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1. Global business is defined as the buying and selling of goods and services by people from different countries.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
2. Regional trading is defined as a method of investment in which a company builds a new business or buys an existing
business in a foreign country.
a. True
b. False
ANSWER: False
RATIONALE: 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. Regional trading zones are areas
in which tariff and nontariff barriers on trade between countries are reduced and eliminated.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
3. Direct foreign investment is an increasingly important and common method of conducting global business.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
4. A European car manufacturer signing a contract to manufacture cars in a Chinese factory is an example of direct
foreign investment.
a. True
b. False
ANSWER: False
RATIONALE: This is an example of a joint venture.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1a
7-3c
NATIONAL STANDARDS: United States - Level V Synthesis
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
5. Multinational corporations are corporations that own businesses in two or more countries.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level IV Analysis
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
6. The Maastricht Treaty of Europe was designed to create the European Union and make the euro, the one common
currency, for all members.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1d
NATIONAL STANDARDS: United States - Level II Comprehension
United States - Level V Synthesis
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities
7. 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.
a. True
b. False
ANSWER: False
RATIONALE: NAFTA (the North American Free Trade Agreement) is a regional trade agreement between
the United States, Canada, and Mexico.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1d
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities
8. In a multinational company, managers at company headquarters may value global consistency as a company policy
because global consistency simplifies decision-making at corporate headquarters.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level VI Evaluation
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Leadership Principles | Strategy
9. Multinational companies typically have no difficulty determining the correct balance between global consistency and
local adaptation.
a. True
b. False
ANSWER: False
RATIONALE: Multinational companies struggle to find the correct balance between global consistency and
local adaptation because there are significant risks in inappropriately leaning too far in either
direction.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
10. Different businesses often need different combinations of global consistency and local adaptation.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
11. Historically, companies have generally followed the phase model of globalization.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
12. 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.
a. True
b. False
ANSWER: False
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
13. It appears that all companies follow the phase model of globalization when entering foreign markets.
a. True
b. False
ANSWER: False
RATIONALE: Evidence suggests that some companies do not follow the phase model of globalization.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
14. The two kinds of cooperative contracts are licensing and franchising.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Strategy
15. 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.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
17. 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.
a. True
b. False
ANSWER: False
RATIONALE: One of the advantages of global joint ventures is that, like licensing and franchising, they help
companies avoid tariff and nontariff barriers to entry.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities | Strategy
18. Global joint ventures can be difficult to manage because they represent a merging of four cultures.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM | Strategy
19. Unlike licensing, franchising, or joint ventures, wholly owned affiliates are 100 percent owned by the parent company.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3d
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Strategy
20. Global new ventures bring a good or service to market in one foreign market at a time.
a. True
b. False
ANSWER: False
RATIONALE: Rather than going global one country at a time, global new ventures bring a product or service
to market in several foreign markets at the same time.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3e
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
21. Deciding where to “go global” is just as important as deciding how your company will go global.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
22. An attractive business climate is defined by one single dimension: Does the business minimize the political risk to the
company?
a. True
b. False
ANSWER: False
RATIONALE: An attractive global business climate has three characteristics: (1) it positions the company for
easy access to growing markets, (2) it is an effective but cost-efficient place to build an office
or manufacturing site, and (3) it minimizes the political risk to the company.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
23. Two factors that help companies determine the growth potential of foreign markets are the purchasing power of the
consumers and types of foreign competitors already in the market.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
24. The criteria for choosing an office/manufacturing location are different from the criteria for entering a foreign market.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
25. When conducting global business, companies should attempt to identify the two types of political risk, which are
political uncertainty and economic uncertainty.
a. True
b. False
ANSWER: False
RATIONALE: When conducting global business, companies should attempt to identify two types of political
risk: political uncertainty and policy uncertainty.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
26. The three strategies used to minimize or to adapt to the political risk inherent to global business are avoidance, control,
and cooperation.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Leadership Principles | Strategy
27. 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.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-6b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM
29. ____ 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
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
30. 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
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
31. Nestlé is a company headquartered 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
ANSWER: b
RATIONALE: A multinational corporation is defined as a corporation that owns businesses in two or more
countries.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
32. As Malta got ready for its admittance into the European Union (EU), the EU removed all taxes on the importation of
goods manufactured in Malta. In other words, the EU abolished ____ for Malta-manufactured merchandise.
a. import quotas
b. customs classifications
c. import standards
d. tariffs
e. boycotts
ANSWER: d
RATIONALE: Tariffs are defined as a direct tax on imported goods.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
33. 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
ANSWER: d
RATIONALE: Trade barriers are defined as government imposed regulations that increase the cost and
restrict the number of imported goods.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
35. In 2000, the United States imposed a tax on all steel imports in an effort to protect about 5,000 jobs. This tax is an
example of a(n) ____.
a. import duty
b. voluntary import restraint
c. subsidy
d. financial boycott
e. tariff
ANSWER: e
RATIONALE: Tariffs are defined as a direct tax on imported goods.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
36. 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
ANSWER: b
RATIONALE: This is the definition of protectionism.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
37. 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
ANSWER: b
RATIONALE: Nontariff barriers are defined as nontax methods of increasing the cost or reducing the
volume of imported goods.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
38. 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
ANSWER: c
RATIONALE: The aim of the Japanese policy is to shield domestic competitors from foreign competition, an
aim consistent with protectionism.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
39. A ____ is a nontax method of increasing the cost or reducing the volume of imported goods.
a. tariff
b. nontariff barrier
c. trade roadblock
d. risk-aversive boycott
e. subsidy quota
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
40. A(n) ____ is a direct tax on imported goods designed to make it more expensive to buy those goods, instituted in
hopes of reducing the volume of those imported goods in a given country.
a. tariff
b. nontariff barrier
c. trade roadblock
d. boycott quota
e. import subsidy
ANSWER: a
RATIONALE: Tariffs are defined as a direct tax on imported goods.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
41. The Japanese government has proclaimed that its snow is different from that found in any other region of the world
and as a result ensures that all snow skis marketed for sale 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
ANSWER: d
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
42. 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 port it imported from the EU?
a. quotas
b. subsidies
c. boycotts
d. customs classifications
e. duties
ANSWER: a
RATIONALE: A quota is defined as a limit on the number or volume of imported products.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
43. The European Union (EU) bans the importation of hormone-fed U.S. beef and bioengineered corn and soybeans on
safety grounds. 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
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
44. ____ 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. Subsidies
e. Tariffs
ANSWER: d
RATIONALE: This is the definition of a government subsidy.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
45. 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. quota
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities
46. 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. World Trade Organization
d. Mercosur
e. Asian Free Trade Arrangement
ANSWER: c
RATIONALE: GATT was a comprehensive trading agreement originally signed by 124 countries and
provided the basic framework for the World Trade Organization agreement, which took the
place of GATT in 1995.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
47. The signing of the ____ created a regional trading zone in Europe.
a. Maastricht Treaty
b. Pact for Free Trade Agreement
c. Global Agreement for Transactional Trading (GATT)
d. South-East Asia Pact
e. all of these
ANSWER: a
RATIONALE: The Maastricht Treaty established the European Union (EU) trading zone.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
48. As Malta got ready for its admittance into the European Union (EU), all taxes on the importation of goods
manufactured in Malta were eliminated. Malta was preparing to become part of a(n) ____.
a. zone of ethnocentricity
b. regional trading zone
c. neutral trading area
d. international cartel
e. global market
ANSWER: b
RATIONALE: Regional trading zones are defined as areas in which tariff and nontariff barriers on trade are
reduced or eliminated.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
51. 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
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Reflective Thinking
KEYWORDS: Environmental Influence
52. One of the major questions that a company must typically answer about its future, 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?
ANSWER: b
RATIONALE: The question of whether to follow a strategy of global consistency or local adaptation is
fundamental to multinational business.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
53. A multinational company that acts with ____ has offices, manufacturing plants, and distribution facilities in different
countries all which run based on the same rules, guidelines, policies, and procedures.
a. policy certainty
b. global consistency
c. global adaptation
d. global certainty
e. regiocentrism
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
54. 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
ANSWER: d
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Leadership Principles | Strategy
55. 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
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
56. 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
ANSWER: c
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
57. ____ 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
ANSWER: d
RATIONALE: This is the definition of exporting.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
58. Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of its lipstick annually in
Japan. 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
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
59. 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
e. direct investment
ANSWER: b
RATIONALE: This is the definition of a cooperative contract.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
61. Sodima is a French cooperative that owns the name, the trade secrets, and the patents on Yoplait yogurt. General Mills
pays Sodima 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
e. direct investment
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities | Strategy
62. 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 joint venture
d. a cooperative contract
e. a wholly-owned subsidiary
ANSWER: c
RATIONALE: A joint venture is defined as a strategic alliance in which two existing companies collaborate
to form a third, independent company.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities | Strategy
63. Ernst & Young, an international accounting and management consulting company, entered Hungary first by
establishing a joint venture with a local firm. Ernst & Young later acquired the company with which it had the alliance. As
a result Ernst & Young then had a(n) ____ in Hungary.
a. franchise
b. licensing arrangement
c. cooperative contract
d. wholly owned affiliate
e. export agency
ANSWER: d
RATIONALE: A wholly owned affiliate is defined as foreign offices, facilities, and manufacturing plants that
are owned by the parent company.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3d
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
64. In terms of Hofstede’s cultural differences, the people who are described as happy-go-lucky and are people who are
comfortable with an unstructured life and deal well with sudden changes. In terms of Hofstede’s cultural differences, these
people 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
ANSWER: b
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
65. All global new ventures share two common factors. One is that the company founders successfully develop and
communicate the company’s global vision from the start. The other is ____.
a. the bringing of a good or service to several different foreign markets at the same time
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. the development of culturally-specific implementation policies
ANSWER: a
RATIONALE: A global new venture is an approach to global business in which new companies are founded
with an active global strategy and have sales, employees, and financing in different countries.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3e
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
66. 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
ANSWER: e
RATIONALE: The other characteristic of a global new venture is that it is conceived by its founders, who
articulate its global mission, as a global company from the start.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3e
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
67. Starbucks is expanding its global operations into South America in spite of 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 ____.
a. political uncertainty
b. economic uncertainty
c. infrastructure regulation
d. nationalistic equity
e. strategy risk
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Ethical Responsibilities | Strategy
68. 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
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
69. 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
ANSWER: c
RATIONALE: On Hofstede’s Cultural Dimensions, the U.S. scores relatively high on individualism,
masculinity, and short-term orientation; and moderate on uncertainty avoidance.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
70. 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
ANSWER: b
RATIONALE: 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 typically base their plans on
success in their home market and because franchisees are embedded in foreign cultures, this
form of global business is especially vulnerable to cultural misunderstandings.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3b
7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
71. 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, McDonald’s saw the new restaurant as an opportunity. Unfortunately, the
restaurant in Paris was not maintained at the cleanliness standards prescribed by McDonald's (but acceptable to the
cleanliness standards of 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
ANSWER: e
RATIONALE: Cross-cultural franchises are especially vulnerable to cultural conflicts and
misunderstandings.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3b
7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
72. 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
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
73. 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
ANSWER: e
RATIONALE: Each of these forms involves situating operations and management in a foreign country. The
franchisee, licensee, foreign venture partner, or management of a foreign subsidiary typically
benefit from some tariff/nontariff relief over what a multinational exporter would face.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Reflective Thinking
KEYWORDS: Environmental Influence | Strategy
74. In Canada, two automobile companies have entered into a ____ to create CAMI Automotive. One firm’s management
runs the plant, which makes the other’s cars. The agreement gives one access to the other’s dealers to sell its brand of
vehicles.
a. licensing agreement
b. subsidiary arrangement
c. cooperative contract
d. exporting agency
e. joint venture
ANSWER: e
RATIONALE: A joint venture involves two existing firms pooling resources to launch and support a third
independent venture.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
75. Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. What method for organizing for
global business has Ford used in this example?
a. joint venture
b. strategic alliance
c. cooperative contract
d. wholly owned affiliate
e. strategic franchise
ANSWER: d
RATIONALE: A wholly owned affiliate is defined as foreign offices, facilities, and manufacturing plants that
are owned by the parent company.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3d
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
76. 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
ANSWER: e
RATIONALE: The wholly owned affiliate is typically the most expensive form of global market entry.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3d
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
77. German chip manufacturer Infineon AG has joined with Motorola Inc. and Agere Systems Inc. to establish a new
company to develop and license chip designs for cellphones. These three companies have created a ____.
a. license facilitator
b. subsidized corporation
c. global new venture
d. joint venture
e. export merchant
ANSWER: d
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
78. 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 need for resources
d. the metamorphosis of marketplaces
e. all of these
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3e
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
79. New companies with sales, employees, and financing in different countries that are found with an active global
strategy are called ____.
a. global new ventures
b. strategic alliances
c. wholly owned affiliates
d. franchisees
e. subsidized corporations
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3e
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
80. A country or region that has an attractive business climate for companies that want to go global has found an ____.
a. easy access to growing markets
b. experienced marketplace metamorphosis
c. eliminated all political risks
d. a limited infrastructure
e. all of these
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
81. 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
ANSWER: b
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Reflective Thinking
KEYWORDS: Environmental Influence | Strategy
82. The most important factor used by a globalizing company for determining if a country or a region has an attractive
business climate is ____.
a. easy access to growing markets
b. marketplace metamorphosis
c. global synergy
d. a large, unskilled workforce
e. natural boundaries
ANSWER: a
RATIONALE: None of the other market factors can compensate for a lack of access or poor market
potential.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
83. 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
ANSWER: b
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
84. A cosmetics company that is considering entering the South American market would be especially interested in the
discretionary income within that region. In other words, which of the following would be a determining factor in its global
strategy?
a. purchasing power
b. political uncertainty
c. expropriation potential
d. infrastructure
e. sociocultural trends
ANSWER: a
RATIONALE: 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).
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
85. Which of the following factors should be considered when choosing an office/manufacturing location in the Brazilian
market for a U.S. company that operates cinemas and wants to open a chain of movie theatres there?
a. work force quality
b. the strategy of the movie theater chain
c. tariff and nontariff barriers
d. exchange rates
e. all of these
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4b
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
86. 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
ANSWER: a
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
87. 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.
a. political uncertainty
b. policy uncertainty
c. economic risk
d. infrastructure failure
e. nationalization
ANSWER: a
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
88. The Japanese government decreed that Japanese snow was different from all others and required that all snow
equipment marketed in the country be made in Japan for safety reasons. The elimination of non-Japanese companies from
the market is an example of how ____ can influence global business.
a. infrastructure modifications
b. policy uncertainty
c. political uncertainty
d. competitive uncertainty
e. sociocultural modifications
ANSWER: b
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
89. 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
ANSWER: e
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
90. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing of cellular
phones. A company which 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
c. cooperative strategy
d. elimination strategy
e. self-protection strategy
ANSWER: a
RATIONALE: Avoidance is used when a company judges the political risk to be too high in a particular
market and decides not to operate in the market.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
91. The Green Giant consumer products company learned that it could not use their 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
c. cooperative strategy
d. cultural difference
e. avoidance strategy
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
92. 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. cooperation
d. avoidance
e. offensive
ANSWER: c
RATIONALE: This is the definition of the cooperation strategy.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
93. 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
ANSWER: b
RATIONALE: This is the definition of the control strategy.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
94. ____ is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of people from a
particular country.
a. National mindset
b. National culture
c. Cultural nationalization
d. Cultural diversity
e. National diversity
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
96. According to Hofstede, when people in a culture are oriented to the present and seek immediate gratification, that
culture is described as ____.
a. having a long-term orientation
b. masculine
c. having a short-term orientation
d. individualistic
e. feminine
ANSWER: c
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
97. 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
ANSWER: b
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
98. 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
ANSWER: d
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
101. 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
ANSWER: c
RATIONALE: Because an expatriate’s spouse and family are often more immersed in the daily culture of
the foreign country, their adaptability exerts a strong influence on the performance and
retention of the expatriate worker.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-6a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM
102. ____ is used to assess how well managers and their families are likely to adjust to foreign cultures.
a. cultural awareness screening
b. sociocultural analysis
c. sensitivity screening
d. sociocultural diagnostics
e. adaptability screening
ANSWER: e
RATIONALE: This is the definition of adaptability screening.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-6b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM
Coca-Cola
Georgia-based Coca-Cola is reentering the Indian market. Coke is 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, yet India has the
fastest-growing demand for consumer products in the world. Coke’s first attempt to enter the Indian market over a decade
ago was plagued by gross mismanagement, and the company lost 20 billion Indian rupies. In that first attempt, Coke
purchased Thumbs Up, the leading India-based carbonated soft drink. The company hoped to replace Thumbs Up with
Coke, while maintaining the Thumbs Up distribution strategy. For its return to the market, Coke built five plants, cut
costly staff, revamped transport, and reduced the size and weight of bottles in order to increase a truck’s carrying capacity.
It also increased its number of distributors and dumped a global advertising campaign that proved irrelevant to the Indian
market.
103. Refer to Coca-Cola. In its first attempt to enter the Indian market, Coke engaged in ____.
a. acculturation
b. direct foreign investment
c. internal importing
d. globalization
e. restraint of trade
ANSWER: b
RATIONALE: Coke acquired an Indian company, an example of the direct foreign investment approach to
market entry.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
105. Refer to Coca-Cola. What kind of strategy has Coca-Cola used for its second entry into the Indian market?
a. global consistency
b. market differentiation
c. market restructuring
d. local adaptation
e. acculturation
ANSWER: d
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
106. Refer to Coca-Cola. One way Coca-Cola increased distribution of Coke was to enter into a ____ with a refrigerator
manufacturer. In order to ensure that retailers had the proper refrigeration units, Coke provided the financing needed for
the retailers to purchase them, and the refrigeration manufacturer gave deep price discounts.
a. franchise agreement
b. direct investment
c. strategic alliance
d. brokered agreement
e. new-venture strategy
ANSWER: c
RATIONALE: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
107. Refer to Coca-Cola. The need for Coke to create a promotional strategy 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
ANSWER: b
RATIONALE: 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 Indian culture.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
WWYD Groupon
Growing from 30 cities in December 2008 to 550 today, Groupon got to $1 billion in sales faster than any other company.
Groupon sends a daily email to its 35 million subscribers offering a discount to a restaurant, museum, store, or service
provider in their city. This “coupon” becomes a “groupon” because the company offering the discount specifies how
many people (i.e., a group) must buy before the deal “tips.” For example, a local restaurant may require 100 people to
buy. If only 90 do, then no one gets the discount. Daily deals go viral as those who buy send the discount to others who
might be interested. When the deal tips, the company and Groupon split the revenue.
Why would companies sign up, especially since half of the money goes to Groupon? Nearly all of Groupon’s clients are
local companies, which have few cost effective ways of advertising. Radio, newspapers, and online advertising all require
upfront payment (whether they work or not). By contrast, local companies pay Groupon only after the daily deal attracts
enough customers to be successful.
Because there are few barriers to entry and the basic Web platform is easy to copy, Groupon’s business has been copied in
50 countries. China alone has 1,000 Groupon-type businesses. So, while Groupon has grown to $1 billion in sales faster
than any other company, competitors threaten to take much of that business, especially in international markets.
While the Web side of Groupon business works in most places, it doesn’t work everywhere. Throughout much of the
world, online credit cards facilitate quick, easy, and trustworthy payment. In India, however, Groupon must use cash-on
delivery. In other ways, however, Groupon is balancing consistency with local adaptation. Groupon’s business model
suggests that the company could find itself locked out of key international markets if it doesn’t move quickly to establish
itself as a multinational company. Groupon began buying market leaders that it identified in 50 different countries—i.e,
entrepreneurs to work with that were excellent operators and also understood the local culture. Groupon first bought a
company in Germany and then repeated this acquisition strategy in Chile, Russia, Japan, China, and other locations. One
year after deciding to go global, Groupon is in 42 different countries.
While Groupon has local managers to run its businesses in 42 different countries, it brings all of them to Chicago to learn
how to run their offices the way that it’s done in the U.S. Then, it makes sure that those managers stay current with its
client companies by using management software to ensure that its sales force follows up to address potential issues after
every daily deal is completed.
108. Refer to WWYD Groupon. What challenge did Groupon face in going global?
a. the refusal of some potential global customers to use credit cards online
b. its Chicago-based call center and HQ
c. a business model easily replicated by competitors and imitators
d. policy uncertainty in the United States
e. political risk in its domestic operations
ANSWER: c
RATIONALE: Competitors in other countries threaten Groupon by using its business model.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
109. Refer to WWYD Groupon. When a company uses the same policies to run its U.S., U.K., and Indian operations, it is
trying to achieve:
a. lower costs with the same paperwork here and abroad
b. perfect adaptation
c. a consistent global business model
d. global consistency
e. simplified logistics
ANSWER: d
RATIONALE: Global consistency means using the same rules, guidelines, policies, and procedures to run
company operations worldwide.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
110. Refer to WWYD Groupon. Groupon has instituted a __________ approach to __________ by training its
international cadre of managers in its hometown of Chicago.
a. culturally sensitive/acquired overseas competitors
b. fair/cultural differences
c. balanced/global consistency
d. critical/global diversification
e. diversity/global expansion
ANSWER: c
RATIONALE: Groupon balances consistency with local adaptation, For example, it trains its overseas
managers in Chicago to run their offices as it is done in the United States.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level VI Evaluation
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
111. Refer to WWYD Groupon. As a Groupon manager, when you consider such characteristics as “uncertainty
avoidance” (reluctance to use credit cards) or women’s dress (modesty in a Muslim state), you are recognizing
__________ differences.
a. cultural
b. economic
c. sexual
d. meaningless
e. demographic
ANSWER: a
RATIONALE: The first step in dealing with culture is to recognize meaningful cultural differences.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level VI Evaluation
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
112. Refer to WWYD Groupon. The companies that Groupon purchased in Japan, Chile, Russia, Germany, and China
became _____ of Groupon
a. strategic partners
b. wholly owned affiliates
c. licensees
d. franchises
e. outposts
ANSWER: b
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-3d
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
113. Refer to WWYD Groupon. Groupon became a multinational company after it bought a company in:
a. Germany
b. Chile
c. Russia
d. Japan
e. China
ANSWER: a
RATIONALE: A multinational company is one that own businesses in two or more countries. After
purchasing an affilitate in Germany, Groupon owned businesses in Germany and the United
States, making it a multinational company
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
114. Define direct foreign investment. Name one of the top five countries with the largest direct foreign investment in the
United States.
ANSWER: 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 five countries with the largest
direct foreign investment in the United States are, in descending order, the United Kingdom,
Japan, Germany, the Netherlands, and Canada.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-1a
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
115. What are trade barriers and identify the two general kinds of trade barriers used by governments. Give one example
of each.
ANSWER: 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 Chinese solar
panels is 24 to 36 percent. (Students could give any relevant example.) Nontariff barriers are
nontax methods of increasing the cost or reducing the volume of imported goods. There are
five types of nontariff barriers: (1) quotas, (2) voluntary export restraints, (3) government
import standards, (4) government subsidies, and (5) customs valuation/classification. An
example of a nontariff barrier would be the quota (or specific limit on imports) on the number
of Chinese area rugs that can be imported each year. (Students could give any relevant
example.)
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1b
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
116. Briefly describe a regional trade agreement and a worldwide trade agreement.
ANSWER: There is only one worldwide agreement, and that is the General Agreement on Tariffs and
Trade (GATT), which will reduce and eliminate tariffs, limit government subsidies, and
protect intellectual property. GATT was replaced by the World Trade Organization (WTO) in
1995.
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), South America (USAN), and Asia
(ASEAN, Association of Southeast Asian Nations, and APEC, Asia-Pacific Economic
Cooperation).
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-1c
7-1d
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence
117. Compare and contrast the concepts of global consistency and local adaptation as policies for entering foreign
markets.
ANSWER: 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 prefer global consistency because it simplifies
decisions. Local adaptation means adapting company 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM | Strategy
118. Briefly explain the phase model of globalization and list its stages in their appropriate order.
ANSWER: 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 increased 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
119. Briefly explain how companies can assess the growth potential of new markets.
ANSWER: 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.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-4a
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Creation of Value | Environmental Influence | Strategy
120. Identify the two basic types of political risk facing organizations when conducting global business. Which one is
more common?
ANSWER: 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-4c
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
121. Define national culture. List the five consistent cultural dimensions across countries.
ANSWER: National culture is the set of shared values and beliefs that affects the perceptions, decisions,
and behavior of 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: (1) power distance, (2) individualism,
(3) short-term versus long-term orientation, (4) masculinity, and (5) uncertainty avoidance.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-5
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence
122. Briefly comment on the types of training that should be provided AND to whom that training should be provided in
order to ensure the success of managers who go on international assignments.
ANSWER: Managers should receive both language and cross-cultural training before going on
assignment. Forms of training include documentary training, cultural simulations, and field
experiences. In addition, the evidence clearly shows that the most important factor in
determining the success or failure of an international assignment depends on how well an
expatriate's spouse and family adjust to the foreign culture. Therefore, language and cross-
cultural training should be provided for the spouses and children of expatriates as well.
POINTS: 1
DIFFICULTY: Easy
REFERENCES: 7-6
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | HRM
123. What are the basic provisions of the General Agreement on Tariffs and Trade (GATT)?. Give three examples of how
it benefits U.S. industries.
ANSWER: 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 will cut average tariffs worldwide by 40 percent. A reduction in tariffs will
benefit 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 puts
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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-1c
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Analytic
KEYWORDS: Environmental Influence | Legal Responsibilities
124. 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.
ANSWER: 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 even as simple as
nasal strips to prevent snoring will be the easiest to use global consistency. The MTV
example in the text should provide students with an example of a service that requires local
adaptation.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-2
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Environmental Influence | Strategy
125. What is the phase model of globalization? Identify the factors that have allowed companies to follow different paths
to globalization. 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.
ANSWER: 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 (1) exporting, (2)
cooperative contracts, (3) strategic alliances, and (4) 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. The exporting 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. The
joint venture is an example of 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 are 100 percent
owned by the parent company. At each step, the company would grow much larger, would
use its increased 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 because 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.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-3
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
AACSB Reflective Thinking
KEYWORDS: Creation of Value | Environmental Influence | Strategy
126. Identify and discuss the basic components of an attractive business climate. Comment on the extent to which a fast
food restaurant franchise might make a different assessment of relevant factors than would a capital-intensive business
such as an oil refinery and pipeline company.
ANSWER: An attractive global business climate has three characteristics: (1) it positions the company for
easy access to growing markets, (2) it is an effective but cost-efficient place to build an office
or manufacturing site, and (3) it minimizes the political risk to the company. A fast food
company would probably make a very different assessment of several relevant factors than
would a capital-intensive business such as an oil refinery and pipeline company.
The first factor (positioning the company for easy access to growing markets) is most clearly
relevant to the fast food company, which must have its stores located directly in the growth
area. An oil refinery/pipeline company would need to be located reasonably close to the
source of the crude oil but would not have to be directly within the actual market for the sale
of the product. On the other hand, since transportation costs for oil can be significant, the
company should be as close as feasible to the target market. Growth potential is determined
through an evaluation of purchasing power and foreign competitors. The purchasing power
dimension would be more relevant to the fast food company, since the fast food company is
selling a discretionary product. The product mix of the oil company would determine the
relevance of this dimension (e.g., gasoline, diesel fuel, heating oil combinations depending
upon the needs of the relevant target market). Foreign competitors may be less relevant to the
fast food company than the oil company, which may be competing with state-owned and
operated facilities.
The second factor (locating an effective but cost-efficient place to build an office or
manufacturing site) would be far more relevant to the oil company, since the fast food
company could license or franchise to foreign markets. While the oil company could export,
the conditions in the host country would be crucial to its long-term viability, since political
factors could ultimately determine its success or failure. Both companies would need to
consider the qualitative factors of work force quality and company strategy, though the oil
company is less labor intensive and may find it easier to bring in qualified technical personnel
than would the fast food company. In addition, quantitative factors would need to be taken
into account by both companies. Among these, tariff and nontariff barriers, exchange rates,
and transportation and labor costs would be relevant to both companies. The kind of facility
being built would be of greater significance to the oil company.
The final factor (minimizing political risk to the company) would be acutely important to the
oil company but less so to the fast food company. Since the fast food company can readily use
licensing or franchising to overcome trade barriers and insulate itself from political risk with a
cooperative strategy of risk management, it may be in a better position on this dimension. The
oil company could be at significant risk from both political uncertainty (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) and policy uncertainty (associated
with changes in laws and government policies that directly affect the way foreign companies
conduct business). For the oil company, careful selection of the site for the facility beforehand
is probably the most crucial step (i.e., an avoidance strategy). Assuming that a reasonable and
relatively stable country has been selected, the control strategy (lobbying foreign
governments) and cooperative strategy (using joint ventures) can help to reduce the political
risk.
POINTS: 1
DIFFICULTY: Difficult
REFERENCES: 7-4
NATIONAL STANDARDS: United States - Level I Knowledge
TOPICS: AACSB Diversity
AACSB Analytic
KEYWORDS: Creation of Value | Environmental Influence | Strategy
127. 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 on 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.
ANSWER: Many expatriates return prematurely from international assignments because of poor
performance. For example, it is estimated that 5 percent to 20 percent of American expatriates
sent abroad by their companies will return to the United States before they have successfully
completed their international assignments. Of those who do complete their international
assignments, as many as 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 positively influence 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 involves not only companies assessing
employees, but also employees screening 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.
POINTS: 1
DIFFICULTY: Moderate
REFERENCES: 7-6
NATIONAL STANDARDS: United States - Level II Comprehension
TOPICS: AACSB Diversity
AACSB Analytic
AACSB Reflective Thinking
KEYWORDS: Environmental Influence | HRM
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Toimikunta oli lyönyt niin paljon tehtäviä laimiin, että nyt vasta oli
kaikki kunnossa. Tarjosi kahvia, jota he lähtivät juomaan.
"Sepä surullista!"
"Kunnioitetut kansalaiset!"
"Mitä?"
Uusi välikirja.
*****
Juuri siinä tuli pehtori vastaan. Pekka oli vähällä unhoittaa nostaa
lakkia, mutta onneksi kuitenkin huomasi sen. Pehtori oli jo astunut
ohitse, kun äkkiä kääntyi ja virkahti:
"Saatana!"
Kun tämä mies tuli kotiin, oli jokseenkin pimeä. Vanhempi tyttö, 11
ikäinen, oli äitinsä kanssa leikkuupellolla, toinen, 8 vuotias keitti
puuroa ja 3 vuotias poika itkeä kyhni penkillä omia aikojaan.
"Mitä se sanoi?"
"Ajattelin sinua, että kun sinä tulisit. Sano nyt, joka tiedät, tuleeko
siitä maanjaosta jotain?"
*****
"Miksikäs ei!"
"Pehtoristammeko?"
"Mitä tekemään?"
"Isabella, minä melkein luulen, että sinä otat asian liian keveältä
kannalta."
"No, mutta hyvä Viktor, eihän sitä nyt maksa vaivaa ottaa noin
kauhean synkästi! Tietäähän koko Helsinki, että perheemme kuuluu
huomattavimpiin tosi-isänmaallisiin perheisiin. Jos torpparit meidän
tilallamme — jota eivät monet tiedä, että ne ovat juuri meidän
tilallamme, — jos ne yksinkertaisuudessaan antautuvat
epäisänmaallisen yllytyksen valtaan, niin emmehän me heitä ole
opettaneet."
"Viktor!"
"Niin, niin."
"Ulkomaa-matkan?"
"Niin, katsos…"
*****
Myöhemmin talvella, muutamalla hiihtoretkellä, ollessaan maalla
osuivat kartanon nuori maisteri ja hänen toverinsa pistäytymään
Pekan mökkiin.
"Ja kyllä on ollut elämisen kanssa niin ja näin, niin että ei tässä
kurjuus ole kovinkaan vieras", selitti vaimo.
Se jäi siihen.
"Ruoat ovat kotona, eikä siellä ole ken toisi. Makaamisen aikaa ei
tässä kyllä jää ollenkaan. Kello 4 pitää olla takaisin", jutteli mies
synkästi.
Toiset hymähtivät: