In the same way that business is defined as the buying and selling of goods and services, global business is defined as the buying and selling of goods and services by people from different countries.
Regional trading is a method of investment in which a company builds a new business or buys an existing business in a foreign country.
Direct foreign investment is an increasingly important and common method of conducting global business.
DaimlerChrysler and Beijung Automotive Industry Corp (BAIC) have signed a contract to manufacture DaimlerChrysler cars in BAIC's Chinese factory. This is an example of a direct foreign investment.
5. Multinational corporations are corporations that own businesses in two or more countries.
6. Customs classification is a non-tariff trade barrier. It is important to international marketers because the category assigned by customs agents can affect the size of the tariff and the impact of import quotas.
7. The Maastricht Treaty of Europe was designed to create the European Union and make the euro, the one common currency, for all members.
8. The North American Free Trade Agreement (NAFTA) is a regional trade agreement between Canada and the United States. No other nations have signed this trade agreement.
9. In a multinational company, managers at company headquarters may value global consistency as a company policy over local adaptation because global consistency simplifies decision-making at corporate headquarters.
10. Multinational companies typically have no difficulty determining the correct balance between global consistency and local adaptation.
11. Different businesses often need different combinations of global consistency and local adaptation.
12. Historically, companies have generally followed the phase model of globalization.
13. The phase model of globalization means that companies made the transition from a domestic company to a global company in three sequential phases. The three phases are exporting, followed by wholly owned subsidiaries, and finishing with strategic alliances.
14. It appears that all companies follow the phase model of globalization when entering foreign markets.
15. The two kinds of cooperative contracts are licensing and franchising.
16. The biggest disadvantage associated with licensing is that the licensor gives up control over the quality of the good or service sold by the foreign licensee.
17. A joint venture is an example of a strategic alliance.
18. One of the disadvantages of global joint ventures is that, unlike licensing and franchising, they do not help companies to avoid tariff and nontariff barriers to entry.
19. Global joint ventures can be difficult to manage because they represent a merging of four cultures.
20. Unlike licensing, franchising, or joint ventures, wholly owned affiliates are 100 percent owned by the parent company.
21. Global new ventures bring a good or service to market in one foreign market at a time.
22. Deciding where to go global is just as important as deciding how your company will go global.
23. An attractive business climate is defined by a single dimension: Does the business minimize the political risk to the company?
24. Two factors that help companies determine the growth potential of foreign markets are purchasing power and foreign competitors.
25. The criteria for choosing an office/manufacturing location are different from the criteria for entering a foreign market.
26. When conducting global business, companies should attempt to identify the two types of political risk, which are political uncertainty and economic uncertainty.
27. The three strategies used to minimize or to adapt to the political risk inherent to global business are avoidance, control, and cooperation.
28. The evidence clearly shows that how well an expatriate's spouse and family adjust to the foreign culture is the most important factor in determining the success or failure of an international assignment.
1. Global business ____.
is the buying and selling of goods and services to people from different countries
2. ____ is a method of investment in which a company builds a new business or buys an existing business in a foreign country.
direct foreign investment
3. Which of the following countries has the largest direct foreign investment in the United States?
4. Nestlé is a company based in Switzerland with manufacturing plants in Columbia, Australia, Canada, Egypt, Kenya, and more than 90 other nations. Nestlé is an example of a ____.
multi national coroporation
5. As Malta got ready for its admittance into the European Union (EU), the EU removed all taxes on the importation of goods manufactured in Malta. In other words, the EU abolished ____ for Malta-manufactured merchandise.
6. Several Arab countries boycott Coca-Cola products because the soft-drink company maintains product distributors in Israel. This boycott is an example of ____.
a trade barrier
7. The two general kinds of trade barriers are ____.
tarrfiff barriers and nontarriff barriers
8. In 2000, the United States imposed a tax on all steel imports in an effort to protect about 5,000 jobs. This tax is an example of a(n) ____.
9. Protectionism is the use of trade barriers to protect local companies and their workers from ____.
10. The Japanese government has proclaimed that its snow is different from that found in any other region of the world. As a result, all snow skis marketed in Japan must be manufactured in Japan. This is an example of a(n) ____.
11. The U.S. Rice Millers' Association claims that if the Japanese rice market were opened to imports by lowering tariffs, the resultant lower prices would save Japanese consumers about $6 billion annually. The Japanese government continues to use the high tariffs to make sure local farmers can earn a living. The tariff on rice is an example of ____.
12. A ____ is a nontax method of increasing the cost or reducing the volume of imported goods.
13. A(n) ____ is a direct tax on imported goods designed to make it more expensive to buy those goods, instituted in hopes of reducing the volume of those imported goods in a given country.
14. The Japanese government has proclaimed that its snow is different from that found in any other region of the world. To make sure the product is safe for local use, all snow skis marketed in Japan must be manufactured in Japan. This is an example of a(n) ____.
gvmnt import standard
15. Russia imposed limits on how much poultry, beef, and pork could be imported into the nation from the European Union (EU) in retaliation to limits the EU placed on how much grain Russia could export. What type of nontariff barrier did Russia use to control the amount of poultry, beef, and port it imported from the EU?
16. The European Union (EU) bans the importation of hormone-fed U.S. beef and bioengineered corn and soybeans on safety grounds although Americans eat this food every day. This ban is so consumers in the EU will buy domestic beef and products made from domestically produced corn and soybeans. This ban is an example of ____.
gvmnt import standard
17. ____ are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect companies or special industries.
18. To protect its farmers, Japan put limitations on the amount of mushrooms and leeks that could be imported into Japan from China. This limitation is an example of a(n) ____.
19. The trade agreement that represented the most significant change to the regulations governing global trade during the 1990s was the ____.
world trade organization
20. The signing of the ____ created a regional trading zone.
21. As Malta got ready for its admittance into the European Union (EU), the EU removed all taxes on the importation of goods manufactured in Malta. Malta was preparing to become part of a(n) ____.
regional trading zone
22. The acronym GATT stands for the ____.
general agreement on tarriffs and trade`
23. The General Agreement on Tariffs and Trade (GATT) ____.
does all of these
24. The ____ is a regional trade agreement that liberalizes trade between countries more than any other such agreement.
north american free trade agreement
25. One of the major questions that a company must typically answer once it has decided to go global is ____.
To what extent should the company standardize or adapt business procedures?
26. A multinational company that acts with ____ has offices, manufacturing plants, and distribution facilities in different countries which are all run based on the same rules, guidelines, policies, and procedures.
27. In a multinational firm, managers at company headquarters typically prefer an emphasis on ____ because it simplifies decisions.
28. Which of the following approaches tends to be most important to making an international business successful in any given country?
29. Historically, most companies have used the ____ to successfully enter foreign markets.
phase model of globalization
30. Which of the following represents the correct sequence for the phase model of globalization?
exporting; cooperative contracts; strategic alliances; wholly-owned affiliates
31. ____ occurs when a company sells domestically produced products to customers in foreign countries.
32. Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of its Moodmatcher lipstick in Japan annually. It has no physical presence within the country beyond the fact its products are sold there. Fran Wilson Creative Cosmetics uses ____ to reach the Japanese market.
33. A(n) ____ is an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country.
34. ____ are both examples of cooperative contracts.
franchising and licensing
35. Sodima is a French cooperative that owns the name, the trade secrets, and the patents on Yoplait yogurt. General Mills pays Sodima for the right to sell Yoplait yogurt in the United States. This is an example of ____.
36. Robert Mondavi Wineries entered into an agreement with Baron Philippe de Rothschild, owner of Boreaux's First Growth chateau, to produce a top quality wine in California. The two companies working together to create a new product is an example of ____.
a joint venture
37. Ernst & Young, an international accounting and management consulting company, entered Hungary first by establishing a joint venture with a local firm. Ernst & Young later acquired the company with which it had the alliance. Ernst & Young then had a(n) ____ in Hungary.
wholly owned affiliate
38. The people who live on the island of Malta are described as happy-go-lucky people who are comfortable with an unstructured life and deal well with sudden changes. In terms of Hofstede's cultural differences, the people of Malta have a ____.
low degree of uncertainty avoidance
39. All global new ventures share two common factors. One is that the company founders successfully develop and communicate the company's global vision from the start. The other is ____.
the bringing of a good or service to several different foreign markets at the same time
40. All global new ventures share two common factors. One is the bringing of a good or service to several different foreign markets at the same time. The other is ____.
none of these
41. Starbucks is expanding its global operations into South America in spite the real probability of civil wars and terrorist activities in many of the continent's nations. As Starbucks expands into South America, it must deal with ____.
42. Starbucks is a chain that is rapidly expanding its global operation. As it expanded into South America, its research showed that Chileans on average drink only 150 cups of coffee annually, and people in Argentina only drink about half that amount. An average citizen of the United States drinks 345 cups annually. These differences in annual coffee consumption most likely reflect ____.
43. A news article on Latin America read, "Mexico is the closest Latin America gets to the U.S. both geographically and culturally." According to Hofstede, this means the Mexican culture ____.
has a masculine orientation
44. Which of the following types of global organization is most likely to suffer problems associated with being culture bound?
45. When McDonald's entered into an agreement with a French entrepreneur who wanted to own and operate a McDonald's fast-food restaurant in Paris, it saw the new restaurant as an opportunity. Unfortunately, the restaurant in Paris was not maintained at the cleanliness standards prescribed by McDonald's but at the cleanliness standards acceptable to the French. McDonald's brought legal action to have the restaurant closed. This example illustrates ____.
a problem with franchising in different cultures
46. A ____ is a strategic alliance in which two existing companies collaborate to form a third, independent company.
47. Which of the following forms of organizing a global business help companies to avoid tariff and nontariff barriers to entry of a given foreign market?
all of these
48. In Canada, General Motors and Suzuki have entered into a ____ to create CAMI Automotive. Suzuki management runs the plant, which makes GM's Geo cars. The agreement gives Suzuki access to GM dealers to sell its brand of vehicles.
49. Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. What method for organizing for global business has Ford used in this example?
wholly owned affiliate
50. The primary disadvantage of using wholly owned affiliates as the means of entering a foreign market is ____.
51. German chip manufacturer Infineon AG has joined with Motorola Inc. and Agere Systems Inc. to establish a new company to develop and license chip designs for cellphones. These three companies have created a ____.
52. Which of the following is a trend that has allowed companies to skip the phase model when going global?
quick reliable air travel
53. New companies with sales, employees, and financing in different countries that are founded with an active global strategy are called ____.
global new ventures
54. A country or region that has an attractive business climate for companies that want to go global has ____.
easy access to growing markets
55. A country or region that has an attractive business climate for companies that want to go global has ____.
an effective but cost-efficient place to build an office or manufacturing site
56. The most important factor used by a globalizing company for determining if a country or a region has an attractive business climate is ____.
easy access to growing markets
57. Which of the following factors helps a company determine the growth potential of a foreign market?
58. A cosmetics company that is considering entering the South American market would be especially interested in the discretionary income within that region. In other words, ____ would be a determining factor in its global strategy.
59. A U.S. company that operates cinemas wants to open a chain of movie theaters in Brazil. Which of the following factors should be considered when choosing an office/manufacturing location in the Brazilian market?
all of these
60. What are the two types of political risk that affect companies conducting global business?
political uncertainty and policy uncertainty
61. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing of cellular phones. Several mining companies recently moved their operations out of the region due to a bloody civil war resulting from a change in rulers. This is an example of how ____ can influence global business.
62. The Japanese government decreed that Japanese snow was different from all others and required that all snow equipment marketed in the country be made in Japan for safety reasons. Prior to this decree, several companies from the United States and Europe had marketed their snow equipment in Japan. The elimination of non-Japanese companies from the market is an example of how ____ can influence global business.
63. What are the strategies that can be used to minimize or adapt to the political risk inherent to global business?
control, avoidance, and cooperative strategies
64. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing of cellular phones. A company which mines that rare mineral decided to not invest in the country due to a bloody civil war resulting from a change in rulers. The mining company used a(n) ____.
65. Green Giant learned that it could not use the Jolly Green Giant character in parts of Asia where a green hat worn by a man signifies that he has an unfaithful wife. This is an example of a(n) ____ that influenced global marketing.
66. The ____ strategy of minimizing or adapting to the political risk inherent to global business makes use of joint ventures and collaborative contracts.
67. A firm using a ____ strategy to prevent or reduce political risks will lobby foreign governments or international trade agencies to change laws, regulations, or trade barriers that hurt their business in that country.
68. ____ is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of people from a particular country.
69. Hofstede's research has shown that there are ____.
five consistent dimensions of cultural differences across countries
70. According to Hofstede, when people in a culture are oriented to the present and seek immediate gratification, that culture is described as ____.
having a short term orientation
71. According to Hofstede's research on cultural dimensions, ____ cultures emphasize the importance of relationships, modesty, caring for the weak, and quality of life.
72. The term ____ is used by Hofstede to describe the degree to which people in a country are uncomfortable with unstructured, ambiguous, unpredictable situations.
73. An expatriate is someone who ____.
lives or works outside of his or her own country
74. The purpose of predeparture language and cross-cultural training is to ____.
reduce the uncertainty for those becoming extrapriates
75. The evidence clearly shows that ____ is the most important factor in determining the success or failure of an international assignment.
how well an expatriate's spouse and family adjust to the foreign culture
76. ____ is used to assess how well managers and their families are likely to adjust to foreign cultures.
77. Refer to Coca-Cola. In its first attempt to enter the Indian market, Coke engaged in ____.
direct foriegn investment
78. Refer to Coca-Cola. As a multinational company, Coca-Cola ____.
owns business in more than one country
79. Refer to Coca-Cola. What kind of strategy has Coca-Cola used for its second entry into the Indian market?
80. Refer to Coca-Cola. One way Coca-Cola increased distribution of Coke was to enter into a ____ with a refrigerator manufacturer. In order to ensure that retailers had the proper refrigeration units, Coke provided the financing needed for the retailers to purchase them, and the refrigeration manufacturer gave deep price discounts.
81. Refer to Coca-Cola. The need for Coke to create a promotional strategy specifically targeted to the Indian market reflects a(n) ____.
awareness of cultural diffferences