Study Guide

1) Define globalization.
According to Wikipedia, globalization is the process of international integration arising from the interchange of world views, products, ideas, and other aspects of culture. Put in simple terms, globalization refers to processes that increase world-wide exchanges of national and cultural resources. (Lena Nguyen; [e-mail])

Globalization refers to the broadening set of interdependent relationships among people from different parts of a world that happens to be divided into nations. (P. 5) (Shaivali Parekh; [e-mail])

Globalization can also refer to the integration of world economies through the reduction of barriers to the movement of trade, capital, technology, and people. (P.5) (Tierney Houston; [e-mail])

3) Define international business.
According to Wikipedia, international business comprises all commercial transactions (private and governmental, sales, investments, logistics,and transportation) that take place between two or moreregions, countries and nations beyond their political boundaries. (Lena Nguyen; [e-mail])

International Business consists of all commercial transactions - including sales, investments, and transportation- that take place between two or more countries. (P.5) (Shaivali Parekh; [e-mail])

International business has been expanding due to technological expansion, the liberalization of government policies, and the establishment of institutions that facilitate international transactions. (P.28) ([e-mail])

4) Differentiate between the objectives of private business companies and governmental entities.
The objectives for the private business companies is to make profits. The government is either for profit or for political reasons. (Rebekah Vang; [e-mail]) (P. 5)

8) Even if you never have direct international responsibilities, explain why an understanding of some of the complexities of international business may be useful to you.
According to the textbook on page 6&7, companies’ international operations and the governmental regulation of those operations affect overall national conditions - profits, employment security and wages, consumer prices, and national security. A better understanding of international business will help you make more informed operational and citizenary decisions, such as where you want to operate and what governmental policies you want to support. (Alysha Mistry; [e-mail])

9) The shifting of national borders has created which of the following situations for international business? When national boundaries shift (consider the breakup of the former Soviet Union or the reunification of East and West Germany), domestic business transactions can become international transactions and vice versa. (p. 7) (Shaivali Parekh; [e-mail])

10) Has world trade grown more rapidly than world production since WW II? Yes (Linda Ho; [e-mail]) (p. 7)

In almost every year since Word War II, word trade has grown more rapidly than word production. (Nima Rahnemoun; [e-mail]) (page 7)

World trade has grown more rapidly post WWII due to an expansion of technology, the liberation of cross-border trade, and the development of international trade services that came with them. (p.7 [e-mail])

11) Are most of the world's goods and services sold in country or exported? Most the world’s good and services are still sold in the countries in which they are produced pg. 7 (Linda Ho; [e-mail])

12) According to the A.T. Kearny/Foreign Policy Globalization Index, which ranked countries on their extent of globalization across economic, technological, personal contact, and political dimensions, do countries tend to rank high on one dimension and low on another or similar levels across the board?
Globalization can differ by dimension. Some countries may be highly globalized on one dimension and not on another. p.7 (Rebekah Vang; [e-mail])

The index has ranked Singapore and Hong Kong as the most globalized countries and India and Iran as the least globalized. ( Nima Rahnemoun; [e-mail])

14) Institutional development of services by business and government has aided the expansion of international business by ________.
Developing means to ease the flow of goods among countries (Linda Ho; [e-mail])

15) What has contributed to consumers demand for access to foreign-made products?
The use of media and technologies have allowed consumers to access resources, which made it possible to compare prices worldwide.
(Christine Nguyen; [e-mail])
16) What political change has caused international business to grow at such a rapid pace in the past few decades? A major reason for growth in international business is the end of the schism between the non-Communist world and what was once the Communist world. Another political factor facilities- that have fostered speed and cost efficiencies for delivering goods internationally. In addition, governments now provide an array of services to help domestic companies sell more abroad, such as collecting information about foreign markets, furnishing contacts with potential buyers abroad, and offering insurance against nonpayment in the home-country currency.(p. 10) (Shaivali Parekh; [e-mail])

17) The recent expansion of technology has contributed to growth in international business through ________. Productivity. (p. 8) (Shaivali Parekh; [e-mail])
Thu nguyen: rising productivity, population growth ([e-mail])

18) Flower producers from Ecuador, Israel, and New Zealand all compete for sales in the same American markets. This is due primarily to ________.
Because of inovations in transportation, growers can ship flowers quickly and economically. 8 (Feiyi Song, [e-mail])

19) Which of the following is false?
A) Technology facilitates a company's headquarters' interactions with its foreign operations.
B) Small companies can more easily access global customers and suppliers.
C) Companies from more countries can compete for sales in foreign markets.
D) Most analysts agree that the rate of development of new products will drop off in the future. B (Minfang Huang; [e-mail]), or D pg.8 as the base of tech. Expand new product development accelerates... (Feiyi Song, [e-mail])
Thu nguyen: D ([e-mail])
D is false. (Nima Rahnemoun; [e-mail])

21) Because their citizens want a greater variety of goods and services at lower prices, many governments have reduced their restrictions on the international movement of goods and services. True or false? TRUE (Lena Nguyen; [e-mail])

22) Governments believe that domestic producers will become more efficient as a result of foreign competition. True or false? T- pg8 competition spurs domestic producers to become more efficient (Feiyi Song, [e-mail])

23) Is the following a reason for recent governmental relaxation in restrictions on cross-border trade or resource movements? Governments hope that other countries will lower their barriers in response.
YES (Lena Nguyen; [e-mail]) Yes (pg8) (Nguyen Phung; [e-mail])
24) What is a born global company?
A company that adopts a global orientation from inception. (Rebekah Vang; [e-mail])
A small company that takes worldwide views and diifferent operating modes.
Pg19 (Anthony Achermann, [e-mail])

Born global companies start out with a global focus because of their founders' international experience and because advances in communications give them a good idea of where global market and supply are. Pg 9 ( Xiuhua Liao; [e-mail]) 25) In a strategy known as ________, many new companies locate themselves near competitors and suppliers. clustering (Lena Nguyen; [e-mail]) clustering (pg9) (Nguyen Phung; [e-mail])

26) Companies often expand their business internationally in response to competitive international advantages gained by their competitors. True or false?
TRUE (Lena Nguyen; [e-mail])

True, Pg16 (Anthony Achermann, [e-mail])

27) When a company successfully responds to foreign production and market opportunities, other companies will likely emulate its successful practices. T or F? TRUE (Linda Ho; [e-mail]

28) Governments cooperate with each other to attack problems that one country acting alone cannot solve, to deal with areas of concern that lie outside the territory of any nation, and to gain reciprocal advantages. Are there other reasons?
One country' s policies may affect those of others. For example , higher real-interst rates in one country can attract funds very quickly from individuals and companies in countries with lower rates , thus creating a shortage of investment funds in the latter. To coordinate economic policies in these and other areas , economically important countries meet regularly to share information and pool ideas.

Countries act to coordinate activities along mutual borders, building highways and railroad or hydroelectric dams that serve the interests of all parties. Pg 11 ( Xiuhua Liao ; [e-mail])

Countries can attack problems of other countries to benefit from the positive political support from that country later on as an investment. ([e-mail])

29) Governments have signed treaties to protect foreign-owned property rights, such as investments and patents. A primary reason for doing so is to gain reciprocal advantages (Lena Nguyen; [e-mail]) gain reciprocal advantages (pg10) (Nguyen Phung; [e-mail])
30) Sources of disagreement about the use of noncoastal areas of the oceans, outer space, and Antarctica follow: There is disagreement about how commercial benefits should be shared among nations and about who should be allowed to develop where. Are there other sources of disagreement?

Another disagreement is tourism, with companies like Virgin offering flight to space and cruises to Antarctica when does the commercial exploitation end?
Pg 11 (Anthony Achermann [e-mail])

31) Why do governments cooperate through treaties, agreements, and consultation?
To gain reciprocal advantages, to attack problems jointly that one country acting alone cannot solve, and to deal with areas of concern that lie outside the territory of any nation. p.10 (Rebekah Vang; [e-mail])
Thu nguyen: THeir own interests can be addressed through international means.

32) Small countries worry about overdependence caused by globalization. Why?

Small countries become vulnerable to foreign demands. These include everything from supporting certain positions at the United Nations to supporting a large economy’s foreign military or economic actions. According to economist, George Akerlof, poor countries are concerned that large international companies are powerful enough to dictate their operating terms (say, by threatening to relocate), exploit legal loopholes to avoid political oversight and taxes, and counter the small economies’ best interests by favoring their home countries’ political and economic interests. (P. 13) (Shaivali Parekh; [e-mail])

33) Although critics complain that globalization causes the consumption of too many nonrenewable resources while despoiling the environment, those in favor of globalization counter that globalization encourages the adoption of uniform and superior standards for combating environmental problems. (Lena Nguyen; [e-mail])

34) Curtailment of logging in the Amazon region is generally viewed as environmentally beneficial for the planet as a whole. However, unemployed Brazilian workers have felt that job creation inside Brazil is more important than climate protection outside Brazil. Is this a viable view?

35) Although globalization may bring economic growth, critics nevertheless contend that the inequality of gains puts some people in a relatively worse economic situation. T or F? TRUE (Lena Nguyen; [e-mail])

36) The process of shifting production from a domestic to a foreign location is known as OFF-SHORING (Lena Nguyen; [e-mail])

37) Proponents of offshoring claim that aggregate employment figures show that displaced workers find new jobs, offshoring increases the number of high-value jobs in the home countries of offshoring companies, and there are upper limits on offshoring because there are not enough workers abroad with needed skills who will permanently work for low wages. T or F? TRUE (Lena Nguyen; [e-mail])

38) A major criticism of offshoring is that it exchanges good jobs for bad jobs (Lena Nguyen; [e-mail])

41) The televising of sports competitions to viewers in multiple countries is an example of international business conducted to achieve the objective of sales expansion (Lena Nguyen; [e-mail])

43) By operating internationally, a company may reduce its risks because it can take advantage of business-cycle differences among countries (Lena Nguyen; [e-mail]) thu nguyen: 2points a- it can smooth sales and profit, b-prevent competitors gain advantages. ([e-mail])

44) An example of a U.S. merchandise import is an automobile made in Japan by a Japanese company and sold in the United States (Lena Nguyen; [e-mail])

45) Visible exports and imports are merchandise imports and exports (Lena Nguyen; [e-mail])
Thu nguyen: activities we can actually see those goods as they leave and enter the country ([e-mail])

47) Royalties from the use of assets abroad, such as trademarks or patents, are an example of service trade (Lena Nguyen; [e-mail])

49) Define foreign direct investment.

A foreign direct investment is also known as a FDI. This is an investment that gives the investor a controlling interest in foreign company. It is also a direct investment into production or business in a country by an individual or company in another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Wiki: Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. (Costanidnos Bakouros [e-mail])

FDI: sometimes referred to simply as direct investment, the investor takes a controlling interest in a foreign company. When, for example, a Japanese investor bought the Seattle Mariners, the baseball team became a Japanese FDI in the United States. Control need not be a 100 percent (or even a 50 percent) interest- if a foreign investor holds a minority stake and the remaining ownership is widely dispersed, no other owner may be efficient at countering the decisions of the foreign investor. When two or more companies share ownership of an FDI, the operation is a joint venture. An example in our opening case is the joint ownership of Liverpool Football Club by owners of a U.S. baseball team and a Canadian hockey team.

Although the world’s 100 largest international companies account for a high proportion of global output, the vast number of companies using FDI means that it’s also common among smaller companies. Today, about 79,000 companies worldwide control about 790,000 FDIs in all industries (P.18) Armando Rios [e-mail]

How to Make FDI:
Foreign Foreign direct investment ownership takes place by transferring abroad financial, other tangible, or intangible assets. There are two ways companies can use these assets to invest in a foreign country. They can either acquire an interest in an existing operation or construct new facilities- an option known as greenfield investment.
Buying: whether a company makes a direct investment by acquisition or start-up depends, of course, on which companies are available for purchase. A global recession and bankruptcy situations have put many companies on the market, and other companies, including those from other countries, have exploited this opportunity to buy them (Page 523) Armando Rios [e-mail]

50) When two or more organizations share ownership of a foreign direct investment, the operation is called a joint venture (Lena Nguyen; [e-mail])

51) Define international portfolio investment.

A international portfolio investment is an investment in the form of either debt or equity that does not give the investor a controlling interest. (Pretty much the opposite of foreign direct investment). Wiki: Portfolio investment is an investment made by an investor who is not particularly interested in involvement in the management of a company. It is also the investment in securities that is intended for financial gain only and does not create a controlling interest in or effective management control over an enterprise. (Costanidnos Bakouros [e-mail])
International portfolio is non controlling.

Portfolio Investment: is a noncontrolling financial interest in another entity. A portfolio investment usually takes one of two forms: stock in a company or loans to a company (or country) in the form of bonds, bills, or notes purchased by the investor. They’re important for most companies with extensive international operations, and except for stock, they’re used primarily for short-term financial gain- as a relatively safe means of earning more money on a firm’s investment. To earn higher yields on short-term investments, companies routinely move funds from country to country (P. 19) Armando Rios [e-mail]

52) A multinational enterprise (MNE) is one that is ________. willing to consider market and production locations anywhere in the world (Linda Ho; [e-mail] thu nguyen: MNE is a company that has worldwide approach to markets and production. Also, it is one with operations in more than one country
Multinational enterprise (sometimes called MNE or TNC) takes on worldwide view of markets and production; in other words, it’s willing to consider market and production locations anywhere in the world. The true MNE typically uses most of the modes of operations we’ve described in this chapter. However, because it isn’t always easy to determine if a company really takes a “worldwide view,” experts have devised some narrower definitions of an MNE. Some people argue, for instance, that an MNE must have direct investments in a minimum number of countries (P.19). Armando Rios [e-mail]

MNCs and TNCs: Today, most writers apply the term MNE to any company with operations in more than one country. This is the definition we use in the text. The term multinational corporation or multinational company (MNC) is often used as a synonym for MNE. At the United Nations, the term transnational company (TNC) is used interchangeably with MNE (P.19). Armando Rios [e-mail]

54) The term sometimes used by the United Nations as a synonym for multinational enterprise is transnational company (Lena Nguyen; [e-mail]) TNC (thu nguyen

56) Politics, law, culture, and economy are all examples of ________ factors that can affect the ways in which companies produce and sell their products in foreign markets. social (Linda Ho; [e-mail]) social ( Nima Rahnemoun; [e-mail])

57) Managers who are knowledgeable about ________ are better able to identify the location, quantity, quality, and availability of the world's natural resources. geographic factors (Linda Ho; [e-mail])

58) Although U.S. films depend heavily on revenue in foreign countries, revenue from international markets is usually low for a sports-themed film. This is due to ________ factors. behavioral (Linda Ho; [e-mail])

59) In addition to understanding the laws affecting business in countries where their companies operate, it is most important for managers to understand the legal factors? Why?

60) Some key ________ factors in the external environment of an international business are product strategy and resource base and experience. competitive (Linda Ho; [e-mail])

61) The same automobile company produces Fiats and Ferraris. The company built an engine plant in China with low production costs for Fiats, but not Ferraris. The probable reason is that ________. Fiat competes mainly on a mass-market strategy, whereas Ferrari competes mainly on a focus strategy (Linda Ho; [e-mail])

62) Which of the following statements is true concerning the international business competitive environment?
A) Although countries' market sizes differ, companies usually face about the same number of competitors in each national market. False
B) In most industries, companies face the same competitors in each country where they operate. False
C) It takes about the same amount of resources to gain national distribution in a large country as in a small one. False
D) Being a leader in one country doesn't guarantee you'll be a leader in any other country. True (Linda Ho; [e-mail])

63) When companies face the same competitors in almost all countries where they operate, they learn to predict the other's strategies and actions elsewhere based on what they do in a given country. T or F? True (Linda Ho; [e-mail])

64) The view that globalization is inevitable is based on the belief that ________. technical advances in transportation and communications are too persuasive for globalization’s growth to be hindered. (Costandinos Bakouros [e-mail])

65) Critics of the view that regionalization will prevail over globalization base their argument on the belief that ________. regionalization is a transition stage toward globalization (Linda Ho; [e-mail])

66) Why could globalization potentially slow or reverse in the future?
Globalization could potentially slow or reverse due to the increase cost of transportation from high oil costs.
Christine Nguyen ( [e-mail])

67) Some observers feel that international institutions and the people working in them cannot adequately handle the complexities of an interconnected world. Based on this, these observers believe that ________. globalization will slow in the future (Linda Ho; [e-mail])

68) In Chapter One's opening case on the globalization of sports, the owner of a U.S. football team and the owner of a Canadian hockey team bought a British soccer team. This is an example of ________. a joint venture (Linda Ho; [e-mail])

69) In Chapter One's opening case on the globalization of sports, we saw that many teams have foreign players. These players have moved abroad primarily because of ________ factors. economic (Linda Ho; [e-mail])

70) In Chapter One's closing case on Carnival Cruise Lines, we saw that cruise lines pay little or no taxes because ________. they take advantage of different taxation and employment laws in foreign countries (Linda Ho; [e-mail])

71) A flag of convenience is ________. This phrase refers to the business practice of registering a particular merchant ship in a sovereign state that is different from the owner’s ship. The purpose of this is to reduce the operational costs and/ or avoid laws and regulations from the owner’s country.
Christine Nguyen ( [e-mail])
The following are T or F:
72) Globalization refers to all economic transactions among countries.
TRUE: (Ashley Wall :[e-mail])

73) International business includes all commercial transactions between two or more countries.
T or F? TRUE (Christine Nguyen; [e-mail])

74) Gaining some understanding of international business is important for any business student because global events and competition affect almost all companies.
T or F? TRUE (Ashley Wall; [e-mail])

75) The best way of conducting business domestically is also typically the best way to conduct business internationally. FALSE ( Christine Nguyen; [e-mail] )

76) It is difficult to compare globalization of business over time because shifting national borders have changed the nature of transactions from domestic to international and vice versa.
TRUE (Linda Ho; [e-mail])

77) Most countries' imports account for more than half of their citizens' consumption. FALSE (Linda Ho; [e-mail])

78) The lowering of tax rates around the world is one of the seven major forces behind recent globalization. FALSE (Ashley Wall: [e-mail])

79) Globalization of business has been stimulated by institutional developments that aid foreign trade and investment. TRUE (Alysha Mistry : [e-mail])

80) The recent expansion of technology has contributed to the growth in international business by creating new products that are important in world trade. TRUE (Alysha Mistry: [e-mail])

81) Improvements in transportation and communications enable managers to better oversee foreign operations. TRUE (Rebekah Vang; [e-mail])

82) Import restrictions are becoming less important because consumers increasingly want to buy goods and services produced in their own countries. FALSE pages 9-10 ([e-mail])

83) Countries have reduced import trade barriers in the expectation that other countries will do the same. TRUE pages 10-11 ([e-mail])

84) Many companies merge with or acquire other companies to gain operating efficiencies that help them compete with or become global leaders. TRUE (Rebekah Vang; [e-mail])

85) It is rare for a new company to locate its operations near competitors and suppliers. FALSE page 9 ([e-mail])

86) Governments sometimes cooperate to deal with areas of concern that lie outside the territory of any one country. TRUE (Rebekah Vang; [e-mail])

87) Governments cooperate through treaties to create a global division of labor. FALSE (Rebekah Vang; [e-mail])

88) People favoring globalization claim that the process helps countries strengthen their sovereignty. FALSE page 12 (Genelle Garcia; [e-mail])

89) A criticism of globalization is that as economic growth increases, too many nonrenewable resources are used. TRUE (Rebekah Vang; [e-mail])

90) The process of shifting production to a foreign country is known as outsourcing. TRUE Daniel Guzman [e-mail]
I think it is offshoring? (Thu nguyen, [e-mail])

91) A major argument against offshoring is that cost savings are not passed on to consumers. TRUE (Aman Kooner [e-mail])
Thu nguyen: part one, counterpoint, p.14

92) Many professional basketball teams recruit tall youngsters in foreign countries into basketball camps where they can develop basketball skills and perhaps become candidates for professional play. This is an example of engaging in international business to acquire resources. TRUE (Aman Kooner [e-mail])

93) By operating internationally, a company may take advantage of business-cycle differences among countries and thereby reduce its financial risks.TRUE (Aman Kooner [e-mail])

94) The production of goods by a French company in Italy for sale in Italy is an example of an Italian merchandise import. FALSE page 17 (Genelle Garcia; [e-mail])

95) When a U.S. citizen flies Japan Airlines, it is a service export for Japan. TRUE (Aman Kooner [e-mail])

96) A joint venture is an example of a portfolio investment. FALSE (Daniel Guzman [e-mail])

97) The ownership of foreign bonds is an example of a portfolio investment. TRUE (Daniel Guzman [e-mail])

98) A multinational enterprise is a company that takes a global approach to markets and production. TRUE (Rebekah Vang; [e-mail])
99) The terms multinational corporation and multinational company are frequently used synonyms for strategic alliances. FALSE (Rebekah Vang; [e-mail])

100) Geographical barriers often affect distribution channels within countries, but they rarely affect communication. FALSE page 20 (Genelle Garcia; [e-mail])

101) Managers need to understand not only the laws of countries where they operate, but also how those laws are enforced. TRUE (Christine Nguyen; [e-mail])

102) A company with limited resources is more likely to achieve national distribution within a small country than within a large country. true (Christine Nguyen; [e-mail])

103) The fact that a company is the market leader in one country is no guarantee that it will be the leader in another country. TRUE (Christine Nguyen; [e-mail])

104) The view that globalization is inevitable is primarily based on the belief that international organizations will replace nation states. FALSE (Christine Nguyen; [e-mail])

105) The view that regionalization, rather than globalization, will prevail in the future is largely based on the use of common languages among countries in a region. FALSE “-is based on studies showing that almost all of the companies we think of as “global” conduct most of their business in home and neighboring countries” (23) (Shang Lin; [e-mail])