Introduction to International Business Midterm Exam
Course Introduction
Introduction to International Business examines the fundamental principles and dynamics of global commerce. The course explores how businesses operate across national borders, focusing on the economic, cultural, political, and legal environments that influence international trade and investment. Students will learn about the strategies multinational firms use to compete in foreign markets, the impact of globalization on business operations, and the challenges of managing international teams. By analyzing real-world case studies and current events, learners will develop a deeper understanding of the complexities and opportunities involved in conducting business on a global scale.
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Global Business Today 10th Edition by
Charles W. L. Hill Dr
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Page 2
Chapter 1: Globalization
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Q1) A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power toward
A)supranational organizations such as the World Trade Organization.
B)the communist states of eastern Europe and central Asia.
C)the medium-size and small U.S.multinationals.
D)the national governments of the countries participating in globalization.
E)nations that have authoritarian forms of government.
Answer: A
Q2) An argument in support of the falling barriers to international trade and investment is that the falling barriers
A)prohibit countries from specializing in the production of goods and services.
B)drive the global economy toward greater prosperity.
C)reduce the need to export jobs overseas.
D)increase the bargaining power of business firms by decreasing the incomes of consumers.
E)reduce attacks from foreign competitors.
Answer: B
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3
Chapter 2: National Differences in Political, Economic, and Legal Systems
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Q1) Which of the following was advocated by Karl Marx?
A)capitalist society
B)individualism
C)selling state-owned enterprises to private investors
D)socialism
E)private profit over public good
Answer: D
Q2) Political systems that emphasize collectivism tend to be democratic,while political systems that place a high value on individualism tend to be totalitarian.
A)True
B)False
Answer: False
Q3) Command economies provide a more favorable environment for innovation and entrepreneurs than market economies.
A)True
B)False
Answer: False
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Page 4
Chapter 3: National Differences in Economic Development
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Q1) Which of the following is most likely to be true about the overall attractiveness of a country as a potential market or investment site for an international business?
A)The potential long-run benefits of doing business in a foreign country are independent of the country's future economic growth rates.
B)The costs and risks associated with doing business in a foreign country are highest in economically advanced democratic nations.
C)Economic growth tends to be higher in a centrally planned command economy system than in a free market system.
D)The risks associated with doing business are low in developing nations where the governments have huge debts.
E)The costs and risks associated with doing business in a foreign country tend to be greater in politically unstable nations.
Answer: E
Q2) Economic freedom does not necessarily equate with political freedom.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Differences in Culture
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Q1) Which of the following statements best defines personal space?
A)It is the amount of distance to be maintained from the audience in order to be audible to them.
B)It is a psychological phase wherein a person has free flowing thoughts.
C)In ergonomics,it is the minimum amount of space required by an average employee in order to work efficiently.
D)It is the comfortable amount of distance between you and someone you are talking with.
E)It is the amount of space a country has per person and is arrived at by dividing the country's total geographical area by its total population.
Q2) Like Christianity and Judaism,Islam is a monotheistic religion.
A)True
B)False
Q3) Values provide the context within which a society's norms are established and justified.
A)True
B)False
Q4) What is class-consciousness? What is its impact on businesses?
Q5) Describe Islamic fundamentalism.
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Chapter 5: Ethics, Corporate Social Responsibility, and Sustainability
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Q1) Which of the following is most likely to lead to unethical behavior in a business setting?
A)a strong sense of personal ethics exhibited by employees
B)expatriate managers working away from their ordinary social context and supporting culture
C)providing managers with a moral compass or an ethical algorithm
D)large business corporations making social investments in host countries
E)multinational corporations advocating the concept of noblesse oblige
Q2) John Rawls's veil of ignorance is a conceptual tool that contributes to the moral compass that managers can use to help them navigate through difficult ethical dilemmas.
A)True
B)False
Q3) Societal business ethics are not divorced from personal ethics.
A)True
B)False
Q4) Noblesse oblige is a French term referring to those multinationals that have unethically used their power for private gain.
A)True
B)False
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Chapter 6: International Trade Theory
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Q1) Which of the following suggests that trade is a positive-sum game in which all participating countries fetch economic gains?
A)Heckscher-Ohlin theory
B)mercantilism
C)comparative advantage
D)Leontief's paradox
E)Samuelson critique
Q2) According to the product life-cycle theory,the high cost of U.S.labor gave U.S.firms an incentive to
A)lower costs of services to offset a fall in demand.
B)develop cost-saving process innovations.
C)invite foreign direct investment in domestic industries.
D)embrace and promote open market capitalism.
E)import new consumer products and export agricultural products.
Q3) The Heckscher-Ohlin theory is the best predictor of real-world international trade patterns.
A)True
B)False
Q4) Discuss Adam Smith's concept of absolute advantage.
Q5) Briefly describe new trade theory.
Page 8
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Chapter 7: Government Policy and International Trade
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Q1) Why is retaliation by government intervention a risky strategy?
A)It encourages dumping by foreign companies.
B)It could result in increased tariff barriers by the country that is being pressured.
C)It may expose certain industries that are important for national security to foreign competition.
D)It allows firms to sell goods in the foreign market at below their fair market value.
E)It makes it difficult for domestic firms to make any investments by borrowing money from the domestic capital market.
Q2) Since strong economic arguments support unrestricted free trade,governments of developed nations are setting an example by unilaterally lowering their trade barriers.
A)True
B)False
Q3) What conclusions can be derived from economic analysis of the effect of import tariffs?
Q4) Define local content requirements.Explain how this helps domestic firms.
Q5) Explain the organizational structure and the key functions of the WTO.
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Chapter 8: Foreign Direct Investment
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Q1) The globalization of the world economy is having a negative effect on the volume of FDI.
A)True B)False
Q2) The WTO embraces the promotion of international trade in services. A)True
B)False
Q3) A critical competitive feature of an oligopoly is independence of the major players. A)True
B)False
Q4) When a firm exports,it need not bear the costs associated with FDI,and it can reduce the risks associated with selling abroad by using a native sales agent.Exporting,however,is not without its limitations.Discuss the most common limitations of exporting as compared to FDI.
Q5) Briefly describe the benefits of inward FDI for a host country that arise from employment effects and balance-of-payments effects.
Q6) How can governments restrict the outward flow of FDI?
Q7) Describe the role of the WTO in the liberalization of FDI.
Page 10
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Chapter 9: Regional Economic Integration
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Q1) Which of the following countries has adopted the euro as its currency?
A)Great Britain
B)France
C)Denmark
D)Sweden
E)Switzerland
Q2) Which of the following is a factor that resulted in the establishment of the European Union (EU)?
A)spectacular success of the North American Free Trade Agreement (NAFTA)
B)trade impasse following the oil crisis in the 1970s that occurred due to collusion among oil producing nations
C)devastation of Western Europe during two world wars and the desire for a lasting peace
D)emergence of Japan as an economic and industrial superpower despite the nuclear holocaust
E)rise of communism in Europe
Q3) Differentiate between a free trade area and a customs union.Provide an example of each form of economic integration.
Q4) Briefly describe the benefits of the euro.
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Chapter 10: The Foreign Exchange Market
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Q1) Spot exchange rates and the 30-day forward rates are the same.
A)True
B)False
Q2) Which of the following is true of the purchasing power parity (PPP)theory?
A)A country's "nominal" interest rate (i)is the sum of the required "real" rate of interest (r)and the expected rate of inflation over the period for which the funds are to be lent (I).
B)The exchange rate will not change if relative prices change.
C)The price of a "basket of goods" should be roughly equivalent in each country in relatively efficient markets.
D)In competitive markets free of transportation costs and trade barriers,identical products sold in different countries must sell for the same price.
E)If the law of one price were true for all goods and services,the PPP exchange rate could not be found from any individual set of prices.
Q3) Explain the concept of economic exposure.How is it different from transaction exposure?
Q4) How do foreign exchange markets benefit international businesses?
Q5) Briefly describe the schools of thought regarding exchange rate forecasting.
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Page 12
Chapter 11: The International Monetary System
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Q1) It is most appropriate for a firm to contract out manufacturing when
A)individual manufacturers have few firm-specific skills that contribute to the value of their product.
B)the value of the host country currency is expected to appreciate.
C)supplier switching costs are correspondingly high.
D)firm-specific technology and expertise add significant value to the product.
E)the currency used for pricing a product is anticipated to stay weak in the long run.
Q2) Which of the following was the initial mission of the World Bank?
A)maintaining order in the international monetary system
B)financing the building of Europe's economy by providing low-interest loans
C)taking over as the successor to the International Monetary Fund
D)reviving the gold standard system
E)enforcement of the floating exchange rate system
Q3) What changes have occurred in the International Monetary Fund in recent years?
Q4) The rise in the value of the dollar between 1980 and 1985 occurred when the United States was running a large and growing trade deficit.Explain the factors that led to this rise.
Q5) Describe the gold standard and a balance-of-trade equilibrium.
Q6) Differentiate between a floating exchange rate and a pegged exchange rate.
Page 13
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Chapter 12: The Strategy of International Business
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Q1) Firms that operate internationally are able to realize location economies by dispersing individual value creation activities to locations where they are performed most efficiently and effectively.
A)True
B)False
Q2) Maintaining the company infrastructure is a support activity.
A)True
B)False
Q3) The two phenomena that help explain the experience curve are
A)learning effects and economies of scale.
B)technology inputs and wealth transfer.
C)leveraging subsidiary and local responsiveness.
D)standardized manufacturing and global web.
E)efficiency frontier and location economies.
Q4) What are the sources of economies of scales?
Q5) What are strategic alliances?
Q6) What constitutes an organizational structure?
Q7) What are core competencies? What are their advantages?
Q9) What are the advantages of strategic alliances? Page 14
Q8) What is an experience curve? What is its strategic significance?
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Page 15
Chapter 13: Entering Foreign Markets
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Q1) By considering advantages and disadvantages,trade-offs can often be avoided when selecting an entry mode.
A)True
B)False
Q2) Describe the pros and cons of greenfield ventures.
Q3) Which of the following is an advantage of franchising as a mode of entry into foreign markets?
A)The franchiser is relieved of many of the costs and risks of opening a foreign market on its own.
B)The franchiser is allowed to take profits out of one country to support competitive attacks in another.
C)The franchiser can easily maintain uniform quality across many geographically dispersed franchisees.
D)Manufacturing concerns can be effectively coordinated across adjacent processes.
E)The franchiser can support its short-term interests in a country with an unstable economy.
Q4) How should a firm choose between a greenfield venture and an acquisition?
Q5) Describe the advantages and disadvantages of acquisitions.
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Chapter 14: Exporting, Importing, and Countertrade
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Q1) What does the term sogo shosha mean? How do they help Japanese exporters and what role do they play in countertrade?
Q2) Abby Goodwin,the sales manager of Ark Techno Products is wary of using an export management company (EMC)to get the company on the exporting path.Her CEO,John Mosco is very much in favor of hiring an EMC.Which of the following is a drawback of relying on an export management company (EMC)that Abby Goodwin can use to support her contention?
A)It does not provide references and has no antecedents.
B)The exporting company can fail to develop its own exporting capabilities.
C)It does not have expert specialists to help a neophyte exporter identify opportunities.
D)It typically lacks information about local business regulations.
E)The exporting company cannot avoid the common pitfalls of exporting.
Q3) The most comprehensive source of information on export opportunities for U.S.firms is the
A)Small Business Administration.
B)Department of Commerce.
C)Federal Trade Commission.
D)Bureau of Competition.
E)Bank of New York.
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Page 17
Chapter 15: Global Production and Supply Chain Management
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Q1) A firm that improves its quality control cannot reduce its costs of value creation simultaneously.
A)True
B)False
Q2) Which of the following is a result of using just-in-time inventory systems?
A)It slows down inventory turnover.
B)It increases inventory holding costs.
C)It increases the amount of working capital a firm needs.
D)It can help firms improve product quality.
E)It does not allow defective inputs to be spotted immediately.
Q3) Manufacturing firms should typically aim at lowering the costs of value creation by
A)decreasing inventory turnover.
B)stocking huge amounts of inventory.
C)lowering the quality of products.
D)increasing after-sales services cost.
E)reducing production costs.
Q4) Discuss the advantages and the disadvantages of just-in-time (JIT)inventory systems.
Q5) Describe the Six Sigma methodology.
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Chapter 16: Global Marketing and Research and Development
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Q1) Source effects are damaging for an international business when A)promotional messages are used to stress the positive performance attributes of its product.
B)fewer firms compete for the attention of prospective customers in developing countries.
C)the firm's marketing strategy emphasizes personal selling rather than mass media advertising.
D)potential consumers in a target country have a bias against foreign firms.
E)international businesses deemphasize their foreign origins.
Q2) The members of a cross-functional team should have
A)low standing within their respective functions.
B)the ability to put functional and national advocacy first.
C)the ability to contribute functional expertise.
D)the ability to solely focus on the ongoing work of their respective functions.
E)the ability to work on several projects simultaneously.
Q3) A firm's ability to use a pull marketing strategy is limited in some countries by media availability.
A)True
B)False
Q4) Discuss the arguments for and against standardized advertising.
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Chapter 17: Global Human Resource Management
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Q1) In international businesses,firms pursue a polycentric staffing policy because they see it as the best way to maintain a unified corporate culture.
A)True
B)False
Q2) There are vast differences in local market needs in the consumer food business across the world.Yamaguchi Media,a Japanese multinational advertising agency,specializes in the food industry.Toward this,Yamaguchi Media uses a geocentric staffing approach.Which of the following is an advantage of adopting a geocentric staffing approach for Yamaguchi Media?
A)It tends to reduce cultural myopia and enhance local responsiveness.
B)It is inexpensive to implement.
C)It reduces the costs of value creation.
D)It allows all key management positions of a firm and its subsidiaries to be filled by parent-country nationals.
E)It requires minimal documentation for hiring foreign nationals.
Q3) Describe how management development programs can increase the value of human capital in an international business firm.
Q4) What is repatriation? What is its importance?
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