Global Business Environment
Study Guide Questions
Course Introduction
The Global Business Environment course explores the complex and dynamic context in which international businesses operate today. Students will examine the economic, political, legal, technological, and socio-cultural factors that influence global markets and shape organizational strategies. The course covers topics such as globalization, international trade and investment, global business regulations, cross-cultural management, and the impact of emerging economies. Through case studies and real-world examples, students will develop the analytical skills to assess risks and opportunities in different regions, understand global competitive dynamics, and make informed decisions for effective international business operations.
Recommended Textbook
International Business 15th Edition by John Daniels
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Page 2
Chapter 1: Globalization and International Business
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Q1) Which of the following is an indication of the increased globalization of business since the end of World War II?
A) Foreign trade has largely replaced foreign ownership as a means of conducting international business.
B) World trade has grown more rapidly than world production.
C) Globally, consumers now depend on foreign output for more than half their consumption.
D) Countries have increased their import restrictions to counter the rising tide of imports.
Answer: B
Q2) Managers who are knowledgeable about ________ are better able to identify the location,quantity,quality,and availability of the world's natural resources.
A) political factors
B) geographic factors
C) competitive factors
D) cultural factors
Answer: B
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Chapter 2: The Cultural Environments Facing Business
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Q1) Raj,an engineer,works long hours and takes full responsibility for both his good and bad work performance.Raj most likely believes in ________.
A) self-determination
B) low power distance
C) collectivism
D) fatalism
Answer: A
Q2) The fact that an English word such as blue-jeans has entered the Spanish language,while a Spanish word such as macho has come into American English illustrates that ________.
A) cultural diffusion is a two-way process
B) cultural trends come from emerging nations
C) existing national borders are shifting
D) material cultures are becoming universal
Answer: A
Q3) National origin is an acquired group membership.
A)True
B)False
Answer: False
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Page 4
Chapter 3: The Political and Legal Environments Facing Business
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Q1) The distinguishing feature of political ideologies along the political spectrum is ________,with some emphasizing its primacy and others opposing it.
A) capitalism
B) socialism
C) freedom
D) liberalism
Answer: C
Q2) How does a nation's legal environment affect an MNE's marketplace behavior,especially when the rule of man prevails?
Answer: National laws stipulate permissible practices in all forms of business activities,including sourcing,distributing,advertising,and pricing products.MNEs adjust their manufacturing configuration,supply chain coordination,and marketing strategy accordingly.In countries where the rule of man is the basis of law,acceptable marketplace behavior is unpredictable.MNEs often complain of trumped-up charges,solicitation of bribes,and favoritism for local rivals.Especially controversial in legal systems where the rule of man prevails is the issue of the protection-or lack thereof-of intellectual property.
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Chapter 4: The Economic Environments Facing Businesses
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Q1) A market economy gives individuals the freedom to decide where to work doing what,how to spend or save money,and whether to consume now or later.
A)True
B)False
Q2) To determine whether the standard of living within a country is rising or falling,economists would most likely use which of the following measures?
A) per capita GNI
B) GNI growth rate
C) purchasing power parity
D) degree of human development
Q3) What issues complicate international economic analysis?
Q4) The World Bank reports that approximately ________ percent of the world's population is poor.
A) 50
B) 33
C) 80
D) 95
Q5) What is inflation? How does inflation affect international business?
Q6) What is the difference between a command economy and state capitalism?
Page 6
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Chapter 5: International Trade and Factor-Mobility Theory
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Q1) The factor proportions theory holds that countries should concentrate production on those products that use their most abundant production factors.
A)True
B)False
Q2) An exception to the PLC theory in terms of production location is often a product with very rapid change in innovation.
A)True
B)False
Q3) According to the PLC theory of trade,most new products are produced in countries where wage rates are low.
A)True
B)False
Q4) Costa Rica applied the concepts of the diamond of national advantage theory to help transform its economy by ________.
A) building domestic demand for its products and services
B) looking globally to develop favorable conditions
C) following import substitution policies
D) concentrating on nontradable goods
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Chapter 6: Governmental Influence on Trade
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Q1) Companies with ________ would most likely oppose global protectionist measures.
A) internationally integrated supply chains
B) domestically focused supply chains
C) multidomestic production facilities
D) product differentiation
Q2) The U.S.automobile industry has attempted to counter import competition in all the following ways EXCEPT ________.
A) concentrating on market niches that initially had less import competition
B) lobbying for customs deposits so that importers' costs would be raised
C) moving some production to lower-cost countries and exporting to the United States
D) effecting internal adjustments, such as cost efficiencies and improved quality
Q3) Import trade controls,but not export trade controls,can be used as a weapon of foreign policy.
A)True
B)False
Q4) Explain the rationale for and problems with making the infant-industry argument work as intended.
Q5) Describe and compare the different types of tariffs (duties).
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Chapter 7: Cross-National Cooperation and Agreements
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Q1) What has been the impact of NAFTA on trade and employment in NAFTA nations?
Q2) The European Union is an example of regional integration.
A)True
B)False
Q3) The 27 member EU negotiates trade agreements as one.The EU and Brazil have negotiated a strategic trade alliance which is an example of a ________.
A) customs union
B) global free trade agreement
C) bilateral agreement
D) multilateral agreement
Q4) Explain the static effects and dynamic effects of economic integration.What is the difference between trade creation and trade diversion resulting from economic integration?
Q5) Very few commodity agreements are successful in bringing together supplier and consumer countries to stabilize commodity prices.
A)True
B)False
Q6) Are commodity agreements effective? Why or why not?
Q7) What are the rules of origin and regional content provisions of NAFTA?
Page 9
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Chapter 8: Global Foreign-Exchange Markets
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Q1) An exchange rate is the number of units that buys one unit of another currency.
A)True
B)False
Q2) The Chicago Mercantile Exchange and NASDAQ are part of the OTC market.
A)True
B)False
Q3) Which of the following is the price at which the trader is willing to sell foreign currency?
A) offer
B) bid
C) spread
D) cross rate
Q4) A confirmed letter of credit may obligate the exporter's bank to honor a draft presented to it.
A)True
B)False
Q5) Why would companies become involved in arbitrage? What is the difference between arbitrage and interest arbitrage?
Q6) What is currency speculation? Why is it risky?
Q7) What is a futures contract? What institutions handle futures contracts?
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Chapter 9: The Determination of Exchange Rates
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Q1) A current account deficit suggests that a country is importing more than it is exporting and building up foreign debt.
A)True
B)False
Q2) Which of the following was part of the stability and growth pact that was required for countries to be part of the European Monetary Union?
A) The annual government budget must be no greater than 3% of GDP.
B) The annual inflation rate must remain within 1.5% of the three best-performing EU countries.
C) The annual government budget deficit could be no greater than 60% of GDP.
D) The annual inflation rate must remain within 5.5% of the four best-performing EU countries.
Q3) Which type of exchange rate arrangement is based on supply and demand?
A) soft peg
B) hard peg
C) crawling
D) floating
Q4) In a short essay,compare the roles of the Federal Reserve Bank of New York and the European Central Bank.
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Chapter 10: Global Capital Markets
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Q1) The Japanese yen makes up the largest portion of the international bond market.
A)True
B)False
Q2) What is the primary concern about offshore financial centers?
A) engaging in illegal activities
B) enabling firms to avoid taxation
C) allowing the transfer of large funds
D) existing in politically risky environments
Q3) A situation in which several banks pool resources in the Eurocurrency market to extend credit to a borrower and spread the risk is known as ________.
A) credit collaboration
B) leverage equity financing
C) syndication
D) short-term Eurocurrency financing
Q4) The OECD is concerned about transfer pricing practices because ________.
A) transfer pricing can help maximize a company's worldwide tax liability
B) transfer prices tend to be higher in industrial than developing countries
C) governments use transfer prices to manipulate companies' investment strategies
D) companies use transfer prices to manipulate prices and therefore taxes
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Chapter 11: Globalization and Society
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Q1) In the long run,MNEs must adequately meet the needs of all stakeholders in order to prosper and survive.
A)True
B)False
Q2) Which of the following statements about GE and its "Green is Green" movement is true?
A) GE is responding in part to the fact that it is operating in many countries which require compliance with higher environmental standards than exist in the United States.
B) GE has decided to develop new products that are environmentally friendly rather than adopt internal policies to reduce greenhouse gas emissions.
C) GE has moved aggressively to reduce greenhouse gas usage internally but has not been able to develop commercially viable "clean" technologies.
D) GE considered joining the U.S. Climate Action Partnership but decided the group was too radical in its approach to reducing greenhouse gas emissions.
Q3) )What types of payments are legal and illegal under the Foreign Corrupt Practices Act (FCPA)of the United States? Provide an example.
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Chapter 12: The Strategy of International Business
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Q1) A differentiation strategy works well when ________.
A) a company designs a universal product for a broad market
B) buyers believe minor product differences are irrelevant to price
C) buyers are highly sensitive to price shifts and quality control
D) a company can continually develop products that have unique features
Q2) Which of the following is the best example of a product disruption driving industry change?
A) redesign of Toyota's Prius
B) introduction of Apple's iPad
C) AT&T's purchase of T-Mobile
D) merger of United and Continental
Q3) In a brief essay,discuss the strategy used by Zara,the firm described in the opening case.Also discuss the features of Zara's value chain.
Q4) A company's value chain is best described as the ________.
A) variable sequence of converting product ideas into value for shareholders
B) mixture of activities taken to define product value standards and price points
C) discrete series of steps taken to move a product from conception to end-users
D) blueprint that must be followed to leverage the core capabilities of a global firm
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Page 14
Chapter 13: Country Evaluation and Selection
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Q1) Executives at Wilson Enterprises need to determine how to leverage and improve the firm's existing competencies on a global basis.What are the two most basic questions that they must answer?
A) Which markets should we serve and where should production be located to serve those markets?
B) What are the short-term competitive advantages of the project and what is the return on investment?
C) What is the total investment required and what are the managerial resources needed to supervise the investment?
D) What is the availability of land and what is the cost of labor?
Q2) The origin of investment proposals differs from the origin of divestment proposals in that the divestment proposals are more likely to come from ________.
A) subsidiary management
B) outside the organization
C) higher up in the organization
D) line personnel as opposed to staff personnel
Q3) What is scanning? What opportunities and risks are most relevant to scanning?
Q4) Why do companies engage in international harvesting or divestment?
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Page 15
Chapter 14: Export and Import
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Q1) Which of the following transactions refers to the purchase of goods or services produced by a company based in one country from sellers that reside in a different country?
A) importing
B) countertrading
C) exporting
D) freight forwarding
Q2) All of the following are common problems associated with exporting and importing EXCEPT ________.
A) managing financial risks
B) finding reliable intermediaries
C) matching foreign rivals' prices
D) establishing distribution networks
Q3) According to the research described in your text,which of the following is among the factors that would increase a firm's probability of exporting?
A) low domestic productivity
B) high domestic labor costs
C) high level of operational efficiency
D) high R & D demands
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Page 16
Chapter 15: Direct Investment and Collaborative Strategies
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Q1) In which of the following situations is a firm most likely to be able to choose the foreign operating form it would most like to use?
A) Its main motive is to gain location-specific assets.
B) It has a desired and unique resource.
C) Its preference for entering foreign markets is via acquisition of foreign facilities.
D) It has little concern about appropriability.
Q2) Lesser-known franchisors sometimes enter foreign countries with company-owned outlets.A reason for doing this is to ________.
A) guarantee profits
B) avoid competition
C) compete with local stores
D) attract potential franchisees
Q3) What is a management contract? What are the potential advantages to both parties in the contract?
Q4) What is the difference between licensing and cross-licensing? What factors do firms need to consider before entering into licensing agreements?
Q5) Explain how franchising agreements differ from licensing agreements.
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Chapter 16: The Organization of International Business
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Q1) A firm's vertical differentiation determines where in its organization structure managers have decided to concentrate decision-making authority.
A)True
B)False
Q2) In which of the following situations would a company most likely benefit from using the international division structure?
A) when the company's different foreign markets pose significantly different opportunities and threats
B) when the company relies on local managers in foreign operations to make strategic decisions
C) when the company's domestic market activity is much more important than its international business activity
D) when the company's domestic business activity has reached its full market potential
Q3) In a brief essay,discuss how decentralized management and organizational culture affect Johnson & Johnson.
Q4) What is the difference between a classical structure and a neoclassical structure? Provide examples of each type.
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Chapter 17: Marketing Globally
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Q1) When a company sells technologically advanced products to global customers,it is more likely to handle distribution itself.
A)True
B)False
Q2) A company would most likely export at a price lower than its production and distribution costs in order to ________.
A) use a skimming strategy abroad before using one domestically
B) test a market before making a big commitment
C) use a cost-plus strategy globally
D) encourage gray market sales
Q3) Diversity of international markets and currency instability have the greatest effect on ________.
A) promotion
B) R&D
C) branding
D) pricing
Q4) In a short essay,compare push and pull promotional strategies.
Q5) In a short essay,describe the various reasons for product alteration.
Q6) What is the gray market? Why are companies concerned about it?
Page 19
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Chapter 18: Global Manufacturing and Supply-Chain Management
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Q1) Foreign trade zones (FTZs)can be either general-purpose zones or subzones.
A)True
B)False
Q2) What are the advantages and disadvantages of global and domestic sourcing? What role does quality play in deciding between global and domestic sourcing?
Q3) Bocce Shoes,an Italian firm,set up a production facility in Vietnam to manufacture the firm's line of athletic shoes.Bocce is most likely using a(n)________ strategy.
A) dependability
B) flexibility
C) innovation
D) efficiency/cost
Q4) What are the roles of compatibility,configuration,coordination,and control in a global manufacturing strategy? Describe each of these four factors.
Q5) Which of the following is one of the main purposes of FTZs?
A) discouraging companies to locate in the host country
B) forcing countries to pay extra duties
C) discouraging companies from using JIT
D) allowing countries to defer duties
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Chapter 19: International Accounting and Finance Issues
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Q1) A typical U.S.company uses the following balance sheet format: assets = liabilities + shareholders' equity.
A)True
B)False
Q2) Which term refers to how companies value assets such as inventory?
A) measurement
B) conservatism
C) disclosure
D) optimism
Q3) The degree of caution companies display in valuing assets and recognizing income is known as conservatism.
A)True
B)False
Q4) Transfer prices are ________.
A) always based on production costs
B) the prices on goods transferred from one country to another
C) regulated by the United Nations so as to avoid manipulation
D) often used to minimize taxation
Q5) How do exchange rates affect budgets used to evaluate performance in MNEs?
Page 21
Q6) In a brief essay,discuss the concepts of transfer pricing and hedging.
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Chapter 20: International Human Resource Management
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Q1) The ________ of compensation determines an expatriate's compensation on the prevailing pay scales in the locale of the foreign assignment.
A) headquarters-based method
B) home-based method
C) culturally based method
D) host-based method
Q2) What is the primary advantage of an MNE using an ethnocentric framework?
A) minimizing relocation costs
B) developing community support
C) transferring core competencies abroad
D) encouraging innovative business practices
Q3) Companies around the world typically find it easy to locate a number of executives able and willing to run foreign operations.
A)True
B)False
Q4) List and compare the three common methods of implementing a balanced compensation plan.
Q5) What are the current trends in expatriate allowances? What are the reasons for these changes?
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