International Management: Managing Across Borders and Cultures, Text and Cases 9th Edition Test Bank

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International Management, 9e(Deresky)Chapter 1Assessing the Environment: Political, Economic, Legal, Technological1) Which of the following is characterized by networks of international linkages that bindcountries, institutions, and people in an interdependent economy?A) communismB) nationalizationC) socialismD) globalizationAnswer: DDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge2) ________ results from the lessening of trade barriers and the increased flow of goods andservices, capital, labor, and technology around the world.A) Economic integrationB) NationalizationC) ProtectionismD) MercantilismAnswer: ADifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge3) In which of the following groups of trade blocs does most of today's world trade take place?A) Middle East, China, and IndiaB) North America, Africa, and CanadaC) Western Europe, Asia, and the AmericasD) Saudi Arabia, Western Europe, and the GulfAnswer: CDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge

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4) The European Union currently consists of how many nations?A) 12B) 27C) 34D) 46Answer: BDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge5) Which of the following is a true statement about China?A) The Chinese government's shift from communism to capitalism has led to an increase in FDI.B) China attracts FDI because the government has eliminated elaborate bureaucracies.C) The Chinese government manipulates market activities for political purposes.D) China lacks an educated pool of employees due to slowly developing industrialization.Answer: CDifficulty: 3: ChallengingChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge6) Which of the following countries is today known as the world's services supplier, providinghighly skilled and educated workers to foreign companies?A) ChinaB) BrazilC) MexicoD) IndiaAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge

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7) Which is the fourth largest trading bloc after the EU, NAFTA, and ASEAN and established in1991?A) SAARCB) ASEANC) NAFTAD) MERCOSURAnswer: DDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge8) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. Thecompany employs almost 130,000 workers at its 250 manufacturing facilities located on fivedifferent continents. Emerson manufactures a wide range of products including air-conditioningcompressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturingfacility to produce automotive parts for cars manufactured in Detroit. Emerson executives areconsidering whether to build the new facility in China or in the United States. Which of thefollowing, if true, supports the argument to build a new Emerson facility in China?A) The Chinese courts recently ruled in favor of an MNC in an intellectual property rightslawsuit.B) The Chinese Commonwealth network is investing large amounts of capital in China.C) China has increased Internet controls and blocked most international search sites.D) China is revoking its membership from the World Trade Organization.Answer: ADifficulty: 3: ChallengingChapter: 1Skill: Critical ThinkingLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Ethical understanding and reasoning

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9) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. Thecompany employs almost 130,000 workers at its 250 manufacturing facilities located on fivedifferent continents. Emerson manufactures a wide range of products including air-conditioningcompressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturingfacility to produce automotive parts for cars manufactured in Detroit. Emerson executives areconsidering whether to build the new facility in China or in the United States. Which of thefollowing, if true, undermines the argument to build a new Emerson facility in China?A) China has committed over $500 billion to infrastructure projects.B) U.S. firms continue outsourcing service jobs despite the economy.C) Fuel costs in China have risen sharply and are not expected to drop.D) China is the world's largest exporter of manufactured goods.Answer: CDifficulty: 3: ChallengingChapter: 1Skill: Critical ThinkingLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Ethical understanding and reasoning10) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. Thecompany employs almost 130,000 workers at its 250 manufacturing facilities located on fivedifferent continents. Emerson manufactures a wide range of products including air-conditioningcompressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturingfacility to produce automotive parts for cars manufactured in Detroit. Emerson executives areconsidering whether to build the new facility in China or in the United States. Which of thefollowing questions is LEAST relevant to Emerson's decision regarding where to build a newfacility?A) How will China's underdeveloped infrastructure affect Emerson's ability to manufacture andship products?B) How is China's political and economic agenda likely to affect Emerson's investment?C) What is the likelihood of expropriation occurring to Emerson if it builds in China?D) How will e-commerce affect Emerson's ability to export products from China?Answer: DDifficulty: 3: ChallengingChapter: 1Skill: Critical ThinkingLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Ethical understanding and reasoning

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11) To which of the following free-trade agreements do Mexico, Canada and the United Statesall belong?A) NAFTAB) ASEANC) CAFTAD) MERCOSURAnswer: ADifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge12) Small-and medium-sized enterprises contribute to their national economies by creating newjobs.Answer: TRUEDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge13) SAARC is an agreement that came into force to bring faster growth, more jobs, betterworking conditions, and a cleaner environment for all as a result of increased exports and trade.Answer: FALSEDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge14) NAFTA is an agreement that came into force to lower tariffs to 25 percent within three tofive years, and to eliminate them within seven years.Answer: FALSEDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge

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15) What is the European Union (EU)? Discuss how the EU affects both Europe andinternational managers working in Europe.Answer: The EU now comprises a 27-nation, unified market of over 400 million people. Sincethe euro became a legally tradable currency, Europe's business environment has beentransformed. The vast majority of legislative measures have been adopted to create an internalmarket with free movement of goods and people among the EU countries. The elimination ofinternal tariffs and customs, as well as financial and commercial barriers, has not eliminatednational pride.Global managers face two major tasks in the EU. One is strategic: how firms outside of Europecan deal with the implications of the EU and of what some have called a "Fortress Europe"—thatis, a market giving preference to insiders. The other task is cultural: how to deal effectively withmultiple sets of national cultures, traditions, and customs within Europe, such as differingattitudes about how much time should be spent on work versus leisure activities.Difficulty: 3: ChallengingChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge16) What is SAARC?Answer: SAARC stands for South Asia Association of Regional Cooperation—an association ofseven developing South Asian nations. According to the Agreement that was effective January 1,2006, the countries will lower tariffs by 25% within three to five years and eliminate them withinseven years. Trade in South Asia is estimated at $14 billion, although the majority of that tradewill take place between India and Pakistan, the two largest members.Difficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-1: To understand the global business environment and how it affects the strategic andoperational decisions which managers must makeAACSB: Application of knowledge17) ________ is the chance that political forces may change a country's business environment inways that lead investors to lose some or all of the value of their investment or be forced to accepta lower-than-projected rate of return.A) Governmental riskB) Operating riskC) Transaction riskD) Political riskAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge18) Which of the following best describes nationalization?

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A) outsourcing of governmental functions to private entitiesB) hiring preferences given to locals rather than expatriatesC) government's gradual and subtle actions against a firmD) forced sale of an MNC's assets to local buyersAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge19)Expropriationoccurs when a local government seizes and provides inadequatecompensation for the foreign-owned assets of an MNC; when no compensation is provided, it is________.A) privatizationB) confiscationC) private actionD) repatriationAnswer: BDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge20) Expropriation is most likely to occur in a country that has ________.A) numerous MNCs in operationB) constant political upheaval and changeC) a capitalistic economic system in placeD) stable economic growth and political consistencyAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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21) The government of Jonovia seizes all assets of Refresh, a world-famous, soft-drink brand inJonovia, and offers compensation to the company. This action by the government of Jonovia isan example of ________.A) private actionB) repatriationC) privatizationD) expropriationAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge22) Which of the following is an example of a macropolitical risk event?A) a terrorist attackB) forced sale of equity to host-country nationalsC) expropriation of corporate assets without prompt and adequate compensationD) barriers to repatriation of fundsAnswer: ADifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge23) Zagreb Inc., a transnational energy company, negotiates a multimillion-dollar contract withthe government to provide electricity to Pilladia. The government is voted out of power shortlyafter. The new government cancels all contracts it has with all oil companies but not contractswith firms in other industries. This is an example of ________.A) barriers to repatriationB) protectionismC) confiscationD) micropolitical riskAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Analytic skills

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24) Intelligentia is attempting to do business in Bazania, but the Bazanian government purposelydelays granting Intelligentia the necessary licenses and permissions required to conduct businessin the country. Which of the following best describes this situation?A) creeping expropriationB) nationalizationC) barriers to repatriationD) confiscationAnswer: ADifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge25) Micropolitical risk events are those that affect ________.A) multiple industries and companiesB) several other nations in the same regionC) one industry or company or a few companiesD) domestic industries or companiesAnswer: CDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge26) Recently, the level of ________ in Europe, for example, was a great concern around theworld, in particular regarding concerns in the eurozone brought about by debt problems inGreece.A) legal risk eventsB) political risk eventsC) cultural risk eventsD) economic risk eventsAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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27) Expropriation of corporate assets without prompt and adequate compensation is an exampleof ________.A) economic riskB) political riskC) legal riskD) cultural riskAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge28) For autonomous international subsidiaries, most of the impact from political risks will be inwhich of the following areas?A) financial operationsB) ownership and controlC) marketing and sales operationsD) managerial strategy and policy-makingAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge29) For global corporations, the primary impact of political risks is likely to be on the firm's________.A) ownership and controlB) hiring and recruiting policiesC) transfers of money or productsD) managerial strategy and policy-makingAnswer: CDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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30) ________ includes the initiation of joint ventures with nationals (individuals or those infirms, labor unions, or government) to reduce political risks.A) Development assistanceB) Equity sharingC) Localization of the operationD) Participative managementAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge31) Which of the following means of political risk reduction is best suited for firms that decide ahigh-risk environment is worth the potential returns?A) avoidanceB) adaptationC) hedgingD) dependencyAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge32) Which of the following strategies is a firm most likely to use, if it initiates a joint venturewith a local company in a foreign country, as a way of adapting to risk?A) equity sharingB) participative managementC) localization of the operationD) development assistanceAnswer: ADifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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33) Which of the following means of adaptation to political risk requires that a firm activelyinvolve nationals in the management of its subsidiary?A) equity sharingB) participative managementC) localization of the operationD) development assistanceAnswer: BDifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge34) In addition to avoidance and adaptation, two other means of risk reduction available tomanagers are ________ and ________.A) qualitative approach; quantitative approachB) dependency; hedgingC) checklisting; blocklistingD) protectionist approach; stability approachAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge35) Which of the following is a form of protectionist policies?A) patentsB) quotasC) foreign direct investmentD) bribesAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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36) ________ poses a severe and random political risk to company personnel and assets, andinterrupts the conduct of business.A) PlagiarismB) An electionC) PrivatizationD) TerrorismAnswer: DDifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge37) If a foreign-based firm borrows money from a host country bank as a hedge against beingforced out of operation without adequate compensation, the firm is managing political risk with________.A) local debt financingB) position controlC) development assistanceD) adaptationAnswer: ADifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge38) Political risk insurance and local debt financing are both forms of ________.A) input controlB) adaptationC) equity sharingD) hedgingAnswer: DDifficulty: 3: ChallengingChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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39) Which of the following is a form of hedging?A) expatriate control in key positionsB) development assistanceC) local debt financingD) localization of the operationAnswer: CDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge40) A country's ability or intention to meet its financial obligations determines its ________.A) technological riskB) legal riskC) political riskD) economic riskAnswer: DDifficulty: 3: ChallengingChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge41) Which of the following is analyzed through the quantitative approach, qualitative approach,and the checklist approach?A) the legal risks of a countryB) the creditworthiness of a countryC) the political risks of a countryD) the cultural atmosphere of a countryAnswer: BDifficulty: 2: ModerateChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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42) The ________ method of analyzing economic risk attempts to measure statistically acountry's ability to honor its debt obligation by assigning different weights to economicvariables.A) quantitativeB) qualitativeC) checklistD) objectiveAnswer: ADifficulty: 1: EasyChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge43) Which two factors are primarily assessed when using the qualitative approach to measure acountry's economic risk?A) the country's natural resources and its long-term national debtB) the competence of the country's leader and the economic policy directionC) the probability of terrorism and the likelihood that the country's debts will be repaidD) the country's purchasing power overseas and the consistency of the country's leadershipAnswer: BDifficulty: 3: ChallengingChapter: 1Skill: ConceptLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge44) Representatives of a multinational firm seek an interview with local government leaders inthe Department of Commerce in Argonia with a view to assess the types of policies likely to beimplemented. According to Mathis, this is an example of ________.A) qualitative approachB) quantitative approachC) checklist approachD) systemic approachAnswer: ADifficulty: 2: ModerateChapter: 1Skill: ApplicationLO: 1-2: To develop an appreciation for the ways in which political and economic factors andchanges impact the opportunities that companies faceAACSB: Application of knowledge

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