Deck 23: Globalisation and Multinational Business

Question 1

The term 'globalisation' captures

A) the process of links of trade, investment, production and finance to develop globally.
B) the process of links of culture, politics, migration, advertising and branding to develop globally.
C) former communist countries that have become capitalist.
D) A and B

Answer 1

A and B

Question 2

Economists use the term 'globalisation' to mean that

A) countries are more vulnerable to changes in the rest of the world.
B) trade is growing faster than GDP.
C) former communist countries have become capitalist.
D) A and C
E) A and B

Answer 2

A and B

Question 3

Which of the following is/are causes of globalisation?

A) Restrictions on trade are being removed.
B) Currency speculation has grown.
C) Trade is growing faster than GDP.
D) A and B
E) A, B and C

Answer 3

A, B and C

Question 4

Which of the following would increase globalisation?

A) A reduction of world trade
B) Regulation of international speculation
C) An increase in demand for Coca- Cola^TM
D) Green policies leading to increased self- sufficiency

Question 5

Which of the following is not a market driver of globalisation?

A) Per capita convergence of incomes across industrialised countries
B) Organisations behaving as global consumers
C) A push to develop global advertising
D) Reduced trade barriers

Question 6

Which of the following would decrease globalisation?

A) Regulation of international speculation
B) An increase in world trade
C) WTO (the World Trade Organisation) saying that countries must not prevent the use of GM foods.
D) An increase in demand for Coca Cola^TM

Question 7

All of the following are government drivers of globalisation, except for

A) creation of trading blocs.
B) improvements in business travel.
C) reduction of tariff barriers.
D) privatisation in state- dominated economies.

Question 8

What is a multinational corporation?

A) A business that sells in domestic and overseas markets
B) A business that has owners who are located in more than one country
C) A business that buys and sells in domestic and overseas markets
D) A business that either owns or controls foreign subsidiaries in more than one country

Question 9

Which of the following is the largest multinational?

A) Chevron
B) Wal- Mart stores
C) Exxon Mobil
D) BP
E) Royal Dutch Shell

Question 10

The volume of FDI over time is

A) always rising.
B) always falling.
C) stable.
D) volatile.

Question 11

Net FDI tends to flow into

A) poorer countries.
B) rich countries.
C) African countries.
D) all countries equally.

Question 12

When compared to domestic firms, MNC productivity is generally

A) lower in services but higher in manufacturing.
B) lower.
C) higher.
D) about the same.

Question 13

In 2012, the world's least developed countries received __________of the total FDI flows to developing countries.

A) 5.4%
B) 3.7%
C) 40%
D) 11.3%

Question 14

Which region received the least FDI in 2012?

A) Europe
B) Asia
C) Australasia
D) Africa

Question 15

The percentage of FDI going to developing countries increased to approximately________ by 2010.

A) 40%
B) 30%
C) 20%
D) 50%

Question 16

Which of the following explains why China has been receiving so much FDI?

A) There has been heavy investment by the government.
B) The economy is growing rapidly.
C) Growth in income is highly concentrated in the hands of the middle classes.
D) It is a huge economy, with a massive population.
E) All of the above

Question 17

In 2007, FDI flows rose by 30% on the previous year. This rise was largely due to

A) economies of scale.
B) removal of trade barriers.
C) globalisation.
D) mergers and acquisitions.

Question 18

The product life cycle model helps explain why

A) firms always locate where labour is cheapest per hour.
B) firms may first export and then engage in FDI.
C) may engage in FDI at the launch stage.
D) all of the above

Question 19

The 'Eclectic Paradigm' by John Dunning identifies three categories of gains from international production. Which of the following is not one of these categories?

A) Location advantages
B) Internalisation advantages
C) Ownership- specific assets
D) International effects

Question 20

'Internalisation advantages', as defined by the 'Eclectic Paradigm', are

A) when the benefits of exporting overseas exceed those of producing overseas.
B) when the benefits of extending the organisation overseas exceed those of contracting with an external party.
C) due to tax advantages in some countries.
D) due entirely to scale economies.

Question 21

A business might become a multinational in order to obtain

A) a spread of risks.
B) lower production costs.
C) larger sales.
D) all of the above

Question 22

Firms may become MNCs in order to access

A) economies of scale.
B) managerial skills.
C) better quality inputs.
D) all of the above.

Question 23

Firms may become MNCs in order to access

A) reduced transaction costs.
B) lower transport costs.
C) better quality inputs.
D) all of the above

Question 24

Which of the following is not a location- related advantage?

A) Availability of raw materials
B) Relative cost of inputs is low
C) Technology- led economies of scale
D) Production is close to customers

Question 25

Accessing global markets can

A) allow firms to learn from experience.
B) exploit competitive advantages.
C) spread risk.
D) all of the above

Question 26

A horizontally integrated multinational is one that

A) exports more than 50% of output.
B) produces different products in different countries.
C) produces various stages of production in different countries.
D) produces the same product in more than one country.

Question 27

A vertically integrated multinational is one that

A) produces different products in different countries.
B) produces various stages of production in different countries.
C) exports more than 50% of output.
D) produces the same product in more than one country.

Question 28

A conglomerate multinational is one that

A) produces different products in different countries.
B) produces various stages of production in different countries.
C) produces the same product in more than one country.
D) exports more than 50% of output.

Question 29

Which of the following statements regarding joint ventures is false?

A) Successful joint ventures will only occur if there are few contractual disadvantages in sharing resources and developing products.
B) Joint ventures never occur in small MNCs owing to limited owner- specific assets.
C) Product joint ventures that have high risks and costs tend to occur in high growth markets.
D) New product joint ventures typically occur among the larger MNCs that have complementary ownership- specific assets.

Question 30

Multinational companies may face several problems except

A) language and communication.
B) access to new markets.
C) corruption.
D) matching sales activities to foreign markets.

Question 31

Poor communication between subsidiaries may cause

A) diseconomies of scale.
B) adverse selection.
C) economies of scope.
D) all of the above

Question 32

Which of the following is not likely to be a gain to a host state of a multinational company?

A) Employment gains
B) Increased certainty over future economic activity
C) Improvement in the balance of payments
D) Technology transfer

Question 33

Multinational companies (MNC) engaging in technological transfer may lead to gains elsewhere in the economy since

A) workers trained by the MNC move to other parts of the economy.
B) the MNC takes market share for inefficient local companies.
C) other companies in the host country may try to copy the methods.
D) A and C

Question 34

Advantages of MNCs to host states do not include

A) technology transfer.
B) gains from transfer pricing.
C) increased tax revenue.
D) increased employment.

Question 35

When technological transfer occurs through copying methods, it is called the

A) blue- sky effect.
B) R&D effect.
C) copying effect.
D) demonstration effect.

Question 36

Many MNCs are located in cities and this causes many workers to move from the countryside. What is this process called?

A) Rural- deficiency
B) Urban crowding
C) Rural- urban migration
D) Urban flows

Question 37

Encouraging FDI may be a risky long- term development strategy for a country because MNCs are often

A) selling products with low profit margins.
B) concerned more with exporting than producing for the domestic market.
C) selling unusual products.
D) footloose.

Question 38

According to the Harrod- Domar model, FDI could help a developing country to fill

A) a demand gap and maximise economic growth.
B) an investment gap and maximise economic growth.
C) an income gap and raise economic growth.
D) a savings gap and raise economic growth.

Question 39

Which of the following is not one of the key gaps that FDI can help to fill?

A) Public finance gap
B) Skills and technology gap
C) The savings gap
D) The foreign exchange gap
E) Income gap

Question 40

Transfer pricing may be a problem for host countries because

A) the cost of exchanging one currency for another is costly in monetary terms and time.
B) profits may not be accurately recorded as occurring in the host country.
C) profits are always removed to the host country.
D) as prices are transferred to the local currency, losses may occur if exchange takes place on a day when the exchange rate is low.

Question 41

Which of the following helps to explain how FDI can help to alleviate the foreign exchange gap?

A) MNC imports will bring in foreign exchange earnings.
B) FDI brings in capital.
C) Less raw materials need to be imported.
D) All of the above
E) None of the above

Question 42

Which of the following is a disadvantage to a developing host country?

A) Transfer pricing may prevent substantial tax revenues from being raised from FDI.
B) Profits are unlikely to remain in the host country, but instead will be repatriated.
C) Domestic producers in the host country may be driven from the market.
D) The inputs to production are typically bought in the host country and the high demand can force up prices.
E) Governments of potential host nations tend to compete with other developing countries and so may end up offering deals to MNCs that are not particularly beneficial to them as a host nation.

Question 43

Since 1990 most multinational businesses have been downsizing their operations in their 'home' country and making overseas subsidiaries more autonomous.

Question 44

Governments do not play an important role in globalisation.

Question 45

Sales by foreign affiliates account for around half of world GDP.

Question 46

The whole of Africa received only 3% of world FDI in 2013.

Question 47

A disadvantage of globalisation is the possibility of multinational companies exploiting their market power.

Question 48

Mergers and acquisitions fell during the recession of the late 2000s.

Question 49

Since 2009, FDI inflows to developing countries have risen.

Question 50

Many multinational companies have turnover figures that are larger than the GDP figures of some industrialised countries.

Question 51

MNCs cover the entire spectrum of business activity, from manufacturing to extraction, agricultural production, chemicals, processing, service provision and finance.

Question 52

Trading internationally may prolong a product's life cycle.

Question 53

During the maturity stage of the product life cycle, we would expect to see a MNC exporting.

Question 54

The location of MNCs depends entirely on factor prices.

Question 55

A conglomerate multinational is one that produces different products in different countries.

Question 56

Investing in developing economies is likely to be much riskier than investing in developed market economies, and returns are likely to be considerably lower.

Question 57

Adopting a policy to encourage FDI may be a method for a country to quickly improve its technological base.

Question 58

The effects of a multinational creating import substitutions are reduced if profits are repatriated.

Question 59

If the host country of a FDI project has high rates of company taxation, it will gain as the FDI company engages in transfer pricing.

Question 60

Transfer pricing is a system of pricing for the transfer of stocks, shares and other financial instruments.

Question 61

Most countries try to entice MNCs to depressed regions where investment is low and unemployment is high.

Question 62

What are the main drivers of globalisation?

Question 63

What are some of the possible disadvantages of globalisation?

Question 64

Give two indicators of the degree of globalisation and how it is changing.

Question 65

What have been some of the key trends in FDI in developed and developing countries over the past 25 years?

Question 66

Why do some businesses become multinational?

Question 67

What are the key characteristics you would expect to see at each stage of the product life cycle?

Question 68

Dunning developed a paradigm for explaining the pattern of international production. This looks at which three categories of gains from becoming multinational?

Question 69

Explain the possible locational advantages for a multinational when it sets up in a new country.

Question 70

Explain the internalisation advantages that may accrue to a multinational when it sets up in a new country.

Question 71

Why does locating in a foreign country that imposes tariffs on imports give a MNC a competitive advantage?

Question 72

What sort of problems may a MNC experience when entering a new country?

Question 73

What are the key advantages and disadvantages of FDI for a host state?

Question 74

Why would a country's balance of payments be affected by MNC investment?