Global Business Environment
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Course Introduction
Global Business Environment explores the complex and dynamic context in which international businesses operate. This course examines factors such as economic systems, political and legal frameworks, cultural influences, technological advancements, and global trade patterns that impact business decisions worldwide. Students will analyze global market entry strategies, the influence of multinational corporations, and current trends in globalization. By understanding the opportunities and challenges presented by diverse markets, learners will develop the skills needed to navigate and succeed in the evolving landscape of international business.
Recommended Textbook
International Business 9th Edition by Charles W. L. Hill
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Chapter 1: Globalization
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Q1) Globalization is criticized because it increases the power of _____.
A) governments to own enterprises
B) unskilled labor to form labor unions
C) supranational organizations over nation-states
D) nation-states to regulate markets and reduce competition
Answer: C
Q2) The shift toward a more integrated and interdependent world economy is referred to as globalization.
A)True
B)False
Answer: True
Q3) What is the Uruguay Round? List the measures implemented in the Uruguay Round?
Answer: Under the umbrella of GATT,eight rounds of negotiations among member states worked to lower barriers to the free flow of goods and services.The most recent negotiations to be completed,known as the Uruguay Round,were finalized in December 1993.The Uruguay Round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents,trademarks,and copyrights; and established the World Trade Organization to police the international trading system.
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Page 3
Chapter 2: National Differences in Political Economy, and Legal Systems
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Q1) In a(n)_____ economy the government plans the goods and services that a country produces,the quantity in which they are produced,and the prices at which they are sold.
A) market
B) command
C) open economy
D) laissez-faire
Answer: B
Q2) Why do command economies tend to stagnate?
Answer: The objective of a command economy is to mobilize economic resources for the public good,however the opposite usually occurs.In a command economy,state-owned enterprises have little incentive to control costs and be efficient,because they cannot go out of business.Also,the abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs; hence,dynamism and innovation are absent from command economies.Instead of growing and becoming more prosperous,such economies tend to stagnate.
Q3) The Foreign Corrupt Practices Act does not allow for grease payments.
A)True
B)False
Answer: False
Page 4
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Chapter 3: National Differences in Economic Development
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Q1) Why does education lead to economic development?
Answer: Nations that invest more in education will have higher growth rates because an educated population is a more productive population.A survey of 14 statistical studies that looked at the relationship between a country's investment in education and its subsequent growth rates concluded investment in education did have a positive and statistically significant impact on a country's rate of economic growth.
Q2) Which of the following is a step in the shift toward a market-based economic system?
A) Increasing trade barriers
B) Increasing price controls
C) Nationalization
D) Creation of a legal system to safeguard property rights
Answer: D
Q3) Democracy is one of the consequences of economic growth and progress.
A)True
B)False
Answer: True
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Chapter 4: Differences in Culture
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Sample Questions
Q1) A society's social structure refers to its:
A) system of values and norms.
B) basic social organization.
C) religious practices.
D) educational infrastructure.
Q2) Which of the following statements is true about the murabaha contract?
A) Under the murabaha contract, when an Islamic bank lends money to a business it takes a share in the profits that are derived from the investment.
B) Under the murabaha contract, money deposited in a savings account is treated as an equity investment in whatever activity the bank uses the capital for.
C) The murabaha contract is widely used among the world's Islamic banks because it is the easiest to implement.
D) The murabaha contract is a more efficient system than the Western banking system since it encourages both long-term savings and long-term investment.
Q3) Folkways have much greater significance than mores.
A)True
B)False
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Chapter 5: Ethics, corporate Social Responsibility, and Sustainability
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Q1) Companies can strengthen the moral courage of employees by committing themselves to not retaliate against employees who exercise moral courage.
A)True
B)False
Q2) What are ethical dilemmas? Why do they exist?
Q3) An international U.S.based company sets up a production unit in a developing country with poor environmental regulations.This contributes to:
A) the noblesse oblige situation.
B) the inequity aversion.
C) the global tragedy of the commons.
D) the Friedman effect.
Q4) The Kantian approach to ethics suggests that:
A) human beings have fundamental rights and privileges that transcend national boundaries.
B) the moral worth of actions or practices is determined by their consequences.
C) people should be treated as ends and never purely as means to the ends of others.
D) ethics are nothing more than the reflection of culture.
Q5) Discuss the notion of social responsibility.What does it mean for corporations?
Page 7
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Chapter 6: International Trade Theory
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Q1) Which of the following theories suggests that first mover advantage is significant in the export of a good?
A) Product life-cycle theory
B) Ricardo's theory
C) New trade theory
D) Theory of comparative advantage
Q2) Factor endowments refer to the extent to which a country is gifted with such resources as land,labor,and capital.
A)True
B)False
Q3) What will happen,according to Paul Samuelson's critique,if a rich country enters into a free trade agreement with a poor country?
A) Both the countries will incur losses due to the exchanges between them.
B) The productivity of the poor country will decline rapidly.
C) The poor country will rapidly improve its productivity.
D) Both the countries will garner benefits from the exchanges between them.
Q4) Simple model of free trade assumed away transportation costs between countries.
A)True
B)False
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Chapter 7: Government Policy and International Trade
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Q1) Antidumping actions are concentrated in certain sectors of the economy such as basic metal industries,chemicals,plastics,and machinery and electrical equipment.
A)True
B)False
Q2) What is dumping? How do governments respond to charges of dumping?
Q3) During the 1980s and early 1990s,the world trading system erected by the GATT gained momentum as protectionist demands generally decreased across the world.
A)True
B)False
Q4) Administrative trade policies are:
A) requirements that some specific fraction of a good be produced domestically.
B) quotas on trade imposed by the exporting country.
C) bureaucratic rules designed to make it difficult for imports to enter a country.
D) designed to punish foreign firms that engage in dumping.
Q5) Discuss the infant industry argument for intervention in markets.What is GATT's position on the argument?
Q6) Explain the notion of predatory behavior with regard to dumping.
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Chapter 8: Foreign Direct Investment
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Q1) In general,FDI in the form of greenfield investments should increase competition.
A)True
B)False
Q2) Describe some of the home country policies that encourage outward FDI.
Q3) Which of the following observations concerning Knickerbocker's theory is true?
A) It does not explain imitative FDI behavior by firms in oligopolistic industries.
B) Economists favor this theory as an explanation for FDI compared to the internalization theory.
C) It addresses the issue of whether FDI is more efficient than exporting or licensing for expanding abroad.
D) It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license.
Q4) Describe the situations when licensing is not a good option for a firm.
Q5) Developing nations currently account for the largest share of FDI inflows.
A)True
B)False
Q6) What is an oligopoly? Discuss the impact of interdependence in an oligopoly.
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Page 10
Chapter 9: Regional Trade Pacts Give the Mexican Auto
Industry an Edge
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Q1) Which of the following is true of ASEAN?
A) China, India, South Korea, and Singapore are among its members.
B) Collectively, the member states account for about 55 percent of world trade.
C) It is slowly progressing toward establishing a free trade zone.
D) It has been successful in fulfilling its basic objective of fostering freer trade between member countries.
Q2) The Andean Pact is a highly successful common market modeled after the EU.
A)True
B)False
Q3) The judges of the European Court of Justice are required to act as representatives of national interests,rather than as independent officials.
A)True
B)False
Q4) Bolivia,Peru,Ecuador,Columbia,and Venezuela are all members of:
A) Mercosur.
B) NAFTA.
C) APEC.
D) the Andean Pact.
Q5) How easy is it for countries to integrate?
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Chapter 10: The Foreign Exchange Market
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Q1) Explain the difference between fundamental analysis and technical analysis.
Q2) Which of the following involves borrowing in one currency where interest rates are low,and then using the proceeds to invest in another currency where interest rates are high?
A) Carry trade
B) Swing trade
C) Channel trade
D) Price action trade
Q3) Arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time.
A)True
B)False
Q4) _____ refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.
A) Countertrade
B) Carry trade
C) Dumping
D) Capital flight
Q5) What is transaction exposure? How can transaction exposure be minimized?
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Chapter 11: The International Monetary System
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Q1) After World War II,world's major industrial nations arranged their currencies against each other at a mutually agreed on exchange rate.This is an example of a _____ system.
A) fixed exchange rate
B) dirty float exchange
C) pegged exchange rate
D) floating exchange rate
Q2) Discuss the arguments that favor a floating exchange rate system against a fixed exchange rate system.
Q3) When the foreign exchange market determines the relative value of a currency,we say that the country is adhering to a _____ regime.
A) currency board exchange
B) pegged exchange rate
C) fixed exchange rate
D) floating exchange rate
Q4) Fixed exchange rates lead to speculation and uncertainty in the value of currencies.
A)True
B)False
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Chapter 12: The Global Capital Market
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Q1) Explain how equity loans and debt loans differ in terms of attractiveness to businesses.
Q2) Banks offer higher interest rates on Eurocurrency deposits than on deposits made in the home currency because Eurocurrency deposits _____.
A) are funded by the European union
B) lack government regulations
C) are associated with low risk
D) have minimum foreign exchange risk
Q3) The main factor that makes the Eurocurrency market attractive to both depositors and borrowers is that it _____.
A) is separated from the foreign exchange market
B) lacks government regulation
C) is associated with low-risk
D) gives high levels of investor protection
Q4) The spread between the Eurocurrency deposit rate and the Eurocurrency lending rate is more than the spread between the domestic deposit and lending rates.
A)True
B)False
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Chapter 13: The Strategy of International Business
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Q1) The basic strategy paradigm suggests that to maximize its profitability,a firm should do all of the following,EXCEPT:
A) choose, according to strategy, any position on the efficiency frontier as all positions are viable.
B) pick a position on the efficiency frontier that is viable in the sense that there is enough demand to support that choice.
C) configure its internal operations so that they support the position on the efficiency frontier.
D) make sure that the right organization structure is in place to execute the strategy.
Q2) Discuss Michael Porter's interpretation of value creation and competitive advantage.
Q3) _____ imply that when a firm already has significant value built into its product offering,increasing value by a relatively small amount requires significant additional costs.
A) Efficiency matrixes
B) Diminishing returns
C) Cost plus curves
D) Strategy convex curves
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Chapter 14: The Organization of International Business
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Q1) Which of the following decisions is typically centralized at a firm's headquarters?
A) Production decisions
B) Human resource management
C) Marketing decisions
D) Overall firm strategy
Q2) In a company using cultural controls,employees' behavior is closely monitored and controlled through direct supervision.
A)True
B)False
Q3) It is difficult to ascertain accountability in the global matrix structure.
A)True
B)False
Q4) A(n)_____ is valuable because it can be used as a nonbureaucratic conduit for information flows within a multinational enterprise.
A) liaison network
B) matrix structure
C) organizational structure
D) knowledge network
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Chapter 15: Entry Strategy and Strategic Alliances
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Q1) According to the _____,top managers typically overestimate their ability to create value from an acquisition.
A) misvaluation theory
B) performance extrapolation hypothesis
C) market timing theory
D) hubris hypothesis
Q2) What are the two methods of entering foreign marketing using a wholly owned subsidiary?
Q3) Relational capital refers to the building of interpersonal relationships between the firms' managers in a strategic alliance.
A)True
B)False
Q4) A small-scale entrant is more likely than a large-scale entrant to capture first-mover advantages associated with demand preemption,scale economies,and switching costs.
A)True
B)False
Q5) What are first-mover advantages? Discuss the advantages associated with them.
Q6) Draw a distinction between firms based on their core competency.
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Chapter 16: Exporting, importing, and Countertrade
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Q1) Which of the following is an advantage of countertrade?
A) Countertrade uses instruments such as time draft and sight draft.
B) It is an effective way of doing business with developing nations.
C) It provides exporters and opportunity to obtain direct revenue.
D) Countertrade prevents exchange of unusable or poor-quality goods.
Q2) A _____ is simply an order written by an exporter instructing an importer,or an importer's agent,to pay a specified amount of money at a specified time.
A) letter of credit
B) bill of lading
C) draft
D) banker's letter
Q3) Barter is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.
A)True
B)False
Q4) An importer obtains a letter of credit from a bank in the exporter's country in a typical international transaction.
A)True
B)False
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Chapter 17: Global Production and Supply Chain Management
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Q1) An advantage of engaging in in-house production of products and components is that _____.
A) the firm will have fewer subunits to control by making products in-house
B) it will help the firm capture more orders from other countries
C) it enables a firm to protect the proprietary technologies that it has
D) firms can make better use of the location advantages of certain countries
Q2) Which of the following products will have low value-to-weight ratios?
A) Pharmaceuticals
B) Refined sugar
C) Microprocessor
D) Electronic items
Q3) How do flexible machine cells work? What is the advantage of incorporating this type of technology into a strategy?
Q4) The benefits of making all or part of a product in-house is minimal when highly specialized assets are involved.
A)True
B)False
Q5) When does concentration of production make sense?
Q6) What is mass customization?
Q7) Briefly describe the Six Sigma methodology. Page 19
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Chapter 18: Global Marketing and Rd
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Q1) What are the arguments for standardized advertising across international markets?
Q2) ____ refers to the number of intermediaries between the producer (or manufacturer)and the consumer.
A) Channel length
B) Channel exclusivity
C) Channel quality
D) Channel speed
Q3) A channel is considered to be long if the producer sells directly to the consumer.
A)True
B)False
Q4) When a channel is exclusive:
A) the firm sells and distributes only high-end products.
B) it is controlled by market leaders or by firms who have a niche market.
C) the firm's products are focused only on the elite, upper class customers.
D) it is often difficult for a new firm to get access to shelf space in supermarkets.
Q5) Define market segmentation.What is its goal?
Q6) Explain briefly the regulatory influences on pricing.
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Chapter 19: Global Human Resource Management
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Q1) Discuss Mendenhall and Oddou's assertion that an executive who performs well in a domestic setting may not adapt to a different cultural setting.
Q2) Discuss the advantages and disadvantages of a polycentric approach to staffing.
Q3) Mendenhall and Oddou's "others-orientation" dimension,in their study on what predicts success in foreign jobs postings,refers to:
A) the expatriate's self-esteem, self-confidence, and mental well-being.
B) the expatriate's ability to interact effectively with host-country nationals.
C) the expatriate's ability to understand why people of other countries behave the way they do.
D) the relationship between the country of the assignment and how well an expatriate adjusts to a particular posting.
Q4) A citizen of Japan who moves to the United States to work at Microsoft would be classified as an inpatriate.
A)True
B)False
Q5) What are the advantages of the geocentric staffing policy?
Q6) Discuss corporate culture.How is corporate culture related to a firm's performance?
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Chapter 20: Accounting and Finance in the International Business
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Q1) What are the main steps in the control process of a typical firm?
Q2) Identify a key accounting problem that international businesses are confronted with but that does not confront purely domestic businesses.Substantiate with a suitable example.
Q3) What is capital budgeting?
Q4) Historically,financial reports prepared by firms in Germany _____.
A) reveal less information than reports of British or U.S. firms
B) contain detailed information required by individual investors
C) overvalued assets and undervalued liabilities
D) made more public disclosures compared to firms in other countries
Q5) Accounting standards are rules for preparing financial statements.
A)True
B)False
Q6) The initial rate,in the Lessard-Lorange Model,refers to the spot exchange rate when the budget is adopted.
A)True
B)False
Q7) Briefly differentiate accounting standards and auditing standards.
Q8) Describe the structure of the International Accounting Standards Board (IASB). Page 23
Q9) Define tax credit and tax treaty.
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