International Business Policy
Review Questions
Course Introduction
International Business Policy explores the strategic decision-making processes and frameworks utilized by multinational corporations operating in the global marketplace. The course examines key issues such as market entry strategies, cross-border mergers and acquisitions, international risk assessment, government policy impact, global supply chain management, and the ethical dimensions of international operations. By analyzing real-world case studies and current business trends, students gain practical insights into how organizations adapt policies to diverse regulatory environments and volatile economic conditions, fostering skills vital for developing and implementing effective international business strategies.
Recommended Textbook
International Business Competing in the Global Marketplace 10th Edition by Charles
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Page 2
W. L. Hill
Chapter 1: Globalization
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Sample Questions
Q1) Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by globalizing their markets. This involves
A) regulating markets
B) privatizing state-owned enterprises
C) decreasing competition
D) reducing foreign investment
Answer: B
Q2) Efficiency gains associated with containerization have caused transportation costs to fall dramatically.
A)True
B)False
Answer: True
Q3) The World Bank has focused on policing the world trading system and making sure nation-states adhere to the rules laid down in trade treaties.
A)True
B)False
Answer: False
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Chapter 2: National Differences in Political Economy
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Sample Questions
Q1) Discuss the different ways to protect intellectual property.
Answer: Ownership rights over intellectual property are established through patents, copyrights, and trademarks. A patent grants the inventor of a new product or process exclusive rights for a defined period to the manufacture, use, or sale of that invention. Copyrights are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit. Trademarks are designs and names by which merchants or manufacturers designate and differentiate their products.
Q2) In a totalitarian country, there are safeguards to protect an individual's right to freedom of expression, opinion, and organization.
A)True
B)False
Answer: False
Q3) In mixed economies, governments also tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests.
A)True
B)False
Answer: True
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Chapter 3: Political Economy and Economic Development
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Sample Questions
Q1) Gross national income per-capita data take into account differences in the cost of living.
A)True
B)False
Answer: False
Q2) A market with a large number of consumers, with low living standards will have a relatively large market when measured in economic terms.
A)True
B)False
Answer: False
Q3) For privatization to work, it must also be accompanied by a more general deregulation and opening of the economy.
A)True
B)False
Answer: True
Q4) The state can expropriate the profits from innovation through legal means.
A)True
B)False
Answer: True
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Chapter 4: Differences in Culture
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Sample Questions
Q1) The protection of the right to private property is embedded within Islam.
A)True
B)False
Q2) An upper-middle-class manager tends to have hostile relationship with the working-class employees in the firm because of his tendency to perceive himself as superior to them based on his class background. In this example, the manager exhibits: A) class consciousness.
B) cultural awareness.
C) social mobility.
D) group orientation.
Q3) 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
Q4) A group of people who share a common set of values and norms form a: A) culture. B) society.
C) country.
D) caste.
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Chapter 5: Ethics in International Business
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Sample Questions
Q1) Discuss the naive immoralist's approach to business ethics. What are the criticisms of this approach?
Q2) Societal business ethics are divorced from personal ethics.
A)True
B)False
Q3) A situation in which none of the available alternatives seems morally acceptable is called:
A) an ethical dilemma.
B) noblesse oblige.
C) the tragedy of the commons.
D) the free rider problem.
Q4) Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics because of all of the following reasons EXCEPT:
A) they are away from their ordinary social context and supporting culture.
B) they are psychologically and geographically closer to the parent company.
C) they may be based in a culture that does not place the same value on ethical norms important in the manager's home country.
D) they may be surrounded by local employees who have less rigorous ethical standards.
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Chapter 6: International Trade Theory
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Sample Questions
Q1) According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.
A)True
B)False
Q2) 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
Q3) Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the ____.
A) first-mover advantage
B) diminishing marginal returns
C) economies of scale
D) constant marginal returns
Q4) Explain how the principle of diminishing returns weakens the Ricardian model.
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Chapter 7: The Political Economy of International Trade
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Sample Questions
Q1) What is strategic trade policy? Provide an example.
Q2) Unlike other trade policies, local content regulations tend to benefit consumers and not producers.
A)True
B)False
Q3) What is dumping? How do governments respond to charges of dumping?
Q4) Compare and contrast import quotas and voluntary export restraints.
Q5) Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.
A)True
B)False
Q6) Krugman has suggested that trade policy designed to retaliate against another country's trade policy would hurt the citizens of both countries.
A)True
B)False
Q7) Discuss the Doha Round of trade talks.
Q8) Explain how governments use administrative trade policies to boost exports and restrict imports. Provide an example of an administrative trade policy.
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Chapter 8: Foreign Direct Investment
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Sample Questions
Q1) Licensing involves the establishment of a new operation in a foreign country.
A)True
B)False
Q2) The _____ of FDI refers to the amount of FDI undertaken over a year.
A) stock
B) net value
C) accumulated value
D) flow
Q3) According to Knickerbocker's theory:
A) when a firm has valuable know-how that cannot be adequately protected by a licensing contract it engages in FDI.
B) when a firm's skills and know-how are not amenable to licensing, it usually prefers the FDI route.
C) by placing tariffs on imported goods, governments indirectly increase the cost of exporting relative to foreign direct investment and licensing.
D) when a firm that is part of an oligopolistic industry expands into a foreign market, other firms in the industry will be compelled to make similar investments.
Q4) How does the free market view support FDI?
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Chapter 9: Regional Economic Integration
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Sample Questions
Q1) Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from CountryB. Country A used to previously import such machinery at lower rates from another country. Which of the following has occurred in this scenario?
A) Trade creation
B) Efficiency gain
C) Trade deficit
D) Trade diversion
Q2) What is ASEAN? What is its basic goal? How successful is ASEAN?
Q3) A political benefit of economic integration is that:
A) it enables participants to achieve gains from the free flow of trade.
B) it enables participants to achieve gains from the free flow of investment.
C) it allow countries to specialize in the production of goods and services that they can produce most efficiently.
D) it reduces the potential for violent conflict.
Q4) A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets.
A)True
B)False
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Chapter 10: The Foreign Exchange Market
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Sample Questions
Q1) Consider the role of investor psychology and bandwagon effects on how well PPP and the International Fisher Effect explain short-term movements in exchange rates.
Q2) _____ is the impact of short-run currency exchange rates changes on the reported financial statements of a company.
A) Economic exposure
B) Financial exposure
C) Translation exposure
D) Transaction exposure
Q3) Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate. Using the concept of purchasing power parity, the euro is:
A) undervalued by 25 percent against the dollar.
B) overvalued by 25 percent against the dollar.
C) appreciating relative to the dollar.
D) depreciating relative to the dollar.
Q4) With the help of an example, explain how a tourist participates in the foreign exchange market.
Q5) Discuss how firms can reduce their economic exposure.
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Chapter 11: The International Monetary System
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Sample Questions
Q1) Under a _____ exchange rate regime, a country will attach the value of its currency to that of a major currency.
A) managed float
B) pegged
C) free float
D) currency board
Q2) The agreement reached at Bretton Woods established ____.
A) International Monetary Fund
B) World Economic Forum
C) United Nations
D) International Atomic Energy Agency
Q3) Moral hazard arises when people behave recklessly because ____.
A) of the restrictions that exist in a country's monetary policy
B) of the restrictions that IMF has imposed on them
C) they know they will be saved if things go wrong
D) they face financial difficulties arising out of external factors
Q4) IMF members were permitted to sell their own gold reserves at the market price in the Jamaica agreement.
A)True
B)False
Page 13
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Chapter 12: The Global Capital Market
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Sample Questions
Q1) When an investor purchases a corporate bond, he purchases the right to receive a
A) share of the overall revenues that the company generates
B) part of the title for the assets that the corporate holds
C) specified fixed stream of income from the corporation
D) share of the profits that the company generates through operations
Q2) An Italian corporation issues a bond denominated in dollars. This is an example of a ____.
A) foreign bond
B) Eurobond
C) micro bond
D) regulatory bond
Q3) What is a Eurocurrency?
Q4) Briefly describe the trends observed in the global deregulation of financial services.
Q5) Explain Eurobonds with an example.
Q6) Global capital market often lack information about the fundamental quality of foreign investments.
A)True
B)False
Page 14
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Chapter 13: The Strategy of International Business
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Sample Questions
Q1) The value of a product to an average consumer is V; and the average price that the firm can charge a consumer for that product is P. Here, V - P can be termed as:
A) consumer surplus per unit.
B) producer surplus per unit.
C) profit growth.
D) profit per unit sold.
Q2) Universal needs exist when the tastes and preferences of consumers in different nations are similar if not identical.
A)True
B)False
Q3) What are the four basic strategies that firms use to compete in international markets?
Q4) In a multinational enterprise, skills are always generated at the headquarters location and are then dispersed to the rest of the organization.
A)True
B)False
Q5) Discuss the evolution of strategy. How does cost become important in the long term?
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Chapter 14: The Organization of International Business
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Sample Questions
Q1) In firms pursuing a transnational strategy, some operating decisions are relatively centralized, while others are relatively decentralized.
A)True
B)False
Q2) In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems?
A) Global matrix structure
B) International division structure
C) Worldwide product division structure
D) Worldwide area structure
Q3) In practice, the dual-hierarchy in a global matrix structure:
A) lessens all forms of conflict.
B) makes it easy to ascertain accountability.
C) results in extremely quick decision making.
D) can lead to perpetual power struggles.
Q4) Consider the use of personal controls in international firms. In which type of firm is this control most common?
Q5) What are the basic principles for successful organizational change?
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Chapter 15: Entry Strategy and Strategic Alliances
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Sample Questions
Q1) Compare and contrast licensing agreements and franchising agreements.
Q2) 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
Q3) Large strategic commitments increase strategic flexibility.
A)True
B)False
Q4) To increase the potential for a successful acquisition, a firm should:
A) always bid low to allow for partial failure.
B) try to acquire a firm with a very different corporate culture so there is no forced "overlap."
C) screen the foreign enterprise to be acquired.
D) seek companies only from similar national cultures.
Q5) Discuss some of the disadvantages of establishing greenfield venture in a foreign country.
Q6) Discuss the three primary characteristics of a good ally.
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Q7) What are first-mover advantages? Discuss the advantages associated with them.
Chapter 16: Exporting, Importing, and Countertrade
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Sample Questions
Q1) Barter is viewed as the least restrictive countertrade arrangement.
A)True
B)False
Q2) _____ is viewed as the most restrictive countertrade arrangement and is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.
A) Switch trading
B) Offset
C) Barter
D) Buyback
Q3) A _____ is issued to the exporter by the common carrier transporting the merchandise and serves as a receipt, a contract, and a document of title.
A) bill of lading
B) sight draft
C) time draft
D) letter of credit
Q4) Foreign borrowers can avail loans from Ex-Im Bank to pay U.S. suppliers.
A)True
B)False
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Chapter 17: Global Production, Outsourcing, and Logistics
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Sample Questions
Q1) The firm that improves its quality control will also reduce its costs of value creation.
A)True
B)False
Q2) How do product factors affect the decision of where to locate production? Where will you locate your firm's production plant if your firm produces refined sugar?
Q3) Decentralization of production is appropriate when location externalities are important.
A)True
B)False
Q4) Organizations are under pressure to produce products in the optimal location and to serve the world market from there if their products have low value-to-weight ratios.
A)True
B)False
Q5) When does concentration of production make sense?
Q6) The minimum efficient scale of production is high when fixed costs are low. A)True
B)False
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Chapter 18: Global Marketing and RD
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Sample Questions
Q1) Products sell well when their attributes match consumer needs.
A)True
B)False
Q2) Which of the following is one of the important factors in determining the elasticity of demand for a product in a given country?
A) Personal selling
B) Logistics
C) Operating revenue
D) Income level
Q3) When the receiver of a message evaluates a message based on the status or image of the sender, ____ are said to have occurred.
A) sender effects
B) noise effects
C) source effects
D) communication effects
Q4) What are the three factors that contribute to the trend toward greater retail concentration in developed countries? How have these factors promoted retail concentration?
Q5) What factors affect 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) An ethnocentric approach is compatible with both global standardization and transnational strategies.
A)True
B)False
Q2) What is cultural toughness?
Q3) Base pay in most firms is set with regard to global market conditions.
A)True
B)False
Q4) Mendenhall and Oddou identified cultural toughness as one of the dimensions in their study on dimensions that predict success in foreign jobs postings. This dimension refers to the:
A) expatriate's self-esteem, self-confidence, and mental well-being.
B) expatriate's ability to interact effectively with host-country nationals.
C) expatriate's ability to understand why people of other countries behave the way they do.
D) relationship between the country of the assignment and how well an expatriate adjusts to a particular posting.
Q5) How can polycentric approach to staffing result in the creation of a "federation" within the firm? Why is this a disadvantage for the firm?
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Chapter 20: Accounting and Finance in the International Business
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Sample Questions
Q1) Most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally _____.
A) a common currency such as the U.S. dollar
B) the home currency
C) a foreign currency
D) the currency of the country where products are sold
Q2) It is uncommon for a parent company to charge its foreign subsidiaries royalties for the technology, patents, or trade names it has transferred to them.
A)True
B)False
Q3) What are the shortcomings of IASB?
Q4) The total size of a firm's cash pool increases when it pools cash reserves of subsidiaries.
A)True B)False
Q5) Accounting standards are rules for preparing financial statements.
A)True
B)False
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Q6) Describe the structure of the International Accounting Standards Board (IASB).