mgm3101 1328517850

Chapter 4
Managing in a Global Environment

True/False Questions
1.
Wal-Mart is a well-established company with a global interest who is facing minimal

challenges in developing a successful international business.
Answer: False
2.
Level: 2
Page: 119
Type: F
Level: 2
Page: 120
Type: A
Level: 1
Page: 120
Type: F
Level: 2
Page: 120
Type: F
The multinational stage of corporate international development transcends any single

home country. The ownership, control, and top management tend to be dispersed among
several nationalities.
Answer: False
8.
Type: F
The second stage in the process of globalization is the international stage, where the
company usually adopts a multidomestic approach.
Answer: True
7.
Page: 118
To deal with the marketing of products in several countries individually, a company in the
international stage often uses an international division.
Answer: True
6.
Level: 1
ABC Manufacturing is in the domestic stage. It has its market potential open to the
countries that border its home country.
Answer: False
5.
Type: F
The reality of today's borderless companies also means that consumers can easily identify
from which country they are buying.
Answer: False
4.
Page: 118
Large companies such as America Online and Yahoo have proven that Internet
development is rapidly expanding and has fewer difficulties than traditional business
operations.
Answer: False
3.
Level: 2
Level: 1
Page: 121
Type: F
As the number of stateless corporations increases, the awareness of national borders

Chapter Four * Managing in a Global Environment
Test Bank * Page 90
increases as well.
Answer: False
9.
Type: F
Level: 1
Page: 122
Type: F
Level: 2
Page: 123
Type: F
Level: 2
Page: 123
Type: F
Level: 1
Page 125
Type: F
Level: 1
Page: 125
Type: F
The belief in the right to vote, the right of choice and equal rights is part of the beliefs,
values and ways of thinking that defines our society's culture.
Answer: True
17.
Page: 122
The countries experiencing political, ethnic, and religious stability face the greatest threat
of violence.
Answer: False
16.
Level: 2
Changes in the exchange rates can have major implications for the profitability of
international operations.
Answer: True
15.
Type: F
Because of cheap labor, most international business firms are headquartered in the less
developed countries of Asia and South America.
Answer: False
14.
Page: 121
LDC's are less developed countries and tend to be found in the Southern Hemisphere
including Africa, Asia and South America.
Answer: True
13.
Level: 1
Some economic environments of business include resource and product markets,

language, religion, and per capita income.
Answer: False
12.
Type: F
The sub-divisions of the international environment are the economic, the sociocultural, and
the legal-political environments.
Answer: True
11.
Page: 121
Whether a company operates domestically or internationally, the basic management

functions of planning, organizing, leading, and controlling are the same.
Answer: True
10.
Level: 2
Level: 2
Page: 127
Type: A
Countries that value high power distances normally have cities that are geographically
separated and so have the need to transport electrical energy over large distances.
Test Bank * Page 91
Answer: False
18.
Type: F
Level: 1
Page: 128
Type: F
Level: 2
Page: 128
Type: F
Level: 1
Page: 130
Type: F
Level: 2
Page: 131
Type: F
Level: 2
Page: 131
Type: F
An organization developed for the purpose of eliminating tariffs in trading between

Canada and the United States is called The North American Freedom of Tariffs
Administration (NAFTA).
Answer: False
26.
Page: 128
The most familiar nation clause, calls for each member country to grant to every other
member country the most familiar treatment it accords to any country with respect to
imports and exports.
Answer: False
25.
Level: 1
The primary tools GATT uses to increase trade are tariff enhancements, coercion, and
most favored nation clause.
Answer: False
24.
Type: F
A tendency to regard their own culture as superior and to downgrade other cultures
reflects an attitude called geocentric.
Answer: False
23.
Page: 128
The fifth dimension of Hofstedes social values is preliminary-term orientation and

extended-term orientation.
Answer: False
22.
Level: 1
Collectivism means a preference for a tightly knit social framework in which individuals
look after one another and organizations protect their members interests.
Answer: True
21.
Type: A
In countries with strong masculine social values including Austria and Japan, both men and
women subscribe to the dominant masculine value.
Answer: True
20.
Page: 127
The social value of uncertainty avoidance is evident in countries like Japan which support
beliefs that provide stability and conformity among its citizenry.
Answer: True
19.
Level: 2
Level: 2
Page: 135
Type: F
An example of global sourcing is seen when Gap, Inc uses low-cost Caribbean labor to
cheaply produce their clothing, and then finish off and sell their clothing in the United
States.
Test Bank * Page 92
Answer: True
27.
Level: 2
Page: 139
Type: F
Level: 2
Page: 139
Type: A
Level: 1
Page: 139
Type: F
Level: 2
Page: 140
Type: F
Level: 1
Page: 140
Type: F
Level: 3
Page: 141
Type: F
Large international firms typically are called multinational corporations.

Answer: True
36.
Type: F
Multinational corporations typically receive more than 35 percent of its total sales
revenues from operations outside the parents home country.
Answer: False
35.
Page: 139
When a company builds a subsidiary from scratch in a foreign country it is called a

greenfield venture.
Answer: True
34.
Level: 1
Joint venture is the most risky type of direct investment.

Answer: False
33.
Type: F
A form of direct investment is franchising.

Answer: False
32.
Page: 138
When Harbor Trades, a Korean-based company, makes resources including technology,

managerial skills, and patent and trademark rights available to Nano Technologies, a
Russian company whereby allowing Nano to make products similar to CBA, it is engaging
in a countertrade agreement.
Answer: False
31.
Level: 2
An estimated 55 percent of world trade is countertrade.

Answer: False
30.
Type: A
Countertrade is the barter of products for products rather than the sale of products for
currency.
Answer: True
29.
Page: 137
With exporting, the corporation transfers its products for sale and its production facilities
in foreign countries.
Answer: False
28.
Level: 2
Level: 1
Page: 141
Type: F
An MNC is managed as an integrated worldwide business system.

Answer: True
Level: 1
Page: 141
Type: F

Test Bank * Page 93
37.
The primary emphasis of polycentric companies is on their home countries.

Answer: False
38.
Page: 141
Type: F
Most managers, given the trend toward globalization, do not need preparation to work in
foreign cultures.
Answer: False
39.
Level: 2
Level: 2
Page: 142
Type: F
Managers in Latin America must show respect for employees as individuals with needs and
interests outside of work.
Answer: True
Level: 3
Page: 143
Type: F
Multiple Choice Questions

1.
Wal-Marts challenges in Germany stem from a difference in __________ culture.

a.
b.
c.
d.
e.
business
marketing
shopping
European
American
Answer: c
2.
Page: 117
Type: F
Wal-Mart has embarked on a crusade to bring everyday low prices to which emerging
market?
a.
b.
c.
d.
e.
China
Taiwan
Brazil
Japan
El Salvador
Answer: c
3.
Level: 2
Level: 2
Page: 105
Type: F
Which of the following companies rely on international business for a substantial portion
of sales and profits?
a.
b.
c.
d.
IBM
Coca-Cola
Kellogg
Texas Instruments
Test Bank * Page 94
e.
All of the above
Answer: e
4.
Level: 3
d.
e.
International business is more important than the study of management.

International business is less important than the study of management.
Since the management functions are universal, international business in not
important to the study of management.
If you are not thinking international, you are not thinking business management.
International business has noting to do with the study of management.
Answer: d
Level: 2
Level: 2
Page: 119
Type: F
In which stage, market potential is limited to home country, with all production and
marketing facilities located at home?
a.
b.
c.
d.
e.
Domestic
International
Global
Multinational
Stateless
Answer: a
Level: 1
Page: 120
Type: F
In which stage does the company usually adopt a multidomestic approach?

a.
b.
c.
d.
e.
Global
Multinational
Stateless
International
Domestic
Answer: d
8.
Type: F
globally
regionally
nationally
strategically
customers first
Answer: a
7.
Page: 118
Companies that think __________ have a competitive edge.

a.
b.
c.
d.
e.
6.
Type: F
Which of these statements best describes the importance of international business to the
study of management?
a.
b.
c.
5.
Page: 118
Level: 2
Page: 120
Type: F
Global Dandelion, with marketing and production facilities located in many countries, is
Test Bank * Page 95
participating at what stage in the international arena?

a.
b.
c.
d.
e.
International stage
Global stage
Domestic stage
Multinational stage
Interdomestic stage
Answer: d
9.
Level: 2
Domestic stage
International stage
Multinational stage
Global stage
Binational stage
Answer: b
Level: 2
Type: A
domestic stage.
global stage.
international stage.
interdomestic stage.
multinational stage.
Answer: d
Level: 1
Page: 120
Stateless stage is also referred to as the

a.
b.
c.
d.
e.
Type: F
stage.
multinational
global
multidomestic
international
domestic
Answer: b
12.
Page: 120
The process of globalization typically passes through all of the following stages EXCEPT
a.
b.
c.
d.
e.
11.
Type: A
Zaman Telecom with an international division would be participating in what stage of the
international arena?
a.
b.
c.
d.
e.
10.
Page: 120
Level: 1
Page: 121
Type: F
Color Copiers operates in a true global fashion, making sales and acquiring resources in
whatever country offers the best opportunities and lowest cost, what stage of international
development is it in?
a.
b.
c.
Stateless stage
Multinational stage
International stage
Test Bank * Page 96
d.
e.
Domestic stage
Multidomestic stage
Answer: a
13.
Page: 121
Type: F
global management.
international management.
outsourcing management.
planning management.
domestic management.
Answer: b
Level: 2
Page: 121
Type: F
When doing business internationally, ______ aspects of management does not change?
a.
b.
c.
d.
e.
planning
organizing
controlling
leading
all of the above
Answer: e
Level: 1
Page: 121
Type: F
Which of the following sectors present the greatest potential for international mistakes?
a.
b.
c.
d.
e.
Internal
Sociocultural
Governmental
All of the above
b and c only
Answer: b
17.
Level: 2
The management of business operations conducted in more than one country is called
a.
b.
c.
d.
e.
16.
Type: A
Nike
Ford Motor Co.
Nestle'
IBM
Coca-Cola
Answer: c
15.
Page: 121
Which of the following is a foreign-owned corporation?

a.
b.
c.
d.
e.
14.
Level: 3
Level: 2
Page: 122
Type: F
Language, values, religion, and education all describe which dimension in the international
environment?
Test Bank * Page 97
a.
b.
c.
d.
e.
Economic
Legal
Political
Sociocultural
Technological
Answer: d
18.
Level: 2
Page: 122
Type: F
In international operations, the economic environment includes

a.
b.
c.
d.
e.
shared knowledge, beliefs and values.

political risks.
social organizations.
infrastructure.
tariffs, quotas, and taxes.
Answer: d
Level: 2
Page: 122
Type: F
Resource development, infrastructure, and exchange rates all describe which dimension in
the international environment?
a.
b.
c.
d.
e.
Economic
Legal
Political
Sociocultural
Technological
Answer: a
21.
Type: F
infrastructure.
resource and product markets.
laws and regulations.
inflation.
exchange rates.
Answer: c
20.
Page: 123
In international operations, the economic environment represents all of the following

factors EXCEPT
a.
b.
c.
d.
e.
19.
Level: 1
Level: 1
Page: 123
Type: F
______ is a sociocultural factor in the international environment.

a.
b.
c.
d.
e.
Language
Exchange rates
Tariffs, taxes, and quotas
Per capita income
Infrastructure
Test Bank * Page 98
Answer: a
22.
23.
Level: 2
Page: 123
Type: F
generally are located in Asia, Africa and South America.

a.
b.
c.
d.
e.
MNCs
EUs
LDCs
WTOs
MFNs
Answer: c
Level: 2
Page: 123
Type: F
A country's physical facilities that support economic activities make up its

a.
b.
c.
d.
e.
resource markets
infrastructure
physical markets
product markets
plants and equipment
Answer: b
Level: 1
Page: 123
Type: F
If you built a computer company in Africa and then found that your product was having
difficulty being distributed to customers because of the road system, your problem would
be related to
a.
b.
c.
d.
e.
an inadequate infrastructure.
an economy incapable of supporting growth.
a poor resource market.
a poor product market.
none of the above.
Answer: a
26.
Type: F
Exchange rates
Interest rates
Gross national product
Per capita income
Inflation rates
Answer: d
25.
Page: 123
Which of these is normally used to classify countries as developed or developing?

a.
b.
c.
d.
e.
24.
Level: 2
Level: 2
Page: 123
Type: A
Exchange rates are included in which of the following international environments?

a.
b.
The legal-political sector

The economic environment
Test Bank * Page 99
c.
d.
e.
The sociocultural environment

The barter system environment
The government sector
Answer: b
27.
Level: 2
Page: 125
Type: A
Which of the following is NOT a legal-political factor in the international environment?

a.
b.
c.
d.
e.
Laws and regulations

Language
Tariffs, quotas, taxes
Political risk
Government takeovers
Answer: b
Level: 2
Page: 125
Type: F
The rate at which one country's currency is exchanged for another country's currency is
called a(n) ______ rate.
a.
b.
c.
d.
e.
interest
inflation
per capita income
exchange
economic
Answer: d
30.
Type: F
product market.
resource market.
infrastructure.
economy.
power distance.
Answer: b
29.
Page: 125
Your grocery store in India is having trouble getting the local farmers to supply you with
the proper produce. This is a problem with Indias
a.
b.
c.
d.
e.
28.
Level: 2
Level: 1
Page: 125
Type: F
Assume that until yesterday, one U.S. dollar could be exchanged for 85 Japanese yens.
Today, a dollar gets you 102 yens. Which of the following statements is true?
a.
b.
c.
d.
e.
U.S. goods will be more expensive in Japan.

Japanese goods will be more expensive in the U.S.
U.S. goods will be the same price in Japan.
Japanese goods will be the same price in the U.S.
None of the above.
Answer: a
Level: 3
Page: 125
Type: A

Test Bank * Page 100
31.
The legal-political environment, in international operations, includes which of the

following?
a.
b.
c.
d.
e.
Shared knowledge, beliefs and values

Political risks
Social organizations
Infrastructure
None of the above
Answer: b
32.
Level: 2
loss of assets
managerial control
earning power
all of the above
b and c only
Answer: d
Level: 2
Type: F
MFN.
political risk.
tariffs.
political instability.
terrorism.
Answer: b
Level: 1
Page: 125
Type: F
Rooftop International, Inc. buys insurance against host government takeover when
investing in foreign countries. This is an example of which sector of the international
environment?
a.
b.
c.
d.
e.
Legal-political
Sociocultural
Technological
Economic
Infrastructure
Answer: a
35.
Page: 125
A company's risk of loss of assets, earning power, or managerial control due to politically
based events or action by host government is referred to as
a.
b.
c.
d.
e.
34.
Type: F
Political risk is defined as an organization's risk of ___________ due to politically based

events or actions by host governments.
a.
b.
c.
d.
e.
33.
Page: 125
Level: 2
Page: 125
Type: A
A foreign terrorist kidnaps your firm's marketing VP while the VP is in the host country.
This is a harsh example of
a.
b.
c.
d.
e.
economic development.
infrastructure.
political risk.
international law.
social risk.
Answer: c
36.
Level: 2
Page: 126
Type: A
Although the challenge in unstable countries is great, often the biggest area of
__________ is also there.
a.
b.
c.
d.
e.
opportunity
consumer shopping
economic improvement
leadership
low governmental control
Answer: a
Level: 2
Page: 126
Type: F
A nation's
includes the shared knowledge, beliefs and values, as well as the
common modes of behavior and ways of thinking, among members of a society.
a.
b.
c.
d.
e.
power distance
culture
masculinity
individualism
uncertainty avoidance
Answer: b
39.
Type: A
Economic Freedom
Corruption Perception
Political Succession
Business Motivation
Political Effect
Answer: a
38.
Page: 126
Often times organizations will refer to the __________ Index to determine the impact
political intervention has on business decisions in a particular country before considering
to move to that region.
a.
b.
c.
d.
e.
37.
Level: 2
Level: 1
Page: 127
Type: F
Cultural factors in foreign countries are ___________ the political and economic factors.
a.
b.
c.
easier than
similar to
more perplexing than
d.
e.
less important than

none of the above
Answer: c
40.
Page: 127
Type: F
are highly democratic.

accept inequality in power among institutions, organizations and people.
expect equality in power.
avoid uncertainty.
none of the above.
Answer: c
Level: 2
Page: 127
Type: F
A loosely knit social framework in which individuals are expected to take care of
themselves is called
a.
b.
c.
d.
e.
culture.
individualism.
ethnocentrism.
masculinity.
power distance.
Answer: b
Level: 2
Page: 128
Type: F
Collectivist values are represented in the social framework of which of these?

a.
b.
c.
d.
e.
The United States

Australia
Ecuador
Great Britain
All of the above
Answer: c
44.
Level: 1
Countries whose social values reflect low power distance

a.
b.
c.
d.
e.
43.
Type: F
Power distance
Uncertainty avoidance
Individualism
Collectivism
Masculinity
Answer: a
42.
Page: 127
Which of these refers to the degree to which people accept inequality in power among
institutions, organizations, and people?
a.
b.
c.
d.
e.
41.
Level: 2
Level: 2
Page: 128
Type: F
Austrias cultural preference is for achievement, heroism, assertiveness, and material

success. This would be considered

a.
b.
c.
d.
e.
power distance.
individualism.
masculinity.
ethnocentrism.
collectivism.
Answer: c
45.
Level: 1
Page: 128
Type: F
______ reflects a cultural preference for cooperation, group decision making, and quality
of life.
a.
b.
c.
d.
e.
Individualism
Collectivism
Masculinity
Femininity
Power distance
Answer: d
Level: 1
Page: 128
Type: F
One of Hofstedes social values that is not well known is

a.
b.
c.
d.
e.
power distance.
uncertainty avoidance.
masculinity.
collectivism.
long-term orientation.
Answer: e
48.
Type: A
Power distance
Uncertainty avoidance
Certainty avoidance
Conformity seekers
None of the above
Answer: b
47.
Page: 128
Which of these refers to a value characterized by people's intolerance for uncertainty and
ambiguity and resulting support for beliefs that promise certainty and conformity?
a.
b.
c.
d.
e.
46.
Level: 2
Level: 2
Page: 128
Type: F
Recent research by the GLOBE project has extended __________ research and offered
new insights for managers.
a.
b.
c.
Hofstedes
Waltons
Webers
d.
e.
Fayols
Gilbreths
Answer: a
49.
Level: 2
Page: 128
Type: F
In countries where women are often in positions of high status, the Globe Project would
describe that culture as high in __________.
a.
b.
c.
d.
e.
assertiveness
gender differentiation
societal collectivism
performance orientation
Answer: c
Level: 2
Page: 129
Type: F
A country that places emphasis on fairness and values kindness would be described by the
Globe Project as high in __________.
a.
b.
c.
d.
e.
assertiveness
humane orientation
societal collectivism
Answer: d
52.
Type: F
assertiveness
social collectivism
humane orientation
masculinity
Answer: e
51.
Page: 128
All of the following are cultural dimensions as defined by the GLOBE Project, except:
a.
b.
c.
d.
e.
50.
Level: 2
Level: 2
Page: 129
Type: F
A cultural attitude marked by the tendency to regard one's own culture as superior to
others is called
a.
b.
c.
d.
e.
ethnocentrism.
polycentrism.
geocentrism
technocentrism.
none of the above.
Answer: a
Level: 1
Page: 130
Type: F

53.
Countries that use several languages

a.
b.
c.
d.
e.
are ethnocentric.
are geocentric.
are likely to have high uncertainty avoidance.
have linguistic pluralism.
are polycentric.
Answer: d
54.
Level: 2
Page: 130
Type: A
When GATT was created in 1947, how many nations signed on for negotiation?
a.
b.
c.
d.
e.
15
23
28
40
57
Answer: b
Level: 3
Page: 131
Type: F
A term describing a GATT clause that calls for member countries to grant other member
countries the most favorable treatment they accord any country concerning imports and
exports is referred to as the
a.
b.
c.
d.
e.
preferred nation.
GATT favored country.
most favored nation.
Mutual GATT Courtesy.
Uruguay Round.
Answer: c
57.
Type: F
Economic
Sociocultural
Legal-political
Technological
None of the above
Answer: b
56.
Page: 130
A company may commit a mistake in which of the following sectors, when it does not
check the meaning of translated words in another language?
a.
b.
c.
d.
e.
55.
Level: 1
Level: 1
Page: 131
Type: F
To increase trade, the primary tools GATT uses are

a.
b.
c.
tariff concessions and most favored nation clause.

tariff and nontariff barriers.
quotas and export taxes.
d.
e.
most favored nation and LDC clauses.

EU and NAFTA.
Answer: a
58.
Level: 1
Page: 133
Type: F
GATT
WTO
GLOBE
EU
NAFTA
Answer: b
Level: 2
Page: 133
Type: F
Europe '92 is/was

a.
b.
c.
d.
e.
the Olympic Games.

the World's Fair.
a single market system.
global market system.
a system that never materialized.
Answer: c
Level: 1
Page: 134
Type: F
__________ was initiated in the 1980s to dramatically reform and deregulate such areas as
banking, insurance, health, and airlines.
a.
b.
c.
d.
e.
Europe 94
Asia 96
Asia 80
Europe 92
Europe 80
Answer: d
62.
-nation alliance
__________ has a goal to guide the nations of the world toward free trade and open
markets.
a.
b.
c.
d.
e.
61.
Type: F
14
12
25
16
21
Answer: c
60.
Page 131
The European Union has expanded to a

a.
b.
c.
d.
e.
59.
Level: 2
Level: 2
Page: 134
Type: F
Which is the single European currency that replaced 12 national currencies and unify a
huge marketplace?
a.
b.
c.
d.
e.
Mark
Franc
MFN
Euro
Pound
Answer: d
63.
Level: 1
Page: 135-136
Type: F
In 1994, NAFTA merged with the United States, Canada, and Mexico into a megamarket
with more than __________ million consumers.
a.
b.
c.
d.
e.
15.6
75.2
421
360
42.7
Answer: c
Level: 3
Page: 135
Type: F
All of the following were included in the negotiated agreements in key areas of NAFTA
EXCEPT
a.
b.
c.
d.
e.
immediate removal of tariffs on half of U.S. farm exports to Mexico.

immediate 100 percent cut of Mexican tariffs on autos.
U.S. trucking of international cargo allowed in Mexico border area by mid-1990s.
patent protection for pharmaceuticals in Mexico.
All of the above were included in the key areas of NAFTA agreement.
Answer: b
66.
Type: F
NAFTA.
GATT.
EU.
ASEAN.
none of the above.
Answer: b
65.
Page: 135
All of the following are examples of an international trade alliance EXCEPT

a.
b.
c.
d.
e.
64.
Level: 1
Level: 3
Page: 135
Type: F
Key area(s) of the North American Free Trade Agreement is/are

a.
b.
c.
removal of tariffs of U.S. farm exports to Canada.

patent protection for pharmaceutical in Mexico.
mandatory 100% North American content on cars and trucks to qualify for dutyfree status.
d.
e.
U.S. trucking of international cargo allowed in Canada.

All of the above.
Answer: b
67.
Page: 135
Type: F
World Trade Organization

International Monetary Fun
World Bank
All of the above
None of the above
Answer: d
Level: 2
Page: 136
Type: F
__________ is primarily concerned with the loss of jobs as companies export work to
countries with lower wages.
a.
b.
c.
d.
e.
Iron Triangle of Globalization

NAFTA
ASEAN
GATT
EU
Answer: a
Level: 2
Page: 137
Type: F
Engaging in the international division of labor so as to obtain the cheapest sources of labor
and supplies regardless of country is referred to as
a.
b.
c.
d.
e.
franchising.
licensing.
market entry strategy.
outsourcing.
activity.
Answer: d
71.
Level: 2
The Iron Triangle of Globalization includes:

a.
b.
c.
d.
e.
70.
Type: F
GLOBE
EU
NAFTA
ASEAN
GATT
Answer: c
69.
Page: 135
Which organization originated and supports the idea of small businesses operating on a
global level?
a.
b.
c.
d.
e.
68.
Level: 3
Level: 1
Page: 137
Type: F
The Maquiladora industry along the Texas-Mexico border uses cheap labor for assembling
products. This lowers the price for U.S. consumers and is an example of
a.
b.
c.
d.
e.
licensing.
joint venture.
outsourcing.
franchising.
none of the above.
Answer: c
72.
Level: 1
Page: 138
Type: F
______ is an entry strategy in which the organization maintains its production facilities
within its home country and transfers its products for sale in foreign markets.
a.
b.
c.
d.
e.
Franchising
Licensing
Exporting
Greenfield venture
Joint venture
Answer: c
Level: 1
Page: 138
Type: F
What is exporting?
a.
b.
c.
d.
e.
Countertrade
The barter of products for products, often used in developing nations
Items produced in the home country for sale in foreign markets
All of the above
None of the above
Answer: d
75.
Type: F
Exporting
Greenfield venture
Joint venture
Acquisition
Direct investment
Answer: a
74.
Page: 137
To enter foreign markets, most firms begin with which strategy?

a.
b.
c.
d.
e.
73.
Level: 2
Level: 2
Page: 138-139
Type: F
A form of exporting to less-developed countries is called

a.
b.
c.
d.
e.
licensing.
franchising.
greenfield venture.
joint venture.
countertrade.
Answer: e
76.
Page: 139
Type: F
franchises
wholly owned foreign affiliates
joint venturers
greenfield venturers
U.K.-based companies
Answer: a
Level: 2
Page: 139
Type: A
Page: 139
Type: F
Franchising is a form of
a.
b.
c.
d.
e.
direct investing.
licensing.
exporting.
countertrade.
barter trade.
Answer: b
Level: 1
Your company is interested in producing and marketing a line of coffee that will penetrate
the Chinese market. Your firm is willing to supply the equipment, products, product
ingredients, trademark, and standardized operating system. What type of strategy are you
going to use?
a.
b.
c.
d.
e.
Wholly owned foreign affiliate

A greenfield venture agreement
A franchise
An export agreement
Barter trade
Answer: c
80.
Level: 2
Pizza Hut is one of the best known ______ internationally.

a.
b.
c.
d.
e.
79.
Type: F
countertrades
licenses
exports
franchises
markets
Answer: b
78.
Page: 139
Heineken begins by exporting its product into new markets, and then __________ to a
local brewer to establish its position in the market.
a.
b.
c.
d.
e.
77.
Level: 1
Level: 2
Page: 139
Type: A
Which of the following pairs of alternatives closely resemble each other in the amount of
ownership, control and risk obtained in operating international businesses?

a.
b.
c.
d.
e.
Direct investment/franchising
Wholly owned foreign affiliate/countertrade
Exporting/licensing
Franchising/licensing
All of the above
Answer: d
81.
Level: 2
Page: 140
Type: F
The Write Pens, Inc. wants to reduce transferring costs by producing closer to the
consumer in a foreign country. This will also help in reducing transportation and storage
costs. Which strategy would be the best to use given the circumstances?
a.
b.
c.
d.
e.
Franchising
Exporting
Direct investing
Barter agreement
Licensing
Answer: c
Level: 2
Page: 140
Type: A
Go RVing, a U.S. company, built a subsidiary from scratch in England. This is an example
of
a.
b.
c.
d.
e.
franchising.
greenfield venture.
joint venture.
exporting.
licensing.
Answer: b
84.
Type: F
joint venture.
licensing agreement.
franchise.
wholly owned foreign affiliate.
foreign venture.
Answer: d
83.
Page: 139
A foreign subsidiary over which an organization has complete control is called a

a.
b.
c.
d.
e.
82.
Level: 3
Level: 2
Page: 140
Type: A
Jessicas Car Care receives more than 25% of its total sales revenues from operations
outside of the United States. Jessicas would be considered a
a.
b.
foreign national.
wealth company.
c.
d.
e.
multinational corporation.
globalization corporation.
None of the above.
Answer: c
85.
Page: 141
Type: F
greenfield venture
joint venture
direct investment
foreign affiliate
direct acquisition
Answer: a
Level: 2
Page: 141
Type: F
______ companies place an emphasis on their home countries.

a.
b.
c.
d.
e.
Polycentric
Geocentric
Ethnocentric
Global
Regiocentric
Answer: c
Level: 2
Page: 141
Type: F
Which of the following types of companies places an emphasis on a worldwide

perspective?
a.
b.
c.
d.
e.
Polycentric companies
Geocentric companies
Ethnocentric companies
Regiocentric companies
Domestic companies
Answer: b
89.
Level: 1
The Mercedes-Benz plant in Alabama is an example of a/an__________.

a.
b.
c.
d.
e.
88.
Type: A
Top management is expected to take a global perspective.

The corporation is controlled by a single management authority.
It is managed as an integrated worldwide business system.
All of the above
a and b only
Answer: d
87.
Page: 141
Which of the following characteristics distinguish a multinational corporation?

a.
b.
c.
d.
e.
86.
Level: 2
Level: 2
Page: 141
Type: F
In relationship-oriented societies, leaders should

a.
b.
c.
take a strong personal interest in employees.

feel free to criticize as much as they feel they need to.
reprimand in public whenever possible. It is an especially effective technique in
these societies.
minimize the emphasis on relations given the society's interest.
maintain the traditional command-and-control management style.
d.
e.
Answer: a
90.
Level: 2
Type: F
Concerning decision making, American managers working in Mexico often dont

__________.
a.
b.
c.
d.
e.
explain themselves
ask for participation
lead by example
motivate from the bottom
allow insubordination
Answer: a
91.
Page: 143
Level: 2
Page: 143
Type: F
Managers in foreign countries, when things go wrong, are often unable to

a.
b.
c.
d.
e.
increase an employee's pay.

get rid of an employee who is not working out.
assess the cause of the problem.
leave the country given their emotional attachment.
None of the above.
Answer: b
Level: 2
Page: 144
Type: F
Scenario Questions
ScenarioTamara Headley
Tamara Headley was an MBA student in Detroit, Michigan, with a managerial position at the Ford
Motor Company plant. She was invited to join a company that had entered into a joint venture
with a German firm to manage a Volkswagen plant. Tamara would be under contract for one
year, with an option to renew for a total of three years. Her salary would be 350% more than she
was currently earning, and she would be given two all-expenses paid vacations each year. The
money and the benefits sounded very nice, but Tamara wasn't sure what the best choice would be.
1.
The degree of international involvement for the joint venture is an example of

a.
b.
outscoring.
exporting.
c.
d.
e.
licensing.
direct investing.
greenfield venture.
Answer: d
2.
If Tamara accepted the new position, she would be facing significant new challenges in
a.
b.
c.
d.
e.
decision making.
motivation technique.
managerial control.
all of the above.
none of the above.
Answer: d
3.
Type: A
The American firm joining in the joint venture

a.
b.
c.
d.
e.
faces lower risk than if it were using a wholly-owned foreign affiliate.

enjoys greater control than is it were using the wholly-owned affiliate.
can anticipate a lower cost than a company that uses global outscoring.
all of the above.
none of the above.
Answer: a
4.
Type: A
Type: A
In making her decision, Tamara should

a.
b.
c.
d.
e.
recognize the substantially higher salary for similar work and take the offer.
recognize the value of salary combined with the additional benefits and take the
offer.
recognize the higher risks involved with managing in a foreign and often hostile
culture, and refuse the offer.
evaluate the benefits and the costs and make the best decision based on a full
cost/benefit analysis.
ask her husband and do what he wants.
Answer: d
Type: A
Short-Answer Questions
1.
In the
stage, exports increase, and the company usually adopts a multidomestic
approach, probably using an international division to deal with the marketing of products
in several countries individually.

Answer: international
2.
Page: 120
In the _______ stage, the company has marketing and production facilities located in
many countries and more than one-third of annual sales come from outside the home
country.
Answer: multinational
3.
Page: 120
List the four stages of globalization.

Answer: Domestic, international, multinational, and global/stateless.
Page: 120
4.
is the management of business operations conducted in more than one

country.
Answer: International management
5.
Page 121
When it comes to economic development, a currently developing country is also called

a(n) __________.
Answer: less-developed country (LDC)
6.
__________ is the criterion traditionally used to classify countries as developed or

developing.
Answer: Per capita income
7.
Page: 123
A country's physical facilities that support economic activities make up its

Answer: infrastructure
8.
Page: 123
Page: 123
List three examples of a country's infrastructure.

Answer: Transportation facilities such as railroads and airports; energy-producing facilities
such as utilities and power plants; and communication facilities such as telephone lines and
radio stations.
Page: 123-124
9.
is the rate at which one country's currency is exchanged for another

country's.
Answer: Exchange rate
10.
Page: 125
The risk of loss due to actions by host country governments is known as _______.
Answer: political risk

11.
Riots, revolutions, civil disorders, and frequent changes in government that affect the
operations of an international company shows __________ in a country.
Answer: political instability
12.
Page: 127
The degree to which people accept inequality in power among institutions, organizations,
and people is called
.
Answer: power distance
15.
Page: 128
reflects the values of relationships, cooperation, group decision making,

and quality of life.
Answer: Femininity
20.
Page: 128
stands for preference for achievement, heroism, assertiveness, work

centrality (with resultant high stress), and material success.
Answer: Masculinity
19.
Page: 128
A preference for a tightly knit social framework in which individuals look after one
another and organizations protect their members' interests refers to
.
Answer: collectivism
18.
Page: 128
A preference for a loosely knit social framework in which individuals are expected to take
care of themselves is called
.
Answer: individualism
17.
Page: 127
A value characterized by people's intolerance for uncertainty and ambiguity and resulting
support for beliefs that promise certainty and conformity refers to
.
Answer: uncertainty avoidance
16.
Page: 126
A nation's
includes the shared knowledge, beliefs, and values, as well as the
common modes of behavior and ways of thinking, among members of a society.
Answer: culture
14.
Page: 126
Companies need to be cautious of _______ and _______ when going international

because they differ from country to country.
Answer: laws; regulations
13.
Page: 125
Page: 128
List the four dimensions of national value systems identified by Hofstede.

Answer: Power distance, uncertainty avoidance, individualism/collectivism, and

masculinity/femininity.
Page: 128
21.
_______ means that people have a tendency to regard their own culture as superior to
other cultures.
Answer: Ethnocentrism
22.
A term describing a GATT clause that calls for member countries to grant other member
countries the most favorable treatment they accord any country concerning imports and
exports is called the
.
Answer: most favored nation
23.
Page: 131
__________ was formed to improve social and economic conditions among its 15-nation
alliance.
Answer: European Union
24.
Page: 130
Page: 133
List five of the countries that make up the European Union (EU).
Answer: Choose any five of the following: Sweden, Finland, Denmark, Ireland, United
Kingdom, Luxembourg, Netherlands, Germany, Belgium, France, Portugal, Spain, Austria,
Italy, and Greece.
Page: 133
25.
The
is the single European currency that has replaced 12 national currencies.
Answer: euro
26.
Page: 135
_______ went into effect in early 1994, effectively creating a megamarket among the U.S.,
Canada, and Mexico.
Answer: NAFTA
27.
Page: 135
means engaging in the international division of labor so that manufacturing

can be done in countries with the cheapest sources of labor and supplies.
Answer: Global outsourcing
28.
Page: 137
is the barter of products for products rather than the sale of products for
currency.
Answer: Countertrade
Page: 139

29.
Whereby a company builds a subsidiary from scratch in a foreign country, is referred to as

a
, and is the most risky type of direct investment.
Answer: greenfield venture
30.
Page: 140
List the three examples of direct investing mentioned in your text.

Answer: Joint venture, wholly owned foreign affiliate, and greenfield venture.
Page: 140
31.
A multinational corporation typically receives at least ______% of its total sales revenues
from outside the parent's home country.
Answer: 25
32.
Page: 141
The frustration and anxiety that results from constantly being subjected to strange and
unfamiliar cues about what to do and how to do it is called ________.
Answer: culture shock
33.
Page: 142
Managing across borders calls for organizations to ______ across borders.

Answer: learn
Page: 142
Essay Questions
1.
Describe the four stages of globalization with specific reference to strategic orientation,
stage of development, cultural sensitivity, and manager assumptions.
ANSWER:
Refer to exhibit 4-1 in the text.
Level: 3
2.
Page: 120
Identify and briefly explain at least two key factors in economic, sociocultural and
political-legal environments that affect an organization.
ANSWER:
Please refer to exhibit 4-2 in the text.
Level: 2
Pages: 123

3.
Briefly explain the difference between high power distance and low power distance.
ANSWER:
Power distance is the degree to which people accept inequality in power among
institutions, organizations, and people. With high power distance, this inequality is
accepted. With low power distance, people expect equality with respect to power.
Level: 2
4.
Page: 127-128
Briefly describe the social characteristic of ethnocentrism and explain how this can have an
impact on the success of an international manager.
ANSWER:
Ethnocentrism is a cultural attitude marked by the tendency to regard one's own culture as
superior to others. When an international manager has this characteristic, he or she is less
likely to be successful, because he or she devalues the culture in which they are trying to
do business. When the culture is devalued, relationships can be damaged, trust can be
lost, and the willingness to maintain the business relationship can be broken.
Level: 2
5.
Page: 130
Describe GATT and the World Trade Organization.

ANSWER:
GATT started as a set of rules to ensure nondiscrimination, clear procedures, dispute
negotiation, and including lesser developed countries into international trade. GATT and
WTO use tariff concessions as a tool to increase trade. Each of the 23 nations that signed
GATT agree to limit tariff levels on imports from other members and to the most favored
nation clause. GATT sponsored eight rounds of international trade negotiations aimed at
reducing trade restrictions. WTO guides and urges nations worldwide toward free trade
and open markets.
Level: 2
6.
Pages: 131-133
Explain NAFTA.
ANSWER:
Taking effect in early 1994, the North American Free Trade Agreement (NAFTA) united
the U.S., Mexico, and Canada into a multi-trillion dollar market. Over a fifteen-year
period, this agreement removes tariffs and trade restrictions on most manufactured and
agricultural products. Potential advantages of NAFTA center on its expectations: it is
expected to spur growth, increase exports, and create jobs in all three countries.
Conversely, many U.S. groups have a number of reservations. These include job loss to
Mexico and weakened pollution standards.
Level: 3
Page: 135-136
7.
What is global outsourcing? Identify a unique variation of global outsourcing.

ANSWER:
Global outsourcing is engaging in the international division of labor so that manufacturing
can be done in countries with the cheapest sources of labor and supplies.
The maquiladora industry is a unique variation of global outsourcing that lies along the
Texas-Mexico border.
Level: 2
8.
Page: 137
Direct investing means that the company is involved in managing the productive assets in a
foreign country. There are three options for direct investing. Name and compare these
three options.
ANSWER:
The three options are joint ventures, wholly-owned foreign affiliates, and greenfield
ventures. With a joint venture, a company shares costs and risks with another firm,
typically in the host country. This is often the fastest, cheapest, and least risky way to
enter a foreign market. In the second option with a wholly-owned affiliate, the company
has full ownership with all of the costs and risks associated with ownership, and enjoys full
control of the affiliate. The most costly and risky direct investment is called a greenfield
venture. The company builds a subsidiary from scratch in a foreign country. While the risks
and costs are high, so is the control and the potential payoff.
Level: 3
9.
Page: 140
Briefly describe two personal challenges for global managers.

ANSWER:
Managers will be most successful in foreign assignments if they are culturally flexible and
if they can easily adapt to new situations. Thus, the two personal challenges that exist for
global managers are overcoming ethnocentric tendencies and culture shock.
Ethnocentrism is a cultural attitude marked by the tendency to regard one's own culture as
superior to others. Culture shock refers to the frustration and stress that result from
continually being exposed to new and different situations. Proper training and preparation
of incoming global managers is crucial.
Level: 2
Page: 142


mgm3101 1328517850

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

mgm3101 1328517850

Uploaded by

Copyright:

Available Formats

Chapter 4

Managing in a Global Environment

Wal-Mart is a well-established company with a global interest who is facing minimal

The multinational stage of corporate international development transcends any single

As the number of stateless corporations increases, the awareness of national borders

Some economic environments of business include resource and product markets,

Whether a company operates domestically or internationally, the basic management

An organization developed for the purpose of eliminating tariffs in trading between

The fifth dimension of Hofstedes social values is preliminary-term orientation and

Large international firms typically are called multinational corporations.

When a company builds a subsidiary from scratch in a foreign country it is called a

Joint venture is the most risky type of direct investment.

A form of direct investment is franchising.

When Harbor Trades, a Korean-based company, makes resources including technology,

An estimated 55 percent of world trade is countertrade.

An MNC is managed as an integrated worldwide business system.

Chapter Four * Managing in a Global Environment

The primary emphasis of polycentric companies is on their home countries.

Multiple Choice Questions

Wal-Marts challenges in Germany stem from a difference in __________ culture.

All of the above

International business is more important than the study of management.

In which stage does the company usually adopt a multidomestic approach?

Companies that think __________ have a competitive edge.

participating at what stage in the international arena?

Stateless stage is also referred to as the

Which of the following is a foreign-owned corporation?

In international operations, the economic environment includes

shared knowledge, beliefs and values.

In international operations, the economic environment represents all of the following

______ is a sociocultural factor in the international environment.

generally are located in Asia, Africa and South America.

A country's physical facilities that support economic activities make up its

Which of these is normally used to classify countries as developed or developing?

Exchange rates are included in which of the following international environments?

The legal-political sector

The sociocultural environment

Which of the following is NOT a legal-political factor in the international environment?

Laws and regulations

U.S. goods will be more expensive in Japan.

Chapter Four * Managing in a Global Environment

The legal-political environment, in international operations, includes which of the

Shared knowledge, beliefs and values

Political risk is defined as an organization's risk of ___________ due to politically based

less important than

are highly democratic.

Collectivist values are represented in the social framework of which of these?

The United States

Countries whose social values reflect low power distance

Austrias cultural preference is for achievement, heroism, assertiveness, and material

success. This would be considered

One of Hofstedes social values that is not well known is

Chapter Four * Managing in a Global Environment

Countries that use several languages

To increase trade, the primary tools GATT uses are

tariff concessions and most favored nation clause.

most favored nation and LDC clauses.

Europe '92 is/was

the Olympic Games.

The European Union has expanded to a

immediate removal of tariffs on half of U.S. farm exports to Mexico.

All of the following are examples of an international trade alliance EXCEPT

Key area(s) of the North American Free Trade Agreement is/are

Companies need to be cautious of _ and _ when going international