Deck 6: The Political Environment: A Critical Concern

Question 1

Nationalism can take an anti-foreign business bias.

Answer 1

True
Explanation: Nationalism can best be described as an intense feeling of national pride and unity, an awakening of a nation's people to pride in their country. This pride can take an anti-foreign business bias, where minor harassment and controls of foreign investment are supported, if not applauded.

Question 2

The most severe political risk is domestication.

Answer 2

False
Explanation: The most severe political risk is confiscation, that is, the seizing of a company's assets without payment.

Question 3

Businesses become increasingly attractive to terrorists, both because they are less well defended than government targets and because of what they symbolize.

Answer 3

True
Explanation: Experts believe that there are reasons to expect that businesses will become increasingly attractive to terrorists, both because they are less well defended than government targets and because of what they symbolize.

Question 4

Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members.

Question 5

When a nation faces shortages of foreign exchange import controls are established.

Question 6

Price controls are normally targeted at nonessential products.

Question 7

Today, many countries have domestication as a condition for investment.

Question 8

Nationalistic feelings are directly proportional to growth of domestic economy.

Question 9

Adherence to World Trade Organization (WTO) rules means a loss of sovereignty to its member nations.

Question 10

One of the easiest tasks in tracing cybercrime is determining if a cyberattack is a legitimate threat or just a prank.

Question 11

Saudi Arabia permits women to vote if they are at least 18 years old and married or 21 years old, if single.

Question 12

The ultimate goal of domestication is to force foreign investors to share more of the ownership, management, and profits with nationals than was the case before domestication.

Question 13

Expropriation and nationalization often lead to nationalized businesses that are efficient, technologically strong, and competitive in world markets.

Question 14

Sanctions are the most effective means of achieving their desired goals of forcing a country to accept demands of the boycotting country.

Question 15

At the top of the list of political issues concerning foreign businesses is the issue of taxation and tariffs.

Question 16

When it comes to participation in international treaty regimes, the United States leads the list of the 72 countries included in Foreign Policy magazine rankings.

Question 17

As politicians in almost all countries use xenophobia to consolidate their own political power, the threat of one country attacking another is escalating fast.

Question 18

As cultural and political scenario varies so widely across nations, there are absolutely no ways to generalize tendencies for products to be politically sensitive.

Question 19

Risks of confiscation and expropriation appear to have lessened over the last two decades.

Question 20

Economically prosperous countries do not display strong nationalistic feelings.

Question 21

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.

Question 22

The principal agency that supports U.S. business abroad is the Department of Commerce (DOC).

Question 23

_____ 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) Self governance
C) Ethnocentrism
D) Autocracy
E) Non-interventionism

Question 24

According to the study cited in the text, compared to French managers, American managers are less influenced by concerns about political risks in foreign markets.

Question 25

Planned domestication can be profitable and operationally expedient for the foreign investor.

Question 26

Which of the following is NOT one of the common forms of government?

A) Democracy
B) Aristocracy
C) Oligopoly
D) Monarchy
E) Dictatorship

Question 27

It is illegal for U.S. citizens to pay bribe unless it is a common practice in the host country.

Question 28

The ideal political climate for a multinational firm is:

A) a country where international laws do not apply.
B) a country where favors can be purchased cheaply.
C) a stable, friendly government.
D) a government where absolute power is a reality.
E) an authoritarian government that can be dealt with through non-legal channels.

Question 29

Relations between governments and MNCs are generally positive if the investment improves the balance of payments by reducing exports or increasing imports.

Question 30

The election of Vicente Fox as President of Mexico was an example of:

A) overthrowing a corrupt regime.
B) peaceful political change.
C) U.S. interference in international politics.
D) cultural adjustment to global expectations.
E) corrupt national election.

Question 31

The five main causes of instability in international markets include trade disputes and all of the following EXCEPT:

A) some forms of government seem to be inherently unstable.
B) changes in political parties.
C) nationalism.
D) U.S. domestic political policies.
E) animosity targeted toward specific countries.

Question 32

Which of the following is the top political issue concerning foreign businesses?

A) Demographic profile of political leaders
B) Government policies on infrastructure
C) Economic awareness of political leaders
D) Stability of prevailing government policies
E) Membership of governments in trade treaties

Question 33

An intense feeling of national pride and unity, an awakening of a nation's people to pride in their country is called:

A) socialism.
B) communism.
C) fascism.
D) nationalism.
E) polarism.

Question 34

A sovereign state, in the context of international law, has all of the following characteristics EXCEPT that it:

A) is obligated to be a member of the United Nations.
B) is independent.
C) enjoys full legal equality with other states.
D) governs its own territory.
E) is free from all external control.

Question 35

What was the goal of the April 2009 agreement arrived at by the G20 nations which required them to cede some sovereignty?

A) Include all G20 nations in the Security Council
B) Fix escalating oil prices
C) Increase infrastructure funding
D) Reject protectionism
E) Increase aid to South Africa

Question 36

Licensing, while being effective in other situations, is least effective when the technology is unique.

Question 37

All of the following are political causes of instability in international markets EXCEPT:

A) inherently unstable governments.
B) changes in political parties having major effects on trade conditions.
C) global focus.
D) animosity targeted toward specific countries.
E) trade disputes.

Question 38

The proposed purchase of Unocal by the Chinese national oil company was opposed by the U.S. ___.

A) because the offer was unrealistically low
B) as retaliation for not allowing similar purchases in China by American firms
C) because Germany had proposal a high offer
D) as a threat to United States' sovereignty
E) because China could divert oil from Unocal to China

Question 39

The only country that precludes women from voting and appears to be still completely in the dark ages with regards to suffrage.

A) Croatia
B) Iran
C) Bolivia
D) Saudi Arabia
E) Venezuela

Question 40

In the context of international law, a _____ state is independent and free from all external control.

A) bounded
B) sovereign
C) legal
D) liberal
E) neutral

Question 41

If there is a substantial amount of capital leaving the country, which of the following is the country likely to implement to control the situation?

A) Exchange controls
B) Local-content laws
C) Import restrictions
D) Tax controls
E) Price controls

Question 42

The government in Chile recently informed Clint Travis' company that his retail grocery chain in Chile would have to be gradually turned over to the people of Chile by the year 2050. Additionally, starting next year fifty percent of the board of directors of the Chilean operation must be Chileans. Which of the following political risk actions is Mr. Travis facing in Chile?

A) Confiscation
B) Expropriation
C) Domestication
D) Nationalism
E) Dictatorship

Question 43

Which of the following is true regarding confiscation, expropriation, and domestication?

A) The ultimate goal of domestication is to force domestic investors to share more of the profits with the government.
B) Risks of confiscation and expropriation appear to have increased over the last two decades.
C) Expropriation and nationalization have led to technologically advanced and competitive businesses.
D) Nowadays, companies have to become domesticated as a condition for investment.
E) Nowadays, confiscation is viewed as a means of economic growth.

Question 44

Often an expropriated investment becomes _____ (i.e., it becomes a government-run entity).

A) democratized
B) domesticated
C) nationalized
D) prioritized
E) socialized

Question 45

When Toyota Motor Company built automobile manufacturing plants in Tennessee and Ohio, it faced economic risks associated with ___. This occurred because the United States required that 50 percent of all parts used in an automobile constructed in the United States must contain parts that were manufactured in the United States. The United States wanted to promote it "Buy American" policy.

A) exchange controls
B) local-content laws
C) import restrictions
D) tax controls
E) price controls

Question 46

Which of the following is NOT true of nationalism?

A) Economic nationalism has as one of its central aims the preservation of national economic autonomy.
B) A call to "buy our country's products only" is one form of manifestation of national feelings.
C) Nationalist feelings may lead to control over foreign investment.
D) The more a country's domestic economy declines, the more nationalistic it becomes.
E) Nationalistic feelings are not prevalent in economically prosperous countries.

Question 47

_____ occurs when host countries gradually cause the transfer of foreign investment to national control and ownership through a series of government decrees by mandating ownership and greater national involvement in a company's management.

A) Confiscation
B) Expropriation
C) Domestication
D) Exchange controls
E) Local-content laws

Question 48

In North Korea there is little foreign investment. One of the reasons is the severe application of ___. Any foreign investor or producer is required to sell its products at prices stated by the North Korean government rather than letting market value and demand determine prices.

A) exchange controls
B) local-content laws
C) import restrictions
D) tax controls
E) price controls

Question 49

Price controls are used during inflationary periods to:

A) control the cost of living.
B) restrict exports to foreign countries.
C) negotiate trade contracts favoring the host country.
D) encourage imports.
E) avoid tax burden on essential items.

Question 50

Since the government of Nigeria is strapped for cash, it has decided to tax all foreign investments (such as oil production equipment) by up to forty percent of appraised value. The Nigerian government has found that this is the handiest and quickest means of finding operating funds. The economic risk in discussion here is:

A) exchange controls.
B) local-content laws.
C) import restrictions.
D) tax controls.
E) price controls.

Question 51

The phrase "Buy American" would most closely be associated with which of the following?

A) Socialism
B) Jingoism
C) Nationalism
D) Mercantilism
E) Polarism

Question 52

Stopping or refusing to trade with another nation for political reasons is called:

A) activism.
B) boycotting.
C) confiscation.
D) democratization.
E) expropriation.

Question 53

The seizing of a company's assets without payment is called:

A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.

Question 54

With respect to political risk that can be faced by a company seeking to invest abroad, which of the following presents the most severe political risk?

A) Confiscation
B) Expropriation
C) Domestication
D) Exchange controls
E) Local-content laws

Question 55

All of the following are instances of how nationalism can be manifested EXCEPT:

A) membership in bilateral trade treaties
B) call to buy our country's products
C) restrictions on import
D) restrictive tariffs
E) focus on national security

Question 56

When a government seizes an investment of a foreign investor but some reimbursement for the assets is made, the government is following a process called:

A) confiscation.
B) expropriation.
C) domestication.
D) exchange controls.
E) local-content laws.

Question 57

Which of the following is more likely to be subjected to price control?

A) Leather garments
B) Mobile phone accessories
C) Aspirin and antacids
D) Handycams and lenses
E) Ceramic tiles

Question 58

In Thailand, it is required that any milk sold in the country must contain at least 50 percent milk from Thai dairy farmers. This would be an illustration of which of the following economic risks faced by international producers of milk?

A) Exchange controls
B) Local-content laws
C) Import restrictions
D) Tax controls
E) Price controls

Question 59

Sales of Japanese cars declined in the U.S. during the late 1980s and early 1990s owing to a phenomenon that was wrongly attributed to American nationalism. Which of the following was later identified as the properly defined problem?

A) Non-aggressive pricing strategy of the Japanese marketers
B) Technology that was not customized to American conditions
C) Americans' fear of Japan
D) Customer reaction to sweatshops in Japanese industries
E) Higher import taxes imposed on Japanese cars

Question 60

All of the following are considered to be economic risks that can be faced by international companies EXCEPT:

A) exchange controls.
B) local-content laws.
C) import restrictions.
D) tax controls.
E) production costs.

Question 61

Which of the following would NOT be the best illustration of a NGO (nongovernmental organization) group?

A) Red Crescent
B) Red Cross
C) Amnesty International
D) Oxfam
E) FedEx

Question 62

Which of the following represents a new and powerful tool of PSAs?

A) International funds
B) National governments backing their causes
C) The Internet
D) The United Nations and its affiliated bodies
E) Private companies providing technical support

Question 63

The newest form of terrorism directed toward a peaceful world is:

A) germ warfare.
B) nuclear warfare.
C) cyberterrorism.
D) hate crimes.
E) extortion.

Question 64

Why do terrorism experts predict multinational businesses will be targeted by terrorists more frequently?

A) They are rich and they are powerful.
B) They are capitalists and what they sell.
C) They are less well defended and because of what they symbolize.
D) They destroy the environment.
E) They are subterfuge for espionage agents.

Question 65

All of the following would be considered to be strategies that multinational corporations can use to minimize vulnerability and risk EXCEPT:

A) joint ventures.
B) sole-proprietorship.
C) expanding the investment base.
D) planned domestication.
E) licensing.

Question 66

Brian is attempting to forecast political instability and help management identify and evaluate political events and their potential influence on current and future international business decisions. Brian is engaged in:

A) political risk assessment.
B) political securitization.
C) democratization.
D) risk abatement.
E) quantification of risk.

Question 67

While expanding the investment base of a company, which of the following can be used as a powerful ally in dealing with threats of government takeovers or harassment?

A) Lender banks to host government
B) World Trade Organization
C) International Labour Organization
D) Regional trade blocs
E) Opposing political parties

Question 68

Which of the following best describes the U.S. government's policy toward multinational corporations that are confronted with situations where bribery is an issue?

A) A bribe may be paid as long as it is not a domestic situation.
B) A bribe is justified is if is the documented traditional practice in a country.
C) A bribe may be paid in a foreign country if there is a tie to national security.
D) It is illegal for a U.S. citizen to pay a bribe--period.
E) The issue revolves around the customs of the country and each issue is decided separately.

Question 69

Although some products are more vulnerable than others with regard to political sensitivity in foreign markets, _____ have often been the lightning rods for groups opposed to foreign companies.

A) manufacturing industries
B) beverage companies
C) fast-food restaurants
D) clothing stores
E) travel agencies

Question 70

Which of the following statements most accurately describes the impact of boycotts?

A) In general, these policies normally control and rectify situations that caused the boycotts.
B) Boycotts are generally not very successful.
C) Boycotts are illegal.
D) The United Nations encourages boycotts as a means of settling a dispute as opposed to armed conflict.
E) Boycotts are least effective against consumer goods.

Question 71

Meteora Inc. is planning to enter the African market through its mobile phone manufacturing operations in Kenya. Which of the following could favor a positive relation with the host country?

A) Meteora Inc. plans to use their manufacturing unit as an export base.
B) Meteora Inc. plans to import phone components from China.
C) Meteora has an R & D centre in California and all technology will be patented there.
D) Most of Meteora Inc.'s middle and upper management are expatriates.
E) Meteora has bargained for a tax holiday for the next five financial years.

Question 72

Juliet is concerned with the potential for political harassment when her company enters a new international market. To reduce the risk of political harassment she will consider using _____ to enter the market.

A) importing
B) sole-proprietorships
C) multinational corporations
D) joint ventures
E) trade bloc memberships

Question 73

The most effective solution to a situation where a foreign government is demanding local participation in a multinational corporation's business activities in the host country is:

A) joint ventures.
B) licensing.
C) expanding the investment base.
D) planned domestication.
E) political payoffs.

Question 74

All of the following strategies can be effective in forestalling or minimizing the effect of a total takeover of a multinational corporation's holdings by a foreign government EXCEPT:

A) joint ventures.
B) licensing.
C) expanding the investment base.
D) advertising.
E) planned domestication.

Question 75

Which of the following strategies minimizes political risks for the multinational corporation in situations in which the technology is unique and the risk is high?

A) Joint ventures
B) Licensing
C) Expanding the investment base
D) Planned domestication
E) Multi-facilities

Question 76

One approach to dealing with political vulnerability is the _____ an attempt to lessen political risks by paying those in power to intervene on behalf of the multinational company.

A) subornation
B) protection money
C) political payoff
D) perjury
E) rake-off

Question 77

Which of the following is used by MNCs as a political bargaining tool with foreign publics and governments?

A) Corporate social responsibility
B) Trade union negotiations
C) Political liaisons and tie-ups with other countries
D) Membership in trade blocs and international trade bodies
E) Planned domestication strategy

Question 78

Slammer, Melissa, and "Goner worm" are all examples of:

A) viruses damaging the Internet.
B) politically sensitive products.
C) third-world diseases.
D) hackers intent on attacking multinational businesses.
E) new video games espousing Internet crime.

Question 79

Relations between governments and MNCs are generally positive if the investment leads to all of the following EXCEPT:

A) reduces the balance of payments.
B) uses locally produced resources.
C) transfers capital, technology, and/or skills.
D) creates jobs.
E) makes tax contributions.

Question 80

Which of the following poses the greatest threat to international marketers, in terms of political risk?

A) Newer environmental regulations approved by global trade bodies
B) Change of ruling parties in the government
C) Exchange rate fluctuations affecting margins
D) The threat of the government actually failing
E) Membership or withdrawal of membership of the government in trade blocs