Deck 2: Avoiding the Pitfalls of the International Political and Legal Environment

Question 1

Government can play a variety of roles in the activities of business firms. The most extreme example of direct government involvement in a business operation is a:

A) partly privatised government business enterprise.
B) government-subsidised private company.
C) state trading company.
D) deregulated telecommunications industry.
E) national two-airline policy.

Answer 1

C

Question 2

Which of the following is an example of the government acting as a facilitator at the macro level?

A) Export incentives
B) Provision of tax deductions related to export levels
C) Tax incentives to attract capital to designated activities, education programs to improve workforce skills or investment in targeted infrastructure
D) Tax offsets for international promotional activities
E) None of the above options

Answer 2

C

Question 3

Discuss how foreign governments can act as participants, facilitators and regulators and the impact of each on international marketing efforts.

Answer 3

Government involvement in the economy provides commercial opportunities but also challenges. Governments may choose to actively participate in the economy, creating their own companies (e.g. state trading companies) or statutory marketing authorities or by undertaking commercial activities themselves (e.g. defence or health). Governments are also major consumers (often the sole consumer). Governments facilitate domestic and international marketing through their national policies/economic plans and export incentives and concessions. Governments also act as regulators by imposing taxes, mandatory standards and so forth that may disadvantage international competitors.

Question 4

Turmoil such as a military coup is a source of which type of political instability?

A) Domestication
B) Political sovereignty
C) Political intervention
D) Expropriation
E) Political conflict

Question 5

When a government seeks to prevent a potentially hostile foreign country from gaining access to strategically important goods, such as defence equipment, the government will impose a(n) ________ on those goods.

A) export control measure
B) embargo
C) boycott
D) military intervention
E) ownership control tariff

Question 6

Which of the following is NOT one of the four methods of determining political risk identified by Jain (1996)?

A) Quantitative methods
B) Delphi technique
C) The grand tour
D) The old hand
E) Investigative methods

Question 7

Restrictions on foreign direct investment encourage foreign firms to invest in specific industries.

Question 8

Public servants in most countries are financially accountable for their actions and tend to be remunerated on efficiencies and achieving savings.

Question 9

Within parliamentary democracies, policies are designed to reflect the wishes of the majority.

Question 10

The business risk associated with possible internal threats (such as civil war), or external threats (such as invasion) to a host government would be classified as:

A) expropriation risk.
B) general instability.
C) transfer risk.
D) operating risk.
E) ownership risk.

Question 11

In many countries there are commercial activities directly undertaken by government, especially in areas related to infrastructure, defence, health or education.

Question 12

A government that dictates policy without reviewing its citizens' needs or seeking their opinions is a(n) ________ government.

A) democratically elected
B) Westminster-system
C) socialist
D) parliamentary
E) absolutist

Question 13

Governments will often offer incentives to foreign firms to invest in priority regions in that country, or to assist in the transfer of technology. This is an example of the government acting as a(n):

A) facilitator.
B) opponent.
C) customer.
D) regulator.
E) investigator.

Question 14

Where nationalism is high in the host country, foreign firms:

A) find that their products are accepted.
B) are not targeted for rigorous scrutiny by government.
C) tend to be looked at with suspicion.
D) are at less risk of having their funds expropriated.
E) none of the above options is correct.

Question 15

The official seizure of a foreign firm's property by the host government on the basis that the property seized is to be used in the public interest is an act of:

A) external conflict.
B) repatriation.
C) expropriation.
D) political sovereignty.
E) none of the above.

Question 16

Explain the different forms of government and the impact each might have on international marketing.

Question 17

When targeting a foreign market, an export firm needs to be aware of those factors that indicate the level of political stability in that market. These factors include:

A) geographic character, extent of cultural or ethnic division, export performance and entrenchment of the current government.
B) degree of social unrest, language diversity, income distribution and export performance.
C) degree of social unrest, frequency of change in government, extent of cultural or ethnic division and language diversity.
D) social diversity, language diversity, religious diversity and income distribution.
E) none of the above options is correct.

Question 18

Embargoes imposed by governments, especially if directed against a particular country rather than unilaterally, do not usually succeed because:

A) avoidance of the embargo is possible through countertrade or by dealing with intermediaries based in countries that are not part of the embargo.
B) the business firms of the nation that initiated the embargo are likely to be at a disadvantage in taking up potential export opportunities in the targeted country because their home country will be one of the last to eventually lift the embargo.
C) a third-party country will often run embargoes, or restrict trade, with the country that initiated the original embargo.
D) the country that has been targeted in the embargo tends to apply its own trading restrictions, which damage the country that set the original embargo.
E) options A and B are correct.

Question 19

A government that imposes controls on the importation of goods and services often does so for balance of payments reasons.

Question 20

Which of the following statements is true about the degree of government participation in international markets?

A) Worldwide governments are increasing their involvement in the market as the level of privatisation slows.
B) Selling to government authorities is the same as selling to private sector organisations.
C) Government ownership of a company may preclude foreigners from selling a competing product.
D) Options A, B and C are true.
E) Options B and C are true.

Question 21

Discuss the different sources of political instability and types of political risk faced by international marketers.

Question 22

The combination of civic projects and investment activities will help a firm to manage the political risk in an overseas country.

Question 23

The London Interbank loan LIBOR rate is a guideline for loans between international governments.

Question 24

The legal system operating in Australia is based on:

A) Aboriginal law
B) common law
C) Islamic law
D) code law
E) legislative law

Question 25

Explain with examples how a company's own behaviours can assist it in minimizing political risk in a particular foreign market.

Question 26

Companies use the Delphi technique to determine political risk. The company brings a group of experts together in its offices and asks for their opinions.

Question 27

International law grows out of the agreement of two or more nations and generally:

A) ensures that the home law of the company is applied.
B) minimises the range of differences between national laws.
C) is only concerned with political issues.
D) is mainly concerned with military issues.
E) ensures that the law of the country in which the organisation is operating is applied.

Question 28

When assessing its exposure to political risk in an overseas market, which of the following factors must a firm pay close attention to?

A) Scenario planning, primary data collection and Delphi technique
B) Market issues, cultural issues and financial issues
C) Commitment levels, financial capacity and prior experience
D) Financial capacity, prior experience and cultural differences
E) Product factors, external factors and company factors

Question 29

Which of the following courses of action is appropriate in situations where the host country changes its foreign investment policies and regulations?

A) Indigenise operations so that the company becomes a local company.
B) Take pre-emptive action to minimise the impact of changes.
C) Withdraw operations from the country.
D) Negotiate an alternative arrangement under the new legal framework.
E) All of the above.

Question 30

Firms that set out to be good corporate citizens of the host country:

A) buy local products wherever possible.
B) establish training programs for local employees.
C) promote freedom of speech and protest against governments.
D) all of the above.
E) options A and B only.

Question 31

Under common law the interpretation of what the law means on a specific subject is influenced by previous decisions of the courts and by usage and custom.

Question 32

The three separate systems of codes that typically operate under code law are:

A) commercial, citizen and contract.
B) commercial, criminal and contract.
C) citizen, contract and criminal.
D) civil, commercial and criminal.
E) civil, commercial and contract.

Question 33

Transfer risk is one type of political risk facing a firm operating in an overseas market. This type of risk involves host government interference in the overseas operations of the firm.

Question 34

Which of the following statements is true for firms wishing to minimise potential political problems?

A) Firms should avoid becoming involved in education projects because these could be seen as interference.
B) Firms should combine investment projects with civil projects.
C) Firms should avoid conveying the impression that its interests in a country are solely economic.
D) Firms should determine the preferred political viewpoints of the current government and publicly support these views.
E) None of the above will reduce potential political problems.

Question 35

Critically evaluate the four methods for determining political risk suggested by Jain (1996).

Question 36

Expropriation is a process by which a host government places controls and restrictions on a foreign firm, thus reducing the firm's influence on the operation of its business.

Question 37

The greater the local ownership of an overseas operation, the less likely it will be subject to political risk.

Question 38

A common legal problem in international business is deciding which country's laws will apply in the event of a dispute.

Question 39

Generally, international law helps to minimise the extent of differences between national laws.

Question 40

Any assessment of a firm's exposure to political risk in an overseas country should cover at least three key factors- product, external, and company.

Question 41

Outline the key political and legal issues that an international marketer would have to take into consideration when developing marketing mixes for a range of international markets.

Question 42

Legal constraints on a product entering a new international market include:

A) the packaging of the product.
B) information on product labels.
C) the physical and chemical composition of the product.
D) options A, B and C.
E) options A and C only.

Question 43

Discuss the circumstances under which arbitration is preferable to conciliation in contract and dispute resolution in international marketing.

Question 44

Companies operating in foreign markets often hire local employees. This can involve a variety of issues including:

A) training locals.
B) numbers of expatriates employed.
C) home country labour laws.
D) options A, B and C.
E) options A and B only.

Question 45

Which of the following statements about intellectual property protection in international marketing is NOT true?

A) Intellectual property rights are aggressively enforced in the USA and Europe.
B) The costs of registering of intellectual property rights often outweigh the benefits.
C) The intellectual property rights a company has in its home country will apply in all foreign markets.
D) Counterfeiting and copyright infringements in foreign markets are significant problems.
E) Companies often have to buy back the rights to their own brand names and logos, as they have already been registered in the foreign market.

Question 46

International marketers need to be aware of areas where international law may impinge on their marketing activities.

Question 47

Explain the intellectual property protection available in most countries and why such protection is important to international marketers.

Question 48

Arbitration is the best approach to resolving contract disputes because it is less likely to close the door on future business relationships between the feuding parties.

Question 49

Companies entering foreign markets do not need to worry about intellectual property as long as they have registered their intellectual property in their home country.

Question 50

Explain the key differences between common law, code law and Islamic law. Why must an international marketer have an understanding of the different legal systems?

Question 51

Transfer pricing involves a firm setting the prices at which it transfers products or technologies to affiliates in other countries.

Question 52

A firm's marketing mix options can be affected through the extraterritorial application of law, which occurs when the laws of the firm's home country are applied in the overseas country.

Question 53

Transfer pricing in international marketing is:

A) a legal mechanism used by some multinational firms to charge a higher price than the market will bear.
B) an illegal mechanism used by some multinational firms to charge a higher price than the market will bear.
C) the use of an unofficial channel to set a lower-than-normal price for the product in an overseas market.
D) a method of pricing that caters for any exchange-rate fluctuations that might occur when operating in an overseas market.
E) none of the above.

Question 54

Environmental law is gaining an increased amount of attention in overseas marketing both within countries and in multilateral forums. Which of the following is NOT an issue of concern?

A) Billboards
B) Noise
C) Energy consumption
D) Packaging materials
E) None of the above

Question 55

Explain how a firm can reduce the impact of foreign laws on its pricing.

Question 56

The Trade in-Intellectual Property (TRIPS) code administered by the WTO:

A) contains comprehensive new rules to protect intellectual property and to govern disputes.
B) automatically provides global protection of intellectual property.
C) has no authority to manage or govern intellectual property disputes.
D) manages intellectual property trade, but refers all disputes to the International Court of Criminal Justice.
E) makes the WTO the final arbitrator of all intellectual property disputes.

Question 57

Patents protect intellectual property and provide the holder with the following protection(s):

A) copyright protection.
B) trademark protection.
C) prevention of imitation in music.
D) options B and C.
E) none of the above.

Question 58

Dumping refers to the practice of an exporter attempting to:

A) sell its product in an overseas market at a price that is lower than the current price in that overseas market.
B) take advantage of an overseas subsidiary company to set an artificially high selling price for its product in the overseas market.
C) sell its product in an overseas market at a price that is higher than the current price in the home market.
D) sell its product in an overseas market at a price that is lower than the current price in the home market.
E) sell its product in an overseas market at a price that is higher than the current price in that overseas market.

Question 59

Arbitration is:

A) usually used when conciliation fails.
B) where disputing parties present their case to a panel of respected persons who make a judgement that both sides agree to honour.
C) where a third party acts as a referee for parties who are in dispute.
D) options A, B and C.
E) options A and B only.

Question 60

Which of the following statements is true about the product element of the marketing mix in international markets?

A) Labelling regulations are often the same in different countries.
B) It is not often necessary for a country to ban products from certain countries of origin.
C) Product standards are usually motivated by a desire to limit foreign company profits.
D) Where countries have laws covering the same issue, the standards to which the product must conform can vary.
E) Most governments avoid interference in the market when it comes to creating safety standards for products.