MGMT338, International Business, Test #1, June 22, 2015

 There are six pages of questions so be sure to answer all the questions.  Be sure to read each question carefully.  Be sure you understand what the question is asking.  Answer only the questions ask, but in a thorough manner.  The questions are graded on the quality of the content not the length of the answer. 

I. (6 pts) Leslie Igles is being sent to Guatemala as the new manager of a local subsidiary of a U.S. firm. She has a participatory management style and is known for her ability to relate to the workers by occasionally stepping in and working along side of them. Answer the following True and False questions using Hofstede’s Five Dimensions.

T   F  1. This management style will work well with Guatemala’s Power Distance rating.

T   F  2. Uncertainty Avoidance levels in Guatemala will make it difficult for Leslie to make changes.

T   F  3. The Individualism level in Guatemala is higher than in Sweden.

II. (57 pts) Select the best answer.

1.  The major globalization drivers include all of the following except:

            A)  Competitive

            B)  Social

            C)  Technological

            D)  Market

            E)   None. All of the above are major kinds of globalization drivers

2.   Foreign Direct Investment

            A)  is the same as Portfolio Investment.

            B)  involves management participation as does Portfolio Investment.

            C)  from developing nations substantially increased from 1990 to 2009.

            D)  has steadily increased since 2000.

            E)   (B) and (D) above.

3. According to the theory of comparative advantage,

            A)  a nation needs to have an absolute advantage in at least one good to gain from trade.

            B)  nations can gain from trade if they are not equally efficient in producing two goods.

            C)  a nation should produce the goods where its disadvantage is the greatest.

            D)  only (B) and (C) above.

            E)   only (A) and (B) above

4.  The international business manager can choose to: 
A. transfer a management practice intact.
B. transfer and adjust a management practice.
C. not transfer a management practice at all.
D. All of the above
E. only (A) and (B) above.

5. From comparisons of income distribution studies over time, it appears that in early stages of development:

            A)  the inequality in income between rich and poor nations increases when purchasing power parity data is used.

            B)  income inequality has narrowed from globalization in most developing nations.

            C)  the income inequality in China has widened.

            D)  All of the above.

            E)   only (B) and (C)  above

6. The percentage of the population living in urban areas is:

            A)  increasing in high-income nations, but decreasing in low- and middle-income nations.

            B)  decreasing everywhere.

            C)  increasing in low- and middle-income nations, but decreasing in high-income nations.

            D)  becoming younger because older people retire to rural areas.

            E) None of the above

7. An organization with multicountry affiliates, each of which formulates its own business strategy based on perceived market differences is a

(A) international company

(B) multidomestic company

(C) global company

(D) only (B) and (C) above

(E) only (A) and (B) above

8. According to Table 2.1, the following country (ies) is (are) in the top five in all four categories:

A. China

B. Japan

C. Germany

D. all of the above

E. only (A) and (C) above

9.  According to proponents of the globalization of trade and investment, 
A. globalization has produced uneven results across nations and people.
B. globalization has had harmful effects on labor and labor standards.
C. globalization has contributed to a decline in environmental and health conditions.
D. all of the above.

E. None of the above

10.  Slightly more than half of the exports from developing nations go to developed nations and 
A. this proportion has been decreasing over the past 40 years.
B. over 70 percent of exports from developed economies go to other industrialized nations.
C. the portion of world trade accounted for by members of regional trade groups increased from 1980 to 2011.
D. all of the above
E.  only (A) and (B) above

11.  Global Strategic Planning is 
A. the way firms make choices about acquiring and using scarce resources.
B. the process by which an organization determines where it is going in the future.
C. an assessment conducted on the chain of interlinked activities of an organization.
D. only (B) and (C) above
E. None of the above.

12.  A Balance of Payment trade deficit 

A. could cause a country to implement restrictive monetary policies.
B. could cause a country to implement restrictive fiscal policies.
C. may affect a manager’s choice of strategic risks to take.
D. All of the above.
E. only (A) and (C) above.

13.  __________ is/are straining the social security systems of Japan and other industrialized nations. 
A. An aging population
B. The fact that retirees are living longer
C. The fact that a smaller percent of the population is working
D. All of the above.
E. only (A) and (B) above

14. Anti-trust law

            A. in the U.S. has per se violations where no harm has to be proven.

B.  in the EU and the U.S. the focus of anti-trust law is on the impact on consumers.

            C. in the U.S. applies to Canadian firms in their business activity in the U.S.

            D. all of the above

            E. only (A) and (C) above

15. Intellectual Property Laws

            A. vary from country to country.

            B. are uniform throughout the world.

            C. in most nations do protect trade secrets.

            D. only (A) and (C) above

            E. only (B) and (C) above

16. The following would be considered a positive political force to a business:

            A. Government ownership of businesses

            B. Nationalism

            C. Privatization

            D. all of the above

            E. only (A) and (B) above

17. Inflation makes international business management more difficult because:

            A)  interest rates go up.

            B)  capital raising and expenditure planning are more difficult.

            C)  inflation is at different rates in different countries.

            D)  all of the above.

            E)  only (A) and (C) above

18.   Under currency exchange controls,

            A)  the currency’s value is arbitrarily fixed by the government and not market forces.

            B)  the currency’s value is set at a rate higher than its value in the free market.

            C)  the currency is freely convertible in the market.

            D)  only (A) and (B) above

            E)   None of the above

19.  When an international contract contains an arbitration clause, the parties can seek arbitration through the:

            A)  International Court of Arbitration of the International Chamber of Commerce in Paris.

            B)  WIPO Arbitration and Mediation Center.

            C)  the International Court of Justice in The Hague

            D)   only (A) and (B) above

            E)   any of the above is appropriate.

III. (36 pts)

T    F   1.  Globalization may produce uneven results across nations and people. 

T    F   2.   Transnational corporations account for approximately 25 percent of total global output and nearly 80 percent of world trade. 

T   F    3. A firm’s size may at times give it bargaining power with the government of a country even though it must comply with the country’s laws.

T   F   4. Both ThinkPad and Chinet are brands owned by non-US firms.

T   F   5. US exports have decreased as US foreign direct investment has increased.

T   F   6. Small firms (those with fewer than 500 employees) account for 97% of the dollar value of US merchandise exports.

T   F   7.  The magnitude of international trade and how it has grown are reflected in that one-fourth of everything grown or made in the world is now exported. 

T   F   8.  Since WWII, economic integration has failed, largely because of nationalism. 

T   F   9.  Sustainable business is any business that potentially can operate at a profit                                in a particular country based upon the information acquired in a CRA.

T   F   10. When you see that it costs 1.77 Swiss francs to buy one US dollar but only

 .70 of a British pound, it does not mean that the British pound is a weaker

 currency than the Swiss franc.

T   F   11.  Countries that levy value-added taxes are permitted by WTO rules to                                      

                        rebate them to exporters.

T   F    12.  Britain’s former Prime Minister, Blair, pioneered what 

                        became a worldwide movement to privatize government activities.

T   F   13.  A choice of laws provision is used in international contracts to indicate                         which court will hear the case.

T   F   14. Management has no control or influence over external forces (uncontrollable forces).

T   F   15. Examining a problem in another culture using one’s own cultural values frequently leads to bad decision making.

T   F   16. Even though there has been a growth in regional trade organizations, there has been a decrease in regional trade since the creation of the WTO.

T  F  17.  All outsourcing involves transferring jobs to a foreign country. 

T  F  18.  The only competitive strategy that has proven to be successful for international firms is the global strategy.

IV. (28 pts) Select only four of the five choices below and explain what each is and what role each plays in international trade:

a. EU and the WTO

b. Climate and the two components of culture (page 94)

c. Intellectual property and enforcement of intellectual property rights internationally(You can use the videos from week three to answer this). 

d. From the video from week one discuss Karma as it relates to international business AND from the video for week three discuss why there are language issues even though English is the native language of a potential foreign market. 

e. Country Risk Assessment in a country and Purchase Power Parity.

V. (9 pts)  If the exchange rate of the dollar and the Euro goes from one Euro equals $1.20 cents in 2014 to one Euro equals $1.11 in 2015, has the dollar strengthened or weakened and why?   If this happens, what is the impact on importers to the U.S. from the EU and on exporters from the U.S. to the EU? 

VI. (14 pts)  Name and explain the concept of tariff barriers and name and explain one reason countries maintain trade barriers, such as tariffs, and state whether or not this reason is justified and why or why not.  What is the impact of these barriers on the efficient allocation of a country’s resources?   What is the impact on the consumers that purchase the items to which the barriers apply?

Test is attached, book for reference

Ball, Donald A. “Natural Resources and Enviornmental Sustainability.”International Business: The Challenge of Global Competition. 13th ed. New

York: McGraw-Hill/Irwin, 2013. Print.