Deck 4: Political Legal Environments

Question 1

What is meant by the term 'political risk'? Distinguish between price controls and local content requirements as examples of political risk.

Answer 1

Not Answer

Question 2

When a government demands partial transfer of ownership and management responsibility and imposes regulations to ensure that a large share of the product is locally produced and a larger share of the profit is retained in the country, this is called:
(a) Bribery
(b) Outsourcing
(c) Domestication
(d) Localization

Answer 2

C

Question 3

What is arbitration? How can it be used in the settlement of international disputes between firms?

Answer 3

Not Answer

Question 4

Which of the following (if any) is an indirect impact of terrorism?
(a) Increased transaction costs for the multinational firm as it attempts to comply with various government regulations put in place to increase the security of commercial activities
(b) Interruptions in the proper functioning of the firm's global supply chain which may lead to shortages and customer dissatisfaction
(c) Reduced foreign direct investment in the affected country
(d) All of the above
(e) None of the above

Question 5

Why is it often difficult to impose sanctions multilaterally? Give one example in which consensus to impose sanctions was achieved and one in which there was a failure to achieve consensus.

Question 6

What strategies can a global marketer use to mitigate political risk when operating in a foreign country?

Question 7

What is meant by the term 'corruption'? List three problems that may result from a corrupt international business environment.

Question 8

Home country governments may impose _______________ which disrupt the free flow of goods, services and money in order to force a target country to coexist peacefully with its neighbours and the rest of the world.
(a) Antitrust measures
(b) Countervailing duties
(c) Sanctions
(d) Corruption protocols

Question 9

Deep divisions in society such as between the Hutus and Tutsis in Africa and the Shiites and Sunnis in Iraq contribute to political risk and would be captured by the ____________________________.
(a) Political Risk Index
(b) Fractionalization Index
(c) Z quotient
(d) Operations Coefficient
(e) F Factor

Question 10

According to the OECD companies should provide protection for whistleblowers, who report corrupt practices taking place within the organization.
(b) False

Question 11

The _______________ provides a measure of the likelihood that firms headquartered in various countries will bribe when operating in a foreign country.
(a) Corruption Perception Index
(b) Bribe Payers Index
(c) Political Risk Index
(d) R Factor

Question 12

The Venezuelan government is rumored to be planning new restrictions on foreign firms. According to these rumors all foreign companies operating in Venezuela will soon have to have a new board of directors. Venezuelan nationals must comprise 60% of the membership of the new board. If true, such a ruling would significantly increase ____________ risks for foreign firms.
(a) Operating
(b) Ownership
(c) Transactional
(d) Transfer
(e) Resource-based

Question 13

Which of the following (if any) is a legitimate criticism of the Corruption Perception Index (CPI)?
(a) The CPI is based on the perceptions of business people and analysts which may not reflect the actual situation in the country.
(b) The CPI does not tell you anything about the type of corruption that exists in the country.
(c) CPI scores are widely reported in the media which may influence the very business people and analysts who are asked to complete the survey.
(d) All of the above
(e) (a) and (b) only

Question 14

The seizure of foreign assets by a government without payment of compensation to owners is called:
(a) Expatriation.
(b) Appropriation.
(c) Expropriation.
(d) Exhausting resources
(e) Confiscation