Chapter 1 – An Overview of International Business

WHAT IS INTERNATIONAL BUSINESS?

1.According to the text, international business consists of business transactions between parties from more than one country.

2. According to the text, transactions that cross national boundaries are called intracountry transactions.

3. Building a plant in one country to take advantage of cheaper labor costs is an example of international business.

4. For a transaction to be considered an international business, it must involve participation by at least two governmental agencies.

5. Doing business domestically or internationally requires conceptually different skills and knowledge.

6. Exporting and importing are the initial ventures into the international marketplace by many firms.

7. Walt Disney Company buying the common stocks of a French company is an example of a Foreign Direct Investment.

8. Merchandise exports and imports can also be referred to as visible trade.

9. A firm that agrees to operate facilities for another firm in another country for a fee is involved in Licensing.

WHY STUDY INTERNATIONAL BUSINESS

10. According to the text, it is estimated that approximately 5.2 million U.S. citizens work for U.S. affiliates of foreign-owned
corporations.

11. An example of an inventory management technique pioneered by Japanese firms is just in time system.

INTERNATIONAL BUSINESS ACTIVITIES

12. Historically, international business activity first took the form of joint ventures.

13. Importing is the buying of products made in other countries for resale in one’s own country.

14. Official U.S. government publications call the trade tangible products such as clothing, computers, and raw materials
merchandise exports and imports.

15. Invisible trade is the term used by the British for the trade in tangible products such as clothing, computers, and raw materials.

16. According to the text, about 53% of Boeing’s commercial aircraft sales are to foreign customers.

17. Exporting accounts for over 60 percent of the Netherlands’ gross domestic product (GDP), and over a quarter of the GDPs of
Canada, Germany, France, and the United Kingdom.

18. Foreign direct investments are investments made for the purpose of actively controlling property, assets, or companies located in
host countries.
19. The purchase of all the common stock of Sweden’s Volvo Corporation by Ford Motor Company is an example of foreign direct
investment.

20. Portfolio Investment is when a firm buys products from another firm in a foreign country.

21. Licensing is​ ​when a firm grants the use of some or all of its intellectual property to a firm in another country.

22. In a licensing arrangement, payments made to the owner of the intellectual property are called royalty payments.

23. A specialized form of licensing that occurs when a firm in one country authorizes a firm in a second country to utilize its
operating systems as well as its brand names, trademarks, and logos in return for royalty payment is called a management
contract.

24. An international business activity that involves the operation of facilities on behalf of another firm in another country for a fee is
referred to as licensing.

25. According to the text, management contracts are common in the fast food restaurant industry.

26. Any organization that engages in cross-border commercial transactions with individuals, private firms, and/or public-sector
organizations is called an international business.

27. According to the text, the term international organizations is used to identify firms that engage in foreign direct investment and
own or control value-adding activities in more than one country.

THE CONTEMPORARY CAUSES OF GLOBALIZATION

28. The two broad reasons mentioned in the text why international business activity is likely to continue to skyrocket during the next
decade are strategic imperatives and environmental changes.

29. The factor mentioned in the text that is responsible for the facilitation of globalization is strategic imperatives.

30. A core competency is a distinctive strength or advantage that is central to a firm’s operations.

31. Japan is an example of a country that is considered an emerging market.

32. Many of the reductions in tariffs and quotas between countries were negotiated through the United Nations after the Second
World War.

33. The World Trade Organization is the successor to the General Agreement on Tariffs and Trade.

34. International tourism is the largest component of international trade in services.

35. The United States leads the world in spending on information technology as a proportion of gross domestic product.

Multiple Choice

THE BUSINESS OF THE OLYMPICS

36. In which of the following countries is the International Olympic Committee based?
 a. New Zealand
b. Italy
c. Germany
d. Canada
e. Switzerland
37. According to the text, NBC paid ______________ for the rights to broadcast in the United States the 2000 Sydney summer games
and the 2002 Salt Lake City winter games.
a. $1.27 million
b. $12.7 million
c. $127 billion
d. $1.27 billion
e. $12.7 billion

38. The highest-profile and most expensive level of corporate sponsorship is that of worldwide partner at the cost of _____________.
a. $500,000
b. $5 million
c. $55 million
d. $550 million
e. $5.5 billion

INTRODUCTION

39. Many futurists now talk about the ______________ global economy—an economy in which national borders are irrelevant.
a. “compounded”
b. “flexible”
c. “horizontal”
d. “vertical”
e. “boundaryless”

WHAT IS INTERNATIONAL BUSINESS?

40. According to the text _____________ consists of business transactions between parties from more than one country.
a. domestic business
b. international business
c. foreign portfolio transactions
d. intracountry transactions
e. expropriation

41. Which of the following is NOT an example of an international business transaction?

a. buying materials in one country and shipping them to another for processing or assembly
b. shipping finished products from one country to another for retail sale
c. building a plant in a foreign country to capitalize on lower labor costs there
d. borrowing money from a bank in one country to finance operations in another
e. all of the answers are examples of international business transactions

42. The parties involved in international business transactions may include all of the following EXCEPT:
a. private individuals.
b. individual companies.
c. groups of companies.
d. governmental agencies.
e. all of the stated entities.

43. Which of the following involves transactions occurring within the boundaries of a single country?
a. international business
b. foreign direct investment
c. foreign portfolio investment
d. domestic business
e. expropriation

44. According to the text, transactions that cross national boundaries are called ______________.
a. domestic business transactions
b. international business transactions
c. expropriation transactions
d. intracountry transactions

45. Which of the following is not a reason why international business can differ from domestic business?
 a. The cultures of countries may differ.
b. Basic skills and knowledge required are different.
c. Countries have different legal systems.
d. Countries may use different currencies.
e. Availability of resources differs from country to country.

46. The fact that U.S. business people prefer to start meetings on time, whereas Latin American business people are less concerned
with promptness is an indication of​ ______________.
a. Latin America is in a different time zone
b. differences in legal systems
c. differences in culture
d. differences in the skills of managers from the different countries
e. differences in the value of time

47. International businesspeople must be knowledgeable about all of the following differences among countries EXCEPT:
a. cultural differences.
b. legal differences.
c. political differences.
d. social differences.
e. all of the stated differences.

WHY STUDY INTERNATIONAL BUSINESS?

48. Reasons why students today need to study international business include the following, EXCEPT:
a. the likelihood of working for a multinational company.
b. most organizations either have international operations or are affected by global economy.
c. global skills and knowledge will aid an individual's career.
d. to learn business techniques that may originate from other countries.
e. to understand another language.
49. According to the text, it is estimated that approximately ______________ U.S. citizens work for U.S. affiliates of foreign-owned
corporations.
a. 52,000
b. 520,000
c. 5.2 million
d. 52 million
e. 520 million

50. It is estimated that _____________ Europeans, Asians, Africans, Australians, Canadians, and Latin Americans are employed by
foreign subsidiaries of U.S. corporations.
a. 80,000
b. 800,000
c. 8 million
d. 80 million
e. 800 million