Deck 8: Global Management

Question 1

Multinational companies typically have no difficulty determining the correct balance between global consistency and local adaptation.

Answer 1

False

Question 2

The purpose of the Maastricht Treaty of Europe was to create the European Union with one common currency, the euro, for its members.

Answer 2

True

Question 3

If companies focus too much on local adaptation, they run the risk of losing the cost effectiveness and productivity that result from using standardized rules and procedures throughout the world.

Answer 3

True

Question 4

Regional trading is defined as a method of investment in which a company builds a new business or buys an existing business in a foreign country. .

Question 5

The two kinds of cooperative contracts are licensing and franchising.

Question 6

A joint venture is an example of a strategic alliance.

Question 7

It appears that all companies follow the phase model of globalization when entering foreign markets.

Question 8

The biggest disadvantage associated with licensing is that the licensor gives up control over the quality of the good or service sold by the foreign licensee.

Question 9

Approximately one-third of multinational companies enter foreign markets through wholly owned affiliates.

Question 10

Global joint ventures can be difficult to manage because they represent a merging of four cultures.

Question 11

Global business is defined as the buying and selling of goods and services by people from different countries.

Question 12

The North American Free Trade Agreement (NAFTA) is a regional trade agreement between Canada and the United States. No other nations have signed this trade agreement.

Question 13

In a multinational company, managers at company headquarters value global consistency as it simplifies decision making.

Question 14

Global new ventures bring a product or service to market in one foreign market at a time.

Question 15

The phase model of globalization is one in which a company makes the transition from a domestic company to a global company in three sequential phases. The three phases are exporting, wholly owned subsidiaries, and strategic alliances.

Question 16

Historically, companies have generally followed the phase model of globalization.

Question 17

One of the disadvantages of global joint ventures is that, like licensing and franchising, they help companies avoid tariff and nontariff barriers to entry.

Question 18

Direct foreign investment is an increasingly important and common method of conducting global business.

Question 19

Multinational corporations are corporations that own businesses in two or more countries.

Question 20

A European car manufacturer collaborating with a Chinese car manufacturer for building a new car manufacturing company in China is an example of direct foreign investment.

Question 21

The Xenonian government has banned the import of snow skis from other countries as there were many fatal accidents involving poorly built snow skis. As a result, all snow skis marketed in Xenonia must now be manufactured in Xenonia. This is an example of a(n) _____.

A)tariff
B)nontariff barrier
C)import boycott
D)industry subsidy
E)industry nationalization

Question 22

Which of the following is true of global business?

A)It is the buying and selling of goods and services by people from different countries.
B)It is the buying and selling of goods and services among different states of a country.
C)It is the setting up of a factory in a country other than the parent country.
D)It is the buying and selling of goods and services within the states of a country.
E)It is the setting up of another factory in the parent country.

Question 23

Triston is a company owned by a single owner with headquarters in Switzerland and manufacturing plants in 90 other nations. Triston is an example of a(n) _____.

A)joint venture
B)multinational corporation
C)ethnocentric organization
D)polycentric organization
E)franchise

Question 24

In 2000, the United States imposed a tax on all steel imports in an effort to protect about 5,000 jobs. This tax is an example of a(n) _____.

A)import duty
B)voluntary import restraint
C)subsidy
D)financial boycott
E)tariff

Question 25

A _____ is a nontax method of increasing the cost or reducing the volume of imported goods.

A)tariff
B)nontariff barrier
C)trade roadblock
D)risk­aversive boycott
E)subsidy quota

Question 26

An attractive business climate is defined by only one dimension: it minimizes the political risk to a company.

Question 27

Souzia, a small tropical country, boycotted the products of an international clothing store because the company manufactures and exports some of its goods from Argonia, the country with which Souzia has long standing political problems. This boycott is an example of _____.

A)acculturation
B)patronization
C)a tariff
D)nationalization
E)​a trade barrier

Question 28

The Candinia government continues to impose high tariffs on rice to make sure local farmers can earn a living. The tariff on rice is an example of _____.

A)a voluntary government restriction
B)political uncertainty
C)protectionism
D)a security quota
E)a bureaucratic subsidy

Question 29

The criteria for choosing an office/manufacturing location are different from the criteria for entering a foreign market.

Question 30

The two general kinds of trade barriers are _____.

A)government import standards and industry import standards
B)qualitative and quantitative barriers
C)voluntary and involuntary barriers
D)nationalistic and geocentric barriers
E)tariff barriers and nontariff barriers

Question 31

A(n) _____ is a direct tax on imported goods.

A)tariff
B)nontariff barrier
C)trade roadblock
D)boycott quota
E)import subsidy

Question 32

_____ is a method in which a company builds a new business or buys an existing business in a foreign country.

A)Strategic alliance
B)Direct foreign investment
C)Global new venture
D)Joint venture
E)Direct exporting

Question 33

The three strategies used to minimize or adapt to the political risk inherent in global business are avoidance, control, and cooperation.

Question 34

_____ are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect companies in special industries.

A)Quotas
B)Voluntary export restraints
C)Cooperative contracts
D)Subsidies
E)Tariffs

Question 35

Two factors that help companies determine the growth potential of foreign markets are the purchasing power of the consumers and types of foreign competitors already in the market.

Question 36

When conducting global business, companies should attempt to identify the two types of political risk, which are political uncertainty and economic uncertainty.

Question 37

After Malta was permitted to join the European Union (EU), the other countries of the EU removed all taxes on the import of goods manufactured in Malta. In this scenario, the EU abolished the _____ for Malta-manufactured merchandise.

A)import quotas
B)customs classification
C)import standards
D)tariffs
E)tonnage duty

Question 38

​Global business:

A)​is the buying and selling of goods and services to people from different countries.
B)​includes any sale of goods and services.
C)​only involves companies with more than 50 employees.
D)​is the setting up of a factory in a country other than the parent country.
E)​is unregulated.

Question 39

Protectionism is the use of trade barriers to protect local companies and their workers from _____.

A)international unions
B)foreign competition
C)trademark infringements
D)patent violations
E)copyright violations

Question 40

The evidence clearly shows that how well an expatriate's spouse and family adjust to the foreign culture is the most important factor in determining the success or failure of an international assignment.

Question 41

Robert Mondavi Wineries entered into an agreement with Baron Philippe de Rothschild, owner of Boreaux's First Growth chateau, to produce a top quality wine in California. The two companies working together to create a new product is an example of _____.

A)exporting
B)licensing
C)a joint venture
D)a cooperative contract
E)a wholly owned subsidiary

Question 42

Most companies have used the _____ to successfully enter foreign markets.

A)phase model of globalization
B)global new venture technique
C)ripple method
D)market echo approach
E)guerrilla approach

Question 43

The acronym GATT stands for the _____.

A)Global Agreement on Temporal Trade
B)Governing Agreement on Trade and Transactions
C)General Agreement on Tariffs and Trade
D)Government Aid for Trade and Transactions
E)Global Arrangement for Trade and Taxes

Question 44

In a multinational firm, managers at company headquarters value _____ because it simplifies decisions.

A)local consistency
B)local adaptation
C)global adaptation
D)global consistency
E)domestic adaptation

Question 45

Which of the following should be a key issue for a company once it decides to go global?

A)Recruit additional employees for the company.
B)Strike the right balance between global consistency and local adaptation.
C)Train employees to handle business abroad.
D)Determine the number of factories to be built in foreign countries.
E)Determine the number of employees to be trained to handle responsibilities.

Question 46

_____ are two kinds of cooperative contracts.

A)Licensing and joint ventures
B)Franchising and licensing
C)Direct investment and indirect investment
D)Direct exporting and indirect exporting
E)Joint ventures and strategies alliances

Question 47

​The General Agreement on Tariffs and Trade (GATT):

A)​replaced the United Nations court system.
B)​eliminated government subsidies.
C)​eliminated tariffs in ten specific industries.
D)​operated in a fashion similar to the Chamber of Commerce.
E)​imposed tariffs on all countries.

Question 48

To protect its farmers, Japan put limitations on the amount of mushrooms and leeks that could be imported from China. This limitation is an example of a(n) _____.

A)tariff
B)voluntary import restraint
C)subsidy
D)agricultural import standard
E)quota

Question 49

Which of the following represents the correct sequence of the phase model of globalization?

A)Exporting; wholly owned affiliates; cooperative contracts; strategic alliances
B)Exporting; direct investment; strategic alliances; job ventures
C)Exporting; cooperative contracts; strategic alliances; wholly owned affiliates
D)Exporting; strategic alliances; cooperative contracts; wholly owned affiliates
E)Exporting; job ventures; strategic alliances; direct investment

Question 50

Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of lipstick annually in Japan. It has no physical presence in Japan beyond the fact that its products are sold there. Which of the following technique does the company adopt to reach the Japanese market?

A)Franchising
B)Direct investment
C)Licensing
D)Strategic alliance
E)Exporting

Question 51

For an initial fee and royalties, Lemmongrass Inc. has licensed its entire business to an organization called Powersurge, located in another country. It has provided this organization with training and marketing assistance to successfully run the business. In this context, Powersurge is a(n) _____.

A)​licensor
B)​franchisee
C)​joint venture
D)​importer
E)​wholly owned affiliate

Question 52

The trade agreement that represented the most significant change to the regulations governing global trade during the 1990s was the _____.

A)Maastricht Treaty of Europe
B)North American Free Trade Agreement
C)World Trade Organization
D)Asia­Pacific Economic Cooperation
E)Asian Free Trade Arrangement

Question 53

After Malta was permitted to join the European Union (EU), the other countries of the EU removed all taxes on the import of goods manufactured in Malta. Malta was preparing to become part of a(n) ____.

A)zone of ethnocentricity
B)regional trading zone
C)high tariff trading zone
D)international cartel
E)global market

Question 54

A multinational company that acts with _____ has offices, manufacturing plants, and distribution facilities in different countries that are run based on the same rules, guidelines, policies, and procedures.

A)policy certainty
B)global consistency
C)global adaptation
D)global certainty
E)regiocentrism

Question 55

_____ occurs when a company sells domestically produced products to customers in foreign countries.

A)Direct foreign investment
B)Franchising
C)Licensing
D)Exporting
E)Cooperative contract

Question 56

The _____ has liberalized trade between countries so that business can plan for one market rather than for three separate markets.

A)Maastricht Treaty of Europe
B)Association of Southeast Asian Nations
C)Asia­Pacific Economic Cooperation
D)North American Free Trade Agreement
E)General Agreement on Tariffs and Trade

Question 57

The _____ created a regional trading zone in Europe.

A)Free Trade Agreement
B)​Maastricht Treaty
C)Global Agreement for Transactional Trading
D)Asia­Pacific Economic Cooperation
E)Association of Southeast Asian Nations

Question 58

A(n) _____ is an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country.

A)exporting agreement
B)cooperative contract
C)joint venture
D)strategic alliance
E)free­trade agreement

Question 59

Sodima is a French cooperative that owns the name, the trade secrets, and the patents of Yoplait yogurt. General Mills pays Sodima for the right to sell Yoplait yogurt in the United States. This is an example of _____.

A)licensing
B)a global joint venture
C)exporting
D)a strategic alliance
E)direct investment

Question 60

The General Agreement on Tariffs and Trade (GATT) _____.

A)increased both tariffs and nontariff barriers
B)removed limits on government subsidies
C)imposed tariffs on specific industries
D)protected intellectual property
E)increased tariffs by 40 percent on average worldwide

Question 61

Which of the following factors helps a company determine the growth potential of a foreign market?

A)Political uncertainty
B)Purchasing power
C)Type of infrastructure
D)Land availability
E)Policy uncertainty

Question 62

​Tugstinia is one of only two countries in the world that produces a mineral required in the manufacturing of cellular phones. Several mining companies recently moved their operations out of the region due to a civil war resulting from a change in rulers. This is an example of how can influence global business.

A)​political uncertainty
B)​policy uncertainty
C)​economic risk
D)​infrastructure failure
E)​nationalization

Question 63

What are the two types of political risk that affect companies conducting global business?

A)Political uncertainty and policy uncertainty
B)Policy uncertainty and expropriation potential
C)Cultural strength and political risks
D)Infrastructure dynamism and political uncertainty
E)Nationalism and economic uncertainty

Question 64

_____ refers to the risk associated with changes in laws and government schemes that directly affect the way foreign companies conduct business.​

A)​Policy uncertainty
B)​Power distance
C)​Political uncertainty
D)​Cultural simulations
E)Purchasing power

Question 65

Managing global joint ventures can be difficult because they:

A)​represent a merging of four cultures.
B)​increase the number of tariffs that have to be paid.
C)​can only be used by large companies that already have an international presence.
D)​use local consistency in marketing.
E)​help companies to allow nontariff barriers to entry.

Question 66

Which of the following is a common factor of global new ventures?

A)A mechanistic organizational culture
B)The use of local adaptation strategy
C)The development of cultural specific implementation policies
D)The ability to respond quickly and efficiently to any changes in the external environment
E)The development and communication of a company's global vision from inception by the founders.

Question 67

What are the strategies that can be used to minimize or adapt to the political risk inherent in global business?

A)Protectionist, avoidance, and offensive strategies
B)Creative, cooperative, and defensive strategies
C)Cooperative, customary, and nationalistic strategies
D)Avoidance, protectionist, and guerrilla strategies
E)Control, avoidance, and cooperation strategies

Question 68

The primary disadvantage of wholly owned business is the _____.

A)dumping of products
B)countertrading of goods
C)nontariff barriers associated with buying existing businesses
D)difficulty in adjusting to a new culture
E)cost of building new operations

Question 69

A _____ is a strategic alliance in which two existing companies collaborate to form a third, independent company.

A)joint venture
B)franchise
C)wholly owned affiliate
D)global new venture
E)cooperative contract

Question 70

The most important factor in an attractive business climate is the _____.

A)easy access to growing markets
B)presence of established markets
C)high political risks
D)limited infrastructure
E)high competition among companies

Question 71

A cosmetics company that is considering entering the South American market would be especially interested in the discretionary income within that region. In this context, which of the following is a determining factor in its global strategy?

A)Purchasing power
B)Political uncertainty
C)Expropriation potential
D)Infrastructure costs
E)Sociocultural trends

Question 72

Many companies in Dansland retracted their businesses as the government passed a new law requiring the companies to pay double the tax for conducting business in Dansland.​ This is a _____ that the companies doing business in Dansland have faced.

A)​political uncertainty
B)​national culture
C)​power distance
D)​control strategy
E)​policy uncertainty

Question 73

Identify a common factor of global new ventures?

A)The bringing of a product or service to several different foreign markets at the same time
B)The use of local adaptation strategy
C)A mechanistic organizational culture
D)The ability to respond quickly and efficiently to any changes in the external environment
E)The development of culturally­specific implementation policies

Question 74

Clive Motor Company solely owns and operates manufacturing plants in Brazil, Chile, Germany and India. Which of the following methods for conducting global business has Clive Motor Company used in this example?

A)Joint venture
B)Strategic alliance
C)Cooperative contract
D)Wholly owned affiliate
E)Strategic franchise

Question 75

German chip manufacturer, Infineon AG, has joined with Motorola Inc. and Agere Systems Inc. to establish a new company in order to develop and license chip designs for cellphones. These three companies have created a _____.

A)franchise
B)subsidized corporation
C)global new venture
D)joint venture
E)policy uncertainty

Question 76

Stardust Inc. is expanding its global operations into South Fordland in spite of the terrorist activities in the country. As Stardust Inc. expands into South Fordland, it must deal with _____.

A)political uncertainty
B)economic uncertainty
C)infrastructure regulation
D)nationalistic equity
E)strategy risk

Question 77

State-of-the-art companies with sales, employees, and financing in different countries that are found with an active global strategy are called _____.

A)wholly owned affiliates
B)​global new ventures
C)franchisees
D)strategic alliances
E)subsidized corporations

Question 78

Starshine Inc., a toy manufacturing company, has collaborated with Capsidy Corp., a book publishing company, to come up with a third company, Starcap Inc., which manufactures educational toys and games for preschool children. In this context, Starcap is a(n) _____. ​

A)​franchise
B)​strategic alliance
C)​licensee
D)​joint venture
E)​exporter

Question 79

_____ is associated with the risk of major changes in governmental regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events.

A)Individualism
B)​Power distance
C)​​​Political uncertainty
D)​Short­term orientation
E)​Policy uncertainty

Question 80

Which of the following is a trend that has allowed companies to skip the phase model when going global?

A)Quick, reliable air travel
B)The globalization of the trend
C)A critical need for resources
D)The complete metamorphosis of marketplaces
E)Cheap labor in developing countries