Deck 17: Emerging Markets

Question 1

The fair trade system attempts to intervene directly on both market and nonmarket issues by coordinating the flow of consumer revenue to participating producers.

Answer 1

False

Question 2

One concern with the fair trade concept was whether retailers would charge such a large price premium that demand would be suppressed.

Answer 2

True

Question 3

Culture can be important, not only shaping the opportunities and risks in a country but also for the likelihood that a company can implement its market strategy.

Answer 3

True

Question 4

The immediate source of many risks is the weak rule of law in a country.

Question 5

The fair trade movement started in the United States in 1988.

Question 6

Banco Compartamos is am example of microfinance institution.

Question 7

Transparency International's Corruption Perceptions Index (CPI) pertains to the corruption in a country or the demand side of corruption.

Question 8

Microfinance is independent of nonmarket risks.

Question 9

Emerging market countries face financial restrictions, price controls, and regulatory risks when doing business in developed countries.

Question 10

The fair trade movement was begun to improve the lives of poor farmers and workers trapped by market conditions.

Question 11

The study of the nonmarket environment of an emerging market country involves assessment of labor market, demand and supply relations, and investigation of the competitiveness of incumbent companies.

Question 12

It is clear that the customers at the bottom of the pyramid, those who lived on less than $2 a day, are highly profitable.

Question 13

The principles of nonmarket strategy for operating in democracies cannot simply be transported to emerging markets, particularly for countries that are not democratic and where the rule of law is weak.

Question 14

To use a country to export goods to better developed countries and markets requires foreign markets to be closed, which if generally the case in developing countries.

Question 15

Business groups as well as individual companies have weaker incentives to interact with government when it controls markets, lets contracts, and regulates business activity.

Question 16

The source of all the revolutions in the Middle East was to seek democracy.

Question 17

Assessment measures developed for countries and the growth of political consultancies help draw conclusions about a country before business can be established.

Question 18

At the level of an individual firm, successful participation in a domestic market requires specific knowledge of that market so as to apply the firm's expertise.

Question 19

Rule of law can override politics and political ties when doing business in emerging market countries.

Question 20

Microfinance, in its modern version, was introduced by Muhammad Yunus, a Bangladeshi economist.

Question 21

Which of the following is true of microfinance?

A) It is a not-for-profit concept.
B) The effects of lending are lower for higher-income borrowers.
C) It is subject to nonmarket risks.
D) Those borrowing for non-business purposes decreased household consumption.

Question 22

An assessment of the nonmarket environment of an emerging market economy will include ________.

A) demand and supply relations in the market
B) competitiveness of incumbent companies
C) assessment of the labor market
D) understanding the impact of corruption

Question 23

Media restrictions, ethnic and religious conflicts, political corruption, and political megalomania are some of the risks faced in emerging market countries.

Question 24

The Index of Economic Freedom is annually published by ________.

A) Freedom House
B) the World Bank
C) the Heritage Foundation and the Wall Street Journal
D) Transparency International

Question 25

Which of the following provides an assessment of political risk "based on criteria including stability, democratic accountability, and economic risk"?

A) Country Watch
B) Deutsche Bank Research
C) IMD Switzerland
D) Transparency International

Question 26

At the level of an individual firm, successful participation in a domestic market requires ________.

A) inadequate capital markets for financial needs
B) specific knowledge of that market so as to apply the firm's expertise
C) lower investment rates
D) drawing conclusions from the various measures and assessments for countries.

Question 27

TMX, a manufacturing company based in the U.S. decides to expand to emerging market countries in Africa. The company uses individualized incentives to motivate employees in its new branches but find that such incentive programs are not working. Which of the following is the most likely explanation for its failure?

A) The transparency of regulation and the nonservicing of payments is high in emerging markets
B) The demand side of corruption is high.
C) The collectivist culture of the country is hostile to such incentive programs.
D) The performance of employees in emerging markets is independent of the incentives provided.

Question 28

Grameen Bank loaned to groups or circles of women, who were responsible for allocating the borrowings among themselves and for ensuring that the borrowings were repaid. This is an example of ________.

A) market risk hedging
B) microfinance
C) micropatronage
D) fair trade movement

Question 29

High dependence on foreign finance and a move toward external debt denominated in foreign currencies explains the breakdown of emerging market economies during the recent global financial and economic crisis.

Question 30

Freedom House publishes an evaluation of ________.

A) personal autonomy and individual rights
B) trade freedom
C) government size
D) corruption index

Question 31

Which of the following is true of emerging markets?

A) Changes occur rapidly in emerging markets countries and risk often accompanies opportunity.
B) Making generalizations helps business in emerging market countries because they share similar problems.
C) The principles of nonmarket strategy in democracies can be simply transported to emerging markets that are not democratic.
D) Foreign direct investment has flowed to relatively unstable and high-risk countries.

Question 32

The World Bank provides an evaluation of the Ease of Doing Business in a country, which reflects the ________.

A) relationship between economic prosperity and economic freedoms
B) bureaucratic, regulatory, and administrative barriers a company can face
C) demand size of corruption in a country
D) freedom for countries around the world

Question 33

Which of the following is true of business groups in emerging market countries and

A) political relationships can become a liability during regime changes
B) relying on political relationships reduce risks
C) firms with strong political relationships rely more on global financial markets
D) firms with strong political relationships have higher transparency

Question 34

Emerging markets countries have imposed a variety of restrictions on foreign direct investment, foreign exchange transactions, and the repatriation of earnings.

Question 35

________ is an example of an opportunity to use an emerging market country to export goods to better developed countries and markets?

A) The extractive industries
B) Wholesale and retail sales
C) Domestic transportation and telecommunication
D) Domestic consumption economy

Question 36

________ distorts economic activity and can substantially reduce GDP.

A) Personal autonomy
B) Competitiveness
C) Economic freedom
D) Corruption

Question 37

In both democracies and nondemocracies, however, obtaining access to government officeholders, whether for the purpose of lobbying or using personal ties or political relationships, can be important for success.

Question 38

Which of the following is a part of BRIC countries?

A) Belgium
B) India
C) Canada
D) Rwanda

Question 39

For emerging market countries strategies for influencing outcomes on issues often involve the development of relationships with government officials. This provides a setting for corruption, and vigilance is required to make certain that managers and advisors do not succumb to temptation.

Question 40

Which of the following is an emerging market country?

A) Australia
B) Canada
C) China
D) United States of America

Question 41

The fair trade movement was begun to improve the lives of poor farmers and workers trapped by ________ conditions.

A) political
B) social
C) nonmarket
D) market

Question 42

Which of the following is the first step of the three-component approach to managing policy risk?

A) have a structure analogous to that of the intelligence community that can provide information and assessments.
B) understand the preferences of the actors in the market and nonmarket environments
C) provide a framework for identifying preferences and collecting information
D) influence the risk through collective action and coalitions

Question 43

What are the two basic types of opportunities in emerging markets?

Question 44

Discuss the sources and types of risks in emerging market countries.

Question 45

Which of the following is true of risks in emerging markets?

A) Domestic risks arise from a broader range of factors than do foreign risks.
B) Risks in emerging markets can differ in magnitude and nature from those of developed countries.
C) Risks are smaller in magnitude in emerging markets.
D) Risks are independent of the country of origin for foreign direct investment and trade.

Question 46

What are the seven factors that explain the resilience of emerging market economies (EMEs) during the recent global financial and economic crisis?

Question 47

Which of the following is the last step of the three-component approach to managing policy risk?

A) have a structure analogous to that of the intelligence community that can provide information and assessments.
B) understand the preferences of the actors in the market and nonmarket environments
C) provide a framework for identifying preferences and collecting information
D) influence the risk through collective action and coalitions

Question 48

Discuss management in the nonmarket environment.

Question 49

The ________ can be understood as an approach to improving the well-being of poor farmers in developing countries by circumventing markets and coordinating market behavior.

A) fair trade movement
B) Clayton Act
C) Freedom House
D) Ethics in Government Act of 1978

Question 50

Which of the following frameworks for management and strategy formulation in the nonmarket environment is NOT applicable to an authoritarian government?

A) identifying issues
B) identifying interests
C) identifying electoral strategies
D) identifying institutions

Question 51

Describe the three-component approach to managing policy risk that was proposed by Henisz and Zellner.

Question 52

Which of the following is true of management in the nonmarket environment?

A) Obtaining information about the agenda of regulators and administrators can be crucial to developing a successful strategy.
B) It requires a divided strategy with a strong market component to share opportunities and deal with risks.
C) Obtaining access to government officeholders in emerging markets is less important because government is not bound by due process requirements.
D) The weaker the rent chain in an emerging markets country; the more effective a nonmarket strategy is likely to be.

Question 53

Most emerging markets countries are not well integrated into global markets, and this can increase the cost of capital yet provide a measure of insulation from risks in global markets. Which of the following types of risks is applicable here?

A) regulatory risk
B) financial restrictions
C) political corruption
D) market risk hedging

Question 54

The fair trade movement began in ________.

A) Australia
B) the United Kingdom
C) the United States
D) the Netherlands

Question 55

The fair trade system attempts to intervene directly on both the ________ and the ________ sides of the market by coordinating the flow of consumer revenue to participating producers.

A) production, distribution
B) branded, non-branded
C) demand, supply
D) regulated, unregulated