Deck 1: Assessing the Environment Political, Economic, Legal, Technological

Question 1

Which of the following is NOT a true statement about India?

A) India's biggest contributor to growth is its excellent infrastructure.
B) India is the world's leader for outsourced high-tech services.
C) India is the fastest-growing free-market democracy.
D) India's middle class spurs the country's growth.

Answer 1

A

Question 2

Which of the following is characterized by networks of international linkages that bind countries, institutions, and people in an interdependent global economy?

A) ethnocentrism
B) nationalization
C) governmentalism
D) globalization

Answer 2

D

Question 3

Which of the following developments in global business has had the greatest effect on international managers in recent years?

A) information technology
B) political unrest
C) increased nationalism
D) ethnic strife

Answer 3

A

Question 4

In 2008, India joined a free-trade agreement known as ________.

A) SAARC
B) ASEAN
C) NAFTA
D) MERCOSUR

Question 5

Which of the following is NOT a true statement about the Mexican trading environment?

A) Mexican trade policy is among the most open in the world.
B) Trade with the U.S. and Canada has tripled since NAFTA was ratified.
C) In recent years, almost 85% of Mexico's exports go to the United States.
D) Under NAFTA regulations, Mexico may only trade with the U.S. and Canada.

Question 6

The European Union currently consists of how many nations?

A) 12
B) 27
C) 34
D) 46

Question 7

Most of today's world trade takes place in which three trade blocs?

A) Middle East, China, and India
B) Asia, North America, and Canada
C) European Union, Asia, and the Americas
D) Saudi Arabia, Western Europe and the United States

Question 8

Which of the following are the three dominant currencies in the world today?

A) British pound, U.S. dollar, Hong Kong dollar
B) Swiss franc, Japanese yen, British pound
C) Euro, Japanese yen, U.S. dollar
D) Euro, U.S. dollar, Swiss franc

Question 9

Most small and medium-sized enterprises (SMEs) are ________.

A) competing only on the local level due to technological and financial constraints
B) investing heavily in world markets by offshoring their labor activities
C) contributing to their national economies through exporting
D) attempting to avoid becoming globalized too quickly

Question 10

The countries of Costa Rica, Guatemala, and Honduras belong to ________.

A) NAFTA
B) ASEAN
C) CAFTA
D) MERCOSUR

Question 11

India's economic boom is most likely a result of all of the following EXCEPT ________.

A) educated workers
B) foreign investment
C) increasing deregulation
D) government leadership

Question 12

Gayle Warwick Fine Linen owes its success as a global business primarily to the firm's ________.

A) large staff in England
B) labor outsourcing in Vietnam
C) management by a French retail expert
D) marketing message in the United States

Question 13

Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located in five different continents. Emerson manufactures a wide range of products including air conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following questions is LEAST relevant to Emerson's decision regarding where to build a new facility?

A) How will China's underdeveloped infrastructure affect Emerson's ability to manufacture and ship products?
B) How is China's political and economic agenda likely to affect Emerson's investment?
C) What is the likelihood of expropriation occurring to Emerson if it builds in China?
D) How will e-commerce affect Emerson's ability to export products from China?

Question 14

All of the following factors contribute to globalization EXCEPT ________.

A) advancements in technology
B) rise of developing economies
C) higher number of trade restrictions
D) increased flow of labor and capital

Question 15

Which of the following is a true statement about China?

A) China retains independence by refusing to join the World Trade Organization.
B) Regional governments and legal systems create stability for foreign investors.
C) China lacks access to oil, which puts the nation at risk in the near future.
D) Both foreign corporations and the Bamboo Network invest in China.

Question 16

Which of the following best explains China's success in exporting?

A) low costs and steady stream of capital
B) geographic location in the world
C) high educational standards
D) close ties with Japan

Question 17

Which of the following is the most highly globalized in regards to economic integration, technological connectivity, personal contact, and political engagement?

A) Singapore
B) Denmark
C) New Zealand
D) United States

Question 18

Which of the following is NOT one of the Four Tigers?

A) South Korea
B) Hong Kong
C) Taiwan
D) Thailand

Question 19

Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located in five different continents. Emerson manufactures a wide range of products including air conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following, if true, supports the argument to build a new Emerson facility in China?

A) The Chinese courts recently ruled in favor of an MNC in an intellectual property rights lawsuit.
B) The Chinese Commonwealth network is investing large amounts of capital into China.
C) China has increased Internet controls and blocked most international search sites.
D) China is revoking its membership from the World Trade Organization.

Question 20

Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located in five different continents. Emerson manufactures a wide range of products including air conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the U.S. Which of the following, if true, undermines the argument to build a new Emerson facility in China?

A) China has committed over $500 billion to infrastructure projects.
B) U.S. firms continue outsourcing service jobs despite the economy.
C) Fuel costs have risen sharply and are not expected to drop.
D) China is the world's largest exporter of manufactured goods.

Question 21

Which of the following terms refers to adopting business strategies that meet the current needs of the firm and also protect and enhance the human and natural resources that will be needed in the future?

A) globalization
B) sustainability
C) protectionism
D) nationalization

Question 22

Micro political risk events are those that affect ________.

A) multiple industries and companies
B) several other nations in the same region
C) one industry or company or a few companies
D) managers and employees who are nationals

Question 23

What is the primary concern among citizens in developed economies regarding the outsourcing of non-manufacturing jobs?

A) tax processing
B) supply chains
C) quality control
D) job retention

Question 24

________ occurs when the local government seizes the foreign-owned assets of the MNC and provides inadequate compensation.

A) Nationalization
B) Expropriation
C) Confiscation
D) Repatriation

Question 25

Which of the following best describes nationalization?

A) negative public opinion regarding the actions of an MNC
B) hiring preferences given to locals rather than expatriates
C) government's gradual and subtle actions against a firm
D) forced sale of an MNC's assets to local buyers

Question 26

Events that affect all foreign firms doing business in a country or region are called ________.

A) macropolitical risk events
B) micropolitical risk events
C) country risk events
D) regional risk events

Question 27

Expropriation is most likely to occur in a country that has ________.

A) numerous MNCs in operation
B) constant political upheaval and change
C) poor education and economic development
D) stable economic growth and political consistency

Question 28

Intel is attempting to do business in Brazil, but the Brazilian government purposely delays granting Intel the necessary licenses and permissions required to do business in the country. Which of the following best describes this situation?

A) creeping expropriation
B) nationalization
C) barriers to repatriation
D) confiscation

Question 29

Dell most likely offshores product support service jobs to India because of the ________.

A) superior technical knowledge of Indian workers
B) extensive call center experience of Indian workers
C) lower payroll costs associated with Indian workers
D) customer preference for interacting with Indian workers

Question 30

For autonomous international subsidiaries, most of the impact from political risks will be in which of the following areas?

A) financial operations
B) ownership and control
C) marketing and sales operations
D) managerial strategy and policy-making

Question 31

All of the following are considered the primary political risks for global manufacturing firms EXCEPT ________.

A) nationalization
B) currency issues
C) import restrictions
D) export restrictions

Question 32

Expropriation of corporate assets without prompt and adequate compensation is an example of ________.

A) economic risk
B) political risk
C) legal risk
D) cultural risk

Question 33

Which of the following is considered the most important resource for an MNC's political risk assessment?

A) government agencies
B) broadcast media
C) outside experts
D) line managers

Question 34

Political risks are best described as any governmental actions or politically motivated events that ________.

A) suggest the firm is legally responsible for specific wrongdoings
B) negatively affect the firm's long-run profitability or value
C) interfere with the personal safety of the firm's employees
D) harm the firm's capacity to meet consumer demands

Question 35

Which of the following is the greatest risk affecting most FDI decisions?

A) government regulation
B) political disturbances
C) security threats
D) IT disruption

Question 36

For global corporations, the primary impact of political risks is likely to be on the firm's ________.

A) ownership and control
B) marketing and sales
C) transfers and exchanges
D) managerial strategy and policy making

Question 37

Risk assessment by multinational corporations usually takes two forms: ________ and ________.

A) outside experts; media reports
B) outside consultants; internal staff
C) internal staff; foreign publications
D) government reports; computer modeling

Question 38

Suppose the government of Karakozia seizes all assets of Pepsi in Karakozia without offering any compensation to the company. This action on the part of the government is an example of ________.

A) nationalization
B) repatriation
C) expropriation
D) confiscation

Question 39

Zagreb Inc., negotiates a multi-million dollar contract with the government to provide electricity to country X. The government is voted out of power shortly after. The new government changes the contracts it has with all oil companies but not contracts with firms in other industries. This is an example of ________.

A) barriers to repatriation
B) expropriation
C) macropolitical risk
D) micro political risk

Question 40

All of the following are typical political risk events common today EXCEPT ________.

A) loss of technology or intellectual property rights
B) violence against foreign firms for political purposes
C) discriminatory treatment in the application of laws
D) interference in managerial decision making

Question 41

Which of the following requires that the firm actively involve nationals in the management of the subsidiary?

A) equity sharing
B) participative management
C) localization of the operation
D) development assistance

Question 42

Which of the following methods is NOT a form of adaptation to the political regulatory environment?

A) participative management
B) equity sharing
C) localization
D) hedging

Question 43

Which of the following is a true statement regarding economic risk?

A) Even minor exchange-rate shifts place a country at economic risk.
B) Undeveloped countries pose very little economic risk for MNCs.
C) Industrialized nations have a significant risk of economic instability.
D) Financial troubles in the U.S. can put the world economy at risk.

Question 44

All of the following are methods of managing terrorism risks by MNCs located in high-risk countries EXCEPT ________.

A) making contributions to local charities
B) flying only U.S.-based airlines
C) assembling counterterrorism teams
D) maintaining low corporate profiles

Question 45

Which of the following requires that a firm keep control of the means of distribution?

A) input control
B) market control
C) position control
D) bureaucratic control

Question 46

Companies often reduce risk in foreign countries by creating dependency of a subsidiary on the host country. Which of the following is NOT a means of maintaining dependency?

A) market control
B) equity sharing
C) staged contribution strategies
D) position control

Question 47

A country's ability or intention to meet its financial obligations determines its ________ risk.

A) economic
B) legal
C) political
D) country

Question 48

When GM does not allow its subsidiary manufacturing company in China to sell the Chinese-made cars outside of China, GM is exercising ________.

A) input control
B) position control
C) hedging
D) market control

Question 49

If a U.S. firm borrows money from a host country bank as a hedge against being forced out of operation without adequate compensation, the firms is managing political risk with ________.

A) local debt financing
B) position control
C) development assistance
D) adaptation

Question 50

Which of the following is a form of hedging?

A) staged contribution strategies
B) development assistance
C) local debt financing
D) localization of the operation

Question 51

Which of the following is a method of dependency?

A) local debt financing
B) development assistance
C) equity sharing
D) position control

Question 52

If the Mexican peso is devalued, then an MNC operating in Mexico will most likely have to ________.

A) repatriate less profits in dollars
B) pay more local and federal taxes
C) shut down operations in Mexico
D) hire fewer locals and more expatriates

Question 53

John Mathis' four recommended methods of analyzing economic risk include all of the following EXCEPT the ________ approach.

A) quantitative
B) automatic
C) qualitative
D) checklist

Question 54

Suppose GE initiates a joint venture with a local company in Mexico as a way of adapting to risk. Which of the following strategies is GE most likely using?

A) equity sharing
B) participative management
C) localization of the operation
D) development assistance

Question 55

In 1998, what occurred as a result of the Russian ruble being devalued?

A) The price of goods imported into Russia dropped.
B) The price of goods imported into Russia increased.
C) Russian firms had more buying power overseas.
D) Foreign firms stopped outsourcing to Russia.

Question 56

________ means that the firm maintains control over raw materials, components, technology, and know-how.

A) Input control
B) Market control
C) Position control
D) Bureaucratic control

Question 57

An MNC located in Taiwan only fills key subsidiary management jobs with expatriates or home-office managers. The MNC is exercising ________.

A) input control
B) market control
C) position control
D) bureaucratic control

Question 58

Which of the following is NOT a generally accepted method of assessing the credit worthiness of a country?

A) quantitative approach
B) survey approach
C) qualitative approach
D) checklist approach

Question 59

Political risk insurance and local debt financing are both forms of ________.

A) input control
B) adaptation
C) equity sharing
D) hedging

Question 60

Which of the following is NOT one of the primary methods of managing political risk?

A) dependency
B) adaptation
C) gainsharing
D) hedging

Question 61

The ________ approach to analyzing economic risk relies on a few easily measurable and timely criteria believed to reflect or indicate changes in the credit worthiness of the country.

A) qualitative
B) checklist
C) quantitative
D) combination

Question 62

Which of the following questions is LEAST relevant to a global manager who is considering what technology is appropriate for the firm's business operations in a less developed country?

A) How has the same technology benefited the firm's operations at its national headquarters?
B) What will be the consequences of a technology transfer on local employees' behavior and values?
C) What are the host government's regulations and requirements regarding technology transfer?
D) What are the training needs of the local employees who will be using the technology?

Question 63

Which of the following terms refers to an agreement by the parties concerned to establish a set of rules for governing a business transaction?

A) procedure
B) policy
C) contract
D) concept

Question 64

Tariffs and quotas are examples of what types of policies?

A) economic development
B) protectionist
C) free market
D) globalization

Question 65

Representatives of a MNC seek an interview with local government leaders in the Department of Commerce in India with a view to assess the types of policies likely to be implemented. According to Mathis, this is an example of ________.

A) qualitative approach
B) quantitative approach
C) checklist approach
D) a combination of all of the above

Question 66

Under ________, past court decisions serve as precedents to the interpretation of the law.

A) civil law
B) common law
C) Islamic law
D) indigenous law

Question 67

The appropriability of technology is best defined as ________.

A) any technology that has been illegally confiscated from a firm by a foreign government
B) the likelihood that a firm's technology will generate long-term profits
C) how easily new technology can be learned and used by host nation employees
D) the ability of a firm to protect its technology from competitors and to profit from that technology

Question 68

The Paris Union was established for the purpose of ________.

A) enforcing contract laws
B) reducing trade barriers
C) protecting patents
D) reducing pollution

Question 69

Which of the following is a true statement about Canada?

A) The Canadian government plays a limited role in industry, which is why the country draws numerous foreign investors.
B) The Canadian government owns businesses in the energy, telecommunications, and transportation industries.
C) The Canadian government requires bilingualism throughout the country, but foreign subsidiaries are exempted.
D) The Canadian government does not allow workers to form or join organized labor unions.

Question 70

Which two factors are primarily assessed when using the qualitative approach to measure a country's economic risk?

A) the country's natural resources and its long-term national debt
B) the competence of the country's leader and the economic policy direction
C) the probability of terrorism and the likelihood that the country's debts will be repaid
D) the country's purchasing power overseas and the consistency of the country's leadership

Question 71

The situation faced by Mr. David Ji, the Chinese-American electronics entrepreneur, in his dispute with China's largest television manufacturer illustrates ________.

A) the sophistication of the Chinese legal system
B) how the Chinese government protects its largest firms
C) the effectiveness of guanxi in resolving a complex problem
D) how special protections are offered to American companies in China

Question 72

The ________ method of analyzing economic risk attempts to measure statistically a country's ability to honor its debt obligation.

A) quantitative
B) qualitative
C) checklist
D) objective

Question 73

Which type of country is most likely to use its investment laws to acquire appropriate technology?

A) post industrial
B) newly industrializing
C) less developed
D) highly developed

Question 74

Japan and about 70 countries in Europe are ruled by ________ law.

A) common
B) Islamic
C) civil
D) judicial

Question 75

In order for a contract to be enforced in a country ruled by ________ law, the details of the promises must be specified in the contract.

A) common
B) policy
C) civil
D) international

Question 76

________ is based on a comprehensive set of laws organized into a code.

A) Islamic law
B) Civil law
C) Common law
D) Contract law

Question 77

In the context of doing business in Asia, what is meant by the phrase "the contract is in the relationship, not on the paper"?

A) Asian contracts are not legally binding for MNCs.
B) Contracts are ceremoniously destroyed after they are written.
C) Managers risk being offensive to Asians by requiring contracts.
D) Managers should nurture the relationship to ensure the reliability of the contract.

Question 78

Which of the following best explains why many foreign companies in China experience significant financial losses?

A) China lacks the financial and legal systems needed to support the country's foreign trade.
B) China's local market is not large enough to support its extensive exporting to the U.S.
C) China's government mandates that workers receive high wages and benefits.
D) China's exchange rate changes too frequently for U.S. businesses to compete.

Question 79

An international agreement which regulates international business by spelling out the rights and obligations of the seller and buyer is known as ________.

A) WTO
B) HCN
C) TNC
D) CISG

Question 80

Less developed countries most likely use their investment laws for all of the following reasons EXCEPT ________.

A) training local people
B) increasing exports
C) acquiring needed technology
D) controlling the flow of technology