CHAPTER 4 – THE INTERNATIONAL ENVIRONMENT

41. Different levels of internationalization include

a) importing.
b) franchising.
c) joint ventures.
d) licensing.
e) All of these.

42. ________________ make(s) up part of the political-legal dimension of the international environment.
a) Flow of capital
b) Resources for inputs
c) Relocation of jobs
d) Tariffs and subsidies
e) Cross-cultural differences

43. The economic dimension of the international environment includes

a) resources used for inputs into a production process.
b) cross-cultural values.
c) the flow of money.
d) mobility of jobs.
e) quotas and subsidies.

44. The statement "All proper business dinner etiquette requires eating with a fork and knife" reflects
a) egali-centrism.
b) cultural adaptability.
c) ethnocentrism.
d) polycentrism.
e) egocentrism

45. Mainstream management approach to the international environment seek to

a) protect the environment.
b) protect domestic businesses.
c) promote social justice.
d) promote micro-financing.
e) None of these.

46. To prepare for her expatriate assignment in France, Geetha attended pre-departure seminars on how to
do business in France. Her company is applying a
a) Mainstream approach with ethnocentrism.
b) Mainstream approach with polycentrism.
c) Multistream approach with polycentrism.
d) Mulistream apporach with egali-centrism.
e) None of these.
47. A Multistream manager make it a high priority to __________________ in the international
environment.
a) gain easy access to low-cost inputs
b) gain access to new markets
c) develop mutually beneficial networks
d) achieve full control over operations
e) adapt to different cultures

48. A Multistream approach to the international environment means treating emerging economies
a) by nurturing them.
b) by creating rules and regulations for free trade.
c) in such a way as to find the best price for raw materials.
d) in such a way as to achieve low costs for waste disposal.
e) None of these.

49. The Multistream approach to the economic-technological dimension of the international environment
seeks to only
a) serve those who have the most needs.
b) share and learn about the most recent ideas and innovations.
c) increase production efficiency.
d) serve those who have the most needs, and share and learn about the most recent ideas and
innovations.
e) None of these.

50. A multinational company is one that derives at least ______ percent of its revenue from outside its
domestic headquarters.
a) 10
b) 25
c) 40
d) 55
e) 70
51. Multinational corporations make up __________ of the 100 largest corporations.
a) more than half
b) about half
c) approximately 25 percent
d) less than 25 percent
e) None of these

52. __________________ is the growing integration and interdependence of people and organizations from
different places around the world.
a) Polycentrism
b) Globalization
c) Egali-centrism
d) All of these
e) None of these

53. Mainstream managers assume that free trade will

a) improve everyone's well-being around the world.
b) increase the wealth of rich countries, while impoverishing the poorer ones.
c) decrease wealth for "third world" countries, while increasing global executives' compensation.
d) lead to peace and prosperity.
e) allow humanity to preserve the environment.
54. Johanssen traveled to many different places to bring back the best spices from around the world for his
restaurant. He is ________________________.
a) exporting
b) importing
c) bartering
d) counter-trading
e) franchising the spices

55. ______________ represent(s) a lower level of engagement in internationalization than

___________________.
a) Strategic alliances; exporting
b) Joint ventures; franchising
c) Franchising; importing
d) Licensing; foreign subsidiaries
e) Foreign subsidiaries; importing

56. _______________ represent(s) a higher level of engagement in internationalization than

_____________________.
a) Importing; franchising
b) Exporting; joint ventures
c) Joint ventures; licensing
d) Franchising; strategic alliances
e) Strategic alliances; foreign subsidiaries

57. When GM brings automobile components from its plants in Mexico for assembly in the United States,
the company is engaged in
a) exporting.
b) global outsourcing.
c) licensing.
d) franchising.
e) joint ventures.

58. The demand for toys in the United States enables Chinese producers to _____________ to a large
market.
a) export
b) import
c) license
d) franchise
e) None of these

59. _______________ and ________________ are different forms of exporting and importing.
a) Licensing; franchising
b) Foreign subsidiaries; greenfield ventures
c) Greenfield ventures; brownfield ventures
d) Counter-trading; licensing
e) Counter-trading; global outsourcing

60. Max Mode Inc. from the United Kingdom organized its global operations with domestic marketing and
design but manufactures and ships products from China while providing IT support services from
India. The company is engaged in
a) global outsourcing.
 b) counter-trading.
c) licensing.
d) franchising.
e) All of these.

61. When Tanzanian coffee producers export to Kenya, they can easily trade for textile products. This type
of international engagement is referred to as
a) global outsourcing.
b) licensing.
c) counter-trading.
d) strategic alliances.
e) joint ventures.

62. Permo Drive from Australia gave Dana Corporation of Toledo the intellectual property rights to
develop and produce a regenerative hybrid hydraulic mechanism. This is an example of
a) global outsourcing.
b) counter-trading.
c) licensing.
d) a foreign subsidiary.
e) a joint venture.

63. When a company like Starbucks sells its name, trademark, operating processes, and related
technologies to a buyer who will set up an identical operation in another country, the seller is
engaged in
a) a low level of internationalization with a foreign subsidiary.
b) a high level of internationalization with a joint venture.
c) a low level of internationalization with exporting.
d) a high level of internationalization with importing.
e) a low level of internationalization with franchising.

64. ____________________ entails significant risks, which include exposing a business's secrets, relying
on someone else to sustain the business's reputation, and creating unintended consequences.
a) Importing
b) Exporting
c) Franchising
d) Building a foreign subsidiary
e) Partnering in a strategic alliance

65. Ford's 33 percent ownership of Mazda is an example of a

a) foreign subsidiary.
b) greenfield venture.
c) maquiladora.
d) strategic alliance.
e) joint venture.

66. Suppose that L'Oreal from France formed a partnership with Parsons: The New School for Design in
New York City to develop a separate interactive online business, "Signature Styles," to enable people
to create their own unique looks. This international business venture would be
a) a joint venture.
b) a strategic greenfield.
c) a foreign subsidiary.
d) a form of global outsourcing.
 e) a form of counter-trading.
67. ___________ levels of internationalization offer companies ___________ control of operations and
profits.
a) Higher; greater
b) Higher; less
c) Lower; greater
d) Lower; less
e) None of these

68. Having a foreign subsidiary requires

a) greater knowledge of the foreign country and longer-term commitment than exporting or
importing requires.
b) more technological expertise and better service than exporting or importing requires.
c) the ability to trade with alternative products rather than using currency.
d) carefully crafted contracts to protect trade secrets.
e) patented technology to protect intellectual property rights.

69. The maquiladora region in Mexico is a special _______________ where international companies can
access lower wages while local people can access jobs that pay a higher rate than domestic wages.
a) importing zone
b) exporting zone
c) greenfield area
d) community of joint venture partners
e) tourism and hospitality site

70. Mainstream managers would approach the international sociocultural dimension of the environment
with either a(an) ________________ or a(an) ______________ approach.
a) ethnocentric; egali-centric
b) ethnocentric; polycentric
c) egali-centric; post-materialistic
d) post-materialistic; ethnocentric
e) polycentric; egali-centric

71. National culture consists of the ______________________________ of a sovereign nation's people.

a) behavioral patterns
b) shared values
c) common norms
d) knowledge and beliefs
e) All of these

72. When people use their own culture to understand and relate to people from other countries, the practice
is called ___________________.
a) egali-centrism
b) strategic partnering
c) applying a self-reference criterion
d) post-materialism
e) deference to authority

73. European explorers and the Native American Indians experienced significant differences in cultural
meaning about the value of ____________________.
a) fur
 b) land
c) coffee
d) weapons
e) fish

74. Three of the five dimensions of national culture that Hofstede identified are
a) individualism, materialism, and licensing.
b) materialism, time orientation, and polycentrism.
c) uncertainty avoidance, time orientation, and materialism.
d) time orientation, deference to the majority, and collectivism.
e) deference to the majority, time orientation, and licensing.

75. In a culture __________________, employees tend to be motivated by bonuses for achieving top sales
or awards of recognition, such as being named employee of the year.
a) with a long-term orientation
b) low in deference to authority
c) comfortable with uncertainty
d) high in quality of life
e) high in individualism

76. Cultures that adapt easily to team work where members of a group have a high level of loyalty tend to
be rated ____________________________.
a) low on individualism
b) high on materialism
c) low on quality of life
d) low on deference to authority
e) high on collectivism

77. Workplace rewards that focus on promotions, increased compensation, bonus systems, and recognition
for high performance would motivate people in cultures that are rated
a) high on deference to authority.
b) high on quality of life.
c) high on materialism.
d) low on uncertainty avoidance.
e) high on collectivism.

78. In a culture rated high on Hofstede's cultural dimension of the quality of life, employees tend to be
motivated by
a) meaningful work.
b) personal relationships.
c) collaborative work groups.
d) None of these.
e) All of these.

79. Mainstream management approaches are aligned with

a) low materialism and high individualism.
b) high quality of life and high deference to authority.
c) high individualism and high materialism.
d) low individualism and high materialism.
e) low uncertainty avoidance and high challenge to authority.
80. Multistream management approaches reflect _______________________.
a) high individualism and low materialism
b) low deference to authority and low quality of life
c) low individualism and high materialism
d) low materialism and low individualism
e) high uncertainty avoidance and high quality of life

81. Mainstream management is commonly associated with

a) a short-term time orientation.
b) a high tolerance for ambiguity.
c) a tendency to challenge authority.
d) All of these.
e) None of these.

82. Multistream management is closely associated with

a) collectivism.
b) low tolerance for ambiguity and change.
c) a long-term time orientation.
d) None of these.
e) All of these.

83. In cultures with a high deference to authority, employees are likely to _____________ people in higher-
ranking positions.
a) hesitate to offer an opinion that differs from that of
b) ask a lot of questions of
c) voice disagreement with
d) lobby with fellow workers to oppose
e) form unions to negotiate with

84. Jacqueline has healthy working relationships with her superior and often contributes to significant
decisions that her bosses are making. She feels free to voice a different opinion, which is an indicator
of ___________________.
a) high deference to authority
b) low deference to authority
c) a short-term time orientation
d) a long-term time orientation
e) low uncertainty avoidance

85. Predictable structures, systems, policies, and procedures are most effective for working with people
from cultures with
a) low uncertainty avoidance.
b) high uncertainty avoidance.
c) low individualism.
d) high individualism.
e) None of these.

86. Hans is an engineer who tends to work very well with entrepreneurial start-up businesses. He would
most likely adapt well to a culture that is
a) low in materialism.
 b) high in materialism.
c) high in uncertainty avoidance.
d) low in uncertainty avoidance.
e) characterized by a short-term time orientation.

87. The pricing of natural resources such as oil, gold, and copper is most strongly affected by
a) demand.
b) population.
c) supply.
d) demand and population.
e) demand and supply.

88. The forecast in the world market for a barrel of oil rising to $200 per barrel accounts for factors that
contribute to
a) low demand and low supply.
b) high demand and low supply.
c) high demand and high supply.
d) low demand and high supply.
e) an aging population of baby boomers.

89. As concern for the environment grows, Mainstream managers tend to locate operations in
a) cleaner communities.
b) areas with strict regulations against pollution.
c) lower-income countries with weak regulations against pollution.
d) the domestic headquarters region.
e) high-income countries.

90. Tariffs, quotas, employment regulations, workplace safety laws, and trade agreements are all part of the
a) sociocultural environment.
b) political-legal environment.
c) free trade agreement sector.
d) micro-economics of international business.
e) multilateral trade agreements.

91. The taxes imposed on imported goods and services are referred to as ________________ and create a
disadvantage for foreign competitors while providing an advantage for domestic producers.
a) quotas
b) subsidies
c) free trade discounts
d) free trade premiums
e) tariffs

92. LeanEx Inc. seeks to export small appliance to Poland but faces a limitation in terms of the quantity
allowed in per year. This is an example of a ______________ in international trade.
a) tariff
b) subsidy
c) free trade allocation
d) quota
e) production regulation
93. When a government provides payments in direct or indirect form to domestic businesses to help them
improve their competitive position in the global marketplace, the payments are known as
_______________.
a) tariffs
b) subsidies
c) quotas
d) foreign trade discounts
e) foreign trade premiums

94. NAFTA
a) is a trade agreement among the United States, Canada, and Mexico.
b) is a trade agreement among the United States, Canada, and Brazil.
c) stands for Norway, Austria, and Finland, Textile Association.
d) stands for North American Fisheries Trade Agreement.
e) stands for Northern Agreement for Trading with Asia.
Ans: a

95. The ____________ purpose is to increase the flow of trade among its member countries by negotiating
the lowering of tariffs and opening up domestic markets.
a) maquiladora's
b) WTO's
c) World Bank's
d) International Monetary Fund's
e) free trade zones'
Ans: b

96. The World Bank is owned by

a) almost 2000 multinational corporations.
b) the 20 richest people in the world.
c) about 200 countries.
d) the 100 largest banks in the world.
e) the U.S. Federal Reserve.
Ans: c

97. The flow of jobs, money, knowledge, and information around the world belongs to the
___________________ environment.
a) political-legal
b) economic-technological
c) sociocultural
d) natural
e) All of these
98. Multistream managers' commitment to considering different stakeholders' needs would favor
a) more hierarchical organizations.
b) more franchises and exporting.
c) more partnerships and networks.
d) more foreign subsidiaries and importing.
e) All of these.
99. Multistream managers would support micro-financing to provide banking services to
_______________ who are ignored by conventional financing institutions.
a) micro-entrepreneurs
b) nanotechnology business
c) research and development think tanks
d) pharmaceutical companies spinning off from a biotechnology business
e) owners of medium-sized businesses in developed countries

100. Multistream managers would seek to work with the sociocultural dimension of the international
environment by
a) improving different stakeholders' overall well-being.
b) maximizing the capital asset base of shareholders.
c) increasing consumption to grow a local market.
d) promoting recycling to build new international markets.
e) creating new markets with new technologies for aging baby boomers who have retirement wealth
to spend.

101. ________________ seeks to develop new practices by interacting and learning from different cultures.
a) Ethnocentrism
b) Polycentrism
c) Egali-centrism
d) Hypercentrism
e) Sociocentrism

102. A Mutlistream management approach to the natural environment would support _______________ for
organizational activities that damage the environment, while reducing them for environmentally
sustainable practices.
a) free trade discounts
b) green taxes
c) quotas
d) free trade zones
e) special economic development areas

103. A Multistream manager's approach to the political-legal environment reflects the conviction that
____________________ is a better predictor of life satisfaction than GDP.
a) post-materialism
b) egali-centrism
c) post-individualism
d) ethnocentrism
e) GNP

104. The Global Compact's mission is to address the needs of the ________________ and facilitate
problem solving among different _________________.
a) poorest people; stakeholder groups
b) healthiest population; shareholders
c) free trade members; members with trade disputes
d) underdeveloped countries; developed and underdeveloped countries
e) lowest-income groups; non-government organizations
105. Multistream managers seek to facilitate the flow of knowledge and ideas that address the needs of
stakeholders found
a) in high-income and low-income countries.
b) only in low-income countries.
c) mainly in high-income countries.
d) in free trade zones of low-income countries.
e) in none of these.

Essays

126. Give examples of free trade agreements and how they facilitate globalization.
Ans: GATT, the WTO, and NAFTA are examples of free trade agreements. The largest free trade
agreement is the WTO with over 150 member countries; it replaced the General Agreement on
Tariffs and Trade. The purpose of the WTO is to facilitate the negotiation process for reducing
barriers due to subsidies, quotas, and tariffs. NAFTA is a free trade agreement among Canada, the
United States, and Mexico that focuses on reducing tariff and nontariff barriers. It creates a market
of over 400 million consumers with over $600 billion in economic activity. As companies take
advantage of these free trade agreements, more information, jobs, and people flow back and forth
between the countries involved.
127. Compare and contrast the Mainstream and Multistream approaches to the international environment.
Ans: Mainstream and Multistream managers strive for similar goals in terms of financial gain and
gaining a competitive advantage in the global marketplace. Mainstream managers would use either
an ethnocentric or polycentric approach to managing the sociocultural dimension; seek the cheapest
raw materials or inputs into the company; strive to protect their domestic base while advocating for
free trade with other countries; and lower costs with cheap labor and/or efficient production
processes. In contrast, Multistream managers look beyond financial goals and strive to address
large, complex problems facing humanity and the natural environment. Multistream managers would
use an egali-centric approach to managing, strive for sustainable development in the natural
dimension, advocate for fair trade, and attempt to assist those in greatest need.

128. Use an example to discuss the different levels of internationalization.

Ans: The list from lowest level to highest level of internationalization: importing or exporting,
licensing/franchising, strategic alliances/joint ventures, and foreign subsidiaries. The Spoke and
Ride Corporation in the United States imports wheels from China for assembling its bicycles in
Mexico. The completed bicycles are exported to different South American markets. The company can
sell to agents and distributors in different South American markets. This would be a low level of
internationalization. A higher degree of internationalization is involved in licensing and franchising.
The company can set up a chain of retail outlets to sell and repair bicycles in different parts of
Canada and the United States; referred to as franchises, these outlets share the parent company's
name, retail concept store, and intellectual property. Alternatively, Spoke and Ride could also license
the blueprints for building and assembling the bicycles in Peru. Such selling of intellectual property
would probably entail a licensing arrangement. A higher level of internationalization is represented
by forming strategic alliances or joint ventures. If Spoke and Ride joins with Ford or General Motors
in a marketing campaign for selling mountain bikes with SUVs or crossover vehicles in South Africa,
the company can help promote a shared image with the auto firm for outdoor- and sports-oriented
individuals. Both partners can gain from shared profits as well as diminished risk. For the highest
level of internationalization, the company could set up a whole assembly plant in Thailand. The
managers would have to have a higher level of knowledge about the country and its culture, laws and
regulations, and economic system.

129. What is the difference between global outsourcing and counter-trade?

Ans: Global outsourcing and counter-trade are variations on importing and exporting. But global
outsourcing involves relocating organizational functions to an overseas location. There is a higher
 level of internationalization than the arm's-length sales involved in importing or exporting goods and
services. The vendor for outsourcing almost acts as a subunit of an organization. Counter-trading is
a significant portion of world trade. Instead of buying and selling goods and services with financial
resources, the company may receive a different kind of good or service in return. For example,
computers might be sent to Russia, and in return the seller might receive oil that could be resold in a
different market for cash.

130. Explain how individualism and materialism can impact global managers.
Ans: Individualism focuses on behaviors, attitudes, and beliefs that serve the self-interests of
individual people. People who are highly individualistic want rewards and compensation for
themselves. People low on individualism are also known as collectivists. Being singled out for praise
may make them very uncomfortable. Collectivism focuses more on the interests of the group.
Managers can launch teams more easily in a collectivist culture. Materialism places a high value on
tangible and visible goods. Managers can motivate people who are high on materialism with
promotions, raises, and public acknowledgment. People who are less materialistic place a higher
value on relationships and the welfare of others. To motivate employees low on materialism,
managers can, for example, provide time and space for social interactions.