Deck 6: The Political Environment: a Critical Concern

Question 1

The most severe political risk is domestication.

Answer 1

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

Question 2

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

Answer 2

False
Explanation: Saudi Arabia precludes women from voting and appears to be the only state still completely in the dark ages with regard to suffrage.

Question 3

Economically prosperous countries do not display strong nationalistic feelings.

Answer 3

False
Explanation: Although militant economic nationalism has subsided, nationalistic feelings can be found even in the most economically prosperous countries.

Question 4

Risk of violence is not a consideration in assessing the political vulnerability of a multinational company's activities.

Question 5

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 6

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

Question 7

Price controls are normally targeted at nonessential products.

Question 8

Political sanctions are the most effective means of achieving the desired goal of forcing a country to accept demands of the boycotting country.

Question 9

International warfare is fast gaining popularity among nations.

Question 10

Foreign investment can be perceived as a threat to sovereignty.

Question 11

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

Question 12

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 13

Many countries have domestication as a condition for investment.

Question 14

Political and social activists have no impact on the normal flow of trade.

Question 15

Barring Latin America, the risks of confiscation and expropriation have lessened over the last two decades.

Question 16

Nongovernmental organizations affect the policy decisions made by governments.

Question 17

Nationalism can take an anti-foreign business bias.

Question 18

Nationalistic feelings are directly proportional to growth of domestic economy.

Question 19

Adherence to World Trade Organization (WTO) rules means a loss of some degree of national sovereignty.

Question 20

Pressure from nationalist and self-interest groups affect the stability of a government.

Question 21

Licensing is least effective when the technology is unique.

Question 22

A single company can directly control or alter the political environment of the country within which it operates.

Question 23

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 24

Products that have or are perceived to have an effect on the environment are more likely to be politically sensitive.

Question 25

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

Question 26

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

Question 27

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 28

The Foreign Credit Insurance Association underwrites trade and investments for U.S. firms.

Question 29

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 30

_____ 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 31

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

Question 32

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

Question 33

Which of the following is a political cause of instability in international markets?

A) Varied taxing conventions
B) Differences in economic philosophies
C) Global focus
D) Activism
E) Trade disputes

Question 34

Adherence to the WTO means:

A) more avenues for outsourcing.
B) loss of national security to a large extent.
C) procurement of economies of scale.
D) loss of some degree of national sovereignty.
E) limited scope for foreign direct investments.

Question 35

Monarchy, like _____, is a form of government ruled by one.

A) aristocracy
B) dictatorship
C) democracy
D) monopoly
E) oligarchy

Question 36

The ancient Greeks conceived three fundamental forms of government. Which of the following refers to a government ruled by one?

A) Aristocracy
B) Monarchy
C) Democracy
D) Monopoly
E) Oligarchy

Question 37

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

Question 38

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 country with a stable and 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 39

Which of the following is true of a sovereign state?

A) It is obligated to be a member of the World Trade Organization.
B) Its political and economic systems are dependent on other nations.
C) It enjoys full legal equality with other states.
D) It has the power to enter into agreements with only select nations.
E) It is bounded by external control.

Question 40

Due to advancements in technology, it is easy to determine if a cyberattack has been launched by a rogue state, a terrorist, or a hacker as a prank.

Question 41

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 42

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

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

Question 43

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

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

Question 44

Which of the following is a common term for a form of government in use today?

A) Protectionism
B) Duopoly
C) Oligopoly
D) Capitalism
E) Oligarchy

Question 45

In _____, police and military are not allowed to vote.

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

Question 46

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 of the company must be Chileans. Which of the following political risk actions is Mr. Travis' company facing in Chile?

A) Confiscation
B) Expropriation
C) Domestication
D) Patronization
E) Socialization

Question 47

Which of the following is an instance of how nationalism can be manifested?

A) Membership in bilateral trade treaties.
B) Call to buy a global counterpart's products.
C) Restrictions on imports.
D) Removal of tariffs and quotas.
E) Focus on global security.

Question 48

In Thailand, it is required that any milk products sold in the country must contain at least 50 percent milk from Thai dairy farmers. Which of the following economic risks faced by international producers of milk is illustrated in this situation?

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

Question 49

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. When Toyota Motor Company built automobile manufacturing plants in Tennessee and Ohio, it faced economic risks associated with _____.

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

Question 50

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

A) Confiscation
B) Expropriation
C) Domestication
D) Democratization
E) Socialization

Question 51

If there is a substantial amount of capital leaving a 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 52

Which of the following countries is the only country to preclude women from voting and appears to be still completely in the dark ages with regard to suffrage?

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

Question 53

______ is an intense feeling of state pride, unity, and an awakening of a country's people to pride in their country.

A) Socialism
B) Communism
C) Fascism
D) Nationalism
E) Polarism

Question 54

When does an expropriated investment become a government-run entity?

A) On democratization
B) On domestication
C) On nationalization
D) On prioritization
E) On socialization

Question 55

Which of the following is true of nationalism?

A) The more a country feels threatened by some outside force the less nationalistic the country becomes.
B) A call to "buy our country's products only" is one form of manifestation of national feelings.
C) Nationalist feelings lead to loss of control over foreign investment.
D) The more a country's domestic economy declines, the less nationalistic it becomes.
E) Nationalistic feelings are not prevalent in economically prosperous countries.

Question 56

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 57

Which of the following is true of domestication?

A) The ultimate goal of domestication is to force domestic investors to share more of the profits with the government.
B) The risk of domestication appears to have decreased over the last two decades.
C) Domestication has led to more technologically advanced and competitive businesses.
D) Nowadays, countries often require companies to become domesticated as a condition for investment.
E) It is the seizing of a company's assets without payment.

Question 58

According to ancient Greeks which of the following refers to a fundamental government form ruled by many?

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

Question 59

Which of the following government forms is ruled by a few?

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

Question 60

_____ stem from shortages of foreign currency held by a country.

A) Exchange controls
B) Local-content laws
C) Price controls
D) Tax controls
E) Production costs

Question 61

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

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

Question 62

"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 63

In North Korea, foreign investors or producers are required to sell products at prices stated by the North Korean government rather than letting market value and demand, determine the prices. This implies that there is severe application of _____.

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

Question 64

Which of the following is a strategy that multinational corporations use to minimize political vulnerability and risk?

A) Expropriation
B) Sanctions
C) Buy outs
D) Confiscation
E) Licensing

Question 65

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 conditioning.
E) quantification of risk.

Question 66

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

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

Question 67

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

A) They are rich and powerful.
B) They are capitalists and are major contributors to the society.
C) They are less well defended.
D) They destroy and pollute the environment.
E) They are subterfuge for espionage agents.

Question 68

Which 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?

A) Confiscation
B) Sole-proprietorship
C) Expanding the investment base
D) Advertising
E) Leasing

Question 69

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. using their manufacturing unit as an export base.
B) Meteora Inc. importing phone components from China.
C) Meteora having an R&D center in California and have all technology patented there.
D) Having most of Meteora Inc.'s middle and upper management be expatriates.
E) Meteora bargaining for a tax holiday for the next five financial years.

Question 70

Which of the following is an NGO (nongovernmental organization) group?

A) Central Intelligence Agency
B) Peace Corps
C) Millennium Challenge Corporation
D) Oxfam
E) FedEx

Question 71

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 the 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) tax restrictions.
D) tax controls.
E) price controls.

Question 72

Which of the following forms of terrorism uses the Internet to inflict damage?

A) Germterrorism
B) Bioterrorism
C) Cyberterrorism
D) Ecoterrorism
E) Narcoterrorism

Question 73

Which of the following strategies to minimize political vulnerability and risk has the advantage of engaging the power of several investors and banks in the host country whenever any kind of government takeover or harassment is threatened?

A) Joint ventures
B) Licensing
C) Expanding the investment base
D) Sole-proprietorship
E) Political bargaining

Question 74

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) collect taxes on foreign investments.

Question 75

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 76

In terms of political risk, which of the following poses the greatest threat to international marketers?

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

Question 77

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) externally produced products
B) a smaller investment base
C) foreign technology
D) joint ventures
E) sole-proprietorships

Question 78

Taxes must be classified as a _____ risk when used as a means of controlling foreign investments.

A) political
B) social
C) financial
D) environmental
E) legal

Question 79

Which of the following statements is true of political sanctions?

A) Political sanctions normally control and rectify situations within a nation.
B) Political sanctions are generally not very successful.
C) Political sanctions are illegal.
D) The United Nations encourages boycotts as a means of settling disputes.
E) Political sanctions are least effective against consumer goods.

Question 80

Relations between governments and MNCs are generally positive if the investment:

A) increases the volume of imports.
B) uses globally produced resources.
C) brings capital, technology, and/or skills.
D) brings in more number of foreign nationals.
E) outsources work back to its home country.