TEST 3
IBM422S DATE: 1 OCTOBER 2015
DURATION: 1H45
50 MARKS
LECTURER: A. MAPANGA
ANSWER ALL QUESTIONS
SECTION A MULTIPLE CHOICE QUESTIONS
20 MARKS
1. FDI occurs when a firm:
A. ships its products from one country to another.
B. invests directly in facilities to produce a product in a foreign country.
C. invests in the shares of another company operating in the same country.
D. grants permission to another company in a different country to use its brand name.
2. Which of the following is an example of a greenfield investment?
A. A Chinese sugar maker setting up a sugar crushing facility in Cuba.
B. A Serbian automobile company purchasing a Croatian component manufacturer.
C. A Finnish mobile phone manufacturer expanding its production facility in Finland.
D. An Indian oil exploration company acquiring an oil refining company.
3. Which term refers to the rate at which one currency is converted into another?
A. Basis point
B. Spread
C. Exchange rate
D. Interchange rate
4. What are the two main functions of the foreign exchange market?
A. Trading of equities of foreign companies and currency conversion
B. Reducing currency volatility and setting interest rates
C. Insuring companies against interest rate risk and enabling imports and exports
D. Currency conversion and providing some insurance against foreign exchange risk
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5. The international monetary system refers to the institutional arrangements that govern ____.
A. microeconomic parameters
B. exchange rates
C. gross domestic produce
D. foreign direct investment
6. When the foreign exchange market determines the relative value of a currency, we say that the
country is adhering to a _____ regime.
A. currency board exchange
B. pegged exchange rate
C. fixed exchange rate
D. floating exchange rate
7. A _____ brings together those who want to invest money and those who want to borrow money.
A. consumer market
B. value chain
C. supply chain
D. capital market
8. Market makers are ____.
A. financial service companies that connect investors and borrowers
B. nonbank financial institutions who want to invest money
C. high net worth individuals with surplus cash to reinvest
D. those who want to borrow money including individuals, companies, and governments
9. _____ can be defined as the rate of return that the firm makes on its invested capital, which is
calculated by dividing the net profits of the firm by total invested capital.
A. Profitability
B. Performance
C. Cash flow
D. Efficiency
10. The percentage increase in net profits over time measures:
A. capital return.
B. profitability.
C. market growth.
D. profit growth.
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11. Organizational structure means all of the following, EXCEPT:
A. the establishment of integrating mechanisms to coordinate the activities of subunits.
B. the location of decision-making responsibilities with a structure.
C. the manner in which decisions are made and work is performed by individuals.
D. the formal division of the organization into subunits such as product divisions and functions.
12. Which of the following terms refers to the metrics used to measure the performance of subunits
and make judgments about how well managers are running those subunits?
A. Key processes
B. Control systems
C. Knowledge networks
D. Job assignments
13. Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in:
A. politically unstable developing nations that operate with a mixed or command economy.
B. nations where there is a dramatic upsurge in either inflation rates or private-sector debt.
C. politically stable developed and developing nations that have free market systems.
D. developing nations where speculative financial bubbles have led to excess borrowing.
14. Early entrants to a market that are able to create switching costs that tie the customer to the
product are capitalizing on _____.
A. first-mover advantages
B. pioneering costs
C. economies of scale
D. late-mover advantages
15. Which of the following statements is true of exporting?
A. It increases the trade deficit that nations have.
B. Exporting leads to diseconomies of scope.
C. It helps a firm achieve economies of scale.
D. Exporting is not beneficial to a country's economy.
16. The great promise of exporting is that ____.
A. large revenue opportunities are often found in foreign markets
B. it provides more opportunities to smaller firms than larger firms
C. international trade is protected against exchange risks
D. it reduces the need for insuring businesses against political risks
17. Which of the following is one of the four elements that constitute a firm's marketing mix?
A. Inventory accounting
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B. Product reengineering
C. Reverse engineering
D. Distribution strategy
18. The set of choices the firm offers to its targeted market is known as the ____.
A. marketing mix
B. marketing concept
C. marketing strategy
D. market promotion
19. Research has long maintained that a major factor of success for new products is the closeness of
the relationship between:
A. finance and marketing.
B. marketing and R&D.
C. finance and materials management.
D. finance and R&D.
20. According to Levitt, which of the following statements is true?
A. Technology drives the world toward a converging commonalty.
B. There are accustomed differences in national preferences.
C. The multinational corporation operates in a number of countries at low relative costs.
D. The global corporation operates with resolute consistency at high relative costs.
SSECTION B
ANSWER ALL QUESTIONS
30 MARKS
E
C21. Describe some of the home country policies that encourage outward FDI.
(10)
T
I
O22. Explain why do many firms take a reactive approach to exporting rather than a proactive
N
approach.
(10)
B
23. Expalin the four main differences between distribution systems across countries. (10)
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