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

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    International Management, 9e (Deresky) Chapter 1 Assessing the Environment: Political, Economic, Legal, Technological 1) Which of the following is characterized by networks of international linkages that bind countries, institutions, and people in an interdependent economy? A) communism B) nationalization C) socialism D) globalization Answer: D Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 2) ________ results from the lessening of trade barriers and the increased flow of goods and services, capital, labor, and technology around the world. A) Economic integration B) Nationalization C) Protectionism D) Mercantilism Answer: A Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 3) In which of the following groups of trade blocs does most of today's world trade take place? A) Middle East, China, and India B) North America, Africa, and Canada C) Western Europe, Asia, and the Americas D) Saudi Arabia, Western Europe, and the Gulf Answer: C Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge

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    4) The European Union currently consists of how many nations? A) 12 B) 27 C) 34 D) 46 Answer: B Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 5) 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: C Difficulty: 3: Challenging Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 6) Which of the following countries is today known as the world's services supplier, providing highly skilled and educated workers to foreign companies? A) China B) Brazil C) Mexico D) India Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge

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    7) Which is the fourth largest trading bloc after the EU, NAFTA, and ASEAN and established in 1991? A) SAARC B) ASEAN C) NAFTA D) MERCOSUR Answer: D Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 8) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air - conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following, 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 rights lawsuit. 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: A Difficulty: 3: Challenging Chapter: 1 Skill: Critical Thinking LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Ethical understanding and reasoning

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    9) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air - conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following, 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: C Difficulty: 3: Challenging Chapter: 1 Skill: Critical Thinking LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Ethical understanding and reasoning 10) Emerson is a global manufacturing company headquartered in St. Louis, Missouri. The company employs almost 130,000 workers at its 250 manufacturing facilities located on five different continents. Emerson manufactures a wide range of products including air - conditioning compressors, garbage disposers, and automotive parts. Emerson's Asian operations employ over 50,000 people at manufacturing facilities in Asia. Emerson needs to build a new manufacturing facility to produce automotive parts for cars manufactured in Detroit. Emerson executives are considering whether to build the new facility in China or in the United States. Which of the following questions is LEAST relevant to Emerson's decision regarding where to build a new facility? A) How will China's underdeveloped infrastructure affect Emerson's ability to manufacture and ship 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: D Difficulty: 3: Challenging Chapter: 1 Skill: Critical Thinking LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Ethical understanding and reasoning

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    11) To which of the following free - trade agreements do Mexico, Canada and the United States all belong? A) NAFTA B) ASEAN C) CAFTA D) MERCOSUR Answer: A Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 12) Small - and medium - sized enterprises contribute to their national economies by creating new jobs. Answer: TRUE Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 13) SAARC is an agreement that came into force to bring faster growth, more jobs, better working conditions, and a cleaner environment for all as a result of increased exports and trade. Answer: FALSE Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 14) NAFTA is an agreement that came into force to lower tariffs to 25 percent within three to five years, and to eliminate them within seven years. Answer: FALSE Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge

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    15) What is the European Union (EU)? Discuss how the EU affects both Europe and international managers working in Europe. Answer: The EU now comprises a 27 - nation, unified market of over 400 million people. Since the euro became a legally tradable currency, Europe's business environment has been transformed. The vast majority of legislative measures have been adopted to create an internal market with free movement of goods and people among the EU countries. The elimination of internal tariffs and customs, as well as financial and commercial barriers, has not eliminated national pride. Global managers face two major tasks in the EU. One is strategic: how firms outside of Europe can deal with the implications of the EU and of what some have called a "Fortress Europe" — that is, a market giving preference to insiders. The other task is cultural: how to deal effectively with multiple sets of national cultures, traditions, and customs within Europe, such as differing attitudes about how much time should be spent on work versus leisure activities. Difficulty: 3: Challenging Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 16) What is SAARC? Answer: SAARC stands for South Asia Association of Regional Cooperation — an association of seven 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 within seven years. Trade in South Asia is estimated at $14 billion, although the majority of that trade will take place between India and Pakistan, the two largest members. Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 1: To understand the global business environment and how it affects the strategic and operational decisions which managers must make AACSB: Application of knowledge 17) ________ is the chance that political forces may change a country's business environment in ways that lead investors to lose some or all of the value of their investment or be forced to accept a lower - than - projected rate of return. A) Governmental risk B) Operating risk C) Transaction risk D) Political risk Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 18) Which of the following best describes nationalization?

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    A) outsourcing of governmental functions to private entities B) hiring preferences given to locals rather than expatriates C) government's gradual and subtle actions against a firm D) forced sale of an MNC's assets to local buyers Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 19) Expropriation occurs when a local government seizes and provides inadequate compensation for the foreign - owned assets of an MNC; when no compensation is provided, it is ________. A) privatization B) confiscation C) private action D) repatriation Answer: B Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 20) Expropriation is most likely to occur in a country that has ________. A) numerous MNCs in operation B) constant political upheaval and change C) a capitalistic economic system in place D) stable economic growth and political consistency Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    21) The government of Jonovia seizes all assets of Refresh, a world - famous, soft - drink brand in Jonovia, and offers compensation to the company. This action by the government of Jonovia is an example of ________. A) private action B) repatriation C) privatization D) expropriation Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 22) Which of the following is an example of a macropolitical risk event? A) a terrorist attack B) forced sale of equity to host - country nationals C) expropriation of corporate assets without prompt and adequate compensation D) barriers to repatriation of funds Answer: A Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 23) Zagreb Inc., a transnational energy company, negotiates a multimillion - dollar contract with the government to provide electricity to Pilladia. The government is voted out of power shortly after. The new government cancels all contracts it has with all oil companies but not contracts with firms in other industries. This is an example of ________. A) barriers to repatriation B) protectionism C) confiscation D) micropolitical risk Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Analytic skills

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    24) Intelligentia is attempting to do business in Bazania, but the Bazanian government purposely delays granting Intelligentia the necessary licenses and permissions required to conduct business in the country. Which of the following best describes this situation? A) creeping expropriation B) nationalization C) barriers to repatriation D) confiscation Answer: A Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 25) Micropolitical risk events are those that affect ________. A) multiple industries and companies B) several other nations in the same region C) one industry or company or a few companies D) domestic industries or companies Answer: C Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 26) Recently, the level of ________ in Europe, for example, was a great concern around the world, in particular regarding concerns in the eurozone brought about by debt problems in Greece. A) legal risk events B) political risk events C) cultural risk events D) economic risk events Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    27) Expropriation of corporate assets without prompt and adequate compensation is an example of ________. A) economic risk B) political risk C) legal risk D) cultural risk Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 28) For autonomous international subsidiaries, most of the impact from political risks will be in which of the following areas? A) financial operations B) ownership and control C) marketing and sales operations D) managerial strategy and policy - making Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 29) For global corporations, the primary impact of political risks is likely to be on the firm's ________. A) ownership and control B) hiring and recruiting policies C) transfers of money or products D) managerial strategy and policy - making Answer: C Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    30) ________ includes the initiation of joint ventures with nationals (individuals or those in firms, labor unions, or government) to reduce political risks. A) Development assistance B) Equity sharing C) Localization of the operation D) Participative management Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 31) Which of the following means of political risk reduction is best suited for firms that decide a high - risk environment is worth the potential returns? A) avoidance B) adaptation C) hedging D) dependency Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 32) Which of the following strategies is a firm most likely to use, if it initiates a joint venture with a local company in a foreign country, as a way of adapting to risk? A) equity sharing B) participative management C) localization of the operation D) development assistance Answer: A Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    33) Which of the following means of adaptation to political risk requires that a firm actively involve nationals in the management of its subsidiary? A) equity sharing B) participative management C) localization of the operation D) development assistance Answer: B Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 34) In addition to avoidance and adaptation, two other means of risk reduction available to managers are ________ and ________. A) qualitative approach; quantitative approach B) dependency; hedging C) checklisting; blocklisting D) protectionist approach; stability approach Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 35) Which of the following is a form of protectionist policies? A) patents B) quotas C) foreign direct investment D) bribes Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    36) ________ poses a severe and random political risk to company personnel and assets, and interrupts the conduct of business. A) Plagiarism B) An election C) Privatization D) Terrorism Answer: D Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 37) If a foreign - based firm borrows money from a host country bank as a hedge against being forced out of operation without adequate compensation, the firm is managing political risk with ________. A) local debt financing B) position control C) development assistance D) adaptation Answer: A Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 38) Political risk insurance and local debt financing are both forms of ________. A) input control B) adaptation C) equity sharing D) hedging Answer: D Difficulty: 3: Challenging Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    39) Which of the following is a form of hedging? A) expatriate control in key positions B) development assistance C) local debt financing D) localization of the operation Answer: C Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 40) A country's ability or intention to meet its financial obligations determines its ________. A) technological risk B) legal risk C) political risk D) economic risk Answer: D Difficulty: 3: Challenging Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 41) Which of the following is analyzed through the quantitative approach, qualitative approach, and the checklist approach? A) the legal risks of a country B) the creditworthiness of a country C) the political risks of a country D) the cultural atmosphere of a country Answer: B Difficulty: 2: Moderate Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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    42) The ________ method of analyzing economic risk attempts to measure statistically a country's ability to honor its debt obligation by assigning different weights to economic variables. A) quantitative B) qualitative C) checklist D) objective Answer: A Difficulty: 1: Easy Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 43) Which two factors are primarily assessed when using the qualitative approach to measure a country's economic risk? A) the country's natural resources and its long - term national debt B) the competence of the country's leader and the economic policy direction C) the probability of terrorism and the likelihood that the country's debts will be repaid D) the country's purchasing power overseas and the consistency of the country's leadership Answer: B Difficulty: 3: Challenging Chapter: 1 Skill: Concept LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge 44) Representatives of a multinational firm seek an interview with local government leaders in the Department of Commerce in Argonia with a view to assess the types of policies likely to be implemented. According to Mathis, this is an example of ________. A) qualitative approach B) quantitative approach C) checklist approach D) systemic approach Answer: A Difficulty: 2: Moderate Chapter: 1 Skill: Application LO: 1 - 2: To develop an appreciation for the ways in which political and economic factors and changes impact the opportunities that companies face AACSB: Application of knowledge

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