Course Introduction
International Business
Pre-Test Questions
International Business examines the complexities of conducting commerce across national borders, focusing on the strategies, structures, and management practices of organizations operating in the global marketplace. Students will explore topics such as international trade theories, cross-cultural communication, global market entry strategies, international financial management, and the impact of political, economic, and legal environments on business decisions. By analyzing real-world case studies and current trends, the course prepares students to navigate the challenges and opportunities of global business and to develop effective strategies for international success.
Recommended Textbook
International Business Environments Operations 14th Edition by John Daniels
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Page 2
Chapter 1: Globalization and International Business
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Q1) A major criticism of offshoring is that it ________.
A) increases production costs
B) exchanges good jobs for bad jobs
C) threatens the sovereignty of larger countries
D) allows companies to avoid payment of any taxes
Answer: B
Q2) The view that globalization is inevitable is most likely based on the belief that ________.
A) international organizations will replace nation-states
B) protesters against globalization will be persuaded to change their views
C) people want more global homogeneity of cultures
D) technical advances in transportation and communications are highly pervasive
Answer: D
Q3) Which of the following is NOT one of the three main reasons affecting international business for governments to cooperate with each other?
A) to attack problems jointly that one country acting alone cannot solve
B) to deal with issues that lie outside the territory of any nation
C) to gain reciprocal advantages
D) to establish a common language
Answer: D
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Chapter 2: The Cultural Environments Facing Business
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Q1) Many firms gain a global competitive advantage by fostering cultural diversity.
A)True
B)False
Answer: True
Q2) A culture in which people prefer to handle tasks sequentially is a polychronic culture.
A)True
B)False Answer: False
Q3) Ethnocentrism in international business refers to the ________.
A) study of group ethics and approaches to corporate social responsibility
B) comparison of the Protestant ethic with other religious views
C) belief that what works best at home should work best everywhere
D) ethnic segmentation of marketing programs within countries
Answer: C
Q4) Creolization refers to the mixing of cultural elements that occurs during cultural diffusion.
A)True
B)False Answer: True
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Chapter 3: The Political and Legal Environments Facing Business
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Q1) The pushback against democracy has powered a rise in totalitarianism,a situation that is likely to include which of the following?
A) increasing adoption of the principles of the rule of law
B) growing demands worldwide for greater fairness and justice in legal proceedings
C) increasing adoption of the principles of the rule of man
D) suppression of state-control in the direction of legal activities
Answer: C
Q2) Which of the following types of political risks often is caused by ethnic conflict or civil disorder and includes those random political developments that adversely affect the operations of all companies in a country?
A) systemic political risk
B) procedural political risk
C) catastrophic political risk
D) distributive political risk
Answer: C
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Page 5
Chapter 4: The Economic Environments Facing Businesses
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Q1) The recent global economic crisis has led to which of the following?
A) governments seeking to impose more constraints on capitalism
B) governments seeking to eliminate constraints on capitalism
C) governments seeking to increase the interdependence of developing economies
D) governments seeking to eliminate the interdependence of developing economies
Q2) Tatum Manufacturing recently opened a new facility in Hong Kong. The firm can most likely expect the Hong Kong government to ________.
A) monitor market prices
B) control natural resources
C) ensure fair competition
D) provide innovation incentives
Q3) In a market economy,the patterns of resource allocation are most directly influenced by ________.
A) government administrators who monitor the equilibrium of supply and demand
B) industry coalitions that strive to improve the efficiency of production and service
C) consumer group alliances that negotiate with firms to improve product quality
D) consumers who "vote" by their personal decision to buy or not buy products
Q4) What issues complicate international economic analysis?
Q5) What is the difference between a command economy and state capitalism?
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Chapter 5: Globalization and Society
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Q1) Which of the following is permitted by the Foreign Corrupt Practices Act?
A) a bribe paid by foreign firms operating in U.S. territories
B) a bribe paid by U.S. firms operating in a foreign country that permits bribes to be paid
C) a payment to a foreign government official to influence a customs official
D) a payment to a customs official to clear legitimate merchandise
Q2) Which of the following best explains Nike's quick response to criticism of unfair employment practices in developing countries?
A) retaining employees
B) improving public relations
C) addressing product safety concerns
D) cutting costs in order to improve profits
Q3) According to the text,which of the following has resulted from GE's Ecomagination initiative?
A) rising profitability for many GE products
B) increasing doubt among GE's foreign partners
C) reducing investments by GE due to poor returns
D) improving pollution levels near GE plants in China
Q4) Explain why the argument that "anything that is legal is ethical" is insufficient.
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Page 7
Chapter 6: International Trade and Factor Mobility Theory
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Q1) The existence of the four favorable conditions of the diamond of national advantage does not guarantee that an industry will develop in a given locale.
A)True
B)False
Q2) The international mobility of labor includes workers,students,tourists,and retirees who travel to another country.
A)True
B)False
Q3) According to the PLC theory of trade,most new products are produced in countries where wage rates are low.
A)True
B)False
Q4) What is the difference between the free trade theories of absolute advantage and comparative advantage? How can free trade improve global efficiency?
Q5) Countries with large land areas are generally less dependent on trade than countries with small land areas.
A)True B)False
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Chapter 7: Governmental Influence on Trade
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Q1) All of the following are reasons a country might institute import restrictions to improve its balance of trade position with other countries EXCEPT to ________.
A) maintain essential industries
B) reduce imports and encourage exports
C) get comparable access for its companies
D) bargain away restrictions by other countries
Q2) In international trade,what is a quota?
A) a guarantee by one country to buy some minimum amount from another
B) a quantitative limit on the amount of a product that can be imported or exported
C) a countertrade arrangement that establishes the value of imports and exports
D) a bilateral agreement calling for mutual access to markets
Q3) All of the following are potential problems of using export controls EXCEPT which one?
A) There is an incentive for other countries to develop production of their own.
B) Domestic producers may have less incentive to increase output.
C) Prices go up in the country imposing the controls.
D) There is more incentive for smuggling.
Q4) Describe and compare the different types of tariffs (duties).
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Page 9
Chapter 8: Cross-National Cooperation and Agreements
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Q1) The ________ is a preferential trade agreement that was organized in 1967 and comprises Brunei,Cambodia,Indonesia,Laos,Malaysia,Myanmar,the Philippines,Singapore,Thailand,and Vietnam.
A) APEC
B) OAU
C) ASEAN
D) CAFTA
Q2) Toyota has been successful in Europe by exporting cars to Europe as well as designing and manufacturing cars in Europe for the European market.
A)True
B)False
Q3) What are the rules of origin and regional content provisions of NAFTA?
Q4) The three major responsibilities of the ________ are legislative power,control over the budget,and supervision of executive decisions.
A) European Commission
B) European Council
C) European Parliament
D) European Court of Justice
Q5) What has been the impact of NAFTA on trade and employment in NAFTA nations?
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Chapter 9: Global Foreign-Exchange Markets
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Q1) As a trading currency,the euro is ________.
A) more widely traded than the U.S. dollar in seven of the top ten currency markets in the world
B) widely traded in London but not in any other major foreign exchange markets in the world
C) becoming more popular than the U.S. dollar because of its global acceptance
D) gaining ground against the U.S. dollar in Eastern European countries
Q2) Outright forward transactions involve the exchange of currency the second day after the date on which the two foreign exchange traders agree to the transaction.
A)True
B)False
Q3) How does arbitrage differ from speculation?
A) Speculation, unlike arbitrage, is never used to protect against risk.
B) A speculator buys or sells foreign currency with the hope that that currency will either weaken or strengthen in the future, resulting in a profit.
C) Speculation is the purchase of foreign currency on one market for the immediate resale on another market.
D) Arbitrage is another way to speculate for profit or protect against risk.
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11
Chapter 10: The Determination of Exchange Rates
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Q1) A current account deficit suggests that a country is importing more than it is exporting and building up foreign debt.
A)True
B)False
Q2) Which of the following accurately explains how producers are affected by exchange rate changes?
A) To save money, a manufacturer may decide to relocate production to a country with a stronger currency.
B) A manufacturing firm relocating to a country with a weak currency can make a cheap initial investment.
C) Goods manufactured in a country with a weak currency may be relatively expensive in world markets.
D) A manufacturer with high operating expenses would likely relocate production to a country with a currency that is gaining value.
Q3) An independently floating exchange rate is adjusted periodically at a fixed pronounced rate.
A)True
B)False
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Chapter 11: The Strategy of International Business
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Q1) Which of the following has the greatest potential to transform an industry's structure?
A) a change in a competitor's management
B) a change in a competitor's pricing structure
C) the expansion of a distribution channel
D) the exit of a competitor from the industry
Q2) Which of the following statements about Zara is most likely FALSE?
A) Zara puts fewer products on clearance racks than most of its competitors in the industry.
B) Zara's large advertising budget generates word-of-mouth and attracts new buyers.
C) New products and designs are delivered to Zara stores every three to four weeks.
D) Most of Zara's products move through the firm's distribution center in Spain.
Q3) Using a concentrated configuration,an MNE performs value activities in different countries.
A)True
B)False
Q4) What is configuration? Briefly list and discuss the factors that influence value chain configuration.
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13
Chapter 12: Country Evaluation and Selection
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Q1) In a diversification strategy for international expansion,a company would move
A) rapidly into many foreign countries, and then gradually increase its presence in those countries
B) rapidly into a few foreign countries with many of its products and most of its resources
C) into one foreign country and fully expand its product lines in that country before moving to another country
D) move quickly into a regional foreign market but build up its resources in only a few of the countries in the region
Q2) A company's operations are most likely to be taken over by a host government when
A) the operations are relatively small and, thus, unlikely to incur the wrath of the company's home government
B) the operations are substantial and have a widespread effect on the country because of the company's size
C) the host country becomes involved in a regional war
D) the firm produces discretionary rather than essential products
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14
Chapter 13: Export and Import
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Q1) Indirect exporters sells goods to a foreign intermediary,who then sells the product in the domestic market to the final consumer.
A)True
B)False
Q2) Countertrade is an efficient way of doing business.
A)True
B)False
Q3) A broker or other import consultant can help an importer minimize import duties by
A) bypassing duty rebates available through drawback provisions
B) incurring duties by using non-bonded warehouses and foreign trade zones
C) maximizing liability by improperly marking an import's country of origin
D) valuing products in such a way that they qualify for more favorable duty treatment
Q4) According to the text,technological advances such as e-mail and VoIP have increased the appeal of international trade because it is now easy and inexpensive to manage customer needs and communicate with customers frequently.
A)True
B)False
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Chapter 14: Direct Investment and Collaborative Strategies
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Q1) Which of the following is an argument for using a collaborative agreement?
A) to prevent problems caused by minority shareholders
B) to preserve a concentration strategy
C) to secure vertical and horizontal links
D) to maintain better control
Q2) Dependencia theory holds that ________.
A) countries should seek to diversify their economies
B) low-income countries have practically no power in dealings with MNEs
C) in a globalized world, no nation can be independent economically or politically
D) there is a natural division of labor whereby developing countries depend on production using fairly unskilled labor and developed countries depend on highly educated workers
Q3) What is a turnkey operation? What features generally make turnkey operations different from other collaborative arrangements?
Q4) It is important when setting up a collaborative arrangement to agree on mutual goals and expectations.
A)True
B)False
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Chapter 15: The Organization of International Business
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Q1) Companies tend to use geographic divisions when they have large foreign operations that are not dominated by a single country or market.
A)True
B)False
Q2) Which of the following begins with a company defining critical success factors and specifying objective targets and hard deadlines?
A) coordination by standardization
B) coordination by consensus
C) coordination by plan
D) coordination by intervention
Q3) Neoclassical structures aim to centralize decision-making authority by removing boundaries that impede the decentralization of decision making.
A)True
B)False
Q4) A common feature of neoclassical structures is greater cross-functional collaboration.
A)True
B)False
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Page 17
Chapter 16: Marketing Globally
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Q1) In a production orientation,a company focuses on efficiency and product quality when selling abroad.
A)True
B)False
Q2) When the currency value in the location where a company produces becomes stronger,the company most likely needs to adjust its margins downward to be competitive in export markets.
A)True
B)False
Q3) Firms alter their products for foreign markets for all of the following reasons EXCEPT
A) home country export requirement
B) religious differences abroad
C) weak infrastructures in some countries
D) to respond to legal requirements
Q4) Passive exports involve the filling of unsolicited orders from abroad.
A)True
B)False
Q5) In a short essay,compare push and pull promotional strategies.
Q6) What is the gray market? Why are companies concerned about it?
Page 18
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Chapter 17: Global Manufacturing and Supply Chain Management
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Q1) In order to assure the quality of its products,Samsonite ________.
A) performs only internal quality tests
B) relies only on independent quality-assurance tests
C) conforms its products to industry-set standards
D) uses both internal quality tests and independent quality-assurance tests
Q2) Gibson Enterprises is an MNE that relies on just-in-time inventory management and lean manufacturing systems to optimize quality and efficiency. For the last few years,Gibson has used the same foreign sources for its raw materials. What is the most likely risk faced by Gibson because of foreign sourcing?
A) quality of incoming inventory
B) uncertainty of arriving parts
C) few available suppliers
D) high inventory costs
Q3) ACE Computers established an assembly operation in Malaysia so that it would be close to its key suppliers. ACE is most likely engaging in ________.
A) industrial clustering
B) horizontal sourcing
C) zero sourcing
D) offshoring
Page 19
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Chapter 18: International Accounting Issues
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Q1) A major force leading to the convergence of accounting standards is ________.
A) a shareholder orientation towards FDI
B) the global separation of capital markets
C) MNEs' needs for foreign capital
D) pressures from the EU
Q2) What are the four main ways that financial statements differ from country to country? What role has the IASB played in establishing global accounting standards?
Q3) What is the LEAST likely reason that MNEs set arbitrary transfer prices?
A) take advantage of tax differences between countries
B) achieve economies of scale on a global level
C) circumvent national controls
D) manipulate profits
Q4) A condition that is conducive to low transfer prices from the parent company to the subsidiary and high transfer prices from the subsidiary to the parent company is where the corporate income tax is lower in the subsidiary's country than in the parent country.
A)True
B)False
Q5) In a brief essay,discuss the concepts of transfer pricing and hedging.
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Chapter 19: The Multinational Finance Function
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Q1) You are the chief financial officer at an MNE. What are your main responsibilities in this position? What taxation issues have a significant effect on the decisions you make?
Q2) What is multilateral netting? What are the advantages of multilateral netting?
Q3) The process of coordinating cash inflows and outflows among subsidiaries so that only the balance in cash is transferred is known as ________.
A) dividend remissions
B) transfer pricing
C) multilateral netting
D) currency hedging
Q4) An economic exposure ________.
A) occurs when reporting systems are inadequate
B) generally takes place when foreign currencies weaken against the dollar
C) occurs when the sourcing and costs of components change as exchange rates change
D) is the same as a translation exposure
Q5) How do countries differ in terms of taxation? In regards to taxation,why do some MNEs turn to offshore financial centers? Why are offshore financial centers a concern to the OECD?
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Chapter 20: International Human Resources
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Q1) The past few years have seen fewer females sent on international assignments.
A)True
B)False
Q2) An example of an expatriate would be a Canadian manager working for a Canadian firm in China.
A)True
B)False
Q3) Which of the following interpretative frameworks does NOT automatically presume that a particular nation provides a solution to every problem or an explanation for every action?
A) ethnocentric
B) geocentric
C) polycentric
D) intercentric
Q4) List and compare the three common methods of implementing a balanced compensation plan.
Q5) A growing number of MNEs are increasing expatriate allowances to entice employees to move overseas.
A)True
B)False
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