Chap 006

Chapter 06
International Management
True / False Questions

1. New York Times columnist Thomas Friedman wrote a best-selling book
called "The Global Economy Is Flat."
True
False
2. Foreign direct investment flows to less developed countries by firms in

developed countries is declining substantially.
True
False
3. One consequence of an increasingly integrated global economy is that

imports are penetrating deeper into the world's largest economies,
such as that of the United States.
True
False
4. Offshoring occurs when an organization contracts with an outside

provider to produce one or more of an organization's products or
services.
True
False
5. North America, South America, and Asia are the three regions that are
most dominant in the global economy.
True
False
6. Germany is a member of the Group of Five.

True
False
7. The Maastricht Treaty formally established the trade area in North

America.
True
False
8. The creation of a unified Europe has resulted in an economic

superpower with a larger GDP than the United States.
True
False
9. Japan is the most important trading partner of the United States based
on the value of imports and exports between the two countries.
True
False
10 The value of U.S. imports from China is more than five times the value
. of U.S. exports to China.
True
False
11 Members of APEC include South Korea, Taiwan, the United States,

. Australia, and Russia.
True
False
12 Mexico has quickly emerged as the third-largest trading partner of the

. United States as a result of NAFTA.
True
False
13 NAFTA had an immediate and negative effect on the U.S. automobile

. industry.
True
False
14 The Middle East is the largest supplier of oil to the United States.
.
True False
15 Pressure to lower costs is one reason a firm may prefer a common

. global strategy to one tailored to individual markets.
True
False
16 Universal needs exist when the tastes and preferences of consumers in

. different countries with regard to a product are similar.
True
False
17 When pressures for local responsiveness are high and pressures for
. global integration are low, the global model is appropriate.
True
False
18 When there are differences among countries in traditional practices

. such as driving, pressures for local responsiveness emerge.
True
False
19 In the international model, managers use their organization's existing

. core capabilities to expand into foreign markets.
True
False
20 Major disadvantages of the multinational model are higher

. manufacturing costs and duplication of efforts.
True
False
21 Companies that adopt the global model tend to be those pursuing a

. cost focus as a competitive strategy.
True
False
22 Transnational companies are companies that produce products in one

. country and export these products to many overseas countries.
True
False
23 One advantage of exporting is that it provides scale economies.

.
True False
24 High transportation costs associated with exporting can make it
. uneconomical, particularly in the case of bulk products.
True
False
25 Franchising is utilized primarily by manufacturing industries, whereas

. licensing is used more often in service industries.
True
False
26 Quality control is a significant disadvantage of franchising.

.
True False
27 When a company's competitive advantage is based on technology and
. it wishes to enter the global marketplace, the least preferred strategy is
the wholly owned subsidiary.
True
False
28 Individuals from the parent country who are sent to work at a foreign
. subsidiary are known as expatriates.
True
False
29 Using host-country nationals at an overseas subsidiary is generally

. more expensive than using expatriates.
True
False
30 Cultural shock is an example of an executive coping strategy for

. international assignments.
True
False
31 The failure rate among expatriates is less than five percent.

.
True False
32 Family issues are the biggest reason for expatriates to return home
. early.
True
False
33 One way to prevent failed global assignments is to use effective,

. validated screening and selection criteria.
True
False
34 Ethnocentrism is the tendency to judge others by the standards of

. one's own culture or group, which are seen as superior.
True
False
35 Culture shock is the disorientation and stress associated with being in a

. foreign environment.
True
False
36 On Hofstede's power distance and individualism scales, the United

. States is very similar to France.
True
False
37 Inpatriates are foreign nationals that are sent abroad for a short period.
.
True False
38 Inpatriates are valuable because they bring with them extensive
. knowledge about how to operate effectively in their home countries.
True
False
39 Ethical behavior and decision making are surprisingly harder in a purely

. domestic situation than in the international arena.
True
False
Multiple Choice Questions

40 Which of the following is a consequence of an increasingly integrated
. global economy?
A. World output and trade have decreased to a dramatically low level.

B. Many companies find their home markets under attack from foreign
competition.
C. Companies are making foreign direct investments at home.
D. Imports are failing to penetrate deeper into the world's largest
economies.
E. There are reduced opportunities for global trade.
41 The flat world has required managers to operate in an environment that
. is ________ complex and competitive and offers more _________.
A.
B.
C.
D.
E.
more; profit
less; profit
more; opportunities
less; opportunities
less; ROI
42 Operating in a global marketplace is considered more complex because

.
A. Managers must compete with cost-efficient overseas competitors.
B. The lessening of trade barriers has decreased opportunities in
previously attractive markets.
C. Many overseas competitors operate with greater economies of scale.
D. Of varying cultures and coordination of globally dispersed
operations.
E. International management is relatively risk-free as compared to
domestic management.
43 ________ occurs when the organization contracts with an outside

. provider to produce one or more of an organization's products or
services.
A.
B.
C.
D.
E.
International development
Outsourcing
Offshoring
Expatriation
Franchising
44 ________ occurs when companies move jobs to another country,

. typically where wages are lower.
A.
B.
C.
D.
E.
Outsourcing
Offshoring
Expatriation
Franchising
45 Answering yes to which of the following questions should be considered

. by managers as a reason to offshore?
A. Is cost the competitive advantage of the organization's products?

B.
Is the business in its early stages?
C. Can production savings be achieved locally?
D. Can the efficiency of the supply chain be improved?
E. Answering yes to any or all of these would be considered by
managers as reason to offshore.
46 Which areas are considered the most dominant in the global economy?
.
A. North America, western Europe, and Asia.
B. North America, South America, and Asia.
C.
Western Europe, Asia, and Africa.
D. North America, South America, and western Europe.
E.
North America, Asia, and Africa.
47 Under (the) ________, member countries agreed to adopt a common

. European currency called the euro.
A.
B.
C.
D.
E.
NAFTA
Maastricht Treaty
GATT Agreement
APEC Treaty
European Unification Act
48 Which of the following has resulted from the formation of the European
. Union?
A. The elimination of all trade barriers within Europe.

B. The protection of local industry within Europe.
C. The strengthening of Europe's position as an economic superpower.
D.
The reunification of Germany.
E. The adoption of one European language.
49 To be competitive in a global economy, Europeans must increase their
. level of
A.
B.
C.
D.
E.
Population density.
Productivity.
Espionage activity.
Philanthropic contributions.
Wealth.
50 Which country does the text describe as becoming the largest producer
. and consumer of many of the world's goods?
A.
B.
C.
D.
E.
Japan.
Canada.
Mexico.
China.
Vietnam.
51 Labor costs in China are about ________ those in Mexico.

.
A.
B.
C.
D.
E.
one-third of
three times
the same as
seven times
10 times
52 NAFTA combined the economies of

.
A. The United States, Canada, and Mexico.
B.
Canada, Mexico, and South America.
C. South America, the United States, and Central America.
D. Latin America, the Pacific Rim, and the European Union.
E. The United States, the European Union, and Canada.
53 Which country does the text describe as having become an important
. provider of online computer and software support for the United
States?
A.
B.
C.
D.
E.
Egypt.
Great Britain.
India.
Mexico.
Taiwan.
54 The passage of NAFTA has provided short-term benefits to which of the

. following industries?
A.
B.
C.
D.
E.
The auto industry.

Grain producers.
The financial industry.
Capital goods suppliers.
All of these have benefited from NAFTA.
55 Which of the following existing agreements includes Costa Rica,

. Nicaragua, and the United States?
A.
B.
C.
D.
E.
NAFTA.
CAFTA-DR.
FTAA.
APEC.
ASEAN.
56 When identifying the best strategy for competing in a global

. marketplace, it is helpful to plot a company's position on a(n)
A.
B.
C.
D.
E.
Leadership grid.
Force field analysis grid.
Integration-responsiveness grid.
Cost-benefit grid.
Strategy map.
57 The grid used for identifying the best strategy for competing in a global
. marketplace measures what two dimensions?
A. Pressures for global integration and pressures for local

responsiveness.
B. Pressure for local interaction and pressures for global
responsiveness.
C. Financial viability and employee satisfaction.
D. Employee satisfaction and management credibility.
E. Pressures for global systems capacity and pressures for local
financial success.
58 Pressure for global integration includes
.
A.
B.
C.
D.
E.
Universal needs.
Differences in traditional practices.
Political demands imposed by host countries.
Varied consumer preferences.
Legal demands imposed by host countries.
59 Pressure for local responsiveness includes

.
A.
B.
C.
D.
E.
Varying consumer preferences.

Varying sales and distribution patterns.
Varying traditions.
Varying political demands.
All of these.
60 Which of the following pressures for local responsiveness includes

. threats of protectionism, economic nationalism, and local rules?
A.
B.
C.
D.
E.
Differences in distribution channels.

Economic and political demands.
Differences in consumer tastes.
Global market integration.
61 Which of the following is a global strategy used as an approach to

. international competition?
A.
B.
C.
D.
E.
International model.
Multinational model.
Global model.
Transnational model.
All of these are global strategies.
62 The model in which managers use their organization's existing core

. capabilities to expand into foreign markets is called the
A.
B.
C.
D.
E.
Global model.
Multimedia model.
63 The international model of organizational structure consists of

.
A. Large low-cost manufacturing facilities located in selected locations
with products exported to various subsidiaries.
B. Subsidiaries located in countries where the company does business
with much of the control exercised by the parent company.
C. Subsidiaries located in countries where the company does business
with much of the control exercised by the subsidiaries.
D. Manufacturing various components at appropriate sites and
assembling the components at national subsidiaries.
E.
Global services.
64 From which model of organizational structure did IBM and Xerox profit
. by transferring skills and know-how to subsidiaries around the globe?
A.
B.
C.
D.
E.
Global model.
Intranational model.
65 The overseas success of Kellogg, Coca-Cola, Heinz, and Procter &

. Gamble is based on marketing know-how. These companies are using
which model of organizational structure?
A.
B.
C.
D.
E.
Global model.
66 Calabria Steel has subsidiaries in each country in which it does

. business. As the parent company, Calabria has located its core skills in
technology and R&D overseas so that each subsidiary remains
dependent on it for new products, processes, and ideas. This illustrates
the __________ model for global strategy.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational
67 Where global efficiency is not required but adapting to local conditions

. offers advantages, the __________ model of organizational structure is
appropriate.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
68 The global strategy model that uses subsidiaries in each country and
. provides each a great deal of discretion to respond to local conditions is
the __________ model.
A.
B.
C.
D.
E.
international
multinational
global
transnational
domestic
69 The multinational model of organization structure consists of

.
A. Large low-cost manufacturing facilities located in selected locations
with products exported to various subsidiaries.
E.
Extensive use of offshoring.
70 Companies that decentralize their operations throughout the globe in
. order to appeal to the varying tastes and preferences of global
consumers are utilizing a ___________ model.
A.
B.
C.
D.
E.
domestic
international
multinational
transnational
global
71 Which global strategy model realizes the advantage of local

. responsiveness but the disadvantage of high manufacturing costs and
duplication of effort?
A.
B.
C.
D.
E.
Transnational.
Global.
Worldwide.
International.
Multinational.
72 A disadvantage of a multinational model is that

.
A. Problems in transferring core skills are created.
B. Each subsidiary must respond to specific consumer needs.
C.
Transfer pricing presents difficulties.
D. It is difficult to launch a coordinated global attack against
competitors.
E. Coordination of efforts within countries is more difficult.
73 Though the product is based on a formula pioneered in California and
. Florida, Euro Disney operates the amusement park in France, and
markets it somewhat differently than the United States facilities in
order to appeal to the European consumer. This type of strategy is
known as a(n) __________ model.
A.
B.
C.
D.
E.
domestic
international
multinational
transnational
global
74 In which two models of global strategy do manufacturing costs remain

. relatively high?
A.
B.
C.
D.
E.
Global and transnational.

International and transnational.
Multinational and international.
Global and international.
Multinational and transnational.
75 Heineken, a Netherlands-based brewing company, produces more than

. 170 different brands around the world, some of them international but
many of them specialty brews for regional and local tastes. This
illustrates the
A.
B.
C.
D.
E.
Global model.
76 The __________ organizational model is designed to enable a company to

. market a standardized product in the global marketplace and to
manufacture that product in a limited number of locations where the
mix of costs and skills is most favorable.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
77 Competing globally under the assumption that no tangible differences

. exist among consumer tastes and preferences in varying countries is
referred to as a __________ model.
A.
B.
C.
D.
E.
multinational
consumer-focused
transnational
global
domestic
78 An organizational model that consists of a company's overseas

. subsidiaries and is characterized by centralized decision making and
tight control by the parent company over most aspects of worldwide
operations is called the
A.
B.
C.
D.
E.
Global model.
79 When a company such as Procter & Gamble approaches the European

. market as a unified whole, thus reducing costs and improving
efficiency, it is using the __________ model of organizational structure.
A.
B.
C.
D.
E.
international
multinational
transnational
global
intranational
80 The __________ model of organizational structure has a disadvantage in

. that it may result in a product that fails to satisfy anyone.
A.
B.
C.
D.
E.
international
multinational
transnational
global
intranational
81 Candace Apparel, a women's clothing manufacturer, assumes that

. people all over the world will view and use its products in the same way.
Therefore it produces standardized versions of its apparel in several
countries with attractive labor rates, and offers them to all of its
international markets. Candace Apparel uses the __________ model of
global strategy.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational model
82 The organizational structure that enables managers to "think globally

. but act locally" is called the
A.
B.
C.
D.
E.
Global model.
83 In companies that adopt the __________ model of organizational

. structure, functions are centralized where it makes sense to do so, but
a great deal of decision making also takes place at the local level.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
84 Transnational companies
.
A. Require effective communication and coordination networks among
subsidiaries.
B. Respond to pressures for both local responsiveness and cost
economies.
C. May centralize production facilities in one location and marketing
functions in separate locations.
D. Must effectively transfer core skills or know-how.
E.
Do all of these.
85 The transnational model of organizational structure may be
. characterized by
A. Large low-cost manufacturing facilities in selected locations with

products exported to various markets.
D. Manufacturing major components at appropriate lower-cost sites and
assembling the components at national subsidiaries to assure local
responsiveness.
E. Marketing a standardized product throughout the world.
86 Which of the following companies is an example of a transnational
. company?
A.
B.
C.
D.
E.
Sony.
IBM.
Coca Cola.
Caterpillar.
Unilever.
87 Which of the models of organization structure depends most heavily on

. communication and coordination between subsidiaries?
A.
B.
C.
D.
E.
The global model.

The transnational model.
The international model.
The worldwide model.
The multinational model.
88 In order to achieve cost economies, Apex Manufacturing bases its

. production plants in Mexico and gets its engineering services from
skilled workers in Germany. Apex is using the __________ model of
organizational structure.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational
89 Mercury Fire Protection manufactures engines for its fire trucks in a

. central location in order to attain cost economies and then sends these
engines to various subsidiaries for final assembly of the truck bodies in
order to meet local safety specifications. Mercury uses the __________
model for global strategy.
A.
B.
C.
D.
E.
global
transnational
international
maquilladora
worldwide
90 Exporting, licensing, franchising, joint ventures, and wholly owned

. subsidiaries are all methods of
A. Identifying lucrative consumers on a global scale.

B.
Operating a transnational business.
C.
Entering overseas markets.
D.
Optimizing global profit.
E.
Reducing costs.
91 Most manufacturing companies begin global expansion through which
. entry mode?
A.
B.
C.
D.
E.
Exporting.
Wholly owned subsidiary.
Franchising.
Licensing.
Joint venture.
92 Exporting is
.
A. A common entry strategy for global expansion.
B. Manufacturing a product in several international locations for
consumers in those global markets.
C. Inconsistent with a pure global strategy.
D.
Expensive.
E.
Not able to achieve scale economies.
93 An advantage of exporting as a global expansion entry mode is that
.
A.
Economies of scale may be realized.
B. The target site may have lower production costs.
C. Transportation costs are generally lower.
D. It is considered responsive to local needs.
E.
Trade barriers may be removed.
94 A disadvantage of exporting is that

.
A.
It is quite risky.
B.
The company may face tariff barriers.
C. It is the most expensive method of expanding globally.
D. The company risks losing control of its intellectual property.
E. It is inconsistent with a pure global strategy.
95 __________ is an arrangement by which an organization in another
. country buys the rights to manufacture another organization's product
in its own country for a negotiated fee.
A.
B.
C.
D.
E.
Franchising
International licensing
Entering a joint venture
Exporting
Royalty facilitation
96 An advantage of licensing as a method of entering global competition is

. that the
A. Licensing company need not bear the costs and risks of opening up
an overseas market.
B. Licensing company has control over its technology.
C. Licensing company has control over quality levels.
D. Licensing company has lower communication costs.
E.
Licensee has lower production costs.
97 A disadvantage of licensing is that the licensing company (licensor)
.
A.
B.
C.
D.
E.
May lose control over its technology.

Takes on greater political risk.
Takes on greater development costs.
Realizes higher profit margins.
Frequently grows too fast as a result.
98 Selling the rights to use your company's brand name in return for a
. lump-sum payment and a share of the buyer's profits is referred to as
A.
B.
C.
D.
E.
Licensing.
Entering a joint venture.
Exporting.
Franchising.
Royalty facilitation.
99 The most significant disadvantage of franchising concerns

.
A.
The very low level of profit potential.
B. The loss of control over technology that may affect an organization's
ability to sustain a competitive advantage.
C. High development costs related to a higher level of risk in worldwide
operations.
D. Loss of identification with local markets.
E.
Quality control.
100 An advantage of joint ventures in the international marketplace is that
.
A. The local partner may have a greater knowledge of local consumer
tastes and preferences.
B. The local partner may have a greater understanding of local
business practices and regulations.
C. The costs of developing the new market are shared with the joint
venture partner.
D. The risks of entering the new market are shared with the joint
venture partner.
E. All of these are advantages of joint ventures.
101 A disadvantage of entering global competition through a joint venture

.
is that
A. It often aggravates political issues and incurs protectionist

measures.
B. The partner's ideas about local tastes and preferences may interfere
with standardized operations.
C. Conflict over control within joint ventures causes many of them to
fail.
D. It is the most expensive and risky option for entering a global
market.
E. There is seldom a formal agreement in place covering the joint
venture.
102 When a company sets up its own overseas operations, independent of
.
foreign partners or governments, it has established a(n)
A.
B.
C.
D.
E.
Purely global strategy.

Competitive venture.
Independent venture.
Multinational contract.
103 A major disadvantage of operating a wholly owned subsidiary is that

.
A.
B.
C.
D.
E.
A loss of technology is likely to occur.

Quality levels are difficult to monitor overseas.
High costs and risk are associated with this type of operation.
Overseas consumers are often resentful of foreigners.
Host countries can impose higher tariffs on the firm.
104 Which of the following is an advantage of a wholly owned subsidiary as

.
a global entry strategy?
A. The company may gain access to new knowledge or technologies.

B. The partner will share the costs of operating overseas.
C. This method has the highest transportation costs for finished goods.
D. This method minimizes the risks of overseas operations.
E. This method gives a company tight control over operations in other
countries.
105 Individuals sent from a company's parent country to work in overseas
.
operations are referred to as
A.
B.
C.
D.
E.
Third-country nationals.
Host-country nationals.
Globalite executives.
Expatriates.
Inpatriates.
106 Carrie Pinon, a chemical engineer from New Jersey, is being sent by
.
her company, L'Oreal of France, to work in product development in
China. Carrie would be considered a(n)
A.
B.
C.
D.
E.
Third-country national.
Host-country national.
Globalite executive.
Expatriate.
Inpatriate.
107 Which of the following is a reason why some companies prefer to use
.
expatriates at their overseas operations?
A. It can cost three to four times as much to use host-country

nationals, compared to expatriates.
B. Expatriates are often able to transfer the corporate culture and best
practices to other countries.
C. The personal security of host-country nationals may be an issue in
some developing countries.
D. Governments may provide incentives to employ expatriates.
E. All of these are reasons why some organizations prefer to use
expatriates.
108 Marielle has just been offered her first expatriate experience, an
.
assignment in Germany. Before she accepts, her employer should
A. Seek advice from locals and the expatriate network on her behalf.
B.
Provide cultural training.
C. Clarify home country rules and how to apply them abroad.
D. Encourage her to perform self- and family evaluation.
E.
Reinforce dual identification.
109 The biggest cause of failure of overseas managers is
.
A.
B.
C.
D.
E.
A lower salary level.

Lack of adequate housing.
Inadequate access to health benefits.
Personal and social issues.
Little vacation time.
110 Which of the following characteristics is most likely associated with an

.
international executive?
A.
B.
C.
D.
E.
Ethnocentric.
Flexible.
Extremely self-confident and assertive.
Likes familiarity.
Avoids criticism.
111 __________ is the tendency to judge others by the standards of one's

.
group or culture, which are seen as superior.
A.
B.
C.
D.
E.
Individualism
Power distance
Uncertainty avoidance
Ethnocentrism
Expatriotism
112 Josh, an American, was visiting South Korea to do business with some
.
Samsung managers located in Seoul. When his Korean counterpart,
Jun-suh, arrived for a meeting, he wanted to chat about family and life
before doing business. Josh felt impatient, and thought it rude for
someone to assume he had no other important commitments that
morning. In this scenario, Josh is best described as exhibiting
A.
B.
C.
D.
E.
Ethnocentrism.
Individualism.
Culture shock.
Uncertainty distance
Power distance
113 The disorientation and stress associated with being in a foreign

.
environment is termed
A.
B.
C.
D.
E.
International mores.
Homesickness.
Culture shock.
Out-of-country experience.
Uncertainty distance.
114 Jennifer has been assigned to manage an operation in Venezuela. Upon

.
her arrival she encouraged all of her employees (native Venezuelans)
to feel free to individually approach her with ideas on improving
operations. After many months, no employees had offered
suggestions. Jennifer should have realized that Venezuelan culture not
only has a _________ degree of collectivism but accepts a _________
power distance.
A.
B.
C.
D.
E. There is not
answer.
low; small
low; large
high; large
high; small
enough information in this example to determine an
115 In Hofstede's depiction of countries' individualism/collectivism and

.
power distance, the United States is most like
A.
B.
C.
D.
E.
France.
Mexico.
New Zealand.
Austria.
Japan.
116 __________ are foreign nationals who are brought in to work at the
.
parent company.
A.
B.
C.
D.
E.
Expatriates
Third-level nationals
Second-party nationals
Inpatriates
Foreign cohorts
117 Steps for establishing and reinforcing the codes of conduct for
.
international business include which of the following?
A. Communicating the company's values.

B. Taking action when standards are violated.
C.
Measuring ethical performance.
D. Rewarding people for meeting ethical standards.
E. All of the above are steps for establishing and reinforcing
international codes of conduct.
118 Despite differences across cultures, research suggests that regardless
.
of nationality or religion, most people embrace which of the following
values?
A.
B.
C.
D.
E.
Individualism.
Competitiveness.
Responsibility.
Persistence.
Sincerity.
Scenario A
Suppose you are a consultant for three companies with international
operations. Each of them has selected a different global strategy. Alpha
Company uses its established skills in producing widgets that it will sell
in foreign markets. Beta Company produces locally targeted wines for
which it has built specialized plants in each local region. Gamma
Company has a single worldwide corporate headquarters from which it
centrally manages the entire company's operations. Finally, Delta
company is located in Wazomia where wages are quite low, and
produces large pieces of widgets that are fairly easy to manufacture,
requiring little employee skill. These pieces are then sent to its
locations abroad to be finished by a more skilled workforce, taking into
account the customs and benefits desired by each of those particular
populations.
119 Which global strategy is Alpha Company using?

.
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
120 Which global strategy is Beta Company using?

.
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
121 Which global strategy is Delta Company using?

.
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
122 Which global strategy is Gamma Company using?

.
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
Scenario B
Tim was having a few friends over for dinner, many of whom Tim knew
from an international management association. Tim's company
provides services to create detailed maps of world areas from satellites,
which the firm then sells via the Internet to firms, countries, and others
around the world. One guest, Lucia, bakes cookies for a living. Her
recipe is so well-liked that her company has grown dramatically. She
has just sold the right to manufacture her cookies to a firm in eastern
Europe. Another, Mac, is a director at Hilton, and his wife Chandra
works for a partnership between Hershey and an Indian firm. Finally,
Samantha works for EDS and is soon to go abroad to visit a firm that
EDS is considering acquiring so that it can keep its technology
proprietary. The guests were speaking about how their companies
decided to "go global."
123 Tim's company uses __________ to participate in the global
.
marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
wholly owned subsidiaries
124 Lucia's company is using __________ to participate in the global

.
marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
125 Hilton uses __________ to participate in the global marketplace.

.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
126 Hershey uses __________ to participate in the global marketplace.

.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
127 Samantha's company wants to use __________ to participate in the

.
global marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
Scenario C
Rebecca is an American who has just accepted her first international
assignment in Sweden. On her first day in the office, she met several
new colleagues. Lars is the manager of the office and is a Swedish
citizen; he has been with the company for five years. Wen is from China
and has also just come to Sweden to work for the company, which is
based in the United States.
128 128.Rebecca would be referred to as a(n)

.
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
129 Lars would be referred to as a(n)

.
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
130 Wen would be referred to as a(n)

.
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
131 Because Rebecca has never worked outside the United States before,
.
how should she approach her new assignment now that she has
arrived in the office in Sweden?
Refer To: Table 6.3
A. She should engage in self-evaluation.

B. She should think of the assignment as a vertical promotion.
C. She should assume Sweden is very similar to the United States.
D. She should behave as she did at home in the meetings she will
attend.
E.
She should seek social support.
Scenario D
A group of managers was recently reunited after completing overseas
assignments, and they were telling stories of their experiences. Alfredo
was surprised by employees in his host nation because he found them
reluctant to take personal credit for good work. Bernie had employees
that were not anxious to adopt any of the changes he recommended,
even though they were accepted best practices at home. Ed noticed
that his employees did not seem to take much pleasure in financial
rewards but loved additional vacation days as a perk. Sarah's local
counterpart told her she would need to fly in coach because employees
would be intolerant of her traveling in first class.
132 Alfredo experienced employees exhibiting Hofstede's cultural
.
dimension of
A.
B.
C.
D.
E.
High power distance.

Low power distance.
Individualism.
Collectivism.
High uncertainty avoidance.
133 Bernie had employees who would best be described as exhibiting

.
Hofstede's dimension of
A.
B.
C.
D.
E.

Masculinity.
Individualism.
Collectivism.
134 Ed's employees exhibited Hofstede's dimension of

.
A.
B.
C.
D.
E.

Low power distance.
Individualism.
Femininity.
135 Sarah's employees exhibited Hofstede's dimension of

.
A.
B.
C.
D.
E.

Low power distance.
Individualism.
Femininity.
Essay Questions
136 Explain the consequences of the increasing integration of the global
.
economy.
137 Describe how the global economy is becoming more integrated than
.
ever before. Include a discussion of the European Union, China, and
NAFTA in your answer.
138 Discuss how an organization should identify the best strategy for
.
competing in a global marketplace and the four approaches typically
used.
139 Discuss the advantages of licensing and franchising. In what situations

.
are each of these strategies most appropriate?
140 What are the pros and cons of using expatriates, host-country
.
nationals, and third-country nations to run overseas operations? If you
were expanding your business, which approach would you use?
141 Summarize the skills and knowledge managers need to manage

.
globally.
142 Discuss the four dimensions identified by Geert Hofstede to analyze

.
cultural differences among countries. Explain the classification for a
country of your choosing according to Hofstede's model.
143 Discuss how culture plays out in terms of ethical behavior. What can
.
organizations do to manage these issues more effectively?
Chapter 06 International Management Answer Key
True / False Questions

1.
New York Times columnist Thomas Friedman wrote a best-selling

book called "The Global Economy Is Flat."
FALSE
The global economy matters because your customers, employees,
and suppliers could be located anywhere in the world. New York
Times columnist Thomas Friedman wrote a best-seller about this
phenomenon. His book, The World Is Flat, described how such trends
as the Internet and trade agreements between more nations have
made international business the norm today.
AACSB: Analytic
Blooms: Remember
Learning Objective: 06-01 Discuss what integration of the global economy means for individual companies and
their managers.
Level of Difficulty: 1 Easy
Topic: Managing in a (Sometimes) Flat World
2.
Foreign direct investment flows to less developed countries by firms

in developed countries is declining substantially.
FALSE
A consequence of increased global integration is that foreign direct
investment (FDI) is playing an ever-increasing role in the global
economy as companies of all sizes invest overseas. In particular, the
foreign direct investment flows to less developed countries from firms
in developed countries has risen substantially.
AACSB: Analytic
Blooms: Understand
their managers.
Level of Difficulty: 2 Medium

3.
One consequence of an increasingly integrated global economy is

that imports are penetrating deeper into the world's largest
economies, such as that of the United States.
TRUE
The increasing integration of the global economy has had many
consequences, including in particular deeper penetration of imports
into the world's largest economies.
AACSB: Analytic
Blooms: Understand
their managers.
4.
Offshoring occurs when an organization contracts with an outside

services.
FALSE
Offshoring occurs when companies move jobs to another country,
typically where wages are lower. This practice does not necessarily
require using an outside provider, as outsourcing does.
AACSB: Analytic
Blooms: Remember
their managers.
5.
North America, South America, and Asia are the three regions that
are most dominant in the global economy.
FALSE
The global economy is dominated by countries in three regions: North
America, western Europe, and Asia.
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-02 Describe how the world economy is becoming more integrated than ever before.
Topic: The Global Environment
6.
Germany is a member of the Group of Five.

TRUE
The Group of Five are the top five industrial nations in the view of the
World Bank and IMF: the United States, Britain, France, Germany, and
Japan.
AACSB: Analytic
Blooms: Understand
7.
The Maastricht Treaty formally established the trade area in North

America.
FALSE
Under the Maastricht Treaty, which formally established the European
Union (EU), the euro was adopted as a common currency among 13
member countries.
AACSB: Analytic
Blooms: Remember
8.
The creation of a unified Europe has resulted in an economic

superpower with a larger GDP than the United States.
TRUE
The European Union was originally formed after World War II to foster
cooperation through trade in place of military conflict, but the efforts
have also created an economic superpower. Its 27 members now
boast a population of more than 492 million and a GDP (gross
domestic product) exceeding that of the United States.
AACSB: Analytic
Blooms: Understand
9.
Japan is the most important trading partner of the United States

based on the value of imports and exports between the two
countries.
FALSE
Japan is America's fourth-largest export market, after Canada, China,
and Mexico; and Japan is in fourth place as a source of U.S. imports
(see Figure 6.5).
Refer To: Figure 6.5
AACSB: Analytic
Blooms: Understand
10.
The value of U.S. imports from China is more than five times the
value of U.S. exports to China.
TRUE
The low wage rates in China help explain why the value of U.S.
imports from China is more than five times the value of U.S. exports
to China.
AACSB: Analytic
Blooms: Understand
11.
Members of APEC include South Korea, Taiwan, the United States,

Australia, and Russia.
TRUE
South Korea, Taiwan, and Singapore and other Asian countries have
joined with the United States, Australia, and Russia to form the 21member Asia-Pacific Economic Cooperation (APEC) trade group.
AACSB: Analytic
Blooms: Remember
12.
Mexico has quickly emerged as the third-largest trading partner of

the United States as a result of NAFTA.
TRUE
Although the United States has had a longer-standing agreement with
Canada, Mexico has quickly emerged as the United States' thirdlargest trading partner as a result of NAFTA.
AACSB: Analytic
Blooms: Remember
13.
NAFTA had an immediate and negative effect on the U.S. automobile

industry.
FALSE
U.S. industries that have benefited in the short run from NAFTA
include capital goods suppliers, manufacturers of consumer durables,
grain producers and distributors, construction equipment
manufacturers, the auto industry, and the financial industry.
AACSB: Analytic
Blooms: Understand
14.
The Middle East is the largest supplier of oil to the United States.
FALSE
The Middle East supplies by far the most oil to the world's buyers,
most of it going to buyers in Asia. The Middle East is not, however,
the largest supplier of oil to the United States, which imports oil
primarily from closer sources: Canada, Mexico, and Venezuela.
AACSB: Analytic
Blooms: Understand
15.
Pressure to lower costs is one reason a firm may prefer a common

global strategy to one tailored to individual markets.
TRUE
Managers may have several reasons to want or need a common
global strategy, rather than one tailored to individual markets. These
factors include the existence of universal needs, pressures to reduce
costs, or the presence of competitors with a global strategy.
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-03 Define the strategies organizations use to compete in the global marketplace.
Topic: Global Strategy
16.
Universal needs exist when the tastes and preferences of consumers

in different countries with regard to a product are similar.
TRUE
Universal needs create strong pressure for a global strategy.
Universal needs exist when the tastes and preferences of consumers
in different countries with regard to a product are similar.
AACSB: Analytic
Blooms: Understand
17.
When pressures for local responsiveness are high and pressures for
global integration are low, the global model is appropriate.
FALSE
Figure 6.5 indicates that the multinational model is the appropriate
one to consider when pressures for local responsiveness are high and
pressures for global integration are low.
AACSB: Analytic
Blooms: Understand
18.
When there are differences among countries in traditional practices

such as driving, pressures for local responsiveness emerge.
FALSE
Pressures for local responsiveness also emerge when there are
differences in traditional practices among countries. In Great Britain
people drive on the left side of the road, creating a demand for righthand-drive cars, whereas in neighboring France people drive on the
right. Obviously automobiles must be customized to accommodate
this difference in traditional practices.
AACSB: Analytic
Blooms: Understand
19.
In the international model, managers use their organization's existing

core capabilities to expand into foreign markets.
TRUE
core capabilities to expand into foreign markets. It is most
appropriate when there are few pressures for economies of scale or
local responsiveness.
AACSB: Analytic
Blooms: Remember
20.
Major disadvantages of the multinational model are higher

manufacturing costs and duplication of efforts.
TRUE
A major disadvantage of the multinational form is higher
manufacturing costs and duplication of effort. Although a
multinational can transfer core skills among its international
operations, it cannot realize scale economies from centralizing
manufacturing facilities and offering a standardized product to the
global marketplace.
AACSB: Analytic
Blooms: Understand
21.
Companies that adopt the global model tend to be those pursuing a

cost focus as a competitive strategy.
TRUE
The global model is an organizational model consisting of a
company's overseas subsidiaries and characterized by centralized
decision making and tight control by the parent company over most
aspects of worldwide operations; it is typically adopted by
organizations that base their global competitive strategy on cost
considerations.
AACSB: Analytic
Blooms: Understand
22.
Transnational companies are companies that produce products in one

country and export these products to many overseas countries.
FALSE
In companies that adopt the transnational model, functions are
centralized where it makes sense to do so, but a great deal of
decision making also takes place at the local level. In addition, the
experiences of local subsidiaries are shared worldwide to improve the
firm's overall knowledge and capabilities.
AACSB: Analytic
Blooms: Remember
23.
One advantage of exporting is that it provides scale economies.

TRUE
One of the advantages of exporting is that it provides scale
economies by avoiding the costs of manufacturing in other countries.
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-04 Compare the various entry modes organizations use to enter overseas markets.
Topic: Entry Mode
24.
High transportation costs associated with exporting can make it

uneconomical, particularly in the case of bulk products.
TRUE
One drawback of exporting is that high transportation costs can make
it uneconomical, particularly in the case of bulk products.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
25.
Franchising is utilized primarily by manufacturing industries, whereas

licensing is used more often in service industries.
FALSE
Franchising is similar to licensing. However, whereas licensing is a
strategy pursued primarily by manufacturing companies, franchising
is used primarily by service companies.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
26.
Quality control is a significant disadvantage of franchising.

TRUE
The most significant disadvantage of franchising concerns quality
control. The company's brand name guarantees consistency in the
company's product. But if overseas franchisees are less concerned
about quality than they should be, the impact can go beyond lost
sales in the local market to a decline in the company's reputation
worldwide.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
27.
When a company's competitive advantage is based on technology

and it wishes to enter the global marketplace, the least preferred
strategy is the wholly owned subsidiary.
FALSE
When a company's competitive advantage is based on technology, a
wholly owned subsidiary normally is the preferred entry mode
because it reduces the risk of losing control over the technology.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
28.
Individuals from the parent country who are sent to work at a foreign
subsidiary are known as expatriates.
TRUE
When establishing operations overseas, headquarters executives
have a choice among sending expatriates (individuals from the
parent country), using host-country nationals (natives of the host
country), and deploying third-country nationals (natives of a country
other than the home country or the host country).
AACSB: Analytic
Blooms: Remember
Learning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.
Topic: Managing across Borders
29.
Using host-country nationals at an overseas subsidiary is generally

more expensive than using expatriates.
FALSE
Because sending employees abroad can cost three to four times as
much as employing host-country nationals, some companies,
including Texas Instruments, have made limited use of expatriates.
AACSB: Analytic
Blooms: Understand
30.
Cultural shock is an example of an executive coping strategy for

international assignments.
FALSE
Cultural shock is a primary stressor, not a coping response, in the
developmental stages of expatriate executives.
AACSB: Analytic
Blooms: Understand
31.
The failure rate among expatriates is less than five percent.

FALSE
The failure rate among expatriates (defined as those who come home
early) ranges from an estimated 20 percent to 70 percent, depending
on the country of assignment. The cost of each failed assignment
ranges from tens of thousands to hundreds of thousands of dollars.
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-06 Summarize the skills and knowledge managers need to manage globally.
32.
Family issues are the biggest reason for expatriates to return home
early.
TRUE
Typically the causes for failure overseas extend beyond technical
capability and include personal and social issues. In a recent survey
of human resource managers around the globe, two-thirds said the
main reason for the failures is family issues, especially dissatisfaction
of the employee's spouse or partner.
AACSB: Analytic
Blooms: Understand
33.
One way to prevent failed global assignments is to use effective,

validated screening and selection criteria.
TRUE
There are a number of ways to prevent failed global assignments
mentioned in Table 6.5, including using effective, validated screening
and selection criteria.
Refer To: Table 6.5
AACSB: Analytic
Blooms: Understand
34.
Ethnocentrism is the tendency to judge others by the standards of

one's own culture or group, which are seen as superior.
TRUE
Without realizing it, some managers may act out of ethnocentrism, a
tendency to judge foreign people or groups by the standards of one's
own culture or group, and to see one's own standards as superior.
AACSB: Analytic
Blooms: Remember
Learning Objective: 06-07 Identify ways in which cultural differences across countries influence management.
35.
Culture shock is the disorientation and stress associated with being in

a foreign environment.
TRUE
People traveling abroad frequently experience culture shock, which is
the disorientation and stress associated with being in a foreign
environment.
AACSB: Analytic
Blooms: Remember
36.
On Hofstede's power distance and individualism scales, the United

States is very similar to France.
FALSE
According to Figure 6.7, the United States has a greater level of
individualism and a smaller power distance than France.
AACSB: Analytic
Blooms: Understand

37.
Inpatriates are foreign nationals that are sent abroad for a short
period.
FALSE
Cross-cultural management includes effective management of
inpatriates, who are foreign nationals brought in to work at the parent
company.
AACSB: Analytic
Blooms: Remember
38.
Inpatriates are valuable because they bring with them extensive

knowledge about how to operate effectively in their home countries.
TRUE
company. These employees provide a valuable service to global
companies because they bring extensive knowledge about how to
operate effectively in their home countries.
AACSB: Analytic
Blooms: Understand
39.
Ethical behavior and decision making are surprisingly harder in a

purely domestic situation than in the international arena.
FALSE
Issues of right and wrong get blurred as we move from one culture to
another, and actions that may be normal and customary in one
setting may be unethical, or even illegal, in another.
AACSB: Analytic
Blooms: Understand
Multiple Choice Questions

40.
Which of the following is a consequence of an increasingly integrated

global economy?
A. World output and trade have decreased to a dramatically low

level.
B. Many companies find their home markets under attack from
foreign competition.
C. Companies are making foreign direct investments at home.
D. Imports are failing to penetrate deeper into the world's largest
economies.
E. There are reduced opportunities for global trade.
The increasing integration of the global economy has had many
consequences: large expansion of international trade: foreign direct
investment increasing, imports penetrating deeper into the world's
largest economies, and companies finding their home markets under
attack from foreign competitors.
AACSB: Analytic
Blooms: Understand
their managers.
41.
The flat world has required managers to operate in an environment

that is ________ complex and competitive and offers more _________.
A.
B.
C.
D.
E.
more; profit
less; profit
more; opportunities
less; opportunities
less; ROI
Opportunities are greater because free trade has opened up formerly

protected national markets. The environment is more complex
because managers deal with the challenges of doing business in
countries with radically different cultures and coordinating globally
dispersed operations. The environment is more competitive because
in addition to domestic competitors, the manager must deal with
cost-efficient overseas competitors.
AACSB: Analytic
Blooms: Understand
their managers.
42.
Operating in a global marketplace is considered more complex

because
A. Managers must compete with cost-efficient overseas competitors.

B. The lessening of trade barriers has decreased opportunities in
previously attractive markets.
C. Many overseas competitors operate with greater economies of
scale.
D. Of varying cultures and coordination of globally dispersed
operations.
E. International management is relatively risk-free as compared to
domestic management.
The environment is more complex because today's manager often
has to deal with the challenges of doing business in countries with
radically different cultures and coordinating globally dispersed
operations.
AACSB: Analytic
Blooms: Understand
their managers.
43.
________ occurs when the organization contracts with an outside

services.
A.
B.
C.
D.
E.
Outsourcing
Offshoring
Expatriation
Franchising
Outsourcing occurs when an organization contracts with an outside

provider to produce one or more of its goods or services.
AACSB: Analytic
Blooms: Remember
their managers.
44.
________ occurs when companies move jobs to another country,

typically where wages are lower.
A.
B.
C.
D.
E.
Outsourcing
Offshoring
Expatriation
Franchising
Offshoring occurs when companies move jobs to another country,

typically where wages are lower. This practice does not necessarily
require using an outside provider.
AACSB: Analytic
Blooms: Remember
their managers.
45.
Answering yes to which of the following questions should be

considered by managers as a reason to offshore?
A. Is cost the competitive advantage of the organization's products?

B.
Is the business in its early stages?
C. Can production savings be achieved locally?
D. Can the efficiency of the supply chain be improved?
E. Answering yes to any or all of these would be considered by
managers as reason to offshore.
If a product is widely available and standardized, like a calculator,
and the only competitive advantage is price, the lowest possible
production cost becomes essential, and offshoring becomes
something managers will consider.
AACSB: Analytic
Blooms: Remember
their managers.
46.
Which areas are considered the most dominant in the global

economy?
A. North America, western Europe, and Asia.

B. North America, South America, and Asia.
C.
Western Europe, Asia, and Africa.
D. North America, South America, and western Europe.
E.
North America, Asia, and Africa.
The global economy is dominated by countries in three regions: North
America, western Europe, and Asia.
AACSB: Analytic
Blooms: Remember
47.
Under (the) ________, member countries agreed to adopt a common

European currency called the euro.
A.
B.
C.
D.
E.
NAFTA
Maastricht Treaty
GATT Agreement
APEC Treaty
European Unification Act
Under the Maastricht Treaty, which formally established the European

Union (EU), the euro was adopted as a common currency among 13
member countries.
AACSB: Analytic
Blooms: Remember
48.
Which of the following has resulted from the formation of the

European Union?
A. The elimination of all trade barriers within Europe.

B. The protection of local industry within Europe.
C. The strengthening of Europe's position as an economic
superpower.
D.
The reunification of Germany.
E. The adoption of one European language.
The European Union was originally formed after World War II to foster
cooperation through trade in place of military conflict, but the efforts
have also created an economic superpower. Its 27 members now
boast a population of more than 492 million and a GDP (gross
domestic product) exceeding that of the United States.
AACSB: Analytic
Blooms: Understand
49.
To be competitive in a global economy, Europeans must increase

their level of
A.
B.
C.
D.
E.
Population density.
Productivity.
Espionage activity.
Philanthropic contributions.
Wealth.
Western Europeans on average work fewer hours, earn more pay,

take longer vacations, and enjoy far more social entitlements than do
their counterparts in North America and Asia. To be competitive in a
global economy, Europeans must increase their level of productivity.
AACSB: Analytic
Blooms: Understand
50.
Which country does the text describe as becoming the largest

producer and consumer of many of the world's goods?
A.
B.
C.
D.
E.
Japan.
Canada.
Mexico.
China.
Vietnam.
With the world's largest population and increasing industrialization,

China is on its way to becoming the largest producer and consumer
of many of the world's goods.
AACSB: Analytic
Blooms: Understand
51.
Labor costs in China are about ________ those in Mexico.
A.
B.
C.
D.
E.
one-third of
three times
the same as
seven times
10 times
The enormous size of its labor force, combined with its extremely low
labor costs, has given it a huge competitive advantage in
manufacturing. Estimates suggest that labor costs in China are less
than $1 an hour, compared with $2.92 for manufacturing workers in
Mexico and $24.59 for manufacturing workers in the United States.
AACSB: Analytic
Blooms: Understand
52.
NAFTA combined the economies of
A. The United States, Canada, and Mexico.

B.
Canada, Mexico, and South America.
C. South America, the United States, and Central America.
D. Latin America, the Pacific Rim, and the European Union.
E. The United States, the European Union, and Canada.
The North American Free Trade Agreement (NAFTA) combined the
economies of the United States, Canada, and Mexico into one of the
world's largest trading blocs with nearly 450 million U.S., Canadian,
and Mexican consumers and a total output of $17 trillion.
AACSB: Analytic
Blooms: Understand
53.
Which country does the text describe as having become an important

provider of online computer and software support for the United
States?
A.
B.
C.
D.
E.
Egypt.
Great Britain.
India.
Mexico.
Taiwan.
India has become an important provider of online support for

computer software development and other services.
AACSB: Analytic
Blooms: Understand
54.
The passage of NAFTA has provided short-term benefits to which of

the following industries?
A.
B.
C.
D.
E.
The auto industry.

Grain producers.
The financial industry.
Capital goods suppliers.
All of these have benefited from NAFTA.
NAFTA has benefited all of the industries listed in the question.

AACSB: Analytic
Blooms: Understand
55.
Which of the following existing agreements includes Costa Rica,

Nicaragua, and the United States?
A.
B.
C.
D.
E.
NAFTA.
CAFTA-DR.
FTAA.
APEC.
ASEAN.
In 2005 President George W. Bush signed into law U.S. participation in

a Central America-Dominican Republic-United States Free Trade
Agreement (CAFTA-DR). Other nations that have agreed to participate
include Costa Rica, the Dominican Republic, El Salvador, Guatemala,
Honduras, and Nicaragua.
AACSB: Analytic
Blooms: Remember
56.
When identifying the best strategy for competing in a global

marketplace, it is helpful to plot a company's position on a(n)
A.
B.
C.
D.
E.
Leadership grid.
Force field analysis grid.
Integration-responsiveness grid.
Cost-benefit grid.
Strategy map.
One of the critical tasks an international manager faces is to identify

the best strategy for competing in a global marketplace. To approach
this issue, managers can plot a company's position on an integrationresponsiveness grid. The vertical axis measures pressures for global
integration, and the horizontal axis measures pressures for local
responsiveness.
AACSB: Analytic
Blooms: Understand
57.
The grid used for identifying the best strategy for competing in a
global marketplace measures what two dimensions?
A. Pressures for global integration and pressures for local

responsiveness.
B. Pressure for local interaction and pressures for global
responsiveness.
C. Financial viability and employee satisfaction.
D. Employee satisfaction and management credibility.
E. Pressures for global systems capacity and pressures for local
financial success.
One of the critical tasks an international manager faces is to identify
the best strategy for competing in a global marketplace. To approach
this issue, managers can plot a company's position on an integrationresponsiveness grid. The vertical axis measures pressures for global
integration, and the horizontal axis measures pressures for local
responsiveness.
AACSB: Analytic
Blooms: Understand
58.
Pressure for global integration includes
A.
Universal needs.
B.
C. Political demands imposed by host countries.
D.
Varied consumer preferences.
E. Legal demands imposed by host countries.
Managers may have several reasons to want or need a common,
global strategy, rather than one tailored to individual markets. These
factors include the existence of universal needs, pressures to reduce
costs, or the presence of competitors with a global strategy.
AACSB: Analytic
Blooms: Understand
59.
Pressure for local responsiveness includes
A.
B.
C.
D.
E.
Varying consumer preferences.

Varying sales and distribution patterns.
Varying traditions.
Varying political demands.
All of these.
Managers may need to make sure their companies can adapt to

different needs in different locations. Strong pressures for local
responsiveness emerge when consumer tastes and preferences differ
significantly, there are differences in traditional practices, there are
differences in distribution channels and sales practices, or economic
and political demands that host-country governments impose
necessitate a degree of local responsiveness.
AACSB: Analytic
Blooms: Remember
60.
Which of the following pressures for local responsiveness includes

threats of protectionism, economic nationalism, and local rules?
A.
B.
C.
D.
E.
Differences in distribution channels.

Economic and political demands.
Differences in consumer tastes.
Global market integration.
Economic and political demands that host-country governments

impose may necessitate a degree of local responsiveness. Most
important, threats of protectionism, economic nationalism, and local
content rules (rules requiring that a certain percentage of a product
be manufactured locally) dictate that international companies
manufacture locally.
AACSB: Analytic
Blooms: Remember
61.
Which of the following is a global strategy used as an approach to

international competition?
A.
B.
C.
D.
E.
Global model.
All of these are global strategies.
According to Figure 6.6, the four types of organization models used in

global trade are global, transnational, international, and
multinational.
AACSB: Analytic
Blooms: Remember
62.
The model in which managers use their organization's existing core

capabilities to expand into foreign markets is called the
A.
B.
C.
D.
E.
Global model.
Multimedia model.

core capabilities to expand into foreign markets. It is most
appropriate when there are few pressures for economies of scale or
AACSB: Analytic
Blooms: Remember
63.
The international model of organizational structure consists of
A. Large low-cost manufacturing facilities located in selected

locations with products exported to various subsidiaries.
B. Subsidiaries located in countries where the company does
business with much of the control exercised by the parent
company.
C. Subsidiaries located in countries where the company does
business with much of the control exercised by the subsidiaries.
E.
Global services.
core capabilities to expand into foreign markets. The international
model uses subsidiaries in each country in which the company does
business, with ultimate control exercised by the parent company.
AACSB: Analytic
Blooms: Remember
64.
From which model of organizational structure did IBM and Xerox profit
by transferring skills and know-how to subsidiaries around the globe?
A.
B.
C.
D.
E.
Global model.
The advantage of the international model is that it facilitates the

transfer of skills and know-how from the parent company to
subsidiaries around the globe. For example, IBM and Xerox profited
from the transfer of their core skills in technology and research and
development (R&D) overseas.
AACSB: Analytic
Blooms: Understand
65.
The overseas success of Kellogg, Coca-Cola, Heinz, and Procter &

Gamble is based on marketing know-how. These companies are using
which model of organizational structure?
A.
B.
C.
D.
E.
Global model.
The advantage of the international model is that it facilitates the

transfer of skills and know-how from the parent company to
subsidiaries around the globe. The overseas success of Kellogg, CocaCola, Heinz, and Procter & Gamble is based more on marketing knowhow than on technological expertise.
AACSB: Analytic
Blooms: Understand
66.
Calabria Steel has subsidiaries in each country in which it does

business. As the parent company, Calabria has located its core skills
in technology and R&D overseas so that each subsidiary remains
dependent on it for new products, processes, and ideas. This
illustrates the __________ model for global strategy.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational
The international model facilitates the transfer of skills and know-how

from the parent company to subsidiaries around the globe, yet the
subsidiaries are still dependent on the parent company for new
products, processes, and ideas.
AACSB: Analytic
Blooms: Apply
Level of Difficulty: 3 Hard
67.
Where global efficiency is not required but adapting to local

conditions offers advantages, the __________ model of organizational
structure is appropriate.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
Where global efficiency is not required but adapting to local

conditions offers advantages, the multinational model is appropriate.
AACSB: Analytic
Blooms: Remember
68.
The global strategy model that uses subsidiaries in each country and
provides each a great deal of discretion to respond to local conditions
is the __________ model.
A.
B.
C.
D.
E.
international
multinational
global
transnational
domestic
The multinational model, sometimes referred to as multidomestic,

uses subsidiaries in each country in which the company does
business and provides a great deal of discretion to those subsidiaries
to respond to local conditions.
AACSB: Analytic
Blooms: Remember
69.
The multinational model of organization structure consists of
A. Large low-cost manufacturing facilities located in selected

locations with products exported to various subsidiaries.
company.
E.
Extensive use of offshoring.
AACSB: Analytic
Blooms: Remember
70.
Companies that decentralize their operations throughout the globe in

order to appeal to the varying tastes and preferences of global
consumers are utilizing a ___________ model.
A.
B.
C.
D.
E.
domestic
international
multinational
transnational
global
Because of individual autonomy, each multinational subsidiary can

customize its products and strategies according to the tastes and
preferences of local consumers; the competitive conditions; and
political, legal, and social structures.
AACSB: Analytic
Blooms: Remember
71.
Which global strategy model realizes the advantage of local

responsiveness but the disadvantage of high manufacturing costs
and duplication of effort?
A.
B.
C.
D.
E.
Transnational.
Global.
Worldwide.
International.
Multinational.
One advantage of the multinational form is the advantage of local

responsiveness. One disadvantage of the multinational form is higher
manufacturing costs and duplication of effort.
AACSB: Analytic
Blooms: Understand
72.
A disadvantage of a multinational model is that
A. Problems in transferring core skills are created.

B. Each subsidiary must respond to specific consumer needs.
C.
Transfer pricing presents difficulties.
D. It is difficult to launch a coordinated global attack against
competitors.
E. Coordination of efforts within countries is more difficult.
Because a multinational approach tends to decentralize strategy
decisions, launching coordinated global attacks against competitors
is difficult. This can be a significant disadvantage when competitors
have this ability.
AACSB: Analytic
Blooms: Understand

73.
Though the product is based on a formula pioneered in California and

Florida, Euro Disney operates the amusement park in France, and
markets it somewhat differently than the United States facilities in
order to appeal to the European consumer. This type of strategy is
known as a(n) __________ model.
A.
B.
C.
D.
E.
domestic
international
multinational
transnational
global

AACSB: Analytic
Blooms: Apply
74.
In which two models of global strategy do manufacturing costs

remain relatively high?
A.
B.
C.
D.
E.
Global and transnational.

International and transnational.
Multinational and international.
Global and international.
Multinational and transnational.
One disadvantage of the international model is that it frequently does

not provide the opportunity to achieve a low-cost position via scale
economies. One disadvantage of the multinational form is higher
manufacturing costs and duplication of effort.
AACSB: Analytic
Blooms: Understand
75.
Heineken, a Netherlands-based brewing company, produces more

than 170 different brands around the world, some of them
international but many of them specialty brews for regional and local
tastes. This illustrates the
A.
B.
C.
D.
E.
Global model.
The multinational model uses subsidiaries in each country in which

the company does business and provides a great deal of discretion to
those subsidiaries to respond to local conditions.
AACSB: Analytic
Blooms: Understand
76.
The __________ organizational model is designed to enable a company

to market a standardized product in the global marketplace and to
manufacture that product in a limited number of locations where the
mix of costs and skills is most favorable.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
The global model is designed to enable a company to market a

standardized product in the global marketplace and to manufacture
that product in a limited number of locations where the mix of costs
and skills is most favorable.
AACSB: Analytic
Blooms: Remember
77.
Competing globally under the assumption that no tangible

differences exist among consumer tastes and preferences in varying
countries is referred to as a __________ model.
A.
B.
C.
D.
E.
multinational
consumer-focused
transnational
global
domestic
The global model has been adopted by companies that view the
world as one market and assume that no tangible differences exist
among countries with regard to consumer tastes and preferences.
AACSB: Analytic
Blooms: Remember
78.
An organizational model that consists of a company's overseas

subsidiaries and is characterized by centralized decision making and
tight control by the parent company over most aspects of worldwide
operations is called the
A.
B.
C.
D.
E.
Global model.
The global model is an organizational model consisting of a

company's overseas subsidiaries and characterized by centralized
decision making and tight control by the parent company over most
aspects of worldwide operations.
AACSB: Analytic
Blooms: Remember
79.
When a company such as Procter & Gamble approaches the

European market as a unified whole, thus reducing costs and
improving efficiency, it is using the __________ model of organizational
structure.
A.
B.
C.
D.
E.
international
multinational
transnational
global
intranational
Procter & Gamble has been successful in Europe against Unilever

because it has approached the entire continent as a unified whole.
AACSB: Analytic
Blooms: Remember
80.
The __________ model of organizational structure has a disadvantage

in that it may result in a product that fails to satisfy anyone.
A.
B.
C.
D.
E.
international
multinational
transnational
global
intranational
Because a company pursuing a purely global approach tries to

standardize its goods and services, it may be less responsive to
consumer tastes and demands in different countries. Attempts to
lower costs through global product standardization may result in a
product that fails to satisfy anyone.
AACSB: Analytic
Blooms: Understand
81.
Candace Apparel, a women's clothing manufacturer, assumes that

people all over the world will view and use its products in the same
way. Therefore it produces standardized versions of its apparel in
several countries with attractive labor rates, and offers them to all of
its international markets. Candace Apparel uses the __________ model
of global strategy.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational model

AACSB: Analytic
Blooms: Apply
82.
The organizational structure that enables managers to "think globally

but act locally" is called the
A.
B.
C.
D.
E.
Global model.
The transnational model is designed to help managers to

simultaneously pursue local responsiveness, transfer of know-how,
and cost economies. It is an approach that enables managers to
"think globally but act locally."
AACSB: Analytic
Blooms: Remember
83.
In companies that adopt the __________ model of organizational

structure, functions are centralized where it makes sense to do so,
but a great deal of decision making also takes place at the local
level.
A.
B.
C.
D.
E.
international
multinational
global
transnational
multimedia
In companies that adopt the transnational model, functions are

centralized where it makes sense to do so, but a great deal of
decision making also takes place at the local level.
AACSB: Analytic
Blooms: Remember
84.
Transnational companies
A. Require effective communication and coordination networks

among subsidiaries.
B. Respond to pressures for both local responsiveness and cost
economies.
C. May centralize production facilities in one location and marketing
functions in separate locations.
D. Must effectively transfer core skills or know-how.
E.
Do all of these.
The transnational model is designed to help managers to
simultaneously pursue local responsiveness, transfer of know-how,
and cost economies. It is an approach that enables managers to
"think globally but act locally."
AACSB: Analytic
Blooms: Remember
85.
The transnational model of organizational structure may be

characterized by
A. Large low-cost manufacturing facilities in selected locations with

products exported to various markets.
company.
D. Manufacturing major components at appropriate lower-cost sites
and assembling the components at national subsidiaries to assure
E. Marketing a standardized product throughout the world.
With the transnational model, major components may be
manufactured in centralized production plants to realize scale
economies and then shipped to local plants, where the final products
are assembled and customized to fit local needs.
AACSB: Analytic
Blooms: Understand
86.
Which of the following companies is an example of a transnational

company?
A.
B.
C.
D.
E.
Sony.
IBM.
Coca Cola.
Caterpillar.
Unilever.
Caterpillar is a transnational company. The need to compete with

low-cost competitors has forced it to look for greater cost economies
by centralizing global production at locations where the mix of costs
and skills is most favorable. At the same time, variations in
construction practices and government regulations across countries
mean that it must be responsive to local needs.
AACSB: Analytic
Blooms: Understand
87.
Which of the models of organization structure depends most heavily

on communication and coordination between subsidiaries?
A.
B.
C.
D.
E.
The global model.

The transnational model.
The international model.
The worldwide model.
The multinational model.
The most important distinguishing characteristic of the transnational

organization is the fostering of communications among subsidiaries
and the ability to integrate the efforts of subsidiaries when doing so
makes sense.
AACSB: Analytic
Blooms: Understand
88.
In order to achieve cost economies, Apex Manufacturing bases its

production plants in Mexico and gets its engineering services from
skilled workers in Germany. Apex is using the __________ model of
organizational structure.
A.
B.
C.
D.
E.
international
multinational
global
transnational
intranational
To achieve cost economies with a transnational model, companies

may base global-scale production plants for labor-intensive products
in low-wage countries such as China and production plants that
require a skilled workforce in high-skill countries such as Germany
and Japan.
AACSB: Analytic
Blooms: Apply
89.
Mercury Fire Protection manufactures engines for its fire trucks in a

central location in order to attain cost economies and then sends
these engines to various subsidiaries for final assembly of the truck
bodies in order to meet local safety specifications. Mercury uses the
__________ model for global strategy.
A.
B.
C.
D.
E.
global
transnational
international
maquilladora
worldwide
With the transnational model, major components may be

manufactured in centralized production plants to realize scale
economies and then shipped to local plants, where the final product
is assembled and customized to fit local needs.
AACSB: Analytic
Blooms: Apply
90.
Exporting, licensing, franchising, joint ventures, and wholly owned

subsidiaries are all methods of
A. Identifying lucrative consumers on a global scale.

B.
Operating a transnational business.
C.
Entering overseas markets.
D.
Optimizing global profit.
E.
Reducing costs.
The five basic ways to expand overseas are exporting, licensing,
franchising, entering into a joint venture with a host-country
company, and setting up a wholly owned subsidiary in the host
country. Table 6.2 compares the entry modes.
Refer To: Table 6.2
AACSB: Analytic
Blooms: Remember
Topic: Entry Mode
91.
Most manufacturing companies begin global expansion through

which entry mode?
A.
B.
C.
D.
E.
Exporting.
Franchising.
Licensing.
Joint venture.
Most manufacturing companies begin global expansion as exporters

and later switch to one of the other modes for serving an overseas
market.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
92.
Exporting is
A. A common entry strategy for global expansion.

B. Manufacturing a product in several international locations for
consumers in those global markets.
C. Inconsistent with a pure global strategy.
D.
Expensive.
E.
Not able to achieve scale economies.
Most manufacturing companies begin global expansion as exporters
and later switch to one of the other modes for serving an overseas
market. The advantages of exporting are that it (1) provides scale
economies by avoiding the costs of manufacturing in other countries
and (2) is consistent with a pure global strategy.
AACSB: Analytic
Blooms: Understand

Topic: Entry Mode
93.
An advantage of exporting as a global expansion entry mode is that
A. Economies of scale may be realized.

B. The target site may have lower production costs.
C. Transportation costs are generally lower.
D. It is considered responsive to local needs.
E.
Trade barriers may be removed.
The advantages of exporting are that it (1) provides scale economies
by avoiding the costs of manufacturing in other countries and (2) is
consistent with a pure global strategy.
Refer To: Table 6.2
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
94.
A disadvantage of exporting is that
A.
It is quite risky.
B. The company may face tariff barriers.
C. It is the most expensive method of expanding globally.
D. The company risks losing control of its intellectual property.
E. It is inconsistent with a pure global strategy.
Exporting has a number of drawbacks, including higher domestic
production costs, high transportation costs, and potential tariff
barriers.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
95.
__________ is an arrangement by which an organization in another

country buys the rights to manufacture another organization's
product in its own country for a negotiated fee.
A.
B.
C.
D.
E.
Franchising
International licensing
Entering a joint venture
Exporting
Royalty facilitation
International licensing is an arrangement by which a licensee in

another country buys the rights to manufacture a company's product
in its own country for a negotiated fee (typically royalty payments on
the number of units sold). The licensee then puts up most of the
capital necessary to get the overseas operation going.
AACSB: Analytic
Blooms: Remember
Topic: Entry Mode
96.
An advantage of licensing as a method of entering global competition

is that the
A. Licensing company need not bear the costs and risks of opening
up an overseas market.
B. Licensing company has control over its technology.
C. Licensing company has control over quality levels.
D. Licensing company has lower communication costs.
E.
Licensee has lower production costs.
The advantage of licensing is that the company need not bear the
costs and risks of opening up an overseas market.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
97.
A disadvantage of licensing is that the licensing company (licensor)
A.
B.
C.
D.
E.
May lose control over its technology.

Takes on greater political risk.
Takes on greater development costs.
Realizes higher profit margins.
Frequently grows too fast as a result.
A problem arises with international licensing when a company

licenses its technological expertise to overseas companies when
technological know-how is the basis of the competitive advantage. It
may lose control over the technology by licensing it.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
98.
Selling the rights to use your company's brand name in return for a
lump-sum payment and a share of the buyer's profits is referred to
as
A.
B.
C.
D.
E.
Licensing.
Entering a joint venture.
Exporting.
Franchising.
Royalty facilitation.
In franchising, the company sells limited rights to use its brand name
to franchisees in return for a lump-sum payment and a share of the
franchisee's profits. Unlike most licensing agreements, the franchisee
has to agree to abide by strict rules regarding how it does business.
AACSB: Analytic
Blooms: Remember
Topic: Entry Mode
99.
The most significant disadvantage of franchising concerns
A.
The very low level of profit potential.
B. The loss of control over technology that may affect an
organization's ability to sustain a competitive advantage.
C. High development costs related to a higher level of risk in
worldwide operations.
D. Loss of identification with local markets.
E.
Quality control.
If overseas franchisees are less concerned about quality than they
should be, the impact can go beyond lost sales in the local market to
a decline in the company's reputation worldwide. To make matters
worse, the geographic distance between the franchisor and its
overseas franchisees makes poor quality difficult to detect.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
100. An advantage of joint ventures in the international marketplace is

that
A. The local partner may have a greater knowledge of local consumer

tastes and preferences.
B. The local partner may have a greater understanding of local
business practices and regulations.
C. The costs of developing the new market are shared with the joint
venture partner.
D. The risks of entering the new market are shared with the joint
venture partner.
E. All of these are advantages of joint ventures.
Joint ventures benefit a company through (1) the local partner's
knowledge of the host country's competitive conditions, culture,
language, political systems, and business systems and (2) the
sharing of development costs and/or risks with the local partner.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
101. A disadvantage of entering global competition through a joint venture

is that
A. It often aggravates political issues and incurs protectionist

measures.
B. The partner's ideas about local tastes and preferences may
interfere with standardized operations.
C. Conflict over control within joint ventures causes many of them to
fail.
D. It is the most expensive and risky option for entering a global
market.
E. There is seldom a formal agreement in place covering the joint
venture.
The disadvantages of joint ventures include running the risk of losing
control over its technology to the venture partner, as well as conflict
over who controls what within a joint venture, which causes many
joint ventures to fail.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
102. When a company sets up its own overseas operations, independent

of foreign partners or governments, it has established a(n)
A.
B.
C.
D.
E.
Purely global strategy.

Competitive venture.
Independent venture.
Multinational contract.
Establishing a wholly owned subsidiary, which is an independent

company owned by the parent corporation, is the most costly method
of serving an overseas market.
AACSB: Analytic
Blooms: Remember
Topic: Entry Mode
103. A major disadvantage of operating a wholly owned subsidiary is that
A.
B.
C.
D.
E.
A loss of technology is likely to occur.

Quality levels are difficult to monitor overseas.
High costs and risk are associated with this type of operation.
Overseas consumers are often resentful of foreigners.
Host countries can impose higher tariffs on the firm.

company owned by the parent corporation, is the most costly method
of serving an overseas market. Companies that use this approach
must bear the full costs and risks associated with setting up overseas
operations.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
104. Which of the following is an advantage of a wholly owned subsidiary

as a global entry strategy?
A. The company may gain access to new knowledge or technologies.

B. The partner will share the costs of operating overseas.
C. This method has the highest transportation costs for finished
goods.
D. This method minimizes the risks of overseas operations.
E. This method gives a company tight control over operations in other
countries.
company owned by the parent corporation, gives the parent tight
control over operations in other countries, which is necessary if the
company chooses to pursue a global strategy.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
105. Individuals sent from a company's parent country to work in overseas

operations are referred to as
A.
B.
C.
D.
E.
Third-country nationals.
Host-country nationals.
Globalite executives.
Expatriates.
Inpatriates.
Expatriates are parent-company nationals who are sent to work at a

foreign subsidiary.
AACSB: Analytic
Blooms: Remember
106. Carrie Pinon, a chemical engineer from New Jersey, is being sent by
her company, L'Oreal of France, to work in product development in
China. Carrie would be considered a(n)
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
Carrie is a third-country national: a native of the United States rather

than the home country (France) or the host country (China).
AACSB: Analytic
Blooms: Apply
107. Which of the following is a reason why some companies prefer to use
expatriates at their overseas operations?
A. It can cost three to four times as much to use host-country

nationals, compared to expatriates.
B. Expatriates are often able to transfer the corporate culture and
best practices to other countries.
C. The personal security of host-country nationals may be an issue in
some developing countries.
D. Governments may provide incentives to employ expatriates.
E. All of these are reasons why some organizations prefer to use
expatriates.
AT&T and Toyota have used expatriates to transfer their corporate
cultures and best practices to other countries, in Toyota's case to its
U.S. plants.
AACSB: Analytic
Blooms: Understand
108. Marielle has just been offered her first expatriate experience, an
assignment in Germany. Before she accepts, her employer should
A. Seek advice from locals and the expatriate network on her behalf.
B.
Provide cultural training.
C. Clarify home country rules and how to apply them abroad.
D. Encourage her to perform self- and family evaluation.
E.
Reinforce dual identification.
According to Table 6.3, when an expatriate is selected the
appropriate employer coping response is to encourage the
expatriate's self- and family evaluation before he or she accepts the
assignment.
Refer To: Table 6.3
AACSB: Analytic
Blooms: Apply
109. The biggest cause of failure of overseas managers is
A.
B.
C.
D.
E.
A lower salary level.

Lack of adequate housing.
Inadequate access to health benefits.
Personal and social issues.
Little vacation time.
Typically, the causes for failure overseas extend beyond technical

capability and include personal and social issues such as
dissatisfaction of the employee's spouse or partner.
AACSB: Analytic
Blooms: Understand
110. Which of the following characteristics is most likely associated with

an international executive?
A.
B.
C.
D.
E.
Ethnocentric.
Flexible.
Extremely self-confident and assertive.
Likes familiarity.
Avoids criticism.
International executives have characteristics such as flexibility,

openness to criticism, ability to use feedback, and other dimensions
listed in Table 6.4.
Refer To: Table 6.4
AACSB: Analytic
Blooms: Understand
111. __________ is the tendency to judge others by the standards of one's

group or culture, which are seen as superior.
A.
B.
C.
D.
E.
Individualism
Power distance
Uncertainty avoidance
Ethnocentrism
Expatriotism
Without realizing it, some managers may act out of ethnocentrism, a

tendency to judge foreign people or groups by the standards of one's
own culture or group, and to see one's own standards as superior.
AACSB: Analytic
Blooms: Remember
112. Josh, an American, was visiting South Korea to do business with some
Samsung managers located in Seoul. When his Korean counterpart,
Jun-suh, arrived for a meeting, he wanted to chat about family and
life before doing business. Josh felt impatient, and thought it rude for
someone to assume he had no other important commitments that
morning. In this scenario, Josh is best described as exhibiting
A.
B.
C.
D.
E.
Ethnocentrism.
Individualism.
Culture shock.
Uncertainty distance
Power distance
Ethnocentrism is a tendency to judge foreign people or groups by the

standards of one's own culture or group, and to see one's own
standards as superior.
AACSB: Analytic
Blooms: Apply
113. The disorientation and stress associated with being in a foreign

environment is termed
A.
B.
C.
D.
E.
International mores.
Homesickness.
Culture shock.
Out-of-country experience.
Uncertainty distance.
People traveling abroad frequently experience culture shock, which is

the disorientation and stress associated with being in a foreign
environment. Managers are better able to navigate this transition if
they are sensitive to their surroundings, including social norms and
customs, and readily able to adjust their behavior to such
circumstances.
AACSB: Analytic
Blooms: Remember
114. Jennifer has been assigned to manage an operation in Venezuela.

Upon her arrival she encouraged all of her employees (native
Venezuelans) to feel free to individually approach her with ideas on
improving operations. After many months, no employees had offered
suggestions. Jennifer should have realized that Venezuelan culture
not only has a _________ degree of collectivism but accepts a
_________ power distance.
A.
low; small
B.
low; large
C.
high; large
D.
high; small
E. There is not enough information in this example to determine an
answer.
Power distance is the extent to which a society accepts the fact that
power in organizations is distributed unequally.
Individualism/collectivism is the extent to which people act on their
own or as a part of a group. Figure 6.7 shows that Venezuela has a
large power distance and a high collectivism.
AACSB: Analytic
Blooms: Apply
115. In Hofstede's depiction of countries' individualism/collectivism and

power distance, the United States is most like
A.
B.
C.
D.
E.
France.
Mexico.
New Zealand.
Austria.
Japan.
The United States is high in individualism and has a medium level of

power distance. Among the countries listed, the United States is most
similar to New Zealand on these dimensions.
AACSB: Analytic
Blooms: Apply
116. __________ are foreign nationals who are brought in to work at the
parent company.
A.
B.
C.
D.
E.
Expatriates
Third-level nationals
Second-party nationals
Inpatriates
Foreign cohorts

company. These employees provide a valuable service to global
companies because they bring extensive knowledge about how to
operate effectively in their home countries.
AACSB: Analytic
Blooms: Remember
117. Steps for establishing and reinforcing the codes of conduct for
international business include which of the following?
A. Communicating the company's values.

B. Taking action when standards are violated.
C.
Measuring ethical performance.
D. Rewarding people for meeting ethical standards.
E. All of the above are steps for establishing and reinforcing
international codes of conduct.
Companies with global operations should be at least as engaged in
establishing and enforcing standards for ethical behavior as domestic
corporations. These corporations should take all of the steps
mentioned in the question to establish and reinforce their codes of
conduct.
AACSB: Analytic
Blooms: Understand
118. Despite differences across cultures, research suggests that

regardless of nationality or religion, most people embrace which of
the following values?
A.
B.
C.
D.
E.
Individualism.
Competitiveness.
Responsibility.
Persistence.
Sincerity.
Regardless of nationality or religion, most people embrace a set of

five core values: compassion, fairness, honesty, responsibility, and
respect for others.
AACSB: Analytic
Blooms: Understand
Scenario A
Suppose you are a consultant for three companies with international
operations. Each of them has selected a different global strategy.
Alpha Company uses its established skills in producing widgets that it
will sell in foreign markets. Beta Company produces locally targeted
wines for which it has built specialized plants in each local region.
Gamma Company has a single worldwide corporate headquarters
from which it centrally manages the entire company's operations.
Finally, Delta company is located in Wazomia where wages are quite
low, and produces large pieces of widgets that are fairly easy to
manufacture, requiring little employee skill. These pieces are then
sent to its locations abroad to be finished by a more skilled
workforce, taking into account the customs and benefits desired by
each of those particular populations.
119. Which global strategy is Alpha Company using?
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.

core capabilities to expand into foreign markets.
AACSB: Analytic
Blooms: Apply
120. Which global strategy is Beta Company using?
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
The multinational model uses subsidiaries in each country in which

the company does business and provides a great deal of discretion to
those subsidiaries to respond to local conditions.
AACSB: Analytic
Blooms: Apply
121. Which global strategy is Delta Company using?
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.
The transnational model centralizes functions where it makes sense

to do so, but a great deal of decision making also takes place at the
local level.
AACSB: Analytic
Blooms: Apply
122. Which global strategy is Gamma Company using?
A.
B.
C.
D.
E.
Global.
International.
Transnational.
Multinational.
Domestic.

AACSB: Analytic
Blooms: Apply
Scenario B
Tim was having a few friends over for dinner, many of whom Tim
knew from an international management association. Tim's company
provides services to create detailed maps of world areas from
satellites, which the firm then sells via the Internet to firms,
countries, and others around the world. One guest, Lucia, bakes
cookies for a living. Her recipe is so well-liked that her company has
grown dramatically. She has just sold the right to manufacture her
cookies to a firm in eastern Europe. Another, Mac, is a director at
Hilton, and his wife Chandra works for a partnership between
Hershey and an Indian firm. Finally, Samantha works for EDS and is
soon to go abroad to visit a firm that EDS is considering acquiring so
that it can keep its technology proprietary. The guests were speaking
about how their companies decided to "go global."
123. Tim's company uses __________ to participate in the global

marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
Tim's firm develops the product in the home country and then
exports it to the global marketplace.
AACSB: Analytic
Blooms: Apply
Topic: Entry Mode
124. Lucia's company is using __________ to participate in the global

marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
International licensing is an arrangement by which a licensee in

another country buys the rights to manufacture a company's product
in its own country for a negotiated fee.
AACSB: Analytic
Blooms: Apply
Topic: Entry Mode
125. Hilton uses __________ to participate in the global marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
McDonald's, Hilton International, and many other companies have

expanded overseas by franchising.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
126. Hershey uses __________ to participate in the global marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
Hershey recently announced a joint venture with India's Godrej

Beverages and Foods as a way to achieve growth in an industry that
has matured in the United States.
AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
127. Samantha's company wants to use __________ to participate in the

global marketplace.
A.
B.
C.
D.
E.
licensing
franchising
exporting
joint ventures
When a company's competitive advantage is based on technology, a

wholly owned subsidiary normally is the preferred entry mode
because it reduces the risk of losing control over the technology.
AACSB: Analytic
Blooms: Apply
Topic: Entry Mode
Scenario C
Rebecca is an American who has just accepted her first international
assignment in Sweden. On her first day in the office, she met several
new colleagues. Lars is the manager of the office and is a Swedish
citizen; he has been with the company for five years. Wen is from
China and has also just come to Sweden to work for the company,
which is based in the United States.
128. 128.Rebecca would be referred to as a(n)
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
Rebecca is an expatriate, a parent-company national (from the United

States) who is sent to work at a foreign subsidiary in Sweden.
AACSB: Analytic
Blooms: Apply
129. Lars would be referred to as a(n)
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
Lars is a host-country national; he is a native of the country (Sweden)

where an overseas subsidiary is located.
AACSB: Analytic
Blooms: Apply
130. Wen would be referred to as a(n)
A.
B.
C.
D.
E.
Expatriate.
Inpatriate.
Wen is a third-country national since she is a native of a country

(China) other than the home country (United States) or the host
country (Sweden) of an overseas subsidiary.
AACSB: Analytic
Blooms: Apply
131. Because Rebecca has never worked outside the United States before,
how should she approach her new assignment now that she has
arrived in the office in Sweden?
Refer To: Table 6.3
A.
She should engage in self-evaluation.
B. She should think of the assignment as a vertical promotion.
C. She should assume Sweden is very similar to the United States.
D. She should behave as she did at home in the meetings she will
attend.
E.
She should seek social support.
Rebecca should seek social support, according to Table 6.3, because,
having just arrived, she may be suffering a bit from cultural shock.
AACSB: Analytic
Blooms: Apply
Scenario D
A group of managers was recently reunited after completing overseas
assignments, and they were telling stories of their experiences.
Alfredo was surprised by employees in his host nation because he
found them reluctant to take personal credit for good work. Bernie
had employees that were not anxious to adopt any of the changes he
recommended, even though they were accepted best practices at
home. Ed noticed that his employees did not seem to take much
pleasure in financial rewards but loved additional vacation days as a
perk. Sarah's local counterpart told her she would need to fly in
coach because employees would be intolerant of her traveling in first
class.
132. Alfredo experienced employees exhibiting Hofstede's cultural

dimension of
A.
B.
C.
D.
E.

Low power distance.
Individualism.
Collectivism.
Hofstede's individualism/collectivism dimension refers to the extent

to which people act on their own or as a part of a group. Alfredo's
employees were more collective than he anticipated.
AACSB: Analytic
Blooms: Apply
133. Bernie had employees who would best be described as exhibiting

Hofstede's dimension of
A.
B.
C.
D.
E.

Masculinity.
Individualism.
Collectivism.
Hofstede's dimension of uncertainty avoidance is the extent to which

people in a society feel threatened by uncertain and ambiguous
situations.
AACSB: Analytic
Blooms: Apply
134. Ed's employees exhibited Hofstede's dimension of
A.
B.
C.
D.
E.

Low power distance.
Individualism.
Femininity.
Hofstede's dimension of masculinity/femininity is the extent to which

a society values quantity of life (e.g., accomplishment, money) over
quality of life (e.g., compassion, beauty).
AACSB: Analytic
Blooms: Apply
135. Sarah's employees exhibited Hofstede's dimension of
A.
B.
C.
D.
E.

Low power distance.
Individualism.
Femininity.
Hofstede's dimension of power distance is the extent to which a

society accepts the fact that power in an organization is distributed
unequally. Here the society has a low power distance.
AACSB: Analytic
Blooms: Apply
Essay Questions
136. Explain the consequences of the increasing integration of the global

economy.
Answers will vary.

AACSB: Analytic
Blooms: Understand
their managers.
137. Describe how the global economy is becoming more integrated than
ever before. Include a discussion of the European Union, China, and
NAFTA in your answer.
Answers will vary.

AACSB: Analytic
Blooms: Understand
138. Discuss how an organization should identify the best strategy for
competing in a global marketplace and the four approaches typically
used.
Answers will vary.

AACSB: Analytic
Blooms: Understand
139. Discuss the advantages of licensing and franchising. In what

situations are each of these strategies most appropriate?
Answers will vary.

AACSB: Analytic
Blooms: Understand
Topic: Entry Mode
140. What are the pros and cons of using expatriates, host-country
nationals, and third-country nations to run overseas operations? If
you were expanding your business, which approach would you use?
Answers will vary.

AACSB: Analytic
Blooms: Apply
141. Summarize the skills and knowledge managers need to manage

globally.
Answers will vary.

AACSB: Analytic
Blooms: Understand
142. Discuss the four dimensions identified by Geert Hofstede to analyze

cultural differences among countries. Explain the classification for a
country of your choosing according to Hofstede's model.
Answers will vary.

AACSB: Analytic
Blooms: Apply
143. Discuss how culture plays out in terms of ethical behavior. What can
organizations do to manage these issues more effectively?
Answers will vary.

AACSB: Analytic
Blooms: Understand

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Chap 006

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Chapter 06

True / False Questions

2. Foreign direct investment flows to less developed countries by firms in

3. One consequence of an increasingly integrated global economy is that

4. Offshoring occurs when an organization contracts with an outside

6. Germany is a member of the Group of Five.

7. The Maastricht Treaty formally established the trade area in North

8. The creation of a unified Europe has resulted in an economic

11 Members of APEC include South Korea, Taiwan, the United States,

12 Mexico has quickly emerged as the third-largest trading partner of the

13 NAFTA had an immediate and negative effect on the U.S. automobile

15 Pressure to lower costs is one reason a firm may prefer a common

16 Universal needs exist when the tastes and preferences of consumers in

18 When there are differences among countries in traditional practices

19 In the international model, managers use their organization's existing

20 Major disadvantages of the multinational model are higher

21 Companies that adopt the global model tend to be those pursuing a

22 Transnational companies are companies that produce products in one

23 One advantage of exporting is that it provides scale economies.

25 Franchising is utilized primarily by manufacturing industries, whereas

26 Quality control is a significant disadvantage of franchising.

29 Using host-country nationals at an overseas subsidiary is generally

30 Cultural shock is an example of an executive coping strategy for

31 The failure rate among expatriates is less than five percent.

33 One way to prevent failed global assignments is to use effective,

34 Ethnocentrism is the tendency to judge others by the standards of

35 Culture shock is the disorientation and stress associated with being in a

36 On Hofstede's power distance and individualism scales, the United

39 Ethical behavior and decision making are surprisingly harder in a purely

Multiple Choice Questions

A. World output and trade have decreased to a dramatically low level.

42 Operating in a global marketplace is considered more complex because

43 ________ occurs when the organization contracts with an outside

44 ________ occurs when companies move jobs to another country,

45 Answering yes to which of the following questions should be considered

A. Is cost the competitive advantage of the organization's products?

47 Under (the) ________, member countries agreed to adopt a common

A. The elimination of all trade barriers within Europe.

51 Labor costs in China are about ________ those in Mexico.

52 NAFTA combined the economies of

54 The passage of NAFTA has provided short-term benefits to which of the

The auto industry.

55 Which of the following existing agreements includes Costa Rica,

56 When identifying the best strategy for competing in a global

A. Pressures for global integration and pressures for local

59 Pressure for local responsiveness includes

Varying consumer preferences.

60 Which of the following pressures for local responsiveness includes

Differences in distribution channels.

61 Which of the following is a global strategy used as an approach to

62 The model in which managers use their organization's existing core

63 The international model of organizational structure consists of

65 The overseas success of Kellogg, Coca-Cola, Heinz, and Procter &

66 Calabria Steel has subsidiaries in each country in which it does

67 Where global efficiency is not required but adapting to local conditions

69 The multinational model of organization structure consists of

71 Which global strategy model realizes the advantage of local

72 A disadvantage of a multinational model is that

74 In which two models of global strategy do manufacturing costs remain

Global and transnational.

75 Heineken, a Netherlands-based brewing company, produces more than

76 The __________ organizational model is designed to enable a company to

77 Competing globally under the assumption that no tangible differences