Chapter 8 Quiz Mgmt

Direct foreign investment refers to the investment made by a company or individual from one country into another country. This investment can involve setting up a new business, acquiring an existing business, or investing in foreign stocks and bonds. With globalization and the growth of multinational corporations, direct foreign investment has become a crucial and widespread approach to conducting global business. It allows companies to expand their operations, access new markets, and benefit from lower production costs or favorable business environments in foreign countries. Therefore, the statement "Direct foreign investment throughout the world is an increasingly important and common method of conducting global business" is true.

Cooperative contracts are indeed an agreement where a foreign business owner pays a company a fee in order to conduct business in their country. This allows the foreign business owner to benefit from the local company's resources, network, and expertise, while also complying with the regulations and requirements of the host country. It is a mutually beneficial arrangement that enables foreign businesses to enter new markets and expand their operations internationally.

The World Trade Organization (WTO) is indeed the successor of the GATT (General Agreement on Tariffs and Trade). GATT was established in 1947 as an international treaty to promote international trade by reducing tariffs and other barriers. In 1995, GATT was replaced by the WTO, which expanded its scope to include services, intellectual property, and dispute settlement mechanisms. The WTO is responsible for regulating and facilitating international trade among its member countries, making it the correct answer.

Global joint ventures are indeed the most common form of strategic alliance. This is because joint ventures allow companies to combine their resources, expertise, and market knowledge to enter new markets and expand their operations globally. Joint ventures also provide a way for companies to share risks and costs, while also benefiting from each other's strengths. Therefore, it can be concluded that global joint ventures are the most common type of strategic alliance.

The given statement is false. GATT, or the General Agreement on Tariffs and Trade, aimed to reduce trade barriers and facilitate international trade. It did not make it more difficult or costly for consumers to buy foreign products. Instead, GATT sought to promote free trade and create a more open global market, benefiting consumers by providing them with access to a wider range of products at competitive prices.

Tariffs are a direct tax on imported goods. Tariffs are imposed by governments as a way to increase the price of imported goods and protect domestic industries. They are directly applied to the imported goods themselves, making them more expensive for consumers. This helps to promote domestic production and reduce competition from foreign goods.

Government subsidies are financial assistance provided by the government to domestic companies in the form of loans, grants, and tax deferments. These subsidies are given with the intention of protecting domestic companies from foreign competition. By providing financial support, the government aims to enable domestic companies to compete effectively in the market and maintain their competitiveness against foreign rivals. This support can help domestic companies lower their costs, invest in research and development, and improve their overall competitiveness in the global market.

Global communication is not a disadvantage to exporting because it allows businesses to easily communicate with customers and partners in different countries, facilitating international trade. On the other hand, transportation costs, subjection to tariff and non-tariff barriers, and distribution issues can all pose challenges and disadvantages to exporting.

The phase model of globalization refers to the process in which companies transition from being primarily focused on domestic markets to expanding their operations globally. This transition typically occurs in sequential stages, meaning that companies gradually increase their global presence and activities over time. Therefore, the correct answer is "domestic, global, sequential."

Global consistency refers to a multinational company having offices/plants in different countries and using the same rules, guidelines, policies, and procedures. This approach ensures that the company maintains a standardized and cohesive operating structure across all locations, regardless of the cultural or regulatory differences in each country. By implementing consistent practices, the company can streamline operations, enhance efficiency, and promote a unified brand image globally.

The correct answer is licensing, franchising. Cooperative contracts refer to agreements between two or more parties to collaborate and work together. Licensing involves granting permission to another party to use certain intellectual property or rights, while franchising involves granting the right to operate a business using a well-established brand and business model. Therefore, licensing and franchising are both types of cooperative contracts. The other options mentioned in the question, such as sharing and explicit, do not accurately represent the types of cooperative contracts.

Direct foreign investment is a method of investment in which a company establishes a new business or acquires an existing business in a foreign country. This involves building a new business from scratch or buying an already established business in the foreign country. This allows the company to expand its operations and presence in the foreign market, taking advantage of new opportunities and potential growth.

Customs classification refers to the process of assigning a classification to imported products by government officials. This classification has an impact on the size of the tariff and the imposition of import quotas. In other words, the assigned classification determines the amount of tax and restrictions placed on the imported goods. This helps regulate and control the flow of goods into a country, protecting domestic industries and ensuring fair competition.

If multinational companies lean too much toward global consistency, they run the risk of using management procedures that may not be suitable for specific countries' markets, cultures, and employees. This means that they may overlook the unique needs and preferences of local markets and fail to effectively engage with employees from different cultural backgrounds. It is important for companies to strike a balance between global consistency and local adaptation to ensure that their management practices align with the specific requirements of different countries.

The statement is false because there is no law that prohibits a US company from having more investments in foreign markets than in its domestic market. In fact, many US companies have significant investments in foreign markets as part of their global expansion strategies.

Trade barriers are government imposed regulations that increase the cost and restrict the number of imported goods. These barriers can include tariffs, quotas, and regulations that make it more expensive or difficult for foreign goods to enter a country's market. By increasing the cost and restricting the number of imported goods, trade barriers aim to protect domestic industries and promote local production.

The correct answer is specific limits imposed by the importing country on the number or volume of imported products. This means that quotas are restrictions set by the importing country on the amount or quantity of goods that can be imported from other countries. This is done to control and regulate the flow of imports in order to protect domestic industries, maintain a balance of trade, or achieve other economic objectives. Quotas can be imposed on specific products or on a country's overall imports.

The correct answer suggests that government import standards are standards that are supposedly established to protect the health and safety of citizens. However, in reality, these standards are often used as a means to restrict imports. This implies that governments may use health and safety regulations as a guise to limit foreign competition and protect domestic industries.

A global new venture typically follows a specific progression in its growth and development. The three trends that characterize this progression are sales, employees, and financing. This means that the venture first focuses on generating sales and building a customer base, then hires employees to support the growing business operations, and finally secures financing to fund further expansion and development. This sequence of sales, employees, and financing is crucial for the success and sustainability of a global new venture.

The correct answer is "exporting, cooperative contracts, strategic alliances, wholly owned affiliates". This answer aligns with the four stages of "The Phase Model of Globalization". In the first stage, exporting, companies begin by selling their products or services to foreign markets. In the second stage, cooperative contracts, companies establish agreements with foreign partners to collaborate on specific projects or ventures. In the third stage, strategic alliances, companies form partnerships with foreign firms to gain access to their resources and capabilities. Finally, in the fourth stage, wholly owned affiliates, companies establish their own subsidiaries or branches in foreign markets to have full control over their operations.

An ideal global location for doing business is characterized by a low degree of global competition and political certainty. A low degree of global competition means that there are fewer competitors in the market, allowing businesses to have a greater chance of success. Political certainty refers to a stable political environment with clear policies and regulations, which provides businesses with the confidence to invest and operate without the risk of sudden changes or disruptions. Both these factors contribute to a favorable business environment, making a location ideal for doing business.

Local adaptations refer to the practice of modifying operating procedures to accommodate the variations in foreign customers, governments, and regulatory agencies. This means that a multinational company adjusts its rules, guidelines, policies, and procedures to adapt to the specific requirements and preferences of different countries where it has offices or plants. This flexibility allows the company to better serve its customers, comply with local regulations, and navigate the cultural and legal differences in various markets.

Non-tariff barriers refer to methods that do not involve taxes but are used to increase the cost or decrease the volume of imported goods. This means that they are not directly related to taxes, but rather focus on other measures such as regulations, quotas, or licensing requirements. These non-tax barriers aim to make it more difficult or costly for imported goods to enter a country, thereby reducing their volume in the market.

Voluntary export restraints refer to limits on the number or volume of exports that are voluntarily imposed by the exporting country. This is different from quotas, where the importing country imposes the limit. Voluntary export restraints are typically implemented to protect domestic industries from foreign competition.

The Maastricht Treaty transferred 12 different economies into the European Union and converted their form of currency to the Euro.

Global business involves the buying and selling of goods and services from different countries.

Both option A and C are correct because licensing can have disadvantages such as giving up control over the quality of the product or service sold, as well as the possibility that their partners can eventually become competitors.

Global joint ventures have several disadvantages, including the need to share profits, the potential for power struggles or lack of leadership in equal ownership situations, and the challenges of merging different cultures. However, the given answer states that the expense of building new operations or buying businesses can be high, which is not a disadvantage of global joint ventures.

If companies focus too much on local adaptation, they run the risk of losing the cost efficiencies and productivity that result from using standardized rules and procedures throughout the world. This means that companies need to strike a balance between adapting their strategies and operations to local markets and maintaining global consistency in order to maximize efficiency and productivity.

The General Agreement on Tariffs and Trade (GATT) is a worldwide trade agreement that reduced tariffs, eliminated tariffs, limited government subsidies, and established protections for intellectual property. It features 124 countries.

The General Agreement on Tariffs and Trade (GATT) is not a regional trading zone, but rather an international treaty that aimed to reduce trade barriers and promote free trade among its member countries. It was replaced by the World Trade Organization (WTO) in 1995. The other options listed, including the Maastricht Treaty of Europe, NAFTA/CAFTA, and ASEAN/APEC, are all regional trading zones or agreements that promote economic integration and trade within specific regions.

The correct answer is "they face a loss of control/success may be culture-bound". This means that franchising can result in a loss of control for the franchisor as they have to rely on their franchisees to uphold the quality of their product or service. Additionally, success in different cultures may vary, which can pose challenges for the franchisor in maintaining consistency and adapting to different cultural preferences.

The correct answer is WTO, NAFTA, CAFTA. The United States belongs to these regional trading zones because it is a member of the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA), and the Central American Free Trade Agreement (CAFTA). These trading zones promote economic cooperation and facilitate trade between member countries, allowing for the reduction or elimination of trade barriers such as tariffs and quotas.

Non-tariff barriers are trade barriers that do not involve the imposition of tariffs or taxes on imports or exports. They are usually implemented by governments to restrict trade and protect domestic industries. The options provided in the question are all examples of non-tariff barriers, except for government export standards and subsidies. Government export standards and subsidies are measures that governments use to support and promote their own exports, rather than restrict them. These measures can include quality standards, labeling requirements, and financial incentives provided to exporters.