International Business
Midterm Exam
Course Introduction
International Business explores the complexities of operating in global markets, examining the economic, cultural, legal, and political factors that influence international trade and investment. The course introduces students to concepts such as globalization, multinational enterprise strategy, cross-cultural communication, international market entry modes, and global supply chain management. It also addresses the challenges and opportunities organizations face as they expand beyond their domestic borders, providing analytical tools to assess international business environments and informed decision-making in a competitive world economy.
Recommended Textbook
International Business Competing in the Global Marketplace 12th Edition by Charles
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20 Chapters
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2122 Flashcards
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Page 2
W. L. Hill
Chapter 1: Globalization
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Which of the following is true of HIPCs?
A) About 100 nations fall in this category.
B) The average debt burden has never been more than 75 percent of the value of the HIPC's economy.
C) Servicing heavy debt leaves HIPCs with little left to invest in public infrastructure.
D) The annual cost of serving debt consumes about 30 percent of HIPC export earnings.
Answer: C
Q2) Issy's Ice Cream is an international business. As such, it
A) needs to have manufacturing units in at least two foreign nations.
B) needs to manufacture products or provide services that target a global market.
C) need not customize its products to the requirements of national markets.
D) invests in international trade or investment.
Answer: D
Q3) Outsourcing is a process that is limited to manufacturing enterprises.
A)True
B)False
Answer: False
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3
Chapter 2: National Differences in Political, Economic, and Legal Systems
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107 Verified Questions
107 Flashcards
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Sample Questions
Q1) Modern socialists trace their intellectual roots to ________, although socialist thought clearly predates this individual.
A) David Hume
B) Karl Marx
C) Adam Smith
D) John Stuart Mill
Answer: B
Q2) Discuss the ways in which public action to violate property rights can occur.
Answer: Public action to violate property rights occurs when public officials, such as politicians and government bureaucrats, extort income, resources, or the property itself from property holders. This can be done through legal mechanisms such as levying excessive taxation, requiring expensive licenses or permits from property holders, taking assets into state ownership without compensating the owners, or redistributing assets without compensating the prior owners. It can also be done through illegal means, or corruption, by demanding bribes from businesses in return for the rights to operate in a country, industry, or location.
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4
Chapter 3: National Differences in Economic Development
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103 Flashcards
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Sample Questions
Q1) According to what political scientist's thesis is global terrorism a product of the tension between civilizations and the clash of value systems and ideology?
A) Amartya Sen
B) Samuel Huntington
C) Francis Fukuyama
D) Hernando de Soto
Answer: B
Q2) The state of Illinois was having budget difficulties, so it hired several private management consultancy firms to manage some state-owned enterprises. This is an example of privatization.
A)True
B)False
Answer: False
Q3) For privatization to work, it must also be accompanied by
A) an increase in trade barriers and tariffs.
B) an increase in government subsidies.
C) stronger barriers to foreign competition.
D) a general deregulation of the economy.
Answer: D
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Page 5
Chapter 4: Differences in Culture
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Sample Questions
Q1) In countries where the value of group identification is considered to be primary, managers and workers are discouraged from moving from company to company.
A)True
B)False
Q2) What are the determinants of culture?
Q3) ________ are the routine conventions of everyday life.
A) Folkways
B) Mores
C) Rites
D) Beliefs
Q4) A class system is a rigid form of social stratification in which the position a person has by birth cannot be changed through his or her own achievements or luck.
A)True
B)False
Q5) Discuss the relationship between culture and national competitive advantage?
Q6) Explain how the Koran views business.
Q7) Discuss the limitations of Hofstede's research.
Q8) Discuss why the stratification of a society is important to business.
Q9) Describe the four dimensions of culture as identified by Geert Hofstede.
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) A manager from the United States is sent to Nigeria to supervise the construction of a road. As a righteous moralist, he is likely to learn the ethics and values of Nigeria and follow them, even if they don't concur with his own.
A)True
B)False
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) Discuss the utilitarian approach to business ethics. When was this approach developed? What are its drawbacks?
Q4) Discuss the notion of social responsibility. What does it mean for corporations?
Q5) Why do organizations appoint an ethics officer?
Q6) Should a multinational feel free to pollute in a developing nation?
Page 7
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Chapter 6: International Trade Theory
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97 Flashcards
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Sample Questions
Q1) Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant.
A) theory of comparative advantage
B) Ricardo theory
C) new trade theory
D) Heckscher-Ohlin theory
Q2) Apple's iPhone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first-mover advantage.
A)True
B)False
Q3) Which of the following is a flaw associated with mercantilism?
A) Mercantilists do not support government intervention in trade.
B) Mercantilists view trade as a zero-sum game.
C) Mercantilists recommend policies to maximize imports.
D) Mercantilists recommend countries maintain a negative trade balance.
Q4) What are the assumptions that we make when we discuss a simple Ricardian model to support free trade?
Q5) Explain Ricardo's theory of comparative advantage.
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Chapter 7: Government Policy and International Trade
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110 Verified Questions
110 Flashcards
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Sample Questions
Q1) The infant industry argument is criticized because it relies on an assumption that A) new manufacturing industries in developing nations can initially compete with established industries in developed countries.
B) selling goods in a foreign market at below their "fair" market value is legally and ethically justified.
C) the domestic industry in a developing nation lacks the capacity to meet demand.
D) firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.
Q2) A key issue in the "millennium round" of the WTO was to
A) increase barriers to cross-border trade in agricultural products.
B) extend GATT to cover trade in commodities.
C) further reduce barriers to cross-border trade and investment.
D) extend GATT rules to cover trade in services.
Q3) What are the central issues facing the WTO at the present time?
Q4) What is the TRIPS agreement? Why was it established?
Q5) Discuss the infant industry argument for intervention in markets. What is GATT's position on the argument?
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Page 9
Chapter 8: Foreign Direct Investment
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108 Verified Questions
108 Flashcards
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Sample Questions
Q1) John Dunning pioneered the eclectic paradigm.
A)True
B)False
Q2) According to pragmatic nationalist view, FDI should be allowed so long as
A) the benefits outweigh the costs.
B) they do not aggressively court domestic firms.
C) the costs outweigh the benefits.
D) the MNE does not seek tax breaks or grants.
Q3) The British advanced corporation tax system taxed British companies' foreign earnings at a higher rate than their domestic earnings. This tax code created an incentive for British companies to invest abroad.
A)True
B)False
Q4) An aspect of ________ is the tendency to aggressively court FDI believed to be in the national interest by, for example, offering subsidies to foreign MNEs in the form of tax breaks or grants.
A) the radical view
B) the noninterventionist principle
C) the free market view
D) pragmatic nationalism
Page 10
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Chapter 9: Regional Economic Integration
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98 Flashcards
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Sample Questions
Q1) ________ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.
A) An economic union
B) A common market
C) A customs union
D) A full political union
Q2) Explain the North American Free Trade Agreement and then debate its ratification.
Q3) The Council of the European Union is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states.
A)True
B)False
Q4) What is the Single European Act? What was the effect of the Single European Act on the EU economy? Did the Single European Act achieve its goals?
Q5) How will EU countries benefit from the establishment of a single currency? What, if any, are the costs of a single currency?
Q6) What prompted the formation of the European Union?
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11
Chapter 10: The Foreign Exchange Market
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Sample Questions
Q1) The ________ states that, for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.
A) purchasing power parity theory
B) efficient market theory
C) International Fisher Effect
D) law of one price
Q2) Parla liked to gamble, so she sometimes moved her funds from dollars to euros in the hope that she would make money based on the exchange rates. This demonstrates a carry trade.
A)True
B)False
Q3) What concept is concerned with the long-run effect of changes in exchange rates on future prices, sales, and costs?
A) translation exposure
B) economic exposure
C) transaction exposure
D) risk exposure
Q4) Explain the notion of economic exposure. How can economic exposure be minimized?
Page 12
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Chapter 11: The International Monetary System
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101 Verified Questions
101 Flashcards
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Sample Questions
Q1) Moral hazard arises when people behave recklessly without regard for the consequences.
A)True
B)False
Q2) Which of the following observations is true of the current system of the foreign exchange market?
A) Most of the currencies can be converted to gold in the current system of foreign exchange.
B) The current system is driven by fixed exchange rates.
C) Currencies float freely against others in the current system.
D) The current system is a combination of government intervention and speculative activity.
Q3) After World War II, the 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
Q4) Discuss the significance of the Jamaica Agreement.
Page 13
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Chapter 12: The Global Capital Market
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104 Flashcards
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Sample Questions
Q1) Eurocurrency can be created anywhere in the world.
A)True
B)False
Q2) A Chinese firm borrows 1 million U.S. dollars from an American bank. The cost of this loan will be less if the U.S. dollar appreciates against the Chinese currency.
A)True
B)False
Q3) How does growth in global capital markets impact investing firms?
Q4) Write a brief note on foreign exchange risks and the cost of capital.
Q5) Companies receive ________ when using the Eurocurrency market.
A) a lower interest rate on deposits and pay more for loans
B) tax incentives
C) a higher interest rate on deposits and pay less for loans
D) liquid asset reserve waiver
Q6) What are foreign bonds?
Q7) Using floating exchange rates will help countries reduce the risk of investing in foreign assets.
A)True
B)False
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Chapter 13: The Strategy of International Business
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102 Flashcards
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Sample Questions
Q1) Global expansion offers companies the opportunity to generate greater profits than companies that focus strictly on
A) value creation.
B) economies of scale.
C) location economies.
D) the domestic market.
Q2) Research and development, production, marketing and sales, and customer service are all examples of
A) core competencies.
B) primary activities.
C) value creation.
D) secondary activities.
Q3) How can a firm increase its profitability?
Q4) The term ________ refers to skills within the firm that competitors cannot easily match or imitate and that may exist in the firm's value creation activities.
A) experience curves
B) core competence
C) economies of scale
D) learning effects
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Chapter 14: The Organization of International Business
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Sample Questions
Q1) ________ refers to the location of decision-making responsibilities within a structure.
A) Vertical differentiation
B) Integrating mechanisms
C) Horizontal integration
D) Horizontal differentiation
Q2) When the need to integrate subunits is very high and complex, firms may
A) use direct contact between subunit managers.
B) give a person in each subunit responsibility for coordinating with another subunit on a regular basis.
C) institute a matrix structure, in which all roles are viewed as integrating roles.
D) use temporary or permanent teams composed of individuals from the subunits that need to achieve coordination.
Q3) A firm pursuing ________ will have a strong incentive to decentralize decision making.
A) a localization strategy
B) a transnational strategy
C) a global standardization strategy
D) an international strategy
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Page 16
Chapter 15: Entry Strategy and Strategic Alliances
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111 Verified Questions
111 Flashcards
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Sample Questions
Q1) Which of the following is true of exporting?
A) It avoids the often substantial costs of establishing manufacturing operations in the host country.
B) It is the best choice if lower-cost manufacturing locations are available abroad.
C) Low transportation costs may make exporting uneconomical.
D) Tariff barriers may make exporting the most attractive option.
Q2) Which of the following statements is true of turnkey projects?
A) Turnkey projects are most common in industries that use simple, inexpensive production technologies.
B) A turnkey strategy can be more risky than conventional FDI, particularly in unstable political environments.
C) A turnkey strategy is particularly useful where FDI is limited by host-government regulations.
D) Firms that enter into a turnkey deal have a long-term interest in the foreign country.
Q3) Educating customers is an element of pioneering costs.
A)True
B)False
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17
Chapter 16: Exporting, Importing, and Countertrade
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Sample Questions
Q1) The Foreign Credit Insurance Association is part of the U.S Department of Commerce and guides the activities of the Export-Import Bank.
A)True
B)False
Q2) In a typical international trade transaction, the
A) exporter should obtain a letter of credit to initiate transactions.
B) importer and exporter maintain an account with the same bank.
C) importer's bank sends a letter of credit to the exporter's bank.
D) importer's bank sends the draft and bill of lading to the exporter's bank.
Q3) Countertrade denotes a whole range of barter-like agreements that involve trading goods and services when they cannot be traded for money.
A)True
B)False
Q4) Countertrade is least attractive to large, diverse multinational enterprises.
A)True
B)False
Q5) Describe the 14 steps in a typical international trade transaction.
Q6) What problems do novice exporters typically face when trying to export?
Q7) What type of firm is most likely to engage in countertrade? Why?
Page 18
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Chapter 17: Global Production and Supply Chain Management
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Sample Questions
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) Packaging, which comes in all shapes, sizes, forms, and uses, can be divided into three different types
A) primary, secondary, and transit.
B) customer, retailer, and distributor.
C) primary, secondary, and tertiary.
D) first level, second level, and third level.
Q3) Make-or-buy decisions are decisions that concern the components to be used in a production process.
A)True
B)False
Q4) Global learning refers to the idea that valuable knowledge does not reside just in a firm's domestic operations.
A)True
B)False
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Chapter 18: Global Marketing and R&D
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121 Flashcards
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Sample Questions
Q1) The longer the distribution channel, the more intermediaries there are that must be persuaded to carry the product for it to reach the consumer.
A)True
B)False
Q2) 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 elite, upper class customers.
D) it is often difficult for a new firm to get access to shelf space in supermarkets.
Q3) The identification of distinct groups of consumers whose purchasing behavior differs from others in important ways is known as
A) market segmentation.
B) market penetration.
C) diversification strategy.
D) differentiation.
Q4) What factors affect the rate of new-product development in countries?
Q5) What factors can jeopardize the success of a firm's international communications?
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Chapter 19: Global Human Resource Management
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Sample Questions
Q1) Discuss the reasons expatriate managers fail to complete their foreign assignment.
Q2) The international trade secretariats have had tremendous success.
A)True
B)False
Q3) Which dimension of Mendenhall and Oddou's study suggests that an expatriate with high self-esteem, self-confidence, and mental well-being is likely to succeed in a foreign job posing?
A) self-orientation
B) others-orientation
C) cultural toughness
D) perceptual ability
Q4) Selection is the first step in matching a manager with a job.
A)True
B)False
Q5) Cultural toughness refers to the relationship between the country of assignment and how well an expatriate adjusts to a particular posting.
A)True
B)False
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Page 21
Chapter 20: Accounting and Finance in the International Business
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109 Verified Questions
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Sample Questions
Q1) Identify a key accounting problem that international businesses are confronted with but that does not confront purely domestic businesses. Substantiate with a suitable example.
Q2) Pooling the cash of all the subsidiaries centrally A) lowers the interest rate earned.
B) reduces the earning potential for firms.
C) increases the interest rate paid.
D) increases the earning potential for firms.
Q3) What are the advantages of using royalties and fees to move money across borders?
Q4) Explain why the evaluation of a subsidiary should be kept separate from the evaluation of its manager.
Q5) The governments of some countries require or prefer foreign multinationals to finance projects in their country by local debt financing or local sales of equity.
A)True B)False
Q6) Accounting is shaped by the environment in which it operates. A)True B)False
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