Deck 4: Political and Regulatory Climate

Question 1

Takeovers are host government initiated actions that result in loss of ownership or direct control.

Answer 1

True

Question 2

Massachusetts passed a state law denying contracts to companies that did business in Myanmar.

Answer 2

True

Question 3

Code law is prevalent in the United States of America.

Answer 3

False

Question 4

Civil,or code law,is based on the Confucian tradition of the preeminence of written laws.

Question 5

The WTO outlaws indirect subsidies and requires all subsidies be direct.

Question 6

In Europe,heads of governments often engage in state visits to encourage major export deals.

Question 7

In bankruptcies,Swiss law gives preference to Swiss creditors.

Question 8

Confiscation is expropriation with compensation.

Question 9

A firm's need to invest in redundant capacity is one of the costs of terrorism.

Question 10

Host country governments frequently protect or promote ideology in combination with other goals.

Question 11

Today,expropriations of firms have virtually ceased.

Question 12

In code law systems,judges play a far more important role and juries usually play a lesser role.

Question 13

Governments often used subsidies to encourage firms that would be major exporters.

Question 14

About 90 percent of very large U.S.companies carry terrorism insurance.

Question 15

Restrictive behaviors by governments occur only in developing countries.

Question 16

Protecting national security and cultural identity are some goals of most governments.

Question 17

Any country that contains an operational unit of an international company can be defined as a home country.

Question 18

The poor state of the Soviet Union and North Korea governments was a consequence of their government's ideology of attaining self-reliance.

Question 19

Up to 100 percent foreign ownership of ports and toll roads is allowed by the Indian government.

Question 20

Many host governments try to improve a nation's prosperity by increasing imports.

Question 21

In China,there are no bankruptcy laws.

Question 22

Private-sector projects in developing countries may qualify for loans from the World Bank.

Question 23

Nigeria's hosting of the All-Africa games is an example of

A)promoting ideology.
B)self-preservation.
C)honoring MFN agreements.
D)enhancing prestige.

Question 24

Sovereignty is defined as the

A)inability to pass and enforce laws within a given geographical area.
B)freedom given to a firm to pass laws within a given geographical area.
C)complete control exercised within a given geographical area.
D)None of the above.

Question 25

In Geneva in 1998,all WTO members made a political commitment to maintain a duty-free cyberspace.

Question 26

Domestication is defined as

A)the seizure of an asset without payment.
B)the seizure of a company with payment.
C)host-government initiated actions that result in a loss of ownership.
D)the limiting of certain economic activities to local citizens.

Question 27

A target of a grass-roots boycott of foreign products in the Arab world was

A)Coca-Cola.
B)Pepsi.
C)Sainsbury's.
D)All of the above.

Question 28

International education has been directly affected by terrorism.

Question 29

Political risk is more predictable than regulatory change.

Question 30

OPIC insurance covers losses due to currency inconvertibility.

Question 31

For many years,Coca-Cola was boycotted in

A)the Arab world.
B)Russia.
C)India.
D)Mexico.

Question 32

By deciding to adopt an "ally" strategy,a company can attempt to avoid some risks of government actions by seeking strategic alliances.

Question 33

The rise of international terrorism has not had an impact on global marketing.

Question 34

Coke decided to abandon its Indian operations in the late seventies because of

A)poor sales.
B)new ownership laws.
C)local competition.
D)Pepsi's entrance into the market.

Question 35

Regulatory changes are sudden,dramatic changes in the regulatory climate of a host country.

Question 36

A country that contains an operational unit of an international company is called a

A)home country.
B)most favored nation.
C)trading partner.
D)host country.

Question 37

An example of a host country pressure group would be

A)expatriates who send home remittances.
B)local companies threatened by foreign competition.
C)the German government.
D)the IMF.

Question 38

Government subsidies are most likely to be given to firms that

A)increase national revenue through export sales.
B)have World Bank guarantees.
C)improve the national balance of payments by increasing imports.
D)receive matching funds from the IMF.

Question 39

What do NAFTA and MERCOSUR have in common?

A)They are both South American free trade associations.
B)They are both economic unions.
C)They both have a local-content requirement.
D)They both boycott Cuba.

Question 40

The main reason countries limit foreign ownership of newspapers,television,and radio stations is to

A)protect national sovereignty.
B)retaliate for similar restrictions in other countries.
C)preserve their cultural identity.
D)protect local companies.

Question 41

Most U.S.companies do not do business in Cuba due to

A)poor climatic conditions in Cuba.
B)a long-standing trade embargo on Cuba.
C)high inflation rates in Cuba.
D)None of the above.

Question 42

In the past 25 years,which country has not been embargoed by the United States?

A)Vietnam
B)Mexico
C)South Africa
D)Iraq

Question 43

When a company adopts the "avoid" strategy to a regulatory change,it

A)does not care about the regulatory change.
B)makes strategic moves that bypass the impact of a government's action.
C)leaves the host country.
D)avoids some risks of government actions by seeking strategic alliances.

Question 44

Companies in the United States can purchase political risk insurance from

A)their state governments.
B)the IMF.
C)OPIC.
D)U.S.AID.

Question 45

The U.S.Securities and Exchange Commission (SEC)requires firms that sell securities in the United States to

A)prepare an annual political risk assessment.
B)disclose any activities in countries subject to U.S.sanctions.
C)disclose any activities in breach of the Arab Boycott.
D)All of the above.

Question 46

A company would adopt the "alter" strategy to a regulatory change when the issue is of

A)low importance to the company,and the firm has no power to influence a change.
B)high importance to the company,and the firm has no power to influence a change.
C)low importance to the company,and the firm has the power to influence a change.
D)high importance to the company,and the firm has the power to influence a change.

Question 47

Regulatory changes include

A)changes in tax rates.
B)political revolutions.
C)revisions of labeling requirements.
D)Both a and C

Question 48

Product liability laws

A)have always been stricter in Europe than in the United States.
B)were first introduced in the United States.
C)are more numerous and more expensive to settle in developing countries.
D)All of the above.

Question 49

OPIC is a source of

A)multilateral lending to developing countries.
B)political risk insurance.
C)cartel oil.
D)hedging contracts for exporters.

Question 50

Which of the following is a cost to business associate with terrorism?

A)Insurance.
B)Redundant capacity
C)Lost revenues
D)All of the above.

Question 51

The U.S.embargo on Vietnam occurred between which dates?

A)1962-1975
B)1962-present
C)1975-1994
D)1975-present

Question 52

Under socialist law,

A)private ownership of businesses is strongly encouraged.
B)market economies exist.
C)business laws exist to protect businesses.
D)None of the above.

Question 53

Multilateral embargoes have been aimed at

A)Iran,Iraq,and Saudi Arabia.
B)South Africa,Serbia,and Iraq.
C)Cuba,South Africa,and Russia.
D)Vietnam,Iraq,and Cuba.

Question 54

The Nestlé Company became a target of boycott by consumer action groups in the United States due to

A)the use of child labor in Asia.
B)marketing of infant-formula in developing countries.
C)a lack of concern for environmental issues.
D)trade with Cuba.

Question 55

OPIC insurance covers losses due to

A)currency inconvertibility.
B)expropriation.
C)war and revolution.
D)All of the above.

Question 56

Which is a political risk reduction strategy?

A)Utilizing local partners
B)Minimizing assets at risk
C)Purchasing political risk insurance
D)All of the above

Question 57

Common law is based on

A)what a society views as right and is commonly done.
B)teachings in the Koran.
C)the preeminence of written laws.
D)Marxist ideology.

Question 58

In Germany,rules are strictly applied because of its

A)high power distance and negative HNO.
B)low power distance and negative HNO.
C)high power distance and positive HNO.
D)low power distance and positive HNO.

Question 59

Borrowing locally helps companies to

A)reduce exposure to political risk.
B)strengthen relationships with local companies.
C)borrow at lower interest rates.
D)address legitimacy issues of the host country.

Question 60

International companies may come under attack from home country pressure groups because of their

A)product policies.
B)promotion strategies.
C)pricing policies.
D)All of the above.

Question 61

In July 2005,the U.S.Congress blocked China's plans to acquire the U.S.oil and gas company,Unocal.Congress argued that crucial raw materials,such as oil,should not be controlled by an economic rival.This action is motivated by the American government's interest in ____.

A)protecting national cultural identity
B)promoting national ideology
C)protecting national security
D)enhancing national prestige

Question 62

In the early 1970s,McKesson,an American firm,owned 31 percent of the shares of stock in the Iranian firm,Pak Dairy.During the Iranian revolution in 1979,the Iranian government seized and took full control of Pak Dairy by force.They did not pay McKesson for their losses.This is an example of a ____.

A)quota
B)confiscation
C)boycott
D)None of the above

Question 63

The Iraqi government limits foreign ownership of businesses in Iraq to 49 percent.This is an example of a(n)____.

A)indirect subsidy
B)ownership restriction
C)operating conditions
D)direct subsidy

Question 64

In the 1980s,many U.S.consumer groups began to pressure American multinational with operations in South Africa,encouraging them to divest their investments in apartheid-practicing South Africa.These consumer groups are examples of ____ groups.

A)host country pressure
B)home country pressure
C)cultural identity preservation
D)auxiliary

Question 65

It can take 153 days to establish a business in Mozambique compared with three days in Canada.It takes twenty-one steps to register a commercial property in Nigeria compared with only three steps in Finland.These are examples of cross-national differences in ____.

A)regulatory environments
B)civil societies
C)ideology
D)self-preservation

Question 66

Ecuador provides electricity to several large exporting companies in Quito,the capital city.This is an example of a(n)____.

A)indirect tariff
B)direct tariff
C)indirect subsidy
D)direct subsidy

Question 67

A major goal of the European Union government is to provide full employment and increasing standard of living for its citizens by encouraging foreign investment in the EU and promoting EU exports in foreign markets.These actions are motivated by the EU government's interest in ____.

A)fostering national prosperity
B)protecting national security
C)enhancing national prestige
D)self-preservation

Question 68

In Australia,foreign ownership of television stations is limited to no more than 20 percent.It is feared that if a foreign country controlled the media,it could influence public opinion and national sovereignty.This regulation is motivated by the Australian government's interest in ____.

A)promoting national ideology
B)enhancing national prestige
C)fostering national prosperity
D)self-preservation

Question 69

For nearly 50 years,North Korea has pursued the strategy of juche,or self-reliance,trading very little with the outside world except with fellow communist states of China and Russia.This is because of the North Korean government's interest in ____.

A)promoting national ideology
B)fostering national prosperity
C)giving into the demands of environmentalist pressure groups
D)All of the above

Question 70

To support the local apparel industry,the Bulgarian government pays each Bulgarian apparel company US$1 for each piece of clothing that they export.This is an example of a(n)____.

A)indirect tariff
B)direct tariff
C)indirect subsidy
D)direct subsidy

Question 71

The legal system in the United Kingdom,the United States,and Canada acknowledge the preeminence of social norms.In these countries,lawyers are as likely to look to prior case decisions as to the law itself in order to argue their own cases.This legal system is called a(n)____ system.

A)common law
B)civil law
C)Islamic law
D)socialist law

Question 72

About ____ percent of very large U.S.companies have terrorism insurance.

A)100
B)90
C)60
D)10

Question 73

In 1998,Friends of the Earth Indonesia and other non-governmental organizations complained that Mobil Oil was complicit in human rights abuses that had occurred during the construction of its pipeline in the Ache province of Indonesia.They tried to pursue the Indonesian government to end their joint venture with Mobil Oil.These organizations are examples of ____ groups.

A)home country pressure
B)self-preservation
C)host country pressure
D)cultural identity preservation

Question 74

In the past,Iran and Venezuela have attempted to outlaw foreign brand names,requiring international marketers to establish names for their products in Persian and Spanish.These governments were interested in ____.

A)promoting national ideology
B)self-preservation
C)protecting cultural identity
D)None of the above

Question 75

The United States imposed a two-year ban on imports from Norinco,a major Chinese defense and industrial manufacturer,because of the company's alleged sale of ballistic-missile technology to Iran.This is an example of a government ____.

A)boycott
B)operating condition
C)operating restriction
D)expropriation

Question 76

In Saudi Arabia,the collection of interest on loans is forbidden because the legal system in Saudi Arabia is a(n)____ system.

A)common law
B)civil law
C)Islamic law
D)socialist law

Question 77

In Vietnam,foreign electric component manufacturers are required by the Vietnamese government to prove that a minimum of 20 percent of the components must be made with local input products.This is an example of ____.

A)indirect subsidy
B)ownership restriction
C)operating conditions
D)direct subsidy

Question 78

An American company sets up a subsidiary in Thailand,including a production facility and marketing/sales office.In this example,Thailand is a(n)____ country.

A)auxiliary
B)home
C)host
D)subsidized

Question 79

An American company sets up a subsidiary in Thailand,including a production facility and marketing/sales office.In this example,the USA is a(n)____ country.

A)auxiliary
B)home
C)host
D)subsidized

Question 80

The Nigerian government decided to host the All-Africa Games in 2003,despite the fact that building costs for a new stadium exceeded $340 million,twice what the government planned to spend on health care for one year.This action was motivated by the Nigerian government's interest in ____.

A)protecting national security
B)enhancing national prestige
C)promoting national ideology
D)self-preservation