Incoterms 2010 and International Business - Daniels - 15th Edition - Quiz - Chapter 13

Incoterms 2010 and International Business - 101

International Business: Environments and Operations, 15e (Daniels et al.)

Incoterms 2010 and International Business - Daniels - 15th Edition - Quiz - Chapter 13

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Incoterms 2010 and International Business - Daniels - 15th Edition - Quiz - Chapter 13 

International Business: Environments and Operations, 15e (Daniels et al.)
Chapter 13 Country Evaluation and Selection

1) Comparing countries in international business is LEAST useful for determining the ________.
A) best location for sales and production
B) sequence of entering different countries
C) amount of resources to allocate in each country
D) selection of which managers to send to which countries
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 1
AACSB: Application of knowledge

2) International managers most likely need to understand how to evaluate international geographic alternatives because ________.
A) they usually have a surplus of resources and need to take advantage of all opportunities
B) many regional trading groups prohibit companies from outside of the trading group from manufacturing in more than one member country
C) the commitment of resources to one locale may require forgoing projects in other locales
D) decreased worldwide transportation costs and increased trade liberalization now allow companies to serve worldwide markets from a single production location
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 1
AACSB: Analytical thinking

3) Executives at Wilson Enterprises need to determine how to leverage and improve the firm's existing competencies on a global basis. What are the two most basic questions that they must answer?
A) Which markets should we serve and where should production be located to serve those markets?
B) What are the short-term competitive advantages of the project and what is the return on investment?
C) What is the total investment required and what are the managerial resources needed to supervise the investment?
D) What is the availability of land and what is the cost of labor?
Answer: A
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 1
AACSB: Application of knowledge
4) A company's overall geographic strategy should be flexible enough to ________.
A) implement concentration strategies instead of diversification strategies
B) respond to new opportunities and withdraw from less profitable ones
C) import from anywhere in the world to a single production location
D) export anywhere in the world from a single production location
Answer: B
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 1
AACSB: Analytical thinking

5) Elison Enterprises is planning international geographic expansion. A manager at Elison has been given the task of scanning for locations primarily to ________.
A) reduce the number of options available to a manageable number for further detailed analysis
B) assure the compatibility between the mode of corporate operation and the country
C) assure that all countries within a region have similar investment climates
D) decide whether to use a concentration or a diversification strategy
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 2
AACSB: Application of knowledge

6) Which of the following most accurately compares the techniques of scanning versus detailed analysis of countries?
A) Scanning is used for planning and detailed analysis is used for control.
B) Detailed analysis is used to consider countries overlooked in the scanning process.
C) Scanning considers a large number of countries so that only the most promising ones undergo a detailed analysis.
D) Scanning compares one country to another, whereas detailed analysis compares regions within a single country.
Answer: C
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Analytical thinking

7) Opal Computers is considering international production expansion. After scanning to decide on a few countries to consider more closely, Opal managers will most likely need to ________.
A) identify firms with which to form joint ventures
B) add some more countries for closer consideration
C) travel to the locations to analyze and collect specific data
D) make final decisions by expanding in locations near their rivals
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Analytical thinking
8) Escalation of commitment is best described as the ________.
A) strategy of first entering a country on a small scale
B) process of entering a country because "everyone else is going there"
C) expectation of a higher return in more politically risky environments
D) increased likelihood of investing in a country because of having spent considerable time and money in examining it
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Application of knowledge

9) Sales expansion is probably the most important variable in determining international location decisions. This statement is most likely based on the assumption that ________.
A) consumer demand exceeds supply
B) increased sales will lead to more profits
C) the company will have a first-mover advantage
D) raw materials are available in the country targeted for sales
Answer: B
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

10) Dawson Manufacturing produces and sells DVD players and is planning to expand sales internationally. Dawson has narrowed down the list of potential countries to India and Guatemala. A Dawson manager has the task of obtaining data regarding the number of DVD players sold annually in India and Guatemala. If unable to locate this information, she might most likely estimate the sales potential of these two countries by ________.
A) determining average wages
B) calculating future inflation rates
C) reviewing the countries' dependence on steel imports
D) examining the sales history of flat-screen televisions
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 3
AACSB: Application of knowledge
11) Gucci, a maker of luxury fashion and leather goods, plans to expand its sales market. The firm needs to compare countries for the market potential of its products. Which of the following is the best indicator for Gucci to use?
A) per capita income in each country
B) population size of each country
C) the number of millionaires in each country
D) gross domestic product for each country
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 3
AACSB: Analytical thinking

12) When examining economic and demographic variables to compare countries' sales potential for your product, you should also consider all the following EXCEPT which one?
A) If countries depend heavily on the import of raw materials, what is the price of elasticity for the demand?
B) Consumers in some countries may more conveniently substitute certain products than consumers in some other countries.
C) Consumers in developing countries may leapfrog technologies by first purchasing the latest products.
D) Trading blocs may enhance sales potential above what is indicated in individual country figures.
Answer: A
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 3
AACSB: Application of knowledge

13) Which of the following is most likely a true statement about companies' acquisition of resources/assets abroad?
A) Regardless of industry, cheap labor is the most sought after resource.
B) Resource availability limits a firm's production location choices.
C) Regardless of industry, raw materials are the most sought after resource.
D) Risks are higher for resource-seeking than for sales-seeking foreign operations.
Answer: B
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking
14) The ability to compare production costs among countries in an effort to determine where to locate production is significantly hampered by all of the following EXCEPT ________.
A) the number of ways the same product can be made
B) restrictions on the international flow of data
C) the ways that laws may be enforced
D) future costs from exchange rate changes
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

15) In which of the following situations would tax rate differences among countries be most important for deciding where to place an investment?
A) Companies find advantages in being located near specialized private and public institutions.
B) Companies must compare the benefits of labor- versus capital-intensive production.
C) Companies want to serve an entire region within a regional trading bloc.
D) Companies must deal with difficult start-up regulations.
Answer: C
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

16) Labor cost advantages gained by moving into a country with low wages may be short-lived because ________.
A) transport costs go up to cancel out the cost savings
B) tax increases cancel out all labor cost differentials
C) rivals adopt capital-intensive production methods
D) competitors follow leaders into low-wage areas
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Reflective thinking

17) Which of the following statements is NOT true about risk as it affects companies' choice of locations for foreign operations?
A) Companies and their managers differ in their perception of what is risky.
B) One company's risk may be another company's opportunity.
C) There are means to reduce risk other than avoiding locations.
D) Companies choose the cheapest location regardless of risks.
Answer: D
Diff: 3
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Concept
Objective: 3
AACSB: Analytical thinking
18) A company's operations are most likely to be taken over by a host government when ________.
A) the operations are relatively small and, thus, unlikely to incur the wrath of the company's home government
B) the operations are substantial and have a widespread effect on the country because of the company's size
C) the host country becomes involved in a regional war
D) the firm produces discretionary rather than essential products
Answer: B
Diff: 3
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Concept
Objective: 3
AACSB: Analytical thinking

19) In terms of political risk, it is most accurate to state that high risk ________.
A) affects all geographic regions of a country equally
B) affects all foreign companies in the same manner
C) if avoided, may lead to higher competitive risk
D) triggers government turnovers
Answer: C
Diff: 2
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Concept
Objective: 3
AACSB: Analytical thinking

20) Fidelity Manufacturing is considering expanding its operations into the Philippines. A manager at Fidelity has the task of predicting political risk in the Philippines. Which of the following approaches should the manager LEAST use to accomplish the task?
A) analyzing the market share of competitors in the country
B) analyzing the country's past political patterns and trends
C) seeking and analyzing opinions of influential people in the country
D) examining social and economic conditions within the country
Answer: A
Diff: 3
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Application
Objective: 3
AACSB: Analytical thinking
21) The concept of liquidity preference in international operations refers to ________.
A) a company's willingness to accept a lower rate of return on investments in countries where it can more easily sell them and convert the proceeds at a favorable rate
B) a company's willingness to accept lower rates of return in poor countries that really need the investments
C) management's need to maintain sufficient funds, preferably in local currency, in each country of operation to ensure meeting daily cash needs
D) investors' preference for foreign stocks over foreign bonds because of the larger market for them
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

22) Risks to companies from natural disasters and communicable diseases are ________.
A) evenly distributed around the world
B) more complicated today because of publicity
C) a minor issue to global firms because of insurance
D) most prevalent in the poorest countries of the world
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Diverse and multicultural work environments

23) U.S. companies generally put earlier and more sales-seeking emphasis on countries ________.
A) with the largest economies
B) with regional trading blocs and high tariffs
C) where governments give operating incentives
D) where operating conditions seem similar to those at home
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

24) The lower survival rate of foreign companies in comparison to local firms for many years after they begin operations is known as ________.
A) ethnocentric reaction
B) polycentric reaction
C) liability of foreignness
D) most-favored-nation behavior
Answer: C
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

25) Which of the following best explains why U.S. firms typically place earlier and greater emphasis on expansion into Canada and the U.K.?
A) most significant sales opportunities
B) similarities in culture and legal systems
C) availability of necessary natural resources
D) government incentives for allied nations
Answer: B
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

26) Which of the following best explains Blockbuster's failed expansion into Germany?
A) laws limiting hours of operation
B) lack of public interest in films
C) inadequate tax incentives
D) communication problems
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

27) The crowding of a foreign market to prevent competitors' advantages is known as ________.
A) oligopolistic reaction
B) concentration strategy
C) liability of foreignness
D) a harvesting strategy
Answer: A
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

28) Companies are more likely to gain advantages by locating near competitors for all the following reasons EXCEPT to ________.
A) take advantage of competitors' research to pick an ideal location
B) attract multiple suppliers and personnel with specialized skills
C) agree with competitors on production limitations
D) attract buyers who want to compare suppliers
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking
29) An example of a first-mover advantage in international operations is ________.
A) gaining economies of scale at a lower output level than competitors
B) increasing sales response functions and customer service
C) using a small country for market tests prior to entering a large country
D) lining up the best suppliers and distributors before competitors enter the market
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

30) Which of the following describes a company's strategy of moving first to those countries where local competitors are most likely to catch up to the firm's innovative advantage?
A) lead country strategy
B) imitation lag strategy
C) oligopolistic reaction strategy
D) liability of foreignness strategy
Answer: B
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

31) A manager has the task of collecting and analyzing data that will help the firm decide where to locate its international operations. Which of the following best describes how the manager should handle this task?
A) conduct extensive research, regardless of the expense, in order to avoid costly mistakes
B) compare the costs of data collection with the probable payoff for the firm in order to budget and schedule the collection
C) continue data gathering until all data have been collected, regardless of how long this takes
D) focus all data collection on governmental resources because they have the highest reliability
Answer: B
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 4
AACSB: Analytical thinking
32) Which of the following is the LEAST likely reason for inaccuracies in published governmental data?
A) translation errors from the host country language
B) limitations of government resources and finances
C) purposeful publication of misleading information
D) false information provided to data collectors
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 4
AACSB: Reflective thinking

33) Which of the following is the LEAST likely reason that inaccuracies appear in published information about countries?
A) inclusion of both legal and illegal economic activities
B) inclusion of both market and non-market economic activities
C) poor methodology used in data collection
D) use of different translation software
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 4
AACSB: Reflective thinking

34) Which of the following is generally the most costly information source for companies?
A) individualized reports
B) reports from international agencies
C) reports from government agencies
D) published reports by accounting firms
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 4
AACSB: Reflective thinking

35) Top executives at Jordan, a U.S. consulting firm, are debating whether or not to expand into a country with a great deal of violence by staffing mostly with U.S. personnel. A vice president argues that Jordan should forego sending its employees there because of the high risk for them of kidnappings in the region. Which of the following statements best supports the vice president's position?
A) There is a high correlation between violence and life-threatening natural disasters.
B) Violence is a harbinger of additional risks that affect operations negatively.
C) Local personnel are immune from violence and are capable of filling positions.
D) The ability to evacuate people when necessary is much slower than it was in the past.
Answer: B
Diff: 3
Learning Outcome: Discuss the role of ethics and social responsibility in international business
Skill: Critical Thinking
Objective: 4
AACSB: Analytical thinking
36) Top executives at Jordan, a U.S. consulting firm, are debating whether or not to expand operations into a country with a great deal of violence by staffing mostly with U.S. personnel. A vice president argues that Jordan should send its employees there. Which of the following statements LEAST supports the vice president's position?
A) Jordan can evacuate personnel more quickly than in earlier eras in case of a real emergency.
B) It is hard to identify countries without a possibility for violence.
C) Operating costs are lower in violent areas.
D) Jordan's industry does not allow the firm the luxury of avoiding high risk locations.
Answer: C
Diff: 3
Learning Outcome: Discuss the role of ethics and social responsibility in international business
Skill: Critical Thinking
Objective: 4
AACSB: Analytical thinking

37) Grids are a useful method of comparing countries for international business expansion because they ________.
A) generally show how countries will perform in the future
B) show risk on one axis and opportunity on another
C) set minimum scores for proceeding further
D) highlight first-mover advantages
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Application of knowledge

38) A manager needs to prepare a grid to compare countries for location of the firm's international operations. It would be most useful for the manager to ________.
A) prepare an opportunity analysis in-house, but out-source the risk analysis
B) have agents within each country supply governmental data
C) prepare the risk analysis in-house, but out-source the opportunity analysis
D) use a team made up of people from different functions within the company
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 5
AACSB: Analytical thinking
39) Which of the following best describes the purpose of using of an opportunity-risk matrix for comparing countries?
A) narrow alternatives so decision makers can make a detailed analysis of the strongest candidates
B) eliminate countries that have specific unacceptable conditions
C) determine whether to use a concentration versus diversification strategy for international expansion
D) estimate where competitors are most likely to globalize
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Analytical thinking

40) The major use of the matrix as a tool in international location strategy is to ________.
A) pinpoint acceptable and unacceptable characteristics of countries
B) indicate the relative placement of countries in terms of attributes
C) rank countries on the basis of expected investment return
D) show the degree of certainty for projected returns
Answer: B
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Application of knowledge

41) In a concentration strategy of foreign expansion, a company would go to ________.
A) many countries very rapidly, and then build up slowly in each
B) a foreign country with one product and not sell other products in that country until a target market share is reached
C) a reporting system that measures performance on a regional rather than a country-by-country basis
D) one or a few foreign countries and build a strong involvement there before going to other countries
Answer: D
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Application of knowledge
42) In a diversification strategy for international expansion, a company would move ________.
A) rapidly into many foreign countries, and then gradually increase its presence in those countries
B) rapidly into a few foreign countries with many of its products and most of its resources
C) into one foreign country and fully expand its product lines in that country before moving to another country
D) quickly into a regional foreign market but build up its resources in only a few of the countries in the region
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Analytical thinking

43) A company should probably use a concentration strategy for international expansion when there are ________.
A) high needs for product adaptation and low growth in each market
B) short competitive lead times and low spillover effects
C) high growth rate and long competitive lead times
D) low sales stability and short competitive lead times
Answer: C
Diff: 2
Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
Skill: Application
Objective: 5
AACSB: Analytical thinking

44) The decision-making process for a company's reinvestment choices is often different from those for new investment choices because ________.
A) internal rate of return and other financial measurement criteria are more difficult to compile and analyze on existing operations, given currency translation distortions
B) failure to support an existing investment may jeopardize the firm's operations and competitiveness in that country
C) most of the net value of foreign investment comes from new international capital transfers rather than from reinvestment of earnings abroad
D) corporate management feels that country managers are best able to make divestment decisions
Answer: B
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Reflective thinking
45) Which of the following is NOT true about the harvesting or divestment of foreign operations?
A) One of the motives is to use resources where the performance prospects are better.
B) Companies can harvest or divest by selling existing facilities.
C) Closing a facility can be difficult because of governmental performance contracts.
D) Companies have tended to divest too soon, rather than working to improve performance.
Answer: D
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Application of knowledge

46) Which of the following best explains why foreign subsidiary managers are often reluctant to propose divestments in the countries where they are working?
A) They are afraid of proposing the elimination of their jobs.
B) They are usually poorly trained in how to sell units or how to close them down.
C) They are too nationalistic to examine political risk objectively.
D) Many are in countries where the cultural attribute of power-distance is very high.
Answer: A
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Application of knowledge

47) The origin of investment proposals differs from the origin of divestment proposals in that the divestment proposals are more likely to come from ________.
A) subsidiary management
B) outside the organization
C) higher up in the organization
D) line personnel as opposed to staff personnel
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Reflective thinking

48) A go/no-go decision means ________.
A) an individual project decision is based on whether the project meets threshold criteria
B) projects are ranked and approved from the top of the list down until available resources are exhausted
C) management reviews existing information and decides whether additional individualized feasibility studies are warranted
D) projects are approved or disapproved based on the potential ease of divestment
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Application of knowledge

49) Instead of comparing different proposals involving foreign operations, companies often make decisions by looking at proposals one at a time. All of the following are reasons for this behavior EXCEPT which one?
A) Companies need to respond quickly to opportunities.
B) Defensive decisions typically need to be made rapidly.
C) A lack of comparable data on different countries renders comparison impossible.
D) Conclusion of different proposals or studies does not usually happen simultaneously.
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Analytical thinking

50) Assume Company A receives a proposal from Company B to be a joint venture partner abroad. Company A is most likely to make its decision based on ________.
A) an opportunity-risk matrix
B) a go/no-go basis
C) a global matrix comparison
D) an oligopolistic reaction
Answer: B
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 7
AACSB: Reflective thinking

51) Which of the following reasons most compels companies to make location decisions on one international opportunity at a time rather than comparing among two or more?
A) The lack of comparability in data among countries renders comparison unfeasible.
B) The information on some countries is so unreliable that companies must deal with these countries separately.
C) Decisions are made by teams, and it is usually not feasible to give so many people time away from their usual duties to examine multiple proposals.
D) If an important customer develops opportunities in a foreign country, a company may have little alternative except to follow that customer's lead.
Answer: D
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Analytical thinking

52) Demographers project that the share (percentage of population) of what we now consider the working-age population in developed countries will decrease up to the year 2050. Which of the following is the most likely result of this trend?
A) an increase in foreign exchange among trading blocs
B) an increase in FDI provided by developed economies
C) a higher percentage in per capita GDP in today's developing economies than in today's developed economies
D) a higher percentage in per capita GDP in today's developed economies than in today's developing economies
Answer: C
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Reflective thinking

53) Which of the following is true about projected demographic changes up to the year 2050 that could affect future production and sales locations?
A) The share of the working population should rise in developed countries and fall in developing countries.
B) The growth in per capita GDP should be higher in today's developing economies than in today's developed economies.
C) The percentage of the world population living in today's developed countries is expected to increase.
D) The population should fall in sub-Saharan Africa.
Answer: B
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Reflective thinking

54) We now have technology to allow people to communicate globally without traveling as much. Leading researchers on urbanization and planning suggest that the most likely consequence of this is ________.
A) a decrease in international airline travel
B) a decreased need for immigration restrictions
C) a smaller number of retirees living in urban areas
D) a greater number of self-motivated workers e-mailing and teleconferencing with colleagues
Answer: D
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Analytical thinking

55) All of the following have been predicted to occur in the future as the result of advances in global communications EXCEPT which one?
A) In spite of being able to work anywhere, people will choose to live primarily where their employers are headquartered.
B) The brightest minds will work more at home but will still need face-to-face interaction with their colleagues.
C) People will be drawn to live in the same places that attract people as tourists.
D) People who are both highly motivated and highly creative will continue to be attracted to interact with people like themselves.
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Analytical thinking

56) Carrefour has been more successful than Walmart in Europe, whereas Walmart has been more successful than Carrefour in the United States. What is the most likely reason for these results?
A) first-mover advantages
B) nationalistic preferences of consumers
C) lack of knowing how to adapt products
D) increased exporting fees and transportation costs
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

57) Carrefour expanded internationally by first ________.
A) entering adjacent countries
B) licensing its name to other companies
C) buying companies in foreign countries
D) entering many countries simultaneously with small commitments in each
Answer: A
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Application of knowledge

58) Which of the following best explains why Burger King has developed such a strong presence in many of the small countries of Latin America and the Caribbean?
A) These business environments allowed Burger King to take advantage of economies of scale.
B) These countries are close to a Burger King's headquarters.
C) These countries offered greater mobility of funds than countries in the European Union.
D) Unlike the BRIC countries, these business environments did not require escalation of commitment.
Answer: B
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

59) Because many regional trading groups prohibit companies from producing in more than one member country, companies need to understand how to evaluate international geographic alternatives.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 1
AACSB: Analytical thinking

60) Committing resources to one country usually means forgoing or delaying projects in others.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 1
AACSB: Application of knowledge

61) When planning international geographic expansion, decision makers use scanning to reduce the number of options available to a manageable number for further detailed analysis.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2

62) Good scanning helps managers avoid the need to make a detailed analysis of countries when deciding where to operate.
Answer: FALSE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Reflective thinking
63) Sales potential is probably the most important variable in determining international location decisions because consumer demand exceeds supply.
Answer: FALSE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Reflective thinking

64) When comparing economic and demographic variables among countries, one should consider that consumers in developing countries do not necessarily follow the same historical patterns as those in more developed countries.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Diverse and multicultural work environments

65) Although capital intensity is growing in most industries, labor compensation remains a significant cost for most companies.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Application of knowledge

66) Labor cost advantages gained by moving into a country with low wages may be short-lived because tax increases cancel out the low-wage advantages.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 2
AACSB: Application of knowledge

67) Governments that conduct takeovers of foreign companies rarely make formal declarations of their intent to take over in advance of the action.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

68) In assessing political risk, the observation of past patterns is problematic because situations may change for better or worse.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking
69) Companies are usually willing to accept a lower rate of return on their investments in countries where they can more easily sell those investments and convert the proceeds at a favorable rate.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Reflective thinking

70) Losses to companies from natural disasters are much less risky than losses from operating in violent areas.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Reflective thinking

71) U.S. companies generally put earlier and more emphasis on countries where they perceive it's easier to operate.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

72) Liability of foreignness refers to the situation in which a government has more stringent legal operating regulations on foreigners and foreign companies than on its own citizens and companies.
Answer: FALSE
Diff: 1
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Concept
Objective: 3
AACSB: Analytical thinking

73) An advantage of locating operations where there are many competitors is that the cluster of competing firms attracts multiple suppliers and specialized personnel.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

74) A company can best benefit from a first-mover advantage by moving into a small country, before entering a much larger country.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 3
AACSB: Analytical thinking
75) Published government data is most often inaccurate because of translation errors from other countries' languages.
Answer: FALSE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 4
AACSB: Reflective thinking

76) Comparability of economic information among countries is hampered by countries' use of different definitions for similar terms.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 4
AACSB: Application of knowledge

77) When choosing international operating locations, companies should outsource the preparation of grids or matrices to experts rather than preparing them with their own personnel.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Reflective thinking

78) Unlike grids, matrices do not require managers to determine weights for factors that indicate risk.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 5
AACSB: Application of knowledge

79) In a concentration strategy for international expansion, a company goes first to one or a few countries and builds up fast there before going to other countries.
Answer: TRUE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Application of knowledge

80) The more a company needs to alter its products and ways of doing business to be successful abroad, the more it should rely on a diversification strategy for entering foreign markets.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Reflective thinking
81) Headquarters management often feels that people within an established operation are the best judge of the operation's investment needs.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Reflective thinking

82) Companies have tended to wait too long to divest poorly performing foreign facilities, trying instead to improve performance through expensive means.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 6
AACSB: Application of knowledge

83) A go/no-go decision for foreign expansion means that management reviews existing information and decides whether more information is needed.
Answer: FALSE
Diff: 1
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Analytical thinking

84) Profit figures for individual country operations may obscure the real impact those operations have on total global performance.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Reflective thinking

85) In developed countries, the percentage of the working-age population (using today's standards) is expected to rise by 2050.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Application of knowledge

86) It is generally agreed that because of technical advancements, managers will not need face-to-face communication in the future.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 7
AACSB: Information technology

87) When income inequality is high in a specific country, the per capita GDP figures are more meaningful.
Answer: FALSE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Application of knowledge

88) The number of computer industry firms located in California's Silicon Valley exemplifies the concept of agglomeration.
Answer: TRUE
Diff: 2
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Concept
Objective: 3
AACSB: Analytical thinking

89) What is the relationship between a company's international market and its production location decisions? How do firms benefit from the use of scanning techniques when making location decisions?
Answer: If a company develops a product that consumers find attractive, it must still find production and transportation cost advantages so that it can price the product favorably enough to sell it. These cost advantages may come from producing near the market, thus allowing the company to sustain a long-term competitive advantage. To compare countries, managers use scanning techniques based on broad variables that indicate opportunities and risk. That way, decision-makers can perform a detailed analysis of a manageable number of geographic locations. Scanning is useful in that a company might otherwise consider too few or too many possibilities. When scanning, managers will look at external conditions in a host country that could significantly affect the success or failure of a foreign enterprise. Scanning can help managers determine whether a company will make a detailed study of the area, as well as the terms under which it will initiate a project.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Synthesis
Objective: 1, 2
AACSB: Reflective thinking

90) What is scanning? What opportunities and risks are most relevant to scanning?
Answer: To compare countries, managers use scanning techniques based on broad variables that indicate opportunities and risk. When scanning, managers will look at external conditions in a host country that could significantly affect the success or failure of a foreign enterprise. Revenues less costs determine opportunities. From a broad scanning perspective, there are variables that indicate the amount of revenue, cost factors, and risk that might be forthcoming from one country to another. The factors that have the most influence on the placement of marketing and production emphasis are sales expansion, economic variables, demographic variables, resource acquisition, infrastructure, and the ease of transportation and communications. Sales potential is probably the most important variable managers use in determining where and whether to make an investment.
Companies weigh opportunities against risks when making decisions. Political risk may occur because of changes in political leaders' opinions and policies, civil disorder, and animosity between the host and other countries, particularly the firm's home country. Changes in exchange rates or the ability to move funds out of a country may also affect an MNE. Other types of risk that are usually considered include the risk of disease or natural disaster and the competitive risk that develops from competitors' actions.
Diff: 3
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Synthesis
Objective: 2, 3
AACSB: Reflective thinking

91) In a short essay, discuss why simply examining a country's per capita GDP and its population doesn't necessarily lead to a good estimate for potential demand.
Answer:
a. Obsolescence and leapfrogging of products: Consumers in emerging economies do not necessarily follow the same patterns as those in higher-income countries. In many emerging economies, consumers have leapfrogged the use of traditional telephones by jumping from having no telephones to using cellular phones exclusively.
b. Prices: If prices of essential products are high, consumers may spend more than what one would expect based on per capita GDP. The expenditures on food in Japan are higher than would be predicted by either population or income level because food is expensive and work habits promote eating out. However, if costs are high for a non-necessity, expenditures will likely be lower.
c. Income elasticity: A common tool to predict total market potential is to divide the percentage of change in product demand by the percentage of change in income in a given country. The more that demand increases, the more elastic is the demand in response to income change. Income elasticity varies by product and by income level.
d. Substitution: Consumers in a given country may have products or services that substitute more conveniently in some countries than in others for the products that companies would like to sell. For example, there are fewer automobiles in Hong Kong than one would expect based on income and population because the crowded conditions make the efficient mass transit system a desirable alternative to automobiles.
e. Income inequality: Where income inequality is high, the per capita GDP figures are less meaningful, as most people have very little to spend and some people have substantial income to spend.
f. Cultural factors and taste: Countries with similar per capita GDPs may have different preferences for products and services because of values or tastes.
g. Existence of trading blocs: Although a country may have a small population and GDP, its presence in a regional trading bloc gives its output access to a much larger market.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Critical Thinking
Objective: 3
AACSB: Analytical thinking

92) In a short essay, discuss liquidity preference as it relates to monetary risk.
Answer: If a company's expansion occurs through direct investment abroad, exchange rates on and access to the invested capital and earnings are key considerations. Liquidity preference is the theory that investors usually want some of their holdings to be in highly liquid assets, on which they are willing to take a lower return. Liquidity is needed in part to make near-term payments, such as paying out dividends; in part to cover unexpected contingencies, such as stockpiling materials if a strike threatens supply; and in part to be able to shift funds to even more profitable opportunities, such as purchasing materials at a discount during a temporary price depression.
Diff: 3
Learning Outcome: Describe how differences in political economy influence economic development
Skill: Application
Objective: 3
AACSB: Analytical thinking
93) What is meant by liability of foreignness? How might this influence location and allocation decisions?
Answer: Liability of foreignness describes the situation in which foreign companies have a lower survival rate than local companies for many years after they begin operations. When a company operates abroad, it usually has higher uncertainty than at home because the foreign operations are in environments with which the company is less familiar. As a company gains experience in operating in a particular country or in similar countries, it improves its assessments of consumer, competitor, and government actions—thereby reducing its uncertainty. Companies may reduce the risk of liability of foreignness by moving first to countries more similar to their home countries. Alternatively, they may contract with experienced companies to handle operations for them, limit the resources they commit to foreign operations, and delay entry to many countries until they are operating successfully in one or a few.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Synthesis
Objective: 3, 6
AACSB: Analytical thinking

94) Compare the advantages of locating foreign operations to avoid where competitors have gone versus locating where competitors are.
Answer: By being the first major competitor in a market, a company can gain the best partners, locations, and suppliers. However, companies may gain other advantages by locating where competitors already are. To begin with, the competitors may have performed the costly task of evaluating locations, so a follower may get a "free ride." Moreover, clusters of competitors in various locations attract suppliers, buyers, and specialized labor.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Synthesis
Objective: 1, 3
AACSB: Analytical thinking

95) What problems are common with the published data available about different countries?
Answer: For the most part, incomplete or inaccurate published data result from the inability of many governments to collect the needed information. Poor countries may have such limited resources that other projects necessarily receive priority in the national budget. Economic factors also hamper record retrieval and analysis. The result may be information that is years old before it is made public. Cultural factors affect responses. Mistrust of how the data will be used may lead respondents to answer incorrectly, particularly if questions probe financial activities. However, not all inaccuracies are due to governmental collection and dissemination procedures. People's desire and ability to cover up data on themselves—such as unrecorded criminal activity—may distort published figures. Finally, researchers may use poor collection and analysis methods.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Application
Objective: 4
AACSB: Reflective thinking

96) What are the major types of published data that managers can use to compare countries? Describe the tools available to managers for making country comparisons.
Answer: Market research and business consulting companies conduct studies for a fee in most countries.
Some research organizations prepare fairly specific studies that they sell to any interested company at costs much lower than for individualized studies. Most companies that provide services to international clients publish reports. These reports usually are geared toward either the conduct of business in a given area or some specific subject of general interest, such as tax or trademark legislation. Governments and their agencies are another source of information. Different countries' statistical reports vary in subject matter, quantity, and quality. Numerous organizations and agencies are supported by more than one country. These include the United Nations, the World Trade Organization, the International Monetary Fund, the Organization for Economic Cooperation and Development, and the European Union. All of these organizations have large research staffs that compile basic statistics as well as prepare reports and recommendations concerning common trends and problems. Trade associations connected to various product lines collect, evaluate, and disseminate a wide variety of data dealing with technical and competitive factors in their industries. A number of companies have information-retrieval services that maintain databases from hundreds of different sources. For a fee, or sometimes for free at public libraries, a company can obtain access to such computerized data and arrange for an immediate printout of studies of interest.
Two common tools for analysis are grids and matrices. A company may use a grid to compare countries on whatever factors it deems important. The grid technique is useful even when a company does not compare countries because it can set a minimum score necessary for either investing additional resources or committing further funds to a more detailed feasibility study. An opportunity-risk matrix is important as a reflection of the placement of a country in comparison to other countries. The companies must determine which factors are good indicators of its risk and opportunity and weigh them to reflect their importance.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Synthesis
Objective: 4, 5
AACSB: Analytical thinking

97) In a short essay, compare the strategies of diversification versus concentration and provide examples of situations in which each would be used.
Answer: Ultimately, a company may gain a sizable presence and commitment in most countries; however, there are different paths to that position. Although any move abroad means some geographic diversification, the term diversification in the context of location is when the company moves rapidly into many foreign markets, gradually increasing its commitments within each. At the other extreme, with a concentration strategy, the company will move to only one or a few foreign countries until it develops a very strong involvement and competitive position there.

When the growth rate in each market is high, a company usually should concentrate on a few markets because it will cost a great deal to expand output sufficiently in each market. The more stable sales and profits are within a single market, the less advantage there is to be gained from a diversification strategy. Similarly, the more interrelated markets are, the less smoothing is achieved by selling in each. If a company determines that it has a long competitive lead time, it may be able to follow a concentration strategy and still beat competitors into other markets. When marketing programs reach many countries, such as by cable television or the Internet, a diversification strategy has advantages. Companies may have to alter products and their marketing to sell in foreign markets, a process that, because of cost, favors a concentration strategy. The more a company needs to control its operations in a foreign country, the more it should develop a concentration strategy. If a company is constrained by the resources it needs to expand internationally compared to the resources it can muster, it will likely follow a concentration strategy.
Diff: 3
Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter into foreign markets
Skill: Critical Thinking
Objective: 6
AACSB: Analytical thinking

98) Why do companies often treat foreign reinvestment decisions differently than new foreign investment decisions?
Answer: Companies treat decisions to replace depreciated assets or add to the existing stock of capital from retained earnings in a foreign country somewhat differently from original investment decisions. Once committed to a given locale, a company may find it doesn't have the option of moving a substantial portion of the earnings elsewhere—to do so would endanger the continued success of an operation in a given foreign location. Aside from competitive factors, a company may need several years of almost total reinvestment and allocation of new funds to one area in order to meet its objectives. Another reason a company treats reinvestment decisions differently is that once it has experienced personnel within a given country, it may believe they are the best judges of what is needed for that country, so headquarters managers may delegate certain investment decisions to them.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Critical Thinking
Objective: 6
AACSB: Analytical thinking
99) Why do companies engage in international harvesting or divestment?
Answer: Companies commonly reduce commitments in some countries because those countries have poorer performance prospects than do others, a process known as harvesting or divesting. Companies may divest by selling or closing facilities. They usually prefer selling because they receive some compensation. A company that considers divesting because of a country's political or economic situation may find few potential buyers except at very low prices. In such situations, the company may try to delay divestment, hoping the situation will improve. If it does, the firm that "waits out" the situation generally is in a better position to regain markets and profits than one that forsakes its operations.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Critical Thinking
Objective: 6
AACSB: Analytical thinking

100) Why do most companies examine expansion proposals one at a time rather than comparing various expansion proposals? Do you think this is effective? Why or why not?
Answer: Three major factors restricting companies from comparing investment opportunities are cost, time, and the interrelation of operations. Clearly, some companies cannot afford to conduct many investigations simultaneously. If they are conducted simultaneously, they are apt to be in various stages of completion at a given time. Further, in many cases they need to respond quickly to an opportunity they had not anticipated, such as an unsolicited proposal or limited offer from a government.
Diff: 3
Learning Outcome: Describe how global production and logistics decisions are made
Skill: Critical Thinking
Objective: 7
AACSB: Analytical thinking

 

 

 

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