Deck 6: The Political Environment: A Critical Concern

Question 1

A good illustration of nationalistic feelings that can cause riffs between allies is the one that occurred between France and the United States over the Iraq/U.S.war.

Answer 1

True

Question 2

According to the text if China raised the value of its currency that would make it even easier for Chinese firms and government to purchase American companies.

Answer 2

True

Question 3

Taxes are always considered as a political risk by foreign and domestic investors.

Answer 3

False

Question 4

Three hot issues in 2008 were the undervalued Chinese currency,the ban on beef imports into Japan,and Chinese subsidies in apparent violation of WHO rules.

Question 5

Exchange controls stem from shortages of foreign exchange held by a country.

Question 6

Socialism 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.

Question 7

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

Question 8

Political sanctions have proved to be a sure-fire method of controlling outlaw nations.

Question 9

The three forms of government are dictatorship,aristocracy,and democracy.

Question 10

Foreign investors,while sometimes feared as a dominant tyrant threatening economic development,are often sought after as a source of needed capital investment.

Question 11

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

Question 12

Confiscation (as a political risk)is the seizing of a company's assets without payment.

Question 13

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 14

Knowledge of the philosophies of all major political parties within a country is important to international marketers.

Question 15

Companies that have thoroughly studied political considerations before constructing their business models do not have to concern themselves with the political environment when attempting to do business abroad.

Question 16

International law recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its citizens conduct business.

Question 17

As an example of what are called local-content laws NAFTA requires 62 percent local content for all cars coming from member countries.

Question 18

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

Question 19

Expropriation occurs when a host country 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.

Question 20

Foreign companies are usually not affected by changes in nationalistic feelings in the countries where they operate.

Question 21

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

A)democracy
B)aristocracy
C)oligopoly
D)monarchy
E)dictatorship

Question 22

When the United States and the European Union get into trade disputes,where do both sides go to settle the matter?

A)The United Nations
B)The World Court
C)The Organization of American States
D)The World Trade Organization
E)The North Atlantic Treaty Organization

Question 23

Planned domestication is a policy that rarely has a positive impact on political vulnerability or risk.

Question 24

__________ 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)Government
C)A cartel
D)An international partnership
E)A trade pact

Question 25

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' soverignty
E)because China could divert oil from Unocal to China

Question 26

Relationships between governments and multinational corporations (MNCs)are generally positive if the investment contributes to the welfare of political leaders.

Question 27

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 28

The newest form of terrorism is called information terrorism because it prevents Third World countries from receiving information.

Question 29

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

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 30

(p.161,Global Perspective)When the World Trade Organization attempted to settle what was called a "banana war," what was the outcome?

A)The European Union won and received payments from the United States.
B)The matter was declared a draw.
C)Both sides in the matter were instructed to cease and desist.
D)The WTO ruled in favor of the United States,however,the EU ignored the ruling.
E)The WTO ruled in favor of the United States and the matter was ended.

Question 31

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 32

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 33

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 34

The ideal political climate for a multinational firm is:

A)a country where there are no laws.
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 35

The authors state that there is reason to believe that international warfare is fast becoming obsolete.

Question 36

A good illustration of a product class that is likely to be politically sensitive is one that has an impact on exchange rates.

Question 37

Political and social activists (PSAs)and nongovernmental organizations (NGOs)almost always interrupt the normal flow of trade.

Question 38

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

A)bounded
B)sovereign
C)legal
D)free-born
E)neutral

Question 39

Nongovernment organizations (NGOs)sometimes use foreign companies and their personnel as pawns in domestic disputes.

Question 40

One of the methods for reducing political vulnerability and risk is to license products,services,or technology.

Question 41

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 42

_____________ 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 43

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 44

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 45

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

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

Question 46

For most countries around the world it is important for international marketers to know the philosophies of all the major political parties,since one them might become dominant and affect:

A)the status of WTO control.
B)the overall business climate.
C)global warming.
D)international support for the United Nations.
E)liberal or conservative.

Question 47

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 48

Crossing Borders 6.2 "Trade Does Not Work as a Stick,Only as a Carrot" suggests:

A)Thomas Jefferson understood how to get the French and English to stop fighting.
B)The U.S.was able to get the Soviet Union out of Afghanistan by boycotting the Moscow Olympics.
C)The U.S.needs to increase its embargo against Myanmar.
D)Coercion does not work,exchange does.
E)Industrial goods trade is less successful than consumer goods trade.

Question 49

No nation-state will tolerate penetration by a foreign company into its market if it perceives a(n)______________ its well-being.

A)sympathy for
B)synergistic relationship to
C)economic boost
D)threat to
E)profitable outcome

Question 50

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 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

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 53

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 54

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 55

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 56

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

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

Question 57

The national telephone company in Mexico was privatized;this meant that the Mexican government sold its operation to _________________.

A)investors
B)regional state regulatory groups.
C)democrats
D)outsourcers.
E)foreigners.

Question 58

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.This form of economic risk is associated with which of the following?

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

Question 59

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

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

Question 60

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 61

Which of the following strategies minimizes political risks for the multinational corporation that wishes to expand into overseas markets?

A)joint ventures
B)licensing
C)expanding the investment base
D)planned domestication
E)multi-facilities

Question 62

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 security.
C)democratization.
D)risk abatement.
E)quantification of risk.

Question 63

Relations between governments and multinational corporations are generally positive if:

A)products impact national security.
B)products are only directed toward the consumer sector.
C)products are only directed toward the business sector.
D)products can be purchased via the Internet.
E)the investment makes tax contributions.

Question 64

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 65

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 66

Relations between governments and multinational corporations are generally positive if investments do all of the following EXCEPT:

A)transfers capital,technology,or skills.
B)creates jobs.
C)makes tax contributions.
D)uses locally produced resources.
E)is tied to national security.

Question 67

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)all of the above are equal with respect to political harassment

Question 68

The most important reason to encourage foreign investment is to:

A)accelerate world peace.
B)accelerate the development of an economy.
C)accelerate the development of the Internet.
D)stall the effects of communism and socialism.
E)make profits.

Question 69

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 what they symbolize.
D)They are destroy the environment.
E)They are subterfuge for espionage agents.

Question 70

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)grocery chains
B)Wal-Mart stores
C)fast-food restaurants
D)clothing stores
E)travel agencies

Question 71

Which of the following is NOT a common goal of terrorists?

A)Use victims as pawns in political or social disputes.
B)Develop military management capability.
C)Inflict fear within a country.
D)To generate funds
E)To embarrass a government.

Question 72

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 73

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 74

Some products and issues are more politically sensitive in international trade than others.Which of the following would likely be LEAST the politically sensitive?

A)the environment.
B)exchange rates.
C)national and economic security.
D)space travel.
E)publicly visible assets.

Question 75

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 76

__________ is fast becoming obsolete;the greater threats to peace are civil strife and terrorism.

A)International warfare
B)Print media
C)Patriotism
D)International prejudice
E)Religion

Question 77

Relations between governments and multinational corporations are generally positive if investments:

A)are tied to national security.
B)are only oriented toward the consumer sector.
C)are under $1 million.
D)create jobs.
E)do not involve extensive Internet business.

Question 78

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 79

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 80

A cynical way to look at the motivation behind corporate social responsibility in general is its use as a __________ with foreign publics and governments.

A)deception tool
B)public relations image
C)marketing ploy
D)positioning guise
E)bargaining chip