MGT 365: Chapters: 1-4

Foreign portfolio investments

________ are purchases of foreign financial assets for a purpose other than control.

Which of the following is an example of FDI?

building a production plant in a foreign nation

If a Dutch pension fund purchases 1,000 shares of Sony's stock, the Dutch company has most likely ________.

Made a foreign portfolio investment

Kraft purchased all of the common stock of Cadbury PLC. This is an example of ________.

Foreign direct investment

Licensing

________ is a contractual arrangement in which a firm in one country allows the use of its intellectual property by a firm in a second country in return for a royalty payment.

Walt Disney permits a German clothing manufacturer to market children's pajamas embroidered with Mickey Mouse in return for a percentage of company sales. This is an example of ________.

Licensing

Any organization that engages in cross-border commercial transactions with individuals, private firms, and/or public sector organizations is a(n) ________.

International business

Which of the following is a common activity of MNCs?

Buying resources in various countries

Globalization

Integration of markets, nations, technologies

• Enables individuals, corporations, nations toaccess resources/products/services faster, farther& cheaper than ever befor

Causes of globalization

• Changes in the Political Environment

Collapse of European Communism, Cold War & the related

ideological differences

Policy changes in Latin America, China & India (Post

1990s

Export substitution

a growth and trade strategy where a country attempts to achieve economic growth by expanding its exports

Integration

similar technology (made the distance we have not matter) platforms, to integrate faster & more easily, trade, imports & exports, products of integration. Convergence in culture, people know adidas, apple is cool everywhere

Emerging Markets

-countries whose recent growth or prospects for future growth exceed that of traditional markets. Many companies are finding much of their sales and profit growth-

~Around 2 billion people

Growing consumer markets & GDP

Migration to cities, rising incomes

Infrastructure is less developed and burdened

China, India, Brazil etc

What is C.A.G.E?

C~ cultural distance

A ~administrative political distance

G~ geographic distance

E~economic/wealth distance

Why is the US dollar referred to as the invoicing currency?

The U.S. dollar serves as the invoicing currency—the currency in which the sale of goods and services is denominated—for about half of all international transactions and is an important component of foreign-currency reserves worldwide.

Why does the US attract flight capital?

Because of its political stability and military strength, the United States also attracts flight capital—money sent out of a politically or economically unstable country to one perceived as a safe haven. Citizens unsure of the value of their home country's currency often choose to keep their wealth in dollars.

Foreign direct investments

________ are investments made for the purpose of activity controlling property, assets, or companies located in host countries.

Mexico and Poland are examples of ________.

Emerging markets

Classification of nations by income level by the World Bank: What are high-income,

low-income, and middle-income nations?

High-income countries are those that enjoy annual per capita incomes of at least $12,055"

Middle-income countries have per capita incomes of more than $955 but less than $12,055.

Other countries in this category, such as Brazil, Costa Rica, and Mauritius, have been undergoing successful industrialization and economic growth and may be elevated to the high-income category by the end of this decade.

Lower-income countries, often called developing countries, have per capita incomes of $955 or less. This category includes some countries, such as Rwanda, whose economies are growing substantially because of external

What is the significance of World Bank Classification?

The World Bank's income classification aims to reflect a country's level of development, drawing on Atlas GNI per capita as a broadly available indicator of economic capacity.

Which industries does Taiwan more recently focus on? ( review page 40)

Taiwanese businesses more recently have focused on high-value-added industries such as electronics and automotive products. However, the businesses still need low-wage workers

Which of the following is considered a BRIC nation?

a. Britain

b. Russia

c. Indonesia

d. Chile

Russia

T/F Business transactions between parties from more than one country are known as international business.

True

T/F Selling products made in one's own country for use or resale in other countries is known as importing.

False

Selling products made in one's own country for use or resale in other countries is known as exporting.

T/F International licensing occurs when a firm in one country authorizes a firm in another country to use its operating systems, brand name, trademark, and logo in return for a royalty payment.

False

International franchising is a specialized form of international licensing, occurs when a firm in one country (the franchisor) authorizes a firm in a second country (the franchisee) to use its operating systems as well as its brand names, trademarks, and logos in return for a royalty payment.

Which of the following is the most likely reason that firms globalize?

Leveraging core competencies

Which of the following Asian countries have attracted foreign investment because of its proximity to China?

Hong Kong

Chaebol is an institutional characteristic of which nation?

S Korea

Keiretsu

large clusters of companies that dominated the Japanese economy between the 1950s and the early 2000s, characterized by cross-shareholding and long-term transactional relationships among their constituents, such as those between assemblers and suppliers.

Samsung, Hyundai, Daewoo Group, and LG are all examples of ________.

a. Chaebol

b. Keiretsu

c. Glasnost

d. Sogo shosha

a. Chaebol

The Korean term, chaebol, refers to ________.

a. A family-based conglomerate

b. Workplace harmony

c. An export trading company

d. Large families of interrelated companies

a. A family-based conglomerate

Since the later 1990s, many foreign companies in developed nations have established factories in Poland, sharing their knowledge in the process to Poland, an Eastern European nation. This has transformed its economy to a rapidly growing one. What does this mean from a national "resources" point of view?

technology transfer has provided the impulse for industrialization

Jeane, a resident of Germany purchases 1000 stocks of General Motors to increase her rate of return. This is an example of

Foreign Portfolio Investment (FPI)

Emerging nations are those based primarily the CAGE nations where GDP is growing at a pace lower than that of developed nations.

False

United States and China show differences in physical, communications, and transportation links. According to the "CAGE" model, this is captured in the:

geographic distance

Walmart purchases pickles from specialized traders in Mexico, repackages them and sells them to its domestic consumers. Which global business activity is Walmart engaging in?

importing

Due to the looming threat of war in Country X, several citizens of the affected nation sent their home-based investments out to Western nations, perceived as a safer retreat. The money sent out in this situation is called:

flight capital

Money sent out of a politically or economically unstable country to one perceived as a safe haven is known as protected capital.

False

Money sent out of a politically or economically unstable country to one perceived as a safe haven is known as flight capital.

Germany is home to many family owned enterprises called as:

mittelstand

The currency in which the sale of goods and services is denominated is the invoicing currency.

True

Indonesia is one of the "Four Tigers" considered so, because of its past association with tiger reserves

False

What are the "Four Asian Tigers"?

South Korea, Taiwan, Singapore, Hong Kong

Thailand, Malaysia, and Indonesia were all recipients of significant FDI during the 1980s and 1990s because they posed few trade barriers.

False

Thailand, Malaysia, and Indonesia were all recipients of significant FDI during the 1980s and 1990s because they posed______

low labor costs

The newly formed government of Country Y in Asia encourages economic growth by creating policies that are directed towards increasing exports of goods and services made in the nation. Broadly such policies are categorized as:

export promotion

A policy that attempts to stimulate development of local industry by discouraging imports through tariffs and nontariff barriers is called ________.

b. Import substitution

Import substitution policies: country attempts to stimulate the development of local industry by discouraging imports by high tariffs and non-tariff barrier

PFZ inc, a US based law firm recently launched a subsidiary in China. PFZ managers in China have noted the sometimes arbitrary rules and decisions implemented by its government authorities. Such legal inconsistency suggests that China likely has a system based on ________ law.

bureaucratic law

A policy that encourages economic growth through export expansion is called ________.

Export promotion

Civil Law

Law based on detailed codification of permissible and nonpermissible activities; world's most common form of legal system

In a civil law system, the judge takes on many of the tasks of the lawyers, determining, for example, the scope of evidence to be collected and presented to the court

Common law

________ is the foundation of the legal systems in the United Kingdom and its former colonies

including the United States, Canada, Australia, India, New Zealand, Hong Kong, Barbados, Saint Kitts and Nevis, and Malaysia. Common law is based on the cumulative wisdom of judges' decisions on individual cases through history. These cases create legal precedents, which other judges use to decide

Religious Law

is based on the officially established rules governing the faith and practice of a particular religion.

Middle Eastern Countries

Family-owned firms are often influential in countries in which legal systems are based on the Koran for exsmple

Statuary law

________ is law enacted by legislative action.

Bureaucratic law

the legal system in communist countries and in dictatorships

rules can be broken at the whim

China

A country restricting access to high-technology goods or withdrawing preferential tariff treatments is using ________.

sanctions

Sanctions

restraints against commerce with that country.

such as restricting access to high-technology goods, withdrawing preferential tariff treatment, boycotting the country's goods, and denying new loans.

Embargos

a comprehensive sanction against all commerce with a given country—may be imposed by countries acting in unison or alone.

For example, the United Nations embargoed all trade with Iraq after Iraq's 1990 invasion of Kuwait.

The government of Z has banned its aerospace companies from selling aircrafts to North Korea and Russia, because the government views aircrafts as........products

dual-use

Dual-use

products that may be used for both civilian and military purposes

Nationalization

they choose to transfer ownership of resources from the private to the public sector, a process known as nationalization"

When a company seeks to have a dispute heard in the court system most favorable to its own interests, the company is ________.

forum shopping

In view of an impending economic collapse, the government of Rwanda seized all assets from the private sector( such as MNCs) and transferred them to the public sector (to itself). This action is called:

Expropriation

Confiscation

When the host government offers no compensation, the transfer is called confiscation.

Privatization

The conversion of state-owned property to privately owned property is called privatization

the opposite of nationalization and creates opportunities for international businesses. "

Expropriation is best defined as the ________.

transference of ownership from private to public sector with compensation to private owners for their losses

Expropriation

When the host government compensates the private owners for their losses, the transfer is called

Walmart has recently opened a store in Namibia, where there are already a number of local open air stores selling grocery, clothing and household goods. Which of the following is the most likely negative effect of the Walmart opening?

failure of local stores

Which of the following questions is most relevant when resolving an international business dispute?

Which country's law applies?

When a company seeks to have a dispute heard in the court system most favorable to its own interests, the company is rejecting the principle of comity

False

When a company seeks to have a dispute heard in the court system most favorable to its own interests, the company is rejecting

forum shopping

The US legal system is based on civil law while France is based on common law.

False

The government of Russia is known to bring about arbitrary changes in laws, environmental standards, tax codes that affect the companies in that nation. The corresponding risk is called:

exchange rate risk

Technological transfer

the transmittal of technology from one country to another.

What factors influence the willingness of a MNC to transfer its technology to an emerging nation?

The value of intellectual property can quickly be damaged unless countries enforce ownership rights of firms. Countries that provide weak protection for intellectual property are less likely to attract technology-intensive foreign investments. Weak intellectual property protection also discourages local firms from developing intellectual property

Political risk

are any changes in the political environment that may adversely affect the value of a firm's business activities.

transfer risk

In which the government interferes with a firm's ability to shift funds into and out of the country

ownership risk

________ is the risk associated with the potential for the firm's property to be confiscated or expropriated.

operating risk

in which the ongoing operations of a firm or the safety of its employees are threatened through changes in laws, environmental standards, tax codes, terrorism, armed insurrection, and so forth

OPIC (Overseas Private Investment Corporation)

insures U.S. overseas investments against nationalization, insurrections or revolutions, and foreign-exchange inconvertibility.

The Multilateral Investment Guarantee Agency (MIGA),

a subsidiary of the World Bank, provides similar insurance against political risks.

The war in Ukraine has impacted all firms in the nation. It is an example of micropolitical risk

False

Saudi Arabia's nationalization of the oil industry in the 1970s is an example of

micropolitical risk

Fillis Software is a U.S. firm with operations in Yemen. Fillis has learned that it may face expropriation. What would be the most likely result of such actions?

loss of future profits

The Multilateral Investment Guarantee Agency provides --------- to firms to protect against political risk.

insurance

What is a MNC?

Multi-National Corporation

businesses that operate in more than one country, they make extensive foreign directive investments (FDI) Investments made by entities in one country to operate & control assets in another

Businesses in ________ discourage nepotism while in ________ family ties are crucial to ensure the growth of a company.

Group of answer choices

the U.S.; China

Social stratification

social stratification. All societies categorize people to some extent on the basis of their birth, occupation, educational achievements, or other attributes.

Backtranslation

Firms can reduce the chances that they are sending the wrong message to their customers by using a technique

one person translates a document, then a second person translates the translated version back into the original language. This technique provides a check that the intended message is actually being sent, thus avoiding communication mistakes.

In which of the following countries is social mobility likely to be highest?

USA

The Japanese concept of wa encourages individual achievement as a way to achieve social harmony.

False

Spanish is the lingua franca of international business.

False

What is the lingua franca?

IT'S ENGLISH

As a result of British economic and military dominance in the nineteenth century and U.S. dominance since World War II, English has emerged as the predominant common language, or lingua franca, of international business.

Cultural clusters

comprises countries that share many cultural similarities, although differences do remain

Ex: nordic europe

denmark

finland

norway

sweden

BASED ON LOCATION

Quadro Tires is an MNE with facilities in Australia, Ireland, Canada, and the United States. Quadro is dealing with populations that are ..........in terms of language.

homogeneous

In which country does the attitude "time is money" prevail?

Canada

Which of the following countries is considered a low-context culture?

England

Chinese counterparts doing business for American companies in China encourage the presence of a lawyer during business dealings and are likely to view it as necessary.

False

In a collectivist society, changing jobs is most likely interpreted as ambition.

False

Patrick has been assigned a 6-month project in Brazil. He observes that Brazilian workers reporting to him accept his decision without any questioning or complaint. Such a culture is characterized by Hofstede as:

power respecting

Peter is working in Pakistan on a marketing campaign strategy for a new clothing brand. One of his tasks is to formulate a promotion campaign and he finds that most advertisements tend to be layered with different emotions than facts. Such a culture is categorized as:

Group of answer choices

high-context

________ is the unconscious use of one's own culture to help assess new surroundings.

Self-reference criterion