Deck 2: Legal and Political Foundations of International Management

Question 1

Identify and briefly describe how the six different types of international legal systems differ.

Answer 1

No Answer

Question 2

If Firm X plans to export a controlled product to Firm Y with the knowledge that Firm Y will then send the product to Firm Z, Firm X is engaging in

A) diversion.
B) expropriation.
C) sanctions.
D) confiscation.
E) third-party exports.

Answer 2

A

Question 3

The President can direct the Department of Commerce to add a country to an embargo list based on

A) the extent to which the country's actions affect US national security.
B) the country's current/future relations with the US or its allies.
C) whether the country is or is not communist.
D) the country's nuclear, chemical, and biological weapons policy and degree of compliance with the work agreement on these weapons.
E) all of these.

Answer 3

E

Question 4

Sanctions

A) are the use of an export license to provide materials to a third party not included on the license.
B) are an all-out prohibition of trade with another country.
C) are sets of specific restraints involving trade that can take many different forms.
D) are multilateral efforts to restrict imports and exports to and from a country.
E) are none of these.

Question 5

Which of the following is not an example of export controls?

A) sanctions.
B) tariff.
C) embargoes.
D) boycott.
E) all of these are export controls.

Question 6

A fee paid by an exporter to the country of import is

A) a tariff.
B) a tax.
C) an import limitation.
D) an export control.
E) a trade barrier.

Question 7

Which of the following is not an example of domestic economic risk?

A) size of population.
B) per capita income.
C) import restrictions.
D) availability of high-quality labor force.
E) availability of energy resources.

Question 8

A collaborative effort among countries to prohibit trade with another nation is called a

A) boycott
B) embargo
C) control list
D) multilateral export control.
E) confiscation.

Question 9

Country X just passed legislation making it more difficult to meet emission standards for clean air. Firm Z has a plant located there that cannot meet the new standard. Firm Z is facing

A) political environment risk.
B) domestic economic conditions risk.
C) economic environment risk.
D) external economic relations risk.
E) all of these.

Question 10

Which of the following is not an example of a domestic economic condition risk factor?

A) size of population.
B) economic growth.
C) degree of infrastructure development.
D) protections for brands, trademarks.
E) inflation.

Question 11

If a foreign copper mining company is taken over by a government and is offered little or no compensation for loss of property, it is called

A) government intervention.
B) foul play.
C) confiscation.
D) expropriate.
E) nationalization.

Question 12

Nationalization is

A) a form of political/economic environment risk that can occur if a government forces the transfer of a firm's ownership from private to the state.
B) generally associated with a large amount of compensation by a government to a firm.
C) a principle that states no nation has the right to judge or challenge the internal actions of another state, provided that state has proceeded justly.
D) discrimination against foreign firms.
E) associated with governmental compensation for loss as a result of privatization.

Question 13

If a company wishes to enter a market in which the government has changed several times in the last two years, it will need to evaluate its risk associated with the

A) external economic relations.
B) internal economic relations.
C) domestic economic conditions.
D) political/economic environment.
E) legal system.

Question 14

One system of categorizing risk divides it into these three main areas:

A) political environment, domestic conditions, and external cultural relations.
B) economic environment, domestic cultural conditions, and external financial relations.
C) political/economic environment, domestic economic conditions, and external economic relations.
D) political and economic environment, and domestic economic conditions.
E) none of these.

Question 15

The government compensating a company after nationalizing its assets is called

A) soverign immunity
B) sanctions
C) expropriation
D) jurisdiction
E) nationalization

Question 16

An agreement on the international transport of hazardous wastes is called

A) NAFTA
B) Basel Convention
C) embargo
D) GATT
E) Foreign Assets Control

Question 17

US firms that refuse to sell to Israel because of the Arab League boycott against that country

A) are not breaking US anti-boycott laws.
B) are breaking US anti-boycott laws.
C) can continue to sell to Arab countries.
D) are free to do so as long as they don't encourage others to do it.
E) should always inform the government before doing so.

Question 18

One of the biggest external risks that companies face is

A) availability of energy resources.
B) inflation.
C) openness of capital markets.
D) the stabiity of the political system.
E) legal protection for their products and trademarks.

Question 19

A firm may decide to take on the risk of patent infringement in Country X because

A) the government of the country promises to do better at enforcing its laws.
B) the market potential outweighs the risk.
C) market share in the home country is declining.
D) the home country can provide patent protection for its firms in other countries.
E) all of these.

Question 20

What has been the impact of the World Trade Organization on the global economy, positively and negatively?

Question 21

How can firms manage the problems resulting from counterfeit goods and piracy? What are some of the steps that firms have taken to mitigate the negative impact?

Question 22

Define two export controls and the advantages and disadvantages of imposing them.

Question 23

Discuss the implications of Islamic law on U.S. companies doing business in the Middle East.

Question 24

Explain the differences between civil and common law.

Question 25

Discuss the risks associated with intellectual property rights violations and how this impacts a company's competitive advantage.

Question 26

Discuss the three requirements that are generally necessary to meet the "just action" criteria for action under sovereign immunity.

Question 27

Discuss some of the ways that political risk can be managed, reduced, or avoided altogether.

Question 28

Which country has neary 40 percent of the world's lawyers?

A) Japan.
B) Iraq.
C) the UK.
D) Singapore.
E) the US.

Question 29

Defensive risk strategy is

A) a risk-reduction strategy that keeps some key aspects of company operations or other assets out of the reach of the risk factor.
B) a risk-reduction strategy in which a company tries to establish close ties to the risky country.
C) a trilateral trade agreement between the US, Canada, and Mexico that reduces or eliminates tariff, quota, and ownership barriers to trade.
D) a risk-reduction strategy that attempts to eal with the problem in a roundabout way
E) a risk-reduction strategy that attempts to deal with the problem on in a direct way.

Question 30

Starbucks' first approach to protecting its trademark in China is an example of a __________ risk strategy.

A) trade agreement.
B) direct/linking.
C) indirect/linking.
D) direct/defensive.
E) indirect/defensive.

Question 31

Firm A opens a plant in a small town north of Santiago, Chile. The residents of the town were not happy about the firm's decision to locate there due to noise pollution. Firm A decides to work with the municipal government to install computers in all the local school classrooms. The firm is using a(n) __________ risk-reduction strategy.

A) indirect, defensive/reactive.
B) direct, defensive/reactive.
C) indirect/linking.
D) direct/defensive.
E) indirect/defensive.

Question 32

An example of a defensive/reactive approach to managing risk would be

A) legal action.
B) lobbying of foreign governments.
C) joint ventures.
D) promoting host goals.
E) long-term trade agreements.

Question 33

Quantifying risk of a country allows companies to

A) determine whether to enter a market.
B) decide what to do with existing operations.
C) put together a more comprehensive international strategy.
D) influence or manage the risk.
E) do all of these.

Question 34

The actions by groups of people or governments that have the potential to affect the immediate and/or long-term viability of a firm is called

A) economic interaction
B) culture
C) political risk
D) social action
E) direct risk

Question 35

The WTO is sometimes criticied for

A) being too slow and indecisive.
B) reacting too hastily.
C) favoring the developing world.
D) allowing small countries more power.
E) all of these are criticisms.

Question 36

Juan is thinking about marketing his product in China. He should be concerned about protecting his product's intellectual property, but not the brand name.

Question 37

The US has nearly 40 percent of all the world's lawyers.

Question 38

A linking/merging risk-reduction strategy usually entails methods by which a firm tries to get closer to the risky country, perhaps even making itself indispensable to the local economy.

Question 39

In general, research shows that the presence of laws protecting intellectual property rights has a positive impact on foreign direct investment

Question 40

There is an increasing trend for real products-not knock-offs-to be in competition in the marketplace

Question 41

All export license applications are strictly verified for accuracy and legitimacy.

Question 42

An analysis of the nearly 50 different uses of sanctions and embargoes to achieve political goals from 1970 to 1983 showed that most were successful.

Question 43

Industries that are capital intensive and based on indigenous resources such as crude oil production and steel were most susceptible to nationalization.

Question 44

In general, there is a tendency for common law countries to have relatively few lawyers, whereas civil law countries have a relatively high number.

Question 45

In addition to France and Germany, the Czech Republic, Greece, Indonesia, Japan, Turkey, and many South American and African countries use the common law system.

Question 46

The President doe not have any discretion to enact an embargo on Pakistan or India if they threatened nuclear attacks on the U.S.

Question 47

The legal system of a country affects and is affected by the political situation in that country.

Question 48

One of the biggest external risks that companies face is the lack of legal protection of their products and trademarks in a foreign country.

Question 49

Once it becomes a member, a nation is required to make its tariff and other business laws consistent (""harmonize"") with WTO guidelines.

Question 50

Civil law uses previous cases or precedents to resolve disputes.

Question 51

Bill is thinking about entering a new foreign market. It is not important for him to consider the extent of export controls as a risk factor.

Question 52

An example of political economic environment risk would be the possibility of internal conflicts.

Question 53

Some U.S. banks have developed creative financing arrangements in order to comply with Islamic law's interest restrictions.

Question 54

__________ was the forerunner of the World Trade Organization

A) Maastricht Treaty.
B) most favored nation.
C) the General Agreement on Tariffs and Trade.
D) NAFTA.
E) the UN.

Question 55

Which legal system prohibits the collection of interest on loans?

A) Sub-Saharan
B) Islamic
C) Asian
D) Communist
E) Civil

Question 56

When a country becomes a member of the WTO, then it must

A) develop new tariff guidelines
B) comply with over 60 agreements
C) begin thinking about intellectual property rights
D) increase its tariffs
E) agree to avoid all trade disputes

Question 57

In relative terms, which legal sytem is more consistent in its rulings?

A) Asian
B) civil
C) code
D) common
E) Socialist law

Question 58

In which of the following countries is common law not practiced?

A) Canada
B) The US
C) France
D) Ireland
E) the UK

Question 59

Civil law is also referred to as

A) traditional law
B) code law
C) common law
D) regulations law
E) socialist law

Question 60

Which of the following legal systems provides minimal rights

A) civil law
B) common law
C) islamic law
D) communist law
E) world law

Question 61

The two most common types of legal systems are:

A) civil and common
B) civil and Islamic
C) common and Islamic
D) communist and civil
E) code and civil

Question 62

The following characteristics, community-oriented, custom-based, and group-based outcomes, are typical of which legal system?

A) civil law
B) common law
C) islamic law
D) sub-Saharan law
E) Asian law

Question 63

A firm may decide to take on the risk of patent infringement in Country X because

A) the government of the country promises to do better at enforcing its laws.
B) the market potential outweighs the risk.
C) market share in the home country is declining.
D) the home country can provide patent protection for its firms in other countries.
E) all of these.

Question 64

Which of the following is not an example of a domestic economic condition risk factor?

A) size of population.
B) economic growth.
C) degree of infrastructure development.
D) protections for brands, trademarks.
E) inflation.

Question 65

One system of categorizing risk divides it into these three main areas:

A) political environment, domestic conditions, and external cultural relations.
B) economic environment, domestic cultural conditions, and external financial relations.
C) political/economic environment, domestic economic conditions, and external economic relations.
D) political and economic environment, and domestic economic conditions.
E) none of these.

Question 66

The government compensating a company after nationalizing its assets is called

A) soverign immunity
B) sanctions
C) expropriation
D) jurisdiction
E) nationalization

Question 67

Which of the following is not an example of a domestic economic condition risk factor?

A) size of population.
B) economic growth.
C) degree of infrastructure development.
D) protections for brands, trademarks.
E) inflation.

Question 68

Which of the following is important for a company to take advantage of opportunites in the glboal market place?

A) local networks.
B) dominance in the home market.
C) supportive corporate culture.
D) backing of state and local government.
E) all of these.

Question 69

Political concerns have no affect legal issues.