International Business Strategy
Chapter Exam Questions
Course Introduction
International Business Strategy explores the frameworks, tools, and principles that guide companies as they expand and compete in the global marketplace. This course examines the strategic decision-making processes involved in entering foreign markets, managing cross-cultural teams, adapting products and services for different environments, and navigating international regulatory and economic complexities. Students will analyze case studies and real-world scenarios to understand how multinational organizations develop global strategies, balance global integration with local responsiveness, and create competitive advantages on the international stage.
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International Business Competing in the Global Marketplace 11th Edition by
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Page 2
Charles W. L. Hill
Chapter 1: Globalization
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Q1) In the last two decades, Latin American countries like Brazil, Mexico, and Chile have
A) embraced communist principles
B) promoted government ownership of enterprises
C) experienced increasing debt and inflation
D) welcomed foreign investment
Answer: D
Q2) A study published in 2011 by the OECD noted that:
A) the real household income of the unskilled workers in the United States increased more in comparison to that of the skilled workers.
B) in almost all countries real income levels declined over the 20-year period studied.
C) the falling unemployment rates brought gains to low-wage workers and fairly broad-based wage growth.
D) the gap between the poorest and richest segments of society in some OECD countries had widened.
Answer: D
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Chapter 2: National Differences in Political Economy, and Legal Systems
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Q1) Compare and contrast the four forms of totalitarianism.
Answer: In a totalitarian country, an individual's right to freedom of expression and organization, a free media, and regular elections are denied to the citizens. There are four forms of totalitarianism. Communist totalitarianism was until recently the most widespread form of totalitarianism. This form of totalitarianism advocates that socialism can only be achieved through totalitarian dictatorship. Theocratic totalitarianism is found in states where political power is monopolized by a party, group, or individual that governs according to religious principles. Tribal totalitarianism occurs when a political party that represents the interests of a particular tribe monopolizes power. Right-wing totalitarianism permits some individual economic freedoms but restricts individual political freedom.
Q2) Which of the following provides exclusive legal rights to authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit?
A) Patent
B) Copyright
C) Trademark
D) License Answer: B
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Chapter 3: National Differences in Economic Development
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Q1) If a country's economy is to sustain long-run economic growth, the business environment must be conducive to innovations and entrepreneurial activity.
A)True
B)False
Answer: True
Q2) How does the ownership structure of newly privatized firms affect its functioning?
Answer: Many former command economies lack the legal regulations regarding corporate governance that are found in advanced Western economies. In such cases, managers with a small ownership stake can often gain control over the newly privatized entity and run it for their own benefit, while ignoring the interests of other shareholders.
Q3) Which of the following helps in adjusting GNI such that it accounts for the differences in the cost of living?
A) Purchasing power parity (PPP) adjustment
B) Human Development Index
C) Debt to GNI ratio
D) Consumer Price Index
Answer: A
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Chapter 4: Differences in Culture
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Q1) The term _____ to refer to a group of people sharing a common set of values and norms.
A) mores
B) society
C) culture
D) folkway
Q2) Hofstede's concept of power distance focused on the extent to which different cultures socialized their members into tolerating uncertainty.
A)True
B)False
Q3) There are three values central to the Confucian system of ethics that have very important economic implications. Which of the following is one of these?
A) Filial piety
B) Rule-based law
C) Humaneness
D) Honesty in dealings with others
Q4) What are the determinants of culture?
Q5) Explain the concept of social stratification.
Q6) Describe the four dimensions of culture as identified by Geert Hofstede.
Page 6
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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Q1) Ethics officers are hired by many businesses to make sure that all employees are trained to be ethically aware and that ethical considerations enter the business decision-making process at all levels of the organization.
A)True
B)False
Q2) _____ approaches to business ethics are raised by business ethics scholars primarily to demonstrate that they offer inappropriate ethical decision making in a multinational enterprise.
A) Cultural relativism
B) The righteous moralist
C) Straw men
D) The naive immoralist
Q3) Identify the correct statement about the rights theories.
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 never purely as means to the ends of others.
D) The only social responsibility of business is to increase profits, so long as the company stays within the rules of law.
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Chapter 6: International Trade Theory
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Q1) A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.
A)True
B)False
Q2) Which of the following terms refers to the extent to which a country is gifted with such resources as land, labor, and capital?
A) Current accounts
B) Factor endowments
C) National balance
D) National accounts
Q3) Explain the concept of free trade.
Q4) Which of the following is a major limitation of the simple Ricardian model of comparative advantage?
A) The model ignores the principle of diminishing marginal returns.
B) The model recommends excessive governmental intervention in trade.
C) The outcome of the model suggested by Ricardo is a zero-sum game.
D) The model is against the idea of engaging in free trade with nations.
Q5) Briefly differentiate between constant returns to specialization and diminishing returns to specialization.
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Chapter 7: Government Policy and International Trade
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Q1) By lowering production costs, _____ help domestic producers compete against foreign imports.
A) subsidies
B) duties
C) quotas
D) tariffs
Q2) GATT has not recognized the infant industry argument as a legitimate reason for protectionism.
A)True
B)False
Q3) After the Uruguay Round of GATT extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were:
A) textiles and technology.
B) telecommunications and financial services.
C) automotives and aerospace.
D) agriculture and consulting services.
Q4) Discuss the establishment of GATT. What was GATT's objective?
Q5) Discuss the economic reasons for government intervention in markets.
Q6) Compare and contrast import quotas and voluntary export restraints.
Page 9
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Chapter 8: Foreign Direct Investment
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Q1) Governments normally are concerned when their country is running a surplus on the current account of their balance of payments.
A)True
B)False
Q2) Through their choice of policies, home countries can both encourage and restrict FDI by local firms. Policies designed to encourage outward FDI include which of the following?
A) Tax rebates
B) Political pressure
C) Expropriation
D) Domestic risk insurance
Q3) Which of the following arises when a country is importing more goods and services than it is exporting?
A) Current account surplus
B) Trade deficit
C) Trade surplus
D) Trade balance
Q4) Describe some of the home country policies that encourage outward FDI.
Q5) Discuss the reasons for the growth in FDI over the last 30 years.
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Chapter 9: Regional Trade Pacts Give the Mexican Auto
Industry an Edge
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Q1) Which of the following is a reason why Turkey is not yet a member of the EU?
A) Only about 10 percent of Turkey's international trade is with the EU.
B) There are concerns over human rights issues in the country.
C) The country has yet to form a customs union with the EU.
D) Turkey has a weak economy.
Q2) Which of the following is a concern of some economist regarding regional integration?
A) The benefits of regional integration are determined by the extent of trade diversion. B) The benefits of regional integration may have been oversold, while the costs have been ignored.
C) A regional free trade agreement will benefit the world only if the amount of trade it diverts exceeds the amount it creates.
D) The costs of regional integration will be exceedingly high with little chance that the benefits will outweigh the costs.
Q3) Since its establishment, the euro has had a stable trading history.
A)True
B)False
Q4) What is ASEAN? What is its basic goal? How successful is ASEAN?
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Chapter 10: The Foreign Exchange Market
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Q1) The extent to which the income from individual transactions is affected by fluctuations in foreign exchange values is known as _____.
A) economic exposure
B) financial exposure
C) translation exposure
D) transaction exposure
Q2) Which of the following would a follower of the inefficient market school of thought agree with?
A) Companies would be better off investing in foreign exchange forecasting services.
B) Forward exchange rates do the best possible job of forecasting future spot exchange rates.
C) Companies can optimize their foreign exchange transactions by using forward markets.
D) Forward rates reflect all available information about likely future changes in exchange rates.
Q3) Compare and contrast the Fisher Effect and the International Fisher Effect.
Q4) Explain the notion of economic exposure. How can economic exposure be minimized?
Q5) What are the main uses of foreign exchange markets for international business?
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Chapter 11: The International Monetary System
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Q1) Which of the following statements is true of the gold standard?
A) Gold standard was adopted only by the smaller nations of the world.
B) Currencies were pegged to gold under the gold standard.
C) Convertibility to gold was not guaranteed under the gold standard.
D) Gold standard was not helpful in maintaining balance-of-trade equilibrium.
Q2) A country's trade balance is in surplus when:
A) its exports are more than its imports.
B) it experiences negative inflation.
C) its exports equal the imports.
D) the prices of commodities are low in the country.
Q3) Which of the following changes were made to the International Monetary Fund's Articles of Agreement in the Jamaica agreement?
A) IMF members were permitted to use the U.S. dollar as the convertible currency.
B) Gold was declared as a formal reserve asset for IMF members.
C) IMF members were permitted to sell their gold reserves at the market price.
D) IMF members were restricted from entering the foreign exchange market.
Q4) Do you think businesses can influence government policies? Explain your answer.
Q5) What is the Bretton Woods agreement? How was it different from the gold standard?
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Chapter 12: The Global Capital Market
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Q1) The element of risk into investing in foreign assets is more with _____ exchange rates.
A) floating
B) pegged
C) fixed
D) managed
Q2) How does the growth in the global capital markets affect investing firms?
Q3) _____ are international bonds, normally underwritten by an international syndicate of banks and placed in countries other than the one in whose currency the bond is denominated.
A) Micro bonds
B) Foreign bonds
C) Eurobonds
D) Regulatory bonds
Q4) Companies receive a _____ when using the Eurocurrency market.
A) lower interest rate on deposits and pay more for loans
B) tax incentives
C) higher interest rate on deposits and pay less for loans
D) liquid asset reserve waiver
Q5) Explain Eurobonds with an example.
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Chapter 13: The Strategy of International Business
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Q1) It has been suggested that learning effects are important only during the start-up period of a new process and that they cease after two or three years. Any decline in the experience curve after such a point is due to:
A) reduction in fixed costs.
B) higher depreciation costs.
C) economies of scale.
D) obsolescence.
Q2) For a firm, all positions on the efficiency frontier are viable.
A)True
B)False
Q3) Economies that arise from performing a value creation activity in the optimal location are known as _____.
A) international strategies
B) location economies
C) localization strategies
D) economies of scale
Q4) What are the two types of competitive pressures that firms competing in the global marketplace face? How do firms respond to these pressures?
Q5) Describe the benefits of global expansion for firms.
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Chapter 14: The Organization of International Business
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Q1) The need for coordination between subunits is highest in firms pursuing a(n) _____.
A) localization strategy
B) international strategy
C) global strategy
D) transnational strategy
Q2) Organizational structure includes several elements. Which of the following is one of them?
A) The establishment of integrating mechanisms to coordinate the activities of subunits.
B) The horizontal decision-making that occurs daily, for example, on the plant floor to improve operations.
C) The manner in which decisions are made and work is performed by individuals.
D) The informal division of the organization into cultural groups.
Q3) What are the basic principles for successful organizational change?
Q4) Because of inertia forces, _____ is often no change.
A) big bang change
B) cultural change
C) shock therapy change
D) incremental change
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Chapter 15: Entry Strategy and Strategic Alliances
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Q1) Which of the following is one of the reasons why acquisitions fail?
A) There is a clash between the cultures of the acquired and the acquiring firms.
B) The acquired firm often overpays for the assets of the acquiring firm.
C) The synergies of the two firms happens quickly and neither acquired nor acquiring firm are prepared for full integration.
D) Despite adequate pre-acquisition screening, the entities encounter unexpected governmental involvement.
Q2) Licensing limits the firm's ability to realize experience curve and location economies by producing its product in a centralized location.
A)True
B)False
Q3) 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.
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Chapter 16: Exporting, Importing, and Countertrade
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Q1) Nearly every state in the U.S. maintains active trade commissions to promote exports.
A)True
B)False
Q2) A _____ states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
A) bill of exchange
B) bill of lading
C) letter of credit
D) bank statement
Q3) A draft is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
A)True
B)False
Q4) What are the typical problems that novice exporters face when trying to export?
Q5) U.S. organizations can get financing aid from the Export-Import Bank.
A)True
B)False
Q6) What is the Foreign Credit Insurance Association?
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Chapter 17: Global Production and Supply Chain Management
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Q1) The level of output at which most plant-level scale economies are exhausted is referred to as the:
A) minimum efficient scale of output.
B) downstream supply chain.
C) flexible machine.
D) upstream supply chain.
Q2) The firm that sources from independent suppliers has fewer subunits to control.
A)True
B)False
Q3) Decentralization of production is appropriate when:
A) a product's value-to-weight ratio is high.
B) the product serves universal needs.
C) barriers to trade are low.
D) volatility in key exchange rates is expected.
Q4) Discuss the strategic objectives of the production and logistics functions of an international firm.
Q5) 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 RD
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Q1) A(n) _____ is one that is difficult for outsiders to access.
A) concentrated retail system
B) exclusive distribution channel
C) private distribution channel
D) fragmented retail system
Q2) According to Levitt, which of the following statements is true?
A) Technology drives the world toward a converging commonalty.
B) There are accustomed differences in national preferences.
C) The multinational corporation operates in a number of countries at low relative costs.
D) The global corporation operates with resolute consistency at high relative costs.
Q3) _____ refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market.
A) Multipoint pricing
B) Experience curve pricing
C) Predatory pricing
D) Competitive pricing
Q4) Explain briefly the regulatory influences on pricing.
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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Q1) According to Mendenhall and Oddou, poorly adjusted expatriates tend to be nonjudgmental and nonevaluative in interpreting the behavior of host-country nationals.
A)True
B)False
Q2) A polycentric approach to staffing is one in which:
A) host-country nationals are recruited to manage subsidiaries while parent-company nationals occupy key positions at corporate headquarters.
B) standard psychological tests are used to assess perceptual ability and cultural toughness, when selecting a manager for foreign posting.
C) all key management positions are filled by parent company nationals.
D) the best people, regardless of nationality, are recruited to fill key positions throughout the organization.
Q3) An organization's norms and value systems are known as its _____.
A) corporate culture
B) mission statement
C) human resources
D) organizational structure
Q4) How can firms reduce the bias in performance appraisals of expatriate managers?
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Chapter 20: Accounting and Finance in the International Business
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Q1) Money management decisions attempt to manage a firm's _____.
A) equity capital
B) fixed costs
C) working capital
D) equipment costs
Q2) Most international businesses require all budgets and performance data within the firm to be expressed in the currencies of the countries where its subunits are located.
A)True
B)False
Q3) What are the considerations when seeking external financing for international business?
Q4) The _____ is the main instrument of financial control in an organization.
A) chief financial officer
B) corporate accounting
C) audit
D) budget
Q5) What are the main steps in the control process of a typical firm?
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Q6) Explain why the evaluation of a subsidiary should be kept separate from the evaluation of its manager.