Test Bank For GLOBAL 2nd Edition by Peng

Chapter 1Globalizing Business
TRUE/FALSE
1. A multinational enterprise is a firm that engages in foreign direct investment by directly investing in,
controlling, and managing value-added activities in other countries.
ANS: T
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: pp. 4-5
NAT: AACSB: Tier 1 Analytic | Tier 2 Creation of Value
2. The terms international business (IB) and global business are synonymous.
ANS: F
OBJ: 1.1
PTS: 1
DIF: Easy
REF: p. 5
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Strategy
3. The term international business always refers to business activities conducted abroad.
ANS: F
OBJ: 1.1
PTS: 1
DIF: Difficult
REF: p. 5
NAT: AACSB: Tier 1 Communication | Tier 2 Environmental Influences
4. Global business includes both international (cross-border) activities as well as domestic business
activities.
ANS: T
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 5
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Environmental Influences
5. Emerging markets contribute about 25% of global GDP when adjusted for purchasing power parity,
PPP.
ANS: F
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: pp. 5-6
NAT: AACSB: Tier 1 Analytic | Tier 2 Environmental Influences
6. The term "base of the pyramid" represents economies in which individuals make less than $2,000 a
year.
ANS: T
OBJ: 1.1
PTS: 1
DIF: Easy
REF: p. 6
7. The greatest number of opportunities for global businesses is opened at the "top of the pyramid,"
where individuals have the greatest purchasing power.
ANS: F
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 6
8. Most top managers of large firms lack significant global competence.

ANS: F
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
9. Expatriate managers make ideal candidates for top management positions.

ANS: T
PTS: 1
DIF: Easy
REF: p. 7
OBJ: 1.2
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Motivation Concepts
10. Expatriate managers are usually paid salaries coinciding with the salaries paid to foreign local
managers of similar rank.
ANS: F
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
11. International premium is a significant pay raise awarded to expatriate employees working abroad.
ANS: T
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
12. Expatriate employees face fewer and lower-ranked employment opportunities upon return to the US.
ANS: F
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
13. Approximately 80 million people worldwide are employed by foreign-owned firms.

ANS: T
OBJ: 1.2
PTS: 1
DIF: Difficult
REF: p. 7
14. The institution- and resource-based views are two core perspectives answering the fundamental
question: "What determines the success and failure of firms around the globe?"
ANS: T
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: pp. 8-9
NAT: AACSB: Tier 1 Communication | Tier 2 Strategy
15. Formal rules refer to government regulations regarding foreign and domestic firms. In most modern
emerging environments, formal rules ensure equal playing field for all companies, regardless of origin.
ANS: T
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 9
16. Due to informal rules such as culture and ethics, some developed economies have a hard time fostering
entrepreneurship.
ANS: T
OBJ: 1.3
PTS: 1
DIF: Difficult
REF: p. 9
17. Possessing intimate knowledge about the formal and informal rules governing competition in various
countries is sufficient to succeed globally.
ANS: F
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 10
18. Firms that are able to succeed in difficult, harsh, even hostile foreign environments, established by
unfavorable formal and informal rules, possess unique firm-specific resources and capabilities not
shared by competitors.
ANS: T
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 10
19. Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties
because of their non-native status.
ANS: T
OBJ: 1.3
PTS: 1
DIF: Easy
REF: p. 10
20. Most opponents of globalization view globalization as a long-run historical evolution since the dawn
of human history.
ANS: F
OBJ: 1.4
PTS: 1
DIF: Easy
REF: p. 10
21. Globalization is a relatively new phenomenon triggered by the information revolution of the late
1980s.
ANS: F
OBJ: 1.4
PTS: 1
DIF: Moderate
REF: pp. 10-11
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Information Technology
22. According to the pendulum view, globalization has been perceived both positively and negatively
throughout history.
ANS: T
OBJ: 1.4
PTS: 1
DIF: Difficult
REF: p. 11
23. The world economy at the beginning of the 21st century is an approximately $55 trillion economy
(GDP calculated at official, nominal exchange rates).
ANS: T
OBJ: 1.5
PTS: 1
DIF: Moderate
REF: p. 13
24. Executives, policymakers, and scholars have carefully evaluated the social, political, and
environmental costs associated with globalization.
ANS: F
OBJ: 1.5
PTS: 1
DIF: Difficult
REF: p. 15
25. Many proponents of globalization are nongovernmental organizations (NGOs).

ANS: F
OBJ: 1.5
PTS: 1
DIF: Difficult
REF: p. 15
MULTIPLE CHOICE
1. The firm that engages in foreign direct investment is a:
a. Global firm
b. Multinational enterprise
c. International enterprise
d. Foreign direct investor
ANS: B
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 4
2. Which of the following definitions of the international/global business represents the author's view?
a.
b.
c.
d.
A business that engages in international economic activities

The action of doing business abroad
Business around the globe including international and domestic business activities
All of these answers
ANS: C
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 5
3. Which of the following terms best describes foreign direct investment?

a. Directly investing in, controlling, and managing value-added activities in other countries.
b. Directly investing in, controlling, and managing value-added activities in other markets.
c. Directly investing in shares of multinational enterprise.
d. All of these answers
ANS: A
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: pp. 4-5
NAT: AACSB: Tier 1 Analytic | Tier 2 Strategy
4. In the 1990s, the term "emerging economy/market" replaced the commonly used term:
a. Fast growing economy/market
b. Developing economy/market
c. Undeveloped economy/market
d. Third world economy/market
ANS: B
OBJ: 1.1
PTS: 1
DIF: Easy
REF: p. 6
5. ____ is/are measured as the sum of value added by resident firms, households, and government
operating in an economy.
a. Gross national product
c. Gross domestic product
b. Gross national income
d. National reserves
ANS: C
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 5
6. In order to better compare/contrast costs of living in the various environments GNP/GDP may be
adjusted to:
a. PPP (purchasing power parity)
b. Foreign exchange rate
c. Country's inflation rate
d. Five-year national bond appreciation/depreciation
ANS: A
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 6
7. The global economy can be viewed as a pyramid. The Triad represents:

a. US, Germany, England
b. US, Western Europe, China
c. Brazil, India, China
d. North America, Western Europe, Japan
ANS: D
OBJ: 1.1
PTS: 1
DIF: Moderate
REF: p. 6
8. According to the text, most MNEs are ____ the base of the pyramid.
a. Focusing on
b. Ignoring
c. Aware of countless opportunities of

d. Considering FDI in the economies at
ANS: B
OBJ: 1.1
PTS: 1
DIF: Easy
REF: p. 6
9. Which of the following is NOT a reason why global business should be studied?
a. Because many ambitious students aspire to join the top ranks of large firms.
b. To acquire hands-on global experience in global business.
c. Because many top rank managers are selected from the pool of expatriate managers
d. In order for one's earning potential to be maximized.
ANS: B
OBJ: 1.2
PTS: 1
DIF: Difficult
REF: p. 7
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 HRM
10. Which of the following definitions best defines an expatriate manager?

a. A manager who works outside his or her native country
b. A manager of great expertise
c. An ex-manager rehired for advisory purposes
d. None of these answers
ANS: A
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
NAT: AACSB: Tier 1 Communication | Tier 2 HRM
11. In addition to their regular compensation, managers working abroad are awarded with
a. Global fringe benefits
b. Foreign pension plan
c. International premium
d. Health insurance
ANS: C
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
12. When an expat employee returns to her or his current employer but the employer does not provide
attractive opportunities, she/he often may be hired by a competitor firm. Why?
a. Competitor firms are also interested in globalizing their business.
b. Former expats bring instant expertise and experience.
c. Competing firms will pay a higher premium for expertise.
ANS: D
OBJ: 1.2
PTS: 1
DIF: Easy
REF: p. 7
13. Why study global business?

a. In order to increase one's employability
b. In order not to get Bangalored or Shanghaied
c. In order to better understand how to become a sought-after, globe-trotting manager
ANS: D
OBJ: 1.2
PTS: 1
DIF: Easy
REF: pp. 7-8
14. How many individuals are employed by foreign-owned firms throughout the world?
a. About 80 million
c. About 18 million
b. About 40 million
d. About 1 million
ANS: A
OBJ: 1.2
PTS: 1
DIF: Moderate
REF: p. 7
15. In order to answer the question: "What determines the success and failures of firms around the
globe?," the author introduces which two core perspectives?
a. Capability- and asset-based views
b. Formal- and informal-rule-based views
c. Institution- and resource-based views
d. Ability- and mobility-based views
ANS: C
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 8
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Creation of Value
16. What defines the field of global business more than anything else?
a. The focus on firm performance around the globe
b. The focus on ROI of the global venture
c. The focus on maximizing profits while minimizing expenses
d. The focus on global expansion
ANS: A
OBJ: 1.3
PTS: 1
DIF: Difficult
REF: p. 8
17. The ____-based view suggests that the formal and informal rules of the game, known as institutions,
shed a great deal of light on what is behind firm performance around the globe.
a. Resource
c. Capability
b. Asset
d. Institution
ANS: D
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 9
18. The ____-based view suggests that in order to achieve remarkable success, a firm must possess some
very rare and powerful firm-specific resources and capabilities that are the envy of their rivals around
the globe.
a. Resource
c. Capability
b. Asset
d. Institution
ANS: A
OBJ: 1.3
PTS: 1
DIF: Moderate
REF: p. 10
19. Which of the following is NOT a view on globalization stressed by the author?
a. A new force sweeping through the world in recent times
b. A long-run historical evolution since the dawn of human history
c. A pendulum that swings from one extreme to another from time to time
d. A force empowered by recent political decisions
ANS: D
OBJ: 1.4
PTS: 1
DIF: Moderate
REF: p. 10
20. More than half of the world GDP growth in recent years comes from ____.
a. The Four Tigers (Hong-Kong, Singapore, South Korea, and Taiwan)
b. Latin America
c. Central and Eastern Europe
d. Emerging economies, such as BRIC (Brazil, Russia, India, and China)
ANS: D
OBJ: 1.4
PTS: 1
DIF: Difficult
REF: p. 11
21. The pendulum view of globalization is embraced by:

a. Globalization's opponents and skeptics
b. Globalization's proponents and enthusiasts
c. Globalization's realists aware of historical cycles that globalization has gone through
d. Most MNEs and their lobbyists
ANS: C
OBJ: 1.4
PTS: 1
DIF: Moderate
REF: pp. 12-13
22. Which expression does the author use to describe contemporary globalization?
a. Global localization
c. Semiglobalization
b. Total globalization
d. Global standardization
ANS: C
OBJ: 1.4
PTS: 1
DIF: Moderate
REF: p. 13
23. The world economy at the beginning of the 21st century is an approximately:
a. $10 trillion economy
b. $23 trillion economy
c. $60 trillion economy
d. $72 trillion economy
ANS: C
OBJ: 1.5
PTS: 1
DIF: Moderate
REF: p. 14
ESSAY
1. Explain in your own words how, according to the author, this book will focus on international
business.
ANS:
Other international business textbooks focus on the international (foreign entrant) to the extent that the
business part (which includes the domestic business) would almost disappear. IB is more about the
business before the international part. Other courses you take in business school have a name
specialization such as marketing, management, and operations. This integrated course will provide an
overall business perspective versus a functional perspective. In this course, you will learn the
international and how business affects the international component.
PTS: 1
DIF: Easy
REF: p. 5
OBJ: 1.1
2. The global economy may be viewed as a pyramid. The growing number of opportunities at the base of
the pyramid highlights the role this bottom tier will play in the years to come. How would you take
advantage of this often-ignored level if you were occupying a top management position at a prominent
MNE?
ANS:
The global economy can be viewed as a pyramid. The top of the pyramid consists of one billion people
with per capita income of $20,000 or higher. The second tier consists of another billion people making
$2,000 to $20,000 a year. The vast majority of the world's populations, representing approximately 5
billion people, live at the base of this pyramid, making less than $2,000 a year.
Marketers have focused on the top two levels and end up ignoring the bottom tier. An increasing
number of countries located in this bottom tier are demonstrating economic and marketing
opportunities as they move from low- to middle-income levels. It is much easier to market to
consumers with higher incomes. In the emerging world, marketing is different. There is no guarantee
that media choices will be available or that your product will be a success.
The challenges in the bottom of the pyramid require innovation, such as identifying special price
points, as well as long-term commitment. Many consumers at the base of the pyramid may be illiterate,
but they are brand conscious. Companies need to think outside the box and identify win-win strategies
for this emerging consumer market.
Although individuals living in developing economies have less purchasing power than their
counterparts living in the developed countries, they still have needs and wants. Global firms capable of
fulfilling these needs will make a profit and emerge as global marketers.
PTS: 1
DIF: Moderate
REF: p. 6
OBJ: 1.1
3. Explain the benefits of gaining international business experience and working as an expat.
ANS:
Answers will vary.
People skills and greater understanding of the complexity of the global business environment are
valuable assets for current and future top MNE executives. Expatriates have a unique opportunity to be
hands-on managers exposed to the corporation's global organizational dynamics.
Top-level jobs, especially those held by expats, are both financially rewarding and secure. Expats often
command a significant premium in compensation, which usually includes a premium pay raise when
accepting overseas assignments. Another benefit is more favorable job security in times of downsizing.
Managers who have positioned themselves strategically with international business experience have a
better chance at continued employment.
When the expat returns from a global assignment, if the current company does not provide attractive
career return opportunities, the expat has the skills and expertise to consider other global firms. In
most cases, the expat will not have a difficult time identifying other employment opportunities and
commanding a higher premium. Expats gain a competitive advantage by accepting global business
assignments as it increases their opportunities for upward mobility.
PTS: 1
DIF: Difficult
REF: p. 7
OBJ: 1.2
4. Explain the correlation between the success and failure of global firms and the institution- and
resource-based views.
ANS:
Global firms can gain success in today's competitive global market by focusing on the institution- and
resource-based perspectives. The first factor from an institutional perspective focuses on how
companies can earn greater success by understanding the external business environments in
international business. MNEs quick to acquaint themselves with an understanding of the external
environment, such as host country market rules, cultural norms, and policies, will increase their
international success.
The resource-based view focuses on an MNEs' internal resources, which are firm-specific resources
and capabilities. Competitors in the same environment do not share these internal capabilities;
therefore, a company possessing unique firm-specific capabilities develops a competitive advantage in
marketing their products or in the value creation process. Global companies that best utilize their
internal strengths will increase their opportunities for business success.
PTS: 1
DIF: Moderate
REF: pp. 8-10
OBJ: 1.3
5. Explain how the pendulum view attempts to describe globalization as a cyclical phenomenon with
many difficulties.
ANS:
The pendulum view presents the events in the present timeframe as a long-term model to help us gain
greater understanding of and perspective on globalization's challenges.
The current era of globalization originated after World War II with the major Western nations
committing to globalization. From the 1950s through the 1970s, political unrest in the communist
countries formed a different view of globalization. Noncommunist countries, such as Argentina and
Brazil, focused on protecting their domestic industries. In contrast, the Four Tigersspecifically, the
developing economies of Hong Kong, Singapore, South Korea, and Taiwanparticipated in the global
economy.
Both emerging and developed markets benefit greatly from globalization. However, seen in a historical
context, globalization never continues in one upward or positive direction, hence the view of it as a
pendulum. In the 1990s, globalization was on the fast track. However, globalization proponents
witnessed significant backlashes and setbacks. This rapid growth in globalization led to an inaccurate
view that globalization was new, which created many negative perceptions. This new view of
globalization created fear, and competition posed a direct threat to countries' culture and values.
More recently, globalization has once again come to be considered a positive, offering contributions to
worldwide economic growth. Globalization changes over time, with both a rosy and dark side. In some
areas, it has resulted in job creation with tremendous outcomes, while in other areas it has resulted in
job losses and hardship. How globalization has affected you or your family will influence your
perceptions and viewpoints.
PTS: 1
DIF: Difficult
REF: pp. 10-12
OBJ: 1.4
6. Explain how a countrys gross domestic product (GDP) is changed after adjusting for purchasing
power parity (PPP).
ANS:
Purchasing power parity (PPP) calculation is a conversion that determines the equivalent amount of
goods and services different currencies can purchase. For example, one dollar spent in Mexico can buy
a lot more than one dollar spent in the United States.
Gross domestic product (GDP) is the sum of value added by resident firms, households, and
government operating in an economy. To compare two countries' GDP, a conversion based on PPP is
necessary.
The PPP between two countries is the rate at which the currency of one country needs to be
converted into that of a second country to ensure that a given amount of the first country's currency
will purchase the same volume of goods and services in the second country. Without adjusting for PPP,
emerging economies contribute about 26% of the global GDP. But after adjusting for PPP, emerging
economies contribute about 50% of the global GDP.
PTS: 1
DIF: Difficult
REF: pp. 7-8
OBJ: 1.4
NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Environmental Influence

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Chapter 1Globalizing Business

8. Most top managers of large firms lack significant global competence.

9. Expatriate managers make ideal candidates for top management positions.

NAT: AACSB: Tier 1 Reflective Thinking | Tier 2 Motivation Concepts

13. Approximately 80 million people worldwide are employed by foreign-owned firms.

25. Many proponents of globalization are nongovernmental organizations (NGOs).

A business that engages in international economic activities

3. Which of the following terms best describes foreign direct investment?

7. The global economy can be viewed as a pyramid. The Triad represents:

c. Aware of countless opportunities of

10. Which of the following definitions best defines an expatriate manager?

13. Why study global business?

21. The pendulum view of globalization is embraced by:

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