Chapter 01 the Rapid Change of International Business

Chapter 01 - The Rapid Change of International Business

Chapter 01

The Rapid Change of International Business

True / False Questions

1.A senior manager of a major multinational said that "no one will be in a general management job by the end of the decade who didn't have international exposure and experience."
TrueFalse

2.American companies want their managers to have a basic knowledge of international business.
TrueFalse

3.CEOs of major American firms doing business overseas are not convinced the business graduates they hire should have some education in the international aspects of business.
TrueFalse

4.Only those companies that have foreign operations need to be aware of what is occurring globally in its markets and their industry.
TrueFalse

5.Firms with no foreign operations of any kind do not need managers with a global business perspective.
TrueFalse

6.The United Nations uses the term transnational to describe a firm doing business in more than one country.
TrueFalse

7.According to the text, foreign business denotes the operations of a company outside its home or domestic market.
TrueFalse

8.According to the text, a global company is an organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.
TrueFalse

9.According to the definitions in the text, a multidomestic firm is an organization that attempts to standardize operations worldwide in all functional areas.
TrueFalse

10.The term in this text, "international company," refers to both global and multidomestic companies.
TrueFalse

11.While international business as a discipline is relatively new, international business as a business practice is not.
TrueFalse

12.The tendency toward an international integration of goods, technology, information, labor and capital, or the process of making this integration happen, is referred to as economic globalization.
TrueFalse

13.There are five major kinds of drivers, all based on changes that are leading international firms to the globalization of their operations.
TrueFalse

14.Transnational corporations account for approximately 25 percent of total global output and nearly 5 percent of world trade.
TrueFalse

15.Critics of large global firms compare these firms' sales with nations' total sales to illustrate the tremendous size of these firms.
TrueFalse

16.In 2006, ExxonMobil's sales worldwide were greater than the gross national incomes of all but the largest 19 nations of the world.
TrueFalse

17.When a global firm's total sales are greater than a nation's GNI, the national government is defenseless against such a firm.
TrueFalse

18.One variable commonly used to measure where and how fast internationalization takes place is the increase in total foreign direct investment.
TrueFalse

19.The world stock of outward foreign direct investment was $12.5 trillion in 2006, which was almost 10 times what it was in 1980.
TrueFalse

20.Exporting refers to the transportation of any good or service to a destination inside a country or region.
TrueFalse

21.Supporters of globalization generally argue that it is the best strategy for advancing the world's economic development.
TrueFalse

22.Expanded international trade is linked with the creation of more and better jobs.
TrueFalse

23.Globalization has produced uneven results across nations and people.
TrueFalse

24.Opponents of free trade point out that globalization has contributed to a decline in environmental and health conditions.
TrueFalse

25.International business differs from domestic business in that a firm operating across borders must deal with three kinds of environments.
TrueFalse

26.The three environments for international business are domestic, foreign and export.
TrueFalse

27.Environment, as used in the textbook, is the sum of all the forces surrounding and influencing the life and development of the firm.
TrueFalse

28.The environmental forces can be classified as internal and foreign.
TrueFalse

29.The external forces are commonly called uncontrollable forces.
TrueFalse

30.Management must administer the controllable forces in order to adapt to changes in the uncontrollable environmental variables.
TrueFalse

31.The domestic environment is composed of all the controllable forces originating in the home country that influence the life and development of the firm.
TrueFalse

32.The kinds of forces in the foreign environment are the same as those in the domestic environment except they occur in foreign nations.
TrueFalse

33.The values of the foreign and domestic forces are identical, but the forces themselves are different.
TrueFalse

34.A problem with the foreign forces is that they are frequently difficult to assess, especially their legal and political elements.
TrueFalse

35.One part of the international environment is the interaction between the domestic and foreign environmental forces.
TrueFalse

36.Those who work in the international environment find that decision making is not as complex as it is in a purely domestic environment.
TrueFalse

37.The international environment is the interactions between the domestic and foreign environmental forces or between sets of foreign environmental forces.
TrueFalse

38.Managers in the international environment find that decision making is easier because foreign countries are smaller than markets in the United States.
TrueFalse

39.The self-reference criterion is probably the biggest cause of international business blunders.
TrueFalse

40.An international manager has two choices on what to do overseas with a concept or technique employed in domestic operations: (1) transfer it intact or (2) adapt it to local conditions.
TrueFalse

Multiple Choice Questions

41.The increased internationalization of business requires ______to have a basic knowledge of international business.
A.all managers
B.managers of multinationals
C.managers of transnationals
D.managers of purely domestic operations

42.There is an emphatic need for all business people to have a basic knowledge of:
A.foreign travel.
B.international business.
C.the Pacific Rim.
D.foreign exchange.

43.According the text, American CEOs want business graduates they hire to have some education in international business.
A.if they are going to work overseas.
B.if they are going to work in a firm with no foreign operations.
C.Neither A nor B because they can learn on the job.
D.Both A and B.

44.Historically, international business:
A.is relatively new.
B.existed before the time of Christ.
C.B and D.
D.was influenced by the rise of the Ottoman Empire.

45.As used in the text, a global company is an organization
A.that attempts to standardize operations worldwide in most or all functional areas.
B.that looks for differences among markets.
C.that is transnational.
D.all of the above

46.Firms that have substantial operations in more than one country are called
A.global companies.
B.multidomestic firms.
C.affiliated companies.
D.A, B, and C.
E.A and B.

47.An international business
A.is a business whose activities involve crossing national borders.
B.denotes the domestic operations within a foreign country.
C.is an organization with multicountry affiliates.
D.is an organization that attempts to standardize operations worldwide.

48.Foreign business denotes
A.a business whose activities involve crossing national borders.
B.the domestic operations within a foreign country.
C.an organization with multicountry affiliates.
D.an organization that attempts to standardize operations worldwide.

49.A multidomestic company is
A.a business whose activities involve crossing national borders.
B.the domestic operations within a foreign country.
C.an organization with multicountry affiliates.
D.an organization that attempts to standardize operations worldwide.

50.A global company (GC) is
A.a business whose activities involve crossing national borders.
B.the domestic operations within a foreign country.
C.an organization with multicountry affiliates.
D.an organization that attempts to standardize operations worldwide.

51.International business really began:
A.with the East India Company chartered in 1600.
B.when Singer Sewing Machine put up a factory in Scotland in 1868.
C.before the time of Christ.
D.when Colt Fire Arms set up a plant in England.

52.The major globalization drivers include all of the following except:
A.Political
B.Social
C.Technological
D.Market
E.None. All of the above are major kinds of globalization drivers

53.The trend toward unification and socialization of the global community is illustrated by which of the following:
A.Preferential trading arrangements that group several nations into a single market.
B.Progressive increases in barriers to foreign investment by most governments.
C.Increased public ownership of much of the industry in formerly communist nations.
D.All of the above are aspects of the trend toward unification and socialization of the global community.

54.UNCTAD, an agency of the United Nations estimates there are ______international firms in the world.
A.5,500
B.12,000
C.64,000
D.120,000
E.over 800,000

55.In 2006, only ______nations had GNIs greater than the total sales of ExxonMobil.
A.46
B.19
C.5
D.76

56.Due to the expanding importance of foreign-owned firms in local economies, host governments have made their policies toward these companies ______.
A.more strict
B.more liberal
C.harsher
D.more confronting
E.A and C

57.Foreign subsidiaries must obey the local laws. If they don't, they are subject to:
A.legal action by the host country.
B.legal action by the host country and the country of the parent company.
C.seizure by the host government.
D.cancellation by the parent company of its right to do business in the host country.
E.A and C.

58.In 2006, the total amount of ExxonMobil's worldwide sales was greater than
A.the combined GNIs of 80 of the world's smallest economies.
B.the sum of the combined sales of Ford and General Electric.
C.the total sales of Wal-Mart Stores and Citigroup.
D.the sum of the GNI of the U.S.

59.In the United States, an overseas investment by an American resident is considered to be a foreign direct investment if it is ______or more of the stockholder's equity.
A.10
B.51
C.25
D.100

60.The worldwide stock of outward FDI is estimated to have increased __ between 1980 and 2006.
A.Threefold
B.Eightfold
C.Twelvefold
D.Seventeenfold
E.Twentytwofold

61.According to the text, one variable commonly used to measure where and how fast internationalization takes place is:
A.the increase in a nation's population.
B.the increase in the number of new companies formed.
C.the increase in foreign direct investment.
D.the increase in international trade.

62.The level of service exports worldwide increased nearly __ between 1980 and 2007.
A.Fourfold
B.Sixfold
C.Ninefold
D.Twentyfold

63.According to supporters of the globalization of trade and investment, free trade
A.creates more and better jobs.
B.benefits all nations and workers.
C.does not cause the loss of high-paying jobs.
D.all of the above

64.According to opponents of the globalization of trade and investment,
A.globalization has produced uneven results across nations and people.
B.globalization has had harmful effects on labor and labor standards.
C.globalization has contributed to a decline in environmental and health conditions.
D.all of the above.

65.Environment as used in the textbook is the forces surrounding and influencing the life and development of the firm and is classified as
A.controllable and uncontrollable.
B.domestic and foreign.
C.internal and external.
D.All of the above.
E.A and C.

66.Management has no direct control over the external environment of the firm but can exert influence by
A.heavy promotion of new products to change cultural attitudes.
B.focus on the strategic plan.
C.lobbying.
D.All of the above.
E.A and C.

67.International business differs from domestic business in that a firm operating across borders must deal with
A.C, D, and E.
B.C and D.
C.the foreign environment.
D.the international environment.
E.the domestic environment.

68.Examples of the kinds of uncontrollable forces listed in the text are:
A.competitive.
B.technological.
C.gravitational.
D.A and B.
E.All of the above.

69.The forces over which the management does have some command are called:
A.internal.
B.controllable.
C.foreign.
D.A and B.
E.B and C.

70.The domestic environment is composed of all the uncontrollable forces originating in the ______that surround and influence the life and development of the firm.
A.international arena
B.host nation
C.home country
D.foreign country
E.B and C.

71.Foreign environmental forces often operate differently than domestic environmental forces because:
A.they are uncontrollable.
B.force values are different.
C.changes are difficult to assess.
D.B and C.
E.A, B, and C.

72.The kinds of forces in the foreign environment are ______those in the domestic environment except that they occur in foreign nations.
A.different from
B.the same as
C.less than
D.more stringent than

73.The international environment is the interactions between
A.the domestic environmental forces and the foreign environmental forces.
B.the foreign uncontrollable forces and the domestic uncontrollable forces.
C.the foreign environmental forces of two countries when an affiliate in one country does business in another country.
D.both A and C.
E.All of the above.

74.Decision making in the international environment is ______it is in a purely domestic environment.
A.less complex than
B.less demanding than
C.more complex than
D.about the same as

75.According to the text, personnel working in a foreign subsidiary are working in the international environment:
A.if they work and live in a foreign country.
B.if they are responsible for the subsidiary's exports.
C.if they are also responsible for the management of another foreign subsidiary.
D.all of the above.
E.B and C.

76.Unconscious reference to one's own cultural values when judging behavioral actions of others in a new and different environment is called:
A.self-reference culture.
B.self-reference values.
C.self-reference criterion.
D.self-reference customs.
E.self-reference environment.

77.The international business manager can choose to:
A.transfer a management practice intact.
B.transfer and adjust a management practice.
C.not transfer a management practice at all.
D.A and B.
E.A, B and C.

Essay Questions

78.Considering the dramatic internationalization of markets, discuss the comment "no one will be in a general management job by the end of the decade who has not had international exposure and experience."

79.Discuss the differences of the various names given to firms that have substantial operations in more than one country such as a global company, a multinational firm and an international company.

80.Contrast the differences between firms of the early 1900s and present-day global companies.

81.Identify and discuss the 5 major kinds of drivers that are leading international firms to the globalization of their operations.

82.Explain why comparisons of nations and industrial firms by GNI and total sales, respectively, can produce misleading results.

83.Discuss the arguments supporting and opposing globalization of trade and investment.

84.Discuss why and how international business differs from domestic business.

85.Discuss the three environments in which an international company operates.

Fill in the Blank Questions

86.Management must have ______to be able to meet the challenge of global competition.
______

87.Some academic writers suggest using terms such as multidomestic and ______as synonyms for what others call a multinational.
______

88.The term ______is used to describe an organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.
______

89.The term ______refers to both global and multidomestic companies.
______

90.______is business whose activities involve crossing national borders.
______

91.______denotes the domestic operations within a foreign country.
______

92.The tendency toward an international integration of goods, technology, information, labor and capital, or the process of making this integration happen, is termed ______.
______

93.The five major kinds of drivers of globalization are ______, ______, ______, ______, and ______.
______

94.International companies have ______their participation in world trade since 1995.
______

95.______refers to direct investments into equipment, structures, and organizations in a foreign country at a level that is sufficient to obtain significant management control.
______

96.______refers to the transportation of any domestic good or service to a destination outside a country or region.
______

97.______, as used in the text, is the sum of all the forces surrounding and influencing the life and development of the firm.
______

98.International business differs from domestic business in that a firm operating across borders must deal with the forces of ______, ______, and ______environments.
______

99.Environmental forces can be classified as ______or ______.
______

100.External environmental forces are commonly referred to as ______.
______

101.Internal environmental forces are commonly referred to as ______.
______

102.The ______is composed of all the uncontrollable forces originating in the home country.
______

103.The forces in the ______are the same as those in the domestic environment except that they occur in foreign nations.
______

104.The ______is the interaction between domestic and foreign environmental forces or between sets of foreign environmental forces.
______

105.A common cause of the added complexity of foreign environments is managers' unfamiliarity with other cultures and is called ______-______.
______

Chapter 01 The Rapid Change of International Business Answer Key

True / False Questions

1.(p.5)A senior manager of a major multinational said that "no one will be in a general management job by the end of the decade who didn't have international exposure and experience."
TRUE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Easy
Learning Objective: 2
Topic: International Business Terminology

2.(p.6)American companies want their managers to have a basic knowledge of international business.
TRUE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Easy
Learning Objective: 2
Topic: International Business Terminology

3.(p.6)CEOs of major American firms doing business overseas are not convinced the business graduates they hire should have some education in the international aspects of business.
FALSE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Medium
Learning Objective: 2
Topic: International Business Terminology

4.(p.7)Only those companies that have foreign operations need to be aware of what is occurring globally in its markets and their industry.
FALSE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Medium
Learning Objective: 2
Topic: International Business Terminology

5.(p.7)Firms with no foreign operations of any kind do not need managers with a global business perspective.
FALSE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Easy
Learning Objective: 2
Topic: International Business Terminology

6.(p.9)The United Nations uses the term transnational to describe a firm doing business in more than one country.
TRUE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Easy
Learning Objective: 1
Topic: International Business Terminology

7.(p.10)According to the text, foreign business denotes the operations of a company outside its home or domestic market.
TRUE

AACSB: Analytic
Bloom: Knowledge
Difficulty: Medium
Learning Objective: 1
Topic: International Business Terminology

8.(p.10)According to the text, a global company is an organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences.
FALSE