International Business Ch1 – Flashcards
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As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities. True or False?
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False
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By offering the same basic product worldwide, firms help to create a global market. True or False?
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True
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As a result of globalization, companies rarely need to customize marketing strategies, product features, and operating practices in different countries. True or False?
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False
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Substantial impediments, such as barriers to foreign direct investment, make it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe. True or False?
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True
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The World Trade Organization, the International Monetary Fund and its sister institution the World Bank, and the United Nations were all created by voluntary agreement between individual nation-states. True or False?
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True
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The WTO is seen as the lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value against those of other nations. True or False?
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False
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The IMF is less controversial than its sister institution, the World Bank. True or False?
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False
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Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside its home country. True or False?
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True
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After World War II, the advanced nations of the West committed themselves to increasing barriers to the free flow of goods, services, and capital between nations. True or False?
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False
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The Uruguay Round extended GATT to cover services as well as manufactured goods. True or False?
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True
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The lowering of trade and investment barriers allows firms to base production at the optimal location for that activity. True or False?
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True
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As a result of international trade, the economies of the world's nation-states are becoming less intertwined. True or False?
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False
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The globalization of markets and production and the resulting growth of world trade, foreign direct investment, and imports all imply that firms are finding it easier to protect themselves from attack by foreign competitors. True or False?
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False
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Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances. True or False?
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True
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The real costs of information processing and communication have fallen dramatically in the past two decades. True or False?
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True
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The United States accounted for a significantly larger share of the world economy in 2012 than it did in the 1960s. True or False?
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False
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Beginning in the 1970s, European and Japanese firms began to shift labor-intensive manufacturing operations from developing nations to their home countries where labor costs were lower. True or False?
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False
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The stock of foreign direct investment refers to the total cumulative value of foreign investments in a country. True or False?
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True
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Throughout the 1990s, the amount of investment directed at both developed and developing nations increased dramatically. True or False?
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True
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Although most international trade and investment are still conducted by large firms, many medium-size and small businesses are becoming increasingly involved in international trade and investment. True or False?
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True
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Many of the former Communist nations of Europe and Asia seem to share a commitment to democratic policies and free market economies. True or False?
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True
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The move toward a global economy has strengthened the adoption of conservative economic policies by developing nations. True or False?
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False
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According to many influential economists, the increase in international trade and cross-border investment will result in an increase in the prices of goods and services. True or False?
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False
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It is possible that economic growth in developed nations has offset the fall in the share of national income enjoyed by unskilled workers, raising their living standards. True or False?
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True
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The growing income inequality is a result of the wages for skilled workers being discounted. True or False?
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False
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In general, as countries get richer, they enact tougher environmental and labor regulations. True or False?
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True
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Highly indebted poor countries (HIPCs) can bootstrap themselves out of poverty by pursuing retaliatory trade policies rather than free trade policies. True or False?
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False
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Managers in an international business must find ways to work around the limits imposed by specific governmental institutions. True or False?
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False
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Despite all the talk about the emerging global village, differences between countries such as cultures and political systems are very profound and enduring. True or False?
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True
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As a result of globalization, international businesses can avoid the haggle of currency exchanges during cross-border transactions. True or False?
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False
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Which of the following has been reduced as a result of globalization? A. Volume of goods and services B. Foreign exchange transactions C. Environment and labor laws D. Differences in material culture E. Regulation of markets
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D. Differences in material culture
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What is the shift toward a more integrated and interdependent world economy called? A. International trade B. Foreign direct investment C. Globalization D. Moore's Law E. Containerization
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C. Globalization
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Automobile companies promote different car models in different countries depending on a range of factors such as demographics, local taste, local fuel costs, income levels, traffic congestion, and cultural values. This most likely demonstrates that: A. significant differences still exist among national markets. B. cultural diversity has been replaced by global uniformity. C. the global market is less complex than national markets. D. only multinational giants can benefit from the globalization of markets. E. the social norms in a country do not affect purchase decisions of consumers.
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A. significant differences still exist among national markets.
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Which of the following statements best supports the claim that greater uniformity replaces diversity in the context of global markets? A. Differences in business systems and legal regulations lead companies to customize their marketing strategies, product features, and operating practices to best match conditions in a particular country. B . As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets. C. Truly innovative companies succeed by developing products that serve specific needs of the local markets. D . The volume of goods, services, and investment crossing national borders has expanded at a slower rate than world output for more than half a century. E. The most global of markets are not typically markets for consumer products, as significant differences in consumer tastes and preferences still exist among national markets.
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B. As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets.
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Which of the following refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors such as labor, energy, land, and capital? A. Globalization of markets B. Containerization of production C. Dispersal of production D. Globalization of production E. Industrialization of markets
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D. Globalization of production
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Which of the following best illustrates the globalization of production? A. Daily Diamonds Inc. buys diamonds from South Africa and exports them to India for the cutting process. B. Evan Swan, a U.S.-based fashion designer, is planning to open a flagship store in China to serve the Asian market. C. Uncle Crab, a U.K. fast food chain, has been serving customers worldwide through its franchises. D. Silver Unicorn Inc. uses sales personnel from the respective host country to sell its products and services. E. Pizza Gallery, an Italian pizza chain, customizes its pizzas and pastas to suit the tastes of its American and Australian customers.
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A. Daily Diamonds Inc. buys diamonds from South Africa and exports them to India for the cutting process.
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West Electronic Corporation sources goods and services for its electronics products from different locations around the globe in an attempt to take advantage of differences in the cost and quality of labor and land. This practice demonstrates the: A. globalization of production. B. globalization of markets. C. dislocation of a developing nation's economy. D. restriction on foreign direct investment. E. regulation of the environment.
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A. globalization of production.
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Early outsourcing efforts were primarily confined to: A. accounting services. B. manufacturing activities. C. testing services. D. educational activities. E. consulting services
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B. manufacturing activities.
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Which of the following services CANNOT be outsourced to foreign nations? A. Debugging software B. Handling consumer queries C. Transcribing medical files D. Interpreting MRI scans E. Delivering closing arguments for a lawsuit
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E. Delivering closing arguments for a lawsuit
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Which of the following was established after the Uruguay Round to police the international trading system? A. United Nations B. International Monetary Fund C. Group of Twenty D. World Trade Organization E. World Bank
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D. World Trade Organization
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Why was the World Bank set up? A. To preserve peace through international cooperation B. To promote economic development C. To maintain order in the international monetary system D. To formulate a coordinated policy response to financial crises E. To police the world trading system
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B. To promote economic development
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Which of the following is an argument put forth by critics of the IMF? A. It increases barriers to the free flow of goods and investment across national borders. B. It provides assistance only to developing nations and completely ignores the developed nations. C. It is not powerful enough to ensure that the nation-states adhere to the rules laid down in trade treaties. D. It promotes the rise of communism across the globe. E. It usurps the sovereignty of nation-states by telling governments what economic policies they must adopt.
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E. It usurps the sovereignty of nation-states by telling governments what economic policies they must adopt.
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According to the UN Charter, one of the four purposes of the UN is to: A. be a center for harmonizing the actions of nations. B. encourage high tariffs on imports of manufactured goods. C. provide enhanced protection for patents. D. promote the establishment of multinational treaties. E. facilitate globalization of production.
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A. be a center for harmonizing the actions of nations.
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Who, along with representatives from the European Union and the European Central Bank, represent the 19 largest economies in the world on the G20? A. Finance ministers and central bank governors B. Presidents and defense ministers C. Prime ministers and army chiefs D. International trade ministers E. Ministers of foreign affairs
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A. Finance ministers and central bank governors
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Which of the following is a macro factor underlying the trend toward greater globalization? A. Rise of communism across the globe B. Increase in nationalization of private organizations C. Increase in diversity in consumer tastes and preferences D. Increase in trade regulations across the globe E. Dramatic developments in information processing and other technologies
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E. Dramatic developments in information processing and other technologies
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Which of the following best exemplifies foreign direct investment (FDI)? A. Pure Pearls, a jewelry store in the United States, imports harvested pearls from Indonesia, Philippines, and Australia. B . Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly plant in Japan to cater to the needs of the Asian market. C. Delicate Love, a reputable florist company in Holland, exports tulips and roses throughout the globe. D. Samantha started an Italian restaurant in her home country, the United States, after she took cooking lessons from a well-known chef in Italy. E. Yin and Yang Inc., a Chinese firm, supplies buttons and zippers to major denim brands in the United Kingdom.
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B . Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly plant in Japan to cater to the needs of the Asian market.
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Michelle, an Italian fashion designer, sells her merchandise by exporting them to the United States, United Kingdom, and Brazil. According to this information, Michelle is most likely involved in: A. foreign direct investment. B. globalization of production. C. international trade. D. multinational enterprise. E. outsourcing
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C. international trade.
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For foreign direct investment (FDI) to occur, a firm should primarily: A. conduct cross-border bartering with neighboring countries. B. invest resources in business activities outside its home country. C. export goods or services to consumers in another country. D. import goods or services from producers in another country. E. erect formidable barriers to international trade.
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B. invest resources in business activities outside its home country.
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The motive behind the high tariffs imposed by nations on imports of manufactured goods, prior to World War II, was to: A. deter any possible attempts to promote communism. B. protect domestic industries from foreign competition. C. prevent the occurrence of the Great Depression. D. safeguard patents, copyrights, and trademarks. E. promote the trade of services over the trade of manufactured goods.
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B. protect domestic industries from foreign competition.
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Which of the following reasons contributed to the Great Depression of the 1930s? A. Inability to meet the increasing world demand for products B. Several countries accepting General Agreement on Tariffs and Trade C. Increasing attack from foreign competitors on domestic industries D. Privatization of state-owned organizations E. Countries progressively raising trade barriers against each other
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E. Countries progressively raising trade barriers against each other
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The 1993 Uruguay Round: A. increased trade and investment barriers. B. excluded the trade of services from international trade. C. transformed the World Trade Organization into the GATT. D. provided enhanced protection for patents, trademarks, and copyrights. E. promoted the worldwide rise of communism.
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D. provided enhanced protection for patents, trademarks, and copyrights.
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52. Which of the following was a part of the agenda of the Doha Round of talks launched by the WTO? A. Limiting the use of antidumping laws B. Abolishing the International Monetary Fund C. Increasing tariffs on industrial goods, services, and agricultural products D. Persuading member governments to cut defense spending E. Establishing GATT as a replacement for the WTO
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A. Limiting the use of antidumping laws
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The lowering of trade and investment barriers: A. protects domestic industries from foreign competition. B. was not an agenda of the Uruguay Round. C. allows firms to base production at optimal locations outside their home country. D. creates an unfavorable environment for FDI. E. caused the Great depression of the 1930s.
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D. creates an unfavorable environment for FDI.
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Which of the following has been declining in the developing nations of the world such as China, India, Russia, Indonesia, Thailand, South Korea, Mexico, and Brazil? A. Economic opportunities for international trade B. Industrialization C. Contribution toward the share of world output D. The stock of foreign direct investment E. Barriers to the free flow of goods, services, and capital
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E. Barriers to the free flow of goods, services, and capital
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While the lowering of trade barriers made globalization of markets and production a theoretical possibility, which of the following has made it a tangible reality? A. The advances in communication, information processing, and transportation technologies B. The rise of communism and the need for independent economies on a global scale C. The increasing diversity in consumer tastes and preferences worldwide D. The increasing differences in the material culture the world over E. The decreasing significance of the World Trade Organization
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A. The advances in communication, information processing, and transportation technologies
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Gerald bought his son, David, a computer two years ago. Recently, he decided to buy his daughter, Julian, a computer of her own. In the context of the two-year gap between the purchase of both the computers and Moore's law, it is most likely that: A. Gerald paid a higher price for Julian's computer. B. David's computer will have a microprocessor with better power than that of Julian's. C. both David's and Julian's computers would cost Gerald the same price. D. the microprocessor in Julian's computer will be more advanced in terms of power than that of David's. E. the power of the microprocessors, in both David and Julian's computers, would be the same.
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D. the microprocessor in Julian's computer will be more advanced in terms of power than that of David's.
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Richard purchased a computer for $600 in 2014. Compared to the $900 computer that he had purchased way back in 2010, the new one seems to be more efficient in terms of the price he has paid and the power of the microprocessor technology. This is best explained by: A. product liability. B. property rights. C. Moore's law. D. purchasing power parity. E. sustainable strategies.
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C. Moore's law.
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The advent of containerization has: A. made the economies of the world's nation-states less intertwined. B. made moving goods from one mode of transport to another extremely labor-intensive. C. significantly lowered the costs of shipping goods over long distances. D. slowed down the globalization of markets and production. E. increased costs of coordinating and controlling a global organization.
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C. significantly lowered the costs of shipping goods over long distances.
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Which of the following is most likely to be observed in today's global economy? A. Increasing U.S. share of world output B. Large U.S. entrepreneurial firms dominating the international business scene C. Increasing U.S. dominance in the world economy and world trade picture D. Most of the nations being governed by centrally planned economies of the communist world E. Rapid rise in the share of world output accounted for by developing nations such as China and India
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E. Rapid rise in the share of world output accounted for by developing nations such as China and India
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Which of the following countries has seen a relative decline in its share of world output between 1960 and 2012? A. United States B. Thailand C. Japan D. China E. South Korea
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A. United States
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Which of the following statements reflects the changing demographics of the global economy? A. U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports. B. The change in the position of the United States in terms of the share of world output is the result of the absolute decline in the health of the U.S. economy. C . From 1960 to 2010, countries that experienced a large decrease in their share of world output include Japan, Thailand, Malaysia, Taiwan, and South Korea. D. The United States is the only developed nation to see its relative standing in the share of world output slip. E. Today, roughly half the globe—the centrally planned economies of the communist world—is off-limits to Western international businesses.
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A. U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports.
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A. Growth of the centrally planned economies of the communist world B. U.S. position in the world economy and world trade picture C. The share of world output enjoyed by rich industrialized countries such as Great Britain, Germany, and Japan D. The share of world output accounted for by developing nations E. Prevalence of independent and self-contained national economies
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D. The share of world output accounted for by developing nations
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Due to the changing economic geography, many of tomorrow's economic opportunities are most likely to be found in the: A. rich industrialized nations of the world like Great Britain and Germany. B. centrally planned economies of the communist world. C. United States. D. developing nations of the world such as China, India, and Brazil. E. countries that are currently not members of the World Trade Organization.
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D. developing nations of the world such as China, India, and Brazil.
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Which of the following identifies the motivation for much of the foreign direct investment by non-U.S. firms? A. The desire to disperse production activities to optimal locations B. The need to suppress emerging economies such as China, India, and Brazil C. The demand for skilled workers in foreign nations D. The lack of adequate environmental regulations E. The establishment of multinational treaties
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A. The desire to disperse production activities to optimal locations
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Which of the following refers to the total cumulative value of foreign investments? A. Purchasing power parity B. Multipoint pricing C. Stock of foreign direct investment D. Switch trading E. Bill of lading
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C. Stock of foreign direct investment
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Silver Fire Electric Inc., a U.S.-based company, has productive activities in more than two countries. As a result, it would be most appropriate to refer to Silver Fire Electric as what type of enterprise? A. Greenfield B. Universal C. Private D. Multinational E. Public
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D. Multinational
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What are mini-multinationals? A. Multinational firms from relatively small countries in terms of area B. Multinationals from the developing nations of the world C. Multinational firms that operate in only one foreign country D. Medium-sized and small multinationals E. Subsidiaries of large multinationals in foreign countries
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D. Medium-sized and small multinationals
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Which of the following statements reflects the trend in the changing nature of multinational enterprises? A. Global business activity is increasingly being dominated by large U.S. multinational corporations. B. The number of medium-size and small multinationals is decreasing continuously. C. The ranks of the world's largest 100 multinationals are dominated by firms from developing economies. D. The Internet is increasing the barriers that small firms face in building international sales. E. International business is conducted not just by large firms but also by medium-size and small enterprises.
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E. International business is conducted not just by large firms but also by medium-size and small enterprises.
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Universal Lingo, a U.K.-based language translation company employing just 65 people worldwide, has an annual turnover of $1.5 million. In this context, Universal Lingo is most likely to be classified as a(n): A. large domestic firm. B. mini-multinational firm. C. greenfield firm. D. foreign firm. E. multinational giant
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B. mini-multinational firm.
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Which of the following conditions is most likely to act as a deterrent for foreign firms willing to do business with former communist nations of East Europe and central Asia? A. The high levels of economic development in these countries B. The signs of growing unrest and totalitarian tendencies seen in these countries C. A strong commitment to market-based economic systems seen in these countries D. The collapse of communism in these countries E. Low returns involved in doing business in these countries
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B. The signs of growing unrest and totalitarian tendencies seen in these countries
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In the past two decades, the majority of Latin American countries have: A. experienced a decline in the health of their economies. B. sold state-owned enterprises to private investors. C. been characterized by low growth, high debt, and hyperinflation. D. restricted investment by foreign firms. E. discouraged both democracy and free market reforms.
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B. sold state-owned enterprises to private investors.
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Which of the following statements reflects the nature of the global economy of the twenty-first century? A. National economies are becoming less integrated into a single and interdependent economic system. B. The number of nations joining the ranks of the developed world has reduced. C. Countries have extensively adopted liberal economic policies. D. There are fewer instances of state-owned businesses privatized and markets being opened to more competition. E. The world is currently moving toward an economic system that is more unfavorable for international business.
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C. Countries have extensively adopted liberal economic policies.
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Which of the following statements is a general implication of globalization? A. Globalization is inevitable. B. From a purely economic perspective, globalization is all good. C. Globalization has no negative impacts on the economies of the developed world. D. Globalization has reduced the risks associated with global financial contagion. E. As a result of globalization, a severe crisis in one region of the world can affect the entire globe.
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E. As a result of globalization, a severe crisis in one region of the world can affect the entire globe.
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An argument in support of the falling barriers to international trade and investment is that the falling barriers: A. prohibit countries from specializing in the production of goods and services. B. drive the global economy toward greater prosperity. C. reduce the need to export jobs overseas. D. increase the bargaining power of business firms by decreasing the incomes of consumers. E. reduce attacks from foreign competitors.
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B. drive the global economy toward greater prosperity.
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"Exporting jobs" to low-wage nations has contributed to: A. higher living standards in those countries that "export" the jobs. B. higher unemployment in wealthy advanced economies such as the United States. C. an increase in the income levels in those nations that "export" the jobs. D. lower standards of living in those countries to which the jobs are exported. E. reduced specialization in the production of goods and services.
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B. higher unemployment in wealthy advanced economies such as the United States.
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Which of the following has increased in the United States as a result of globalization? A. Unemployment rate B. Price of goods and services C. Demand for unskilled workers D. Standard of living E. Income equality between workers in skilled and unskilled sectors
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A. Unemployment rate
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Supporters of globalization insist that dislocation in the form of lost jobs is a trade-off that will ultimately lead to the economy being better off. Which of the following is being justified in this case? A. Protectionism and retaliatory trade policy B. Free trade of goods and services C. Rise of communism D. High tariff on imports of manufactured goods E. The need to be a self-contained nation
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B. Free trade of goods and services
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Critics of globalization say that exporting jobs to low-wage nations results in higher unemployment and lower living standards in their home nations. Which of the following statements does NOT support this argument? A. Globalization destroys manufacturing jobs in wealthy advanced economies. B. Globalization demonstrates a structural adjustment to a more integrated global economy. C. Globalization results in depressed wages in developed nations. D. Globalization leads to economic dislocation in most cases. E. Globalization induces a decline in the share of labor in national income.
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B. Globalization demonstrates a structural adjustment to a more integrated global economy.
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Globalization critics argue that the decline in unskilled wage rates in advanced economies is due to the: A. migration of low-wage manufacturing jobs offshore. B. technology-induced shift toward jobs that require significant education and skills. C. increased supply of highly skilled workers. D. decreasing demand for unskilled workers in developing nations. E. reducing national differences in the cost of labor between developed and developing nations.
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A. migration of low-wage manufacturing jobs offshore.
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Growing income inequality between the skilled and unskilled workers in advanced nations, such as the United States, is a result of the: A. wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted. B. decrease in the outsourcing of low-wage manufacturing jobs offshore and a corresponding increase in demand for unskilled workers. C. shift within advanced economies toward jobs where the only qualification is the willingness to turn up for work every day. D. increasing wage gap between developing and developed nations. E. shortage of unskilled workers and an excess supply of highly skilled workers.
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A. wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted.
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In the context of the environment, globalization critics argue that: A. free trade discourages firms from advanced nations to move manufacturing facilities to less developed countries. B. adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises. C. manufacturing enterprises are put at a competitive disadvantage by moving their production facilities to nations that do not have burdensome regulations. D. as countries get richer, they relax their environmental and labor regulations. E. while pollution levels are rising in the world's richer countries, they have been falling in developing nations.
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B. adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises.
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The NAFTA was formed in 1994 between: A. Canada, Mexico, and the United States. B. the United States, Brazil, and Argentina. C. Canada, Argentina, and Mexico. D. Colombia, Venezuela, and Brazil. E. Uruguay, Colombia, and Costa Rica.
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A. Canada, Mexico, and the United States.
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Which of the following is the most appropriate solution to the problem of rising carbon dioxide emissions in developed economies? A. Roll back the trade liberalization efforts that have fostered economic growth and globalization. B. Tie free trade agreements to the implementation of fewer environmental and labor laws in less developed countries. C. Get the nations of the world to agree to policies designed to limit pollutant emissions. D. Increase the export of low-wage manufacturing jobs to developing nations. E. Restrict international trade and investment only to services.
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C. Get the nations of the world to agree to policies designed to limit pollutant emissions.
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A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power toward: A. supranational organizations such as the World Trade Organization. B. the communist states of eastern Europe and central Asia. C. the medium-size and small U.S. multinationals. D. the national governments of the countries participating in globalization. E. nations that have authoritarian forms of government.
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A. supranational organizations such as the World Trade Organization.
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Which of the following statements supports the claim that the gap between the rich and poor nations of the world has gotten wider because of globalization? A. There are many countries that suffer from totalitarian governments. B. A quarter of the countries with a GDP per capita of less than $1,000 in 1960 had growth rates of less than zero from 1960 to 1995. C. There is a rapidly growing population in many developing nations. D. Unelected bureaucrats limit a nation's ability to control its own destiny. E. Endemic corruption has long been a problem in the national governments of developing nations.
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B. A quarter of the countries with a GDP per capita of less than $1,000 in 1960 had growth rates of less than zero from 1960 to 1995.
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Which of the following is a power of the WTO? A. It can restrict the membership of nations in other supranational organizations such as the United Nations. B. It can grant loans to cash-strapped governments in poor nations. C. It supersedes IMF and has complete authority over IMF's actions. D. It can issue a ruling instructing a member-state to change trade policies that violate GATT regulations. E. It can make decisions related to international trade without considering the collective interests of member-states.
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D. It can issue a ruling instructing a member-state to change trade policies that violate GATT regulations.
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Which of the following is NOT a concern for managers in international businesses? A. Fundamental differences in culture B. Perceived distance between home country and operating nations C. Government restrictions on international trade D. Cross-border transactions involving currency exchange E. Ethical adherence to environmental standards
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B. Perceived distance between home country and operating nations
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Free trade alone, some argue, is a necessary but not sufficient prerequisite to help the world's poorest countries bootstrap themselves out of poverty. They also recommend: A. a highly regulated command economy. B. weaker property rights laws. C. weaker labor regulations. D. large-scale debt relief. E. rapid expansion in population.
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D. large-scale debt relief.
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The minimum that a firm has to do to engage in international business is to: A. export or import products from other countries. B. invest directly in operations in another country. C. establish joint ventures or strategic alliances with companies in other countries. D. export low-wage manufacturing jobs to companies in other countries. E. develop franchises and subsidiaries in other countries.
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A. export or import products from other countries.
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Ryan is the executive general manager of a U.S. multinational and Veronica is a manager in a similar position, but works for another U.S. company that operates only in its home country. In this context, which of the following business functions will be most typically exclusive to Ryan? A. Marketing a product or service B. Maintaining healthy relations with the U.S. government C. Planning on a business strategy D. Adhering to labor and environmental standards E. Choosing an appropriate mode for entering a particular foreign country
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E. Choosing an appropriate mode for entering a particular foreign country
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What is globalization? Explain, with examples, how global companies can facilitate the creation of a global market.
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The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market. Consumer products such as Citigroup credit cards, Coca-Cola soft drinks, Sony PlayStation video games, McDonald's hamburgers, Starbucks coffee, IKEA furniture, and Apple iPhones are frequently held up as prototypical examples of this trend; they are also facilitators of it. By offering the same basic product worldwide, they help to create a global market.
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Explain the concepts of "globalization of markets" and "globalization of production."
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The globalization of production refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labor, energy, land, and capital). By doing this, companies hope to lower their overall cost structure or improve the quality or functionality of their product offering, thereby allowing them to compete more effectively. The globalization of markets refers to the merging of historically distinct and separate national markets into one huge global marketplace. Falling barriers to cross-border trade have made it easier to sell internationally. It has been argued for some time that the tastes and preferences of consumers in different nations are beginning to converge on some global norm, thereby helping to create a global market.
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Briefly trace the history of the G20 and describe its current role in international business.
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Established in 1999, the G20 comprises the finance ministers and central bank governors of the 19 largest economies in the world, plus representatives from the European Union and the European Central Bank. Originally established to formulate a coordinated policy response to financial crises in developing nations, in 2008 and 2009 it became the forum through which major nations attempted to launch a coordinated policy response to the global financial crisis that started in America and then rapidly spread around the world, ushering in the first serious global economic recession since 1981.
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Explain the factors that led to the Great Depression of the 1930s
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Many of the barriers to international trade took the form of high tariffs on imports of manufactured goods. The typical aim of such tariffs was to protect domestic industries from foreign competition. One consequence, however, was "beggar thy neighbor" retaliatory trade policies, with countries progressively raising trade barriers against each other. Ultimately, this depressed world demand and contributed to the Great Depression of the 1930s.
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What were the implications of the Uruguay Round held under the umbrella of GATT for international business?
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Under the umbrella of GATT, eight rounds of negotiations among member states worked to lower barriers to the free flow of goods and services. The most recent negotiations to be completed, known as the Uruguay Round, were finalized in December 1993. The Uruguay Round further reduced trade barriers; extended GATT to cover services as well as manufactured goods; provided enhanced protection for patents, trademarks, and copyrights; and established the World Trade Organization to police the international trading system.
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What is a multinational enterprise? What have been the two most notable trends in multinational enterprises since the 1960s?
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A multinational enterprise is any business that has productive activities in two or more countries. The two most notable trends in multinational enterprises since the 1960s have been (1) the rise of non-U.S. multinationals and (2) the growth of mini-multinationals. The globalization of the world economy has resulted in a relative decline in the dominance of U.S. firms in the global marketplace. Another trend in international business has been the growth of medium-size and small multinationals (mini-multinationals). Although most international trade and investment is still conducted by large firms, many medium-size and small businesses are becoming increasingly involved in international trade and investment.
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In the context of international trade and investment, describe how the former communist nations of Europe and Asia have been changing.
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Many of the former communist nations of Europe and Asia seem to share a commitment to democratic politics and free market economics. If this continues, the opportunities for international businesses are significant. For half a century, these countries were essentially closed to Western international businesses. Now they present a host of export and investment opportunities. Just how this will play out over the next 10 to 20 years is difficult to say. The economies of many of the former communist states are still relatively undeveloped, and their continued commitment to democracy and free market economics cannot be taken for granted. Disturbing signs of growing unrest and totalitarian tendencies continue to be seen in several Eastern European and Central Asian states, including Russia, which has shown signs of shifting back toward greater state involvement in economic activity and authoritarian government. Thus, the risks involved in doing business in such countries are high, but so may be the returns.
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Elaborate on why globalization is not inevitable.
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The world may be moving toward a more global economic system, but globalization is not inevitable. Countries may pull back from the recent commitment to liberal economic ideology if their experiences do not match their expectations. There are clear signs, for example, of a retreat from liberal economic ideology in Russia. If Russia's hesitation were to become more permanent and widespread, the liberal vision of a more prosperous global economy based on free market principles might not occur as quickly as many hope. Clearly, this would be a tougher world for international businesses.
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Discuss the arguments for and against globalization regarding jobs and income.
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Globalization opponents argue that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies such as the United States and Western Europe. Falling barriers allow firms to move manufacturing activities to countries where wage rates are much lower. Because of this, wage rates of poorer Americans have fallen significantly over the past quarter of a century. Supporters of globalization argue that free trade will result in countries specializing in the production of those goods and services that they can produce most efficiently, while importing goods and services that they cannot produce as efficiently.
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Discuss the concerns voiced by critics of globalization regarding labor policies and environment.
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A source of concern for critics of globalization is that free trade encourages firms from advanced nations to move manufacturing facilities to less developed countries that lack adequate regulations to protect labor and the environment from abuse by the unscrupulous. Globalization critics often argue that adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises and puts them at a competitive disadvantage in the global marketplace vis-à-vis firms based in developing nations that do not have to comply with such regulations. Firms deal with this cost disadvantage, the theory goes, by moving their production facilities to nations that do not have such burdensome regulations or that fail to enforce the regulations they have.
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What are the various reasons for economic stagnation in many of the world's poorest countries?
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Many of the world's poorest countries have suffered from totalitarian governments, economic policies that destroyed wealth rather than facilitated its creation, endemic corruption, scant protection for property rights, and war. Such factors help explain why countries such as Afghanistan, Cuba, Haiti, Iraq, Libya, Nigeria, Sudan, Vietnam, and Zaire have failed to improve the economic lot of their citizens during recent decades. A complicating factor is the rapidly expanding populations in many of these countries. Without a major change in government, population growth may exacerbate their problems.
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Why are supranational organizations, such as the World Trade Organization and the United Nations, criticized?
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A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power away from national governments and toward supranational organizations such as the World Trade Organization, the European Union, and the United Nations. As perceived by critics, unelected bureaucrats now impose policies on the democratically elected governments of nation-states, thereby undermining the sovereignty of those states and limiting the nation's ability to control its own destiny.
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What are some of the challenges faced by managers of an international business?
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Managing an international business is challenging in many ways and involves a great deal of complexity. The managers of an international business must decide where in the world to site production activities to minimize costs and to maximize value added. They must decide whether it is ethical to adhere to the lower labor and environmental standards found in many less developed nations. Then they must decide how best to coordinate and control globally dispersed production activities. The managers in an international business also must decide which foreign markets to enter and which to avoid. They must choose the appropriate mode for entering a particular foreign country. These managers must also deal with government restrictions on international trade and investment. They must find ways to work within the limits imposed by specific governmental interventions.
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How is managing an international business different from managing a purely domestic business?
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Managing an international business is different from managing a purely domestic business for at least four reasons: (1) countries are different, (2) the range of problems confronted by a manager in an international business is wider and the problems themselves are more complex than those confronted by a manager in a domestic business, (3) an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system, and (4) international transactions involve converting money into different currencies
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Briefly discuss the ways in which technological change has affected globalization.
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The lowering of trade barriers made globalization of markets and production a theoretical possibility. Technological change has made it a tangible reality. Since the end of World War II, the world has seen major advances in communication, information processing, and transportation technology, including the explosive emergence of the Internet.
