International Business and Globalization Quiz
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Questions and Answers

What is globalisation primarily defined as?

  • The expansion of local businesses into nearby markets
  • The government intervention in international trade
  • The integration of world markets through technological advances (correct)
  • The reduction of trade barriers only

    • International business has no impact on the economy of a country.

    False (B)

    Name one positive impact of globalisation on countries.

    Increased market access

    The __________ advantage theory suggests that a country should specialize in producing goods it can make more efficiently than others.

    <p>absolute</p> Signup and view all the answers

    Which entry mode allows shared ownership and risks between two or more firms?

    <p>Joint ventures (B)</p> Signup and view all the answers

    Match the following entry modes with their descriptions:

    <p>Exporting = Access foreign markets with little investment Licensing = Granting rights to use proprietary technology Franchising = Transferring a complete business model Wholly owned subsidiary = Full investment and control in foreign market</p> Signup and view all the answers

    Small firms typically begin their internationalisation process with wholly owned subsidiaries.

    <p>False (B)</p> Signup and view all the answers

    What does David Ricardo's comparative advantage theory suggest?

    <p>Countries benefit by focusing on goods they can produce at a lower opportunity cost.</p> Signup and view all the answers

    What is a key characteristic of emerging markets?

    <p>Rapid GDP growth (C)</p> Signup and view all the answers

    Multinational corporations operate only within their home countries.

    <p>False (B)</p> Signup and view all the answers

    What economic strategy do firms use to mitigate risks related to currency fluctuations?

    <p>Hedging</p> Signup and view all the answers

    Japan's comparative advantage in electronics arises from a skilled workforce and __________.

    <p>advanced technology</p> Signup and view all the answers

    Match the following strategies of MNCs with their descriptions:

    <p>Global strategy = Focus on standardization for cost efficiency Transnational strategy = Balance global integration with local responsiveness Multi-domestic strategy = Customize products to meet local preferences Internalization strategy = Expand operations to foreign markets</p> Signup and view all the answers

    What type of legal system is based on precedent?

    <p>Common law (B)</p> Signup and view all the answers

    Tariffs are used to increase the quantity of imports.

    <p>False (B)</p> Signup and view all the answers

    Name one of Hofstede's cultural dimensions.

    <p>Individualism vs. Collectivism</p> Signup and view all the answers

    Corporate Social Responsibility (CSR) encompasses a company's economic, legal, and ethical obligations to __________.

    <p>society</p> Signup and view all the answers

    Which of the following best describes the trade evolution reflected in the Product Life Cycle theory?

    <p>Innovation to standardization (C)</p> Signup and view all the answers

    All emerging markets share similar characteristics and challenges.

    <p>False (B)</p> Signup and view all the answers

    What is one example of a BRIC economy?

    <p>Brazil</p> Signup and view all the answers

    Government interventions like subsidies are primarily aimed at protecting __________ industries.

    <p>domestic</p> Signup and view all the answers

    Match the following types of political systems with their descriptions:

    <p>Democracy = Supports market-friendly policies Totalitarian regime = Centralized control of the economy Market economy = Little government intervention Mixed economy = Combines elements of both markets and governments</p> Signup and view all the answers

    Study Notes

    International Business and Globalization

    • International business involves cross-border trade of goods, services, and resources, driven by globalization.
    • Globalization integrates world markets through technology (communication, transport), economic liberalization (reduced trade barriers), market convergence (consumer preferences), and cost drivers (economies of scale, outsourcing).
    • Positive impacts include increased market access, innovation, and economic growth.
    • Negative impacts include environmental degradation and income disparities.
    • Globalization progresses through stages: market participation, supply chain integration, and economic interdependence.

    Alternative Routes to Internationalization

    • Firms internationalize using various entry modes with varying benefits and risks.
    • Exporting (direct and indirect) allows market access without significant investment.
    • Licensing grants foreign firms usage rights to technology/processes.
    • Franchising transfers a complete business model to another country.
    • Joint ventures involve shared ownership and risk among firms.
    • Wholly owned subsidiaries represent full foreign investment, offering control but requiring resources.
    • Entry mode choices depend on market size, risk tolerance, and resources. Small firms often start with indirect exporting.

    Theories of International Trade

    • Trade theories explain why countries engage in trade.
    • Absolute advantage theory (Smith): Countries specialize in goods produced more efficiently.
    • Comparative advantage theory (Ricardo): Countries benefit by focusing on goods with lower opportunity costs.
    • Heckscher-Ohlin model: Trade patterns based on factor endowments (labor, capital).
    • Product Life Cycle theory: Trade evolution from innovation to standardization.
    • New trade theories highlight economies of scale and monopolistic competition (product differentiation).

    Overview of Emerging Markets

    • Emerging markets are economies transitioning toward industrialization and modernization.
    • Marked by rapid GDP growth, a burgeoning middle class, and government influence.
    • Emerging markets offer expansion opportunities and access to resources.
    • Risks include political instability and regulatory challenges.
    • BRIC economies (Brazil, Russia, India, China) are important to global trade.
    • Challenges in emerging markets include infrastructure deficits and fluctuating regulations.

    MNCs and Their Strategies

    • Multinational corporations (MNCs) operate globally and adapt strategies for diverse markets.
    • Global strategies emphasize standardization for cost efficiency.
    • Transnational strategies balance global integration and local responsiveness.
    • Multi-domestic strategies customize products for local preferences.
    • MNC challenges include cultural differences, complex supply chains, and political risks.
    • Successful MNCs adapt strategies to individual market dynamics.
    • Political and legal environments shape international business operations.
    • Political systems range from democracies (market-friendly) to totalitarian regimes.
    • Legal systems include common law, civil law, and religious law.
    • Political risks include expropriation, trade barriers, and nationalization.
    • Companies must assess market stability and regulatory frameworks.

    Government Intervention

    • Governments intervene in trade to safeguard domestic industries, ensure security, and foster economic growth.
    • Instruments include tariffs, quotas, and subsidies.
    • Interventions can protect local economies but lead to inefficiencies and disputes.
    • Businesses must understand government policies to adapt their strategies.

    Cultural Environment of IB

    • Cultural differences significantly impact international business.
    • Hofstede's cultural dimensions (individualism/collectivism, power distance) explain these differences.
    • Individualistic societies prioritize personal goals, collectivist cultures value group harmony.
    • High power distance societies accept hierarchy, low power distance cultures value equality.
    • Businesses adapt to local cultures to enhance negotiations & partnerships.

    Ethics, CSR, and Sustainability

    • Ethical principles guide international business decision-making.
    • Corporate Social Responsibility (CSR) encompasses economic, legal, and ethical obligations.
    • CSR often involves supporting local communities and reducing environmental impact.
    • Sustainability prioritizes present needs without compromising future generations.
    • Ethical practices build stronger reputations and contribute to long-term success.

    International Monetary and Financial Environment

    • The international monetary system includes fixed and floating exchange rate regimes.
    • Fixed rates are pegged to another currency for stability, floating rates fluctuate based on market conditions.
    • Institutions like the IMF and World Bank provide financial stability.
    • Financial risks include currency fluctuations and interest rate changes.
    • Businesses use hedging to mitigate financial risks.

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    Description

    Test your knowledge on the concepts of international business and globalization. This quiz covers the effects of globalization, various modes of internationalization, and the positive and negative impacts on economies and environments. Understand the stages of globalization and the strategies companies use to enter foreign markets.

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