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:

Accepted Answer

A state trading company is a business enterprise that is owned and managed by the government. It is responsible for importing and exporting goods on behalf of the government. This is the most extreme form of government involvement in a business operation as the government has complete control over the operations of the company. Partly privatised government business enterprises, government-subsidised private companies, and national two-airline policies all involve some level of government intervention but not to the same extent as a state trading company. Deregulated telecommunications industry involves the opposite, where government involvement is reduced.

Question 2

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

Accepted Answer

Tax incentives, education programs, and targeted infrastructure investments are examples of the government playing a facilitating role at the macro level by creating a supportive environment for business and economic growth. The other options (export incentives, tax deductions related to export levels, and tax offsets for international promotional activities) are more focused on specific actions related to exports and international business rather than broader macro-level facilitation.

Question 3

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

Accepted Answer

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?

Accepted Answer

Turmoil caused by a military coup is a form of political conflict. Political conflict is one of several forms of political instability, defined as the "likelihood of political turmoil including riots, terrorism, assassinations, or military coups disrupting the social environment."

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.

Accepted Answer

Export control measures are used by governments to restrict the export of certain goods, especially those that are strategically important, to specific countries.

Question 6

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

Accepted Answer

Investigative methods are not listed by Jain (1996) as one of the four methods for determining political risk. The correct methods include quantitative methods, the Delphi technique, the grand tour, and the old hand.

Question 7

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

Accepted Answer

Restrictions on foreign direct investment typically discourage foreign firms from investing as they impose limitations and regulations that can make investment less attractive or more difficult 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.

Accepted Answer

Public servants are typically salaried based on their position, grade, or level within the government structure, not directly on efficiencies or achieving savings. Financial accountability for actions usually pertains to adherence to budgetary constraints and regulations, rather than personal financial responsibility for the outcomes of their decisions.

Question 9

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

Accepted Answer

In parliamentary democracies, policies are designed to reflect the wishes of the majority, as the government is formed based on the party or coalition that has won a majority or the most seats in the legislature. These policies may be informed by public opinion polls, petitions, and feedback from constituents to ensure that they reflect the views and needs of the electorate.

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:

Accepted Answer

The potential internal and external threats pose a risk to the general stability in the host government, which could adversely affect the business operations. This risk is classified as general instability risk. Expropriation risk pertains to the possibility of the host government taking over the business or assets without adequate compensation. Transfer risk refers to the limitation on the ability to transfer profits or assets out of the host country. Operating risk is the risk associated with managing day-to-day operations. Ownership risk is related to the investment in the company and the potential loss of ownership rights.

Question 11

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

Accepted Answer

This statement is true. Many governments have commercial activities directly undertaken by them, especially in areas related to infrastructure, defence, health or education. These activities are often referred to as state-owned enterprises or government-owned corporations.

Question 12

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

Accepted Answer

An absolutist government is one that exercises complete and unrestricted power, often without considering the needs or opinions of its citizens.

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):

Accepted Answer

When the government offers incentives to foreign firms to invest in priority regions or help in technology transfer, it is acting as a facilitator. The government is promoting and encouraging investment and technology transfer, facilitating the process.

Question 14

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

Accepted Answer

When nationalism is high in the host country, foreign firms tend to be looked at with suspicion due to the perception that they may be taking away jobs, resources, or profits from the local population. This can lead to increased scrutiny from the government and potential backlash from consumers. Therefore, the correct choice is C. Choices A, B, and D are incorrect since they do not reflect the reality of the situation in which foreign firms face challenges in countries with high levels of nationalism.

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:

Accepted Answer

Expropriation is the official seizure of a foreign firm's property, as decided by the host government, for the public interest. This can include nationalization of assets, confiscation of property or shares, or any other formal appropriation.

Question 16

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

Accepted Answer

The answer of Explain the different forms of government and...

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:

Accepted Answer

The degree of social unrest reflects the potential for political instability, as does the frequency of change in government. The extent of cultural or ethnic division can also be a factor, as these divisions can lead to political tensions. Language diversity can make it more difficult for the export firm to communicate with potential customers or partners. Finally, export performance is a reflection of the strength of the foreign market's economy, which can be impacted by political instability. Income distribution and religious diversity may also be indicators of political stability, but they are less directly related than the factors included in option C.

Question 18

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

Accepted Answer

Both option A and B are correct. Avoidance of the embargo is possible through countertrade or by dealing with intermediaries based in countries that are not part of the embargo. Additionally, 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. Therefore, embargoes imposed by governments, especially if directed against a particular country rather than unilaterally, do not usually succeed.

Question 19

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

Accepted Answer

Control on importation is often implemented to improve trade balance by reducing the amount of foreign currency leaving the country for importing goods and services.

Question 20

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

Accepted Answer

Government ownership of a company can create barriers for foreign competitors, as governments may favor domestic companies or impose restrictions on foreign entities.

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