Transnational Corporations Test Preparation
Course Introduction
This course examines the structure, strategies, and impacts of Transnational Corporations (TNCs) in the global economy. Students will explore the historical development of TNCs, their roles in shaping international trade and investment, and their influence on economic, social, and political processes across borders. The course analyzes how TNCs interact with governments, international organizations, and civil societies, and addresses key issues such as corporate governance, global supply chains, labor rights, environmental responsibilities, and regulatory challenges. Through case studies and theoretical perspectives, the course provides a comprehensive understanding of how TNCs operate and their implications for development and globalization.
Recommended Textbook
International Business Environments Operations 14th Edition by John Daniels
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Chapter 1: Globalization and International Business
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Q1) Assume an enterprise is considering establishment of a foreign production facility. Which of the following best supports this decision?
A) Its foreign competitors have higher production costs than it has.
B) Its main competitor successfully opened a foreign plant.
C) Its suppliers follow an agglomeration strategy.
D) None of its competitors have foreign production facilities.
Answer: B
Q2) A joint venture is an example of a portfolio investment.
A)True
B)False
Answer: False
Q3) The owner of a U.S. football team and the owner of a Canadian hockey team purchase a British soccer team. This is an example of a ________.
A) royalty
B) portfolio investment
C) turnkey operation
D) joint venture
Answer: D
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3
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) There is a strong correlation between the intensity of religious belief and attributes that lead to economic growth,such as obeying laws and thriftiness.
A)True
B)False
Answer: True
Q3) Cultures do not transcend national boundaries.
A)True
B)False
Answer: False
Q4) Creolization refers to the mixing of cultural elements that occurs during cultural diffusion.
A)True
B)False
Answer: True
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Page 4
Chapter 3: The Political and Legal Environments Facing Business
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Q1) Wharton Enterprises,a U.S. firm,manufactures small kitchen appliances. The firm has recently developed an innovative blender design that Wharton executives anticipate being very profitable. Currently,Wharton has production facilities in the U.S. and China. Wharton executives are trying to determine where the new product should be manufactured. Which of the following questions is most relevant to the decision?
A) What selection procedures would be best in China?
B) Should expatriates or locals manage the Chinese facility?
C) How can the firm guard against counterfeiting in China?
D) How would China's individualistic system affect the firm?
Answer: C
Q2) In a totalitarian political system,________.
A) political power resides with the citizens of the country
B) governments direct most economic activity but few social ones
C) an individualistic outlook shapes political debate and policy formation
D) one agent monopolizes political power
Answer: D
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Chapter 4: The Economic Environments Facing Businesses
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Q1) What is gross national income? How is it calculated? Illustrate your answer with a specific example.
Q2) External debt results when the government spends more than it collects in revenues,whereas internal debt results when a government borrows money from foreign lenders.
A)True
B)False
Q3) A firm with operations in Denmark can most likely expect all of the following EXCEPT ________.
A) high taxes
B) significant regulation
C) tough job-protection laws
D) minimal monetary policies
Q4) The Happy Planet Index measures well-being and perceptions of living conditions by assessing areas such as housing,incomes,security,and work-life balance.
A)True
B)False
Q5) What is inflation? How does inflation affect international business?
Q6) 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 a primary business objective for pursuing ethical behavior?
A) avoiding industrial sanctions
B) developing competitive advantages
C) developing creative advertisements
D) discouraging false commitments to the firm
Q2) What is the primary problem associated with Anglo American PLC's ART program?
A) unknown side effects to drugs and treatment
B) rising costs of medications and procedures
C) poor treatment adherence by employees
D) lack of sufficient insurance coverage
Q3) An internal code of conduct is a set of guidelines,recommendations,and rules issued by entities within society but outside the firm with the intent of affecting the behavior of international business entities in order to enhance corporate responsibility.
A)True
B)False
Q4) An effective code of conduct reports results to external stakeholders.
A)True
B)False
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Chapter 6: International Trade and Factor Mobility Theory
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Q1) Which of the following assumptions was made in the original theories of absolute and comparative advantage?
A) Specialized labor seeks efficiency.
B) Labor resources are fully employed.
C) Countries pursue objectives other than economic efficiency.
D) Production networks enable countries to concentrate on particular functions.
Q2) A strategic trade policy is one that develops industries to lessen dependence on foreign military goods.
A)True
B)False
Q3) Under the theory of absolute advantage,countries hold two types of advantages-acquired advantages and technological advantages.
A)True
B)False
Q4) Understanding trade theories helps companies know if they will need to compete against goods and services produced abroad.
A)True
B)False
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Page 8
Chapter 7: Governmental Influence on Trade
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Q1) What is the main motive for countries' protection of their film/cinema industries?
A) to keep prices low for their citizens
B) to improve their balance of payments
C) to diversify their economies
D) to maintain their cultural sovereignty
Q2) Export prices of primary products fluctuate less than export prices of manufactured products.
A)True
B)False
Q3) Countries most likely establish export restrictions to ________.
A) retaliate against foreign import controls
B) raise prices in foreign markets
C) encourage substitute products
D) reduce domestic production
Q4) Companies that have integrated their supply chains internationally tend to lobby their home governments for increased protectionist measures.
A)True
B)False
Q5) Describe and compare the different types of tariffs (duties).
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Chapter 8: Cross-National Cooperation and Agreements
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Q1) Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering expansion into the European Union. Which of the following questions is most relevant to the decision?
A) What is the primary language of most workers?
B) Which country has the best production location?
C) Which currency has the most favorable value of the euro?
D) Which country has the lowest tariffs for manufactured products?
Q2) GATT's contribution to trade liberalization made possible the expansion of world trade in the second half of the twentieth century.
A)True
B)False
Q3) Trade creation allows consumers access to more goods at a lower price than would have been possible without integration.
A)True
B)False
Q4) Are commodity agreements effective? Why or why not?
Q5) Most MNEs generate a majority of their revenues in their home regions.
A)True
B)False
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Chapter 9: Global Foreign-Exchange Markets
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Q1) An offer is the right but not the obligation to buy or sell foreign currency.
A)True
B)False
Q2) Which of the following is an example of interest arbitrage?
A) investing in debt instruments in different currencies or different countries
B) selling U.S. dollars for Swiss francs, then selling Swiss francs for British pounds, then selling British pounds for U.S. dollars
C) investigating different commercial banks to find the best exchange rate
D) an American investing in a London-based company
Q3) A major challenge faced by Western Union in transferring money between the United States and Mexico is that Mexican citizens trust the banks but do not trust Western Union due to its reliance on global banks.
A)True
B)False
Q4) If the forward rate for a foreign currency is less than the spot rate,the foreign currency is selling at a forward premium.
A)True
B)False
Q5) What is a futures contract? What institutions handle futures contracts?
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Chapter 10: The Determination of Exchange Rates
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Q1) The ________ theory seeks to define the relationship between currencies based on relative inflation.
A) inflation growth rate
B) revaluation
C) purchasing power parity
D) interest rate
Q2) ________ is a form of locking the value of a country's currency onto another currency.
A) Managed floating
B) Monetarization
C) Dollarization
D) Floating
Q3) According to the text,which currency is expected to experience the most change in the upcoming years?
A) yen
B) yuan
C) euro
D) U.S. dollar
Q4) In a short essay,discuss purchasing power parity and the short-run problems that affect PPP.
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Chapter 11: The Strategy of International Business
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Q1) An MNE in which new knowledge and capabilities are developed in both domestic and foreign locations,both independently and jointly,and then diffused throughout the worldwide organization,is following a ________ strategy.
A) transnational
B) multidomestic
C) global
D) matrix
Q2) Google essentially views the entire world as one market and assumes that there are no fundamental differences among countries with regard to consumers' preferences. Google is engaging a(n)________ strategy.
A) international
B) multidomestic
C) transnational
D) global
Q3) What is configuration? Briefly list and discuss the factors that influence value chain configuration.
Q4) The fundamental outlook of the multidomestic strategy is standardization.
A)True
B)False
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Chapter 12: Country Evaluation and Selection
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Q1) 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
Q2) Which of the following describes a company's strategy of moving first to those countries where local competitors are most likely to catch up to the firm's innovative advantage?
A) lead country strategy
B) imitation lag strategy
C) oligopolistic reaction strategy
D) liability of foreignness strategy
Q3) In a short essay,compare the strategies of diversification versus concentration and provide examples of situations in which each would be used.
Q4) Why do companies engage in international harvesting or divestment?
Q5) In a short essay,discuss liquidity preference as it relates to monetary risk.
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Chapter 13: Export and Import
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Q1) Jordan Jewelry is a U.S. firm that designs,manufactures,and sells inexpensive jewelry and accessories. Executives at the firm believe that Jordan Jewelry could significantly increase its profitability by exporting products to foreign markets. Before engaging in international trade,Jordan executives need to develop an export plan. Which of the following questions is LEAST relevant to this activity?
A) Would Jordan's resources be better utilized developing business in the United States?
B) How much will it cost to get Jordan's products to the targeted markets?
C) What marketing campaign would be best for Jordan's foreign markets?
D) Is exporting consistent with Jordan's long-term goals?
Q2) The probability that a business is engaged in exporting tends to ________.
A) decrease with the size of the firm
B) increase with the product life cycle
C) decrease with the product life cycle
D) increase with the size of the firm
Q3) What are some reasons that firms decide to export their products or services? What does a firm need to consider when developing an export plan?
Q4) What role does the customs agency of a government play?
Q5) What are export management companies,and how do they help potential exporters?
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Chapter 14: Direct Investment and Collaborative Strategies
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Q1) Coca-Cola has collaborative arrangements whereby it produces concentrate that it sells to other companies to bottle its drinks. Which of the following terms best describes this type of arrangement?
A) vertical alliance
B) horizontal alliance
C) link alliance
D) scale alliance
Q2) When no single company has control over a collaborative arrangement,________.
A) the operation may lack direction
B) none of the partners is responsible for legal violations
C) differences in corporate culture are likely to grow
D) one partner's interests are likely to be put ahead of the other partner's interests
Q3) What is a master franchise?
A) the original agreement between the franchisor and franchisee
B) the franchisee with the highest revenue in a region
C) a franchisee with rights to open outlets on its own or develop subfranchises
D) the set of standard terms regulating the relationship between franchisor and franchisee
Q4) Explain how franchising agreements differ from licensing agreements.
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Chapter 15: The Organization of International Business
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Q1) Vertical and horizontal constraints that segment employees and their tasks within an organization are generally referred to as ________.
A) structures
B) networks
C) boundaries
D) classifications
Q2) The balance between centralization and decentralization of authority in a company is known as ________.
A) systemic differentiation
B) horizontal differentiation
C) schematic differentiation
D) vertical differentiation
Q3) Martin Manufacturing is an MNE that centralizes authority to implement an extensive set of rules and procedures to govern a broad range of activities. Martin Manufacturing is most likely applying a system of ________.
A) market control
B) adjustment control
C) bureaucratic control
D) clan control
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Chapter 16: Marketing Globally
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Q1) Agreements on international product standards are hampered by all the following factors EXCEPT ________.
A) that standardization increases production costs
B) consumer reluctance to change
C) the cost of redesigning and retooling
D) governments' desires to protect investments
Q2) A company sometimes handles a broader line of products in a foreign country than in its home country because most of its new product development is abroad.
A)True
B)False
Q3) Foreman Enterprises produces and sells a variety of products for the home. Foreman recently introduced a new detergent at a very low price with the hope that a high number of consumers will try it out. Foreman is most likely using a ________ strategy.
A) cost-plus
B) skimming
C) penetration
D) diversification
Q4) How do language differences affect international branding and promotion?
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Chapter 17: Global Manufacturing and Supply Chain Management
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Q1) Japanese ________ are groups of independent companies that work together to manage the flow of goods and services along an entire value chain.
A) chaebol
B) keiretsus
C) sigmas
D) kaizen
Q2) Configuration is the linking or integrating of activities into a unified system.
A)True
B)False
Q3) Rapid Technologies owns its entire supplier network,which means that the firm most likely uses ________.
A) industrial clustering
B) competitive sharing
C) vertical integration
D) global outsourcing
Q4) The make-or-buy decision applies only to domestic firms.
A)True
B)False
Q5) What are foreign trade zones? How are they used?
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Chapter 18: International Accounting Issues
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Q1) The standard-setting organization tasked with the challenge of determining one set of accounting standards that can be used worldwide is the ________.
A) Global Financial Accounting Standards Board
B) International Organization of Securities Commissions
C) International Financial Reporting Committee
D) International Accounting Standards Board
Q2) Budget versus actual comparisons,followed by some form of ROI,are most likely used by ________ MNEs.
A) Japanese
B) American
C) British
D) German
Q3) From an accounting perspective,countries with strong equity markets and shareholder orientations tend to be macro-uniform systems.
A)True
B)False
Q4) How do exchange rates affect budgets used to evaluate performance in MNEs?
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) An economic exposure does not result in a change in future cash flows.
A)True
B)False
Q2) Foreign branch income is ________.
A) deferred from U.S. taxation until a dividend is remitted to the parent company
B) considered passive income and therefore not subject to U.S. taxation
C) directly included in the parent's taxable income in the year in which it is earned
D) considered active income and therefore deferred until future years
Q3) Which of the following is a characteristic of most offshore financial centers?
A) strict domestic regulation
B) minimal banking activities
C) large foreign currency markets
D) nominal or non-existent tax rates
Q4) The OECD has set transfer pricing guidelines to enhance the manipulation of prices and therefore taxes for MNEs and the countries where they operate.
A)True
B)False
Q5) What is a transfer price? Why are transfer prices used?
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Chapter 20: International Human Resources
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Q1) There is growing consensus that human resource managers must hire,develop,reward,and retain people whose performance explicitly improves the
A) productivity of the firm's core competencies
B) fit between the firm's practices and industry standards
C) firm's engagement of political authorities
D) firm's responsiveness to customer complaints
Q2) A growing number of MNEs are increasing expatriate allowances to entice employees to move overseas.
A)True
B)False
Q3) List and discuss the main components of an expatriate's compensation package.
Q4) ________ refers to the activities that an organization carries out to put the right person into the right job in the right place at the right time for the right salary.
A) Work force analysis
B) Staff development
C) Human resource management
D) Leadership planning
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