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  • CHAPTER 4: MANAGING GLOBALLY Test Correlation Table Question Types/Level of Difficulty LEARNING OBJECTIVES Easy Moderate Difficult 1. State several characteristics of TF — 1, 2, 3, 4, 5, 6 — the global economy. MC 1 3, 7, 8 2, 4, 5, 6, 9 ES — 1 — 2. Describe how a country’s TF — 7, 8, 10 9 culture can affect an organization’s business practices. MC 18 11, 12, 14, 15, 10, 13, 17 16, 19, 20, 21 ES — 2, 3 — 3. Explain the impact of political– TF — 11, 13, 14, 15 12 legal forces on international business. MC 23, 25, 26, 32, 27, 28, 30, 34, 22, 24, 29, 31, 33, 35, 37, 39, 40, 43, 49, 50 36, 38, 47 41, 42, 44, 45, 46, 48, 51 ES — — 4 4. Discuss how three major trade TF 18, 19 16, 17 — agreements affect global competition. MC 59, 64 52, 53, 54, 55, 61, 65, 66, 71, 56, 57, 58, 60, 73 62, 63, 67, 68, 69, 70, 72, 74 ES — — 5 5. Describe six strategies used by TF 20, 21 22, 23, 24 25, 26 organizations in international business. MC 77, 78, 82, 85, 75, 76, 79, 80, 87, 89, 96, 101, 86, 90, 97, 102 81, 83, 84, 88, 103 91, 92, 93, 94, 95, 98, 99, 100 ES — — 6, 7, 8 83
  • CHAPTER 4: MANAGING GLOBALLY True/False Questions Learning Objective 1 1. In a recent poll, most of the people thought that expanded trade leads to an increase in U.S. jobs. ANSWER: F, Knowledge, Moderate, p. 99 2. Increasingly, trade today is often between different parts of the same corporation or through alliances (joint ventures). ANSWER: T, Knowledge, Moderate, p. 99 3. A driving force of global activity is the information revolution that permits instantaneous worldwide communication. ANSWER: T, Knowledge, Moderate, p. 99 4. As domestic policies become more market-oriented, governments are responding by restricting access to multinational trade. ANSWER: F, Knowledge, Moderate, p. 100 5. One of the most important factors that has fueled the growth of the global economy is the availability of labor and resources in different parts of the world. ANSWER: T, Knowledge, Moderate, p. 100 6. Three-fourths of the world’s population has never used a telephone. ANSWER: F, Knowledge, Moderate, p. 100 Learning Objective 2 7. Many people in the United States and Canada think of time as an abundant commodity. ANSWER: F, Knowledge, Moderate, p. 101 8. People of many non-Western cultures view change as part of the evolution of human being and the universe. ANSWER: T, Knowledge, Moderate, p. 101 9. Language serves to bind as well as to separate cultures. ANSWER: T, Knowledge, Difficult, p. 102 10. Four aspects of a culture that have direct implications for international management are 84
  • CHAPTER 4: MANAGING GLOBALLY views of social change, time orientation, language, and value system. ANSWER: T, Knowledge, Moderate, p. 101 Learning Objective 3 11. When assessing political risk, factors are grouped into four categories: domestic instability, foreign conflict, legislative conflict, and economic climate. ANSWER: F, Knowledge, Moderate, p. 106 12. Foreign conflict is the amount of subversion, revolution, assassinations, guerrilla warfare and government crisis in a country. ANSWER: F, Knowledge, Difficult, p. 106 13. Protectionism, bribery, and extortion are significant types of international political mechanisms. ANSWER: T, Knowledge, Moderate, p. 107 14. A bribe is a payment made to ensure that the recipient doesn’t harm the payer in some way. ANSWER: F, Knowledge, Moderate, p. 108 15. Four widely used protectionism mechanisms are tariffs, quotas, subsidies, and cartels. ANSWER: T, Knowledge, Moderate, p. 107 Learning Objective 4 16. The World Trade Organization (WTO) has 136 member countries, which account for about 85% of world trade. ANSWER: F, Knowledge, Moderate, p. 110 17. Three principles are fundamental to World Trade Organization (WTO) operations. Among these, the most favored nation principle means that when country A grants a tariff concession to country B, the same concession automatically applies to all other countries that are member of the WTO. ANSWER: T, Knowledge, Moderate, p. 111 18. NAFTA is an economic, social, and military alliance among the United States, Canada and Mexico. ANSWER: F, Knowledge, Easy, p. 111 19. The European Union (EU) was formerly known as the European Community (EC). ANSWER: T, Knowledge, Easy, p. 113 85
  • CHAPTER 4: MANAGING GLOBALLY Learning Objective 5 20. Organizations typically choose from among four strategies for conducting international business. ANSWER: F, Knowledge, Easy, p. 114 21. An exporting strategy involves maintaining facilities within a home country and transferring goods and services abroad for sale in foreign markets. ANSWER: T, Knowledge, Easy, p. 115 22. Under a licensing strategy, the licensor must be concerned about making major capital investments abroad or becoming involved in the daily production, technical, marketing, or management details of the international operation. ANSWER: F, Application, Moderate, p. 116 23. A franchising strategy involves one organization (the franchisee) granting another organization (the franchiser) the right to use its trademarked name and to produce and sell its goods or services. ANSWER: F, Knowledge, Moderate, p. 116 24. An alliance strategy involves agreeing with other companies to pool physical, financial, and human resources to achieve common goals. ANSWER: T, Knowledge, Moderate, p. 117 25. A profit center is an organizational unit that is only accountable for the revenues generated by its activities. ANSWER: F, Knowledge, Difficult, p. 118 26. A global strategy and a multidomestic strategy are the same. ANSWER: F, Knowledge, Difficult, p. 118 Multiple Choice Questions Preview 1. Which of the following is not a problem Wal-Mart is facing in its overseas operations? a. highways are not as good as North America b. low education and motivation of store employees c. purchasing strategy is more of a problem d. ability to manage high-volume inventory ANSWER: B, Knowledge, Easy, p. 98 2. By becoming a contractor, importer, and wholesaler, Wal-Mart expects to __________. a. cut off supplies to its competitors b. sell its own brands cheaper than name brands 86
  • CHAPTER 4: MANAGING GLOBALLY c. bring lower cost merchandise to America d. speed up supply lines ANSWER: D, Knowledge, Difficult, p. 98 3. The Wal-Mart preview case illustrated the effect of several global forces that an increasing number of companies face. Which of the following is not one of these forces? a. entrenched local competitors b. pressures on prices c. need for cost cutting d. All of the above are global forces that Wal-Mart faces. ANSWER: A, Knowledge, Moderate, p. 98 Learning Objective 1 The Global Economy 4. a. one in six b. two in five c. one in ten d. three in ten ANSWER: A, Knowledge, Difficult, p. 99 5. In a recent poll, most people identified _________ as the biggest threat to U. S. jobs. a. increased imports b. immigration c. poor quality of domestic products d. cheap foreign labor ANSWER: D, Knowledge, Difficult, p. 99 6. Since 1995, U.S. exports of goods and services have soared ______ percent, accounting for much of the overall growth in the economy. a. 10 b. 20 c. 30 d. 40 ANSWER: D, Knowledge, Difficult, p. 99 87
  • CHAPTER 4: MANAGING GLOBALLY 7. ______________ has created a new group of rapid-growth countries in Central and Eastern Europe. a. The establishment of the European Union b. The establishment of a common European currency, the Euro, c. The North American Free Trade Agreement (NAFTA) d. The collapse of Communism in 1989 ANSWER: D, Knowledge, Moderate, p. 100 8. The globalization of business has placed a premium on ____________. a. information b. labor costs c. free trade d. worker training ANSWER: A, Knowledge, Moderate, p. 99 9. As domestic policies in many foreign countries are becoming more market- oriented, governments are opening their countries to multinational trade and joining regional trade associations. This has led to the emergence of __________. a. political forces that advocate a return to state-managed economies b. new strategic partnerships of foreign and domestic organizations c. high inflation d. the World Trade Organization ANSWER: B, Knowledge, Difficult, p. 100 Learning Objective 2 Cultural Forces 10. Culture as it relates to __________ is typical of people from nations such as India and Italy that are characterized by high uncertainty avoidance. a. time orientation b. value systems c. social change d. economic systems ANSWER: C, Knowledge, Difficult, p. 101 11. __________ refers to the deeply rooted system of unspoken principles that guide individuals in their everyday behaviors. a. Collectivism b. Social norms c. Cultural distance d. Values ANSWER: B, Knowledge, Moderate, p. 104 88
  • CHAPTER 4: MANAGING GLOBALLY 12. For Mexican workers, the combination of high uncertainty avoidance and power distance produces the desire for __________. a. a powerful manager who can be praised or blamed b. high government intervention in everyday life c. guaranteed salaries rather than production bonuses d. minimal levels of direct supervision on the job ANSWER: A, Knowledge, Moderate, p. 104 13. Which of the following statements is not true about Mexican society? a. Mexicans feel threatened by uncertain and ambiguous situations. b. Preserving harmony and saving face is important. c. Identifying yourself by title is considered rude. d. Consensus and social harmony is something to be sought. ANSWER: C, Knowledge, Difficult, pp. 103–104 14. The people of many non-Western cultures, such as those of India, Saudi Arabia, and China, view change as __________. a. slow b. rapid c. turbulent d. stable ANSWER: A, Knowledge, Moderate, p. 101 15. Maria Braun works for a company and is compensated on an hourly basis. Her manager has asked her to be more conscientious about her individual productivity and punctuality. Maria probably works for a __________ company. a. Mexican b. U.S. c. Turkish d. Japanese ANSWER: B, Application, Moderate, pp. 101–102 16. Herman Garcia has received many written and verbal warnings due to excessive tardiness. His philosophy is best characterized as mañana. Herman’s work ethic could probably be attributed to his __________ culture. a. Japanese b. American c. British d. Mexican ANSWER: D, Application, Moderate, p. 102 89
  • CHAPTER 4: MANAGING GLOBALLY 17. Although their attitude is changing, for many managers in Mexico, time commitments are considered ___________________. a. undesirable b. binding c. not binding d. desirable but not binding ANSWER: D, Knowledge, Difficult, p. 102 18. ______________ serves to bind as well as to separate cultures. a. The Euro b. Quotas c. Language d. Status system ANSWER: C, Knowledge, Easy, p. 102 19. Charlie Parker’s habit of putting his feet up on the desk during meetings will be perceived as an egregiously insulting nonverbal gesture by his __________ coworkers. a. German b. Mexican c. Japanese d. Jordanian ANSWER: D, Knowledge, Moderate, p. 102 20. Motorola’s managers in Malaysia found that cultural forces caused local employees to __________. a. not communicate honestly with Americans b. try to avoid making decisions c. be disrespectful to the women workers d. not complain about unsafe work conditions ANSWER: B, Application, Moderate, p. 105 21. Motorola’s team building initiative in their Malaysian operation emphasized treating people with respect, giving rewards to achievers, and sharing every success story. The outcome observed from this approach was __________. a. a complete failure b. copied by many other Malaysian companies c. only effective with one team d. highly successful ANSWER: C, Knowledge, Moderate, p. 105 90
  • CHAPTER 4: MANAGING GLOBALLY Learning Objective 3 Political–Legal Forces 22. Domestic instability and corruption are components of _____________. a. economic risk b. political risk c. foreign conflict d. political climate ANSWER: B, Knowledge, Difficult, p. 106 23. In his job with IBM, Brad Sorensen monitors political events and decisions in Saudi Arabia to determine the likelihood that these events will adversely affect the profitability of IBM’s investments in that country. Sorensen works to assess IBM’s __________. a. economic risk b. political risk c. foreign conflict d. political climate ANSWER: B, Application, Easy, p. 106 24. __________ is not considered a political risk. a. Corruption b. Protectionism c. Foreign conflict d. Economic climate ANSWER: B, Knowledge, Difficult, p. 106 25. The amount of subversion, revolution, assassinations, guerrilla warfare, and government crisis in a country is referred to as __________. a. domestic instability b. international stability c. foreign conflict d. political climate ANSWER: A, Knowledge, Easy, p. 106 26. The degree of hostility one nation shows toward others is known as __________. a. domestic instability b. foreign conflict c. international stability d. political coalitions ANSWER: B, Knowledge, Easy, p. 106 91
  • CHAPTER 4: MANAGING GLOBALLY 27. Before waging war with Iraq, President George W. Bush determined that the actions of the government of Iraq were an unusual and extraordinary threat to the national security and foreign policy of the United States. This is an example of __________. a. political risk b. international instability c. foreign conflict d. economic climate ANSWER: C, Application, Moderate, p. 106 28. The likelihood that a government will swing to the far left or far right politically is known as __________. a. domestic coercion b. international control c. foreign propaganda d. political climate ANSWER: D, Knowledge, Moderate, p. 106 29. A number of variables should be assessed to determine the political climate. These variables include all of the following except __________. a. inequality of the governmental bureaucracy b. role of the military in the political process c. number of factions in the legislature d. extent of racial and nationality tensions ANSWER: A, Knowledge, Difficult, p. 106 30. Infrastructure is one of the elements of ___________. a. domestic integration b. international negotiation c. foreign climate d. economic climate ANSWER: D, Knowledge, Moderate, p. 107 31. Stan Jepsen has developed an interest in assessing the variables involved in the economic climate. He found that all of the following are included except ____________. a. government regulatory and economic control prices b. government inability to manage its own economic affairs c. government provision of support services d. government capabilities in general ANSWER: B, Knowledge, Difficult, p. 107 92
  • CHAPTER 4: MANAGING GLOBALLY 32. All of the following are considered to be a part of a country’s infrastructure, except ___________. a. wages b. roads c. airports d. electricity ANSWER: A, Knowledge, Easy, p. 107 33. ____________ relates to the degree to which institutions, including the government, are perceived to be untrustworthy, are open to bribes, and conduct fraudulent business practices. a. Corruption b. Foreign conflict c. Political climate d. Foreign instability ANSWER: A, Knowledge, Easy, p. 107 34. ______________ is not a country that ranks low on the corruption index. a. Argentina b. Japan c. United States d. New Zealand ANSWER: A, Knowledge, Moderate, p. 107 35. _________ are not an example of protectionism. a. Tariffs b. Joint ventures c. Quotas d. Cartels ANSWER: B, Knowledge, Easy, p. 107 36. The primary purpose of a tariff is to __________. a. create a “level playing field” b. subsidize domestic industries c. raise the price of imported goods d. create tax revenue ANSWER: C, Knowledge, Difficult, p. 107 37. A restriction on the quantity of a country’s imports is known as a __________. a. tariff b. quota c. price control d. boycott ANSWER: B, Knowledge, Easy, p. 108 38. Most experts agree that if protectionism is politically unavoidable, __________ are preferable to quotas. 93
  • CHAPTER 4: MANAGING GLOBALLY a. tariffs b. subsidies c. free trade agreements d. joint ventures ANSWER: A, Knowledge, Difficult, p. 108 39. A direct or indirect payment by a government to its country’s firms to make selling or investing abroad cheaper for them is known as a(n) ____________. a. quota b. export control c. import control d. subsidy ANSWER: D, Knowledge, Easy, p. 108 40. The U.S. government subsidizes commercial project investors in developing countries through the Overseas Private Investment Corporation (OPIC). Which of the following are not protections included in this program? a. political risk insurance b. credit risk c. seizure of assets d. damage from war, revolution, or insurrection ANSWER: B, Knowledge, Moderate, p. 108 41. An alliance of producers engaged in the same type of business, formed to limit or eliminate competition, is known as a __________. a. cartel b. subsidy c. joint venture d. global strategy ANSWER: A, Knowledge, Easy, p. 108 42. The Organization of Petroleum Exporting Countries (OPEC) is an example of an organization that attempts to operate as a __________. a. cartel b. strategic business unit c. joint venture d. multidomestic strategy ANSWER: A, Knowledge, Easy, p. 108 94
  • CHAPTER 4: MANAGING GLOBALLY 43. By law, U.S. firms __________________________________. a. may form and participate in cartels. b. may not form or participate in cartels. c. may form but not participate in cartels. d. may participate in but not form cartels. ANSWER: B, Knowledge, Moderate, p. 108 44. An improper payment made to induce the recipient to do something for the payer is known as a __________. a. coercion b. cartel c. tariff d. bribe ANSWER: D, Knowledge, Easy, p. 108 45. A payment made to ensure that the recipient does not harm the payer in some way is known as a(n) __________. a. extortion b. grease payment c. intrinsic reward d. bribe ANSWER: A, Knowledge, Easy, p. 109 46. Bribery and extortion are practiced throughout the world. They occur frequently in all of the following countries except __________. a. Indonesia b. Honduras c. Great Britain d. Yugoslavia ANSWER: C, Knowledge, Easy, p. 109 47. A company in violation of the U.S. Foreign Corrupt Practices Act of 1977 may be fined up to __________. a. $250,000 b. $10,000,000 c. $10,000 d. $1,000,000 ANSWER: D, Knowledge, Difficult, p. 109 95
  • CHAPTER 4: MANAGING GLOBALLY 48. Small payments used to get lower level government employees to speed up required paperwork are known as __________. a. grease payments b. bribes c. extortion d. subsidies ANSWER: A, Knowledge, Easy, p. 109 49. Japanese rice farmers have their local markets protected by a number of mechanisms similar to the paint industry. Foreigners who would like to enter the Japanese market are primarily exposed to obstacles arising from __________. a. economic risk b. cartels c. foreign climate d. political risk ANSWER: D, Application, Moderate, pp. 109–110 50. Which of the following is not a technique used by Japanese paint producers to keep out foreign competitors? a. predatory pricing b. tariffs and quotas c. just-in-time delivery d. complicated distribution systems ANSWER: A, Knowledge, Moderate, p. 110 51. France has a protected market for paint used on __________ that foreign producers are unable to gain access to. a. airplanes b. government buildings c. roads d. road signs ANSWER: C, Knowledge, Easy, p. 110 Learning Objective 4 Global Trade Agreements 52. A series of negotiated understandings regarding trade and related issues among the participating countries is known as __________. a. AACSB b. ECC c. IMF d. WTO ANSWER: D, Knowledge, Moderate, p. 110 96
  • CHAPTER 4: MANAGING GLOBALLY 53. The first GATT was signed by _____ countries in 1947. a. 123 b. 9 c. 66 d. 23 ANSWER: D, Knowledge, Moderate, p. 110 54. The World Trade Organization (WTO) has 144 member countries, which account for about ______ percent of world trade. a. 65 b. 75 c. 85 d. 95 ANSWER: D, Knowledge, Moderate, p. 110 55. Which of the following is not a key function of the World Trade Organization (WTO)? a. providing technical training in developing countries b. monitoring foreign exchange markets c. handling trade disputes between nations d. providing a forum for trade negotiations ANSWER: B, Knowledge, Moderate, p. 110 56. When country A grants a tariff concession to country B, the same concession automatically applies to all other countries that are members of the World Trade Organization (WTO). This is known as the __________ principle. a. reciprocity b. most favored nation c. transparency d. collaborative ANSWER: B, Knowledge, Moderate, p. 111 57. The __________ concept establishes that any tariffs be readily visible to all countries. a. reciprocity b. transparency c. escape d. most favored nation ANSWER: B, Knowledge, Moderate, p. 111 58. The __________ principle ensures each member country that it will not be forced to reduce tariffs unilaterally. a. reciprocity b. transparency c. matrix escape d. most favored nation ANSWER: A, Knowledge, Moderate, p. 111 59. The North American Free Trade Agreement (NAFTA) was created to increase free trade 97
  • CHAPTER 4: MANAGING GLOBALLY between (among) _____________________. a. the U.S. and Mexico b. North America and South America c. Canada, the U.S., and Mexico d. the U.S. and South America ANSWER: C, Knowledge, Easy, p. 111 60. The North American Free Trade Agreement (NAFTA) went into effect in __________. a. 1991 b. 1992 c. 1993 d. 1994 ANSWER: D, Knowledge, Moderate, p. 111 61. NAFTA was expected to ______________________. a. reduce and eliminate numerous tariffs b. reduce and eliminate most nontariff barriers c. make all trade between the U.S. and Mexico tariff free d. a and b only ANSWER: D, Knowledge, Difficult, p. 111 62. According to the text, over _____ percent of the goods imported from Mexico may now enter the United States without tariffs. a. 40 b. 50 c. 60 d. 70 ANSWER: D, Knowledge, Moderate, p. 111 63. __________ plants are foreign-owned industrial plants located in Mexico that border the U.S. states of Texas, New Mexico, Arizona, and California. a. Border-state b. Southwestern c. Maquiladora d. Matamoras ANSWER: C, Knowledge, Moderate, p. 112 64. Maquiladoras __________. a. pay below U.S. minimum wage b. account for roughly 40 percent of Mexico’s manufacturing c. employ more than 1 million people d. all of the above ANSWER: D, Knowledge, Easy, p. 112 65. For certain industries, most notably _____________, NAFTA imposes higher North American content rules. a. automobiles b. textiles 98
  • CHAPTER 4: MANAGING GLOBALLY c. apparel d. all of the above ANSWER: D, Knowledge, Difficult, p. 112 66. NAFTA doesn’t change requirements for the entry of _____________ into the United States and Canada. a. automobiles b. light trucks c. telecommunication companies d. foreign banks ANSWER: D, Knowledge, Difficult, p. 112 67. Luis Avalos, CEO of Mabe, seized an opportunity created by NAFTA to expand his business. Mabe exports _________________ throughout much of North and South America. a. refrigerators b. ranges c. heating elements d. all of the above ANSWER: D, Knowledge, Moderate, p. 112 68. The Planning and Administration Competency highlighted Mabe, an appliance company located in Mexico. Based on the text, which of the following is not true? a. 20% of Mabe’s employees working hours are spent in training. b. The average Mexican employee at Mabe works a 45-hour week. c. Mexico does not have labor unions whose goals are based on antimanagement ideologies. d. In Mexico, it is easy to find workers with at least a high school education. ANSWER: A, Knowledge, Moderate, p. 113 69. According to the text, the European Union (EU), called the European Community (EC) until 1994, has _____ members. a. 8 b. 13 c. 18 d. 23 ANSWER: C, Knowledge, Moderate, p. 113 70. Which of the following is not one of the goals of the European Union? a. the creation of a single market among member countries b. educational degree standardization for professionals c. establishing the free movement of goods, people, services and investment capital d. All of the above are goals of the European Union. ANSWER: D, Knowledge, Moderate, p. 113 71. The ______________ is the European Union’s executive body and sole initiator of legislation. 99
  • CHAPTER 4: MANAGING GLOBALLY a. European Commission b. European Community c. Euro d. Economic Monetary Union ANSWER: A, Knowledge, Difficult, p. 114 72. A major stage of the European Union program has been to complete formation of the common internal market. This involves eliminating all of the following except _________ barriers. a. physical b. nationalistic c. technical d. financial ANSWER: B, Knowledge, Moderate, p. 114 73. The European Union has increased market opportunities and fostered competition for companies outside of Europe. For example, ____________, which had no previous global experience, began operating in Europe. a. Ford b. NBC c. IBM d. UPS ANSWER: B, Knowledge, Difficult, p. 114 74. ISO is __________. a. Idustriale Supervision Organisation b. Industrial Standards Ordinance c. International Organization for Standardization d. International Standards of Operations ANSWER: C, Knowledge, Moderate p. 114 100
  • CHAPTER 4: MANAGING GLOBALLY Learning Objective 5 Strategies for International Business 75. Strategies for international operations include all of the following except ____________. a. exporting b. licensing c. franchising d. manufacturing ANSWER: D, Knowledge, Moderate, p. 115`jh 76. The strategies that are available to organizations for conducting international business range from low to high in _______________ and _______________. a. costs; revenues b. simplicity; complexity c. exporting; importing d. complexity; resource commitment ANSWER: D, Knowledge, Moderate, p. 114 77. _____________ refers to the structure of the organization and the amount of coordination required to deliver a product or service to customers. a. Integration b. Complexity c. Differentiation d. Entanglement ANSWER: B, Knowledge, Easy, pp. 114–115 78. ____________ refers to the amount of tangible financial assets and information support systems that the organization dedicates to its global strategy. a. Complexity b. Leverage c. Resource commitment d. Return on assets ANSWER: C, Knowledge, Easy, p. 115 79. Maintaining facilities in a home country and transferring goods and services abroad for sale in foreign markets is known as a(n) _________ strategy. a. exporting b. multinational c. importing d. global ANSWER: A, Knowledge, Moderate, p. 115 101
  • CHAPTER 4: MANAGING GLOBALLY 80. When a domestic firm wants to move toward global operations, its first policy should be to __________. a. study the effects of currency exchange b. build a global customer base c. find a partner in the desired country d. acquire basic language skills ANSWER: B, Knowledge, Moderate, p. 115 81. An arrangement in which the export sale of goods and services by a producer is linked to an import purchase of other goods and services is known as __________. a. franchising b. exporting c. countertrade d. an alliance ANSWER: C, Knowledge, Moderate, p. 116 82. Countertrade is a particularly effective way of trading with countries that have _________. a. human rights sanctions against them b. difficulties trading in hard currency c. hyperinflation d. free trade agreements ANSWER: B, Knowledge, Easy, p. 116 83. A licensing strategy involves a contractual arrangement whereby a firm in one country gives other domestic or foreign firms the right to use all of the following except a __________. a. technology b. patent c. trademark d. royalty ANSWER: D, Knowledge, Moderate, p. 116 84. A __________ strategy for entering foreign markets makes it possible to avoid large capital investments or getting involved with the details of daily production and management. a. licensing b. export c. multinational d. multidomestic ANSWER: A, Application, Moderate, p. 116 102
  • CHAPTER 4: MANAGING GLOBALLY 85. Which of the following does a franchisee not receive from the franchiser? a. training and technology transfer b. complete assortment of materials c. low interest loans d. trademarks and marketing program ANSWER: C, Knowledge, Easy, p. 116–117 86. __________ is a special type of licensing agreement whereby an organization provides the product, technology, process and/or trademark, and most of the marketing program. a. Brand awareness b. Exporting c. Franchising d. Work-life linkages ANSWER: C, Knowledge, Easy, p. 116 87. ___________ permits companies to maintain marketing control while passing along many of the costs, risks, and responsibilities. a. Franchising b. Exporting c. Outsourcing d. Private labeling ANSWER: A, Application, Difficult, p. 117 88. A(n) __________ strategy is the pooling of companies' physical, financial, and human resources to achieve common goals. a. licensing b. alliance c. exporting d. franchising ANSWER: B, Knowledge, Moderate, p. 117 89. The formation of alliances, especially joint ventures, has been stimulated by all of the following needs and desires except __________. a. the need to share and lower the costs of high-risk, technologically intensive development projects, such as computer-based information systems b. the desire to maximize costs by sharing the large fixed-cost investments for manufacturing plants in some locations and in industries such as autos and steel. c. the desire to learn another firm’s technology and special processes or to gain access to customers and distribution channels d. the desire to participate in the evolution of competitive activity in growing global industries ANSWER: B, Knowledge, Difficult, p. 117 103
  • CHAPTER 4: MANAGING GLOBALLY 90. Alliances provide entry into markets that are ______________ because of strict political requirements or great economic uncertainty. a. multinational b. international c. multidomestic d. risky ANSWER: D, Knowledge, Easy, p. 117 91. __________ requires foreign companies to form some sort of alliance with local participants rather than establish wholly owned subsidiaries in the country. a. Mexico b. Finland c. China d. South Africa ANSWER: C, Knowledge, Moderate, pp. 117–118 92. A(n) __________ strategy involves adjusting products, services, and practices to individual countries or regions. a. licensing b. exporting c. franchising d. multidomestic ANSWER: D, Knowledge, Moderate, p. 118 93. Sheila Dinkler has convinced the management of Joske Products to adjust their product line and their business practices to meet the needs of the countries that purchase their products. Sheila is asking her organization to adopt a(n) __________ strategy. a. multinational b. multidomestic c. exporting d. international ANSWER: B, Application, Moderate, p. 118 94. Nick Larsen is an employee with Merrill Lynch. Top management believes that the benefits of local response will outweigh the extra costs of customizing. Merrill Lynch has developed a __________ strategy. a. multidomestic b. global c. franchising d. international ANSWER: A, Application, Moderate, p. 118 104
  • CHAPTER 4: MANAGING GLOBALLY 95. A(n) ____________________ is an organizational unit that is accountable for both the revenues generated by its activities and the costs of those activities. a. business entity b. domestic center c. profit center d. collaboration center ANSWER: C, Knowledge, Moderate, p. 118 96. Disney’s theme parks outside America have incorporated unique features that meet the special needs and interests of local customers. Disney is responding with a __________ strategy. a. global b. international c. diversity d. multidomestic ANSWER: D, Application, Difficult, p. 118 97. A(n) __________ strategy stresses worldwide consistency, standardization, and low relative cost. a. exporting b. multidomestic c. global d. multinational ANSWER: C, Knowledge, Easy, p. 118 98. A Black & Decker subsidiary in one country manufactures parts of products, such as power drills, and exchanges components with subsidiaries in other countries to complete the products. This illustrates the __________ strategy. a. international b. importing c. multidomestic d. global ANSWER: D, Application, Moderate, p. 118 99. For the ____________ strategy to succeed, the customers of global firms must have needs that are basically similar in many countries. Thus, primary marketing strategies are highly transferable across national boundaries. a. exporting b. multidomestic c. global d. multinational ANSWER: C, Knowledge, Moderate, p. 118 105
  • CHAPTER 4: MANAGING GLOBALLY 100. ICI has abandoned its traditional country-by-country organization in favor of worldwide business units. It wants employees to be less nationalistic and more concerned with what happens outside their country. ICI uses the ___________ strategy. a. exporting b. multidomestic c. global d. multinational ANSWER: C, Knowledge, Moderate, pp. 118–119 101. ICI makes paint products for global markets at its Delaware headquarters because __________. a. huge local sales volume invites product development b. aggressive global marketing talent is available c. American paint researchers have proven to be the best d. special tax incentives are available to Delaware corporations ANSWER: A, Application, Difficult, p. 119 102. ICI is a global company that is more commonly associated with its popular __________ brand. a. Hitachi b. Glidden c. Toys R Us d. Mountain Dew ANSWER: B, Knowledge, Easy, pp. 118–119 103. Various needs must be addresses for a multinational’s global strategy to be successful. Which of the following is one of these needs? a. The firm needs to be a significant competitor in the world’s most important regional markets—North America, Europe, and Asia. b. Most new goods and services need to be developed for the whole world. c. Profit targets should be based on product lines rather than regions or countries of the world. d. All of the above. ANSWER: D, Knowledge, Difficult, pp. 119–120 106
  • CHAPTER 4: MANAGING GLOBALLY Essay Questions Learning Objective 1 1. Wal-Mart is pursuing continued growth by going global. Although it depends on a proven business model that translates internationally, there are some serious issues that the company must address. What are these problems? a. high-volume inventory and supply networks do not function well in some countries b. some highway systems are not conducive to reliable truck deliveries c. store sizes are typically smaller than North America d. local managers need to be given more latitude to buy from vendors than their American counterparts e. Wal-Mart is finding it necessary to become a contractor, importer, and wholesaler in order to reduce inventories and speed up supply lines Moderate, p. 98 Learning Objective 2 2. Describe some of the ways that power distance influences cultural differences between American and Mexican workers. a. Americans prefer small power distances, while Mexicans are more comfortable with large power distances. b. Mexicans believe that an order of inequality is natural, while Americans try to minimize inequality. c. Mexicans believe that managers are privileged and should be inaccessible. Americans want their managers to be accessible and generally feel that organizational hierarchies are a convenience rather than being essential to social structure. d. Mexicans identify themselves by title, while Americans regard this as overly pretentious. e. Mexicans prefer a highly directive management style and are uncomfortable if the manager delegates decisions. Americans are more likely to decentralize their decision making. Moderate, pp. 102–104 3. What cultural factors affect international management? a. View of social change (passive or active) b. Time orientation (scarce or unlimited) c. Language (verbal and nonverbal differences) d. Value systems (such as individualism versus collectivism) e. Cultural distance (differences in religion, race, social norms, and language) Moderate, pp. 101–105 107
  • CHAPTER 4: MANAGING GLOBALLY Learning Objective 3 4. Political risk factors may be grouped into four principal categories. Describe three of these risk factors. a. Domestic instability is the amount of subversion, revolution, assassinations, guerrilla warfare, and government crisis in an country. b. Foreign conflict is the degree of hostility that one nation expresses to others. c. Political climate is the likelihood that a government will move to the far left or far right. d. The economic climate reflects the extent of government control of markets and financial investments, as well as government support services and capabilities. Difficult, pp. 106–107 Learning Objective 4 5. What is the main purpose of the three significant international trade agreements discussed in the text? a. The World Trade Organization (WTO) was established as an outgrowth of the General Agreement on Tariffs and Trade (GATT). This represented a series of negotiated understandings regarding trade and related issues among the participating countries. The WTO administers WTO trade agreements, provides a forum for trade negotiations, handles trade disputes between nations, monitors national trade policies, and provides technical assistance and training for people in developing countries. b. The North American Free Trade Agreement (NAFTA) is intended to reduce and eliminate numerous tariffs and most nontariff barriers as a means of encouraging investment and stimulating trade among Canada, Mexico, and the United States. c. The European Union (EU) is an organization of 18 member countries. Its primary goals are to create a single market through the removal of trade barriers, and establishing the free movement of goods, services, people, and investment capital among its member countries. Difficult, pp. 110–114 Learning Objective 5 6. Why do organizations use alliances, especially joint ventures? 1. The need to lower the costs of high-risk new products or manufacturing, technologically intensive development projects, such as computer-based information systems. 2. The desire to lower costs by sharing the large fixed-cost investments for manufacturing plants in some locations and in industries such as autos and steel. 3. The desire to learn another firm’s technology and special processes or to gain access to customers and distribution channels. 4. The desire to participate in the evolution of competition in growing global industries. Difficult, p. 117 108
  • CHAPTER 4: MANAGING GLOBALLY 7. What are three of the ingredients needed for a multinational’s global strategy to be successful? Also, identify examples of each. a. The firm needs to be a significant competitor in the world’s most important regional markets—North America, Europe, and Asia. b. Most new goods and services need to be developed for the whole world—such as American Express Co.’s financial services and Kodak’s film and related products. c. Profit targets should be based on product lines—such as an ICI line of paint—rather than countries or regions of the world. d. Decisions about products, capital investments, research and development, and production should be based on global considerations—such as ICI’s choice of strategic locations for plants for producing chemicals and related products in various regions of the world. e. Narrow-minded attitudes—such as “this isn’t how we operate here”—must be overcome, possibly by training employees to think globally, sending them to various countries for first-hand exposure, and giving them the latest information technology. f. Foreign managers need to be promoted into senior ranks at corporate headquarters. Difficult, p. 119–120 8. Explain four of the main strategies for international operations. a. Exporting strategy—involves maintaining facilities within a home country and transferring goods and services abroad for sale in foreign markets. b. Licensing strategy—involves a firm (the licensor) in one country giving other domestic or foreign firms (licensees) the right to use a patent, trademark, technology, production process, or product in return for the payment of a royalty or fee. c. Franchising strategy—involves a parent organization (the franchiser) granting other companies or individuals (franchisees) the rights to use its trademarked name and to produce and sell its goods or services. d. Alliance strategy—involves agreeing with other companies to pool physical and human resources to achieve common goals. e. Multidomestic strategy—involves adjusting products, services, and practices to individual countries or regions. f. Global strategy—stresses worldwide consistency, standardization, and low relative costs. Difficult, pp. 115–118 109