Answer: d Level: 2 Type: F globally regionally nationally strategically “customers first” Answer: a Level: 2 Page: 119 Type: F In which stage, market potential is limited to home country, with all production and marketing facilities located at home? a. b. c. d. e. Domestic International Global Multinational Stateless Answer: a 7. Page: 118 Companies that think __________ have a competitive edge. a. b. c. d. e. 6. Type: F Which of these statements best describes the importance of international business to the study of management? a. b. c. 5. Page: 118 Level: 1 Page: 120 Type: F In which stage does the company usually adopt a multidomestic approach? Chapter Four * Managing in a Global Environment Test Bank * Page 95 a. b. c. d. e. Global Multinational Stateless International Domestic Answer: d 8. Level: 2 International stage Global stage Domestic stage Multinational stage Interdomestic stage Answer: d Level: 2 Type: A Domestic stage International stage Multinational stage Global stage Binational stage Answer: b Level: 2 Page: 120 Type: A The process of globalization typically passes through all of the following stages EXCEPT a. b. c. d. e. domestic stage. global stage. international stage. interdomestic stage. multinational stage. Answer: d 11. Page: 120 Zaman Telecom with an international division would be participating in what stage of the international arena? a. b. c. d. e. 10. Type: F Global Dandelion, with marketing and production facilities located in many countries, is participating at what stage in the international arena? a. b. c. d. e. 9. Page: 120 Level: 1 Page: 120 Stateless stage is also referred to as the a. b. c. Type: F stage. multinational global multidomestic Chapter Four * Managing in a Global Environment Test Bank * Page 96 d. e. international domestic Answer: b 12. Level: 3 Page: 121 Type: A Which of the following is a foreign-owned corporation? a. b. c. d. e. Nike Ford Motor Co. Nestle' IBM Coca-Cola Answer: c Level: 2 Page: 121 Type: F The management of business operations conducted in more than one country is called a. b. c. d. e. global management. international management. outsourcing management. planning management. domestic management. Answer: b 15. Type: F Stateless stage Multinational stage International stage Domestic stage Multidomestic stage Answer: a 14. Page: 121 Color Copiers operates in a true global fashion, making sales and acquiring resources in whatever country offers the best opportunities and lowest cost, what stage of international development is it in? a. b. c. d. e. 13. Level: 1 Level: 2 Page: 121 Type: F When doing business internationally, ______ aspects of management does not change? a. b. c. d. e. planning organizing controlling leading all of the above Answer: e Level: 1 Page: 121 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 97 16. Which of the following sectors present the greatest potential for international mistakes? a. b. c. d. e. Internal Sociocultural Governmental All of the above b and c only Answer: b 17. Level: 1 Page: 123 Type: F In international operations, the economic environment represents all of the following factors EXCEPT a. b. c. d. e. infrastructure. resource and product markets. laws and regulations. inflation. exchange rates. Answer: c Level: 2 Page: 122 Type: F In international operations, the economic environment includes a. b. c. d. e. shared knowledge, beliefs and values. political risks. social organizations. infrastructure. tariffs, quotas, and taxes. Answer: d 20. Type: F Economic Legal Political Sociocultural Technological Answer: d 19. Page: 122 Language, values, religion, and education all describe which dimension in the international environment? a. b. c. d. e. 18. Level: 2 Level: 2 Page: 122 Type: F Resource development, infrastructure, and exchange rates all describe which dimension in the international environment? Chapter Four * Managing in a Global Environment Test Bank * Page 98 a. b. c. d. e. Economic Legal Political Sociocultural Technological Answer: a 21. Type: F Language Exchange rates Tariffs, taxes, and quotas Per capita income Infrastructure Answer: a Level: 2 Page: 123 Type: F Which of these is normally used to classify countries as developed or developing? a. b. c. d. e. Exchange rates Interest rates Gross national product Per capita income Inflation rates Answer: d 23. Level: 2 Page: 123 Type: F generally are located in Asia, Africa and South America. a. b. c. d. e. MNCs EUs LDCs WTOs MFNs Answer: c 24. Page: 123 ______ is a sociocultural factor in the international environment. a. b. c. d. e. 22. Level: 1 Level: 2 Page: 123 Type: F A country's physical facilities that support economic activities make up its a. b. c. d. e. resource markets infrastructure physical markets product markets plants and equipment Chapter Four * Managing in a Global Environment Test Bank * Page 99 . Answer: b 25. Page: 123 Type: A The legal-political sector The economic environment The sociocultural environment The barter system environment The government sector Answer: b Level: 2 Page: 125 Type: F Your grocery store in India is having trouble getting the local farmers to supply you with the proper produce. This is a problem with India’s a. b. c. d. e. product market. resource market. infrastructure. economy. power distance. Answer: b Level: 2 Page: 125 Type: A Which of the following is NOT a legal-political factor in the international environment? a. b. c. d. e. Laws and regulations Language Tariffs, quotas, taxes Political risk Government takeovers Answer: b 29. Level: 2 Exchange rates are included in which of the following international environments? a. b. c. d. e. 28. Type: F an inadequate infrastructure. an economy incapable of supporting growth. a poor resource market. a poor product market. none of the above. Answer: a 27. Page: 123 If you built a computer company in Africa and then found that your product was having difficulty being distributed to customers because of the road system, your problem would be related to a. b. c. d. e. 26. Level: 1 Level: 2 Page: 125 Type: F The rate at which one country's currency is exchanged for another country's currency is Chapter Four * Managing in a Global Environment Test Bank * Page 100 called a(n) ______ rate. a. b. c. d. e. interest inflation per capita income exchange economic Answer: d 30. Level: 3 Page: 125 Type: A The legal-political environment, in international operations, includes which of the following? a. b. c. d. e. Shared knowledge, beliefs and values Political risks Social organizations Infrastructure None of the above Answer: b Level: 2 Page: 125 Type: F Political risk is defined as an organization's risk of ___________ due to politically based events or actions by host governments. a. b. c. d. e. loss of assets managerial control earning power all of the above b and c only Answer: d 33. Type: F U.S. goods will be more expensive in Japan. Japanese goods will be more expensive in the U.S. U.S. goods will be the same price in Japan. Japanese goods will be the same price in the U.S. None of the above. Answer: a 32. Page: 125 Assume that until yesterday, one U.S. dollar could be exchanged for 85 Japanese yens. Today, a dollar gets you 102 yens. Which of the following statements is true? a. b. c. d. e. 31. Level: 1 Level: 2 Page: 125 Type: F A company's risk of loss of assets, earning power, or managerial control due to politically based events or action by host government is referred to as Chapter Four * Managing in a Global Environment Test Bank * Page 101 a. b. c. d. e. MFN. political risk. tariffs. political instability. terrorism. Answer: b 34. Level: 2 Page: 125 Type: A A foreign terrorist kidnaps your firm's marketing VP while the VP is in the host country. This is a harsh example of a. b. c. d. e. economic development. infrastructure. political risk. international law. social risk. Answer: c Level: 2 Page: 126 Type: A Often times organizations will refer to the __________ Index to determine the impact political intervention has on business decisions in a particular country before considering to move to that region. a. b. c. d. e. Economic Freedom Corruption Perception Political Succession Business Motivation Political Effect Answer: a 37. Type: F Legal-political Sociocultural Technological Economic Infrastructure Answer: a 36. Page: 125 Rooftop International, Inc. buys insurance against host government takeover when investing in foreign countries. This is an example of which sector of the international environment? a. b. c. d. e. 35. Level: 1 Level: 2 Page: 126 Type: A Although the challenge in unstable countries is great, often the biggest area of __________ is also there. Chapter Four * Managing in a Global Environment Test Bank * Page 102 a. b. c. d. e. opportunity consumer shopping economic improvement leadership low governmental control Answer: a 38. Level: 1 Page: 127 Type: F Cultural factors in foreign countries are ___________ the political and economic factors. a. b. c. d. e. easier than similar to more perplexing than less important than none of the above Answer: c Level: 2 Page: 127 Type: F Which of these refers to the degree to which people accept inequality in power among institutions, organizations, and people? a. b. c. d. e. Power distance Uncertainty avoidance Individualism Collectivism Masculinity Answer: a 41. Type: F power distance culture masculinity individualism uncertainty avoidance Answer: b 40. Page: 126 A nation's includes the shared knowledge, beliefs and values, as well as the common modes of behavior and ways of thinking, among members of a society. a. b. c. d. e. 39. Level: 2 Level: 1 Page: 127 Type: F Countries whose social values reflect low power distance a. b. c. d. are highly democratic. accept inequality in power among institutions, organizations and people. expect equality in power. avoid uncertainty. Chapter Four * Managing in a Global Environment Test Bank * Page 103 e. none of the above. Answer: c 42. Level: 2 Page: 128 Type: F Collectivist values are represented in the social framework of which of these? a. b. c. d. e. The United States Australia Ecuador Great Britain All of the above Answer: c Level: 2 Page: 128 Type: F Austria’s cultural preference is for achievement, heroism, assertiveness, and material success. This would be considered a. b. c. d. e. power distance. individualism. masculinity. ethnocentrism. collectivism. Answer: c 45. Type: F culture. individualism. ethnocentrism. masculinity. power distance. Answer: b 44. Page: 127 A loosely knit social framework in which individuals are expected to take care of themselves is called a. b. c. d. e. 43. Level: 2 Level: 2 Page: 128 Type: A Which of these refers to a value characterized by people's intolerance for uncertainty and ambiguity and resulting support for beliefs that promise certainty and conformity? a. b. c. d. e. Power distance Uncertainty avoidance Certainty avoidance Conformity seekers None of the above Answer: b Level: 1 Page: 128 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 104 46. ______ reflects a cultural preference for cooperation, group decision making, and quality of life. a. b. c. d. e. Individualism Collectivism Masculinity Femininity Power distance Answer: d 47. Level: 2 Page: 128 Type: F Recent research by the GLOBE project has extended __________ research and offered new insights for managers. a. b. c. d. e. Hofstede’s Walton’s Weber’s Fayol’s Gilbreth’s Answer: a Level: 2 Page: 128 Type: F All of the following are cultural dimensions as defined by the GLOBE Project, except: a. b. c. d. e. assertiveness gender differentiation social collectivism humane orientation masculinity Answer: e 50. Type: F power distance. uncertainty avoidance. masculinity. collectivism. long-term orientation. Answer: e 49. Page: 128 One of Hofstede’s social values that is not well known is a. b. c. d. e. 48. Level: 1 Level: 2 Page: 128 Type: F In countries where women are often in positions of high status, the Globe Project would describe that culture as high in __________. Chapter Four * Managing in a Global Environment Test Bank * Page 105 a. b. c. d. e. assertiveness uncertainty avoidance gender differentiation societal collectivism performance orientation Answer: c 51. Level: 2 assertiveness uncertainty avoidance gender differentiation humane orientation societal collectivism Answer: d Level: 2 Type: F ethnocentrism. polycentrism. geocentrism technocentrism. none of the above. Answer: a Level: 1 Page: 130 Type: F Countries that use several languages a. b. c. d. e. are ethnocentric. are geocentric. are likely to have high uncertainty avoidance. have linguistic pluralism. are polycentric. Answer: d 54. Page: 129 A cultural attitude marked by the tendency to regard one's own culture as superior to others is called a. b. c. d. e. 53. Type: F A country that places emphasis on fairness and values kindness would be described by the Globe Project as high in __________. a. b. c. d. e. 52. Page: 129 Level: 1 Page: 130 Type: F A company may commit a mistake in which of the following sectors, when it does not check the meaning of translated words in another language? a. b. c. Economic Sociocultural Legal-political Chapter Four * Managing in a Global Environment Test Bank * Page 106 d. e. Technological None of the above Answer: b 55. Level: 3 Page: 131 Type: F A term describing a GATT clause that calls for member countries to grant other member countries the most favorable treatment they accord any country concerning imports and exports is referred to as the a. b. c. d. e. preferred nation. GATT favored country. most favored nation. Mutual GATT Courtesy. Uruguay Round. Answer: c Level: 1 Page: 131 Type: F To increase trade, the primary tools GATT uses are a. b. c. d. e. tariff concessions and most favored nation clause. tariff and nontariff barriers. quotas and export taxes. most favored nation and LDC clauses. EU and NAFTA. Answer: a 58. Type: A 15 23 28 40 57 Answer: b 57. Page: 130 When GATT was created in 1947, how many nations signed on for negotiation? a. b. c. d. e. 56. Level: 2 Level: 2 Page 131 The European Union has expanded to a a. b. c. d. e. Type: F -nation alliance 14 12 25 16 21 Answer: c Level: 1 Page: 133 Type: F Chapter Four * Managing in a Global Environment Test Bank * Page 107 59. __________ has a goal to guide the nations of the world toward free trade and open markets. a. b. c. d. e. GATT WTO GLOBE EU NAFTA Answer: b 60. Level: 1 Page: 134 Type: F __________ was initiated in the 1980s to dramatically reform and deregulate such areas as banking, insurance, health, and airlines. a. b. c. d. e. Europe ’94 Asia ’96 Asia ’80 Europe ’92 Europe ’80 Answer: d Level: 2 Page: 134 Type: F Which is the single European currency that replaced 12 national currencies and unify a huge marketplace? a. b. c. d. e. Mark Franc MFN Euro Pound Answer: d 63. Type: F the Olympic Games. the World's Fair. a single market system. global market system. a system that never materialized. Answer: c 62. Page: 133 Europe '92 is/was a. b. c. d. e. 61. Level: 2 Level: 1 Page: 135 Type: F All of the following are examples of an international trade alliance EXCEPT Chapter Four * Managing in a Global Environment Test Bank * Page 108 a. b. c. d. e. NAFTA. GATT. EU. ASEAN. none of the above. Answer: b 64. Level: 3 Page: 135 Type: F All of the following were included in the negotiated agreements in key areas of NAFTA EXCEPT a. b. c. d. e. immediate removal of tariffs on half of U.S. farm exports to Mexico. immediate 100 percent cut of Mexican tariffs on autos. U.S. trucking of international cargo allowed in Mexico border area by mid-1990s. patent protection for pharmaceuticals in Mexico. All of the above were included in the key areas of NAFTA agreement. Answer: b Level: 3 Page: 135 Type: F Key area(s) of the North American Free Trade Agreement is/are a. b. c. d. e. removal of tariffs of U.S. farm exports to Canada. patent protection for pharmaceutical in Mexico. mandatory 100% North American content on cars and trucks to qualify for dutyfree status. U.S. trucking of international cargo allowed in Canada. All of the above. Answer: b 67. Type: F 15.6 75.2 421 360 42.7 Answer: c 66. Page: 135-136 In 1994, NAFTA merged with the United States, Canada, and Mexico into a megamarket with more than __________ million consumers. a. b. c. d. e. 65. Level: 1 Level: 3 Page: 135 Type: F Which organization originated and supports the idea of small businesses operating on a global level? a. b. GLOBE EU Chapter Four * Managing in a Global Environment Test Bank * Page 109 c. d. e. NAFTA ASEAN GATT Answer: c 68. World Trade Organization International Monetary Fun World Bank All of the above None of the above Iron Triangle of Globalization NAFTA ASEAN GATT EU Answer: a Level: 2 Page: 137 Type: F Engaging in the international division of labor so as to obtain the cheapest sources of labor and supplies regardless of country is referred to as a. b. c. d. e. franchising. licensing. market entry strategy. outsourcing. activity. Answer: d 71. Type: F Answer: d Level: 2 Page: 136 Type: F __________ is primarily concerned with the loss of jobs as companies export work to countries with lower wages. a. b. c. d. e. 70. Page: 135 The Iron Triangle of Globalization includes: a. b. c. d. e. 69. Level: 2 Level: 1 Page: 137 Type: F The Maquiladora industry along the Texas-Mexico border uses cheap labor for assembling products. This lowers the price for U.S. consumers and is an example of a. b. c. d. e. licensing. joint venture. outsourcing. franchising. none of the above. Chapter Four * Managing in a Global Environment Test Bank * Page 110 Answer: c 72. Page: 138 Type: F Franchising Licensing Exporting Greenfield venture Joint venture Answer: c Level: 1 Page: 138 Type: F What is exporting? a. b. c. d. e. Countertrade The barter of products for products, often used in developing nations Items produced in the home country for sale in foreign markets All of the above None of the above Answer: d Level: 2 Page: 138-139 Type: F A form of exporting to less-developed countries is called a. b. c. d. e. licensing. franchising. greenfield venture. joint venture. countertrade. Answer: e 76. Level: 1 ______ is an entry strategy in which the organization maintains its production facilities within its home country and transfers its products for sale in foreign markets. a. b. c. d. e. 75. Type: F Exporting Greenfield venture Joint venture Acquisition Direct investment Answer: a 74. Page: 137 To enter foreign markets, most firms begin with which strategy? a. b. c. d. e. 73. Level: 2 Level: 1 Page: 139 Type: F Heineken begins by exporting its product into new markets, and then __________ to a local brewer to establish its position in the market. Chapter Four * Managing in a Global Environment Test Bank * Page 111 a. b. c. d. e. countertrades licenses exports franchises markets Answer: b 77. Level: 2 Page: 139 Type: A Page: 139 Type: F Franchising is a form of a. b. c. d. e. direct investing. licensing. exporting. countertrade. barter trade. Answer: b Level: 1 Your company is interested in producing and marketing a line of coffee that will penetrate the Chinese market. Your firm is willing to supply the equipment, products, product ingredients, trademark, and standardized operating system. What type of strategy are you going to use? a. b. c. d. e. Wholly owned foreign affiliate A greenfield venture agreement A franchise An export agreement Barter trade Answer: c 80. Type: F franchises wholly owned foreign affiliates joint venturers greenfield venturers U.K.-based companies Answer: a 79. Page: 139 Pizza Hut is one of the best known ______ internationally. a. b. c. d. e. 78. Level: 2 Level: 2 Page: 139 Type: A Which of the following pairs of alternatives closely resemble each other in the amount of ownership, control and risk obtained in operating international businesses? a. b. Direct investment/franchising Wholly owned foreign affiliate/countertrade Chapter Four * Managing in a Global Environment Test Bank * Page 112 c. d. e. Exporting/licensing Franchising/licensing All of the above Answer: d 81. Level: 2 Page: 140 Type: F The Write Pens, Inc. wants to reduce transferring costs by producing closer to the consumer in a foreign country. This will also help in reducing transportation and storage costs. Which strategy would be the best to use given the circumstances? a. b. c. d. e. Franchising Exporting Direct investing Barter agreement Licensing Answer: c Level: 2 Page: 140 Type: A Go RVing, a U.S. company, built a subsidiary from scratch in England. This is an example of a. b. c. d. e. franchising. greenfield venture. joint venture. exporting. licensing. Answer: b 84. Type: F joint venture. licensing agreement. franchise. wholly owned foreign affiliate. foreign venture. Answer: d 83. Page: 139 A foreign subsidiary over which an organization has complete control is called a a. b. c. d. e. 82. Level: 3 Level: 2 Page: 140 Type: A Jessica’s Car Care receives more than 25% of its total sales revenues from operations outside of the United States. Jessica’s would be considered a a. b. c. d. foreign national. wealth company. multinational corporation. globalization corporation. Chapter Four * Managing in a Global Environment Test Bank * Page 113 e. None of the above. Answer: c 85. Page: 141 Type: F greenfield venture joint venture direct investment foreign affiliate direct acquisition Answer: a Level: 2 Page: 141 Type: F ______ companies place an emphasis on their home countries. a. b. c. d. e. Polycentric Geocentric Ethnocentric Global Regiocentric Answer: c Level: 2 Page: 141 Type: F Which of the following types of companies places an emphasis on a worldwide perspective? a. b. c. d. e. Polycentric companies Geocentric companies Ethnocentric companies Regiocentric companies Domestic companies Answer: b 89. Level: 1 The Mercedes-Benz plant in Alabama is an example of a/an__________. a. b. c. d. e. 88. Type: A Top management is expected to take a global perspective. The corporation is controlled by a single management authority. It is managed as an integrated worldwide business system. All of the above a and b only Answer: d 87. Page: 141 Which of the following characteristics distinguish a multinational corporation? a. b. c. d. e. 86. Level: 2 Level: 2 Page: 141 Type: F In relationship-oriented societies, leaders should Chapter Four * Managing in a Global Environment Test Bank * Page 114 a. b. c. take a strong personal interest in employees. feel free to criticize as much as they feel they need to. reprimand in public whenever possible. It is an especially effective technique in these societies. minimize the emphasis on relations given the society's interest. maintain the traditional command-and-control management style. d. e. Answer: a 90. Level: 2 Type: F Concerning decision making, American managers working in Mexico often don’t __________. a. b. c. d. e. explain themselves ask for participation lead by example motivate from the bottom allow insubordination Answer: a 91. Page: 143 Level: 2 Page: 143 Type: F Managers in foreign countries, when things go wrong, are often unable to a. b. c. d. e. increase an employee's pay. get rid of an employee who is not working out. assess the cause of the problem. leave the country given their emotional attachment. None of the above. Answer: b Level: 2 Page: 144 Type: F Scenario Questions Scenario—Tamara Headley Tamara Headley was an MBA student in Detroit, Michigan, with a managerial position at the Ford Motor Company plant. She was invited to join a company that had entered into a joint venture with a German firm to manage a Volkswagen plant. Tamara would be under contract for one year, with an option to renew for a total of three years. Her salary would be 350% more than she was currently earning, and she would be given two all-expenses paid vacations each year. The money and the benefits sounded very nice, but Tamara wasn't sure what the best choice would be. 1. The degree of international involvement for the joint venture is an example of Chapter Four * Managing in a Global Environment Test Bank * Page 115 a. b. c. d. e. outscoring. exporting. licensing. direct investing. greenfield venture. Answer: d 2. If Tamara accepted the new position, she would be facing significant new challenges in a. b. c. d. e. decision making. motivation technique. managerial control. all of the above. none of the above. Answer: d 3. Type: A The American firm joining in the joint venture a. b. c. d. e. faces lower risk than if it were using a wholly-owned foreign affiliate. enjoys greater control than is it were using the wholly-owned affiliate. can anticipate a lower cost than a company that uses global outscoring. all of the above. none of the above. Answer: a 4. Type: A Type: A In making her decision, Tamara should a. b. c. d. e. recognize the substantially higher salary for similar work and take the offer. recognize the value of salary combined with the additional benefits and take the offer. recognize the higher risks involved with managing in a foreign and often hostile culture, and refuse the offer. evaluate the benefits and the costs and make the best decision based on a full cost/benefit analysis. ask her husband and do what he wants. Answer: d Type: A Short-Answer Questions 1. In the stage, exports increase, and the company usually adopts a multidomestic Chapter Four * Managing in a Global Environment Test Bank * Page 116 approach, probably using an international division to deal with the marketing of products in several countries individually. Answer: international 2. In the _______ stage, the company has marketing and production facilities located in many countries and more than one-third of annual sales come from outside the home country. Answer: multinational 3. Page: 120 Page: 120 List the four stages of globalization. Answer: Domestic, international, multinational, and global/stateless. Page: 120 4. is the management of business operations conducted in more than one country. Answer: International management 5. When it comes to economic development, a currently developing country is also called a(n) __________. Answer: less-developed country (LDC) 6. Page: 123 A country's physical facilities that support economic activities make up its Answer: infrastructure 8. Page: 123 __________ is the criterion traditionally used to classify countries as developed or developing. Answer: Per capita income 7. Page 121 . Page: 123 List three examples of a country's infrastructure. Answer: Transportation facilities such as railroads and airports; energy-producing facilities such as utilities and power plants; and communication facilities such as telephone lines and radio stations. Page: 123-124 9. is the rate at which one country's currency is exchanged for another country's. Chapter Four * Managing in a Global Environment Test Bank * Page 117 Answer: Exchange rate 10. The risk of loss due to actions by host country governments is known as _______. Answer: political risk 11. Page: 127 The degree to which people accept inequality in power among institutions, organizations, and people is called . Answer: power distance 15. Page: 128 A preference for a tightly knit social framework in which individuals look after one another and organizations protect their members' interests refers to . Answer: collectivism 18. Page: 128 A preference for a loosely knit social framework in which individuals are expected to take care of themselves is called . Answer: individualism 17. Page: 127 A value characterized by people's intolerance for uncertainty and ambiguity and resulting support for beliefs that promise certainty and conformity refers to . Answer: uncertainty avoidance 16. Page: 126 A nation's includes the shared knowledge, beliefs, and values, as well as the common modes of behavior and ways of thinking, among members of a society. Answer: culture 14. Page: 126 Companies need to be cautious of _______ and _______ when going international because they differ from country to country. Answer: laws; regulations 13. Page: 125 Riots, revolutions, civil disorders, and frequent changes in government that affect the operations of an international company shows __________ in a country. Answer: political instability 12. Page: 125 Page: 128 stands for preference for achievement, heroism, assertiveness, work centrality (with resultant high stress), and material success. Answer: Masculinity Page: 128 Chapter Four * Managing in a Global Environment Test Bank * Page 118 19. reflects the values of relationships, cooperation, group decision making, and quality of life. Answer: Femininity 20. Page: 128 List the four dimensions of national value systems identified by Hofstede. Answer: Power distance, uncertainty avoidance, individualism/collectivism, and masculinity/femininity. Page: 128 21. _______ means that people have a tendency to regard their own culture as superior to other cultures. Answer: Ethnocentrism 22. A term describing a GATT clause that calls for member countries to grant other member countries the most favorable treatment they accord any country concerning imports and exports is called the . Answer: most favored nation 23. Page: 131 __________ was formed to improve social and economic conditions among its 15-nation alliance. Answer: European Union 24. Page: 130 Page: 133 List five of the countries that make up the European Union (EU). Answer: Choose any five of the following: Sweden, Finland, Denmark, Ireland, United Kingdom, Luxembourg, Netherlands, Germany, Belgium, France, Portugal, Spain, Austria, Italy, and Greece. Page: 133 25. The is the single European currency that has replaced 12 national currencies. Answer: euro 26. Page: 135 _______ went into effect in early 1994, effectively creating a megamarket among the U.S., Canada, and Mexico. Answer: NAFTA Page: 135 Chapter Four * Managing in a Global Environment Test Bank * Page 119 27. means engaging in the international division of labor so that manufacturing can be done in countries with the cheapest sources of labor and supplies. Answer: Global outsourcing 28. Page: 137 is the barter of products for products rather than the sale of products for currency. Answer: Countertrade 29. Page: 139 Whereby a company builds a subsidiary from scratch in a foreign country, is referred to as a , and is the most risky type of direct investment. Answer: greenfield venture 30. Page: 140 List the three examples of direct investing mentioned in your text. Answer: Joint venture, wholly owned foreign affiliate, and greenfield venture. Page: 140 31. A multinational corporation typically receives at least ______% of its total sales revenues from outside the parent's home country. Answer: 25 32. Page: 141 The frustration and anxiety that results from constantly being subjected to strange and unfamiliar cues about what to do and how to do it is called ________. Answer: culture shock 33. Page: 142 Managing across borders calls for organizations to ______ across borders. Answer: learn Page: 142 Essay Questions 1. Describe the four stages of globalization with specific reference to strategic orientation, stage of development, cultural sensitivity, and manager assumptions. ANSWER: Refer to exhibit 4-1 in the text. Level: 3 Page: 120 Chapter Four * Managing in a Global Environment Test Bank * Page 120 2. Identify and briefly explain at least two key factors in economic, sociocultural and political-legal environments that affect an organization. ANSWER: Please refer to exhibit 4-2 in the text. Level: 2 3. Pages: 123 Briefly explain the difference between high power distance and low power distance. ANSWER: Power distance is the degree to which people accept inequality in power among institutions, organizations, and people. With high power distance, this inequality is accepted. With low power distance, people expect equality with respect to power. Level: 2 4. Page: 127-128 Briefly describe the social characteristic of ethnocentrism and explain how this can have an impact on the success of an international manager. ANSWER: Ethnocentrism is a cultural attitude marked by the tendency to regard one's own culture as superior to others. When an international manager has this characteristic, he or she is less likely to be successful, because he or she devalues the culture in which they are trying to do business. When the culture is devalued, relationships can be damaged, trust can be lost, and the willingness to maintain the business relationship can be broken. Level: 2 5. Page: 130 Describe GATT and the World Trade Organization. ANSWER: GATT started as a set of rules to ensure nondiscrimination, clear procedures, dispute negotiation, and including lesser developed countries into international trade. GATT and WTO use tariff concessions as a tool to increase trade. Each of the 23 nations that signed GATT agree to limit tariff levels on imports from other members and to the most favored nation clause. GATT sponsored eight rounds of international trade negotiations aimed at reducing trade restrictions. WTO guides and urges nations worldwide toward free trade and open markets. Level: 2 Pages: 131-133 Chapter Four * Managing in a Global Environment Test Bank * Page 121 6. Explain NAFTA. ANSWER: Taking effect in early 1994, the North American Free Trade Agreement (NAFTA) united the U.S., Mexico, and Canada into a multi-trillion dollar market. Over a fifteen-year period, this agreement removes tariffs and trade restrictions on most manufactured and agricultural products. Potential advantages of NAFTA center on its expectations: it is expected to spur growth, increase exports, and create jobs in all three countries. Conversely, many U.S. groups have a number of reservations. These include job loss to Mexico and weakened pollution standards. Level: 3 7. Page: 135-136 What is global outsourcing? Identify a unique variation of global outsourcing. ANSWER: Global outsourcing is engaging in the international division of labor so that manufacturing can be done in countries with the cheapest sources of labor and supplies. The maquiladora industry is a unique variation of global outsourcing that lies along the Texas-Mexico border. Level: 2 8. Page: 137 Direct investing means that the company is involved in managing the productive assets in a foreign country. There are three options for direct investing. Name and compare these three options. ANSWER: The three options are joint ventures, wholly-owned foreign affiliates, and greenfield ventures. With a joint venture, a company shares costs and risks with another firm, typically in the host country. This is often the fastest, cheapest, and least risky way to enter a foreign market. In the second option with a wholly-owned affiliate, the company has full ownership with all of the costs and risks associated with ownership, and enjoys full control of the affiliate. The most costly and risky direct investment is called a greenfield venture. The company builds a subsidiary from scratch in a foreign country. While the risks and costs are high, so is the control and the potential payoff. Level: 3 9. Page: 140 Briefly describe two personal challenges for global managers. ANSWER: Chapter Four * Managing in a Global Environment Test Bank * Page 122 Managers will be most successful in foreign assignments if they are culturally flexible and if they can easily adapt to new situations. Thus, the two personal challenges that exist for global managers are overcoming ethnocentric tendencies and culture shock. Ethnocentrism is a cultural attitude marked by the tendency to regard one's own culture as superior to others. Culture shock refers to the frustration and stress that result from continually being exposed to new and different situations. Proper training and preparation of incoming global managers is crucial. Level: 2 Page: 142 Chapter Four * Managing in a Global Environment Test Bank * Page 123