Globalization and International Business

Study Questions

STUDY QUESTIONS

CHAPTER 1

Globalization and International Business

1

Study Questions

1. What are international business and globalization? What is the relationship between them?
2. Why should you study international business?
3. Explain how globalization has changed over time and differs both among countries and within countries.
4. Identify and explain the seven forces that have been causing the growth in globalization.
5. How is technology affecting the growth of international business?
6. Why have most governments lowered restrictions on international trade?
7. What is the relationship between competition and globalization?
8. Why do countries cooperate with other countries? How does this cooperation affect international business?
9. What are the main criticisms of globalization?
10. What is meant by off-shoring? What are the major arguments for and against it?
11. Why do companies engage (What advantages do they gain?) in international business?
12. Define and give examples of merchandise and service imports and exports.
13. What are the types of foreign investment?
14. What is a multinational enterprise (MNE)?
15. What do we mean by a company’s physical and societal environments? Why should companies understand them when engaging in international business?
16. How does a company’s competitive environment affect its international operations? How might its competitive environment differ from one country to another?
17. What are the three main viewpoints about the future of globalization?

CHAPTER 2

The Cultural Environments Facing Business

1.Define culture and cultural membership.

2.Why is cultural awareness important in international business? What are methods and problems in building cultural awareness?

3.What are the advantages and shortcomings of using the nation as a proxy for a culture?

4.What features influence cultural stability and cultural change?

5.What are major ways that societies rank people? What social stratification systems exist? Why is an understanding important in international business?

6.Describe the major theories that explain why work motivation may differ from one country to another.

7.Describe the relationship preferences explained by power distance and individualism versus collectivism.

8.What cultural factors help to explain risk-taking behavior? How do differences affect business?

9.Explain the concepts of low-context versus high-context cultures, monochronic versus polychronic cultures, and idealistic versus pragmatist cultures.

10.What problems occur when moving either from one language to another or from one country to another that share the same official language? What are suggestions to deal with these problems?

11.What influences how much adjustment companies and managers must make when operating in different cultures?

12.What are ethnocentrism, polycentrism, and geocentrism, and what are the problems and/or advantages of each?

13.What factors should companies consider when trying to minimize resistance to changes they might introduce to foreign societies?

14.What are the major scenarios about the future of national cultures? How does cultural imperialism fit into these scenarios?

CHAPTER 3
The Political and Legal Environment

1.What is the individualistic paradigm and how does it influence how governments intervene in the economy?
2.What is the collectivist paradigm and how does it influence how governmentsintervene in the economy?

3.What is a political ideology?
4.What are the fundamental features and elements of a democracy?
5.What are the fundamental features and elements of a totalitarian system?
6.What are the types of a totalitarian political system? What differentiates them from each other?
7.What sorts of political systems exist in the world today? What conditions have spurred political change? How do political systems change and evolve?

8.What is meant by political risk? What are the major causes and costs of political risk?
9.What are the characteristics of an active versus passive approach to managing political risk?
10.What is the role and function of a legal system?

11.What are the principal types of legal systems?
12.How does a country’s legal system affect operational aspects of the local business activity of domestic and foreign companies?
13.How does a country’s legal system affect strategic aspects of the local business activity of domestic and foreign companies?
14.What is intellectual property? What types are there? What is an intellectual property right?
15.What are the consequences and outcomes of intellectual property rights violation?
16.Why might IPRs' disputes become more prevalent in the future?
CHAPTER 4

The Economic Environment

1.What are the benefits of international economic analysis?

2.What is GNI?

3.What is the implication of Human Development Index to measuring economic development?

4.What do we mean by inflation? How does it affect the business environment?

5.What do we mean by unemployment and debt? How does it affect the business environment?

6.What do we mean by income distribution and poverty? How does it affect the business environment?

7.What is the balance of payments? What is the current account component of the balance of payments? What is the capital account component of the balance of payments?

8.What is meant by an economic system?

9.Identify the fundamental features of a market economy.

10.Identify the fundamental features of a command economy.

11.Identify the fundamental features of a mixed economy.

12.Describe the idea of economic freedom and what it means to the economic developmentof a country.

13.Most formerly command economies are going through a transition to a market economy. What does this mean?

14.What are the means of a transition to a market economy?

15.What is privatization? How does it work?

CHAPTER 5

Globalization and Society

1.Why does the size of many MNEs concern many countries?

2.Which stakeholders must companies satisfy? Why is this process more difficult for companies operating internationally?

3.Why is it difficult to make generalizations about the overall effect of FDI?

4.Describe the potential economic effects of MNEs.

5.What are the potential gains and losses of FDI to both the home and host countries? How do these benefits and losses change over time?

6.Why are ethical decisions more complicated for MNE managers?

7.What are the two basic views about accepting contradictory cultural practices?

8.What are two possible objectives for socially responsible behavior?

9.What are NGOs? What do they do? What potential problems could stem from their actions?

10.Why is the argument that “anything legal is ethical” insufficient? What are the main reasons for complying with the law?

11.Explain and give an example of extraterritoriality

12.What is the difference between civil and common law?

13.How does bribery affect the performance of countries and companies? Why do companies engage in bribery?

14.What types of payments are legal and illegal under the Foreign Corrupt Practices Act of the United States? What are the controversies surrounding the FCPA?

15.What other efforts are under way to stop bribery?

16.How is the Kyoto Protocol affecting MNEs?

17.What are some of the major labor issues facing companies? In which industries and countries are these issues most significant?

18.Why do companies need to act more responsibly?

19.What is a code of conduct? What are four dimensions to an effective code of conduct?

CHAPTER 6

International Trade and Factor Mobility Theory

1.Why is the understanding of international trade theory useful to managers in international business?

2.What are mercantilism and neomercantilism and the arguments for against them?

3.Explain absolute advantage and the determinants of it.

4.Explain comparative advantage and how it differs from absolute advantage.

5.What assumptions underlie the theories of specialization in international trade? What are the limitations of these assumptions?

6.Why are large countries usually less dependent on international trade than small countries are?

7.Explain the logic of the factor proportions theory and the complexities in applying it.

8.Why does most world trade occur among countries with similar characteristics?

9.How and why does production of many products shift from one country to another as hey go through their life cycles (product life cycle theory of trade and investment)?

10.What are the tests and limitations of the product life cycle (PLC) theory of trade and investment?

11.What is a strategic trade policy and its limitations?

12.What are the four conditions in the Porter Diamond? What are the uses and limitations of the Porter Diamond?

13.Why do production factors move from one country to another?

14.What are the effects of international factor mobility on origin and destination countries?

15.Explain the relationship between international trade and factor mobility from the standpoint of cost reduction.

CHAPTER 7

Governmental Influence on Trade

1.What is trade protectionism, and why is an understanding of it useful for managers?

2.What are the conflicting results of trade policies?

3.Explain the argument for using protectionism to reduce unemployment. Why might the protectionism not fully work as planned?

4.Explain the rationale for and problems of making the infant industry argument work as intended.

5.Why do developing countries sometimes impose import restrictions to increase their levels of industrialization? What problems might result from these restrictions?

6.Compare import substitution policies with export-led development policies.

7.Explain why and how governments impose trade restrictions to improve their relative trade positions.

8.Why might governments enact export restrictions? What are the possible negative consequences of these restrictions?

9.Explain the price control objectives from import restrictions.

10.What are the noneconomic rationales for governmental intervention in the free movement of trade? What problems exist in using protectionism to achieve the noneconomic objectives?

11.Define and explain the different types of tariffs (duties).

12.Define and explain the non-tariff barriers that directly affect prices to limit trade.

13.List and explain the nontariff barriers that limit the quantity of goods traded.

14.What are the main arguments for limiting trade in services?

15.When a company faces import competition that threatens its market position, what alternatives might it follow?

CHAPTER 8

Cross-National Cooperation and Agreements

1. What are three ways to approach economic integration? How do they differ?
2. Why are regional trading groups important for MNEs’ strategies?
3. Compare and contrast the WTO and its predecessor, GATT.
4. Why is geographic proximity an important reason for economic integration?
5. What are the types of economic integration and the differences among these types?
6. Explain the static effects of regional economic integration. Under what conditions may they develop?
7. What is the difference between trade creation and trade diversion resulting from regional economic integration?
8. Explain the dynamic effects of regional economic integration. What are the functions of the European Commission, European Council, European Parliament, and European Court of Justice?
9. What is the euro and the rationale for it?
10. What are the implications of the European Union on corporate strategy?
11. Describe the main challenges facing the European Union.
12. What was the rationale for NAFTA?
13. What are the rules of origin and local content provisions of NAFTA?
14. How has NAFTA impacted trade and employment?
15. What are the major regional trading groups in Latin America, Asia, and Africa?
16. What are the two basic types of commodity agreements? How do they differ?
17. Contrast the buffer stock system and the quota system for commodity agreements.

CHAPTER 9

Global Foreign Exchange and Capital Markets

1.What are foreign exchange and the exchange rate?

2.Explain the differences among spot transactions, forward transactions, and future contracts.

3.For what reasons are U.S. dollars so widely traded?

4.What are the four biggest markets (locations) for foreign exchange trades?

5.Define a foreign exchange bid, offer, and spread.

6.What is meant by a discount or premium between the spot and forward exchange rates?

7.What is a foreign exchange option?

8.What is the difference between hard and soft currencies?

9.What is a multiple exchangerate system?

10.Why do companies use foreign exchange?

11.What is arbitrage?

12.What institutions do companies use for exchanging currencies?

13.What is a Eurocurrency (as opposed to a “euro”) and what are some of its key characteristics and uses?

14.Contrast a foreign, euro, and global bond.What should companies consider when deciding which form of bond to use?

15.What are some approaches to using stock markets to raise funds?

16.Why is the trend of listing on more than one exchange beginning to reverse?

17.What are ADRs? How are they used?

18.What are global share offerings, and why are companies increasingly using them?

CHAPTER 10

The Determination of Exchange Rates

1.What is the International Monetary Fund (IMF)? What are its objectives?

2.What is a Special Drawing Right (SDR)? How is it used?

3.List and define the categories of exchange rate regimes.

4.What is a black market?

5.What is the role of central banks? How do they carry out this role?

6.In what forms do central banks hold their assets?

7.How does a floating exchange rate system work?

8.How does a government maintain a currency value in a managed fixed rate system?

9.Explain the adjustment system that enables a pegged currency system to work.

10.Explain how inflation affects currency values according to the purchasing power parity (PPP) theory.

11.What is the Big MacIndex, and what are its limitations?

12.What is the relationship between the Fisher Effect and the International Fisher Effect in terms of currency values?

13.What is the difference between fundamental forecasting and technical forecasting of exchange rates?

14.What aspects of exchange rate movements does forecasting predict?

15.What are the key factors to monitor when trying to predict exchangerate movements?

16.Why do we need to bother with predicting exchangerate changes?

CHAPTER 11

Strategy in International Business

1.What are some of the general features of the challenge and importance of strategy in international business?

2.What are the competing views of firm performance in terms of the industry organization (IO) versus general management perspectives?

3.What is industry structure? How can managers interpret it?

4.How does a firm create value in terms of low-cost leadership?

5. How does a firm create value in terms of differentiation?

6.What is the value chain?

7.What does core competencies refer to? Why should managers pay attention to it?

8.What conditions influence how MNEs configure and coordinate their value chains?

9.Define global integration. How do international firms respond to this sortof pressure?

10.Define local responsiveness. How do international firms respond to thissort of pressure?

11.What are the principal types of strategies that a company can choose?

12.What is an international strategy? What are its defining characteristics? Why would managers choose this type?

13.What is a multidomestic strategy? What are its defining characteristics? Why would managers choose this type?

14.What is a global strategy? What are its defining characteristics? Why would managers choose this type?

15.What is a transnational strategy? What are its defining characteristics? Why would managers choose this type?

CHAPTER 12

Country Evaluation and Selection

1.Why do international managers need to understand how to evaluate countries and select among them for operations? What are the major considerations in developing an overall location strategy?

2.When deciding where to locate production and sales efforts, how and why might companies use scanning techniques? How do these techniques differ from the making of final country selections?

3.What are the major indicators/variables that are important in comparing countries for market potential?

4.Explain why/how the ease and compatibility of operations is important in choosing where to operate.

5.When using scanning techniques, what variables are important in indicating where to go to secure resources?

6.Why is the existence of red tape and corruption important in choosing where to operate?

7.What is meant by liability of foreignness, and how does it influence companies’ international location decisions?

8.Compare the advantages of locating foreign operations to avoid where competitors have gone versus locating where competitors are.

9.How might political risk occur? How can companies respond to it?

10.What risks other than political risks should companies consider when making international location decisions?

11.Compare the major types of published data/information managers can use to compare countries. What are the problems in relying on these data?

12.Explain how grids and matrices can be used as tools to compare countries.

13.How should reinvestment and harvesting be treated in companies’ location decisions?

14.What are meant by a diversification strategy and a concentration strategy for international location decisions? Under what circumstances would one strategy be preferable to the other?

15.Why do most companies examine expansion proposals one at a time rather than comparing various expansion proposals?

16.How might demographic and technical factors influence changes in the future prime locations for production and sales?

CHAPTER 13

Export and Import Strategies

1.How prevalent isexporting today?

2.What are the strategic advantages of exports?

3.What are the characteristics of exporters?

4.What are the features of the stages of export development?

5.What are the pitfalls of exporting?

6.What are some of the characteristics of designing an export and import strategy?

7.What are the strategic advantages of imports?

8.What are customs agencies? And what is their role?

9.What is indirect selling?

10.What are the types of third-party intermediaries that assist exporters?