Global Business Management
Exam Answer Key
Course Introduction
Global Business Management explores the complexities and dynamics of managing organizations in an international context. The course covers topics such as cross-cultural communication, global market analysis, international business strategies, global supply chain management, and the impact of legal, economic, and political environments on global operations. Students develop an understanding of how to lead and adapt in diverse business environments, navigate global challenges, and leverage opportunities arising from globalization. Emphasis is placed on practical decision-making skills and the development of strategies for competing in a rapidly changing international marketplace.
Recommended Textbook
International Business Competing in the Global Marketplace 12th Edition by Charles
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Page 2
W. L. Hill
Chapter 1: Globalization
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Q1) According to critics of globalization, today's interdependent global economy limits a nation's national sovereignty.
A)True
B)False
Answer: True
Q2) Discuss the characteristics of globalization. Use an example in your discussion.
Answer: Globalization refers to a fundamental shift in the world economy in which national economies are no longer relatively self-contained entities. Instead, nations are moving toward an interdependent global economic system. Within this new global economy, an American might drive to work in a car designed in Germany that was assembled in Mexico by DaimlerChrysler from components made in the United States and Japan that were fabricated from Korean steel and Malaysian rubber. A company does not have to be the size of these multinational giants to facilitate, and benefit from, the globalization of markets.
Q3) Managing an international business is quite similar to managing a domestic business.
A)True
B)False
Answer: False
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Page 3
Chapter 2: National Differences in Political, Economic, and Legal Systems
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Q1) Explain the differences between common law and civil law systems by the approach of each to contract law.
Answer: Contracts drafted under a common law framework tend to be very detailed with all contingencies spelled out. In contrast, contracts in a civil law system tend to be much shorter and less specific because many of the issues typically covered in a common law contract are already covered in a civil code.
Q2) Fred wanted to protect his novel from piracy, so he copyrighted it. Patents, copyrights, and trademarks establish ownership rights over intellectual property.
A)True
B)False
Answer: True
Q3) A political system that prioritizes the needs of the society over individual freedoms is called
A) totalitarianism.
B) collectivism.
C) capitalism.
D) egalitarianism.
Answer: B
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Chapter 3: National Differences in Economic Development
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Sample Questions
Q1) GNI and PPP data are useful because they provide a ________ of economic development.
A) static picture
B) dynamic analysis
C) static analysis
D) global view
Answer: A
Q2) Which of the following is a first-mover advantage?
A) International firms may gain experience in that country's business practices.
B) An international firm can reap the rewards of growth in a new market without incurring the risks.
C) A firm may have the opportunity to be the first to introduce generic brands to a market.
D) A firm can gauge how well their product will do in the market without taking the risk of investing there.
Answer: A
Q3) Economic risks are independent of political risk.
A)True
B)False
Answer: False
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Chapter 4: Differences in Culture
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Q1) Which of the following statements about the use of spoken language is true?
A) The nature of a language has no effect on the way we perceive the world.
B) The language of a society does not direct the attention of its members to certain features of the world rather than others.
C) Countries with more than one language often only have one culture.
D) Most people prefer to converse in their own language rather than English.
Q2) The term ________ also means culture.
A) folkway
B) society
C) country
D) norm
Q3) People who share a common set of values and norms form a
A) culture.
B) society.
C) country.
D) caste.
Q4) Compare and contrast folkways and mores.
Q5) Explain the concept of social stratification.
Q6) Consider the influence of Confucian ethics on the economies of China, Japan, South Korea, and Taiwan.
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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Q1) What are the ways in which international business and its managers can ensure that ethical issues are considered in business decisions?
Q2) Identify the incorrect statement about environmental regulations.
A) Environmental regulations are often lacking in developing nations.
B) Environmental regulations are similar across developed and developing nations.
C) Developed nations have substantial regulations governing the emission of pollutants, the dumping of toxic chemicals, and so on.
D) Inferior environmental regulations in host nations, as compared to the home nation, can lead to ethical issues.
Q3) According to the ________, even if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should maintain the standards of the company's home country.
A) cultural relativist
B) righteous moralist
C) utilitarian
D) naive immoralist
Q4) What are ethical dilemmas? Why do they exist?
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Chapter 6: International Trade Theory
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Q1) According to Adam Smith, a country should specialize in the production of a good when it has
A) an absolute advantage in the production of the good.
B) a strong domestic demand for the good.
C) the ability to help country increase its national output.
D) the necessary raw materials for production.
Q2) Identify the theory that argues that advanced nations have an incentive to develop new consumer products and hence such nations always tend to create a good or service for the first time.
A) absolute advantage
B) Ricardo
C) product life-cycle
D) Heckscher-Ohlin
Q3) A country has an absolute advantage in the production of a product when it
A) has the capability to produce the product within its boundaries.
B) is more efficient than any other country in producing it.
C) has the largest domestic demand for the product.
D) has access to the raw materials needed to produce the product.
Q4) Explain Paul Samuelson's critique.
Q5) Explain the concept of free trade.
Page 8
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Chapter 7: Government Policy and International Trade
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Q1) Economist Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that
A) provides enhanced protection for intellectual property of those firms.
B) boosts national income at the expense of other countries.
C) reduces domestic agricultural profits.
D) depletes national income to the benefit of other countries.
Q2) 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
Q3) Explain the notion of predatory behavior with regard to dumping.
Q4) Strategic trade policy suggests that a government should use ________ to support promising firms that are active in newly emerging industries.
A) tariff rate quotas
B) quota rents
C) subsidies
D) ad valorem tariffs
Q5) What is the TRIPS agreement? Why was it established?
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Chapter 8: Foreign Direct Investment
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Q1) By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.
A)True
B)False
Q2) The ________ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located.
A) product life-cycle theory
B) internalization theory
C) multipoint competition theory
D) eclectic paradigm
Q3) The pragmatic nationalist view highlights ________ of FDI.
A) only the benefits
B) only the costs
C) both the benefits and costs
D) neither the benefits nor the costs
Q4) Discuss the two main forms of FDI.
Q5) Discuss the benefits and costs of FDI from the perspective of a host country and from the perspective of the home country.
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Page 10
Chapter 9: Regional Economic Integration
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Sample Questions
Q1) Explain the North American Free Trade Agreement and then debate its ratification.
Q2) Once the barriers to trade and investment are removed, companies are able to realize cost economies by centralizing production in key locations and producing a standardized product for a single multiple-country market.
A)True
B)False
Q3) In ____, similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy.
A) an optimal currency area
B) a unified economic area
C) a uniform currency zone
D) a monetary zone
Q4) Which of the following is seen as a benefit of the euro?
A) governments gaining greater control over their monetary policies
B) reduced competition in most industries
C) zero interest expense for businesses
D) lower foreign exchange and hedging costs
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Chapter 10: The Foreign Exchange Market
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Q1) Governments allow convertibility to preserve their foreign exchange reserves.
A)True
B)False
Q2) Assuming the 30-day forward exchange rate was $1 = 130 and the spot exchange rate was $1 = ×120, the dollar is selling at a ________ on the 30-day forward market.
A) premium
B) margin
C) discount
D) subsidy
Q3) A(n) ________ involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.
A) A follower strategy
B) An interim strategy
C) A lead strategy
D) A lag strategy
Q4) Discuss the two schools of thought on exchange rate forecasting.
Q5) What are the main uses of foreign exchange markets for international business?
Q6) Describe translation exposure. How can translation exposure be minimized?
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Chapter 11: The International Monetary System
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Q1) Which of the following is an advantage of using the gold standard?
A) The standard makes sure that goods are not priced out from markets due to inflation.
B) The standard does not require a commitment from a nation to maintain its currency's value.
C) The standard effectively prevents the devaluation of currencies across the world.
D) The standard contains a powerful mechanism for achieving balance-of-trade equilibrium by all countries.
Q2) In the face of unpredictable movements in exchange rates, businesses should
A) pursue strategies that will reduce their economic exposure.
B) pursue strategies that will decrease their strategic flexibility.
C) pursue strategies that will reduce their foreign market exposure.
D) sell off investments in foreign subsidiaries and consolidate domestic facilities.
Q3) Implementing a fixed exchange rate regime increases the price inflation in countries. A)True B)False
Q4) Present the common arguments that favor fixed exchange rates.
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Chapter 12: The Global Capital Market
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Q1) Eurodollars are
A) the exchange value of the dollar with the euro.
B) used to pay for imports from Europe.
C) dollars banked outside of the United States.
D) the exchange buffer that the euro has against dollar.
Q2) ________ is made when a corporation sells stock to investors.
A) A corporate bond sale
B) A debt loan
C) A Eurobond investment
D) An equity loan
Q3) Foreign bonds are sold within the borrower's country and are denominated in the currency of the country in which they are issued.
A)True
B)False
Q4) Entering into a forward contract will
A) increase the risk involved in a transaction.
B) lower the borrower's cost of capital.
C) benefit the borrower because the interest rate will be lower.
D) raise the borrower's cost of capital.
Q5) What are the drawbacks of the Eurocurrency market?
Page 14
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Chapter 13: The Strategy of International Business
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Sample Questions
Q1) Which of the following is an example of a support activity in a firm's value chain?
A) research and development
B) customer service
C) human resources
D) marketing and sales
Q2) When a firm focuses on increasing profitability by customizing the product or service so that it provides a good match to tastes and preferences in different national markets, the firm is following ________ strategy.
A) a transnational
B) a localization
C) an international
D) a global standardization
Q3) For firms selling a product that serves universal needs but not facing significant competition, ________ strategy makes sense.
A) a localization
B) an international
C) a transnational
D) a global standardization
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Chapter 14: The Organization of International Business
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Q1) Global learning based on the multidirectional transfer of skills between subsidiaries and the corporate center is a central feature of a firm pursuing ________ strategy.
A) a localization
B) a global standardization
C) a transnational
D) an international
Q2) Which control system is most widely used by small firms?
A) personal
B) output
C) bureaucratic
D) cultural
Q3) Which of the following is an effective strategy for implementing organizational change?
A) Physically move the organization to a new state.
B) Keep the organizational structure.
C) Refreeze the organizational structure.
D) Slowly, through incremental changes, rearrange the organizational structure.
Q4) Describe the situation where an international division makes sense. How common is this structure? What are the disadvantages of the structure?
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Chapter 15: Entry Strategy and Strategic Alliances
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Q1) A firm can establish a wholly owned subsidiary in a country by building a subsidiary from the ground up, called the
A) joint venture.
B) turnkey strategy.
C) licensing agreement.
D) greenfield strategy.
Q2) An arrangement whereby a firm grants the right of intangible property to another entity for a specified time period in exchange for royalties is ________ agreement.
A) a turnkey
B) a licensing
C) a greenfield
D) an acquisition
Q3) The greater the pressures for cost reductions, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.
A)True
B)False
Q4) What are first-mover advantages? Discuss these advantages.
Q5) Why should a firm be cautious about entering a licensing agreement?
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Chapter 16: Exporting, Importing, and Countertrade
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Q1) Describe the 14 steps in a typical international trade transaction.
Q2) A ________ is issued to the exporter by the common carrier transporting the merchandise.
A) bill of lading
B) sight draft
C) time draft
D) letter of credit
Q3) Compare and contrast counterpurchase agreements and offset arrangements. Why might an exporter prefer an offset to a counterpurchase deal?
Q4) Countertrade is
A) most attractive to small, primarily domestic enterprises.
B) least attractive to small, primarily domestic enterprises.
C) most attractive to large, diverse multinational enterprises.
D) least attractive to large, diverse multinational enterprises.
Q5) Hiring an export management company (EMC) will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.
A)True
B)False
Q6) Explain why barter is viewed as the most restrictive countertrade arrangement.
Page 18
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Chapter 17: Global Production and Supply Chain Management
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Sample Questions
Q1) Buying a product from external vendors is highly appropriate when a firm intends to protect proprietary technology.
A)True
B)False
Q2) Which of the following products will have low value-to-weight ratios?
A) pharmaceuticals
B) refined sugar
C) microprocessor
D) electronic items
Q3) Cost and ________ are the two main drivers behind make-or-buy choices made by global companies when they engage in global supply chains.
A) production capacity
B) assurance of continual supply
C) quality control
D) control
Q4) Describe the concept of minimum efficient scale of output. What are the implications of minimum efficient scale?
Q5) Explain how the strategic role of foreign factories evolves over time.
Q6) Briefly describe the Six Sigma methodology.
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Chapter 18: Global Marketing and R&D
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Q1) A measure of the responsiveness of demand for a product to change in price is referred to as
A) arbitrage demand.
B) predatory pricing.
C) price elasticity of demand.
D) experience curve pricing.
Q2) A push strategy makes sense when distribution channels are short.
A)True
B)False
Q3) If market segments transcend national borders
A) the company should develop unique products for each national market.
B) the company can view the global market as a single entity and pursue a global strategy.
C) a localization strategy would be appropriate.
D) consumers will have differing purchasing behavior in different nations.
Q4) The means a firm chooses for delivering the product to the consumer is its
A) communication strategy.
B) segmentation strategy.
C) product attributes.
D) distribution strategy.
Page 20
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Chapter 19: Global Human Resource Management
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Q1) ________ staffing policy seeks the best people for key jobs throughout the organization, regardless of nationality.
A) An ethnocentric
B) A polycentric
C) A eurocentric
D) A geocentric
Q2) An executive who performs well in a domestic setting may not be able to adapt to managing in a different cultural setting.
A)True
B)False
Q3) A strong ________, the organization's norms and value systems, can help a firm to implement its strategy.
A) corporate culture
B) human resources division
C) mission statement
D) beliefs systems
Q4) Discuss the reasons expatriate managers fail to complete their foreign assignment.
Q5) Discuss the concerns of organized labor.
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Chapter 20: Accounting and Finance in the International Business
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Q1) Transfer price refers to the
A) price at which goods and services are transferred to a subsidiary.
B) price at which the title of products is transferred to a customer.
C) price at which a supplier provides raw materials to a firm.
D) cost incurred when goods or services are transferred from one place to another.
Q2) Define tax credit and tax treaty.
Q3) ________ are the most important source of external capital for business enterprises in the United States.
A) Stocks or bonds
B) World Bank loans
C) Banks
D) Venture capitalists
Q4) Payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company.
A)True
B)False
Q5) Describe the problem of blocked earnings.
Q6) Explain the concept of transfer pricing.
Q7) Describe the importance of accounting information in business.
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