Chapter 1 Hill--International Business 8e

8/12/2019 Chapter 1 Hill--International Business 8e

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Chapter 01

Globalization

True / False Questions

1. The notion that national economies are relatively self-contained entities is on the rise.True False

2. The shift toard a more inte!rated and interdependent orld economy is referred to as!lobali"ation.True False

#. The mer!in! of historically distinct and separate markets into one hu!e !lobal marketplaceis knon as the !lobali"ation of markets.True False

$. The ma%ority of &.'. firms that export are lar!e multinationals that employ ()) or morepeople.True False

(. The most !lobal markets currently are markets for industrial !oods and materials that servea universal need the orld over.True False

*. +utsourcin! is a process that is limited to manufacturin! enterprises.True False

,. ecause of their nature service activities cannot be outsourced to other companies.True False



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. +ne of the &0 central mandates is the promotion of hi!her standards of livin! fullemployment and conditions of economic and social pro!ress and development.True False

. &nderlyin! the trend toards !reater !lobali"ation is technolo!ical chan!e and a decline inbarriers to the free flo of !oods services and capital.True False

1). ccordin! to the &nited 0ations most chan!es beteen 12 and 2))( to las !overnin!F34 have resulted in a less favorable environment for F34.True False

11. ccordin! to 5T+ data the volume of orld merchandise trade has !ron faster than theorld economy since 1().True False

12. The expansion of orld trade implies that nations are becomin! less dependent on eachother for important !oods and services.

True False

1#. 4n the period 1()-1) the orld 637 shoed a consistent decline as opposed to thevolume of exports.True False

1$. 3urin! the period 1) - 2))) the volume of total exports as more than tice the orld

637.True False



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1(. 3eclinin! barriers to cross-border trade and investment cannot be taken for !ranted.True False

1*. The !lobali"ation of markets and production and the resultin! !roth of orld tradeforei!n direct investment and imports all imply that firms are findin! their home marketsprotected from forei!n competitors.True False

1,. 8oore9s a predicts that the poer of microprocessor technolo!y doubles and its cost ofproduction falls by half every 1 months.True False

1. ;fficiency !ains associated ith containeri"ation have caused transportation costs to falldramatically.True False

1. Today !lobal communication netorks and !lobal media are creatin! a orldideculture.

True False

2). 4n the early 1*)s the &nited 'tates as by far the orld9s dominant industrial poer.


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22. ccordin! to forecasts a further relative decline in the share of orld output and orldexports accounted for by the &nited 'tates and other lon!-established developed nations isunlikely.True False

2#. current trend in international business is the !roth of medium-si"ed and smallmultinationals knon as mini-multinationals.True False

2$. Today the risks involved in doin! business in countries such as =ussia are lo but so arethe returns.

True False

2(. 4f the free market reforms in >hina continue for to more decades >hina may move fromThird 5orld status to industrial superpoer status even more rapidly than ?apan did.True False

2*. >urrent trends indicate that the orld is movin! rapidly toards an economic system that

is more favorable for international business.True False

2,. 8any economists politicians and business leaders believe that the shift toard a moreinte!rated and interdependent !lobal economy is a positive trend.True False

2. The anti!lobali"ation effort is created and supported only by a small !roup of hard-coreanarchists.True False



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2. 'tudies have shon that a!e rates for unskilled orkers in many advanced economieshave fallen in recent years.True False

#). 'ome critics ar!ue that outsourcin! has caused a!e rates of poorer mericans to fallsi!nificantly over the past @uarter of a century.True False

#1. =ecent evidence indicates that the solution to the problem of sta!nant incomes amon! theunskilled is to be found in increasin! society9s investment in education to reduce the supply ofunskilled orkers.

True False

#2. source of concern of critics of free trade is that it usually encoura!es firms fromadvanced countries to move manufacturin! facilities to less developed countries that lackade@uate re!ulations to protect labor and the environment from abuse.True False

##. ccordin! to supporters of free trade as countries !et richer they enact tou!herenvironmental and labor re!ulations.True False

#$. ccordin! to critics of !lobali"ation today9s interdependent !lobal economy limits anation9s national soverei!nty.True False

#(. >ritics of !lobali"ation su!!est that over the last century the !ap beteen the rich andpoor nations of the orld has shrunken.True False



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#*. 3ebt continues to be a ma%or burden for poorer nations as they strive to !et ahead.True False

#,. 'upporters of debt relief ar!ue that ne democratic !overnments in poor nations shouldnot be forced to honor debts that their corrupt and dictatorial predecessors incurred andmismana!ed lon! a!o.True False

#. n international business is any firm that en!a!es in international trade or investment.True False

#. The mana!ers of an international business must decide hether it is ethical to adhere tothe loer labor and environmental standards found in many less developed nations.True False

$). 4n !eneral mana!in! an international business is a more complex task than mana!in! abusiness that serves only the local market.True False

Multiple Choice Questions

$1. 5hich of the folloin! is not characteristic of !lobali"ationA. 0ational economies are turnin! into independent economic systems.. 8aterial culture is startin! to look similar the orld over.>. 7erceived distance is shrinkin! due to advances in transportation and telecommunications.3. arriers to cross-border trade and investment are declinin!.



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$2. 6lobali"ation has BBBBB the opportunities for a firm to expand its revenues by sellin!around the orld and BBBBB its costs by producin! in nations here key inputs are cheap.. reduced reduced. increased increased

>. increased reduced3. reduced increased

$#. 'ince the collapse of communism at the end of the 1)s the ersthile communist nationshave transformed their economies by encoura!in! all of the folloin! except:. privati"in! state-oned enterprises.. re!ulatin! markets.>. increasin! competition.3. elcomin! investment by forei!n businesses.

$$. 4dentify the incorrect statement concernin! !lobali"ation.. 4t has been blamed for unemployment in developed nations environmental de!radationand the mericani"ation of popular culture.. 4t has created ne threats for businesses accustomed to dominatin! their domestic markets.>. 4t is transformin! industries and is hi!hly elcomed by those ho believed their %obs ereprotected from forei!n competition.3. ccordin! to most economists it is a very beneficial process here !ains outei!h thelosses by a ide mar!in.

$(. 4n the &.'. BBBBB percent of firms that export are small companies employin! feer than1)) people.. ). ,(>. ()3. #)



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$*. The most !lobal markets currently are markets for:. services.. consumer !oods.>. consumer durables.

3. industrial !oods.

$,. 5hich of the folloin! is not an impediment that makes it difficult for firms to achievethe optimal dispersion of their productive activities to locations around the !lobeA. =educed transportation costs.. 6overnment re!ulations.>. 4ssues associated ith economic and political risk.3. arriers to forei!n direct investment.

$. The BBBBBB is primarily responsible for policin! the orld tradin! system and makin!sure nation-states adhere to the rules laid don in trade treaties si!ned by member states.. 4nternational 3evelopment ssociation. 5orld ank>. 4nternational >ourt of %ustice3. 5orld Trade +r!ani"ation

$. The BBBBB as created in 1$$ by $$ nations that met in reton 5oods 0e enter>. 5orld Trade +r!ani"ation3. &nited 0ations

(). The institution created in 1$$ at retton 5oods responsible for maintainin! order in theinternational monetary system is the

. 48F.. 5T+.>. &0.3. &0;'>+.



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(1. BBBBB occurCsD hen a firm exports !oods or services to consumers in another country.. 4nternational trade. Forei!n direct investment>. 4nard investment

3. 8er!er and ac@uisitions

(2. The BBBBB as established to remove barriers to the free flo of !oods services andcapital beteen nations.. &0. 48F>. 6TT3. 43

(#. t the 3oha =ound of the 5T+ in late 2))1. the 5T+ as established.. 6TT as extended to include services.>. orld trade volume increased.3. an a!enda as established to phase out subsidies to a!ricultural producers.

($. The reduction in the avera!e tariff rates on manufactured products since 1() implies all

of the folloin! except that. firms are dispersin! parts of their production process to !lobal locations to drive donproduction costs and increase product @uality.. the economies of the orld9s nation states are becomin! more intertined.>. nations are becomin! increasin!ly independent of each other for important !oods andservices.3. the orld has become si!nificantly ealthier since 1().



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((. The !roin! inte!ration of the orld economy is:. increasin! the intensity of competition in a ide ran!e of manufacturin! and serviceindustries.. decreasin! the intensity of competition in manufacturin! industries and increasin! the

intensity of competition in services.>. increasin! the intensity of competition in manufacturin! industries and decreasin! theintensity of competition in services.3. narroin! the scope of competition in a ide ran!e of service commodity andmanufacturin! industries.

(*. 5hich of the folloin! statements re!ardin! cross-border trade and investment is nottrueA. E7rotectionE from forei!n competitors has been at times demanded by the &nited 'tates.

. Forecasts indicate a return to the restrictive trade policies of the 12)s and #)s.>. 4f trade barriers decline no further they ill put a brake upon the !lobali"ation of bothmarkets and production.3. 4t is not clear hether the political ma%ority in the industriali"ed orld favors furtherreductions in trade barriers.

(,. 4dentify the incorrect statement pertainin! to the 5orld 5ide 5eb.. 4t makes it much easier for buyers and sellers to find each other.. ieed !lobally it is emer!in! as an e@uali"er.

>. 4t rolls back all of the constraints of location scale and time "ones.3. 4t allos businesses to expand their !lobal presence at a loer cost than ever before.

(. 'ince 1) the orld9s containership fleet has more than BBBBB reflectin! in part the!roin! volume of international trade.. doubled. tripled>. @uadrupled3. @uintupled



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(. Technolo!ical innovations have facilitated all of the folloin! except:. !lobali"ation of production.. !lobali"ation of markets.>. creation of electronic !lobal marketplaces.

3. creation of absolutely homo!eneous consumer markets.

*). lthou!h the characteristics of the !lobal economy have chan!ed dramatically over thepast #) years as late as the 1*)s all of the folloin! demo!raphic characteristics ere trueexcept:. the &.'. dominated the orld economy.. small &.'. entrepreneurial firms dominated the international business scene.>. the &.'. dominated the orld forei!n direct investment picture.3. rou!hly half the orld as !overned by centrally planned economies of the >ommunist

orld.

*1. 5hich of the folloin! nation9s orld output has declined the least over the last $) yearsA. France. &nited 'tates>. &nited Gin!dom3. >anada

*2. 5hich of the folloin! countries has had the maximum relative decline in its share oforld output since 1*#A. >anada. &nited 'tates>. ?apan3. 6ermany



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*#. 5hich of the folloin! statements pertainin! to the chan!in! demo!raphics of orld637 and trade from 1*# to 2))* is not trueA. s emer!in! economies continue to !ro a relative decline in the share of orld outputand orld exports accounted for by the &.'. seems unlikely.

. Forecasts predict a rapid rise in the share of orld output accounted for by somedevelopin! nations.>. decline in the share en%oyed by rich industriali"ed countries such as 6reat ritain6ermany ?apan and the &.'. is likely.3. 4f current trends continue the >hinese economy could be lar!er than that of the &.'. on apurchasin! poer parity basis.

*$. ccordin! to 5orld ank numbers. developin! nations currently account for more than *) percent of orld economic activity.

. rich nations currently account for more than ,) percent of orld economic activity.>. today9s rich nations may account for (( percent of orld economic activity by 2)2).3. today9s developin! nations may account for more than *) percent of orld economicactivity by 2)2).

*(. 4n the 1,)s many ?apanese firms invested in 0orth merica and ;urope. to avoid a hi!hly competitive domestic market.. to exploit hi!h domestic tariff barriers.>. as a hed!e a!ainst unfavorable currency movements.

3. to take advanta!e of lo labor costs.

**. 5hat is the total cumulative value of forei!n investments best referred to asA. ccumulation of forei!n shares. 7ortfolio investments>. 'tock of forei!n direct investments3. 'tock market investments



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*,. The share of the total F34 stock accounted for by hich of the folloin! countriesincreased markedly from 1) to 2))(A. &nited 'tates. France

>. &nited Gin!dom3. 0etherlands

*. Firms based in BBBBB accounted for 1$., percent of the stock of forei!n direct investmentin 2)), up from only 1.1 percent in 1).. sia. developin! countries>. &nited Gin!dom3. 0FT re!ion

*. 5hich of these statements pertainin! to cross-border F34 flos is trueA. The !roth of F34 resumed in 2))$ and continued throu!h 2))*.. sur!e in F34 from 1( to 1, as folloed by a slump from 1 to 2))).>. mon! developin! nations the lar!est recipient of F34 has been =ussia.3. The dramatic increase in F34 reflects the decreasin! internationali"ation of businesscorporations.

,). 5hich of the folloin! countries has been the lar!est recipient of forei!n directinvestment and received about H,) billion a year in inflos in 2))( and 2))*A. ra"il. =ussia>. 4ndia3. >hina

,1. y 2))* some 2$ of the orld9s 1)) lar!est non-financial multinationals ere:

. >hinese enterprises.. ritish enterprises.>. &.'. enterprises.3. ?apanese enterprises.



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,2. 4dentify the incorrect statement re!ardin! the former >ommunist nations of ;urope andsia.. The economies of most of the former >ommunist states are very stron! and developed.. 8any of the former >ommunist nations of ;urope and sia share a commitment to free

market economies.>. s a result of disturbin! si!ns of !roin! unrest and totalitarian tendencies the risksinvolved in doin! business in these countries is very hi!h.3. For about half a century these countries ere essentially closed to 5estern internationalbusiness.

,#. 5hich of the folloin! observations concernin! atin merican countries is trueA. >omplete restrictions on direct investment by forei!n firms.. >haracteri"ed by lo !roth hi!h debt and hyperinflation.

>. 3ebt and inflation are up compared to previous decades.3. 'ubstantial opportunities exist but are accompanied by substantial risks.

,$. 5hich of the folloin! statement pertainin! to chan!es in the !lobal economy of the 21stcentury is not trueA. arriers to the free flo of !oods services and capital have been comin! don.. olume of cross-border trade and investment has been !roin! more rapidly than !lobaloutput.>. 0ational economies are becomin! more independent and movin! aay from the !lobal

economic system.3. s economies advance more nations are %oinin! the ranks of the developed orld.

,(. 5hich of the folloin! does not help create an economic system that is favorable tointernational businessA. 3ecreased privati"ation. 5idespread dere!ulation>. +pen markets3. Fallin! trade and investment barriers



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,*. 5hen a company Eexports %obsE overseas the company is:. helpin! domestic orkers by pushin! up a!e rates.. increasin! the demand of @ualified domestic orkers.>. takin! advanta!e of loer a!es in forei!n markets.

3. deceivin! the supporters of !lobali"ation.

,,. 4f the critics of !lobali"ation are correct all of the folloin! thin!s must be shonexcept:. the share of national income received by labor as opposed to the share received by theoners of capital should have declined in advanced nations.. even thou!h labor9s share of the economic pie may have declined livin! standards need notdeteriorate if the si"e of the total pie has increased sufficiently to offset the decline in labor9sshare.

>. the decline in labor9s share of national income must be due to movin! production to lo-a!e countries as opposed to improvin! production technolo!y and productivity.3. economic !roth in developed nations has offset the fall in unskilled orkers9 share ofnational income raisin! their livin! standards.

,. study by the +;>3 hose members include the 2) richest economies in the orldnoted all of the folloin! except:. the !ap beteen the poorest and richest se!ments of society in some +;>3 countriesidened.

. in almost all countries real income levels rose over the 2)-year period studied.>. fallin! unemployment rates brou!ht !ains to lo-a!e orkers and fairly broad-baseda!e !roth.3. the !ap beteen rich and poor had narroed in all +;>3 countries.

,. >ritics of !lobali"ation maintain that the apparent decline in real a!e rates of unskilledorkers. oes far more to a technolo!y-induced shift ithin advanced economies toard %obs thatre@uire si!nificant education and skills.

. is due to the mi!ration of lo-a!e manufacturin! %obs offshore and a correspondin!reduction in demand for unskilled orkers.>. has been impacted most by technolo!ical chan!e.3. can be checked by increasin! society9s investment in education to reduce the supply ofunskilled orkers.



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). efore 0FT as passed. 8exico a!reed to establish a hi!her minimum a!e.. the &.'. a!reed to limit the number of %obs that could be exported to 8exico.>. 8exico committed to tou!her enforcement of environmental protection re!ulations.

3. >anada committed to establish ne limits of F34.

Essay Questions

1. 5ith the help of an example discuss the characteristics of !lobali"ation.

2. 3efine !lobali"ation and discuss it has chan!ed the business environmentA

#. ;xplain hat is meant by the !lobali"ation of markets. 7rovide an example. 5hat are themost !lobal marketsA



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$. 3iscuss the concept of the !lobali"ation of production.

(. 5hat is the 5orld Trade +r!ani"ationA 5hat is its role in the orld economyA

*. 5hat is the 4nternational 8onetary FundA 5hat is the 5orld ankA 5hat is theirrelationship if any ith each otherA

,. ;xplain ho a company competes usin! outsourcin!. 7rovide an example.



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. ;xplain the trends in orld trade and forei!n direct investment over the last half century.

.


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2. 3iscuss the demo!raphics of orld trade since the 1*)s.


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*. >onsider the !lobal economy of the 21stcentury. 5hat important chan!es are takin!placeA 5hat do these chan!es mean for international companiesA

,. >onsider hether the shift toard a more inte!rated and interdependent !lobal economyis a !ood thin!. 3iscuss the shift from the eyes of the consumer the orker the company andthe environmentalist.

. 3iscuss hat occurred in 'eattle in 1 at the meetin! of the 5T+ and hy the eventsere important to the future of !lobal trade.

. Fallin! barriers to international trade destroy manufacturin! %obs in ealthy advancedeconomies. 3iscuss this statement. 3o you a!reeA 5hy or hy notA



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1)). 3iscuss the effect of !lobali"ation on national soverei!nty.



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>hapter )1 6lobali"ation nser Gey

True / False Questions

1.(p. 4)The notion that national economies are relatively self-contained entities is on the rise.FALSE

5e are movin! aay from a orld in hich national economies ere relatively self-contained entities.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium

ea!ning "#$ecti%e: &

2.(p. )The shift toard a more inte!rated and interdependent orld economy is referred to as!lobali"ation.TRE

AACSB: Analytic

Bloom's: Comp!e*ensionDifficulty: +asyea!ning "#$ecti%e: &



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#.(p. )The mer!in! of historically distinct and separate markets into one hu!e !lobalmarketplace is knon as the !lobali"ation of markets.TRE

AACSB: Analytic

Bloom's: Knowledge

Difficulty: +asy


$.(p. )The ma%ority of &.'. firms that export are lar!e multinationals that employ ()) or morepeople.FALSE

AACSB: Analytic

Bloom's: KnowledgeDifficulty: +asy


(.(p. )The most !lobal markets currently are markets for industrial !oods and materials thatserve a universal need the orld over.TRE

AACSB: Analytic

Bloom's: KnowledgeDifficulty: Medium


*.(p. ,)+utsourcin! is a process that is limited to manufacturin! enterprises.FALSE

AACSB: -eflecti%e *in/ingBloom's: Comp!e*ension

Difficulty: Medium




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,.(p. ,)ecause of their nature service activities cannot be outsourced to other companies.FALSE

AACSB: -eflecti%e *in/ing

Bloom's: Comp!e*ension

Difficulty: Medium


.(p. )+ne of the &0 central mandates is the promotion of hi!her standards of livin! fullemployment and conditions of economic and social pro!ress and development.TRE

AACSB: Analytic



.(p. )&nderlyin! the trend toards !reater !lobali"ation is technolo!ical chan!e and adecline in barriers to the free flo of !oods services and capital.TRE



Difficulty: Mediumea!ning "#$ecti%e: &0

1).(p. 0)ccordin! to the &nited 0ations most chan!es beteen 12 and 2))( to las!overnin! F34 have resulted in a less favorable environment for F34.FALSE

AACSB: AnalyticBloom's: Knowledge

Difficulty: Medium

ea!ning "#$ecti%e: &0



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11.(p. 0)ccordin! to 5T+ data the volume of orld merchandise trade has !ron fasterthan the orld economy since 1().TRE

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


12.(p. 0)The expansion of orld trade implies that nations are becomin! less dependent oneach other for important !oods and services.FALSE


Bloom's: Comp!e*ensionDifficulty: Medium


1#.(p. 1)4n the period 1()-1) the orld 637 shoed a consistent decline as opposed tothe volume of exports.TRE

AACSB: Analytic



1$.(p. 0)3urin! the period 1) - 2))) the volume of total exports as more than tice theorld 637.TRE

AACSB: Analytic

Bloom's: Knowledge




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1(.(p. 4)3eclinin! barriers to cross-border trade and investment cannot be taken for !ranted.TRE



Difficulty: Medium


1*.(p. 1)The !lobali"ation of markets and production and the resultin! !roth of orld tradeforei!n direct investment and imports all imply that firms are findin! their home marketsprotected from forei!n competitors.FALSE

AACSB: Analytic

Bloom's: Comp!e*ensionDifficulty: +asy


1,.(p. 4)8oore9s a predicts that the poer of microprocessor technolo!y doubles and itscost of production falls by half every 1 months.TRE

AACSB: Analytic



1.(p. 2);fficiency !ains associated ith containeri"ation have caused transportation costs tofall dramatically.TRE






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1.(p. )Today !lobal communication netorks and !lobal media are creatin! a orldideculture.TRE

AACSB: ec*nology

Bloom's: Knowledge

Difficulty: Medium


2).(p. )4n the early 1*)s the &nited 'tates as by far the orld9s dominant industrialpoer.


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2#.(p. 0) current trend in international business is the !roth of medium-si"ed and smallmultinationals knon as mini-multinationals.TRE

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


2$.(p. 01)Today the risks involved in doin! business in countries such as =ussia are lo butso are the returns.FALSE

AACSB: Analytic

Bloom's: ApplicationDifficulty: Medium


2(.(p. 01)4f the free market reforms in >hina continue for to more decades >hina may movefrom Third 5orld status to industrial superpoer status even more rapidly than ?apan did.TRE

AACSB: Analytic



2*.(p. 04)>urrent trends indicate that the orld is movin! rapidly toards an economic systemthat is more favorable for international business.TRE


Bloom's: Knowledge




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2,.(p. 04)8any economists politicians and business leaders believe that the shift toard amore inte!rated and interdependent !lobal economy is a positive trend.TRE

AACSB: Analytic


Difficulty: +asy


2.(p. 0)The anti!lobali"ation effort is created and supported only by a small !roup of hard-core anarchists.FALSE

AACSB: Analytic



2.(p. 0,)'tudies have shon that a!e rates for unskilled orkers in many advancedeconomies have fallen in recent years.TRE

AACSB: Analytic



#).(p. 0)'ome critics ar!ue that outsourcin! has caused a!e rates of poorer mericans to fallsi!nificantly over the past @uarter of a century.TRE

AACSB: Analytic


Difficulty: +asyea!ning "#$ecti%e: &4



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#1.(p. 05)=ecent evidence indicates that the solution to the problem of sta!nant incomesamon! the unskilled is to be found in increasin! society9s investment in education to reducethe supply of unskilled orkers.TRE

AACSB: Analytic

Bloom's: Comp!e*ensionDifficulty: Medium


#2.(p. 05) source of concern of critics of free trade is that it usually encoura!es firms fromadvanced countries to move manufacturin! facilities to less developed countries that lackade@uate re!ulations to protect labor and the environment from abuse.TRE

AACSB: Analytic


Difficulty: Medium


##.(p. 05)ccordin! to supporters of free trade as countries !et richer they enact tou!herenvironmental and labor re!ulations.TRE

AACSB: Analytic

Bloom's: Knowledge


#$.(p. 1)ccordin! to critics of !lobali"ation today9s interdependent !lobal economy limits anation9s national soverei!nty.TRE

AACSB: AnalyticBloom's: Comp!e*ension

Difficulty: a!d




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#(.(p. 1)>ritics of !lobali"ation su!!est that over the last century the !ap beteen the richand poor nations of the orld has shrunken.FALSE

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


#*.(p. 10)3ebt continues to be a ma%or burden for poorer nations as they strive to !et ahead.TRE

AACSB: Analytic



#,.(p. 10)'upporters of debt relief ar!ue that ne democratic !overnments in poor nationsshould not be forced to honor debts that their corrupt and dictatorial predecessors incurred andmismana!ed lon! a!o.TRE

AACSB: Analytic

Bloom's: Comp!e*ensionDifficulty: a!d


#.(p. 11)n international business is any firm that en!a!es in international trade orinvestment.TRE

AACSB: Analytic

Bloom's: Knowledge




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#.(p. 11)The mana!ers of an international business must decide hether it is ethical to adhereto the loer labor and environmental standards found in many less developed nations.TRE



Difficulty: +asy


$).(p. 11)4n !eneral mana!in! an international business is a more complex task than mana!in!a business that serves only the local market.TRE

AACSB: Analytic



Multiple Choice Questions

$1.(p. 4)5hich of the folloin! is not characteristic of !lobali"ationAA!0ational economies are turnin! into independent economic systems..8aterial culture is startin! to look similar the orld over.

>.7erceived distance is shrinkin! due to advances in transportation and telecommunications.3.arriers to cross-border trade and investment are declinin!.

5e have been movin! aay from a orld in hich national economies ere relatively self-contained entities. nd e are movin! toard a orld in hich barriers to cross-border tradeand investment are declinin!.

AACSB: Analytic


Difficulty: Mediumea!ning "#$ecti%e: &



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$2.(p. 4)6lobali"ation has BBBBB the opportunities for a firm to expand its revenues by sellin!around the orld and BBBBB its costs by producin! in nations here key inputs are cheap..reduced reduced.increased increased

C!increased reduced3.reduced increased

The !lobal expansion of enterprises has been facilitated by favorable political and economictrends.

AACSB: AnalyticBloom's: Comp!e*ension

Difficulty: Medium


$#.(p. 2)'ince the collapse of communism at the end of the 1)s the ersthile communistnations have transformed their economies by encoura!in! all of the folloin! except:.privati"in! state-oned enterprises."!re!ulatin! markets.>.increasin! competition.3.elcomin! investment by forei!n businesses.

'ince the collapse of communism at the end of the 1)s the pendulum of public policy innation after nation has sun! toard the free market end of the economic spectrum. This hasalloed businesses both lar!e and small from both advanced nations and developin! nations

to expand internationally.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium




34/61


$$.(p. 2)4dentify the incorrect statement concernin! !lobali"ation..4t has been blamed for unemployment in developed nations environmental de!radationand the mericani"ation of popular culture..4t has created ne threats for businesses accustomed to dominatin! their domestic markets.

C!4t is transformin! industries and is hi!hly elcomed by those ho believed their %obs ereprotected from forei!n competition.3.ccordin! to most economists it is a very beneficial process here !ains outei!h thelosses by a ide mar!in.

s !lobali"ation unfolds it is transformin! industries and creatin! anxiety amon! those hobelieved their %obs ere protected from forei!n competition.

AACSB: Analytic



$(.(p. )4n the &.'. BBBBB percent of firms that export are small companies employin! feerthan 1)) people.A!).,(>.()3.#)

0early ) percent of firms that export are small businesses employin! less than 1)) people

and their share of total &.'. exports has !ron steadily over the last decade to no exceed 2)percent.

AACSB: Analytic

Bloom's: Knowledge




35/61


$*.(p. )The most !lobal markets currently are markets for:.services..consumer !oods.>.consumer durables.

#!industrial !oods.

The most !lobal markets currently are not markets for consumer productsIhere nationaldifferences in tastes and preferences are still often important enou!h to act as a brake on!lobali"ationIbut markets for industrial !oods and materials that serve a universal need theorld over.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


$,.(p. 5)5hich of the folloin! is not an impediment that makes it difficult for firms toachieve the optimal dispersion of their productive activities to locations around the !lobeAA!=educed transportation costs..6overnment re!ulations.>.4ssues associated ith economic and political risk.3.arriers to forei!n direct investment.

'ubstantial impediments still make it difficult for firms to achieve the optimal dispersion oftheir productive activities to locations around the !lobe. These impediments include formal

and informal barriers to trade beteen countries barriers to forei!n direct investmenttransportation costs and issues associated ith economic and political risk.

AACSB: Analytic


Difficulty: +asyea!ning "#$ecti%e: &



36/61


$.(p. 5)The BBBBBB is primarily responsible for policin! the orld tradin! system and makin!sure nation-states adhere to the rules laid don in trade treaties si!ned by member states..4nternational 3evelopment ssociation.5orld ank

>.4nternational >ourt of %ustice#!5orld Trade +r!ani"ation

s of 2)) 1(# nations that collectively accounted for , percent of orld trade ere 5T+members thereby !ivin! the or!ani"ation enormous scope and influence. The 5T+ is alsoresponsible for facilitatin! the establishment of additional multinational a!reements beteen5T+ member states.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: +asyea!ning "#$ecti%e: &

$.(p. &)The BBBBB as created in 1$$ by $$ nations that met in reton 5oods 0eenter>.5orld Trade +r!ani"ation3.&nited 0ations

The 5orld ank has focused on makin! lo-interest loans to cash-strapped !overnments in

poor nations that ish to undertake si!nificant infrastructure investments.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: +asy




37/61


().(p. &)The institution created in 1$$ at retton 5oods responsible for maintainin! orderin the international monetary system is theA!48F..5T+.

>.&0.3.&0;'>+.

The 48F is often seen as the lender of last resort to nation-states hose economies are inturmoil and currencies are losin! value a!ainst those of other nations.


Difficulty: +asy


(1.(p. )BBBBB occurCsD hen a firm exports !oods or services to consumers in anothercountry.A!4nternational trade.Forei!n direct investment>.4nard investment3.8er!er and ac@uisitions

Forei!n direct investment CF34D occurs hen a firm invests resources in business activitiesoutside its home country.

AACSB: Analytic

Bloom's: Comp!e*ensionDifficulty: +asy




38/61


(2.(p. )The BBBBB as established to remove barriers to the free flo of !oods services andcapital beteen nations..&0.48F

C!6TT3.43

&nder the umbrella of 6TT ei!ht rounds of ne!otiations amon! member states Cnonumberin! 1(#D have orked to loer barriers to the free flo of !oods and services. Themost recent round of ne!otiations to be completed knon as the &ru!uay =ound erefinali"ed in 3ecember 1#.

AACSB: Analytic

Bloom's: Knowledge


(#.(p. 0)t the 3oha =ound of the 5T+ in late 2))1.the 5T+ as established..6TT as extended to include services.>.orld trade volume increased.#!an a!enda as established to phase out subsidies to a!ricultural producers.

The 3oha a!enda includes cuttin! tariffs on industrial !oods services and a!riculturalproductsJ phasin! out subsidies to a!ricultural producersJ reducin! barriers to cross-border

investmentJ and limitin! the use of antidumpin! las.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d




39/61


($.(p. 1)The reduction in the avera!e tariff rates on manufactured products since 1() impliesall of the folloin! except that.firms are dispersin! parts of their production process to !lobal locations to drive donproduction costs and increase product @uality.

.the economies of the orld9s nation states are becomin! more intertined.C!nations are becomin! increasin!ly independent of each other for important !oods andservices.3.the orld has become si!nificantly ealthier since 1().

s trade expands nations are becomin! increasin!ly dependent on each other for important!oods and services.

AACSB: Analytic

Bloom's: Knowledge


((.(p. 1)The !roin! inte!ration of the orld economy is:A!increasin! the intensity of competition in a ide ran!e of manufacturin! and serviceindustries..decreasin! the intensity of competition in manufacturin! industries and increasin! theintensity of competition in services.>.increasin! the intensity of competition in manufacturin! industries and decreasin! theintensity of competition in services.3.narroin! the scope of competition in a ide ran!e of service commodity and

manufacturin! industries.

The !roin! inte!ration of the orld economy into a sin!le hu!e marketplace is increasin!the intensity of competition in a ran!e of manufacturin! and service industries.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: +asy




40/61


(*.(p. 4)5hich of the folloin! statements re!ardin! cross-border trade and investment is nottrueA.E7rotectionE from forei!n competitors has been at times demanded by the &nited 'tates."!Forecasts indicate a return to the restrictive trade policies of the 12)s and #)s.

>.4f trade barriers decline no further they ill put a brake upon the !lobali"ation of bothmarkets and production.3.4t is not clear hether the political ma%ority in the industriali"ed orld favors furtherreductions in trade barriers.

lthou!h a return to the restrictive trade policies of the 12)s and #)s is unlikely it is notclear hether the political ma%ority in the industriali"ed orld favors further reductions intrade barriers.

AACSB: Analytic

Bloom's: KnowledgeDifficulty: a!d


(,.(p. 4)4dentify the incorrect statement pertainin! to the 5orld 5ide 5eb..4t makes it much easier for buyers and sellers to find each other..ieed !lobally it is emer!in! as an e@uali"er.C!4t rolls back all of the constraints of location scale and time "ones.3.4t allos businesses to expand their !lobal presence at a loer cost than ever before.

4t rolls backsomeof the constraints of location scale and time "ones. The 5eb makes it

much easier for buyers and sellers to find each other herever they may be located andhatever their si"e. 4t allos businesses both small and lar!e to expand their !lobal presenceat a loer cost than ever before.


Difficulty: Medium




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(.(p. 2)'ince 1) the orld9s containership fleet has more than BBBBB reflectin! in part the!roin! volume of international trade..doubled.tripled

C!@uadrupled3.@uintupled

s a result of the efficiency !ains associated ith containeri"ation transportation costs haveplummeted makin! it much more economical to ship !oods around the !lobe thereby helpin!to drive the !lobali"ation of markets and production.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


(.(p. )Technolo!ical innovations have facilitated all of the folloin! except:.!lobali"ation of production..!lobali"ation of markets.>.creation of electronic !lobal marketplaces.#!creation of absolutely homo!eneous consumer markets.

5hile modern communication and transportation technolo!ies are usherin! in the E!lobalvilla!eE si!nificant national differences remain in culture consumer preferences andbusiness practices.


Difficulty: +asy




42/61


*).(p. )lthou!h the characteristics of the !lobal economy have chan!ed dramatically overthe past #) years as late as the 1*)s all of the folloin! demo!raphic characteristics eretrue except:.the &.'. dominated the orld economy.

"!small &.'. entrepreneurial firms dominated the international business scene.>.the &.'. dominated the orld forei!n direct investment picture.3.rou!hly half the orld as !overned by centrally planned economies of the >ommunistorld.

4n 1*# the &nited 'tates accounted for $).# percent of orld economic activity measured by6ross 3omestic 7roduct C637D. y 2)) the &nited 'tates accounted for 2)., percent oforld 637 still the orld9s lar!est industrial poer but don si!nificantly in relative si"esince the 1*)s.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


*1.(p. 3)5hich of the folloin! nation9s orld output has declined the least over the last $)yearsA.France.&nited 'tates>.&nited Gin!dom#!>anada

Table 1.2: The >han!in! 3emo!raphics of 5orld 637 and Trade

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!dea!ning "#$ecti%e: &1



43/61


*2.(p. 3)5hich of the folloin! countries has had the maximum relative decline in its shareof orld output since 1*#A.>anada"!&nited 'tates

>.?apan3.6ermany

Table 1.2: The >han!in! 3emo!raphics of 5orld 637 and Trade

AACSB: Analytic



*#.(p. 3)5hich of the folloin! statements pertainin! to the chan!in! demo!raphics of orld637 and trade from 1*# to 2))* is not trueAA!s emer!in! economies continue to !ro a relative decline in the share of orld outputand orld exports accounted for by the &.'. seems unlikely..Forecasts predict a rapid rise in the share of orld output accounted for by somedevelopin! nations.>. decline in the share en%oyed by rich industriali"ed countries such as 6reat ritain6ermany ?apan and the &.'. is likely.3.4f current trends continue the >hinese economy could be lar!er than that of the &.'. on apurchasin! poer parity basis.

s emer!in! economies such as >hina 4ndia and ra"il continue to !ro a further relativedecline in the share of orld output and orld exports accounted for by the &nited 'tates andother lon!-established developed nations seems likely.


Difficulty: a!d




44/61


*$.(p. 3)ccordin! to 5orld ank numbers.developin! nations currently account for more than *) percent of orld economic activity..rich nations currently account for more than ,) percent of orld economic activity.>.today9s rich nations may account for (( percent of orld economic activity by 2)2).

#!today9s developin! nations may account for more than *) percent of orld economicactivity by 2)2).

The 5orld ank has estimated that today9s developin! nations may account for more than *)percent of orld economic activity by 2)2) hile today9s rich nations hich currentlyaccount for more than (( percent of orld economic activity may account for only about #percent.

AACSB: Analytic

Bloom's: Knowledge


*(.(p. 5)4n the 1,)s many ?apanese firms invested in 0orth merica and ;urope.to avoid a hi!hly competitive domestic market..to exploit hi!h domestic tariff barriers.C!as a hed!e a!ainst unfavorable currency movements.3.to take advanta!e of lo labor costs.

e!innin! in the 1,)s ;uropean and ?apanese firms be!an to shift labor-intensivemanufacturin! operations from their home markets to developin! nations here labor costs

ere loer. 4n addition many ?apanese firms invested in 0orth merica and ;uropeIoftenas a hed!e a!ainst unfavorable currency movements and the possible imposition of tradebarriers.


Difficulty: Medium




45/61


**.(p. 5)5hat is the total cumulative value of forei!n investments best referred to asA.ccumulation of forei!n shares.7ortfolio investmentsC!'tock of forei!n direct investments

3.'tock market investments

The stock of forei!n direct investment refers to the total cumulative value of forei!ninvestments.

AACSB: Analytic



*,.(p. 5)The share of the total F34 stock accounted for by hich of the folloin! countriesincreased markedly from 1) to 2))(A.&nited 'tates"!France>.&nited Gin!dom3.0etherlands

The share of the total stock accounted for by &.'. firms declined from about # percent in1) to 1,. percent in 2)),. 8eanhile the shares accounted for by France and the orld9sdevelopin! nations increased markedly.

AACSB: Analytic





46/61


*.(p. 5)Firms based in BBBBB accounted for 1$., percent of the stock of forei!n directinvestment in 2)), up from only 1.1 percent in 1)..sia"!developin! countries

>.&nited Gin!dom3.0FT re!ion

Firms based in hinaaccounted for much of this investment.


Difficulty: Medium


*.(p. 0&)5hich of these statements pertainin! to cross-border F34 flos is trueAA!The !roth of F34 resumed in 2))$ and continued throu!h 2))*.. sur!e in F34 from 1( to 1, as folloed by a slump from 1 to 2))).>.mon! developin! nations the lar!est recipient of F34 has been =ussia.3.The dramatic increase in F34 reflects the decreasin! internationali"ation of businesscorporations.

sur!e in forei!n direct investment from 1 to 2))) as folloed by a slump from 2))1to 2))#. mon! developin! nations the lar!est recipient of forei!n direct investment hasbeen >hina. Throu!hout the 1)s the amount of investment directed at both developed and

developin! nations increased dramatically a trend that reflects the increasin!internationali"ation of business corporations.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!dea!ning "#$ecti%e: &1



47/61


,).(p. 0&)5hich of the folloin! countries has been the lar!est recipient of forei!n directinvestment and received about H,) billion a year in inflos in 2))( and 2))*A.ra"il.=ussia

>.4ndia#!>hina

mon! developin! nations the lar!est recipient of forei!n direct investment has been >hinahich in 2))$-2)) received H*)-H) billion a year in inflos.


Difficulty: Medium


,1.(p. 0)y 2))* some 2$ of the orld9s 1)) lar!est non-financial multinationals ere:.>hinese enterprises..ritish enterprises.C!&.'. enterprises.3.?apanese enterprises.

y 2))* thin!s had shifted si!nificantly. 'ome 2$ of the orld9s 1)) lar!est non-financialmultinationals ere &.'. enterprisesJ 1# ere FrenchJ 12 6ermanJ 12 ritishJ and ?apanese. The !lobali"ation of the orld economy has resulted in a relative decline in thedominance of &.'. firms in the !lobal marketplace.


Difficulty: Medium




48/61


,2.(p. 01)4dentify the incorrect statement re!ardin! the former >ommunist nations of ;uropeand sia.A!The economies of most of the former >ommunist states are very stron! and developed..8any of the former >ommunist nations of ;urope and sia share a commitment to free

market economies.>.s a result of disturbin! si!ns of !roin! unrest and totalitarian tendencies the risksinvolved in doin! business in these countries is very hi!h.3.For about half a century these countries ere essentially closed to 5estern internationalbusiness.

The economies of many of the former >ommunist states are still relatively undeveloped andtheir continued commitment to democracy and free market economics cannot be taken for!ranted.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


,#.(p. 01)5hich of the folloin! observations concernin! atin merican countries is trueA.>omplete restrictions on direct investment by forei!n firms..>haracteri"ed by lo !roth hi!h debt and hyperinflation.>.3ebt and inflation are up compared to previous decades.#!'ubstantial opportunities exist but are accompanied by substantial risks.

Throu!hout most of atin merica debt and inflation are don !overnments have sold state-oned enterprises to private investors forei!n investment is elcomed and the re!ion9seconomies have expanded. These chan!es have increased the attractiveness of atin mericaboth as a market for exports and as a site for forei!n direct investment.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium




49/61


,$.(p. 04)5hich of the folloin! statement pertainin! to chan!es in the !lobal economy of the21stcentury is not trueA.arriers to the free flo of !oods services and capital have been comin! don..olume of cross-border trade and investment has been !roin! more rapidly than !lobal

output.C!0ational economies are becomin! more independent and movin! aay from the !lobaleconomic system.3.s economies advance more nations are %oinin! the ranks of the developed orld.

The volume of cross-border trade and investment has been !roin! more rapidly than !lobaloutput indicatin! that national economies are becomin! more closely inte!rated into a sin!leinterdependent !lobal economic system.

AACSB: Analytic



,(.(p. 04)5hich of the folloin! does not help create an economic system that is favorable tointernational businessAA!3ecreased privati"ation.5idespread dere!ulation>.+pen markets3.Fallin! trade and investment barriers

4n keepin! ith the normative prescriptions of liberal economic ideolo!y in country aftercountry e have seen state-oned businesses privati"ed idespread dere!ulation adoptedmarkets opened to more competition and commitment increased to removin! barriers tocross-border trade and investment.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium




50/61


,*.(p. 0)5hen a company Eexports %obsE overseas the company is:.helpin! domestic orkers by pushin! up a!e rates..increasin! the demand of @ualified domestic orkers.C!takin! advanta!e of loer a!es in forei!n markets.

3.deceivin! the supporters of !lobali"ation.

>00 nes anchor ou 3obbs has been runnin! T shos that are hi!hly critical of the trendby merican companies to take advanta!e of !lobali"ation and Eexport %obsE overseas. s theorld slipped into a recession in 2)) 3obbs stepped up his anti !lobali"ation rhetoric.


Difficulty: Medium


,,.(p. 0,)4f the critics of !lobali"ation are correct all of the folloin! thin!s must be shonexcept:.the share of national income received by labor as opposed to the share received by theoners of capital should have declined in advanced nations..even thou!h labor9s share of the economic pie may have declined livin! standards need notdeteriorate if the si"e of the total pie has increased sufficiently to offset the decline in labor9sshare.>.the decline in labor9s share of national income must be due to movin! production to lo-a!e countries as opposed to improvin! production technolo!y and productivity.#!economic !roth in developed nations has offset the fall in unskilled orkers9 share of

national income raisin! their livin! standards.

This is the position ar!ued by supporters of !lobali"ation.


Difficulty: a!d




51/61


,.(p. 0,) study by the +;>3 hose members include the 2) richest economies in theorld noted all of the folloin! except:.the !ap beteen the poorest and richest se!ments of society in some +;>3 countriesidened.

.in almost all countries real income levels rose over the 2)-year period studied.>.fallin! unemployment rates brou!ht !ains to lo-a!e orkers and fairly broad-baseda!e !roth.#!the !ap beteen rich and poor had narroed in all +;>3 countries.

study by the +r!ani"ation for ;conomic >ooperation and 3evelopment hose membersinclude the 2) richest economies in the orld noted that hile the !ap beteen the poorestand richest se!ments of society in some +;>3 countries had idened this trend as by nomeans universal.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d


,.(p. 05)>ritics of !lobali"ation maintain that the apparent decline in real a!e rates ofunskilled orkers.oes far more to a technolo!y-induced shift ithin advanced economies toard %obs thatre@uire si!nificant education and skills."!is due to the mi!ration of lo-a!e manufacturin! %obs offshore and a correspondin!reduction in demand for unskilled orkers.

>.has been impacted most by technolo!ical chan!e.3.can be checked by increasin! society9s investment in education to reduce the supply ofunskilled orkers.

'upporters of !lobali"ation maintain that the apparent decline in real a!e rates of unskilledorkers oes far more to a technolo!y-induced shift ithin advanced economies aay from%obs here the only @ualification as a illin!ness to turn up for ork every day and toard%obs that re@uire si!nificant education and skills.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d




52/61


).(p. 05)efore 0FT as passed.8exico a!reed to establish a hi!her minimum a!e..the &.'. a!reed to limit the number of %obs that could be exported to 8exico.C!8exico committed to tou!her enforcement of environmental protection re!ulations.

3.>anada committed to establish ne limits of F34.

'upporters of free trade point out that it is possible to tie free trade a!reements to theimplementation of tou!her environmental and labor las in less developed countries.0FT for example as passed only after side a!reements had been ne!otiated thatcommitted 8exico to tou!her enforcement of environmental protection re!ulations.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


Essay Questions

1.(p. 4)5ith the help of an example discuss the characteristics of !lobali"ation.

6lobali"ation refers to a fundamental shift in the orld economy in hich national economiesare no lon!er relatively self-contained entities. 4nstead nations are movin! toard aninterdependent !lobal economic system. 5ithin this ne !lobal economy an merican mi!htdrive to ork in a car desi!ned in 6ermany that as assembled in 8exico by

3aimler>hrysler from components made in the &.'. and ?apan that ere fabricated fromGorean steel and 8alaysian rubber. company does not have to be the si"e of thesemultinational !iants to facilitate and benefit from the !lobali"ation of markets.


Difficulty: Medium




53/61


2.(p. 42)3efine !lobali"ation and discuss it has chan!ed the business environmentA

6lobali"ation has created many opportunities for businesses to expand their revenues bysellin! around the orld hile at the same time reducin! their costs by producin! in nations

here labor and other inputs are cheap. oca->ola'tarbucks and 8c3onald9s offer the same basic product orldide and are in fact not only apart of the trend but facilitators of the trend as ell. The most !lobal markets are not actuallyfor consumer !oods but instead are for industrial !oods and materials that serve the sameneeds across the orld.

AACSB: Analytic

Bloom's: Knowledge


$.(p. 35)3iscuss the concept of the !lobali"ation of production.

The !lobali"ation of production refers to the sourcin! of !oods and services from locationsaround the orld to take advanta!e of national differences in the cost and @uality of factors ofproduction. >ompanies that capitali"e on this trend are able to outsource production to thebest suppliers in the orld and should therefore end up ith a better final product.

AACSB: Analytic





54/61


(.(p. 5&)5hat is the 5orld Trade +r!ani"ationA 5hat is its role in the orld economyA

The 5orld Trade +r!ani"ation C5T+D is primarily responsible for policin! the orld tradin!system and makin! sure nation-states adhere to the rules laid don in trade treaties si!ned by

5T+ members. The 5T+ currently has 1$ members that collectively account for , percentof orld trade. The 5T+ has been instrumental in loerin! barriers to cross-border trade andinvestment. 4n addition to these responsibilities the 5T+ also facilitates the establishment ofadditional a!reements beteen member states.

AACSB: Analytic



*.(p. &)5hat is the 4nternational 8onetary FundA 5hat is the 5orld ankA 5hat is theirrelationship if any ith each otherA

The 4nternational 8onetary Fund C48FD as created to maintain order in the internationalmonetary system. The 5orld ank as established to promote economic development. othor!ani"ations ere launched as part of the 1$$ retton 5oods !reement and haveemer!ed as si!nificant players in the !lobal economy. The 48F is often seen as the lender oflast resort to nation-states hose economies are in turmoil and currencies are losin! valuea!ainst those of other nations.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium




55/61


,.(p. 0);xplain ho a company competes usin! outsourcin!. 7rovide an example.

>ompanies compete by outsourcin! manufacturin! activities to the optimal location hereverin the orld that may beJ !iven production and transportation costs. Thus a firm mi!ht desi!n

a product in one country produce component parts in to other countries assemble theproduct in yet another country and then export the finished product around the orld. 48for example desi!ned a laptop computer in the &.'. outsourced production of the casekeyboard and hard drive to Thailand produced the display screen and memory in 'outhGorea the ireless card in 8alaysia and the microprocessor in the &.'. The final productas assembled in 8exico and as then exported to the &.'. for sale.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


.(p. 14);xplain the trends in orld trade and forei!n direct investment over the last halfcentury.

'ince 1() the volume of orld merchandise trade has !ron faster than the orld economy.4n particular there has been acceleration in orld trade since 1). This trade and investmentpattern implies that firms are dispersin! parts of their production to different locations aroundthe orld to drive don production costs and increase product @uality that the economies ofthe orld9s nation states are becomin! more intertined that forei!n direct investment isplayin! an increasin! role in the !lobal economy as firms increase their cross-border

investments and that the orld has become si!nificantly ealthier over the last () years.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d




56/61


.(p. 4)


57/61


1.(p. 42)4nnovations in transportation have had a ma%or impact on !lobal trade. >onsiderone of these innovations: containeri"ation. 5hy is this innovation so si!nificantA

>ontaineri"ation has revolutioni"ed the transportation business si!nificantly loerin! the

costs of shippin! !oods over lon! distances. ;mer!in! in the 1,)s and 1)scontaineri"ation spelled an end to the costly and len!thy business of loadin! and unloadin!ships trucks and trains. >ost savin!s associated ith containeri"ation are si!nificant.eteen 12) and 1) avera!e ocean frei!ht and port char!es per ton fell from H( to H2.ir transportation sa a similar decline as did truckin!.


Difficulty: Medium


2.(p. ,)3iscuss the demo!raphics of orld trade since the 1*)s. hina. 8ostforecasts predict that the share of orld output accounted for by developin! countries such as>hina 4ndia and 8exico ill rise over the next 2) years hile at the same time rich

industriali"ed countries ill continue to see their share of orld output decline.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d




58/61


#.(p. ,0&)hina also emer!ed as an important destination for F34.

AACSB: Analytic

Bloom's: KnowledgeDifficulty: a!d


$.(p. 0&0)5hat is a multinational enterprise C80;DA


59/61


(.(p. 01)8any companies are keepin! their eyes on >hina. 5hy is >hina so important tointernational businessA

4nternational companies are excited about >hina because ith its 1.# billion people it

represents a hu!e and lar!ely untapped market for !oods and services. >ompanies are sointerested in its potential that F34 to >hina sur!ed beteen 1# and 2))$ !oin! from lessthan H2 billion in 1# to H,) billion in 2))*. hina remains a very attractivemarket companies must beare of the competition that is be!innin! to emer!e from thecountry.


Difficulty: a!d


*.(p. 04)>onsider the !lobal economy of the 21stcentury. 5hat important chan!es are takin!placeA 5hat do these chan!es mean for international companiesA

The last 2( years have been a time of !reat chan!e in the !lobal economy. arriers to the freeflo of !oods services and capital have been fallin! national economies are becomin! moreinte!rated and more countries are %oinin! the ranks of the developed orld. ll of thesechan!es point toard an economic system that is more favorable for international business.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d




60/61


,.(p. 041)>onsider hether the shift toard a more inte!rated and interdependent !lobaleconomy is a !ood thin!. 3iscuss the shift from the eyes of the consumer the orker thecompany and the environmentalist.

There are many advanta!es of !lobali"ation. From a broad perspective !lobali"ation createseconomic activity Chich stimulates economic !rothD creates %obs raises income levels andprovides consumers ith more choices in re!ard to the products and services that areavailable to them. From the perspective of an individual firm !lobali"ation has the potentialto increase revenues Cthrou!h expanded market potentialD drive don costs Cthrou!hadditional economies of scaleD and boost profits.ritics also ar!ue that !lobali"ation encoura!es firms fromadvanced nations to move manufacturin! facilities offshore to less developed countries to

avoid the more strin!ent pollution controls in place in their home countries.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: a!d


.(p. 020)3iscuss hat occurred in 'eattle in 1 at the meetin! of the 5T+ and hy theevents ere important to the future of !lobal trade.

4n 3ecember 1 more than $)))) protesters blocked the streets of 'eattle in an effort toshut don a 5T+ meetin! bein! held in the city. The issue as %ob losses in industries underattack from forei!n competitors fallin! a!e rates of unskilled orkers environmentalde!radations and cultural imperialism of !lobal media and 80;s. 7rotesters believed that allof these issues ere the result of !lobali"ation and felt that the 5T+ as a promoter of!lobali"ation as a le!itimate tar!et for blame. The protest as a violent one andemboldened by the experience its experience anti!lobali"ation protesters no turn up atalmost every ma%or meetin! of a !lobal institution.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium




61/61


.(p. 005)Fallin! barriers to international trade destroy manufacturin! %obs in ealthyadvanced economies. 3iscuss this statement. 3o you a!reeA 5hy or hy notA

>ritics ar!ue that fallin! trade barriers allo firms to move manufacturin! activities to

countries here a!e rates are much loer. ecause of such moves they ar!ue that the a!erates of poorer mericans have fallen si!nificantly over the past @uarter of a century.'upporters of !lobali"ation reply that critics of these trends miss the essential point about freetradeIthe benefits outei!h the costs. They ar!ue that free trade ill result in countriesspeciali"in! in the production of those !oods and services that they can produce mostefficiently hile importin! !oods and services that they cannot produce as efficiently.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


1)).(p. 1)3iscuss the effect of !lobali"ation on national soverei!nty.

>ritics of !lobali"ation ar!ue that today9s increasin!ly interdependent !lobal economy shiftseconomic poer aay from national !overnments and toard supranational or!ani"ations.They feel that unelected bureaucrats no impose policies on the democratically elected!overnments of nation-states thereby underminin! the soverei!nty of those states andlimitin! the nation9s ability to control its on destiny.4n contrast many economists and politicians maintain that the poer of supranationalor!ani"ations is limited to hat nation-states collectively a!ree to !rant. They ar!ue that these

bodies exist to serve the collective interests of member states not to subvert those interests.'upporters of supranational or!ani"ations point out that the poer of these bodies restslar!ely on their ability to persuade member states to follo a certain action. 4n this vie realpoer still resides ith individual nation-states not supranational or!ani"ations.

AACSB: Analytic

Bloom's: Knowledge

Difficulty: Medium


Documents

Chapter 1 Hill--International Business 8e