Deck 6: The Political Environment: a Critical Concern

Question 1

Risk of violence does not tend to be a consideration in assessing the political vulnerability of a multinational company's activities.

Answer 1

False

Question 2

The ultimate goal of domestication is to require companies to produce more products to export than was the case before domestication.

Answer 2

False

Question 3

Sovereignty is exclusive to the supreme powers exercised by a nation over its own members.

Answer 3

False

Question 4

Nongovernmental organizations can affect the policy decisions made by governments through lobbying.

Question 5

Saudi Arabia began permitting women to vote in 2015.

Question 6

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

Question 7

The most severe political risk of global business is the government action of domestication.

Question 8

Nationalistic feelings in general bear no relation to the domestic economy.

Question 9

Price controls are only targeted at nonessential products.

Question 10

Political sanctions are usually an unsuccessful means of achieving the goal of forcing a country to accept the demands of the boycotting country.

Question 11

Adherence to the World Trade Organization (WTO) does not result in the loss of national sovereignty.

Question 12

Property may legally be seized by the government with or without compensation.

Question 13

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

Question 14

Sovereignty may be threatened by foreign investment.

Question 15

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

Question 16

Through expropriation and nationalization, nationalized businesses have become more efficient, technologically strong, and competitive in world markets.

Question 17

Many countries have domestication as a condition for investment.

Question 18

Foreign businesses no longer need to be concerned about the stability or instability of prevailing government policies.

Question 19

Nationalism supports foreign business because it improves local economies.

Question 20

International warfare is fast gaining popularity among nations.

Question 21

What is one of the main political causes of instability in international markets?

A) varied taxing conventions
B) differences in economic philosophies
C) global focus
D) environmental awareness
E) trade disputes

Question 22

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

Question 23

What 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 24

Licensing is not effective in situations where the technology is unique and the risk is high.

Question 25

The Agency for International Development underwrites trade and investments for U.S. firms.

Question 26

For a multinational firm, the ideal political climate is a

A) country where international laws do not apply.
B) country where favors can be purchased easily.
C) country with a stable and friendly government.
D) government with absolute power.
E) government that radically shifts its philosophy.

Question 27

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

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

Question 28

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

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

Question 29

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

Question 30

It is common for a single company to directly control or alter the political environment of the country within which it operates.

Question 31

Due to advancements in technology, it is relatively easy to determine whether a cyber attack has been launched by a rogue state, a terrorist, or a hacker as a prank.

Question 32

Relations between governments and MNCs are generally negative, particularly if the investment made by the MNCs increases exports or reduces imports.

Question 33

In the context of international law, a ________ governs its own territory and may enter into agreements with other nations.

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

Question 34

________ 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) Federalism
D) Autocracy
E) Nationalism

Question 35

The principal agency that supports U.S. business abroad is the Global Chamber of Commerce (GCC).

Question 36

Adherence to the WTO inevitably means

A) a definite increase in import tariffs worldwide.
B) the loss of national security to a large extent.
C) reduction in world trade of at least 70 percent.
D) the loss of some degree of national sovereignty.
E) complete stoppage of foreign direct investments.

Question 37

Planned domestication involves taking over an industry in a foreign country.

Question 38

In April 2009, the G20 nations agreed to cede some sovereignty and

A) include all G20 nations in the Security Council.
B) raise oil prices.
C) increase infrastructure funding.
D) reject protectionism.
E) increase aid to South Africa.

Question 39

As cultural and political scenarios vary so widely across nations, there is no way to generalize the tendency for a particular product to be politically sensitive.

Question 40

A sovereign state is one that

A) is obligated to be a member of the World Trade Organization.
B) has its political and economic systems determined by the United Nations Development Program.
C) enjoys full legal equality with other states.
D) has its territory governed by the United Nations.
E) is bounded by external control.

Question 41

The government in Chile recently informed Mario's company that his retail grocery chain in Chile would have to be gradually turned over to the people of Chile by the year 2050 as it is a foreign company in Chile. Additionally, starting the following year, 50 percent of the board of directors of the Chilean operation of the company must be Chileans. What political risk action is Mario's company facing in Chile?

A) confiscation
B) expropriation
C) domestication
D) patronization
E) nationalization

Question 42

The United States requires that 50 percent of all parts used to construct an automobile in the United States be manufactured in the United States. As a result of this, when Toyota Motor Company builds automobile manufacturing plants in Tennessee and Ohio, it faces economic risks associated with

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

Question 43

Which statement about domestication is correct?

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 always led to more technologically advanced and competitive businesses.
D) Countries often require companies to become domesticated as a condition for investment.
E) Domestication refers to the seizing of a company's assets without payment.

Question 44

What country recently allowed women the right to vote for the first time?

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

Question 45

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

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

Question 46

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

A) socialism
B) communism
C) nationalism
D) abstractionism
E) polarism

Question 47

What 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 48

________ occurs when host countries gradually cause the transfer of foreign investment to national control and ownership through a series of government decrees.

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

Question 49

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

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

Question 50

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

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

Question 51

Which action is most likely a manifestation of nationalism?

A) membership in bilateral trade treaties
B) a call to buy a global counterpart's products
C) restrictions on imports
D) removal of tariffs and quotas
E) a focus on global security

Question 52

Marziland found that a large amount of capital was leaving the country due to foreign corporate ownership, so it instituted controls over all movements of capital to conserve the supply of foreign exchange. These are called ________ controls.

A) exchange
B) local-content
C) price
D) tax
E) production

Question 53

What is a common term for a form of government in use today?

A) protectionism
B) duopoly
C) oligopoly
D) capitalism
E) oligarchy

Question 54

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 55

When an expropriated investment becomes a government-run entity, it is

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

Question 56

According to ancient Greeks, what fundamental government form represents rule by many?

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

Question 57

Which government form can be most accurately described as rule by few?

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

Question 58

In Thailand, it is required that any milk product sold in the country by a foreign company must use the milk that is at least 50 percent produced by Thai dairy farmers. What economic risk is faced by the international producers of milk products in this situation?

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

Question 59

What event caused a drop in "economic freedom" in the United States, according to the Heritage Foundation?

A) Hurricane Katrina
B) the war in Iran
C) Obamacare
D) the bombing of the World Trade Towers
E) the economic stimulus of 2008-2009

Question 60

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

A) Nepotism
B) Absolutism
C) Fascism
D) Nationalism
E) Polarism

Question 61

Which of these organizations is an NGO (nongovernmental organization)?

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

Question 62

Bao is attempting to forecast political instability and help his company's management identify and evaluate political events and their potential influence on current and future international business decisions. Bao is engaged in

A) political risk assessment.
B) political confiscation.
C) democratization.
D) arbitration.
E) risk expropriation.

Question 63

What strategy is used by multinational corporations to minimize political vulnerability and risk?

A) expropriation
B) sanctions
C) buyouts
D) confiscation
E) licensing

Question 64

As the FBI investigates security breaches, the analyses are more often pointing to ________ as the most serious threat.

A) Russian government supported hackers
B) religious extremists
C) white supremacists
D) American rogue hackers
E) the Chinese government

Question 65

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 is most likely to consider using ________ to enter the market.

A) externally produced products
B) a smaller investment base
C) foreign technology
D) a joint venture
E) the threat of sanctions

Question 66

What is true of political sanctions?

A) Political sanctions normally control and rectify situations within a nation.
B) Political sanctions are generally unsuccessful.
C) Political sanctions are illegal.
D) The United Nations encourages boycotts as a means of settling political disputes.
E) The use of political sanctions is the most effective way to increase world trade.

Question 67

Which form of terrorism is most likely to use the Internet to inflict damage?

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

Question 68

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 application of

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

Question 69

Meteora Inc. is planning to enter the Kenyan market by establishing a mobile phone manufacturing operation in Kenya. Meteora is most likely to have a positive relationship with Kenyan government through its investment if it

A) uses locally produced resources.
B) imports phone components from China.
C) establishes an R&D center in California and has all its technology patented there.
D) ensures that its middle and upper management are expatriates.
E) bargains for a tax holiday for the next five financial years.

Question 70

Price controls applied during inflationary periods may have the effect of

A) controlling the cost of living.
B) restricting exports to foreign countries.
C) negotiating trade contracts favoring the host country.
D) encouraging imports.
E) collecting taxes on foreign investments.

Question 71

Which of these items is most likely to be subjected to price control?

A) leather garments
B) mobile phone accessories
C) aspirin and antacids
D) camcorders and lenses
E) ceramic tiles

Question 72

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

A) They impose export controls on the underdeveloped nations.
B) They are the major cause for political sanctions against Arab nations.
C) They are less well defended than government targets.
D) They destroy and pollute the environment.
E) They are subterfuge for espionage agents.

Question 73

Which strategy 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 74

What are effective tools that political and social activists (PSAs) use to spread word about their causes?

A) political sanctions
B) monetary barriers and trade embargoes
C) the Internet and cellphones
D) local-content laws and questionnaires
E) export controls

Question 75

Relations between governments and MNCs are generally positive if the investment

A) increases the volume of imports.
B) uses globally produced resources.
C) transfers capital, technology, and skills.
D) brings in a higher number of foreign nationals.
E) decreases the volume of exports.

Question 76

Which strategy 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 77

In terms of political risk, what 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 78

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

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

Question 79

Taxes must be classified as a(n) ________ risk when used as a means of controlling foreign investments.

A) political
B) social
C) ignorable
D) environmental
E) harmless

Question 80

The government of Namibia is strapped for cash, and it has decided to tax all foreign investments (such as food packaged in the country) by up to 40 percent of the appraised value. The Namibian 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.