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Chapter 8: Global Management
TRUE/FALSE
1. In the same way that business is defined as the buying and selling of goods and services, global
business is defined as the buying and selling of goods and services by people from different countries.
ANS: T PTS: 1 DIF: Easy REF: 296

TOP: AACSB Diversity | AACSB Analytic
KEY: Environmental Influence | Strategy
2. Regional domestic investment is a method of investment in which a company builds a new business or
buys an existing business in a foreign country.
ANS: F
Direct foreign investment is a method of investment in which a company builds a new business or buys
an existing business in a foreign country.
PTS: 1 DIF: Moderate REF: 298

3. Direct foreign investment is an increasingly important and common method of conducting global
business.

4. Multinational corporations are corporations that own businesses in two or more countries.

5. Random House publishing company has signed a contract with the Korean-owned Joo-Ang Ilbo Media
Network, which will sell Random House books in Asia’s third largest market. This is an example of a
direct foreign investment.
ANS: F
A direct foreign investment means the company would build a new business or buy an existing
business to expand into a foreign country.
PTS: 1 DIF: Moderate REF: 298 TOP: AACSB Analytic

KEY: Environmental Influence | Legal Responsibilities
6. No matter what part of the world they live in, most consumers prefer to buy domestically made
products rather than imported products.
ANS: F
Although most consumers usually don’t care where the products they buy come from, national
governments have preferred that consumers buy domestically made products in hopes that such
purchases would increase the number of domestic businesses and workers.

TOP: AACSB Reflective Thinking | AACSB Diversity
KEY: Environmental Influence | Individual Dynamics
7. The 20 percent tax on all leather shoes imported from China and Vietnam proposed by the European
Union’s trade commission is an example of protectionism.

TOP: AACSB Analytic KEY: Environmental Influence
8. The basis for determining whether Chupa Chups, the world’s largest maker of lollipops, received an
illegal subsidy from a European Union member nation lies in an examination of the category in which
the candy was classified.
ANS: F
It is an illegal subsidy when the subsidy thwarts competition.
PTS: 1 DIF: Difficult REF: 299 TOP: AACSB Analytic

9. The Maastricht Treaty of Europe was designed to create the European Union and make the euro, the
one common currency, for all members.

10. The North American Free Trade Agreement (NAFTA) is a regional trade agreement between Canada
and the United States. No other nations have signed this trade agreement.
ANS: F
NAFTA (the North American Free Trade Agreement) is a regional trade agreement between the
United States, Canada, and Mexico.
PTS: 1 DIF: Easy REF: 302

11. In a multinational company, managers at company headquarters value global consistency as a

company policy over local adaptation because global consistency simplifies decision-making at
corporate headquarters.

KEY: Environmental Influence | Strategy | Leadership Principles
12. Customs classification is a nontariff trade barrier. It is important to international marketers because the
category assigned by customs agents can affect the size of the tariff and the impact of import quotas.
ANS: T PTS: 1 DIF: Difficult REF: 300

KEY: Environmental Influence | Strategy | Legal Responsibilities
13. One reason that Americans get more for their money is that the U.S. marketplace is the most
competitive in the world even though it has been one of the hardest for foreign companies to enter.
ANS: F
Americans get more for their money because purchasing power in the United States is high.

KEY: Environmental Influence
14. Countries that have not been open to foreign companies and products have higher prices due to a low
level of competition. For example, Japanese trade barriers amount to a 51 percent tax on food for the
average Japanese family.
ANS: T PTS: 1 DIF: Moderate REF: 304

15. Historically, companies have generally followed the phase model of globalization.

16. The phase model of globalization means that companies made the transition from a domestic company
to a global company in three sequential phases. The three phases are exporting, followed by wholly
owned subsidiaries, and finishing with strategic alliances.
ANS: F
The phase model of globalization means that companies made the transition from a domestic company
to a global company in four sequential phases: exporting, followed by cooperative contracts, moving
next to strategic alliances, and finishing with wholly owned affiliates.

17. It appears that all companies follow the phase model of globalization when entering foreign markets.
ANS: F
Evidence suggests that some companies do not follow the phase model of globalization.

18. According to the Fair Labor Association, employees should not be required to work more than 40
hours and 20 hours of overtime.
ANS: F PTS: 1 DIF: Moderate REF: 308

TOP: AACSB Reflective Thinking | AACSB Ethics
KEY: Ethical Responsibilities | HRM
19. The two kinds of cooperative contracts are licensing and franchising.

TOP: AACSB Analytic KEY: Strategy
20. The biggest disadvantage associated with licensing is that the licensor gives up control over the quality
of the good or service sold by the foreign licensee.

TOP: AACSB Analytic KEY: Environmental Influence | Strategy
21. An international joint venture is an example of mutually beneficial direct foreign investment.
ANS: T
A joint venture is an example of a strategic alliance.

KEY: Strategy
22. One of the disadvantages of global joint ventures is that, unlike licensing and franchising, they do not
help companies to avoid tariff and nontariff barriers to entry.
ANS: F
One of the advantages of global joint ventures is that, like licensing and franchising, they help
companies avoid tariff and nontariff barriers to entry.

23. Global joint ventures can be difficult to manage because they represent a merging of four cultures.
ANS: T PTS: 1 DIF: Difficult REF: 310

KEY: Environmental Influence | Strategy | HRM
24. Unlike licensing, franchising, or joint ventures, wholly owned affiliates are 100 percent owned by the
parent company.

TOP: AACSB Analytic KEY: Strategy
25. Deciding where to go global is just as important as deciding how your company will go global.

26. Two factors that help companies determine the growth potential of foreign markets are purchasing
power and foreign competitors.

27. The criteria for choosing an office/manufacturing location are different from the criteria for entering a
foreign market.

28. When conducting global business, companies should attempt to identify the two types of political risk,
which are political uncertainty and economic uncertainty.
ANS: F
When conducting global business, companies should attempt to identify two types of political risk:
political uncertainty and policy uncertainty.

29. The three strategies used to minimize or to adapt to the political risk inherent to global business are
avoidance, control, and cooperation.
ANS: T PTS: 1 DIF: Moderate REF: 317-318

TOP: AACSB Analytic
30. A global business can prevent or reduce political risks by using a proactive strategy in which it lobbies
foreign governments or international trade agencies to change laws, regulations, or trade barriers.
ANS: F
This describes a control strategy.

31. The difficulty that companies face when trying to adapt management practices to cultural differences is
that different cultures will probably perceive management practices and policies differently.

32. Power distance is greatest in countries where power is distributed equally across all societies and
organizations.
ANS: F
Power distance is weakest in countries where power is distributed equally across all societies and
organizations.
PTS: 1 DIF: Moderate REF: 319 TOP: AACSB Diversity

KEY: Environmental Influence | Group Dynamics
33. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, will soon be
available in China, but due to restrictions on conventional promotion, the event will be promoted on
the Great Wall. This modification of promotional strategy reflects a local adaptation to the Chinese
culture.
TOP: AACSB Diversity KEY: Environmental Influence | Strategy
34. When a company based in Singapore hires an Australian manager to run its manufacturing plant in
Australia, the manager would be classified as an expatriate.
ANS: F
An expatriate is someone who lives and works outside of his or her own country.
PTS: 1 DIF: Easy REF: 321 TOP: AACSB Diversity

KEY: Environmental Influence | Group Dynamics
35. The evidence clearly shows that how well an expatriate’s spouse and family adjust to the foreign
culture is the most important factor in determining the success or failure of an international
assignment.

KEY: Environmental Influence | HRM
36. According to “What Really Works,” studies have proven that cross-cultural training helps employees
to adjust more quickly to new cultures that they are unfamiliar with.

MULTIPLE CHOICE
1. Global business:
a. is the buying and selling of goods and services to people from different countries
b. includes any sale of goods and services
c. only involves companies with more than 50 employees
d. refers to sales made to people from different cultures, different regions, and different
nations
e. is unregulated
ANS: A
Definition of global business.

2. ____ is a method of investment in which a company builds a new business or buys an existing
business in a foreign country.
a. A strategic alliance
b. Direct foreign investment
c. A global new venture
d. A joint venture
e. Direct exporting
ANS: B PTS: 1 DIF: Easy REF: 298
3. Which of the following countries has the largest direct foreign investment in the United States?
a. Netherlands
b. Germany
c. Japan
d. Canada
e. United Kingdom
ANS: E PTS: 1 DIF: Moderate REF: 298
4. Nestlé is a company based in Switzerland with manufacturing plants in Columbia, Australia, Canada,
Egypt, Kenya, and more than 90 other nations. Nestlé is an example of a:
a. multidomestic global company
b. multinational corporation
c. ethnocentric organization
d. acculturated corporation
e. macro-marketer
ANS: B
A multinational corporation is defined as a corporation that owns businesses in two or more countries.
PTS: 1 DIF: Easy REF: 297 TOP: AACSB Analytic

5. Several Arab countries boycott Coca-Cola products because the soft-drink company maintains product
distributors in Israel. This boycott is an example of:
a. geocentrism
b. nationalism
c. nationalization
d. a trade barrier
e. acculturation
ANS: D
Trade barriers are defined as government-imposed regulations that increase the cost and restrict the
number of imported goods.

KEY: Environmental Influence | Ethical Responsibilities
6. The two general kinds of trade barriers are:

a. government import standards and industry import standards
b. qualitative and quantitative barriers
c. voluntary and involuntary barriers
d. nationalistic and geocentric barriers
e. tariff barriers and nontariff barriers
ANS: E PTS: 1 DIF: Easy REF: 299
7. Protectionism is the use of trade barriers to protect local companies and their workers from:
a. international unions
b. foreign competition
c. trademark infringements
d. patent violations
e. all of these
ANS: B
Definition of protectionism.

8. After years of flooding international markets with surplus milk products, the European Union, under
heavy pressure from member nations, has curtailed its $59 billion annual subsidy system for its dairies.
This curtailment of subsidies means:
a. an end to tariff barriers
b. European dairy farmers will no longer be protected from international competition
c. dairy products will be given a new customs classification
d. government import standards on dairy products will end
e. an end to voluntary export restraints
ANS: B
Subsidies are long-term, low-interest loans, cash grants, and tax deductions used to develop and
protect companies or special industries, such as dairy farmers.

9. The Japanese government has proclaimed that its snow is different from that found in any other region
of the world. As a result, all snow skis marketed in Japan must be manufactured in Japan. This is an
example of a(n):
a. tariff
b. nontariff barrier
c. import boycott
d. industry subsidy
e. industry nationalization
ANS: B
Nontariff barriers are defined as nontax methods of increasing the cost or reducing the volume of
imported goods.

10. The U.S. Rice Millers’ Association claims that if the Japanese rice market were opened to imports by
lowering tariffs, the resultant lower prices would save Japanese consumers about $6 billion annually.
The Japanese government continues to use the high tariffs to make sure local farmers can earn a living.
The tariff on rice is an example of:
a. a voluntary government restriction
b. geocentrism
c. protectionism
d. a security quota
e. a bureaucratic subsidy
ANS: C
The aim of the Japanese policy is to shield domestic competitors from foreign competition--an aim
consistent with protectionism.
11. A ____ is a nontax method of increasing the cost or reducing the volume of imported goods.
a. tariff
c. trade roadblock
d. risk-aversive boycott
e. subsidy quota
ANS: B PTS: 1 DIF: Moderate REF: 299
12. A(n) ____ is a direct tax on imported goods designed to make it more expensive to buy those goods, in
hopes of reducing the volume of those imported goods in a given country.
a. tariff
c. trade roadblock
d. boycott quota
e. import subsidy
ANS: A
Tariffs are defined as a direct tax on imported goods.

13. The Japanese government has proclaimed that its snow is different from that found in any other region
of the world. To make sure the product is safe for local use, all snow skis marketed in Japan must be
manufactured in Japan. This is an example of a(n):
a. tariff
b. government subsidy
c. voluntary export restraint
d. government import standard
e. subsidy
ANS: D
A government import standard is a standard established ostensibly to protect the health and safety of
citizens, but in reality, often used to restrict imports.
PTS: 1 DIF: Difficult REF: 299

14. Russia imposed limits on how much poultry, beef, and pork could be imported into the nation from the
European Union (EU) in retaliation to limits the EU placed on how much grain Russia could export.
What type of nontariff barrier did Russia use to control the amount of poultry, beef, and pork it
imported from the EU?
a. quotas
b. subsidies
c. boycotts
d. customs classifications
e. duties
ANS: A
A quota is defined as a limit on the number or volume of imported products.

15. The European Union (EU) bans the importation of hormone-fed U.S. beef and bioengineered corn and
soybeans on safety grounds although Americans eat this food every day. This ban is so consumers in
the EU will buy domestic beef and products made from domestically produced corn and soybeans.
This ban is an example of:
a. a subsidy
b. an involuntary import restraint
c. geocentrism
d. expropriation
e. a government import standard
16. ____ are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect
companies or special industries.
a. Quotas
b. Voluntary export restraints
c. Cooperative contracts
d. Government subsidies
e. Tariffs
ANS: D PTS: 1 DIF: Easy REF: 299
17. To protect its farmers, Japan put limitations on the amount of mushrooms and leeks that could be
imported into Japan from China. This limitation is an example of a(n):
a. tariff
b. voluntary import restraint
c. subsidy
d. agricultural import standard
e. import quota
18. The trade agreement that represented the most significant change to the regulations governing global
trade during the 1990s was the:
a. Maastricht Treaty of Europe
b. North American Free Trade Agreement
c. General Agreement on Tariffs and Trade
d. Mercosur
e. Asian Free Trade Arrangement
ANS: C
GATT was a comprehensive trading agreement originally signed by 124 countries, and providing the
basic framework for the World Trade Organization agreement of 1995.

19. The signing of the ____ created a regional trading zone.

a. the Maastricht Treaty
b. the Pact for Free Trade Agreement
c. the Global Agreement for Transactional Trading (GATT)
d. the South-East Asia Pact
e. all of these
ANS: A
The Maastricht Treaty established the European Union (EU) trading zone.

20. The General Agreement on Tariffs and Trade (GATT):

a. decreases both tariffs and nontariff barriers
b. puts stricter limits on government subsidies
c. eliminates tariffs in ten specific industries
d. protects intellectual property, such as trademarks, patents, and copyright
e. does all of these
ANS: E PTS: 1 DIF: Difficult REF: 300
TOP: AACSB Analytic KEY: Environmental Influence | Legal Responsibilities
21. The ____ is a regional trade agreement that liberalizes trade between countries more than any other
such agreement.
a. Maastricht Treaty of Europe
b. Association of South East Nations
c. Asia-Pacific Economic Cooperation agreement
d. North American Free Trade Agreement
e. Free Trade Area of South America
ANS: D PTS: 1 DIF: Moderate REF: 302
TOP: AACSB Reflective Thinking KEY: Environmental Influence
22. Trade barriers and free trade agreements matter to consumers because they do which of the following:
a. increase choices
b. increase competition
c. increase purchasing power
d. decrease what people pay for necessities
e. all of the choices
23. One of the major questions that a company must typically answer once it has decided to go global is:
a. How many additional employees will the company need?
b. To what extent should the company standardize or adapt business procedures?
c. To what extent should a company abide by global or regional trade agreements?
d. Will the organization’s mission statement need to be changed?
e. How many new shareholders will be influenced by global activities?
ANS: B
The question of whether to follow a strategy of global consistency or local adaptation is fundamental
to multinational business.

24. When a multinational company that acts with ____ has offices, manufacturing plants, and distribution
facilities in different countries, it will run those offices, plants, and facilities based on the same rules,
guidelines, policies, and procedures.
a. policy certainty
b. global consistency
c. global adaptation
d. global certainty
e. regiocentrism
25. In a multinational firm, managers at company headquarters typically prefer an emphasis on ____
because it simplifies decisions.
a. local consistency
b. local adaptation
c. global adaptation
d. global consistency
e. domestic adaptation
TOP: AACSB Analytic
26. Which of the following approaches tends to be most important to making an international business
successful in any given country?
a. global consistency
b. local adaptation
c. domestic synergy
d. predetermined benchmarks
e. mechanistic controls
ANS: B
Local adaptation is more likely to be responsive to customer needs and tastes within a particular
market.
PTS: 1 DIF: Easy REF: 305-306 TOP: AACSB Analytic

27. Historically, most companies have used the ____ to successfully enter foreign markets.
a. phase model of globalization
b. global new venture approach
c. ripple approach
d. market echo approach
e. guerrilla approach
ANS: A
The phase model is incremental in its approach to growing an international business, and was
attractive because it increased risk/exposure to foreign markets gradually over time.

28. Which of the following represents the correct sequence for the phase model of globalization?
a. exporting; wholly-owned affiliates; cooperative contracts; strategic alliances
b. exporting; cooperative contracts; wholly owned affiliates; strategic alliances
c. exporting; cooperative contracts; strategic alliances; wholly owned affiliates
d. exporting; strategic alliances; cooperative contracts; wholly owned affiliates
e. home country sales; exporting; job ventures; strategic alliances, and direct investment
ANS: C PTS: 1 DIF: Difficult REF: 306
29. ____ occurs when a company sells domestically produced products to customers in foreign countries.
a. Direct foreign investment
b. Franchising
c. Licensing
d. Exporting
e. A joint venture
ANS: D
The definition of exporting.

30. Jim Beam is a distillery in the United States. In 2000, it began marketing its U.S. made liquor to
customers in 27 different European countries. Since it was at the first stage of the phase model of
globalization, it used ____ to reach European customers.
a. licensing
b. franchising
c. strategic alliances
d. exporting
e. direct investment
31. Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of its
Moodmatcher lipstick in Japan annually. It has no physical presence within the country beyond the
fact its products are sold there. Fran Wilson Creative Cosmetics uses ____ to reach the Japanese
market.
a. franchising
b. direct investment
c. licensing
d. a strategic alliance
e. exporting
32. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, is produced
by MTV Networks, a part of the U.S. media group Viacom. The television show is broadcast in 171
international markets and has been translated into 26 different languages. Given that the show is
produced in the United States, which form of global business is MTV Networks using?
a. direct foreign investment
b. franchising
c. strategic alliance
d. exporting
e. a joint venture
ANS: D
Exporting occurs when a company sells domestically produced products to customers in foreign
countries.

TOP: AACSB Analytic | AACSB Diversity
33. A(n) ____ is an agreement in which a foreign business owner pays a company a fee for the right to
conduct that business in his or her country.
a. exporting agreement
b. cooperative contract
c. joint venture
d. strategic alliance
ANS: B
Definition of a cooperative contract.

34. ____ are both examples of cooperative contracts.

a. Licensing and joint ventures
b. Franchising and licensing
c. Direct investment and indirect investment
d. Direct exporting and indirect exporting
e. Joint ventures and strategies alliances
35. Sodiaal is a French cooperative that owns the name, the trade secrets, and the patents on Yoplait
yogurt. Before it purchased a controlling stake in Yoplait S.A.S. in 2011, General Mills paid Sodiaal
for the right to sell Yoplait yogurt in the United States. This is an example of:
a. licensing
b. a global joint venture
c. exporting
d. a strategic alliance
ANS: A
Licensing is defined as an agreement in which a domestic company, the licensor, receives royalty
payments for allowing another company, the licensee, to produce the licensor’s product, sell its
service, or use its brand name in a specified foreign market.
36. Robert Mondavi Wineries entered into an agreement with Baron Philippe de Rothschild, owner of
Bordeaux’s First Growth chateau, to produce a top quality wine in California. The two companies
working together to create a new product is an example of:
a. exporting
b. licensing
c. a strategic alliance
d. a cooperative contract
e. a wholly-owned subsidiary
ANS: C
A strategic alliance is an agreement in which companies combine key resources.

37. General Motors and Russia’s largest domestic carmaker collaborated to create a third independent
company to produce sport utility vehicles under the Chevrolet brand name. The two companies created
a:
a. global new venture
b. wholly owned affiliate
c. joint venture
d. strategic subsidy
e. new franchise
ANS: C
A joint venture is a strategic alliance in which two existing companies collaborate to form a third
independent company.

38. Ernest & Young, an international accounting and management consulting company, entered Hungary
first by establishing a joint venture with a local firm. Ernest & Young later acquired the company with
which it had the alliance. Ernst & Young then had a(n) ____ in Hungary.
a. franchise
b. licensing arrangement
c. cooperative contract
d. wholly owned affiliate
e. export agency
ANS: D
A wholly-owned affiliate is defined as foreign offices, facilities and manufacturing plants that are 100
percent owned by the parent company.

39. All global new ventures share two common factors. One is the bringing of a good or service to several
different foreign markets at the same time. The other is:
a. the development of culturally-specific implementation policies
b. the use of local adaptation strategy
c. a mechanistic organizational culture
d. the ability to respond quickly and efficiently to any changes in the external environment
e. none of these
ANS: E
The second factor is that, rather than going global one country at a time, new global ventures bring a
product or service to market in several foreign markets at the same time.

40. Which of the following types of global organization is most likely to suffer problems associated with
being culture bound?
a. licensing
b. franchising
c. joint ventures
d. global new ventures
e. wholly owned subsidiaries
ANS: B
A franchising organization is defined as a collection of networked firms in which the manufacturer or
marketer of a product or service (franchisor) licenses the entire business to another person or
organization (franchisee). Because franchisors are typically basing their plans on success in their home
market, and because franchisees are embedded in foreign cultures, this form is especially vulnerable to
cultural misunderstandings.

41. When McDonald’s entered into an agreement with a French entrepreneur who wanted to own and
operate a McDonald’s fast-food restaurant in Paris, it saw the new restaurant as an opportunity.
Unfortunately, the restaurant in Paris was not maintained at the cleanliness standards prescribed by
McDonald’s but at the cleanliness standards acceptable to the French. McDonald’s brought legal
action to have the restaurant closed. This example illustrates:
a. an opportunity for McDonald’s to enter into more joint ventures
b. a need for McDonald’s to curtail its international franchising
c. a cultural threat against McDonald’s
d. a weakness within the McDonald’s franchising system
e. a problem with franchising in different cultures
ANS: E
Cross-cultural franchises are especially vulnerable to such conflicts and misunderstandings.

42. Proton is the national carmaker of Malaysia. A(n) _____ with Volkswagen had been seen as vital to
the survival of the company. VW promised to provide technical help in improving the quality of
Proton cars, to add VW models to Proton’s product line, and to assist with expanding Proton’s small
export market. In return, VW sought a degree of management control that found little favor with the
Malaysian government that owns Proton.
a. exporting license
b. cooperative contract
c. franchisee agreement
d. strategic alliance
e. indirect investment
ANS: D
A strategic alliance is an agreement in which companies combine key resources, costs, risks,
technology, and people.

KEY: Strategy | Environmental Influence
43. A ____ is a strategic alliance in which two existing companies collaborate to form a third, independent
company.
a. joint venture
b. franchise
c. wholly owned affiliate
d. global new venture
e. cooperative contract
ANS: A PTS: 1 DIF: Moderate REF: 310
44. Which of the following forms of organizing a global business help companies to avoid tariff and
nontariff barriers to entry of a given foreign market?
a. licensing
b. franchising
c. global joint ventures
d. wholly owned affiliates
e. all of these
ANS: E
Each of these forms involves situating operations and management within a foreign country. The
franchisee, licensee, foreign venture partner, or management of foreign subsidiary typically benefit
from some tariff/nontariff relief over what a multinational exporter would face.
PTS: 1 DIF: Difficult REF: 310 TOP: AACSB Reflective Thinking

45. In Canada, General Motors and Suzuki entered into a ____ to create CAMI Automotive. Suzuki
management ran the plant, which made GM’s Geo cars. The agreement gave Suzuki access to GM
dealers to sell its brand of vehicles.
a. licensing agreement
b. subsidiary arrangement
d. exporting agency
e. joint venture
ANS: E
An example of a joint venture would be two existing firms pooling resources to launch and support a
third, independent venture.

46. German chip manufacturer Infineon AG joined with Motorola Inc. and Agere Systems Inc. to establish
a new company to develop and license chip designs for cell phones. These three companies created a:
a. license facilitator
b. subsidized corporation
c. global new venture
d. joint venture
e. export merchant
ANS: D
A joint venture is a strategic alliance in which two existing companies collaborate to form a third
independent company.

47. Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. What method of
organizing for global business has Ford used in this example?
a. joint venture
b. strategic alliance
d. wholly owned affiliate
e. strategic franchise
ANS: D
A wholly owned affiliate is defined as foreign offices, facilities and manufacturing plants that are
owned by the parent company.

48. The primary disadvantage of using wholly owned affiliates as the means of entering a foreign market
is:
a. dumping
b. countertrading
c. nontariff barriers
d. acculturation
e. costs
ANS: E
The wholly owned affiliate is typically the most expensive form of global market entry.

49. Which of the following is a trend that has allowed companies to skip the phase model when going
global?
a. quick, reliable air travel
b. the globalization of the cocooning trend
c. a critical mass of resources
d. the metamorphosis of marketplaces
e. all of these
ANS: A
Three factors are identified as supporting the emergence of global new ventures: 1) quick, reliable air
travel; 2) low-cost communication technologies; and 3) critical mass of business people with extensive
international business experience.

50. New companies with sales, employees, and financing in different countries that are founded with an
active global strategy are called:
a. global new ventures
b. strategic alliances
c. wholly-owned affiliates
d. franchisees
e. subsidized corporations
51. A country or region that has an attractive business climate for companies that want to go global has:
a. easy access to growing markets
b. experienced marketplace metamorphosis
c. eliminated all political risks
d. a limited infrastructure
e. all of these
ANS: A
Three attributes that contribute to an attractive business climate are identified as: 1) easy access to
growing markets; 2) cost-efficient location; and 3) lower level of political risk.

52. A country or region that has an attractive business climate for companies that want to go global has:
a. a large population of unskilled workers
b. an effective but cost-efficient place to build an office or manufacturing site
c. a small youth population
d. natural boundaries
e. all of these
ANS: B
Three attributes that contribute to an attractive business climate are identified as: 1) easy access to
growing markets; 2) cost-efficient location; and 3) lower level of political risk.
PTS: 1 DIF: Easy REF: 314 TOP: AACSB Reflective Thinking

53. The most important factor used by a globalizing company for determining if a country or a region has
an attractive business climate is:
b. marketplace metamorphosis
c. global synergy
d. a large, unskilled workforce
e. natural boundaries
ANS: A
None of the other market factors can “compensate” for a lack of access or poor market potential.

54. In the past decade, purchasing power has doubled, and poverty has been halved in Vietnam, making
the nation:
a. a good choice for companies looking for attractive global markets
b. a potential target for nationalization activities
c. a less-than-desirable choice for companies looking for new global markets
d. a source of Asian protectionism
e. a country that has eliminated all tariff barriers
ANS: A
Countries with high and growing levels of purchasing power are good choices for global expansion.

KEY: Environmental Influence | Creation of Value
55. Which of the following factors helps a company determine the growth potential of a foreign market?
a. political uncertainty
b. purchasing power
c. type of infrastructure
d. land availability
e. natural boundaries
ANS: B
Purchasing power is defined as a comparison of the relative cost of a standard set of goods and
services in different countries. The growth potential of a given market is determined by its purchasing
power and the strength of foreign competitors. Markets are most attractive when they have solid and
growing purchasing power and relatively weak existing competition.

56. A cosmetics company that is considering entering the South American market would be especially
interested in the discretionary income within that country. In other words, ____ would be a
determining factor in its global strategy.
a. purchasing power
b. political uncertainty
c. expropriation potential
d. infrastructure
e. sociocultural trends
ANS: A
Purchasing power is defined as a comparison of the relative cost of a standard set of goods and
services in different countries. Discretionary income is that portion of purchasing power above and
beyond income required to meet basic living expenses (i.e., “spending money”).

57. According to the ASEAN trade agreement, Malaysia was supposed to eliminate nearly all tariff
barriers protecting its car market by 2008. With this act, the Malaysian government would:
a. stop using nontax methods to increase the volume of imported goods
b. eliminate most protectionism
c. reduce the tax it gathers on imported cars
d. nationalize the car industry
e. limit the number of cars that can be exported
ANS: C
A tariff is a direct tax on imported goods.

58. What are the two types of political risk that affect companies conducting global business?
a. political uncertainty and policy uncertainty
b. policy uncertainty and expropriation potential
c. cultural strength and political risks
d. infrastructure dynamism and political uncertainty
e. nationalism and economic uncertainty
59. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The
Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the
following e-mail: “We wish to warn the Chinese government and its oil companies to steer well clear
of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese
government, by investing in stolen crude, places its citizens in our line of fire.” Thus, _____ forced
the Chinese government to rethink its investment in international petroleum.
a. policy uncertainty
b. economic uncertainty
c. infrastructure regulation
d. nationalistic equity
e. political uncertainty
ANS: E
Political uncertainty is the risk of major changes in political regimes that can result from a war,
revolution, death of political leaders, social unrest, or another influential event.

60. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The
Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the
following e-mail: “We wish to warn the Chinese government and its oil companies to steer well clear
of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese
government, by investing in stolen crude, places its citizens in our line of fire.” If, as a result of this
terrorist act, China decided to divest itself of all of its business in Nigeria, China would have
implemented a(n):
a. avoidance strategy
b. control strategy
c. cooperative strategy
d. elimination strategy
e. self-protection strategy
ANS: A
An avoidance strategy is used when the political risks associated with a foreign country are viewed as
too great.

61. Starbucks is expanding its global operations into South America in spite the real probability of civil
wars and terrorist activities in many of the continent’s nations. As Starbucks expands into South
America, it must deal with:
b. economic uncertainty
c. infrastructure regulation
d. nationalistic equity
e. strategy risk
ANS: A
Political uncertainty is defined as the risk of major changes in political regimes that can result from
war, revolution, death of political leaders, social unrest, or other influential events.

KEY: Environmental Influence | Ethical Responsibilities | Strategy
62. Starbucks is a chain that is rapidly expanding its global operation. As it expanded into South America,
its research showed that Chileans on average drink only 150 cups of coffee annually, and people in
Argentina only drink about half that amount. An average citizen of the United States drinks 345 cups
annually. These differences in annual coffee consumption most likely reflect:
a. policy uncertainties
b. nationalistic motivations
c. cultural differences
d. economic uncertainties
e. differences in internal marketing strategies
ANS: C PTS: 1 DIF: Moderate REF: 318
63. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing
of cellular phones. Several mining companies recently moved their operations out of the region due to
a bloody civil war resulting from a change in rulers. This is an example of how ____ can influence
global business.
b. policy uncertainty
c. economic risk
d. infrastructure failure
e. nationalization
ANS: A
Political uncertainty is defined as the risk of major changes in political regimes that can result from
war, revolution, death of political leaders, social unrest or other influential events.
64. Prior to the Japanese government decreeing that Japanese snow was different from all others and the
requirement that all snow equipment marketed in the country be made in Japan for safety reasons,
several companies from the U.S. and Europe had marketed their snow equipment in Japan. The
elimination of non-Japanese companies from the market is an example of how ____ can influence
global business.
a. infrastructure modifications
c. political uncertainty
d. competitive uncertainty
e. sociocultural modifications
ANS: B
Policy uncertainty is defined as the risk associated with changes in laws and government policies that
directly affect the way foreign companies conduct business. The Japanese government changed its
policy regarding snow equipment.

65. What are the strategies that can be used to minimize or adapt to the political risk inherent to global
business?
a. protectionist, avoidance, and offensive strategies
b. creative, cooperative, and defensive strategies
c. cooperative, customary, and nationalistic strategies
d. avoidance, protectionist, and guerrilla strategies
e. control, avoidance, and cooperative strategies
ANS: E PTS: 1 DIF: Moderate REF: 317-318
66. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing
of cellular phones. A company that mines that rare mineral decided to not invest in the country due to
a bloody civil war resulting from a change in rulers. The mining company used a(n):
a. avoidance strategy
b. control strategy
d. elimination strategy
e. self-protection strategy
ANS: A
Avoidance is used when a company judges the political risk to be too high in a particular market, and
therefore decides not to operate in the market.

67. The ____ strategy of minimizing or adapting to the political risk inherent to global business makes use
of joint ventures and collaborative contracts.
a. defensive
b. control
c. cooperative
d. avoidance
e. offensive
ANS: C PTS: 1 DIF: Difficult REF: 318
68. A firm using a ____ strategy to prevent or reduce political risks will lobby foreign governments or
international trade agencies to change laws, regulations, or trade barriers that hurt their business in that
country.
a. defensive
b. control
c. cooperative
d. protectionist
e. avoidance
ANS: B
Definition of the control strategy.

69. Green Giant learned that it could not use the Jolly Green Giant character in parts of Asia where a green
hat worn by a man signifies that he has an unfaithful wife. This is an example of a(n) ____ that
influenced global marketing.
a. geocentric attitude
b. control strategy
d. cultural difference
e. avoidance strategy
70. ____ is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the
people from a particular country.
a. National mindset
b. National culture
c. Cultural nationalization
d. Cultural diversity
e. National diversity
71. Hofstede’s research has shown there are:

a. no cultural differences among nations in which Spanish is the national language
b. two distinct methods for dealing with cultural differences--adaptation and continuation
c. direct relationships existing between type of infrastructures and growth potential
d. five consistent dimensions of cultural differences across countries
e. four factors upon which a company should base its decision to globalize
ANS: D
Hofstede identified five consistent cultural dimensions: 1) individualism/collectivism; 2)
masculinity/femininity; 3) uncertainty avoidance/acceptance; 4) short-/long-term orientation; and 5)
power distance (high/low).

TOP: AACSB Diversity | AACSB Analytic KEY: Environmental Influence
72. A news article on Latin America read, “Mexico is the closest Latin America gets to the U.S. both
geographically and culturally.” According to Hofstede, this means the Mexican culture:
a. does not support individualism
b. is strong in power distance
c. has a masculine orientation
d. is not oriented towards individualism
e. is accurately described by all of these
ANS: C
On Hofstede’s Cultural Dimensions the U.S. scores relatively high on individualism, masculinity, and
short-term orientation; and moderate on uncertainty avoidance.

73. According to Hofstede’s research on cultural dimensions, ____ cultures emphasize the importance of
relationships, modesty, caring for the weak, and quality of life.
a. economic-based
b. feminine
c. relationship-oriented
d. individualistic
e. masculine
ANS: B PTS: 1 DIF: Moderate REF: 319
74. The people who live on the island of Malta are described as happy-go-lucky people who are
comfortable with an unstructured life and deal well with sudden changes. In terms of Hofstede’s
cultural differences, the people of Malta have a:
a. culture based on equity
b. low degree of uncertainty avoidance
c. masculine culture
d. high degree of uncertainty avoidance
e. feminine culture
ANS: B
Uncertainty avoidance is defined as the degree to which people in a country are uncomfortable with
unstructured, ambiguous, unpredictable situations. Here the Maltese are described in a manner
consistent with a low degree of this cultural dimension.

75. The term ____ is used by Hofstede to describe the degree to which people in a country are
uncomfortable with unstructured, ambiguous, unpredictable situations.
a. power distance
b. masculinity
c. short-term/long-term orientation
d. uncertainty avoidance
e. risk aversion
76. According to Hofstede, the people in a culture that is described as ____ are oriented to the present and
seek immediate gratification
a. long-term oriented
b. masculine
c. short-term oriented
d. individualistic
e. feminine
ANS: C PTS: 1 DIF: Moderate REF: 320
77. An expatriate is someone who:

a. claims dual citizenship
b. lives and works outside of his or her own country
c. believes strongly in nationalization
d. is unhappy with his or her present residence
e. desires to be employed in a country outside of his or her own
TOP: AACSB Analytic KEY: Environmental Influence | HRM
78. Some 5.5 million British citizens, about 10 percent of Great Britain’s total population, now live as
expatriates, with 200,000 more every year. This means that:
a. about 90 percent of the people born in Great Britain are bilingual
b. approximately 10 percent of people born in Great Britain do not work there
c. about 10 percent of the British population is involved in global marketing at a level
beyond exportation
d. approximately 10 percent of the people living Great Britain were not born there
e. about 10 percent of the British population works for international companies
ANS: B
An expatriate is someone who lives and works outside of his or her own country.
PTS: 1 DIF: Easy REF: 321 TOP: AACSB Diversity

79. The purpose of predeparture language training and cross-cultural training is to:
a. cater to employees who require affective learning
b. increase job empathy
c. encourage job specialization
d. reduce the uncertainty for those becoming expatriates
e. avoid legal problems in the future
80. According to the What Really Works, “Cross-Cultural Training,” 21 different research studies show
cross-cultural training:
a. does not have any anecdotal evidence to support its usefulness
b. really helps expatriates adjust to foreign cultures
c. is largely a waste of resources
d. does not prepare expatriates for one-to-one relationships with natives
e. cannot be justified by any current research
ANS: B
Meta-analysis reports that cross-cultural training has a 79% probability of reporting healthy
psychological well being and self-development in a foreign assignment.

81. The evidence clearly shows that ____ is the most important factor in determining the success or failure
of an international assignment.
a. the amount of language training provided to the expatriate
b. the amount of cross-cultural training provided to the expatriate
c. how well an expatriate’s spouse and family adjust to the foreign culture
d. how willing the expatriate was to accept the foreign assignment
e. the similarity of the foreign language to the expatriate’s native language
ANS: C
Spouses and family of the expatriate worker are often more immersed in the daily culture of the
foreign country, and their adaptability exerts a strong influence on the performance and retention of the
expatriate worker.

82. In order to assess how well managers and their families are likely to adjust to foreign cultures, ____ is
used.
a. cultural awareness screening
b. sociocultural analysis
c. sensitivity screening
d. sociocultural diagnostics
e. adaptability screening
ANS: E PTS: 1 DIF: Difficult REF: 323
Coca-Cola
In 2003, Coca-Cola attempted to enter the Indian market once again. Georgia-based Coca-Cola was
attracted to India’s market because India’s per capita consumption of carbonated beverages is less than
half of Pakistan and about five percent of China’s. India has the fastest-growing demand for consumer
products in the world. Coke’s first attempt a decade earlier had resulted in gross mismanagement,
which led to the company losing $20 billion Indian rubles. In Coke’s first attempt to enter the Indian
market, it purchased Thumbs Up, the leading India-based carbonated soft drink, and hoped to replace
Thumbs Up with Coca-Cola while maintaining the Thumbs Up distribution strategy. The greatest
indignity is that India is one of the few markets where Pepsi has outsmarted Coke. For its return to the
market, Coca-Cola built five plants, cut costly staff, revamped transport, shrunk bottles, and made
them lighter to increase a truck’s carrying capacity. It also increased its number of distributors and
dumped a global advertising campaign that was irrelevant to the Indian market.
83. Refer to Coca-Cola. In its first attempt to enter the Indian market, Coca-Cola engaged in:
a. acculturation
b. direct foreign investment
c. internal importing
d. globalization
e. restraint of trade
ANS: B
Coca-Coal acquired an Indian company, an example of the direct foreign investment approach to
market entry.

84. Refer to Coca-Cola. As a multinational company, Coca-Cola:

a. owns businesses in more than one country
b. is not affected by protectionism
c. is able to avoid trade barriers
d. pays no tariffs
e. is accurately described by all of these
ANS: A PTS: 1 DIF: Easy REF: 297
85. Refer to Coca-Cola. What kind of strategy has Coca-Cola used for its second entry into the Indian
market?
b. market differentiation
c. market restructuring
d. local adaptation
e. acculturation
ANS: D
Coca-Cola has made changes in its bottling, distribution, and advertising which are intended to make it
more responsive to the needs and desires of the Indian market.

86. Refer to Coca-Cola. One way Coca-Cola increased distribution of Coke was to enter into a ____ with a
refrigerator manufacturer. Coca-Cola provided the financing needed for the retailers to purchase
refrigeration units, and the refrigeration manufacturer gave deep price discounts.
a. franchise agreement
b. direct investment
c. strategic alliance
d. brokered agreement
e. new-venture strategy
ANS: C
Strategic alliances are defined as an agreement in which companies combine key resources, costs, risk,
technology, and people. Coca-Cola and this Indian refrigerator manufacturer are sharing resources to
expand refrigerated storage/distribution networks.

87. Refer to Coca-Cola. What two factors determined Coca-Cola’s desire to invest again in the Indian
market?
a. political stability and nationalization
b. acculturation potential and discretionary income
c. the present of the competition and acculturation potential
d. the lack of substantial competition and India’s infrastructure
e. India’s purchasing power and the presence of the competition
ANS: E PTS: 1 DIF: Difficult REF: 313-314
88. Refer to Coca-Cola. The need for Coca-Cola to create a promotional strategy that was specifically
targeted to the Indian market reflects a(n):
a. diversification strategy
b. awareness of cultural differences
c. desire to maintain a high contribution margin
d. insular approach to strategy
e. desire to maintain global consistency
ANS: B
The advertising associated with Coca-Cola’s first entry into the Indian market was judged irrelevant.
The company decided to alter its approach to better adapt to the Indian culture.

AES and Cameroon

AES was established in Arlington, Virginia, in 1981 expressly to take advantage of what its founders
foresaw as an inevitable wave of global liberalization and privatization. The company owns a single
electric utility in Indianapolis and about 20 generating plants in the United States; the rest of its
operations are scattered over 27 countries. When Cameroon's government announced that it would sell
a majority stake in its electricity system, AES saw it as a perfect fit for its global approach--and as a
way to position AES for what it hoped would be a wave of utility privatizations in other African
countries. The absence of other bids on the project might have hinted that AES was in for a struggle.
Cameroon is perpetually impoverished and one of the most difficult places in the world to do business.
In the late 1990s, Transparency International, the anticorruption watchdog, ranked Cameroon as the
most corrupt country in the world--for the second year.
The state-owned utility company from which AES took over was broke, milked dry by the
government and by some of its own employees, who had created their own mini-empires by reselling
power siphoned from the bedraggled network of power lines and decades-old electricity meters. Bill
payment was erratic, in part because of the government's curious practice of requiring everyone to pay
their monthly bills in cash, in person, on nearly the same date, and at a few select payment centers.
AES's first country manager in Cameroon was an American who had never worked in Africa and
spoke no French, the nation's lingua franca.
The American was soon replaced with one of the few Cameroonians still in a high-ranking
position at the utility, Jean-David Bile. Bile canceled a scheduled rate hike. To further control costs,
Bile attacked a procurement system of almost comic inefficiency. When he took charge, the utility still
had an astonishing 3,000 suppliers, each of whom negotiated directly with the company. Not all of his
ideas were successful. Bile believed a government minister who told him the essential equipment for
improving a generating plant could be imported without paying any duties. When the equipment
arrived, however, the government imposed heavy duties and kept the project at a stalemate for months
until AES paid the duties and additional penalty fees.
89. Refer to AES and Cameroon. How does AES invest in global business?
a. a strategic alliance
c. a global new venture
d. a joint venture
e. direct exporting
ANS: B
Direct foreign investment occurs when a company builds a new business or buys an existing business
in a foreign country.

90. Refer to AES and Cameroon. The duties charged by Cameroon were an example of:
a. import quotas
b. customs classifications
c. import standards
d. tariffs
e. boycotts
ANS: D
Tariffs are direct taxes on imported goods.

91. Refer to AES and Cameroon. One of Bile’s first moves as the head of the operation was to invite
native chiefs to chant and pour libations of water, wine, and whiskey to seek favor from the gods when
AES opened a new oil-fired plant. AES found it effective to use _____ for its Cameroon operation.
b. domestic synergy
c. the guerilla approach
d. the product ripple approach
e. local adaptation
ANS: E
Local adaptation occurs when a company modifies its rules, guidelines, policies, and procedures to
adapt to differences in foreign customers, governments, and regulatory agencies.
92. Refer to AES and Cameroon. As one of the poorest nations in Africa, Cameroon lacked _____, an
important sign of growth potential in foreign markets.
a. an economic infrastructure
b. work life quantity
c. purchasing power
d. foreign competition
e. tariff barriers
ANS: C
Strong purchasing power, a comparison of the relative cost of a standard set of goods and services in
different countries, can indicate good growth potential in a foreign market.

93. Refer to AES and Cameroon. When officials told AES it would not have to pay duties to import
necessary equipment and then required it to pay them, AES faced problems associated with _____ .
c. economic risk
d. infrastructure failure
e. nationalization
ANS: B
Policy uncertainty is the risk associated with changes in laws and government policies that directly
affect the way foreign companies conduct business.

94. Refer to AES and Cameroon. The other utility companies that chose not to bid on an opportunity to
own and operate the Cameroonian utilities used a(n) _____ strategy.
a. defensive
b. control
c. cooperative
d. avoidance
e. offensive
ANS: D
Companies use avoidance strategies if they decide that the political risks associated with a foreign
country or region are too great.

95. Refer to AES and Cameroon. According to Hofstede, Cameroonians would be classified as having
_____ because lack of structure is accepted as a national norm.
a. a feminine culture
b. a masculine structure
c. a long-term orientation
d. low uncertainty avoidance
e. high risk aversion
ANS: D
Uncertainty avoidance is the degree to which people in a country are uncomfortable with unstructured,
ambiguous, unpredictable situations.

96. Refer to AES and Cameroon. The first CEO that AES brought into manage the Cameroonian utilities
was a(n):
a. expatriate
b. interim manager
c. nationalistically naïve manager
d. bureaucratic manager in the sense that Weber used the term
e. privatized manager
ANS: A
An expatriate is someone who lives and works outside his or her native country.

KEY: Environmental Influence | Leadership Principles
97. Refer to AES and Cameroon. How does AES invest in global business?
a. a strategic alliance
c. a global new venture
d. a joint venture
e. direct exporting
ANS: B
Direct foreign investment occurs when a company builds a new business or buys an existing business
in a foreign country.

Tommy Hilfiger
Less than a decade ago, Tommy Hilfiger (the company) was selling billions of dollars a year in
affordable fashions, cosmetics, and accessories, and Tommy Hilfiger, the designer, was successful
enough to be recognized on a first name basis. Nonetheless, operating exclusively in U.S. markets left
the company vulnerable to a turbulent retail industry and limited the company’s growth potential. With
annual revenues of $1.9 billion domestically, Tommy Hilfiger began investigating growth
opportunities in Europe and Asia. At the height of its U.S. popularity, Hilfiger opened a large store full
of traditional Hilfiger apparel on Bond Street in London.
Then very quickly, the company’s success dried up. Sales dropped to $1.1 billion only a few
years after they had peaked, and then plummeted to a comparatively paltry $260 million. As a result of
this astounding 86% drop in revenue, the company closed 30 Tommy Hilfiger stores in the United
States and shut down its children’s wear and Tommy Jens’s divisions. Overseas, Tommy was
sputtering. The Bond Street store closed the same year it opened, largely because of differing
European fashion tastes.
Slow growth rates were not the only reason for the dramatic change in the company’s
performance. More damaging was the rapid consolidation of U.S. retail stores. Many of the major
department and discount stores where Hilfiger items are sold have either closed or been purchased by
large department store chains. Today a few retailers, like Macy’s and Kohl’s, account for more than a
third of U.S. clothing sales, and those same retailers often sell their own private brands, too.
To avoid stalling out completely, Tommy Hilfiger needed to figure out how to expand
globally. The failure overseas of Tommy’s traditional U.S. look prompted the designer to adapt to
cultural differences in Europe and Asia. The biggest change was the decision to start creating designs
uniquely for the European consumer. Hilfiger opened a design center in Amsterdam, dedicated to
designing clothes and accessories for consumers from different European cultures. For example,
because Germans and Italians have different preferences for sweaters, Hilfiger has created a line of
sweaters for Germans clients, which is different from what it designs for Italian clients.
Those differences presented challenges; as managers soon discovered, the European market
differed greatly from the U.S. market. CEO Fred Gehring said, “The fragmentation of dealing with all
these little mom-and-pop stores is so alien to American businesses,” yet, “these stores are the
backbone of every major brand” that sells in Europe. Further, because there are so few locations for
new stores available (unlike in the U.S.), it makes more sense to work with existing retailers. To
handle the fragmented market, Hilfiger opened 21 regional showrooms, featuring 25 clothing lines,
each with several tailored to particular markets. Even though that led to higher operating costs,
operating in that manner enabled the company to achieve much higher profit levels and to place its
products in 4,500 boutique stores in 15 European countries.
In addition to selling branded apparel in boutiques, Hilfiger opened 34 company-owned
Hilfiger Denim stores throughout Europe. Designs and layouts of the stores and their merchandise are
tailored to the cultural tastes of the countries where they are located. Hilfiger has a higher margin on
products sold at its company-owned stores, as well as complete control over the facilities. The new
strategy has been a success. Today, European sales now account for 37% of Hilfiger’s $1.78 billion in
sales.
98. Refer to Tommy Hilfiger. You know that Tommy Hilfiger is a global business because it:
a. buys and sells goods and services to people from different countries
b. sells goods and services
c. has more than 150 employees
d. is financed through stockholders
e. is unregulated
ANS: A
Global business is the buying and selling of goods from different countries.

99. Refer to Tommy Hilfiger. When Tommy Hilfiger first sold its clothing globally, it made the mistake of
relying too heavily on_____, which means its business was being not designed for specific countries’
markets, cultures, and employees.
a. local adaptation
b. cooperative contracts
c. global consistency
d. ethnocentrism
e. acculturation
ANS: C
Global consistency occurs when a multinational company has office, manufacturing plants, and
distribution facilities in different countries and runs them all using the same rules, guidelines, policies,
and procedures.
100. Refer to Tommy Hilfiger. The company is interested in expanding into the Indian market, probably
because India offers the company:
b. experienced marketplace metamorphosis
c. the elimination of all political risks
d. a limited infrastructure
e. all of these
ANS: A
Easy access to growing markets is the most important factor in an attractive business climate.

101. Refer to Tommy Hilfiger. Which of the following factors should Tommy Hilfiger have considered
when selecting a location for its design centers?
a. work force quality
b. its own company strategy
c. tariff and nontariff barriers
d. exchange rates
e. all of these
ANS: E
Companies consider multiple factors as they decide where to locate new offices or factories.
PTS: 1 DIF: Moderate REF: 312-318 TOP: AACSB Analytic

SHORT ANSWER
1. Define direct foreign investment. Name one of the top five countries with the largest direct foreign
investment in the United States.
ANS:
Direct foreign investment is a method of investment in which a company builds a new business or buys
an existing business in a foreign country. The top five countries with the largest direct foreign
investment in the U.S. are, respectively, the United Kingdom, Japan, the Netherlands, Canada, and
Germany.

2. What are trade barriers? Identify the two general kinds of trade barriers used by governments, and give
one example of each.
ANS:
Trade barriers are government-imposed regulations that increase the cost and restrict the number of
imported goods. Governments have used two general kinds of trade barriers: tariff and nontariff
barriers. A tariff is a direct tax on imported goods. Tariffs increase the cost of imported goods relative
to domestic goods. For example, the U.S. import tax on trucks is 25 percent. Nontariff barriers are
nontax methods of increasing the cost or reducing the volume of imported goods. There are five types
of nontariff barriers: quotas, voluntary export restraints, government import standards, government
subsidies, and customs valuation/classification. An example of a quota (a nontariff barrier) would be
the limit of 20 foreign films that are allowed to be released in Chinese movie theaters each year.

3. During the 1990s, trade agreements were developed on the worldwide and the regional levels. Briefly
describe a regional trade agreement and a worldwide trade agreement.
ANS:
The two geographic levels at which trade agreements have been developed during the 1990s are
worldwide and regional. The single worldwide agreement is the General Agreement on Tariffs and
Trade (GATT), which will reduce and eliminate tariffs, limit government subsidies, and protect
intellectual property. In addition to this global agreement, a second major development in the historic
move toward reduction of trade barriers has been the creation of regional trading zones, in which tariff
and nontariff barriers are reduced or eliminated for countries within the trading zone. The largest and
most important trading zones are in Europe (the Maastricht Treaty), North America (the North
American Free Trade Agreement, NAFTA), Central America (Central American Free Trade
Agreement, CAFTA), and Asia, (ASEAN, Association of Southeast Asian Nations, and APEC,
Asia-Pacific Economic Cooperation).
PTS: 1 DIF: Moderate REF: 300-303 TOP: AACSB Analytic

4. Briefly explain the phase model of globalization. List its stages in their appropriate order.
ANS:
The phase model of globalization refers to a series of four sequential stages that most companies have
historically gone through in growing from domestic to global companies. The four stages are (1)
exporting, (2) cooperative contracts (which take the form of either licensing or franchise agreements),
(3) strategic alliances (characterized by the global joint venture), and finally, (4) wholly owned
affiliates. At each step, the company would grow much larger, would use those resources to enter more
global markets, would be less dependent on home country sales, and would be more committed in its
orientation to global business.

5. Compare and contrast global consistency and local adaptation as policies for entering foreign markets.
ANS:
Global business requires a balance between global consistency and local adaptation. Global
consistency means using the same rules, guidelines, policies, and procedures in each foreign location.
Managers at company headquarters like global consistency, because it simplifies decisions. Local
adaptation means adapting standard procedures to differences in foreign markets. Local managers
prefer a policy of local adaptation because it gives them more control. Not all businesses need the
same combinations of global consistency and local adaptation. Some thrive by emphasizing global
consistency and ignoring local adaptation. Others succeed by ignoring global consistency and
emphasizing local adaptation.
PTS: 1 DIF: Moderate REF: 305-306

KEY: Environmental Influence | Strategy | HRM
6. Briefly explain how companies can assess the growth potential of new markets.
ANS:
When deciding where to go global, companies try to find countries or regions with promising business
climates. The most important factor in an attractive business climate is access to a growing market.
Two factors help companies determine the growth potential of foreign markets: purchasing power and
foreign competitors. Purchasing power is measured by comparing the relative cost of a standard set of
goods and services in different countries. Countries with high and growing levels of purchasing power
are good choices for companies looking for attractive global markets. The second part of assessing
growing global markets is to analyze the degree of global competition, which is determined by the
number and quality of companies that already compete in foreign markets. Companies should look for
countries were foreign competitors are weak.
PTS: 1 DIF: Easy REF: 312-314

KEY: Environmental Influence | Strategy | Creation of Value
7. Identify the two basic types of political risk facing organizations when conducting global business.
Which one is more common?
ANS:
When conducting global business, companies should attempt to identify two types of political risk:
political uncertainty and policy uncertainty. Political uncertainty is associated with the risk of major
changes in political regimes that can result from war, revolution, death of political leaders, social
unrest, or other influential events. Policy uncertainty refers to the risk associated with changes in laws
and government policies that directly affect the way foreign companies conduct business. Policy
uncertainty is the most common form of political risk in global business and perhaps the most
frustrating.

8. Define national culture. List the five consistent cultural dimensions across countries.
ANS:
National culture is the set of shared values and beliefs that affects the perceptions, decisions, and
behavior of the people from a particular country. The first step in dealing with culture is to recognize
that there are meaningful differences in national cultures. Research shows that there are five consistent
differences across national cultures: power distance, individualism/collectivism, short-term versus
long-term orientation, masculinity/femininity, and uncertainty avoidance.
PTS: 1 DIF: Difficult REF: 318-320
9. Briefly comment on the types of training that should be provided (and to whom that training should be
provided), when managers go on international assignments, in order to ensure the success of those
managers.
ANS:
Managers should receive both language and cross-cultural training, such as documentary training,
cultural simulations, or field experiences, before going on assignment. In addition, since the evidence
clearly shows that how well an expatriate’s spouse and family adjust to the foreign culture is the most
important factor in determining the success or failure of an international assignment, language and
cross-cultural training should be provided for the spouses and children of expatriates as well.
PTS: 1 DIF: Easy REF: 321-325

ESSAY
1. What are the basic provisions of the General Agreement on Tariffs and Trade (GATT)? Give three
examples of how it benefits U.S. industries.
ANS:
During the 1990s 124 countries agreed to adopt the General Agreement on Tariffs and Trade (GATT).
Through tremendous decreases in tariff and nontariff barriers, GATT makes it much easier and
cheaper for consumers in all countries to buy foreign products. First, by the year 2005, GATT cut
average tariffs worldwide by 40 percent. A reduction in tariffs benefits U.S. industries whose goods
are currently made less competitive by these measures. Second, GATT will eliminate tariffs in ten
specific industries: beer, alcohol, construction equipment, farm machinery, furniture, medical
equipment, paper, pharmaceuticals, steel, and toys. Obviously, this will be very beneficial to these
U.S. industries. Third, GATT put stricter limits on government subsidies. For example, GATT places
limits on how much national governments can subsidize company research in electronic and high
technology industries. Again, U.S. electronics and high-tech industries should benefit. Fourth, GATT
protects intellectual property such as trademarks, patents, and copyright. Protection of intellectual
property has been an increasingly important issue in global trade because of widespread product
piracy, which costs companies billions in lost revenue each year. The U.S. entertainment and software
industries should both benefit significantly from this provision. Finally, trade disputes between
countries will be fully settled by arbitration panels from the World Trade Organization. In the past,
countries could ignore arbitration panel rulings by using their veto power to cancel arbitration
decisions. For instance, the French government has routinely vetoed rulings that it unfairly subsidized
French farmers with extraordinarily large cash grants. However, countries that are members of the
World Trade Organization (every country that agrees to GATT is a member) will no longer have veto
power. Thus, World Trade Organization rulings will be complete and final. Thus, U.S. agriculture may
benefit through the inability of the French to continue to protect their own farmers.
PTS: 1 DIF: Difficult REF: 300-301 TOP: AACSB Analytic

2. Explain how the concepts of global consistency and local adaptation are relevant to success of a global
business. Give one example of a good or service that would be likely to succeed with the use of global
consistency. Give one example of a good or service that would be likely to succeed with the use of
local adaptation.
ANS:
Global business requires a balance between global consistency and local adaptation that is an
appropriate fit for the environment facing the particular global company. Global consistency means
that when a multinational company has offices, manufacturing plants, and distribution facilities in
different countries, it will run those offices, plants, and facilities based on the same rules, guidelines,
policies, and procedures. Managers at company headquarters value global consistency, because it
simplifies decisions.
Local adaptation is a company policy to modify its standard operating procedures to adapt to
differences in foreign customers, governments, and regulatory agencies. Local adaptation is typically
more important to local managers who are charged with making the international business successful
in their countries.
Multinational companies struggle to find the correct balance between global consistency and local
adaptation. If companies focus too much on local adaptation, they run the risk of losing the cost
efficiencies and productivity that result from using standardized rules and procedures throughout the
world. If they lean too much toward global consistency, they run the risk of using management
procedures poorly suited to particular countries’ markets, cultures, and employees.
Thus, not all businesses need the same combinations of global consistency and local adaptation.
Some thrive by emphasizing global consistency and ignoring local adaptation. Others succeed by
ignoring global consistency and emphasizing local adaptation. Students’ examples will vary, but most
students should realize that high-tech products as simple products such as nasal strips to prevent
snoring will be the easiest to use global consistency. The H&M example in the text should provide
students with an example of a service that requires local adaptation.

3. What is the phase model of globalization? Identify the factors that have allowed companies to follow
different paths to globalization, and then explain the nature of the global new venture. Comment on the
extent to which it is likely that this latter approach to globalization will increase.
ANS:
The phase model of globalization says that as companies move from a domestic to a global orientation,
they use four organizational forms in sequence. These forms are exporting, cooperative contracts,
strategic alliances, and wholly owned affiliates. The process begins with exporting, which occurs when
companies produce products in their home countries and sell those products to customers in foreign
countries. This phase is followed by cooperative contracts, which represent an agreement in which a
foreign business owner pays a company a fee for the right to conduct that business in his or her
country (such contracts may take the form of either licensing or franchising). The third stage is
strategic alliances, where companies combine key resources, costs, risk, technology and people, as for
example, in the joint venture, which is a strategic alliance in which two existing companies collaborate
to form a third, independent company. Finally, the company would move to the wholly owned affiliate
phase, where foreign offices, facilities, and manufacturing plants that are 100 percent owned by the
parent company. At each step, the company would grow much larger, would use those resources to
enter more global markets, would be less dependent on home country sales, and would be more
committed in its orientation to global business. However, evidence suggests that some companies do
not follow the phase model of globalization. Some skip phases on their way to becoming more global
and less domestic. Others, known as new global ventures, don’t follow the phase model at all.
Three trends have combined to allow companies to skip the phase model when going global. First,
quick, reliable air travel can transport people to nearly any point in the world within one day. Second,
low-cost communication technologies, such as international e-mail, teleconferencing, and phone
conferencing, make it easier to communicate with global customers, suppliers, managers, and
employees. Third, there is now a critical mass of business people with extensive personal experience in
all aspects of global business. This combination of events has made it possible to start companies that
are global from inception. With sales, employees, and financing in different countries, global new
ventures are new companies founded with an active global strategy. While there are several different
kinds of global new ventures, they share two common factors. First, the company founders
successfully develop and communicate the company’s global vision. Second, rather than going global
one country at a time, new global ventures bring a product or service to market in several foreign
markets at the same time.
It is highly likely that this latter approach to globalization will increase. Each of the three trends
that has enabled the development of global new ventures is continuing, and will undoubtedly
accelerate. As the technology and human resources necessary to develop global businesses grow,
companies will pursue such growth, as it creates a global win-win situation. That is, companies win by
increasing market share and profitability, consumers win through decreasing costs and increasing
product selection, and national economies win through industrialization and economic growth.
PTS: 1 DIF: Difficult REF: 306-312

TOP: AACSB Diversity | AACSB Analytic | AACSB Reflective Thinking
KEY: Environmental Influence | Strategy | Creation of Value
4. A married manager with two children has been offered the opportunity to go abroad on an expatriate
assignment for the company in a foreign country for a period of three years. If the manager chooses to
accept the assignment, he or she wants to perform very well, in order to continue moving up the
corporate ladder. What sorts of preparations should the manager expect the company to provide, in
order to ensure his or her success in the assignment? Comment on these training and preparatory
expectations in an ideal world as well as the real world that the manager probably will face.
ANS:
Many expatriates return prematurely from international assignments because of poor performance. For
example, it is estimated that 5 percent to 25 percent of American expatriates sent abroad by their
companies will return to the U.S. before they have successfully completed their international
assignments. Of those who do complete their international assignments, about one-third are judged by
their companies to be no better than marginally effective. Thus, the manager who wants to continue
moving up the corporate ladder must be critically concerned with obtaining the proper screening and
support to ensure that their overseas assignment will be successful.
Considerable research shows that expatriates are much more likely to be successful if they receive
language and cross-cultural training, such as documentary training, cultural simulations, or field
experiences, before going on assignment. Such training has been shown to impact positively on five
separate dimensions: (1) psychological well-being and self development, (2) fostering relationships
with native citizens, (3) accurate perceptions of the culture, (4) rapid adjustment to a foreign culture
and country, and (5) on-the-job performance.
Adjustment of expatriates’ spouses and families, which is the most important determinant of
success in international assignments, can be improved through adaptability screening and intercultural
training. Adaptability screening is not just companies assessing employees; it can also mean that
employees screen international assignments for desirability. Since more employees are becoming
aware of the costs of international assignments (spouses having to give up or change jobs, children
having to change schools, having to learn a new language, etc.), some companies are willing to pay for
a pre-assignment trip for the employee and his or her spouse to investigate the country before
accepting the international assignment. In our ideal world example, this option should be taken by the
manager considering a three-year assignment.
Language and cross-cultural training for families is just as important as language and
cross-cultural training for expatriates. In fact, it may be more important, because unlike expatriates,
whose professional jobs often shield them from the full force of a country’s culture, spouses and
children are often fully immersed in foreign neighborhoods and schools. Households must be run,
shopping must be done, and bills must be paid. Likewise, children and their parents must deal with
different cultural beliefs and practices about discipline, alcohol, dating, and other issues.
Thus, in an ideal world, all of these procedures, which have been shown to contribute to the
success of the expatriate, should be employed. Unfortunately, in the real world, only about a third of
the managers who go on international assignments receive any kind of pre-departure training. Thus,
our manager’s decision of whether or not to accept the assignment should be very carefully
considered, based upon the likely impact of strong or weak performance on their future career
prospects, and the level of support the company is willing and able to provide.

TOP: AACSB Diversity | AACSB Analytic | AACSB Reflective Thinking
Another random document with
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It comforted him but little as he fretted on:
“There wasn’t any fake about it! I really did repent all these darn’
fool sins. Even smoking—I’m going to cut it out. I did feel the—the
peace of God.
“But can I keep up this speed? Christ! I can’t do it! Never take a
drink or anything—
“I wonder if the Holy Ghost really was there and getting after me?
I did feel different! I did! Or was it just because Judson and Ma and
all those Christers were there whooping it up—
“Jud Roberts kidded me into it. With all his Big Brother stuff.
Prob’ly pulls it everywhere he goes. Jim’ll claim I—Oh, damn Jim,
too! I got some rights! None of his business if I come out and do the
fair square thing! And they did look up to me when I gave them the
invitation! It went off fine and dandy! And that kid coming right up
and getting saved. Mighty few fellows ever’ve pulled off a conversion
as soon after their own conversion as I did! Moody or none of ’em! I’ll
bet it busts the records! Yes, sir, maybe they’re right. Maybe the Lord
has got some great use for me, even if I ain’t always been all I might
of been . . . some ways . . . but I was never mean or tough or
anything like that . . . just had a good time.
“Jim—what right’s he got telling me where I head in? Trouble with
him is, he thinks he knows it all. I guess these wise old coots that’ve
written all these books about the Bible, I guess they know more’n
one smart-aleck Kansas agnostic!
“Yes, sir! The whole crowd! Turned to me like I was an All-
American preacher!
“Wouldn’t be so bad to be a preacher if you had a big church and
— Lot easier than digging out law-cases and having to put it over a
jury and another lawyer maybe smarter’n you are.
“The crowd have to swallow what you tell ’em in a pulpit, and no
back-talk or cross-examination allowed!”
For a second he snickered, but:
“Not nice to talk that way. Even if a fellow don’t do what’s right
himself, no excuse for his sneering at fellows that do, like
preachers. . . . There’s where Jim makes his mistake.
“Not worthy to be a preacher. But if Jim Lefferts thinks for one
single solitary second that I’m afraid to be a preacher because he
pulls a lot of guff—I guess I know how I felt when I stood up and had
all them folks hollering and rejoicing— I guess I know whether I
experienced salvation or not! And I don’t require any James Blaine
Lefferts to tell me, neither!”
Thus for an hour of dizzy tramping; now colder with doubt than
with the prairie wind, now winning back some of the exaltation of his
spiritual adventure, but always knowing that he had to confess to an
inexorable Jim.
IV
It was after one. Surely Jim would be asleep, and by next day
there might be a miracle. Morning always promises miracles.
He eased the door open, holding it with a restraining hand. There
was a light on the washstand beside Jim’s bed, but it was a small
kerosene lamp turned low. He tiptoed in, his tremendous feet
squeaking.
Jim suddenly sat up, turned up the wick. He was red-nosed, red-
eyed, and coughing. He stared, and unmoving, by the table, Elmer
stared back.
Jim spoke abruptly:
“You son of a sea-cook! You’ve gone and done it! You’ve been
saved! You’ve let them hornswoggle you into being a Baptist witch-
doctor! I’m through! You can go—to heaven!”
“Aw, say now, Jim, lissen!”
“I’ve listened enough. I’ve got nothing more to say. And now you
listen to me!” said Jim, and he spoke with tongues for three minutes
straight.
Most of the night they struggled for the freedom of Elmer’s soul,
with Jim not quite losing yet never winning. As Jim’s face had
hovered at the gospel meeting between him and the evangelist,
blotting out the vision of the cross, so now the faces of his mother
and Judson hung sorrowful and misty before him, a veil across Jim’s
pleading.
Elmer slept four hours and went out, staggering with weariness,
to bring cinnamon buns, a wienie sandwich, and a tin pail of coffee
for Jim’s breakfast. They were laboring windily into new arguments,
Jim a little more stubborn, Elmer ever more irritable, when no less a
dignitary than President the Rev. Dr. Willoughby Quarles, chin
whisker, glacial shirt, bulbous waistcoat and all, plunged in under the
fat soft wing of the landlady.
The president shook hands a number of times with everybody, he
eyebrowed the landlady out of the room, and boomed in his throaty
pulpit voice, with belly-rumblings and long-drawn R’s and L’s, a voice
very deep and owlish, most holy and fitting to the temple which he
created merely by his presence, rebuking to flippancy and chuckles
and the puerile cynicisms of the Jim Leffertses—a noise somewhere
between the evening bells and the morning jackass:
“Oh, Brother Elmer, that was a brave thing you did! I have never
seen a braver! For a great strong man of your gladiatorial powers to
not be afraid to humble himself! And your example will do a great
deal of good, a grrrrrreat deal of good! And we must catch and hold
it. You are to speak at the Y. M. C. A. tonight—special meeting to
reënforce the results of our wonderful Prayer Week.”
“Oh, gee, President, I can’t!” Elmer groaned.
“Oh, yes, Brother, you must. You must! It’s already announced. If
you’ll go out within the next hour, you’ll be gratified to see posters
announcing it all over town!”
“But I can’t make a speech!”
“The Lord will give the words if you give the good will! I myself
shall call for you at a quarter to seven. God bless you!”
He was gone.
Elmer was completely frightened, completely unwilling, and
swollen with delight that after long dark hours when Jim, an
undergraduate, had used him dirtily and thrown clods at his intellect,
the president of Terwillinger College should have welcomed him to
that starched bosom as a fellow-apostle.
While Elmer was making up his mind to do what he had made up
his mind to do, Jim crawled into bed and addressed the Lord in a low
poisonous tone.
Elmer went out to see the posters. His name was in lovely large
letters.
For an hour, late that afternoon, after various classes in which
every one looked at him respectfully, Elmer tried to prepare his
address for the Y. M. C. A. and affiliated lady worshipers. Jim was
sleeping, with a snore like the snarl of a leopard.
In his class in Public Speaking, a course designed to create
congressmen, bishops, and sales-managers, Elmer had had to
produce discourses on Taxation, the Purpose of God in History, Our
Friend the Dog, and the Glory of the American Constitution. But his
monthly orations had not been too arduous; no one had grieved if he
stole all his ideas and most of his phrasing from the encyclopedia.
The most important part of preparation had been the lubrication of
his polished-mahogany voice with throat-lozenges after rather steady
and totally forbidden smoking. He had learned nothing except the
placing of his voice. It had never seemed momentous to impress the
nineteen students of oratory and the instructor, an unordained
licensed preacher who had formerly been a tax-assessor in
Oklahoma. He had, in Public Speaking, never been a failure nor ever
for one second interesting.
Now, sweating very much, he perceived that he was expected to
think, to articulate the curious desires whereby Elmer Gantry was
slightly different from any other human being, and to rivet together
opinions which would not be floated on any tide of hallelujahs.
He tried to remember the sermons he had heard. But the
preachers had been so easily convinced of their authority as
prelates, so freighted with ponderous messages, while himself, he
was not at the moment certain whether he was a missionary who
had to pass his surprising new light on to the multitude, or just a
sinner who—
Just a sinner! For keeps! Nothing else! Damned if he’d welsh on
old Jim! No, sir! Or welsh on Juanita, who’d stood for him and merely
kidded him, no matter how soused and rough and mouthy he might
be! . . . Her hug. The way she’d get rid of that buttinsky aunt of
Nell’s; just wink at him and give Aunty some song and dance or
other and send her out for chow—
God! If Juanita were only here! She’d give him the real dope.
She’d advise him whether he ought to tell Prexy and the Y. M. to go
to hell or grab this chance to show Eddie Fislinger and all those Y. M.
highbrows that he wasn’t such a bonehead—
No! Here Prexy had said he was the whole cheese; gotten up a
big meeting for him. Prexy Quarles and Juanita! Aber nit! Never get
them two together! And Prexy had called on him—
Suppose it got into the newspapers! How he’d saved a tough kid,
just as good as Judson Roberts could do. Juanita—find skirts like
her any place, but where could they find a guy that could start in and
save souls right off the bat?
Chuck all these fool thoughts, now that Jim was asleep, and
figure out his spiel. What was that about sweating in the vineyard?
Something like that, anyway. In the Bible. . . . However much they
might rub it in—and no gink’d ever had a worse time, with that
sneaking Eddie poking him on one side and Jim lambasting him on
the other—whatever happened, he had to show those yahoos he
could do just as good—
Hell! This wasn’t buying the baby any shoes; this wasn’t getting
his spiel done. But—
What was the doggone thing to be about?
Let’s see now. Gee, there was a bully thought! Tell ’em about how
a strong husky guy, the huskier he was the more he could afford to
admit that the power of the Holy Ghost had just laid him out cold—
No. Hell! That was what Old Jud had said. Must have something
new—kinda new, anyway.
He shouldn’t say “hell.” Cut it out. Stay converted, no matter how
hard it was. He wasn’t afraid of— Him and Old Jud, they were husky
enough to—
No, sir! It wasn’t Old Jud; it was his mother. What’d she think if
she ever saw him with Juanita? Juanita! That sloppy brat! No
modesty!
Had to get down to brass tacks. Now!
Elmer grasped the edge of his work-table. The top cracked. His
strength pleased him. He pulled up his dingy red sweater, smoothed
his huge biceps, and again tackled his apostolic labors:
Let’s see now: The fellows at the Y. would expect him to say—
He had it! Nobody ever amounted to a darn except as the—what
was it?—as the inscrutable designs of Providence intended him to
be.
Elmer was very busy making vast and unformed scrawls in a ten-
cent note-book hitherto devoted to German. He darted up, looking
scholarly, and gathered his library about him: his Bible, given to him
by his mother; his New Testament, given by a Sunday School
teacher; his text-books in Weekly Bible and Church History; and one-
fourteenth of a fourteen-volume set of Great Orations of the World
which, in a rare and alcoholic moment of bibliomania, he had
purchased in Cato for seventeen cents. He piled them and repiled
them and tapped them with his fountain-pen.
His original stimulus had run out entirely.
Well, he’d get help from the Bible. It was all inspired, every word,
no matter what scoffers like Jim said. He’d take the first text he
turned to and talk on that.
He opened on: “Now therefore, Tatnai, governor beyond the river,
Shethar-boznai, and your companions the Apharsachites, which are
beyond the river, be ye far from thence,” an injunction spirited but not
at present helpful.
He returned to pulling his luxuriant hair and scratching.
Golly. Must be something.
The only way of putting it all over life was to understand these
Forces that the scientists, with their laboratories and everything,
couldn’t savvy, but to a real Christian they were just as easy as
rolling off a log—
No. He hadn’t taken any lab courses except Chemistry I, so he
couldn’t show where all these physicists and biologists were boobs.
Elmer forlornly began to cross out the lovely scrawls he had
made in his note-book.
He was irritably conscious that Jim was awake, and scoffing:
“Having quite a time being holy and informative, Hell-cat? Why
don’t you pinch your first sermon from the heathen? You won’t be the
first up-and-coming young messiah to do it!”
Jim shied a thin book at him, and sank again into infidel sleep.
Elmer picked up the book. It was a selection from the writings of
Robert G. Ingersoll.
Elmer was indignant.
Take his speech from Ingersoll, that rotten old atheist that said—
well, anyway, he criticized the Bible and everything! Fellow that
couldn’t believe the Bible, least he could do was not to disturb the
faith of others. Darn’ rotten thing to do! Fat nerve of Jim to suggest
his pinching anything from Ingersoll! He’d throw the book in the fire!
But— Anything was better than going on straining his brains. He
forgot his woes by drugging himself with heedless reading. He
drowsed through page on page of Ingersoll’s rhetoric and jesting.
Suddenly he sat up, looked suspiciously over at the silenced Jim,
looked suspiciously at Heaven. He grunted, hesitated, and began
rapidly to copy into the German note-book, from Ingersoll:
Love is the only bow on life’s dark cloud. It is the Morning
and the Evening Star. It shines upon the cradle of the babe,
and sheds its radiance upon the quiet tomb. It is the mother of
Art, inspirer of poet, patriot and philosopher. It is the air and
light of every heart, builder of every home, kindler of every fire
on every hearth. It was the first to dream of immortality. It fills
the world with melody, for Music is the voice of Love. Love is
the magician, the enchanter, that changes worthless things to
joy, and makes right royal kings and queens of common clay.
It is the perfume of the wondrous flower—the heart—and
without that sacred passion, that divine swoon, we are less
than beasts; but with it, earth is heaven and we are gods.
Only for a moment, while he was copying, did he look doubtful;

then:
“Rats! Chances are nobody there tonight has ever read Ingersoll.
Agin him. Besides I’ll kind of change it around.”
V
When President Quarles called for him, Elmer’s exhortation was
outlined, and he had changed to his Sunday-best blue serge double-
breasted suit and sleeked his hair.
As they departed, Jim called Elmer back from the hall to whisper,
“Say, Hell-cat, you won’t forget to give credit to Ingersoll, and to me
for tipping you off, will you?”
“You go to hell!” said Elmer.
VI
There was a sizable and extremely curious gathering at the Y. M.
C. A. All day the campus had debated, “Did Hell-cat really sure-
enough get saved? Is he going to cut out his hell-raising?”
Every man he knew was present, their gaping mouths dripping
question-marks, grinning or doubtful. Their leers confused him, and
he was angry at being introduced by Eddie Fislinger, president of the
Y. M. C. A.
He started coldly, stammering. But Ingersoll had provided the
beginning of his discourse, and he warmed to the splendor of his
own voice. He saw the audience in the curving Y. M. C. A. auditorium
as a radiant cloud, and he began to boom confidently, he began to
add to his outline impressive ideas which were altogether his own—
except, perhaps, as he had heard them thirty or forty times in
sermons.
It sounded very well, considering. Certainly it compared well with
the average mystical rhapsody of the pulpit.
For all his slang, his cursing, his mauled plurals and singulars,
Elmer had been compelled in college to read certain books, to hear
certain lectures, all filled with flushed, florid polysyllables, with juicy
sentiments about God, sunsets, the moral improvement inherent in a
daily view of mountain scenery, angels, fishing for souls, fishing for
fish, ideals, patriotism, democracy, purity, the error of Providence in
creating the female leg, courage, humility, justice, the agricultural
methods of Palestine circ. 4 a. d., the beauty of domesticity, and
preachers’ salaries. These blossoming words, these organ-like
phrases, these profound notions, had been rammed home till they
stuck in his brain, ready for use.
But even to the schoolboy-wearied faculty who had done the
ramming, who ought to have seen the sources, it was still
astonishing that after four years of grunting, Elmer Gantry should
come out with these flourishes, which they took perfectly seriously,
for they themselves had been nurtured in minute Baptist and
Campbellite colleges.
Not one of them considered that there could be anything comic in
the spectacle of a large young man, divinely fitted for coal-heaving,
standing up and wallowing in thick slippery words about Love and
the Soul. They sat—young instructors not long from the farm,
professors pale from years of napping in unaired pastoral studies—
and looked at Elmer respectfully as he throbbed:
“It’s awful’ hard for a fellow that’s more used to bucking the line
than to talking publicly to express how he means, but sometimes I
guess maybe you think about a lot of things even if you don’t always
express how you mean, and I want to—what I want to talk about is
how if a fellow looks down deep into things and is really square with
God, and lets God fill his heart with higher aspirations, he sees that
—he sees that Love is the one thing that can really sure-enough
lighten all of life’s dark clouds.
“Yes, sir, just Love! It’s the morning and evening star. It’s—even
in the quiet tomb, I mean those that are around the quiet tomb, you
find it even there. What is it that inspires all great men, all poets and
patriots and philosophers? It’s Love, isn’t it? What gave the world its
first evidences of immortality? Love! It fills the world with melody, for
what is music? What is music? Why! Music is the voice of Love!”
The great President Quarles leaned back and put on his
spectacles, which gave a slight appearance of learning to his chin-
whiskered countenance, otherwise that of a small-town banker in
1850. He was the center of a row of a dozen initiates on the platform
of the Y. M. C. A. auditorium, a shallow platform under a plaster half-
dome. The wall behind them was thick with diagrams, rather like
anatomical charts, showing the winning of souls in Egypt, the
amount spent on whisky versus the amount spent on hymn books,
and the illustrated progress of a pilgrim from Unclean Speech
through Cigarette Smoking and Beer Saloons to a lively situation in
which he beat his wife, who seemed to dislike it. Above was a large
and enlightening motto: “Be not overcome of evil, but overcome evil
with good.”
The whole place had that damp-straw odor characteristic of
places of worship, but President Quarles did not, seemingly, suffer in
it. All his life he had lived in tabernacles and in rooms devoted to thin
church periodicals and thick volumes of sermons. He had a slight
constant snuffle, but his organism was apparently adapted now to
existing without air. He beamed and rubbed his hands, and looked
with devout joy on Elmer’s long broad back as Elmer snapped into it,
ever surer of himself; as he bellowed at the audience—beating them,
breaking through their interference, making a touchdown:
“What is it makes us different from the animals? The passion of
Love! Without it, we are—in fact we are nothing; with it, earth is
heaven, and we are, I mean to some extent, like God himself! Now
that’s what I wanted to explain about Love, and here’s how it applies.
Prob’ly there’s a whole lot of you like myself—oh, I been doing it, I’m
not going to spare myself—I been going along thinking I was too
good, too big, too smart, for the divine love of the Savior! Say! Any of
you ever stop and think how much you’re handing yourself when you
figure you can get along without divine intercession? Say! I suppose
prob’ly you’re bigger than Moses, bigger than St. Paul, bigger than
Pastewer, that great scientist—”
President Quarles was exulting, “It was a genuine conversion!
But more than that! Here’s a true discovery—my discovery! Elmer is
a born preacher, once he lets himself go, and I can make him do it!
O Lord, how mysterious are thy ways! Thou hast chosen to train our
young brother not so much in prayer as in the mighty struggles of the
Olympic field! I—thou, Lord, hast produced a born preacher. Some
day he’ll be one of our leading prophets!”
The audience clapped when Elmer hammered out his conclusion:
“—and you Freshmen will save a lot of the time that I wasted if you
see right now that until you know God you know—just nothing!”
They clapped, they made their faces to shine upon him. Eddie
Fislinger won him by sighing, “Old fellow, you got me beat at my own
game like you have at your game!” There was much hand-shaking.
None of it was more ardent than that of his recent enemy, the Latin
professor, who breathed:
“Where did you get all those fine ideas and metaphors about the
Divine Love, Gantry?”
“Oh,” modestly, “I can’t hardly call them mine, Professor. I guess I
just got them by praying.”
VII
Judson Roberts, ex-football-star, state secretary of the Y. M. C.
A., was on the train to Concordia, Kansas. In the vestibule he had
three puffs of an illegal cigarette and crushed it out.
“No, really, it wasn’t so bad for him, that Elmer what’s-his-name,
to get converted. Suppose there isn’t anything to it. Won’t hurt him to
cut out some of his bad habits for a while, anyway. And how do we
know? Maybe the Holy Ghost does come down. No more improbable
than electricity. I do wish I could get over this doubting! I forget it
when I’ve got ’em going in an evangelistic meeting, but when I watch
a big butcher like him, with that damn’ silly smirk on his jowls—I
believe I’ll go into the real estate business. I don’t think I’m hurting
these young fellows any, but I do wish I could be honest. Oh, Lordy,
Lordy, Lordy, I wish I had a good job selling real estate!”
VIII
Elmer walked home firmly. “Just what right has Mr. James B.
Lefferts got to tell me I mustn’t use my ability to get a crowd going?
And I certainly had ’em going! Never knew I could spiel like that.
Easy as feetball! And Prexy saying I was a born preacher! Huh!”
Firmly and resentfully he came into their room, and slammed
down his hat.
It awoke Jim. “How’d it go over? Hand ’em out the gospel guff?”
“I did!” Elmer trumpeted. “It went over, as you put it, corking. Got
any objections?”
He lighted the largest lamp and turned it up full, his back to Jim.
No answer. When he looked about, Jim seemed asleep.
At seven next morning he said forgivingly, rather patronizingly, “I’ll
be gone till ten—bring you back some breakfast?”
Jim answered, “No, thanks,” and those were his only words that
morning.
When Elmer came in at ten-thirty, Jim was gone, his possessions
gone. (It was no great moving: three suit-cases of clothes, an armful
of books.) There was a note on the table:
I shall live at the College Inn the rest of this year. You can
probably get Eddie Fislinger to live with you. You would enjoy
it. It has been stimulating to watch you try to be an honest
roughneck, but I think it would be almost too stimulating to
watch you become a spiritual leader.
J. B. L.
All of Elmer’s raging did not make the room seem less lonely.
CHAPTER IV
I
president quarles urged him.
Elmer would, perhaps, affect the whole world if he became a
minister. What glory for Old Terwillinger and all the shrines of
Gritzmacher Springs!
Eddie Fislinger urged him.
“Jiminy! You’d go way beyond me! I can see you president of the
Baptist convention!” Elmer still did not like Eddie, but he was making
much now of ignoring Jim Lefferts (they met on the street and bowed
ferociously), and he had to have some one to play valet to his
virtues.
The ex-minister dean of the college urged him.
Where could Elmer find a profession with a better social position
than the ministry—thousands listening to him—invited to banquets
and everything. So much easier than— Well, not exactly easier; all
ministers worked arduously—great sacrifices—constant demands on
their sympathy—heroic struggle against vice—but same time,
elegant and superior work, surrounded by books, high thoughts, and
the finest ladies in the city or country as the case might be. And
cheaper professional training than law. With scholarships and
outside preaching, Elmer could get through the three years of
Mizpah Theological Seminary on almost nothing a year. What other
plans had he for a career? Nothing definite? Why, looked like divine
intervention; certainly did; let’s call it settled. Perhaps he could get
Elmer a scholarship the very first year—
His mother urged him.
She wrote, daily, that she was longing, praying, sobbing—
Elmer urged himself.
He had no prospects except the chance of reading law in the
dingy office of a cousin in Toluca, Kansas. The only things he had
against the ministry, now that he was delivered from Jim, were the
low salaries and the fact that if ministers were caught drinking or
flirting, it was often very hard on them. The salaries weren’t so bad—
he’d go to the top, of course, and maybe make eight or ten
thousand. But the diversions— He thought about it so much that he
made a hasty trip to Cato, and came back temporarily cured forever
of any desire for wickedness.
The greatest urge was his memory of holding his audience,
playing on them. To move people— Golly! He wanted to be
addressing somebody on something right now, and being applauded!
By this time he was so rehearsed in his rôle of candidate for
righteousness that it didn’t bother him (so long as no snickering Jim
was present) to use the most embarrassing theological and moral
terms in the presence of Eddie or the president; and without one grin
he rolled out dramatic speeches about “the duty of every man to lead
every other man to Christ,” and “the historic position of the Baptists
as the one true Scriptural Church, practising immersion, as taught by
Christ himself.”
He was persuaded. He saw himself as a white-browed and star-
eyed young evangel, wearing a new frock coat, standing up in a
pulpit and causing hundreds of beautiful women to weep with
conviction and rush down to clasp his hand.
But there was one barrier, extremely serious. They all informed
him that select though he was as sacred material, before he decided
he must have a mystic experience known as a Call. God himself
must appear and call him to service, and conscious though Elmer
was now of his own powers and the excellence of the church, he
saw no more of God about the place than in his worst days of
unregeneracy.
He asked the president and the dean if they had had a Call. Oh,
yes, certainly; but they were vague about practical tips as to how to
invite a Call and recognize it when it came. He was reluctant to ask
Eddie—Eddie would be only too profuse with tips, and want to kneel
down and pray with him, and generally be rather damp and excitable
and messy.
The Call did not come, not for weeks, with Easter past and no
decision as to what he was going to do next year.
II
Spring on the prairie, high spring. Lilacs masked the speckled
brick and stucco of the college buildings, spiræa made a flashing
wall, and from the Kansas fields came soft airs and the whistle of
meadow larks.
Students loafed at their windows, calling down to friends; they
played catch on the campus; they went bareheaded and wrote a
great deal of poetry; and the Terwillinger baseball team defeated
Fogelquist College.
Still Elmer did not receive his divine Call.
By day, playing catch, kicking up his heels, belaboring his
acquaintances, singing “The happiest days that ever were, we knew
at old Terwillinger” on a fence fondly believed to resemble the Yale
fence, or tramping by himself through the minute forest of
cottonwood and willow by Tunker Creek, he expanded with the
expanding year and knew happiness.
The nights were unadulterated hell.
He felt guilty that he had no Call, and he went to the president
about it in mid-May.
Dr. Quarles was thoughtful, and announced:
“Brother Elmer, the last thing I’d ever want to do, in fairness to the
spirit of the ministry, would be to create an illusion of a Call when
there was none present. That would be like the pagan hallucinations
worked on the poor suffering followers of Roman Catholicism.
Whatever else he may be, a Baptist preacher must be free from
illusions; he must found his work on good hard scientific facts—the
proven facts of the Bible, and substitutionary atonement, which even
pragmatically we know to be true, because it works. No, no! But at
the same time I feel sure the voice of God is calling you, if you can
but hear it, and I want to help you lift the veil of worldliness which
still, no doubt, deafens your inner ear. Will you come to my house
tomorrow evening? We’ll take the matter to the Lord in prayer.”
It was all rather dreadful.
That kindly spring evening, with a breeze fresh in the branches of
the sycamores, President Quarles had shut the windows and drawn
the blinds in his living-room, an apartment filled with crayon portraits
of Baptist worthies, red-plush chairs, and leaded-glass unit
bookcases containing the lay writings of the more poetic clergy. The
president had gathered as assistants in prayer the more aged and
fundamentalist ex-pastors on the faculty and the more milky and
elocutionary of the Y. M. C. A. leaders, headed by Eddie Fislinger.
When Elmer entered, they were on their knees, their arms on the
seats of reversed chairs, their heads bowed, all praying aloud and
together. They looked up at him like old women surveying the bride.
He wanted to bolt. Then the president nabbed him, and had him
down on his knees, suffering and embarrassed and wondering what
the devil to pray about.
They took turns at telling God what he ought to do in the case of
“our so ardently and earnestly seeking brother.”
“Now will you lift your voice in prayer, Brother Elmer? Just let
yourself go. Remember we’re all with you, all loving and helping
you,” grated the president.
They crowded near him. The president put his stiff old arm about
Elmer’s shoulder. It felt like a dry bone, and the president smelled of
kerosene. Eddie crowded up on the other side and nuzzled against
him. The others crept in, patting him. It was horribly hot in that room,
and they were so close—he felt as if he were tied down in a hospital
ward. He looked up and saw the long shaven face, the thin tight lips,
of a minister . . . whom he was now to emulate.
He prickled with horror, but he tried to pray. He wailed, “O
blessed Lord, help me to—help me to—”
He had an enormous idea. He sprang up. He cried, “Say, I think
the spirit is beginning to work and maybe if I just went out and took a
short walk and kinda prayed by myself, while you stayed here and
prayed for me, it might help.”
“I don’t think that would be the way,” began the president, but the
most aged faculty-member suggested, “Maybe it’s the Lord’s
guidance. We hadn’t ought to interfere with the Lord’s guidance,
Brother Quarles.”
“That’s so, that’s so,” the president announced. “You have your
walk, Brother Elmer, and pray hard, and we’ll stay here and besiege
the throne of grace for you.”
Elmer blundered out into the fresh clean air.
Whatever happened, he was never going back! How he hated
their soft, crawly, wet hands!
He had notions of catching the last train to Cato and getting
solacingly drunk. No. He’d lose his degree, just a month off now, and
be cramped later in appearing as a real, high-class, college-
educated lawyer.
Lose it, then! Anything but go back to their crawling creepy
hands, their aged breathing by his ear—
He’d get hold of somebody and say he felt sick and send him
back to tell Prexy and sneak off to bed. Cinch! He just wouldn’t get
his Call, just pass it up, by Jiminy, and not have to go into the
ministry.
But to lose the chance to stand before thousands and stir them
by telling about divine love and the evening and morning star—If he
could just stand it till he got through theological seminary and was on
the job— Then, if any Eddie Fislinger tried to come into his study
and breathe down his neck—throw him out, by golly!
He was conscious that he was leaning against a tree, tearing
down twigs, and that facing him under a street-lamp was Jim
Lefferts.
“You look sick, Hell-cat,” said Jim.
Elmer strove for dignity, then broke, with a moaning, “Oh, I am!
What did I ever get into this religious fix for?”
“What they doing to you? Never mind; don’t tell me. You need a
drink.”
“By God, I do!”
“I’ve got a quart of first-rate corn whisky from a moon-shiner I’ve
dug up out here in the country, and my room’s right in this block.
Come along.”
Through his first drink, Elmer was quiet, bewildered, vaguely
leaning on the Jim who would guide him away from this horror.
But he was out of practice in drinking, and the whisky took hold
with speed. By the middle of the second glass he was boasting of his
ecclesiastical eloquence, he was permitting Jim to know that never in
Terwillinger College had there appeared so promising an orator, that
right now they were there praying for him, waiting for him, the
president and the whole outfit!
“But,” with a slight return of apology, “I suppose prob’ly you think
maybe I hadn’t ought to go back to ’em.”
Jim was standing by the open window, saying slowly, “No. I think
now— You’d better go back. I’ve got some peppermints. They’ll fix
your breath, more or less. Good-by, Hell-cat.”
He had won even over old Jim!
He was master of the world, and only a very little bit drunk.
He stepped out high and happy. Everything was extremely
beautiful. How high the trees were! What a wonderful drug-store
window, with all those glossy new magazine covers! That distant
piano—magic. What exquisite young women the co-eds! What
lovable and sturdy men the students! He was at peace with
everything. What a really good fellow he was! He’d lost all his
meannesses. How kind he’d been to that poor lonely sinner, Jim
Lefferts. Others might despair of Jim’s soul—he never would.
Poor old Jim. His room had looked terrible—that narrow little
room with a cot, all in disorder, a pair of shoes and a corncob pipe
lying on a pile of books. Poor Jim. He’d forgive him. Go around and
clean up the room for him.
(Not that Elmer had ever cleaned up their former room.)
Gee, what a lovely spring night! How corking those old boys
were, Prexy and everybody, to give up an evening and pray for him!
Why was it he felt so fine? Of course! The Call had come! God
had come to him, though just spiritually, not corporeally, so far as he
remembered. It had come! He could go ahead and rule the world!
He dashed into the president’s house; he shouted from the door,
erect, while they knelt and looked up at him mousily, “It’s come! I feel
it in everything! God just opened my eyes and made me feel what a
wonderful ole world it is, and it was just like I could hear his voice
saying, ‘Don’t you want to love everybody and help them to be
happy? Do you want to just go along being selfish, or have you got a
longing to—to help everybody?’ ”
He stopped. They had listened silently, with interested grunts of
“Amen, Brother.”
“Honest, it was awful’ impressive. Somehow, something has
made me feel so much better than when I went away from here. I’m
sure it was a real Call. Don’t you think so, President?”
“Oh, I’m sure of it!” the president ejaculated, getting up hastily
and rubbing his knees.
“I feel that all is right with our brother; that he has now, this
sacred moment, heard the voice of God, and is entering upon the
highest calling in the sight of God,” the president observed to the
dean. “Don’t you feel so?”
“God be praised,” said the dean, and looked at his watch.
III
On their way home, they two alone, the oldest faculty-member
said to the dean, “Yes, it was a fine gratifying moment. And—
herumph!—slightly surprising. I’d hardly thought that young Gantry
would go on being content with the mild blisses of salvation.
Herumph! Curious smell of peppermint he had about him.”
“I suppose he stopped at the drug-store during his walk and had
a soft-drink of some kind. Don’t know, Brother,” said the dean, “that I
approve of these soft drinks. Innocent in themselves, but they might
lead to carelessness in beverages; A man who drinks ginger ale—
how are you going to impress on him the terrible danger of drinking
ale?”
“Yes, yes,” said the oldest faculty-member (he was sixty-eight, to
the dean’s boyish sixty). “Say, Brother, how do you feel about young
Gantry? About his entering the ministry? I know you did well in the

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11. In a multinational company, managers at company headquarters value global consistency as a

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19. The signing of the ____ created a regional trading zone.

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