International Business & Globalization Quiz
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Questions and Answers

What is the primary effect of globalisation on countries?

  • Increase in environmental degradation
  • Higher trade barriers
  • Reduction in consumer preferences
  • Improvement in market access (correct)

Which entry mode involves the most significant investment and risk for a company?

  • Wholly owned subsidiaries (correct)
  • Indirect exporting
  • Franchising
  • Licensing

What does the Heckscher-Ohlin model suggest regarding trade patterns?

  • Trade is influenced by historical trade relationships
  • Countries should specialize in all products
  • Trade is based solely on market access
  • Trade occurs due to labour and capital abundance (correct)

Which of the following represents a benefit of outsourcing as part of cost drivers in globalisation?

<p>Reduction in operational costs (C)</p> Signup and view all the answers

According to Adam Smith's absolute advantage theory, what should countries specialize in?

<p>Producing goods they can make more efficiently than others (B)</p> Signup and view all the answers

What is a characteristic feature of joint ventures?

<p>Shared ownership and risk between firms (B)</p> Signup and view all the answers

Which theory explains the evolution of trade patterns as products move from innovation to standardization?

<p>Product Life Cycle theory (D)</p> Signup and view all the answers

What drives consumer preferences to converge in international markets?

<p>Technological advancements (C)</p> Signup and view all the answers

What is a key advantage of exporting as a mode of entry into international markets?

<p>Low investment costs (C)</p> Signup and view all the answers

Which of the following describes a disadvantage of exporting?

<p>Dependence on intermediaries (C)</p> Signup and view all the answers

What differentiates franchising from licensing in internationalization?

<p>Franchising allows local adaptation (D)</p> Signup and view all the answers

Which of the following best represents the theory of absolute advantage?

<p>The ability of a country to produce a good more efficiently than another (C)</p> Signup and view all the answers

What is a characteristic commonly found in emerging markets?

<p>High GDP growth potential (D)</p> Signup and view all the answers

How does the Heckscher-Ohlin model explain international trade patterns?

<p>By linking exports to resource abundance (A)</p> Signup and view all the answers

Which multinational corporation is an example of a global strategy implementation?

<p>Coca-Cola (D)</p> Signup and view all the answers

What major challenge do MNCs face in supply chain management across multiple countries?

<p>Regulatory variations and compliance issues (A)</p> Signup and view all the answers

Which aspect is NOT a focus of the Product Life Cycle theory?

<p>Cost leadership in production (A)</p> Signup and view all the answers

What is a typical risk associated with investing in emerging markets?

<p>Regulatory hurdles and political instability (C)</p> Signup and view all the answers

What characterizes emerging markets?

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

How do multinational corporations (MNCs) typically adapt their strategies?

<p>By customizing products to various local markets while maintaining a global brand identity (A)</p> Signup and view all the answers

What type of legal system is based on precedents and judicial rulings?

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

What is a common reason for government intervention in trade?

<p>To protect domestic industries (C)</p> Signup and view all the answers

Which of the following best illustrates Hofstede’s cultural dimension of individualism versus collectivism?

<p>A society that values group goals over personal aspirations (C)</p> Signup and view all the answers

What is a significant challenge faced by multinational corporations in foreign markets?

<p>Addressing cultural differences and local regulations (A)</p> Signup and view all the answers

Which practice is primarily associated with Corporate Social Responsibility (CSR)?

<p>Supporting local communities and promoting sustainable practices (B)</p> Signup and view all the answers

What is a potential negative impact of globalization?

<p>Income inequality and environmental degradation (A)</p> Signup and view all the answers

What is the role of the International Monetary Fund (IMF)?

<p>Offering financial stability and assistance during crises (A)</p> Signup and view all the answers

What is a primary goal of supply chain management for multinational corporations?

<p>To simplify the complexity of global sourcing and distribution (A)</p> Signup and view all the answers

What describes the attitude of high power distance cultures?

<p>Acceptance of hierarchical structures and disparities (A)</p> Signup and view all the answers

What is one of the risks that firms face when operating in emerging markets?

<p>Political instability and fluctuating regulations (A)</p> Signup and view all the answers

What is an example of economic liberalization?

<p>Reducing trade barriers to enhance market access (D)</p> Signup and view all the answers

What is a key driver of globalization?

<p>Technological advancements in communication and transport (B)</p> Signup and view all the answers

Flashcards

Globalisation

The process of integrating national economies through trade, technology, and common cultural trends.

International Business

The exchange of goods, services, and resources across national borders.

Absolute Advantage

A country's ability to produce a good more efficiently than another country.

Comparative Advantage

A country should focus on producing goods where its opportunity cost is lower, even if it's not the most efficient producer overall.

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Exporting

Entering a foreign market through direct sales or using intermediaries.

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Licensing

Giving a foreign firm the right to use your technology or manufacturing processes.

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Wholly owned subsidiary

A firm entering a foreign market by investing and controlling a subsidiary wholly owned by itself.

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Joint Venture

Two or more companies sharing ownership and risks to enter a foreign market together.

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Multinational Company

A company with operations in multiple countries, often involving local adaptation of products and marketing.

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Franchising

A type of licensing where a company grants another company the right to use its entire business model, including trademarks, operations, and branding. It allows for controlled expansion and brand consistency.

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Heckscher-Ohlin Model

A model that explains international trade based on the differences in the relative abundance of factors of production (land, labor, capital) across countries. Countries export goods that use their abundant resources.

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Product Life Cycle Theory

A theory that describes the stages of a product's life cycle. Initially, innovation in developed countries, followed by production shifting to developing countries as the product matures.

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Emerging Markets

Nations undergoing a transition towards industrialization and modernization, characterized by high GDP growth, a growing middle class, and urbanization.

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New Trade Theories

Economies where production is larger, reducing costs, combined with the emphasis on making each product unique to attract customers.

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Multinational Corporations (MNCs)

Companies that operate in multiple countries, adapting their strategies to work in different markets.

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Global Strategy

MNC Strategy: Focused on making the product the same everywhere to save money.

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Transnational Strategy

MNC Strategy: Balancing making products globally while also changing them to fit local preferences.

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Multi-domestic Strategy

MNC Strategy: Making products specially for each country to match their tastes.

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Political and Legal Environment

The system of government, laws, and regulations in a country that influences international business.

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Democracy

A government system where citizens have a say in the government and support market-driven policies.

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Totalitarian Regime

A government system where one leader or small group has total control.

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Common Law

A type of legal system based on past court decisions.

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Civil Law

A type of legal system where laws are written down in a code.

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Government Intervention

The actions taken by governments to influence trade and protect their economy.

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Tariff

Tax on imported goods to make them more expensive and protect local businesses.

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Quota

Limit on the amount of a product allowed into a country to protect local industries.

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Subsidy

Financial support given to local businesses by the government to help them compete.

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Study Notes

International Business & Globalization

  • International business involves cross-border exchange of goods, services, and resources, influenced by globalization.
  • Globalization integrates world markets through technological advancements (communication, transportation), economic liberalization (reduced trade barriers), market drivers (converging consumer preferences), and cost drivers (economies of scale, outsourcing).
  • Positive impacts of globalization: increased market access, innovation, and economic growth.
  • Negative impacts of globalization: environmental degradation, income disparity.
  • Globalization progresses through stages, from global market participation to integration via supply chains and eventual interdependence.

Alternative Routes to Internationalization

  • Firms internationalize via various entry modes.
  • Exporting (direct or indirect) allows access to foreign markets with less investment.
  • Licensing grants foreign firms use of proprietary technology or processes.
  • Franchising transfers a complete business model.
  • Joint ventures share ownership and risks.
  • Wholly owned subsidiaries provide full control but require significant resources.
  • Entry mode choices depend on market size, risk tolerance, and resources.
  • Small firms often start with indirect exporting and then progress to joint ventures or subsidiaries.

Theories of International Trade

  • Trade theories explain why countries trade internationally.
  • Absolute advantage theory (Adam Smith): Countries specialize in goods they produce most efficiently.
  • Comparative advantage theory (David Ricardo): Countries benefit from specializing in goods with lower opportunity costs.
  • Heckscher-Ohlin model: Trade patterns based on a country's factor endowments (labor, capital).
  • Product life cycle theory: Illustrates trade evolution from innovation to standardization.
  • New trade theories highlight economies of scale and monopolistic competition.

Overview of Emerging Markets

  • Emerging markets are economies transitioning towards industrialization and modernization.
  • Characteristics include rapid GDP growth, a burgeoning middle class, and government influence on the economy.
  • Emerging markets offer expansion opportunities and resource access, but also risks like political instability and regulatory challenges.
  • Examples of BRIC economies (Brazil, Russia, India, China) highlight this dynamism.
  • Firms operating in emerging markets face challenges such as infrastructural deficits and regulatory fluctuations.

MNCs and Their Strategies

  • Multinational Corporations (MNCs) operate internationally and adapt strategies.
  • Global strategy: standardized products for cost efficiency.
  • Transnational strategy: balances global integration with local responsiveness.
  • Multi-domestic strategy: customized products for local markets.
  • MNCs face challenges: cultural differences, complex supply chains, and political risks.
  • Political and legal environments impact international business operations.
  • Political systems range from democratic to totalitarian.
  • Legal systems include common law, civil law, and religious law.
  • Political risks include expropriation, trade barriers, and nationalization, impacting firm operations.
  • Firms assess market stability and regulatory frameworks to mitigate these risks.

Government Intervention

  • Governments intervene in trade to protect domestic industries, ensure national security, and stimulate economic growth.
  • Methods include tariffs, quotas, and subsidies.
  • Examples include agricultural subsidies in the U.S.
  • Intervention can lead to trade inefficiencies and disputes.

Cultural Environment of IB

  • Cultural differences heavily influence international business.
  • Hofstede's cultural dimensions (individualism/collectivism, power distance) inform strategies.
  • Companies like McDonald's adapt to local cultural preferences.
  • Cultural sensitivity is crucial for successful cross-cultural negotiations and partnerships.

Ethics, CSR, and Sustainability

  • Ethical principles guide international business decisions.
  • Corporate Social Responsibility (CSR): Companies' economic, legal, and ethical obligations to society.
  • Sustainability prioritizes meeting present needs without compromising future generations.
  • Examples include Unilever's sustainability initiatives.

International Monetary and Financial Environment

  • International monetary systems include fixed and floating exchange rate regimes.
  • Fixed rates are pegged to another currency, while floating rates fluctuate.
  • Institutions like the IMF and World Bank provide financial stability and development assistance.
  • Financial risks (currency fluctuations, interest rate changes) challenge firms.
  • Firms use hedging strategies to mitigate these risks.

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Description

Test your knowledge on international business and the effects of globalization. This quiz covers key concepts such as market integration, entry modes, and the impacts of globalization on economies and societies. Understand both the positive and negative dimensions of global trade and business strategies.

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