Chapter 5: The Global Context of Business

1. A firm that conducts a significant portion of its business abroad, that has some facilities overseas, and
that imports a significant portion of goods from other countries is best described as an international firm.
2. Biltmore Corp. is involved in a planning process for doing business internationally. They have already
determined that their product can be modified to fit foreign market. What should they do next? Assess
the business climate for receptivity to imports.
3. Beta Corp. is trying to decide whether to market its products internationally. Its first decision is to
determine whether there is international demand for its products.
4. According to the World Bank, Australia, Japan, and Israel are high-income countries, while China,
Argentina, and South Africa are upper middle income countries.
5. A form that buys products made in another country for distribution and sale in its own country is an
importer.
6. According to the World Bank, Argentina is considered an upper middle-income country.
7. Which of the following social or cultural differences would a Canadian exporter of refrigerators to Europe
have to deal with? Consumers shop on a daily basis.
8. Michael is going to sell his baby products abroad, and he is interested in having someone in the foreign
country sell the product for him. Michael is most interested in working with a(n) independent agent.
9. The balance of payments refers to the difference between money flowing into and out of a country as a
result of trade and other transactions.
10. Canadians who were opposed to free trade feared all of the following except Canada would have to peg
the Canadian dollar to the U.S. dollar.
11. Canada prohibits the importing if ivory from any foreign nation. This is a(n) embargo.
12. Which of the following international organizational strategies means buying or establishing tangible
assets in another country? Foreign direct investment.
13. When Manulife Financial entered the Chinese market, it made an agreement with Sinochem, a state-
owned trading company. This is an example of a strategic alliance.
14. If there is a favourable balance of payments, it means that the country has more money flowing into it
than out as a result if trade and other transactions.
15. The theory of national competitive advantage derives from all of the following conditions except supply
conditions.
16. The purpose of GATT was to reduce or eliminate trade barriers such as quotas and tariffs.
17. Which areas represent the three major market places for international business? North America, Europe,
and Asia-Pacific
18. Which of the following items is least likely to impact a nation’s balance of payments? An increase in the
GDP
19. The comparative advantage form of competitive advantage means that a country can produce some
products better or more cheaply than it can other products.
20. Upper middle-income countries are defined as those with per capita income between US$4036 and
US$12475.
21. In marketing its new product in a foreign nation, Mega Computer was surprised to see the very low prices
on its local competitor’s models. Subsequent investigation revealed that the domestic businesses had

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 receives money from the government. Mega now knows what a(n) subsidy is.
22. Mega Computers has decided to expand operations overseas. In order to give foreign customers a sense
of security, Mega has chosen to send several of its own managers and technicians to country as parts of
the start-up operations. In addition, this will give Mega more control over making sure that toping quality
service is given to the new customers. Mega has chosen the organizational strategy known as branch
office.
23. Computers-B-Us sent some of its managers abroad to gain more control over the operations and provide
a more visible public presence. This type of organizational structure is known as a(n) branch office.
24. Tariffs that are imposed strictly to raise money for the government are referred to as revenue tariffs.
25. How will a business firm know if there is a demand for its product in another nation? Due to the
successful prior entry of a competitor firm with a similar product in the international market.
26. In which international structure would royalties likely be paid to the exporter? Under a licensing
arrangement.
27. Canada has a(n) comparative advantage in farming due to its fertile land, while South Korea has a(n)
comparative advantage in electronics manufacturing.
28. Which of the following is not one of the goals of the WTO? To reduce the amount of corruption in
countries that score poorly on the Corruption Perceptions Index of Transparency International.
29. In France, McDonald’s restaurants sell wine. This is a classic example of adapting to customer needs.
30. Selling a product abroad for less than the cost of production is referred to as dumping.
31. Which of the following is not true about protectionism? It is a revenue source for the provincial
government in Canada.
32. If Montrose Corp. purchases tangible assets in Germany, which international organizational structure is it
using? Foreign direct investment.
33. Which of the following is correct with regard to Canada’s balance of trade? None of these are accurate.
34. Which if the following best explains why a nation like Canada or Japan would export a particular product
or service? That nation has an absolute advantage.
35. The organization was founded in Pacific Asia for economic, political, social, and cultural cooperation?
ASEAN
36. McCain Foods developed single-sized portions of frozen vegetables to serve customers in South Africa
that do not have proper refrigeration. This is an example of modifying a product to fit a foreign market.
37. Which of the following types if payment are usually received by an exporter as an ongoing payment
calculated as a percentage of the license holder’s sales? Royalties
38. With respect to international organizational structure, it is correct to say that a company has more control
over branch managers than it does over agents or license holder.
39. International trade improves peoples’ standard of living, yet countries often put up trade barriers? Why is
this? Goods that are imported compete with domestic products and put pressure on domestic
businesses.
40. What is the implication for a manufacturer of electrically powered equipment contemplating
international operation upon learning of the wide variety of electric outlets around the world? Modify
the product to meet the standards of different countries.
41. All of the following characteristics describe an independent agent except that it often represents only one

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 firm.
42. Sometimes foreign companies have many problems in complying with stringent and often changing
regulations and bureaucratic obstacles known as business practice laws.
43. Why do foreign companies sometimes have problems complying with stringent and often changing
regulations and bureaucratic obstacles? Because of business practice laws
44. According to the World Bank, high income countries include all of the following except South Africa.
(Include South Korea, Japan, U.S., and Canada.)
45. Laura’s Lights began shipping products to its new partner in a foreign nation only to find out that before
the products would be let into the country a tax of $1.00 per unit had to be paid. This tax is known as a(n)
tariff.
46. KFC’s dishes in China come with a side order of rice and soy mike. This is an example of adapting to
customer needs.
47. Associations of producers that control supply and prices are called cartels.
48. The country that has economically dominated Western Europe is Germany.
49. NAFTA is a trade agreement that removes tariffs and other barriers among the United State, Canada, and
Mexico.
50. Using a(n) strategic alliance strategy, the company finds a partner in the country in which it would like to
conduct business.
51. Local content laws state that products sold in a country should be at least partially made in that country.
52. Greencorp Ltd. Sold the rights for production of 4 Star Soil to Soil X of Italy, and that company now
produces the special mix of fertilized soil and sells it in Italy. This arrangement is called a(n) licensing
arrangement.
53. Which id the following best explains why a nation exports specific products and services? Whether a
nation has an absolute advantage.
54. Bob’s Barbecue has expanded its operations to include several foreign countries. Bob has given individual
or organizations in those countries exclusive rights to market Bob’s products. He has shared his secret
recipe and trade secrets on how to produce the products. In return for this, Bob will receive a percentage
of the revenues generated in each of the countries. Bob’s arrangements are best described as a(n)
licensing arrangement.
55. When Bob began exporting his famous barbecue beef be found that one country would let him bring only
1000 pounds of beef into the country each year. Bob had just discovered a(n) quota.
56. Marina Corp. wants to “go international,” and has already determined that there is international demand
for its products. What should the company do next? Determine of their products need to be modified to
fit the foreign market.
57. The largest free marketplace in the world is the European Union.
58. The absolute advantage form of competitive advantage means that a country can produce something
better or more cheaply than any other country.
59. The balance of trade that Canada has experienced has been favouriable for most of the last thirty years.
60. A firm that produces goods in one country and distributes and sells them in other countries is an
exporter.
61. Citronel is a French company that markets a range of fashionable clothing to Franch consumers under its

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 widely known brand name. The company wants to begin marketing its products worldwide and needs to
decide on the most effective and profitable strategy.
Citronel’s Chief Operating Officer thinks that the company should adopt a standardized marketing
approach throughout the world. Which of the following, if true, would strengthen her position? Long
production runs of the same items would allow the company to save money.

Fembooks Bookstore sells books only over the internet. It has established an excellent reputation for
finding out-of-print and hard-to-find books of interest to women. The CEO of Fembooks is considering
going global with the bisuness, since it is already established on the internet.
62. (1)The vice president of Fembooks argues that they will encounter too many difficulties in taking the
business global via the internet. The president argues that the benefits would be worth the problems
encountered, which of the following statement, if true, would support the argument of the vice president
against going global? While English is the dominant language of the internet, more local traffic would be
generated by Web pages in the local language.
63. (2)Which of the following statement, if true, would support the president’s argument for the global
expansion of Fembooks through the internet? Demographic targeting is more easily accomplished on the
internet than in other forms of advertising.

Derrido is an American firm that has produces several successful animated TV series in the United State.
It is considering with one or more international companies as a way to market its products overseas.
64. (1)An executive at Derrido suggests that a contractual relationship will provide the company with a fair
amount of control over how the foreign partner markets Derrido’s product. Which of the following, if
true, would strengthen this case? Contractual relationships typically include limits and stipulations on the
foreign partner.
65. (2)Another marketing executive points out that a contractual agreement will allow Derrido to blend in
with the local market and goes on to argue that this will be advantageous to the company. Which of the
following, if true, would strengthen this argument? Consumers in many countries are wary of what they
perceive as American cultural imperialism.

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