Deck 1: Introduction: What Is International Business

Question 1

International business is also known as which of the following?

A) born global business
B) laissez-faire business
C) cross-border business
D) multi-hub business

Answer 1

C

Question 2

Each of the following represents a factor of production EXCEPT ________.

A) manufacturing infrastructure
B) technology
C) government regulations
D) managerial talent

Answer 2

C

Question 3

Each of the following has contributed to the rapid growth of trade among nations EXCEPT ________.

A) the growth of emerging market countries
B) the increase in trade barriers
C) advances in information technology
D) the liberalization of markets

Answer 3

B

Question 4

Which of the following is subject to importing and exporting?

A) both finished products and intermediate goods
B) finished products but not intermediate goods
C) intermediate goods but not raw materials
D) raw materials and components, but not finished products

Question 5

________ is the total value of products and services produced in a country over the course of a year.

A) GDP
B) CAD
C) FDI
D) PPP

Question 6

Freehold Investment Corp. (Scenario)
Dan Freehold and his business partner, Bethany Quinn, are successful investors engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand their foreign investing operations. They hold a meeting for individuals interested in participating in certain overseas ventures.
At the meeting, Dan explains to the attendees that Freehold direct investment projects differ from international trade in that ________.

A) the firm itself is crossing international borders to purchase foreign assets
B) the firm is restricting its investments to stocks and does not purchase mutual funds
C) the firm has chosen to focus strictly on the technology sector
D) the firm is engaging in the transfer of products across national borders

Question 7

Which of the following best explains why export growth has outpaced the growth of domestic production during the last few decades?

A) Both world exports and domestic production have grown significantly over the past 30 years.
B) The cost to import products is generally higher than the cost to produce domestic products.
C) Growth in gross domestic product in most countries has steadily increased since 1970.
D) Advanced economies now source many of their consumable products from low-cost manufacturing nations.

Question 8

Freehold Investment Corp. (Scenario)
Dan Freehold and his business partner, Bethany Quinn, are successful investors engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand their foreign investing operations. They hold a meeting for individuals interested in participating in certain overseas ventures.

-Dan discusses an investment opportunity that involves the purchase of selected securities from the Chinese stock market. This opportunity represents which type of international investment?

A) indirect production
B) international portfolio
C) foreign direct
D) domestic securities

Question 9

Freehold Investment Corp. (Scenario)
Dan Freehold and his business partner, Bethany Quinn, are successful investors engaged in a variety of enterprises. Recently Dan and Bethany have decided to expand their foreign investing operations. They hold a meeting for individuals interested in participating in certain overseas ventures.

-Bethany presents another opportunity that involves the purchase of a manufacturing plant in South Korea. She explains that this type of strategy will involve ________ ownership on the part of the firm.

A) indirect
B) passive
C) short-term
D) active

Question 10

International business is defined as the performance of ________ activities by firms across national borders.

A) marketing and fiduciary
B) trade and investment
C) finance and operational
D) accounting and auditing

Question 11

International business is performed not just by individual firms, but also governments and international agencies.

Question 12

International Trade Summit (Scenario)
An international trade summit is held in Geneva, Switzerland. The purpose of the summit is to cooperatively develop policies that promote international trade. Representatives from 50 different countries attend the summit.
One of the attendees represents a leading nation in the international merchandise trade. This attendee is most likely from which of the following countries?

A) New Zealand
B) Germany
C) Kenya
D) Saudi Arabia

Question 13

A few decades ago, international business was largely the domain of ________.

A) service firms
B) multinational firms
C) smaller firms
D) all of the these

Question 14

International Trade Summit (Scenario)
An international trade summit is held in Geneva, Switzerland. The purpose of the summit is to cooperatively develop policies that promote international trade. Representatives from 50 different countries attend the summit.
One of the attendees represents a leading nation in the international services trade. This attendee is most likely from which of the following countries?

A) Brazil
B) Greece
C) Singapore
D) South Africa

Question 15

________ refers to the transfer of assets to another country or the acquisition of assets in that country.

A) International investment
B) International trade
C) Importing
D) Exporting

Question 16

Phillip Hardy, one of the potential investors, expresses the desire to purchase only those types of assets in which he can maintain a relatively short-term interest. Which of the following investment opportunities would be most suited for Mr. Hardy?

A) a venture that gives investors ownership of the equipment used by multiple South African mining companies
B) an initiative to purchase the technology assets of an Indian consulting firm
C) the Freehold Eastern Growth Fund, which purchases Eastern European growth stocks
D) the Freehold World Climb Project, which maintains partial ownership of an Australian hiking equipment production plant

Question 17

Which of the following best characterizes the development of international business?

A) It has existed in some form for centuries.
B) It first started in Europe.
C) It developed after the year 2000.
D) Its development has slowed in recent years.

Question 18

Which of the following is another term for importing?

A) capital investment
B) supply side development
C) global sourcing
D) unilateral procurement

Question 19

International Trade Summit (Scenario)
An international trade summit is held in Geneva, Switzerland. The purpose of the summit is to cooperatively develop policies that promote international trade. Representatives from 50 different countries attend the summit.
One summit attendee pointed out that the total value of her country's products trade typically accounted for more than 100 percent of her nation's GDP. This attendee most likely represents ________.

A) Japan
B) United Kingdom
C) France
D) Netherlands

Question 20

Which of the following would NOT be considered an example of foreign direct investment (FDI)?

A) cross-border purchase of a textile plant
B) cross-border purchase of stocks
C) purchase of capital assets of a foreign company
D) purchase of foreign land for business operations

Question 21

Over the last few decades, export activity by nations has grown more quickly than has domestic production.

Question 22

International business today is predominantly the domain of large, multinational companies.

Question 23

Although services trade is growing rapidly, the value of merchandise trade is still much larger.

Question 24

What are the main differences between products and services? In a short essay, explain the difference between the two and provide three examples of each. Which sector has seen the greatest growth in international trade in recent years?

Question 25

In the past, international trade and investment activities were mainly conducted by companies that sold services.

Question 26

Fluctuating exchange rates are an example of which of the following?

A) country risk
B) political risk
C) currency risk
D) cross-cultural risk

Question 27

Which of the following is NOT an example of a cross-cultural risk factor?

A) negotiation patterns
B) decision-making styles
C) costs of production
D) ethical practices

Question 28

Which of the following types of risk is also known as political risk?

A) currency risk
B) cross-cultural risk
C) commercial risk
D) country risk

Question 29

In a short essay, explain the four trends that provide evidence for the globalization of markets. Provide an example to illustrate one of the trends.

Question 30

In a short essay, explain the main differences between international portfolio investment and foreign direct investment.

Question 31

The globalization of markets refers to the growing independence and self-sufficiency of countries worldwide.

Question 32

In a short essay, explain the meaning of international trade. Describe the two major forms through which international trade takes place.

Question 33

Exporting is an entry strategy involving the sale of products or services to customers located abroad.

Question 34

Overseas Expansion (Scenario)
Whittaker Semiconductors has recently decided to expand its operations overseas. Amanda Quan, Vice President of International Business, assigned a team of investigators to analyze the risks faced by the company in making this move. Of particular interest were the risks that might affect the success of a new production plant to be located in one of three potential countries.
Philip Baxter reported on the risks associated with establishing the plant in Country A. The most significant risk, in his view, was posed by the government's complex bureaucratic structure. Philip reported the likelihood of significant administrative delays in opening the plant. The risk identified by Philip is an example of which of the following?

A) country risk
B) commercial risk
C) currency risk
D) cross-cultural risk

Question 35

What is meant by the term "entrepôt economies"? In a short essay, explain the concept and provide an example.

Question 36

What is international business, and how has it transformed the world economy?

Question 37

In a short essay, identify three sectors in the service industry that are internationalizing rapidly. Explain the types of activities conducted within each sector, and provide examples of three companies that operate in each.

Question 38

A country's economic assets are also known as factors of production.

Question 39

The two primary types of international investment are portfolio investment and foreign direct investment.

Question 40

In a short essay, describe the major trends in the growth of foreign direct investment (FDI) since the 1980s.

Question 41

In a short essay, discuss how international firms manage the four types of international business risk. Provide an example that illustrates the process of risk management.

Question 42

Overseas Expansion (Scenario)
Whittaker Semiconductors has recently decided to expand its operations overseas. Amanda Quan, Vice President of International Business, assigned a team of investigators to analyze the risks faced by the company in making this move. Of particular interest were the risks that might affect the success of a new production plant to be located in one of three potential countries.
LeShaun Golding researched the risks linked to establishing the plant in Country B. He cited government intervention, lack of local managerial talent, and unethical business practices as the most prominent risks for this location. LeShaun noted all of the following types of risks EXCEPT ________.

A) currency risk
B) political risk
C) country risk
D) cross-cultural risk

Question 43

Which of the following is an example of a new global challenger?

A) a firm from Russia that is rapidly growing in the communications industry
B) a U.S. nonprofit that focuses on fundraising for children's health care
C) an MNE from France with large-scale operations across the globe
D) an SME from Canada that began international operations early in its development

Question 44

Each of the following types of organizations is active in international business EXCEPT ________.

A) MNE
B) SME
C) RND
D) NGO

Question 45

Calexor is a telecommunications SME that has been highly successful despite its limited resources. Stakeholders attribute Calexor's success to its ability to serve niche markets. Which of the following, if TRUE, would most strongly support the claim that Calexor's growth can be attributed to niche market sales?

A) Calexor developed an interest in serving niche markets through an R & D experiment.
B) Most of Calexor's sales are in specialty markets that larger competitors do not serve.
C) Calexor's sales in mainstream telecommunications markets have always been strong.
D) Calexor's growth soared after it entered its first overseas market and has continued to climb.

Question 46

The process of targeting and serving markets outside the home country is known as ________.

A) market diversification
B) competition intensity
C) reactive internationalization
D) trade protectionism

Question 47

The level of government intervention in commercial activities is similar across most countries.

Question 48

In a short essay, explain why nonprofit organizations might conduct cross-border activities.

Question 49

Businesses that directly initiate international business transactions are known as ________.

A) focal firms
B) fiscal enterprises
C) fiduciary trusts
D) business affiliates

Question 50

For internationalizing firms, the consequences of poor business management decisions are usually more costly when mistakes occur abroad than when they occur at home.

Question 51

SMEs usually choose exporting as their main strategy for entering foreign markets.

Question 52

China has the second most MNEs.

Question 53

The Coca-Cola Company is an example of a(n) ________.

A) born global firm
B) SME
C) multinational enterprise
D) NGO

Question 54

Which of the following countries hosts the greatest number of MNEs?

A) Germany
B) Japan
C) Netherlands
D) United States

Question 55

What distinguishes an MNE from an SME? In a short essay, describe the major differences between the two types of firms.

Question 56

What is a born global firm? Explain one strategic or reactive reason why an SME might choose to start as a born global.

Question 57

Overseas Expansion (Scenario)
Whittaker Semiconductors has recently decided to expand its operations overseas. Amanda Quan, Vice President of International Business, assigned a team of investigators to analyze the risks faced by the company in making this move. Of particular interest were the risks that might affect the success of a new production plant to be located in one of three potential countries.
Rosa Suarez reported on her analysis of cross-cultural risks involved with establishing the plant in Country C. Each of the following was most likely discussed in her report EXCEPT ________.

A) language barriers
B) lifestyle differences
C) religious beliefs
D) the level of national debt

Question 58

The world's largest MNEs are concentrated in emerging economies.

Question 59

In a short essay, explain the cross-cultural risk faced by internationalizing firms. What causes this type of risk? Why might it pose a problem for internationalizing firms?

Question 60

Currency risk refers to the risk posed by adverse fluctuations in exchange rates.

Question 61

Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts.
The CEO introduced another overseas effort by noting that it represented an attempt to confront an international competitor. The CEO was most likely referring to which of the following efforts?

A) a new plant established in Vietnam to benefit from low-cost labor
B) a sales outlet established in Indonesia, where Sterling could charge more for its products
C) a marketing and advertising partnership established with a successful French car retailer
D) a distribution center established in London to preempt the growth of a British car manufacturer

Question 62

Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts.
One shareholder wanted clarification about a research effort that investigated the possibility of setting up a plant in China. The CEO explained that serving China's rapidly growing middle class population would enable Sterling to increase the size of its customer base dramatically. In China, the CEO was most likely interested in ________.

A) avoiding government intervention
B) challenging Chinese competitors
C) gaining access to innovative ideas
D) developing economies of scale

Question 63

Which of the following best explains why Taiwanese computer manufacturers established subsidiaries in the United States?

A) low-cost financial capital
B) low-cost labor
C) access to raw materials
D) lack of skilled managerial talent in home country

Question 64

Which of the following best explains why the Japanese firm Canon relocated much of its production to China?

A) low-cost financial capital
B) low-cost labor
C) access to raw materials
D) lack of skilled managerial talent in home country

Question 65

Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts.
One shareholder questioned the CEO's rationale for beginning an exploratory effort to establish a new manufacturing plant in India. The CEO responded by explaining that India was an untapped market with a high demand for products such as those produced by Sterling. His rationale represented an example of which of the following reasons for international expansion?

A) investing in a potentially rewarding relationship with a foreign partner
B) gaining access to lower-cost or better-value factors of production
C) seeking opportunities for growth through market diversification
D) better serving key customers that have relocated abroad

Question 66

Why might firms choose to pursue internationalization strategies? In a short essay, identify five major motivations for expanding overseas. Classify these motivations as strategic or reactive and provide an example of each.

Question 67

For manufacturing companies, on a per-unit-of-output basis, high volumes of production are correlated with lower per-unit cost.

Question 68

Which of the following, if TRUE, would most strongly support the claim that national prosperity is increased by participation in international business?

A) Countries that participate in international trade have higher GDP per capita than non-participating countries.
B) Individuals in advanced economies tend to set purchasing trends for consumers worldwide.
C) For most countries, levels of international trade have increased significantly in recent decades.
D) National literacy levels are strongly correlated with a country's degree of political freedom.

Question 69

Firms that do not export tend to create jobs more quickly than do exporting firms.

Question 70

Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts.
The CEO justified one of the company's moves by pointing out that it not only enabled Sterling to benefit from global sourcing advantages, but it also provided access to new ideas about business methods. The shareholders viewed this justification positively most likely because they understood which of the following?

A) Sourcing advantages are usually more important to growth than obtaining new business ideas.
B) International firms may have more than one motive for international expansion.
C) The most compelling motive for international expansion is to gain new ideas from other markets.
D) This expansion strategy would enable the company to better manage cross-cultural risk.

Question 71

Since the 1980s, emerging market countries have experienced substantial market liberalization and privatization.

Question 72

Which of the following contributes LEAST to increasing a company's profit margins?

A) increasing demand
B) increasing global competition
C) high-growth markets
D) underserved economies

Question 73

Sterling Auto International (Scenario)
Sterling Auto International is a successful car manufacturing company headquartered in Detroit, Michigan. Over the past year, the company implemented multiple efforts to expand its overseas operations. At a recent shareholder's meeting, attendees questioned the CEO's motivations for authorizing certain aspects of the expansion efforts.
In discussing the expansion effort to India, the CEO reminded shareholders of Black and Decker's move to partner with the Indian auto retailer Bajaj. The CEO was most likely attempting to justify which of the following?

A) a joint venture that would position Sterling for long-term sales in India
B) a marketing effort targeted to American citizens living in India
C) a price drop to ward off competition from an emerging Indian auto retailer
D) a new manufacturing protocol based on an efficient Indian production method

Question 74

A U.S. shoe manufacturer is considering internationalizing to promote growth by diversifying its markets. Which of the following, if TRUE, would most strongly support the claim that moving to France would help the company grow through market diversification?

A) Doing business in France would likely expose the company to new ideas for product innovation.
B) French women tend to purchase shoes more frequently than do French men.
C) French consumers represent a sizeable market that could significantly boost the company's sales.
D) Many of the company's U.S. customers have moved overseas to Europe.

Question 75

All of the following are reasons to study international business EXCEPT ________.

A) international business contributes to economic prosperity
B) international trade is a critical engine for job creation
C) international trade and investment have experienced unprecedented decline
D) international business provides an opportunity to support sustainability and corporate citizenship