International Trade and Investment
Exam Answer Key
Course Introduction
International Trade and Investment explores the theories, policies, and practices that govern the flow of goods, services, and capital across national boundaries. The course examines comparative advantage, trade patterns, and the role of major institutions such as the World Trade Organization in shaping global commerce. Students analyze the impact of trade agreements, tariffs, and foreign direct investment on both developed and developing economies, while considering issues such as globalization, regional trading blocs, and the challenges of economic integration. Emphasis is placed on understanding the strategic decisions of multinational enterprises and the dynamic interplay between national policy and international economic forces.
Recommended Textbook
International Business The New Realities 4th Edition by S. Tamer Cavusgil
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Chapter 1: Introduction: What Is International Business
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Sample Questions
Q1) International business is defined as the performance of ________ activities by firms across national borders.
A)marketing and fiduciary
B)trade and investment
C)finance and operational
D)accounting and auditing
Answer: B
Q2) Which of the following best explains why the Japanese firm Canon relocated much of its production to China?
A)low-cost financial capital
B)low-cost labor
C)access to raw materials
D)lack of skilled managerial talent in home country
Answer: B
Q3) Although services trade is growing rapidly, the value of merchandise trade is still much larger.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Globalization of Markets and the
Internationalization of the Firm
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Q1) Which of the following represents the final stage in a firm's value chain?
A)marketing
B)procurement
C)research and development
D)sales and service
Answer: D
Q2) ________ refers to the tendency of a financial or monetary crisis in one country to spread rapidly to other countries, due to the ongoing integration of national economies.
A)Contagion
B)Nationalization
C)Internationalization
D)Codetermination
Answer: A
Q3) Over time, the GATT evolved into the ________.
A)World Bank
B)International Monetary Fund
C)World Trade Organization
D)World Intellectual Property Organization
Answer: C
Page 4
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Chapter 3: The Cultural Environment of International Business
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Q1) Which type of religious practices will Harold most likely have to study?
A)Christian
B)Jewish
C)Confucian
D)Islamic
Answer: D
Q2) Polycentric orientation refers to ________.
A)a host-country mind-set in which the manager develops a strong affinity with the country in which she or he conducts business
B)the use of one's own culture as the standard for judging other cultures
C)a collectivist mind-set, which emphasizes conformity, duty, prescribed roles, and sacrifice for the greater good
D)the tendency to rely on elaborate verbal explanations, putting much emphasis on spoken words
Answer: A
Q3) Business jargon unique to a culture can impede communication.
A)True
B)False
Answer: True
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Chapter 4: Ethics, Corporate Social Responsibility,
Sustainability and Corporate Governance
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Sample Questions
Q1) The process of reproducing assets without compensating those who originally created them is known as ________.
A)counterfeiting
B)bribery
C)product differentiation
D)trademarking
Q2) Which of the following is true with regard to corruption?
A)Countries with minimal corruption fail to attract direct investment.
B)In firms, corruption rarely occurs across the range of value chain activities.
C)Corruption harms the poorest in societies.
D)Under the Sherman Antitrust Act, firms charged for corruption may be fined $2 million and managers can be imprisoned for up to five years.
Q3) ________ is most likely to point to a controversial practice in his/her country in which the compensation of top executives is far greater than that of low-ranking subordinates.
A)Geoff
B)Luis
C)Jang
D)Marta
6
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Chapter 5: Theories of International Trade and Investment
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Q1) What is a collaborative venture? In a short essay, describe the two major types of international collaborative ventures.
Q2) Industrial cluster refers to a concentration of businesses, suppliers, and supporting firms in the same industry at a particular geographic location, characterized by a critical mass of human talent, capital, or other factor endowments.
A)True
B)False
Q3) Developing new product designs and new ways of organizing or training are some of the ways in which companies innovate.
A)True
B)False
Q4) Born globals have emerged in large numbers for two main reasons: globalization and advances in communication and transportation technologies .
A)True
B)False
Q5) In a short essay, discuss the internalization theory. Provide examples.
Q6) In a short essay, explain mercantilism and the monopolistic advantage theory.
Q7) Distinguish between comparative and competitive advantages. Provide examples.
Page 7
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Chapter 6: Political and Legal Systems in National Environments
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Q1) Which of the following is the LEAST adversarial method of resolving a contractual dispute?
A)trial
B)arbitration
C)litigation
D)conciliation
Q2) Of the five types of participants that are active in transforming political and legal systems, the public sector is the most important.
A)True
B)False
Q3) Which of the following terms refers to the existence of a legal system based on clear rules and fair enforcement?
A)conciliation
B)arbitration
C)culture of law
D)rule of law
Q4) Describe the methods used by governments to seize the assets of foreign firms. How would proactive environmental scanning mitigate this risk?
Q5) What are some of the risks for firms involved with international e-commerce?
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Chapter 7: Government Intervention and Regional Economic Integration
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Sample Questions
Q1) One approach for reducing exposure to trade barriers is to have exported products classified in the appropriate harmonized product code.
A)True
B)False
Q2) Which of the following terms refers to two or more geographically connected nations in pursuit of free trade relations?
A)grey market
B)trading diaspora
C)economic bloc
D)business strategic unit
Q3) Increasing trade barriers are a major factor in the growth of developing nations and global commerce.
A)True
B)False
Q4) Governments impose defensive barriers to ________.
A)generate tax revenues
B)increase employment
C)pursue strategic policy objectives
D)promote national security
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Chapter 8: Understanding Emerging Markets
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Q1) In a short essay, explain why family conglomerates dominate emerging markets. What are the benefits to foreign firms who collaborate with FCs in order to do business in emerging markets?
Q2) Outsourcing helps firms become more efficient, concentrate on their core competencies, and obtain competitive advantages .
A)True
B)False
Q3) Developing economies ________.
A)account for nearly two-thirds of world GDP
B)are often highly developed in historical and cultural terms
C)are characterized by high purchasing power
D)have a high literacy rate
Q4) Which of the following most likely supports the consulting firm's recommendation that Vytel proceed with plans to do business in Argentina?
A)The political conditions in Argentina are stable.
B)Government bureaucrats favor domestic firms to foreign firms.
C)Potential local partners have few government contacts.
D)The Argentine government lacks transparency.
Q5) Write a short essay on technology and emerging markets.
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Chapter 9: The International Monetary and Financial Environment
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Q1) Which of the following is a characteristic of momentum trading?
A)Investors buy stocks as prices fall.
B)Investors sell stocks when others sell.
C)Investors buy stocks as prices rise.
D)Investors buy and sell stocks spontaneously.
Q2) Which of the following supports maintaining the current production status instead of increasing production?
A)The euro-dollar exchange rate is unpredictable due to its constant fluctuation.
B)Exporters and importers typically profit from currency speculation.
C)The euro/dollar exchange rate usually remains steady for long periods of time.
D)The cost of living in the U.S. has risen dramatically in the last year.
Q3) Which of the following questions would be more important to evaluate in determining the reason behind the inflation in Country X?
A)Has momentum trading of agricultural commodities been occurring in Country X?
B)What is the exchange rate between Country X currency and the euro?
C)How quickly was the money supply increased by the central bank of Country X?
D)How many pounds of coffee beans are being imported annually to Country X?
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Chapter 10: Financial Management and Accounting in the Global Firm
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Q1) Which of the following is most likely an advantage of Intensity accessing funds through the global capital market instead of domestic sources?
A)maturity period of instruments is restricted to less than 365 days
B)access to a vast number of competitive funding sources
C)access to short-term financing exclusively
D)reduced exposure to currency risk and rate fluctuation
Q2) Which of the following should most likely be considered by financial managers before FEG purchases Maple Leaf?
A)How will environmentalists react to the purchase of Maple Leaf by FEG?
B)Should FEG integrate the Maple Leaf logo into the FEG marketing campaign?
C)What is the best way for FEG to manage currency fluctuation between U.S. dollars and Canadian dollars?
D)How will NAFTA affect the legal negotiations between FEG and Maple Leaf?
Q3) How has technology affected foreign exchange trading?
Q4) Which of the following is the final task in international financial management?
A)managing currency risk
B)managing the diversity of international accounting and tax practices
C)raising funds for the firm
D)managing working capital and cash flow
Page 12
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Chapter 11: Strategy and Organization in the International Firm
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Q1) Which of the following most likely supports Extra Clean implementing a transnational strategy?
A)The country managers have been trained in the United States.
B)Extra Clean is a highly centralized organization.
C)Extra Clean could reduce the number of global suppliers.
D)There is high local competition in each of the markets.
Q2) Strategic global teams identify or implement initiatives that enhance the long-term direction of the firm in its global industry.
A)True
B)False
Q3) Armaz Inc. , a manufacturing company, has its headquarters located in Texas, U.S. , and subsidiaries in India, China, and Vietnam. Which of the following decisions will be the most centralized?
A)decision about building factories in Cambodia
B)decision about hiring a marketing manager for its India operations
C)decision to open a retail store in Vietnam
D)decision about marketing newly developed products for the Chinese market
Q4) Describe local responsiveness and explain how a multidomestic strategy allows an international firm to pursue local responsiveness.
Page 13
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Chapter 12: Global Market Opportunity Assessment
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Q1) While estimating company sales potential, managers may make multiple estimates based on best-case, worst-case, and most-likely case scenarios.
A)True
B)False
Q2) Which of the following is considered a regional hub?
A)Hong Kong
B)Ireland
C)Canada
D)Russia
Q3) Which of the following most likely supports the opinion of Beth Schultz over the opinion of Edward O'Neal?
A)Happy Pet has a monopoly in the U.S. pet products market.
B)Happy Pet's online sales reflect a high demand for premium pet food in the EU.
C)Happy Pet's market research identified the presence of market saturation in the EU.
D)Happy Pet's competitors have successfully branched into foreign markets.
Q4) Compare and contrast industry market potential and company sales potential. How is an estimate of industry market potential helpful to managers? What factors are necessary to determine industry market potential?
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Chapter 13: Exporting and Global Sourcing
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Sample Questions
Q1) Typically, firms tend to concentrate research and development activities abroad rather than in their home countries.
A)True
B)False
Q2) After managers have chosen an appropriate market for exporting, the next step is to
A)decide about the resources to be committed
B)acquire the skills and competencies to handle export operations
C)engage appropriate international trade attorneys
D)modify advertising and promotional activities to suit individual markets
Q3) Which of the following questions must be evaluated by OTC managers as a first step to exporting?
A)What are the risks involved in exporting OTC towels to Earth Waves?
B)Do Canadian towel companies have a high success rate when they export?
C)Will OTC save money on domestic marketing by exporting?
D)How can OTC adapt its distribution strategy in Canada?
Q4) In a short essay, explain the factors involved in a firm's decision to use indirect exporting or direct exporting.
Q5) In a short essay, explain how global sourcing can affect home-country employees.
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Chapter 14: Foreign Direct Investment and Collaborative Ventures
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Q1) Which of the following most likely supports a decision to enter the Asian market through a project-based, non-equity collaborative venture with an Asian appliance manufacturer to create an environmentally-friendly dishwasher?
A)Asian firms have offered to pool their resources with ABC to create a new legal entity.
B)Managers of both firms have decided not to seek ownership, rather they have decided to pool resources.
C)ABC managers have the financial resources to quickly build a new Asian plant.
D)The Asian government has offered incentives to ABC if the firm builds a plant.
Q2) During her presentation, Jessica describes how two automakers joined forces and formed a separate firm by pooling their assets. Which of the following topics was most likely assigned to Group A?
A)equity joint venture
B)acquisition
C)greenfield investment
D)vertical integration
Q3) FDI is the most advanced and complex foreign market entry strategy.
A)True
B)False
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Chapter 15: Licensing, Franchising, and Other Contractual Strategies
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Q1) Information technology has increased the success and growth of international franchising operations by ________.
A)eliminating the need for corporate meetings to discuss quality control
B)improving communication between MNE managers and their franchisees
C)reducing Internet sales and the need for freight forwarding services
D)assigning franchisors maximum control to oversee franchisees activities
Q2) Which of the following statements is true of leasing?
A)It is an arrangement in which a contractor supplies managerial know-how to operate a hotel, hospital, airport, or other facility in exchange for compensation.
B)The lessor transfers ownership of the property in exchange for a lump-sum payment.
C)It is a high-risk and high-cost method of entering a foreign market.
D)A major advantage for the focal firm is the ability to gain quick access to target markets, while putting assets to use in earning profits.
Q3) Describe three challenges faced by professional service firms when they internationalize.
Q4) Describe five advantages of licensing agreements from the perspective of the licensor.
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Chapter 16: Marketing in the Global Firm
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Q1) Channel length refers to the number of distributors or other intermediaries that it takes to get the product from the manufacturer to the market.
A)True
B)False
Q2) A standardized marketing approach is appropriate when customers seek similar features in the product or service.
A)True
B)False
Q3) Which of the following best characterizes the purpose of a global marketing strategy?
A)guides firms on hiring highly skilled resources
B)provides managers with demographic data
C)helps managers check high employee turnover
D)guides firms in targeting the right customer segments
Q4) What is global account management? Briefly describe the role of global account management in international business.
Q5) Discuss four factors that would persuade firms to adapt elements of their marketing programs for individual markets. Provide suitable examples.
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Chapter 17: Human Resource Management in the Global Firm
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Q1) When outsourcing work to foreign suppliers, managers must ensure that ________.
A)wages in the host country are higher than that in the home country
B)the local level of productivity is more
C)workers in the host country enjoy a high degree of employee empowerment
D)worker productivity in the host country meets acceptable levels
Q2) Women enjoy equal access to senior management positions in most Asian countries.
A)True
B)False
Q3) ________ refers to searching for and locating potential job candidates to fill the firm's needs.
A)Retrenchment
B)Recruitment
C)Codetermination
D)Repatriation
Q4) With rapid globalization, the incidence of strikes has increased worldwide.
A)True
B)False
Q5) Discuss the reasons why labor union membership has declined in recent years.
Q6) In a short essay, discuss the factors that complicate the job of international human resource managers. Page 19
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