What happens to consumer surplus when tariffs and quotas are discontinued?
What is a benefit of implementing a system of free trade?
Reduced tariffs would result in lower costs of imported raw materials.
How are free trade agreements handled differently than treaties in the United States?
Country A exports farming equipment to Country B, while Country B exports car manufacturing equipment to Country A. Both countries are highly developed and could develop these industries separately but instead made the decision to export and import these products from each other.
Which unique condition caused this practice between the two countries?
To restrict international economic trade
How do anti dumping laws protect a domestic market?
They prevent foreign companies from selling goods and services at or below cost.
How do Congress and the Department of Agriculture use quotas to their advantage?
To increase domestic prices to specific levels to make products profitable
Which strategy should a government use to offset the cost of manufacturing domestically?
Which type of globalization refers to the international movement of goods, capital, and services?
The CEO of an international company reminds the executive vice presidents that while the company may do good while performing corporate social responsibilities, the business has one ultimate goal since it is engaged in commercial activities with corporate shareholders.
Which ultimate goal is the CEO emphasizing to the executive vice presidents?
A CEO is discussing an expansion of production of a company’s highly perishable dairy line in a country that can offer low labor costs and good internet connections. The country has no highways, and roads are poorly maintained.
Which challenge to international business expansion do the road conditions present?
Which argument is used by critics who wish to discourage movement towards globalization?
It increases the wealth of the rich rather than the poor
Individuals control political activities, and the government has no control over these activities
A centralized government creates oppressive policies based on ideas from powerful leadership.
The government provides a method of voting for the people of a country, not for elected officials.
A geographic region in which a county will reduce restrictions that might prevent or reduce trade
Prevalent formation of new markets with possibility of saturation
Focus on agriculture and raw materials with limited imports
Growing population which leads to long-term growth potential.
What type of economy is centered on families or tribes where little to no global trade is practiced?
a system in which the government owns and operates a country’s means of production
A system in which all property is publicly owned and the government controls global trade.
Which type of law system is based on a code and focuses on how the law is applied to the facts?
Which activity of the International Monetary Fund (IMF) impacts policy making?
Being owned and directed by the governments of the member nations
What is a characteristic of the International Monetary Fund (IMF)?
The IMF is a cooperative institution and provides more effective currency exchange.
What was the initial purpose of the International Monetary Fund (IMF) in phase one, prior to 1973?
Regulated currency exchange between nations
How does the International Monetary Fund (IMF) impact international organizations and governments?
It reduces funding for social programs.
What is a common name for the International Bank for Reconstruction and Development?
What was the first loan that the World Bank made after the end of World War II?
To France to rebuild its infrastructure
Which criticism is associated with the World Bank?
The developed countries of U.S. and Europe have too much control over its decisions.
Which criticism is made about the World Bank?
It does not consider how funding projects will affect the environment.
What was one of the results of the Uruguay Round of the World Trade Organization negotiations?
Which organization was formed after World War II to encourage international commerce?
Which criticism is made about the World Trade Organization (WTO)?
It protects developed countries more than developing countries.
World Trade Organization (WTO)
The IMF provides a means for effective currency exchange between countries.
Which strategy is used by governments to limit the foreign direct investment in a country?
Creating foreign ownership restrictions in the country
Which activity is considered a foreign direct investment (FDI) by a multinational corporation?
Setting up manufacturing plants in the host country
Why does a company engage in foreign direct investment?
The company wants to control organizational assets in another country.
What is a benefit of foreign direct investment?
The inflow of capital benefits global and local economies
What is a potential disadvantage of foreign direct investment from a host government’s perspective?
The host country’s natural resources may be depleted.
What is a reason for companies to engage in foreign direct investments?
To take advantage of tax exemptions offered by the host country
Political stability and security
It would make countries less likely to go to war.
The relationships are mixed because MNCs can cause, but also solve, problems for the host country.
Improves relations between countries where the MNC operates
What is the result of the existence of multinational businesses?
Economic integration among countries
Which level of economic integration presents an alliance of all policies by a common organization?
Which drawback is involved when regional agreements are created?
Member countries will trade less with nonmember countries.
What is a benefit of creating a regional economic integration agreement?
What is an advantage of regional economic integration?
Flexibility on labor movement develops job opportunities.
What is a disadvantage of regional economic integration?
The exclusion of external countries reduces global free trade.
Which economic actor benefits as the U.S. dollar weakens?
Which economic actor benefits as the U.S. dollar strengthens?
A foreign firm exporting to the U.S.
Which economic actors are suppliers of U.S. dollars?
Foreign firms exporting to the U.S
How is global business positively affected by intercultural exchange?
It increases worldwide connections that support commodity trading.
How does globalization support tolerance for different people and ideas?
By increasing the access to information
It will levy a variable tax based on the value of goods imported.
Which business component does the TRIPS agreement help protect for member nations?
Intellectual property protection for all member nations
Countries A, B, and C have a trade agreement. Country C imposes high tariffs on all raw materials imported from Country A, and Country B imposes a lower tax on the same raw materials. These raw materials are unique to Countries B and C and essential to Country A. What is the effect of this set of actions on these countries?
Country A will do more business with Country B.
What is enhanced when creating regional trade agreements?
Which issue was the main purpose of the creation of the European Union?
Environmental Protection Agency
Which action is used by companies wishing to avoid working with vendors who use sweatshops?
Sending a whistle blower to the job sites to ensure the vendor practices safe working conditions
Allowing vendor practices to be flagged by nongovernmental organizations such as the National Labor Committee
Establishing national child labor laws and requiring vendors to comply with them
Developing and imposing a company internal code of conduct for vendor labor practices
developing and imposing a company internal code of conduct for vendor labor practices
A major footwear brand company is contracting the manufacturing of its products to a contractor’s manufacturing plant overseas. The footwear company has been accused of turning a blind eye to sweatshop practices at other overseas contract locations before.
How should the footwear company ensure that the contractor will comply with the standards set forth in the code of conduct that explicitly prohibit this practice?
Require that the factories be available for inspections
What did the Worst Forms of Child Labor Convention, 1999 define?
The age at which a person becomes an adult
Maritime Labor Convention, 2006
The party who has been affected can seek damages.
Which two primary sources of law govern contracts in the United States?
The common law and the Uniform Commercial Code
How is contract law structured as it applies to global business among nations?
Both the United States and the host country’s laws
How does the Sarbanes-Oxley Act (SOX) attempt to increase the public’s trust in American companies?
By enforcing companies’ compliance with a dual listing on the U.S exchange
By requiring public companies to have and reveal a code of business conduct and ethics
By refusing to protect persons who report behaviors that are illegal or unethical in a public company
By strengthening disclosure of insider transactions and permitting loans to executives
By requiring public companies to have and reveal a code of business conduct and ethics
Which organization aims to develop a global intellectual property infrastructure?
WRC
WIPO
WTO
TRIPS
WIPO World Intellectual Property Organization
An accountant for a transnational company feels pressure from senior management to hide losses from the firm’s operational activities. The requested action is legal but certainly does not give an accurate financial picture of the firm’s current finances and could influence foreign investment.
What type of stimulus is being used in regards to this company’s organizational ethics?
External
Internal
Technical
Political
A company sells products that many have reported on social media to be culturally insensitive, and sales have decreased significantly since the negative publicity began.
How are consumers responding to the publicity?
By focusing on supply chain
By voting with their purchases
By notifying government agencies
By considering sustainability
By voting with their purchases
A global buyer reviews a company’s ethical profile and the social responsibility section of its annual report. Understanding that the company’s values match the buyer’s principles, the buyer purchases the company’s products.
Which action did the buyer perform regarding the purchase of the company’s products?
The buyer used organizational ethics.
The buyer practiced shareholder activism.
The buyer used personal ethics.
The buyer practiced ethical consumerism.
The buyer practiced ethical consumerism.
A company is reviewing how ethical consumerism is being addressed in the organization. It is hoping to improve its awareness of this factor and how it will influence future business decisions.
How does this factor affect business decisions?
Companies must remember that their consumers may care about more than just the final product.
Companies that hide their production methods can avoid negative impacts of ethical consumerism.
Companies that make good financial decisions will be perceived well by the public.
Companies must consider the age of the intended audience for a product.
Companies must remember that their consumers may care about more than just the final product.
A company that released a new vehicle marketed as being environmentally friendly is found to have cheated when testing the vehicle’s total emissions. The company would like to repair damage from the negative publicity by changing its image and catering more to ethical consumers.
Which action should the company take to reach this goal?
Hire a new leader to send the message that practices have changed
Retest the vehicles using its own test environment and protocols
Market the original product strongly so ethical consumers receive the information
Ask political supporters to modify the environmental emission regulations
Hire a new leader to send the message that practices have changed
A business has experienced significant internal and external events, and the owner decides to respond effectively while maintaining the rules of behavior the company has always vocalized as being appropriate.
Which component has guided this owner’s response?
Organizational ethics
Ethical conundrum
Personal ethics
Ethical standardization
A coffee company received international criticism for an employee negatively responding towards a customer. The response was said to be racially motivated. The company needs to take swift action to improve how all employees in the organization are viewed by ethical consumers.
Which course of action should the company take to meet this goal?
Fire the worker’s supervising manager
Give the person affected company gift cards
Have employees attend sensitivity training
Show instances of employees helping that population
Have employees attend sensitivity training
An American salesperson is attempting to do business in a Middle Eastern country.
What is one of the major cultural issues the salesperson needs to understand about this part of the world?
It is more relationship-based than the United States.
It is more rules-based than the United States.
Individualistic culture is stronger in the Middle East than in the United States.
Secular culture is stronger in the Middle East than in the United States.
It is more relationship-based than the United States.
How can the corruption perceptions index (CPI) be used to understand international business ethics?
It identifies nations in which corruption is frequent.
It describes the global rules of trade between countries.
It provides practical tools to build ethical integrity.
It establishes a unified economic and monetary system.
It identifies nations in which corruption is frequent.
A global company has warned managers that the country involved in their current business venture typically expects small payments to be made to government officials to expedite decisions and transactions. The company has encouraged managers to avoid this type of unethical practice.
Which form of activity is the company concerned about?
Unfair competition
Grease payments
Trade policies
Oil payments
The British East India Company used expansionist policies to gain profits in the East Indies by collecting unreasonable taxes from Indians.
Which unethical practice was used by this company?
Creating fake assets
Hiding debt from investors
Stealing from the people they ruled
Colluding to commit finance fraud
Stealing from the people they ruled
To create redundancies in a system to ensure it functions properly
By performing due diligence with procedures
A cruise ship employs over 200 workers over the course of 18 years. One worker describes terrible living conditions and the limited amount of food that employees are given to eat. Which labor convention is being violated by the employer?
Domestic Workers
Geneva
The Maritime Labour
Worst Forms of Child Labour
What does Article 2 of the Uniform Commercial Code (UCC) govern?
The required conduct of the initiator of a contract
The standards for the performance of business activities
The required conduct of both parties in accordance with the contract
The standards for the countries from which the two businesses originate
The required conduct of both parties in accordance with the contract
An employee at the U.S. Patent and Trademark Office was casually talking to a friend who worked at Company XYZ. The patent office employee mentioned that a pending patent application for Company XYZ was about to be denied, and the decision would become public in a few days. The public release of the report was likely to result in a severe reduction in the stock price of the company. The friend who worked at Company XYZ then placed an online trade transaction to sell all shares of stock they owned in Company XYZ the next day. Which specific law passed by the U.S. Congress did the Company XYZ employee violate?
An American employee is working in a Chinese firm in China and notices an ethical violation. The employee tells a colleague, who is Chinese, and the colleague advises the American employee to save face. What does the Chinese colleague mean by this advice?
Confront the people who are responsible since they could retaliate
Make sure that everyone knows the person who discovered the ethical violation
Ensure that the supervisor is aware of the situation to avoid being personally accused
Report only if directly asked if a violation occurred
Report only if directly asked if a violation occurred
During a training session, the employees are asked to identify irregularities. Which activity should be identified?
An employee siphoning funds from the office account
An employee taking home office supplies for personal use
A data entry technician unintentionally entering incorrect data
A grocery store employee forgetting to report rotting produce
An employee siphoning funds from the office account
Remedy negative events immediately with change
An employee at the U.S. Patent and Trademark Office was casually talking to a friend who worked at Company XYZ. The patent office employee mentioned that a pending patent application for Company XYZ was about to be denied, and the decision would become public in a few days. The public release of the report was likely to result in a severe reduction in the stock price of the company. The friend who worked at Company XYZ then placed an online trade transaction to sell all shares of stock they owned in Company XYZ the next day. Which specific law passed by the U.S. Congress did the Company XYZ employee violate?
Sarbanes-Oxley Act (SOX)
Foreign Corrupt Practices Act (FCPA)
North American Free Trade Agreement (NAFTA)
Freedom of Information Act (FOIA)
An individual works in a global office where it is typical to pay small, unofficial fees to top administrators in the city to gain an advantage. The individual agrees to pay the fee needed to expedite placement of a business phone line at home so work can be completed after normal work hours. What is this inducement called?
Grease payment
Gratuity
Installation fee
Kickback
A large U.S. corporation is entering a foreign market but is having significant delays in acquiring the necessary permits to begin operations. A local official tells the project manager that a financial incentive should be paid to speed up the permit process. The official stresses that other companies engage in this practice and that it is acceptable in the local culture, so the project manager pays the incentive. How is this action characterized?
It is acceptable under Transparency International practices.
It is a violation of the U.S. Foreign Corrupt Practices Act.
It is acceptable as it is customary in the local culture.
It is a violation of World Economic Forum standards.
It is a violation of the U.S. Foreign Corrupt Practices Act.
A U.S. organization has a factory in a foreign market that is well-known for sweatshops. To maintain the organization’s social responsibility, the organization describes the factories and working conditions to its customers via its website. Which practice is this company using?
Supporting ethical decision-making
Using ethical transparency
Limiting cronyism
Improving brand image
A company is training new employees and helping them identify discrepancies.
Which scenario indicates a discrepancy that should be identified by the employees?
An accounting manager siphons a significant amount of funds from the company’s account.
A data entry technician unintentionally entered incorrect data into the system.
An employee takes home high-quality office equipment.
An employee fails to record large transactions with a customer.
A data entry technician unintentionally entered incorrect data into the system.
Managers at an international business are deciding the method by which it will be organized. The business is highly diversified, manufacturing a number of different components and parts for its industrialized customers.
Which departmentalization structure should be used by this company?
Geographic
Functional
Process
Product
What is functional departmentalization?
What is product departmentalization?
What is process departmentalization?
What is customer departmentalization?
Geographic Departmentalization
Functional/departmental structure
A structure in which top-level managers delegate little authority to lower levels
A conglomerate company in the United States wants to conduct business in a foreign country with another major corporation but recently found out that resources are limited if both companies produced the same products at the same speed.
How should these companies cooperate to reduce costs?
Exporting
Partnering
Licensing
Acquisition
A multinational company plans on setting up a greenfield venture in a foreign country.
What is a potential implication for the company?
The company will need to share costs with the other entity.
The company will be seen as an insider who would hire locals.
The company should work in a sound regulatory environment.
The company will gain a quick entry into a new market.
The company will be seen as an insider who would hire locals.
A company wishes to make a foreign direct investment into a country.
Which investment should be used by the company?
Purchase of a plant in the host country
Purchase of a noncontrolling investment in a host country company
Purchase of a bond in the host country’s bond market
Purchase of stock in a host country company
Purchase of a plant in the host country
When expanding internationally to a country with a lower average income, a company made efforts to reduce the price of its product, even though it eliminated some of the benefits the product has in other markets. This allowed for greater sales in the new market.
Which strategy is being used by this company?
Standardization
Multibrand
Global
Adaptation
A company owner is considering manufacturing using a global standardization strategy to achieve economies of scale.
Why is this strategy effective?
It improves manufacturing processes.
It manufactures the same product for all markets.
It decreases shipping costs.
It ensures product safety is maintained.
It manufactures the same product for all markets.
A company decides to focus on economies of scale to decrease production costs and increase revenues.
Why is this strategy effective?
Manufacturing in large quantities keeps costs low.
Ordering in small quantities ensures that shipping costs stay low.
Manufacturing in small quantities minimizes operational costs.
Ordering in large quantities takes advantage of bulk pricing.
Manufacturing in large quantities keeps costs low.
A company is expanding internationally through the purchase of other companies and decides to use the multibrand strategy.
Why is this strategy appropriate?
It competes with many companies using a different strategy for each competitor.
It has increased revenues by having customers make purchases from two entities.
It eliminates excess inventory from the parent company.
It has a purchased company with a recognizable brand in its market.
It has a purchased company with a recognizable brand in its market.
Establishing a greenfield venture
An individual is considering entering the global market via a franchise.
Which outcome should be expected by the individual if this approach is used?
Limited access to the franchiser’s brand and trademarks
Low access to advertising and product training
Limited name recognition
Majority of financial risk
A company plans on using horizontal integration.
Which strategy is being adopted by this company?
Buying complementary companies in industries such as delivery and payments
Growing the company to include two or more stages of production
Acquiring companies that supply the same or similar goods and services
Collaborating with a local supplier on a new product line
Acquiring companies that supply the same or similar goods and services
A company is trying to identify the factors that will increase their risk when entering a global market.
Which strategy increases this risk?
Conducting market research on the size of franchisees
Localizing the product through franchisees
Acquiring domestic business partners
Aligning responsibilities for each of the partner entities
Acquiring domestic business partners
Greenfield venture (Direct investment and wholly-owned subsidiaries)
A business partner is hoping to persuade the other partners on the benefits that can be gained by expanding into foreign markets.
Which reason should the business partner use to illustrate these benefits?
Improves the quality of the product
Extends the reach of the brand
Grows domestic sales
Reduces the risks in the home market
Extends the reach of the brand
A well-respected company wants to expand its operations in another country and voluntarily decides to use locally supplied materials.
What is a reason the company wishes to make this transfer?
To decrease home country management
To increase compliance with local laws
To decrease World Trade Organization actions
To increase product profitability
To increase product profitability
A company is experiencing a decrease in sales in the home country. During this difficult time, the company has decided to invest abroad.
What is the motivation for taking this action?
To ensure the company reaches more customers in a new market
To ensure the company maintains its reputation for producing high-quality products
To ensure the company follows regulations by retaining its employees
To ensure that the company avoids penalties levied by the home country
To ensure the company reaches more customers in a new market
A U.S. employee believes that each individual is responsible for one’s own success and finds it challenging to work in cultures that emphasize collaborative approaches to decision-making.
Which aspect of Hofstede’s cultural dimensions is being exemplified by this employee?
Long-term orientation
Individualism
Uncertainty avoidance
Power distance
A country’s corporate culture requires that most of the decisions be made by senior management, and entry-level positions are viewed as having much less status and respect.
Which of Hofstede’s cultural dimensions is being used by this country?
Power distance
Restraint
Long-term orientation
Uncertainty avoidance
A chief executive officer (CEO) of a Scandinavian company sought to expand operations in Japan through a joint venture. When the CEO asked the Japanese business owner whether she was committed to the venture, the business owner responded with a flat-toned “yes.” The outcome the CEO expected did not happen, and the joint venture failed.
What was the CEO’s misinterpretation in this communication?
The response indicated misunderstanding.
The response indicated possibility.
The response indicated excitement.
The response indicated agreement.
The response indicated agreement.
A company’s chief executive officer (CEO) emphasizes to other executives in the foreign country’s joint venture that the CEO’s culture should take precedence over other cultural systems since it is superior.
Which type of viewpoint is the CEO demonstrating regarding culture?
Individualism
Ethnocentrism
Power distance
Uncertainty avoidance
A company’s chief executive officer (CEO) wants to expand the company into China and is reviewing the Chinese word guanxi, the basis of all business in that country.
Which English meaning must the CEO understand in regards to this Chinese concept?
The die is cast.
If God is willing.
All is well that ends well.
You owe me one.
A company would like to use a human resource approach that leads to more fluid movement among employees and creates diversity in the workforce. Assignment decisions are made jointly by the headquarters and the field offices.
Which human resource approach should be used by this company?
Polycentric
Multicentric
Geocentric
Ethnocentric
A company wishes to make a foreign direct investment in a new country where it can make and test products more easily. While local suppliers would not normally meet the requirements for its products, this new plant will accept them.
Which factor affected the company’s production location?
Incentive
Cost
Growth
Innovation
A company wishes to expand internationally in countries that have high tariffs on the product the company makes. The company decides to use foreign direct investment because the labor costs are low and the country is politically stable.
Which type of production is the company using?
Manufacture in the host country then export to the home country
Global sourcing then using the home country for assembly
Production in the host country then local retailing
Manufacture in the home country then export abroad
Production in the host country then local retailing
A fast food company requires franchisees to make the company’s specialty products on-site. The company sends the ingredients used to make the fast food in prepackaged bags to prevent each franchisee from deviating from the company’s recipe and to prevent them from stealing recipes.
Which type of intellectual property is the company attempting to protect?
Trade secret
Trademark
Production patent
Copyright
A company wants to move production offshore to a low-skilled labor company because the company’s machines will make the product and it only needs these low-skilled operators to work the machines.
Which advantage of outsourcing does the company seek to take?
Lower costs
Enhanced expertise
Greater discipline
Focus on core activities
Better established infrastructure
Broader knowledge about the existing markets
Private Export Funding Corporation (PEFCO)
Creating international standards of accounting
A government is managing a difficult economy that appears to be at a stand-still and a direct-tax rate that is rapidly decreasing. The government decides to use an indirect tax to improve the situation.
Which tax did this government use?
Goods and services
Capital gains
International tax treaties
Corporate income
Why should a company identify corporate tax rates in various countries to make a strategic business decision, such as expanding the company globally?
To determine most profitable location of plants and headquarters
To evaluate the market readiness for product and service offering
To establish household incomes of target market consumers
To analyze pricing strategies that will generate consumer interest
To determine most profitable location of plants and headquarters
A company is in a geographic area with low literacy levels, and the surrounding population does not understand the benefits of a computer and the internet. Due to this lack of information, the individuals are not able to use the digital technology to its full potential, and this is negatively impacting the company’s business plan.
Which type of divide must this company manage?
Usability
Empowerment
Accessibility
Economic
They are accessible 24 hours per day.
A company is beginning to operate on a more complex global scale and needs a seamless integration of all the data the business uses. This integration must include data from human resources (HR), employee data, sales information, and development figures.
Which type of software solution should be used for this purpose?
Material requirements planning
Desktop publishing
Spreadsheet program
Enterprise resource planning
The Fourth Industrial Revolution
Many governments were required to add a carbon tax to businesses based on the emission levels of their operations. This added tax stemmed from a piece of international legislation that was developed in 2016 to protect the environment.
Which international initiative impacted businesses in this manner?
Paris Agreement
Doha Amendment
Kyoto Protocol
North American Agreement on Environmental Cooperation
An entity launched the national emissions trading system (ETS). These guidelines are scheduled to be implemented in 2020 to control and gradually reduce carbon emissions.
Which entity took this step?
Federal Trade Commission
North American Commission for Economic Cooperation
European Union
China’s National Development and Reform Commission
China’s National Development and Reform Commission
In 2017, the Federal Trade Commission (FTC) passed a law that required a change in the practices used by influencers who participate in video postings and web site tweets.
Why did the FTC take this action?
To prevent individuals from misleading consumers
To create forums for industry marketing experts
To establish limits for paying celebrity endorsers
To uphold freedom of speech in online advertising
To prevent individuals from misleading consumers
How does General Data Protection Regulation (GDPR) help protect people’s personal data?
The regulation applies to all European companies processing data of worldwide citizens.
Users are required to opt in explicitly to grant permission for sensitive data.
Companies that breach the policies of the GDPR can be fined up to 25% of their annual global turnover.
Users must be notified of data breach within 24 hours of awareness.
Users are required to opt in explicitly to grant permission for sensitive data.
Which negative outcome on political systems comes from globalization?
Creation of isolationist policies
Which factor results in a higher rate of globalization?
Reduced trade barriers
What are the four factors in Ghemawat’s CAGE analysis?
Culture, administration, geography, economy
What is a major drawback to the home country when companies outsource manufacturing jobs to countries with lower worker wages?
Loss of manufacturing jobs
A country has a characteristic traditional economic system with poor infrastructure and limited economic opportunity.
What is the impact of this system on the process of globalization?
The globalization process is at a disadvantage as the country has a lower standard of living.
What is a characteristic of a market economy?
Firms seek to maximize profi ts.
Which impact does Islamic law directly have on businesses?
It forbids charging interest.
Which institution helps to maintain availability of global financing to solve trade deficit issues?
International Monetary Fund
We have an expert-written solution to this problem!
What is the current focus of the World Bank?
Improving quality of life
For which concern has the World Trade Organization been criticized?
Adoption of labor standards protecting labor rights
How is the Special Drawing Right of the International Monetary Fund (IMF) valued?
It is based on the value of the five most significant members’ currencies.
Two countries agree to open their borders to international business transactions with one another without tariffs.
How does this affect global business?
It leads to developing free trade policies with strategic partners.
A country uses its established technology infrastructure to produce a good.
What is the impact of this infrastructure on trade?
It will create barriers to entry for other nations.
What was the economic impact of the North American Free Trade Agreement (NAFTA)?
The shift of jobs away from low comparative advantage industries
A company that is located in Country A would like to sell products in Country B. The government of Country B is pushing for a tariff-based international trade agreement on the product.
What is the reasoning behind Country B’s decision?
Country B seeks to protect its economy and give it the opportunity for long-term expansion.
Countries A and B participate in trade agreements that allow free trade among participant countries. However, Country A imposed quotas on several imported products to protect its domestic products.
What is the effect, if any, on the domestic prices of these products?
Increases
Two countries decide to open up trade with each other.
What is likely to happen when trade opens up?
Jobs will increase in comparative advantage industries.
What is a purpose of a country implementing trade protectionism?
To protect an infant industry
Country A and Country B are trying to mend their relationship. A company from Country A would like to invest in a company in Country B.
Which action by Country B will help these two countries meet their goal?
Provide tax exemptions
Which level of regional economic integration is a key feature of a Customs Union?
Unified trading policies with non-members
What is a drawback of creating regional trade agreements?
They shift employment opportunities.
The United States-Mexico- Canada Agreement (USMCA), a modification of the North American FreeTrade Agreement (NAFTA), broadened the scope of free trade between member nations and tightened restrictions in the region.
Which regulation was established by this new agreement?
Almost half of all automobile parts must be made by a labor force that earns a minimum of $16 per hour by 2023.
A U.S. capital investment firm is researching new markets to enter to diversify its portfolio. The director of foreign investments presented a pitch to the board of directors encouraging entry into the Costa Rican telecommunications market by investing in local companies in the region through acquisition.
Which alliance supports this director’s suggestion?
Central America Free Trade Agreement
A firm based in Country A manufactures its products in Country B and pays the manufacturing employees in the currency in which they are located.
Which currency situation will result in the maximum profit for the firm?
The currency in Country A is strong relative to the currency in Country B.
Which drawback is associated with regional economic integration?
Increased exclusive internal trade
Which factor contributes to the creation of a monopoly?
Control of natural resources
Which convention provides gap fillers for terms that may not be expressly stated in agreements between two companies?
Contracts for the International Sale of Goods
Which laws are violated by practices such as price-fixing, price discrimination, restraints, and monopolization?
Anti-trust
An international company’s consumers are demanding that the owners make socially ethical business decisions concerning their packaging, but the company is finding that the suggested green modifications are increasing the costs of producing the product.
Which concern is this company facing by meeting these ethical demands?
Decreased profitability
A business is entering a global market at the same time it has been trying to improve its level of corporate social responsibility (CSR).
Which CSR goal should this company remember during this process?
Increase shareholder trust via high ethical standards
A company would like to expand its corporate social responsibility (CSR) initiatives to a global level.
Which strategy should the company use to meet this goal?
Engage stakeholders on the issue of air quality
An individual is encouraged to provide a small, quiet fee to local offi cials to get some critical work doneoverseas for a global offi ce. The individual was told that this would greatly expedite the work. Theindividual took that advice, and the work was completed, but the manager in the United States was upsetwith the action and called the individual to discuss the matter.
What is the most challenging aspect of this individual’s ethical dilemma?
Ethical behaviors are not standardized across the world.
A CEO of a multinational corporation tells employees that they are expected to follow the organization’s values, remember the mission, and adapt behaviors to be in alignment with the vision and mission, regardless of the situation.
Which ethical standard is being stressed by this company?
Code of ethics
An international company has employees divided into departments related to designated areas of the business, such as marketing, production, human resources, information technology, and customer service.
What is the organizational structure of this company?
Functional
Which organizational structure is common in international high-tech and engineering firms that have projects of limited lengths of time where employees can be put on different teams to maximize ingenuity?
Matrix
Which organizational structure helps increase employee creativity, productivity, and mutual accountability?
Teams
A global household appliance company competes in three areas: washers, dryers, and refrigerators.
Which type of departmentalization does this company use?
Product
A multinational corporation (MNC) with headquarters in the United States is seeking to limit its supply chain to U.S. companies so that decision-making authority is localized at the highest level of the organization.
What is a result of using this decision-making structure?
There is increased consistency in operations.
A company wants to hold a direct operating presence in a foreign country, so it buys a company in the target country and runs the operations.
Which type of business agreement is this company using?
Subsidiary
A multinational beverage company decides to export products into a new market in order to grow its business. Exporting products was determined to be one of the cheapest methods of market entry for this company; however, the company realizes there are some disadvantages to exporting.
Which challenge is this company likely facing by exporting its products?
Costs of transporting goods is high.
A multinational company hires a distributor to manage the distribution of products in a new international market that it recently entered.
Which entry strategy is the company using?
Exporting
A company located in the United States ships its products to a country overseas. Frequent bad weather causes significant delays, thus leading to reduced profits. As a result, the company wants to encourage leadership to consider adding a location in this overseas country.
Which strategy solves this problem?
Decentralized manufacturing
As a company enters a foreign market, it provides assets, takes on all of the responsibility, and assumes the significant risk.
What is this market entry strategy?
Greenfield venture
A company has entered several foreign markets and maintains the same branding in all of them.
What is the term for this marketing strategy?
Standardization
A company would like to have a direct operating presence in a foreign country. The company is concerned about being exposed to the highest levels of risk and a slow market entry.
Which entry strategy is the company concerned about?
Subsidiary
Which national cultural dimension refers to how agreeably a society accepts hierarchical differences between people in the global workplace?
Power distance
Which national cultural dimension in global business refers to the amount of ambiguity a society is willing to accept?
Uncertainty avoidance
Which national cultural dimension in global business refers to people’s inclination to take care of themselves and their close circle of family and friends, often at the cost of the whole society?
Individualistic
A senior manager from the head office of a company based in the United States is assigned to work in its overseas office in Indonesia where the significant emphasis is placed on workplace harmony. The manager ensures that the local culture and language are understood and is often perceived as an insider who follows the normal traditions.
How will the cultural dimensions of the local country influence the manager’s evaluation?
The senior manager would be given a very favorable performance evaluation.
An employee for a global technology company was assigned to the overseas office in Asia. Once the assignment was completed, the employee experienced disorientation in repatriating to the head office in the United States.
What caused this disorientation?
Changes in work culture and customs
Human resources policies are determined by how a particular global company decides to oversee its diverse workforce.
What is the disadvantage of using this polycentric approach?
A computer technology company has several factories in three countries. The headquarters introduces steps in the manufacturing process so that waste decreases dramatically.
Which supply chain practice is this company using to optimize production efficiency?
Lean manufacturing
A company is evaluating where it will locate its next facility to minimize its distribution shipping costs.
Which factor must the company consider as part of this decision?
Value-to-weight ratio
A multinational company sources the components for its products from multiple countries around the globe and assembles the final finished product locally in the country of sale. However, the consumers in the local country do not prefer locally made goods.
Which phenomenon is the company experiencing?
Country-of-origin effect
What is an advantage of using intermediaries in an indirect distribution channel?
It reduces up-front costs with the use of an existing channel
A new start-up company wants to connect directly with its consumers.
How many layers of intermediaries should the company consider?
0
A company’s distribution channel consists of a producer, a distributor, a retailer, and a consumer.
What is a distribution channel with this structure called?
Indirect
Which form of funding requires a low cost of capital and does not require time to mature?
Loans
A manufacturing company in the United States acquired a small national supplier based in California.
Which accounting method should the company use to record the acquisition?
Generally accepted accounting principles
How do banks and investors use financial statements?
To decide whether to grant access to money
A company wants to reduce the effects of currency fluctuations with its host country subsidiaries for the coming year.
Which action should the company take?
Use a forward contract
A multinational company uses transfer pricing to reduce its tax burden in the subsidiaries’ countries.
Which effect does this action have on subsidiaries?
Lowered profit
What is an example of a micro risk for multinational companies?
Government nationalization of assets
A community has the skills and ability to access computers and the internet but does not value that form of technology. A company is trying to change the situation in order to facilitate increased online transactions.
Which stage of the digital divide is the company hoping to correct?
Empowerment
A global company wants to share and store business information online 24/7 for employees so they can access the items when they are not physically in the office.
Which tool should the company use for this purpose?
Cloud-based fi le share
A manufacturing facility would like to consider the use of artificial intelligence deep learning.
Which practice illustrates the use of this approach?
Machines become familiar with common defects in products
A company is interested in working with the technology that will allow consumers to privately and securely store personal information such as social security and credit card numbers, making it accessible around the world.
Which piece of technology is of interest to this company?
Blockchain
An international business experienced significant changes due to advances in global technology such as autonomous cars, 3D printing, biometrics, nanotechnology, and quantum computing.
Which era caused this impact on the business?
Fourth Industrial Revolution
An international company works with many economic sectors and notices that one sector, in particular, is slower to adopt artificial intelligence, which limits their opportunities on a global scale.
Which economic sector shows this slower pace?
Education
Workers at a company are struggling to efficiently address daily problems because the company’s current information systems do not communicate across departments.
What type of system should the company implement to solve this problem?
Enterprise resource planning system