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Chapter 6  the political environment a critical concern
 

Chapter 6 the political environment a critical concern

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International Marketing MSQ-T/F

International Marketing MSQ-T/F

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    Chapter 6  the political environment a critical concern Chapter 6 the political environment a critical concern Document Transcript

    • Chapter 6 The Political Environment: A Critical ConcernTrue/False Questions 1. Only companies that have constructed their business models on shaky legal ground should concern themselves with the political environment when attempting to do business abroad. Answer: False Page: 158 Difficulty: Easy Type: Comprehension 2. International law recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its citizens conduct business. Answer: True Page: 158 Difficulty: Moderate Type: Fact 3. Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. Answer: True Page: 158 Difficulty: Moderate Type: Definition 4. Adherence to World Trade Organization (WTO) rules means a loss of sovereignty to its member nations. Answer: True Page: 159 Difficulty: Moderate Type: Comprehension 5. At the top of the list of political issues concerning foreign businesses is the issue of taxation and tariffs. Answer: False Page: 159 Difficulty: Hard Type: Comprehension 6. Considering recent events in Mexico, a new era in Mexicos economic and social history began when President Fox assumed office because of his communist/socialist background. Answer: False Page: 160 Difficulty: Moderate Type: Comprehension and Application 7. In Mexico, when the PRI party was defeated, seventy-one years of uninterrupted rule came to an end. Answer: True Page: 160-161 Difficulty: Moderate Type: Fact
    • Chapter 6 The Political Environment: A Critical Concern 8. Socialism can best be described as an intense feeling of national pride and unity, an awakening of a nations people to pride in their country. Answer: False Page: 162 Difficulty: Easy Type: Definition 9. By the late 1980s, the foreign investor, once feared as a dominant tyrant that threatened economic development, is often sought after as a source of needed capital investment. Answer: True Page: 162 Difficulty: Moderate Type: Fact 10. After 91 years of secrecy, Coca-Cola revealed its “secret Coke” formula so it could continue to do business in India (the Indian government mandated the revelation). Answer: False Page: 163, Crossing Borders 6.1 Difficulty: Moderate Type: Fact and ApplicationMultiple Choice Questions 1. When the United States and the European Union got into a “banana war” recently, where did both sides go to settle the matter? A) The United Nations B) The World Court C) The Organization of American States D) The World Trade Organization E) none of the above Answer: D Page: 157, Global Perspective Difficulty: Moderate Type: Comprehension and Application 2. When the World Trade Organization recently attempted to settle what was called a “banana war,” what was the outcome? A) The European Union won and received payments from the United States. B) The matter was declared a draw. C) Both sides in the matter were instructed to cease and desist. D) The WTO ruled in favor of the United States, however, the EU ignored the ruling. E) The WTO ruled in favor of the United States and the matter was ended. Answer: D Page: 157, Global Perspective Difficulty: Hard Type: Comprehension and Application 3. ___________ recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its
    • Chapter 6 The Political Environment: A Critical Concern citizens conduct business. A) Napoleonic Law B) Code Law C) Traditional Law D) International Law E) Civilized Law Answer: D Page: 158 Difficulty: Moderate Type: Fact 4. In the context of international law, a _____________ state is independent and free from all external control. A) bounded B) sovereign C) legal D) free-born E) none of the above Answer: B Page: 158 Difficulty: Easy Type: Definition 5. A sovereign state, in the context of international law, has all of the following characteristics EXCEPT: A) is obligated to be a member of the United Nations. B) is independent and free from all external control. C) enjoys full legal equality with other states. D) governs its own territory. E) all of the above are true. Answer: A Page: 158 Difficulty: Moderate Type: Comprehension 6. __________ refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. A) Sovereignty B) Government C) A cartel D) An international partnership E) A trade pact Answer: A Page: 158 Difficulty: Moderate Type: Definition 7. The ideal political climate for a multinational firm is: A) a country where there are no laws. B) a country where favors can be purchased cheaply. C) a stable, friendly government. D) a government where absolute power is a reality.
    • Chapter 6 The Political Environment: A Critical Concern E) an authoritarian government that can be dealt with through non-legal channels. Answer: C Page: 159 Difficulty: Moderate Type: Comprehension 8. At the top of the list of political issues concerning foreign businesses is the: A) ruling party of a country. B) the political history of a country. C) the voting process of a country. D) the court system of a country. E) the stability or instability of prevailing government policies. Answer: E Page: 159 Difficulty: Moderate Type: Comprehension 9. The PRI party in Mexico has been the dominant political party in the country for a number of years. This dominance ended when Vicente Fox was elected as president in 2000. How many years of uninterrupted rule did the PRI party enjoy in Mexico prior to its historic defeat? A) 55 years B) 60 years C) 71 years D) 89 years E) 103 years Answer: C Page: 160 Difficulty: Hard Type: Fact 10. The PRI party ruled Mexico for seventy-one years prior to 2000. Which of the following halted PRIs rule in Mexico? A) a scandal involving cocaine and drug trafficking B) Vicente Fox was elected President of Mexico C) the United States withdrew its support D) NAFTA was created E) none of the above Answer: B Page: 160 Difficulty: Moderate Type: FactFill in the Blank Questions 1. The term __________ refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. Answer: sovereignty Page: 158 Difficulty: Moderate Type: Definition 2. At the top of the list of political issues concerning foreign businesses is the ___________ of prevailing government policies.
    • Chapter 6 The Political Environment: A Critical Concern Answer: stability (instability) Page: 159 Difficulty: Hard Type: Comprehension 3. In Great Britain, the __________ Party traditionally has tended to be more restrictive regarding foreign trade than the other political parties in the country. Answer: Labour Page: 161 Difficulty: Moderate Type: Fact 4. ___________ can best be described as an intense feeling of national pride and unity, an awakening of a nations people to pride in their country. Answer: Nationalism Page: 162 Difficulty: Easy Type: Definition 5. Feelings of ___________ are expressed in a variety of ways such as a call to “buy our countrys products only” or “Buy American.” Answer: nationalism Page: 162 Difficulty: Easy Type: Application 6. ___________ is the seizing of a companys assets without payment. Answer: Confiscation Page: 164 Difficulty: Moderate Type: Definition 7. __________ occurs when a government seizes an investment but some reimbursement for the assets is made. Answer: Expropriation Page: 164 Difficulty: Moderate Type: Definition 8. When host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a companys management, _____________ has occurred. Answer: domestication Page: 164 Difficulty: Hard Type: Definition 9. _________ controls stem from shortages of foreign exchange held by a country. Answer: Exchange Page: 165 Difficulty: Easy Type: Definition and Comprehension 10. Countries often require a portion of any product sold within the country to have local content (contain locally made parts); these laws are called __________ laws. Answer: local-content Page: 165 Difficulty: Easy Type: Definition
    • Chapter 6 The Political Environment: A Critical ConcernEssay Questions 1. Describe the characteristics of a sovereign state. Page: 158 Difficulty: Moderate Type: Definition and Comprehension Answer: A sovereign state is independent and free from all external control; enjoys full legal equality with other states; governs it own territory; selects its own political, economic, and social systems; and has the power to enter into agreements with other nations. 2. Describe the concept of nationalism. Page: 162 Difficulty: Moderate Type: Definition and Comprehension Answer: Nationalism can best be described as an intense feeling of national pride and unity, an awakening of a nations people to pride in their country. This pride can take an anti- foreign business bias, and minor harassment and controls of foreign investment are supported, if not applauded. 3. Discuss and compare the terms confiscation, expropriation, and domestication. Page: 164 Difficulty: Moderate Type: Definition Answer: Confiscation is the seizing of a companys assets without payment. Expropriation occurs where the government seizes and investment but some reimbursement of assets is made. Domestication occurs when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a companys management. For additional information see page 164. 4. List and briefly discuss the various economic risks that international companies must face when they seek to market abroad. Page: 165-166 Difficulty: Hard Type: Comprehension Answer: The text lists six economic risks—exchange controls, local-content laws, import restrictions, tax controls, price controls, and labor problems. See pages 165-166 for analysis and discussion of the various economic risks.
    • Chapter 6 The Political Environment: A Critical Concern 5. Relations between governments and MNCs are generally positive if the investment proposed relates one or more of five situations. What are those five situations? Page: 173 Difficulty: Hard Type: Comprehension Answer: The five situations are if the investment: (1) improves the balance of payments by increasing exports or reducing imports through import substitution; (2) uses locally produced resources; (3) transfers capital, technology, or skills; (4) creates jobs; or (5) makes tax contributions.Application Questions 1. Brazil would like to increase its control and ownership of foreign investments in its country. However, Brazil does not want to cut off or discourage foreign investment. Cite and describe a political risk strategy that Brazil could follow that would meet the aforementioned objective. Page: 164, 175 Difficulty: Hard Type: Comprehension and Application Answer: Brazil could choose domestication (planned domestication). Domestication occurs when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a companys management. For additional information see pages 164 and 175. 2. Richard Branch is considering a multi-million dollar investment in Chile. He hopes that the investment will be positively received by the Chilean government. He does not want anti-MNC feelings to block the deal. Relations between MNC and foreign investors can be positive. What actions should Mr. Branch consider to ensure that his investment offer would be positively received by the Chilean government? Page: 173 Difficulty: Hard Type: Application and Comprehension Answer: According to information presented in the text, Mr. Branch should make sure that his investment provides at least one of the following benefits to the Chilean government and/or the people of Chile—benefits should (1) improve the balance of payments by increasing exports or reducing imports through import substitution; (2) use locally produced resources; (3) transfer capital, technology, or skills; (4) create jobs; or (5) make tax contributions.