Chap 006

Chapter 06

International Management

True / False Questions

1. New York Times columnist Thomas Friedman wrote a best-selling book called "The Global Economy Is Flat." True False

2. Foreign direct investment flows to less developed countries by firms in developed countries is declining substantially. True False

3. One consequence of an increasingly integrated global economy is that imports are penetrating deeper into the world's largest economies, such as that of the United States. True False

4. Offshoring occurs when an organization contracts with an outside provider to produce one or more of an organization's products or services. True False

5. North America, South America, and Asia are the three regions that are most dominant in the global economy. True False

6. Germany is a member of the Group of Five. True False

7. The Maastricht Treaty formally established the trade area in North America. True False

8. The creation of a unified Europe has resulted in an economic superpower with a larger GDP than the United States. True False

9. Japan is the most important trading partner of the United States based on the value of imports and exports between the two countries. True False

10.

The value of U.S. imports from China is more than five times the value of U.S. exports to China. True False

11.

Members of APEC include South Korea, Taiwan, the United States, Australia, and Russia. True False

12.

Mexico has quickly emerged as the third-largest trading partner of the United States as a result of NAFTA. True False

13.

NAFTA had an immediate and negative effect on the U.S. automobile industry. True False

14.

The Middle East is the largest supplier of oil to the United States. True False

15.

Pressure to lower costs is one reason a firm may prefer a common global strategy to one tailored to individual markets. True False

16.

Universal needs exist when the tastes and preferences of consumers in different countries with regard to a product are similar. True False

17.

When pressures for local responsiveness are high and pressures for global integration are low, the global model is appropriate. True False

18.

When there are differences among countries in traditional practices such as driving, pressures for local responsiveness emerge. True False

19.

In the international model, managers use their organization's existing core capabilities to expand into foreign markets. True False

20.

Major disadvantages of the multinational model are higher manufacturing costs and duplication of efforts. True False

21.

Companies that adopt the global model tend to be those pursuing a cost focus as a competitive strategy. True False

22.

Transnational companies are companies that produce products in one country and export these products to many overseas countries. True False

23.

One advantage of exporting is that it provides scale economies. True False

24.

High transportation costs associated with exporting can make it uneconomical, particularly in the case of bulk products. True False

25.

Franchising is utilized primarily by manufacturing industries, whereas licensing is used more often in service industries. True False

26.

Quality control is a significant disadvantage of franchising. True False

27.

When a company's competitive advantage is based on technology and it wishes to enter the global marketplace, the least preferred strategy is the wholly owned subsidiary. True False

28.

Individuals from the parent country who are sent to work at a foreign subsidiary are known as expatriates. True False

29.

Using host-country nationals at an overseas subsidiary is generally more expensive than using expatriates. True False

30.

Cultural shock is an example of an executive coping strategy for international assignments. True False

31.

The failure rate among expatriates is less than five percent. True False

32.

Family issues are the biggest reason for expatriates to return home early. True False

33.

One way to prevent failed global assignments is to use effective, validated screening and selection criteria. True False

34.

Ethnocentrism is the tendency to judge others by the standards of one's own culture or group, which are seen as superior. True False

35.

Culture shock is the disorientation and stress associated with being in a foreign environment. True False

36.

On Hofstede's power distance and individualism scales, the United States is very similar to France. True False

37.

Inpatriates are foreign nationals that are sent abroad for a short period. True False

38.

Inpatriates are valuable because they bring with them extensive knowledge about how to operate effectively in their home countries. True False

39.

Ethical behavior and decision making are surprisingly harder in a purely domestic situation than in the international arena. True False

Multiple Choice Questions

40.

Which of the following is a consequence of an increasingly integrated global economy?

A. World output and trade have decreased to a dramatically low level.

B. Many companies find their home markets under attack from foreign competition.

C. Companies are making foreign direct investments at home.

D. Imports are failing to penetrate deeper into the world's largest economies.

E. There are reduced opportunities for global trade.

41.

The flat world has required managers to operate in an environment that is ________ complex and competitive and offers more _________.

A. more; profit

B. less; profit

C. more; opportunities

D. less; opportunities

E. less; ROI

42.

Operating in a global marketplace is considered more complex because

A. Managers must compete with cost-efficient overseas competitors.

B. The lessening of trade barriers has decreased opportunities in previously attractive markets.

C. Many overseas competitors operate with greater economies of scale.

D. Of varying cultures and coordination of globally dispersed operations.

E. International management is relatively risk-free as compared to domestic management.

43.

________ occurs when the organization contracts with an outside provider to produce one or more of an organization's products or services.

A. International development

B. Outsourcing

C. Offshoring

D. Expatriation

E. Franchising

44.

________ occurs when companies move jobs to another country, typically where wages are lower.


B. Outsourcing

C. Offshoring

D. Expatriation

E. Franchising

45.

Answering yes to which of the following questions should be considered by managers as a reason to offshore?

A. Is cost the competitive advantage of the organization's products?

B. Is the business in its early stages?

C. Can production savings be achieved locally?

D. Can the efficiency of the supply chain be improved?

E. Answering yes to any or all of these would be considered by managers as reason to offshore.

46.

Which areas are considered the most dominant in the global economy?

A. North America, western Europe, and Asia.

B. North America, South America, and Asia.

C. Western Europe, Asia, and Africa.

D. North America, South America, and western Europe.

E. North America, Asia, and Africa.

47.

Under (the) ________, member countries agreed to adopt a common European currency called the euro.

A. NAFTA

B. Maastricht Treaty

C. GATT Agreement

D. APEC Treaty

E. European Unification Act

48.

Which of the following has resulted from the formation of the European Union?

A. The elimination of all trade barriers within Europe.

B. The protection of local industry within Europe.

C. The strengthening of Europe's position as an economic superpower.

D. The reunification of Germany.

E. The adoption of one European language.

49.

To be competitive in a global economy, Europeans must increase their level of

A. Population density.

B. Productivity.

C. Espionage activity.

D. Philanthropic contributions.

E. Wealth.

50.

Which country does the text describe as becoming the largest producer and consumer of many of the world's goods?

A. Japan.

B. Canada.

C. Mexico.

D. China.

E. Vietnam.

51.

Labor costs in China are about ________ those in Mexico.

A. one-third of

B. three times

C. the same as

D. seven times

E. 10 times

52.

NAFTA combined the economies of

A. The United States, Canada, and Mexico.

B. Canada, Mexico, and South America.

C. South America, the United States, and Central America.

D. Latin America, the Pacific Rim, and the European Union.

E. The United States, the European Union, and Canada.

53.

Which country does the text describe as having become an important provider of online computer and software support for the United States?

A. Egypt.

B. Great Britain.

C. India.

D. Mexico.

E. Taiwan.

54.

The passage of NAFTA has provided short-term benefits to which of the following industries?

A. The auto industry.

B. Grain producers.

C. The financial industry.

D. Capital goods suppliers.

E. All of these have benefited from NAFTA.

55.

Which of the following existing agreements includes Costa Rica, Nicaragua, and the United States?

A. NAFTA.

B. CAFTA-DR.

C. FTAA.

D. APEC.E. ASEAN

.

56.

When identifying the best strategy for competing in a global marketplace, it is helpful to plot a company's position on a(n)

A. Leadership grid.

B. Force field analysis grid.

C. Integration-responsiveness grid.

D. Cost-benefit grid.

E. Strategy map.

57.

The grid used for identifying the best strategy for competing in a global marketplace measures what two dimensions?

A. Pressures for global integration and pressures for local responsiveness.

B. Pressure for local interaction and pressures for global responsiveness.

C. Financial viability and employee satisfaction.

D. Employee satisfaction and management credibility.

E. Pressures for global systems capacity and pressures for local financial success.

58.

Pressure for global integration includes

A. Universal needs.

B. Differences in traditional practices.

C. Political demands imposed by host countries.

D. Varied consumer preferences.

E. Legal demands imposed by host countries.

59.

Pressure for local responsiveness includes

A. Varying consumer preferences.

B. Varying sales and distribution patterns.

C. Varying traditions.

D. Varying political demands.

E. All of these.

60.

Which of the following pressures for local responsiveness includes threats of protectionism, economic nationalism, and local rules?

A. Differences in distribution channels.


C. Economic and political demands.

D. Differences in consumer tastes.

E. Global market integration.

61.

Which of the following is a global strategy used as an approach to international competition?

A. International model.

B. Multinational model.

C. Global model.

D. Transnational model.

E. All of these are global strategies.

62.

The model in which managers use their organization's existing core capabilities to expand into foreign markets is called the



C. Global model.


E. Multimedia model.

63.

The international model of organizational structure consists of

A. Large low-cost manufacturing facilities located in selected locations with products exported to various subsidiaries.

B. Subsidiaries located in countries where the company does business with much of the control exercised by the parent company.

C. Subsidiaries located in countries where the company does business with much of the control exercised by the subsidiaries.

D. Manufacturing various components at appropriate sites and assembling the components at national subsidiaries.

E. Global services.

64.

From which model of organizational structure did IBM and Xerox profit by transferring skills and know-how to subsidiaries around the globe?



C. Global model.


E. Intranational model.

65.

The overseas success of Kellogg, Coca-Cola, Heinz, and Procter & Gamble is based on marketing know-how. These companies are using which model of organizational structure?



C. Global model.



66.

Calabria Steel has subsidiaries in each country in which it does business. As the parent company, Calabria has located its core skills in technology and R&D overseas so that each subsidiary remains dependent on it for new products, processes, and ideas. This illustrates the __________ model for global strategy.

A. international

B. multinational

C. global

D. transnational

E. intranational

67.

Where global efficiency is not required but adapting to local conditions offers advantages, the __________ model of organizational structure is appropriate.

A. international

B. multinational

C. global

D. transnational

E. multimedia

68.

The global strategy model that uses subsidiaries in each country and provides each a great deal of discretion to respond to local conditions is the __________ model.

A. international

B. multinational

C. global

D. transnational

E. domestic

69.

The multinational model of organization structure consists of





E. Extensive use of offshoring.

70.

Companies that decentralize their operations throughout the globe in order to appeal to the varying tastes and preferences of global consumers are utilizing a ___________ model.

A. domestic

B. international

C. multinational

D. transnational

E. global

71.

Which global strategy model realizes the advantage of local responsiveness but the disadvantage of high manufacturing costs and duplication of effort?

A. Transnational.

B. Global.

C. Worldwide.

D. International.

E. Multinational.

72.

A disadvantage of a multinational model is that

A. Problems in transferring core skills are created.

B. Each subsidiary must respond to specific consumer needs.

C. Transfer pricing presents difficulties.

D. It is difficult to launch a coordinated global attack against competitors.

E. Coordination of efforts within countries is more difficult.

73.

Though the product is based on a formula pioneered in California and Florida, Euro Disney operates the amusement park in France, and markets it somewhat differently than the United States facilities in order to appeal to the European consumer. This type of strategy is known as a(n) __________ model.

A. domestic

B. international

C. multinational

D. transnational

E. global

74.

In which two models of global strategy do manufacturing costs remain relatively high?

A. Global and transnational.

B. International and transnational.

C. Multinational and international.

D. Global and international.

E. Multinational and transnational.

75.

Heineken, a Netherlands-based brewing company, produces more than 170 different brands around the world, some of them international but many of them specialty brews for regional and local tastes. This illustrates the



C. Global model.



76.

The __________ organizational model is designed to enable a company to market a standardized product in the global marketplace and to manufacture that product in a limited number of locations where the mix of costs and skills is most favorable.

A. international

B. multinational

C. global

D. transnational

E. multimedia

77.

Competing globally under the assumption that no tangible differences exist among consumer tastes and preferences in varying countries is referred to as a __________ model.

A. multinational

B. consumer-focused

C. transnational

D. global

E. domestic

78.

An organizational model that consists of a company's overseas subsidiaries and is characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations is called the



C. Global model.



79.

When a company such as Procter & Gamble approaches the European market as a unified whole, thus reducing costs and improving efficiency, it is using the __________ model of organizational structure.

A. international

B. multinational

C. transnational

D. global

E. intranational

80.

The __________ model of organizational structure has a disadvantage in that it may result in a product that fails to satisfy anyone.

A. international

B. multinational

C. transnational

D. global

E. intranational

81.

Candace Apparel, a women's clothing manufacturer, assumes that people all over the world will view and use its products in the same way. Therefore it produces standardized versions of its apparel in several countries with attractive labor rates, and offers them to all of its international markets. Candace Apparel uses the __________ model of global strategy.

A. international

B. multinational

C. global

D. transnational

E. intranational model

82.

The organizational structure that enables managers to "think globally but act locally" is called the

A. Intranational model.

B. International model.

C. Multinational model.

D. Global model.

E. Transnational model.

83.

In companies that adopt the __________ model of organizational structure, functions are centralized where it makes sense to do so, but a great deal of decision making also takes place at the local level.

A. international

B. multinational

C. global

D. transnational

E. multimedia

84.

Transnational companies

A. Require effective communication and coordination networks among subsidiaries.

B. Respond to pressures for both local responsiveness and cost economies.

C. May centralize production facilities in one location and marketing functions in separate locations.

D. Must effectively transfer core skills or know-how.

E. Do all of these.

85.

The transnational model of organizational structure may be characterized by

A. Large low-cost manufacturing facilities in selected locations with products exported to various markets.



D. Manufacturing major components at appropriate lower-cost sites and assembling the components at national subsidiaries to assure local responsiveness.

E. Marketing a standardized product throughout the world.

86.

Which of the following companies is an example of a transnational company?

A. Sony.

B. IBM.

C. Coca Cola.

D. Caterpillar.

E. Unilever.

87.

Which of the models of organization structure depends most heavily on communication and coordination between subsidiaries?

A. The global model.

B. The transnational model.

C. The international model.

D. The worldwide model.

E. The multinational model.

88.

In order to achieve cost economies, Apex Manufacturing bases its production plants in Mexico and gets its engineering services from skilled workers in Germany. Apex is using the __________ model of organizational structure.

A. international

B. multinational

C. global

D. transnational

E. intranational

89.

Mercury Fire Protection manufactures engines for its fire trucks in a central location in order to attain cost economies and then sends these engines to various subsidiaries for final assembly of the truck bodies in order to meet local safety specifications. Mercury uses the __________ model for global strategy.

A. global

B. transnational

C. international

D. maquilladora

E. worldwide

90.

Exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries are all methods of

A. Identifying lucrative consumers on a global scale.

B. Operating a transnational business.

C. Entering overseas markets.

D. Optimizing global profit.

E. Reducing costs.

91.

Most manufacturing companies begin global expansion through which entry mode?

A. Exporting.

B. Wholly owned subsidiary.

C. Franchising.

D. Licensing.

E. Joint venture.

92.

Exporting is

A. A common entry strategy for global expansion.

B. Manufacturing a product in several international locations for consumers in those global markets.

C. Inconsistent with a pure global strategy.

D. Expensive.

E. Not able to achieve scale economies.

93.

An advantage of exporting as a global expansion entry mode is that

A. Economies of scale may be realized.

B. The target site may have lower production costs.

C. Transportation costs are generally lower.

D. It is considered responsive to local needs.

E. Trade barriers may be removed.

94.

A disadvantage of exporting is that

A. It is quite risky.

B. The company may face tariff barriers.

C. It is the most expensive method of expanding globally.

D. The company risks losing control of its intellectual property.

E. It is inconsistent with a pure global strategy.

95.

__________ is an arrangement by which an organization in another country buys the rights to manufacture another organization's product in its own country for a negotiated fee.

A. Franchising

B. International licensing

C. Entering a joint venture

D. Exporting

E. Royalty facilitation

96.

An advantage of licensing as a method of entering global competition is that the

A. Licensing company need not bear the costs and risks of opening up an overseas market.

B. Licensing company has control over its technology.

C. Licensing company has control over quality levels.

D. Licensing company has lower communication costs.

E. Licensee has lower production costs.

97.

A disadvantage of licensing is that the licensing company (licensor)

A. May lose control over its technology.

B. Takes on greater political risk.

C. Takes on greater development costs.

D. Realizes higher profit margins.

E. Frequently grows too fast as a result.

98.

Selling the rights to use your company's brand name in return for a lump-sum payment and a share of the buyer's profits is referred to as

A. Licensing.

B. Entering a joint venture.

C. Exporting.

D. Franchising.

E. Royalty facilitation.

99.

The most significant disadvantage of franchising concerns

A. The very low level of profit potential.

B. The loss of control over technology that may affect an organization's ability to sustain a competitive advantage.

C. High development costs related to a higher level of risk in worldwide operations.

D. Loss of identification with local markets.

E. Quality control.

100.

An advantage of joint ventures in the international marketplace is that

A. The local partner may have a greater knowledge of local consumer tastes and preferences.

B. The local partner may have a greater understanding of local business practices and regulations.

C. The costs of developing the new market are shared with the joint venture partner.

D. The risks of entering the new market are shared with the joint venture partner.

E. All of these are advantages of joint ventures.

101.

A disadvantage of entering global competition through a joint venture is that

A. It often aggravates political issues and incurs protectionist measures.

B. The partner's ideas about local tastes and preferences may interfere with standardized operations.

C. Conflict over control within joint ventures causes many of them to fail.

D. It is the most expensive and risky option for entering a global market.

E. There is seldom a formal agreement in place covering the joint venture.

102.

When a company sets up its own overseas operations, independent of foreign partners or governments, it has established a(n)

A. Purely global strategy.

B. Competitive venture.

C. Wholly owned subsidiary.

D. Independent venture.

E. Multinational contract.

103.

A major disadvantage of operating a wholly owned subsidiary is that

A. A loss of technology is likely to occur.

B. Quality levels are difficult to monitor overseas.

C. High costs and risk are associated with this type of operation.

D. Overseas consumers are often resentful of foreigners.

E. Host countries can impose higher tariffs on the firm.

104.

Which of the following is an advantage of a wholly owned subsidiary as a global entry strategy?

A. The company may gain access to new knowledge or technologies.

B. The partner will share the costs of operating overseas.

C. This method has the highest transportation costs for finished goods.

D. This method minimizes the risks of overseas operations.

E. This method gives a company tight control over operations in other countries.

105.

Individuals sent from a company's parent country to work in overseas operations are referred to as

A. Third-country nationals.

B. Host-country nationals.

C. Globalite executives.

D. Expatriates.

E. Inpatriates.

106.

Carrie Pinon, a chemical engineer from New Jersey, is being sent by her company, L'Oreal of France, to work in product development in China. Carrie would be considered a(n)

A. Third-country national.

B. Host-country national.

C. Globalite executive.

D. Expatriate.

E. Inpatriate.

107.

Which of the following is a reason why some companies prefer to use expatriates at their overseas operations?

A. It can cost three to four times as much to use host-country nationals, compared to expatriates.

B. Expatriates are often able to transfer the corporate culture and best practices to other countries.

C. The personal security of host-country nationals may be an issue in some developing countries.

D. Governments may provide incentives to employ expatriates.

E. All of these are reasons why some organizations prefer to use expatriates.

108.

Marielle has just been offered her first expatriate experience, an assignment in Germany. Before she accepts, her employer should

A. Seek advice from locals and the expatriate network on her behalf.

B. Provide cultural training.

C. Clarify home country rules and how to apply them abroad.

D. Encourage her to perform self- and family evaluation.

E. Reinforce dual identification.

109.

The biggest cause of failure of overseas managers is

A. A lower salary level.

B. Lack of adequate housing.

C. Inadequate access to health benefits.

D. Personal and social issues.

E. Little vacation time.

110.

Which of the following characteristics is most likely associated with an international executive?

A. Ethnocentric.

B. Flexible.

C. Extremely self-confident and assertive.

D. Likes familiarity.

E. Avoids criticism.

111.

__________ is the tendency to judge others by the standards of one's group or culture, which are seen as superior.

A. Individualism

B. Power distance

C. Uncertainty avoidance

D. Ethnocentrism

E. Expatriotism

112.

Josh, an American, was visiting South Korea to do business with some Samsung managers located in Seoul. When his Korean counterpart, Jun-suh, arrived for a meeting, he wanted to chat about family and life before doing business. Josh felt impatient, and thought it rude for someone to assume he had no other important commitments that morning. In this scenario, Josh is best described as exhibiting

A. Ethnocentrism.

B. Individualism.

C. Culture shock.

D. Uncertainty distance

E. Power distance

113.

The disorientation and stress associated with being in a foreign environment is termed

A. International mores.

B. Homesickness.

C. Culture shock.

D. Out-of-country experience.

E. Uncertainty distance.

114.

Jennifer has been assigned to manage an operation in Venezuela. Upon her arrival she encouraged all of her employees (native Venezuelans) to feel free to individually approach her with ideas on improving operations. After many months, no employees had offered suggestions. Jennifer should have realized that Venezuelan culture not only has a _________ degree of collectivism but accepts a _________ power distance.

A. low; small

B. low; large

C. high; large

D. high; small

E. There is not enough information in this example to determine an answer.

115.

In Hofstede's depiction of countries' individualism/collectivism and power distance, the United States is most like

A. France.

B. Mexico.

C. New Zealand.

D. Austria.

E. Japan.

116.

__________ are foreign nationals who are brought in to work at the parent company.

A. Expatriates

B. Third-level nationals

C. Second-party nationals

D. Inpatriates

E. Foreign cohorts

117.

Steps for establishing and reinforcing the codes of conduct for international business include which of the following?

A. Communicating the company's values.

B. Taking action when standards are violated.

C. Measuring ethical performance.

D. Rewarding people for meeting ethical standards.

E. All of the above are steps for establishing and reinforcing international codes of conduct.

118.

Despite differences across cultures, research suggests that regardless of nationality or religion, most people embrace which of the following values?

A. Individualism.

B. Competitiveness.

C. Responsibility.

D. Persistence.

E. Sincerity.

Scenario A

Suppose you are a consultant for three companies with international operations. Each of them has selected a different global strategy. Alpha Company uses its established skills in producing widgets that it will sell in foreign markets. Beta Company produces locally targeted wines for which it has built specialized plants in each local region. Gamma Company has a single worldwide corporate headquarters from which it centrally manages the entire company's operations. Finally, Delta company is located in Wazomia where wages are quite low, and produces large pieces of widgets that are fairly easy to manufacture, requiring little employee skill. These pieces are then sent to its locations abroad to be finished by a more skilled workforce, taking into account the customs and benefits desired by each of those particular populations.

119.

Which global strategy is Alpha Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

120.

Which global strategy is Beta Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

121.

Which global strategy is Delta Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

122.

Which global strategy is Gamma Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

Scenario B

Tim was having a few friends over for dinner, many of whom Tim knew from an international management association. Tim's company provides services to create detailed maps of world areas from satellites, which the firm then sells via the Internet to firms, countries, and others around the world. One guest, Lucia, bakes cookies for a living. Her recipe is so well-liked that her company has grown dramatically. She has just sold the right to manufacture her cookies to a firm in eastern Europe. Another, Mac, is a director at Hilton, and his wife Chandra works for a partnership between Hershey and an Indian firm. Finally, Samantha works for EDS and is soon to go abroad to visit a firm that EDS is considering acquiring so that it can keep its technology proprietary. The guests were speaking about how their companies decided to "go global."

123.

Tim's company uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures

E. wholly owned subsidiaries

124.

Lucia's company is using __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


125.

Hilton uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


126.

Hershey uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


127.

Samantha's company wants to use __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


Scenario C

Rebecca is an American who has just accepted her first international assignment in Sweden. On her first day in the office, she met several new colleagues. Lars is the manager of the office and is a Swedish citizen; he has been with the company for five years. Wen is from China and has also just come to Sweden to work for the company, which is based in the United States.

128.

128.Rebecca would be referred to as a(n)




D. Expatriate.

E. Inpatriate.

129.

Lars would be referred to as a(n)




D. Expatriate.

E. Inpatriate.

130.

Wen would be referred to as a(n)




D. Expatriate.

E. Inpatriate.

131.

Because Rebecca has never worked outside the United States before, how should she approach her new assignment now that she has arrived in the office in Sweden? Refer To: Table 6.3

A. She should engage in self-evaluation.

B. She should think of the assignment as a vertical promotion.

C. She should assume Sweden is very similar to the United States.

D. She should behave as she did at home in the meetings she will attend.

E. She should seek social support.

Scenario D

A group of managers was recently reunited after completing overseas assignments, and they were telling stories of their experiences. Alfredo was surprised by employees in his host nation because he found them reluctant to take personal credit for good work. Bernie had employees that were not anxious to adopt any of the changes he recommended, even though they were accepted best practices at home. Ed noticed that his employees did not seem to take much pleasure in financial rewards but loved additional vacation days as a perk. Sarah's local counterpart told her she would need to fly in coach because employees would be intolerant of her traveling in first class.

132.

Alfredo experienced employees exhibiting Hofstede's cultural dimension of

A. High power distance.

B. Low power distance.

C. Individualism.

D. Collectivism.

E. High uncertainty avoidance.

133.

Bernie had employees who would best be described as exhibiting Hofstede's dimension of


B. Masculinity.

C. Individualism.

D. Collectivism.


134.

Ed's employees exhibited Hofstede's dimension of



C. Individualism.

D. Femininity.


135.

Sarah's employees exhibited Hofstede's dimension of



C. Individualism.

D. Femininity.


Essay Questions

136.

Explain the consequences of the increasing integration of the global economy.

137.

Describe how the global economy is becoming more integrated than ever before. Include a discussion of the European Union, China, and NAFTA in your answer.

138.

Discuss how an organization should identify the best strategy for competing in a global marketplace and the four approaches typically used.

139.

Discuss the advantages of licensing and franchising. In what situations are each of these strategies most appropriate?

140.

What are the pros and cons of using expatriates, host-country nationals, and third-country nations to run overseas operations? If you were expanding your business, which approach would you use?

141.

Summarize the skills and knowledge managers need to manage globally.

142.

Discuss the four dimensions identified by Geert Hofstede to analyze cultural differences among countries. Explain the classification for a country of your choosing according to Hofstede's model.

143.

Discuss how culture plays out in terms of ethical behavior. What can organizations do to manage these issues more effectively?

Chapter 06 International Management Answer Key

True / False Questions

1. New York Times columnist Thomas Friedman wrote a best-selling book called "The Global Economy Is Flat." FALSE

The global economy matters because your customers, employees, and suppliers could be located anywhere in the world. New York Times columnist Thomas Friedman wrote a best-seller about this phenomenon. His book, The World Is Flat, described how such trends as the Internet and trade agreements between more nations have made international business the norm today.

AACSB: Analytic

Blooms: RememberLearning Objective: 06-01 Discuss what integration of the global economy means for individual companies and

their managers.Level of Difficulty: 1 Easy

Topic: Managing in a (Sometimes) Flat World

2. Foreign direct investment flows to less developed countries by firms in developed countries is declining substantially. FALSE

A consequence of increased global integration is that foreign direct investment (FDI) is playing an ever-increasing role in the global economy as companies of all sizes invest overseas. In particular, the foreign direct investment flows to less developed countries from firms in developed countries has risen substantially.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-01 Discuss what integration of the global economy means for individual companies and

their managers.Level of Difficulty: 2 Medium


3. One consequence of an increasingly integrated global economy is that imports are penetrating deeper into the world's largest economies, such as that of the United States. TRUE

The increasing integration of the global economy has had many consequences, including in particular deeper penetration of imports into the world's largest economies.

AACSB: Analytic




4. Offshoring occurs when an organization contracts with an outside provider to produce one or more of an organization's products or services. FALSE

Offshoring occurs when companies move jobs to another country, typically where wages are lower. This practice does not necessarily require using an outside provider, as outsourcing does.

AACSB: Analytic




5. North America, South America, and Asia are the three regions that are most dominant in the global economy. FALSE

The global economy is dominated by countries in three regions: North America, western Europe, and Asia.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-02 Describe how the world economy is becoming more integrated than ever before.

Level of Difficulty: 2 MediumTopic: The Global Environment

6. Germany is a member of the Group of Five. TRUE

The Group of Five are the top five industrial nations in the view of the World Bank and IMF: the United States, Britain, France, Germany, and Japan.

AACSB: Analytic



7. The Maastricht Treaty formally established the trade area in North America. FALSE

Under the Maastricht Treaty, which formally established the European Union (EU), the euro was adopted as a common currency among 13 member countries.

AACSB: Analytic

Blooms: RememberLearning Objective: 06-02 Describe how the world economy is becoming more integrated than ever before.

Level of Difficulty: 1 EasyTopic: The Global Environment

8. The creation of a unified Europe has resulted in an economic superpower with a larger GDP than the United States. TRUE

The European Union was originally formed after World War II to foster cooperation through trade in place of military conflict, but the efforts have also created an economic superpower. Its 27 members now boast a population of more than 492 million and a GDP (gross domestic product) exceeding that of the United States.

AACSB: Analytic



9. Japan is the most important trading partner of the United States based on the value of imports and exports between the two countries. FALSE

Japan is America's fourth-largest export market, after Canada, China, and Mexico; and Japan is in fourth place as a source of U.S. imports (see Figure 6.5).

Refer To: Figure 6.5

AACSB: Analytic



10. The value of U.S. imports from China is more than five times the value of U.S. exports to China. TRUE

The low wage rates in China help explain why the value of U.S. imports from China is more than five times the value of U.S. exports to China.

AACSB: Analytic



11. Members of APEC include South Korea, Taiwan, the United States, Australia, and Russia. TRUE

South Korea, Taiwan, and Singapore and other Asian countries have joined with the United States, Australia, and Russia to form the 21-member Asia-Pacific Economic Cooperation (APEC) trade group.

AACSB: Analytic



12. Mexico has quickly emerged as the third-largest trading partner of the United States as a result of NAFTA. TRUE

Although the United States has had a longer-standing agreement with Canada, Mexico has quickly emerged as the United States' third-largest trading partner as a result of NAFTA.

AACSB: Analytic



13. NAFTA had an immediate and negative effect on the U.S. automobile industry. FALSE

U.S. industries that have benefited in the short run from NAFTA include capital goods suppliers, manufacturers of consumer durables, grain producers and distributors, construction equipment manufacturers, the auto industry, and the financial industry.

AACSB: Analytic



14. The Middle East is the largest supplier of oil to the United States. FALSE

The Middle East supplies by far the most oil to the world's buyers, most of it going to buyers in Asia. The Middle East is not, however, the largest supplier of oil to the United States, which imports oil primarily from closer sources: Canada, Mexico, and Venezuela.

AACSB: Analytic



15. Pressure to lower costs is one reason a firm may prefer a common global strategy to one tailored to individual markets. TRUE

Managers may have several reasons to want or need a common global strategy, rather than one tailored to individual markets. These factors include the existence of universal needs, pressures to reduce costs, or the presence of competitors with a global strategy.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-03 Define the strategies organizations use to compete in the global marketplace.

Level of Difficulty: 2 MediumTopic: Global Strategy

16. Universal needs exist when the tastes and preferences of consumers in different countries with regard to a product are similar. TRUE

Universal needs create strong pressure for a global strategy. Universal needs exist when the tastes and preferences of consumers in different countries with regard to a product are similar.

AACSB: Analytic



17. When pressures for local responsiveness are high and pressures for global integration are low, the global model is appropriate. FALSE

Figure 6.5 indicates that the multinational model is the appropriate one to consider when pressures for local responsiveness are high and pressures for global integration are low.


AACSB: Analytic



18. When there are differences among countries in traditional practices such as driving, pressures for local responsiveness emerge. FALSE

Pressures for local responsiveness also emerge when there are differences in traditional practices among countries. In Great Britain people drive on the left side of the road, creating a demand for right-hand-drive cars, whereas in neighboring France people drive on the right. Obviously automobiles must be customized to accommodate this difference in traditional practices.

AACSB: Analytic



19. In the international model, managers use their organization's existing core capabilities to expand into foreign markets. TRUE

In the international model, managers use their organization's existing core capabilities to expand into foreign markets. It is most appropriate when there are few pressures for economies of scale or local responsiveness.

AACSB: Analytic

Blooms: RememberLearning Objective: 06-03 Define the strategies organizations use to compete in the global marketplace.

Level of Difficulty: 1 EasyTopic: Global Strategy

20. Major disadvantages of the multinational model are higher manufacturing costs and duplication of efforts. TRUE

A major disadvantage of the multinational form is higher manufacturing costs and duplication of effort. Although a multinational can transfer core skills among its international operations, it cannot realize scale economies from centralizing manufacturing facilities and offering a standardized product to the global marketplace.

AACSB: Analytic



21. Companies that adopt the global model tend to be those pursuing a cost focus as a competitive strategy. TRUE

The global model is an organizational model consisting of a company's overseas subsidiaries and characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations; it is typically adopted by organizations that base their global competitive strategy on cost considerations.

AACSB: Analytic



22. Transnational companies are companies that produce products in one country and export these products to many overseas countries. FALSE

In companies that adopt the transnational model, functions are centralized where it makes sense to do so, but a great deal of decision making also takes place at the local level. In addition, the experiences of local subsidiaries are shared worldwide to improve the firm's overall knowledge and capabilities.

AACSB: Analytic



23. One advantage of exporting is that it provides scale economies. TRUE

One of the advantages of exporting is that it provides scale economies by avoiding the costs of manufacturing in other countries.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-04 Compare the various entry modes organizations use to enter overseas markets.

Level of Difficulty: 2 MediumTopic: Entry Mode

24. High transportation costs associated with exporting can make it uneconomical, particularly in the case of bulk products. TRUE

One drawback of exporting is that high transportation costs can make it uneconomical, particularly in the case of bulk products.

AACSB: Analytic



25. Franchising is utilized primarily by manufacturing industries, whereas licensing is used more often in service industries. FALSE

Franchising is similar to licensing. However, whereas licensing is a strategy pursued primarily by manufacturing companies, franchising is used primarily by service companies.

AACSB: Analytic



26. Quality control is a significant disadvantage of franchising. TRUE

The most significant disadvantage of franchising concerns quality control. The company's brand name guarantees consistency in the company's product. But if overseas franchisees are less concerned about quality than they should be, the impact can go beyond lost sales in the local market to a decline in the company's reputation worldwide.

AACSB: Analytic



27. When a company's competitive advantage is based on technology and it wishes to enter the global marketplace, the least preferred strategy is the wholly owned subsidiary. FALSE

When a company's competitive advantage is based on technology, a wholly owned subsidiary normally is the preferred entry mode because it reduces the risk of losing control over the technology.

AACSB: Analytic



28. Individuals from the parent country who are sent to work at a foreign subsidiary are known as expatriates. TRUE

When establishing operations overseas, headquarters executives have a choice among sending expatriates (individuals from the parent country), using host-country nationals (natives of the host country), and deploying third-country nationals (natives of a country other than the home country or the host country).

AACSB: Analytic

Blooms: RememberLearning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.

Level of Difficulty: 1 EasyTopic: Managing across Borders

29. Using host-country nationals at an overseas subsidiary is generally more expensive than using expatriates. FALSE

Because sending employees abroad can cost three to four times as much as employing host-country nationals, some companies, including Texas Instruments, have made limited use of expatriates.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.

Level of Difficulty: 2 MediumTopic: Managing across Borders

30. Cultural shock is an example of an executive coping strategy for international assignments. FALSE

Cultural shock is a primary stressor, not a coping response, in the developmental stages of expatriate executives.

AACSB: Analytic

Blooms: Understand

Learning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.Level of Difficulty: 2 Medium

Topic: Managing across Borders

31. The failure rate among expatriates is less than five percent. FALSE

The failure rate among expatriates (defined as those who come home early) ranges from an estimated 20 percent to 70 percent, depending on the country of assignment. The cost of each failed assignment ranges from tens of thousands to hundreds of thousands of dollars.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-06 Summarize the skills and knowledge managers need to manage globally.


32. Family issues are the biggest reason for expatriates to return home early. TRUE

Typically the causes for failure overseas extend beyond technical capability and include personal and social issues. In a recent survey of human resource managers around the globe, two-thirds said the main reason for the failures is family issues, especially dissatisfaction of the employee's spouse or partner.

AACSB: Analytic



33. One way to prevent failed global assignments is to use effective, validated screening and selection criteria. TRUE

There are a number of ways to prevent failed global assignments mentioned in Table 6.5, including using effective, validated screening and selection criteria.

Refer To: Table 6.5

AACSB: Analytic



34. Ethnocentrism is the tendency to judge others by the standards of one's own culture or group, which are seen as superior. TRUE

Without realizing it, some managers may act out of ethnocentrism, a tendency to judge foreign people or groups by the standards of one's own culture or group, and to see one's own standards as superior.

AACSB: Analytic

Blooms: RememberLearning Objective: 06-07 Identify ways in which cultural differences across countries influence management.


35. Culture shock is the disorientation and stress associated with being in a foreign environment. TRUE

People traveling abroad frequently experience culture shock, which is the disorientation and stress associated with being in a foreign environment.

AACSB: Analytic



36. On Hofstede's power distance and individualism scales, the United States is very similar to France. FALSE

According to Figure 6.7, the United States has a greater level of individualism and a smaller power distance than France.


AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-07 Identify ways in which cultural differences across countries influence management.


37. Inpatriates are foreign nationals that are sent abroad for a short period. FALSE

Cross-cultural management includes effective management of inpatriates, who are foreign nationals brought in to work at the parent company.

AACSB: Analytic

Blooms: Remember

Learning Objective: 06-07 Identify ways in which cultural differences across countries influence management.Level of Difficulty: 1 Easy

Topic: Managing across Borders

38. Inpatriates are valuable because they bring with them extensive knowledge about how to operate effectively in their home countries. TRUE

Cross-cultural management includes effective management of inpatriates, who are foreign nationals brought in to work at the parent company. These employees provide a valuable service to global companies because they bring extensive knowledge about how to operate effectively in their home countries.

AACSB: Analytic



39. Ethical behavior and decision making are surprisingly harder in a purely domestic situation than in the international arena. FALSE

Issues of right and wrong get blurred as we move from one culture to another, and actions that may be normal and customary in one setting may be unethical, or even illegal, in another.

AACSB: Analytic



Multiple Choice Questions

40. Which of the following is a consequence of an increasingly integrated global economy?

A. World output and trade have decreased to a dramatically low level.

B.Many companies find their home markets under attack from foreign competition.

C. Companies are making foreign direct investments at home.

D. Imports are failing to penetrate deeper into the world's largest economies.

E. There are reduced opportunities for global trade.

The increasing integration of the global economy has had many consequences: large expansion of international trade: foreign direct investment increasing, imports penetrating deeper into the world's largest economies, and companies finding their home markets under attack from foreign competitors.

AACSB: Analytic




41. The flat world has required managers to operate in an environment that is ________ complex and competitive and offers more _________.

A. more; profit

B. less; profit

C. more; opportunities

D. less; opportunities

E. less; ROI

Opportunities are greater because free trade has opened up formerly protected national markets. The environment is more complex because managers deal with the challenges of doing business in countries with radically different cultures and coordinating globally dispersed operations. The environment is more competitive because in addition to domestic competitors, the manager must deal with cost-efficient overseas competitors.

AACSB: Analytic




42. Operating in a global marketplace is considered more complex because

A. Managers must compete with cost-efficient overseas competitors.

B. The lessening of trade barriers has decreased opportunities in previously attractive markets.

C. Many overseas competitors operate with greater economies of scale.

D.Of varying cultures and coordination of globally dispersed operations.

E. International management is relatively risk-free as compared to domestic management.

The environment is more complex because today's manager often has to deal with the challenges of doing business in countries with radically different cultures and coordinating globally dispersed operations.

AACSB: Analytic




43. ________ occurs when the organization contracts with an outside provider to produce one or more of an organization's products or services.


B.Outsourcing

C. Offshoring

D. Expatriation

E. Franchising

Outsourcing occurs when an organization contracts with an outside provider to produce one or more of its goods or services.

AACSB: Analytic




44. ________ occurs when companies move jobs to another country, typically where wages are lower.


B. Outsourcing

C. Offshoring

D. Expatriation

E. Franchising

Offshoring occurs when companies move jobs to another country, typically where wages are lower. This practice does not necessarily require using an outside provider.

AACSB: Analytic




45. Answering yes to which of the following questions should be considered by managers as a reason to offshore?

A. Is cost the competitive advantage of the organization's products?

B. Is the business in its early stages?

C. Can production savings be achieved locally?

D. Can the efficiency of the supply chain be improved?

E. Answering yes to any or all of these would be considered by managers as reason to offshore.

If a product is widely available and standardized, like a calculator, and the only competitive advantage is price, the lowest possible production cost becomes essential, and offshoring becomes something managers will consider.

AACSB: Analytic




46. Which areas are considered the most dominant in the global economy?

A.North America, western Europe, and Asia.

B. North America, South America, and Asia.

C. Western Europe, Asia, and Africa.

D. North America, South America, and western Europe.

E. North America, Asia, and Africa.

The global economy is dominated by countries in three regions: North America, western Europe, and Asia.

AACSB: Analytic



47. Under (the) ________, member countries agreed to adopt a common European currency called the euro.

A. NAFTA

B.Maastricht Treaty

C. GATT Agreement

D. APEC Treaty

E. European Unification Act

Under the Maastricht Treaty, which formally established the European Union (EU), the euro was adopted as a common currency among 13 member countries.

AACSB: Analytic



48. Which of the following has resulted from the formation of the European Union?

A. The elimination of all trade barriers within Europe.

B. The protection of local industry within Europe.

C. The strengthening of Europe's position as an economic superpower.

D. The reunification of Germany.

E. The adoption of one European language.

The European Union was originally formed after World War II to foster cooperation through trade in place of military conflict, but the efforts have also created an economic superpower. Its 27 members now boast a population of more than 492 million and a GDP (gross domestic product) exceeding that of the United States.

AACSB: Analytic



49. To be competitive in a global economy, Europeans must increase their level of

A. Population density.

B.Productivity.

C. Espionage activity.

D. Philanthropic contributions.

E. Wealth.

Western Europeans on average work fewer hours, earn more pay, take longer vacations, and enjoy far more social entitlements than do their counterparts in North America and Asia. To be competitive in a global economy, Europeans must increase their level of productivity.

AACSB: Analytic



50. Which country does the text describe as becoming the largest producer and consumer of many of the world's goods?

A. Japan.

B. Canada.

C. Mexico.

D.China.

E. Vietnam.

With the world's largest population and increasing industrialization, China is on its way to becoming the largest producer and consumer of many of the world's goods.

AACSB: Analytic



51. Labor costs in China are about ________ those in Mexico.

A.one-third of

B. three times

C. the same as

D. seven times

E. 10 times

The enormous size of its labor force, combined with its extremely low labor costs, has given it a huge competitive advantage in manufacturing. Estimates suggest that labor costs in China are less than $1 an hour, compared with $2.92 for manufacturing workers in Mexico and $24.59 for manufacturing workers in the United States.

AACSB: Analytic



52. NAFTA combined the economies of

A.The United States, Canada, and Mexico.

B. Canada, Mexico, and South America.

C. South America, the United States, and Central America.

D. Latin America, the Pacific Rim, and the European Union.

E. The United States, the European Union, and Canada.

The North American Free Trade Agreement (NAFTA) combined the economies of the United States, Canada, and Mexico into one of the world's largest trading blocs with nearly 450 million U.S., Canadian, and Mexican consumers and a total output of $17 trillion.

AACSB: Analytic



53. Which country does the text describe as having become an important provider of online computer and software support for the United States?

A. Egypt.

B. Great Britain.

C. India.

D. Mexico.

E. Taiwan.

India has become an important provider of online support for computer software development and other services.

AACSB: Analytic



54. The passage of NAFTA has provided short-term benefits to which of the following industries?

A. The auto industry.

B. Grain producers.

C. The financial industry.

D. Capital goods suppliers.

E. All of these have benefited from NAFTA.

NAFTA has benefited all of the industries listed in the question.

AACSB: Analytic



55. Which of the following existing agreements includes Costa Rica, Nicaragua, and the United States?

A. NAFTA.

B.CAFTA-DR.

C. FTAA.

D. APEC.E. ASEAN

.

In 2005 President George W. Bush signed into law U.S. participation in a Central America-Dominican Republic-United States Free Trade Agreement (CAFTA-DR). Other nations that have agreed to participate include Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

AACSB: Analytic



56. When identifying the best strategy for competing in a global marketplace, it is helpful to plot a company's position on a(n)

A. Leadership grid.

B. Force field analysis grid.

C. Integration-responsiveness grid.

D. Cost-benefit grid.

E. Strategy map.

One of the critical tasks an international manager faces is to identify the best strategy for competing in a global marketplace. To approach this issue, managers can plot a company's position on an integration-responsiveness grid. The vertical axis measures pressures for global integration, and the horizontal axis measures pressures for local responsiveness.

AACSB: Analytic



57. The grid used for identifying the best strategy for competing in a global marketplace measures what two dimensions?

A.Pressures for global integration and pressures for local responsiveness.

B. Pressure for local interaction and pressures for global responsiveness.

C. Financial viability and employee satisfaction.

D. Employee satisfaction and management credibility.

E. Pressures for global systems capacity and pressures for local financial success.

One of the critical tasks an international manager faces is to identify the best strategy for competing in a global marketplace. To approach this issue, managers can plot a company's position on an integration-responsiveness grid. The vertical axis measures pressures for global integration, and the horizontal axis measures pressures for local responsiveness.

AACSB: Analytic



58. Pressure for global integration includes

A.Universal needs.


C. Political demands imposed by host countries.

D. Varied consumer preferences.

E. Legal demands imposed by host countries.

Managers may have several reasons to want or need a common, global strategy, rather than one tailored to individual markets. These factors include the existence of universal needs, pressures to reduce costs, or the presence of competitors with a global strategy.

AACSB: Analytic



59. Pressure for local responsiveness includes

A. Varying consumer preferences.

B. Varying sales and distribution patterns.

C. Varying traditions.

D. Varying political demands.

E. All of these.

Managers may need to make sure their companies can adapt to different needs in different locations. Strong pressures for local responsiveness emerge when consumer tastes and preferences differ significantly, there are differences in traditional practices, there are differences in distribution channels and sales practices, or economic and political demands that host-country governments impose necessitate a degree of local responsiveness.

AACSB: Analytic



60. Which of the following pressures for local responsiveness includes threats of protectionism, economic nationalism, and local rules?

A. Differences in distribution channels.


C. Economic and political demands.

D. Differences in consumer tastes.

E. Global market integration.

Economic and political demands that host-country governments impose may necessitate a degree of local responsiveness. Most important, threats of protectionism, economic nationalism, and local content rules (rules requiring that a certain percentage of a product be manufactured locally) dictate that international companies manufacture locally.

AACSB: Analytic



61. Which of the following is a global strategy used as an approach to international competition?



C. Global model.


E. All of these are global strategies.

According to Figure 6.6, the four types of organization models used in global trade are global, transnational, international, and multinational.


AACSB: Analytic



62. The model in which managers use their organization's existing core capabilities to expand into foreign markets is called the



C. Global model.


E. Multimedia model.

In the international model, managers use their organization's existing core capabilities to expand into foreign markets. It is most appropriate when there are few pressures for economies of scale or local responsiveness.

AACSB: Analytic



63. The international model of organizational structure consists of


B.Subsidiaries located in countries where the company does business with much of the control exercised by the parent company.



E. Global services.

In the international model, managers use their organization's existing core capabilities to expand into foreign markets. The international model uses subsidiaries in each country in which the company does business, with ultimate control exercised by the parent company.

AACSB: Analytic



64. From which model of organizational structure did IBM and Xerox profit by transferring skills and know-how to subsidiaries around the globe?



C. Global model.



The advantage of the international model is that it facilitates the transfer of skills and know-how from the parent company to subsidiaries around the globe. For example, IBM and Xerox profited from the transfer of their core skills in technology and research and development (R&D) overseas.

AACSB: Analytic



65. The overseas success of Kellogg, Coca-Cola, Heinz, and Procter & Gamble is based on marketing know-how. These companies are using which model of organizational structure?



C. Global model.



The advantage of the international model is that it facilitates the transfer of skills and know-how from the parent company to subsidiaries around the globe. The overseas success of Kellogg, Coca-Cola, Heinz, and Procter & Gamble is based more on marketing know-how than on technological expertise.

AACSB: Analytic



66. Calabria Steel has subsidiaries in each country in which it does business. As the parent company, Calabria has located its core skills in technology and R&D overseas so that each subsidiary remains dependent on it for new products, processes, and ideas. This illustrates the __________ model for global strategy.

A. international

B. multinational

C. global

D. transnational

E. intranational

The international model facilitates the transfer of skills and know-how from the parent company to subsidiaries around the globe, yet the subsidiaries are still dependent on the parent company for new products, processes, and ideas.

AACSB: Analytic

Blooms: ApplyLearning Objective: 06-03 Define the strategies organizations use to compete in the global marketplace.

Level of Difficulty: 3 HardTopic: Global Strategy

67. Where global efficiency is not required but adapting to local conditions offers advantages, the __________ model of organizational structure is appropriate.

A. international

B.multinational

C. global

D. transnational

E. multimedia

Where global efficiency is not required but adapting to local conditions offers advantages, the multinational model is appropriate.

AACSB: Analytic



68. The global strategy model that uses subsidiaries in each country and provides each a great deal of discretion to respond to local conditions is the __________ model.

A. international

B.multinational

C. global

D. transnational

E. domestic

The multinational model, sometimes referred to as multidomestic, uses subsidiaries in each country in which the company does business and provides a great deal of discretion to those subsidiaries to respond to local conditions.

AACSB: Analytic



69. The multinational model of organization structure consists of





E. Extensive use of offshoring.


AACSB: Analytic



70. Companies that decentralize their operations throughout the globe in order to appeal to the varying tastes and preferences of global consumers are utilizing a ___________ model.

A. domestic

B. international

C. multinational

D. transnational

E. global

Because of individual autonomy, each multinational subsidiary can customize its products and strategies according to the tastes and preferences of local consumers; the competitive conditions; and political, legal, and social structures.

AACSB: Analytic



71. Which global strategy model realizes the advantage of local responsiveness but the disadvantage of high manufacturing costs and duplication of effort?

A. Transnational.

B. Global.

C. Worldwide.

D. International.

E. Multinational.

One advantage of the multinational form is the advantage of local responsiveness. One disadvantage of the multinational form is higher manufacturing costs and duplication of effort.

AACSB: Analytic



72. A disadvantage of a multinational model is that

A. Problems in transferring core skills are created.

B. Each subsidiary must respond to specific consumer needs.

C. Transfer pricing presents difficulties.

D.It is difficult to launch a coordinated global attack against competitors.

E. Coordination of efforts within countries is more difficult.

Because a multinational approach tends to decentralize strategy decisions, launching coordinated global attacks against competitors is difficult. This can be a significant disadvantage when competitors have this ability.

AACSB: Analytic



73. Though the product is based on a formula pioneered in California and Florida, Euro Disney operates the amusement park in France, and markets it somewhat differently than the United States facilities in order to appeal to the European consumer. This type of strategy is known as a(n) __________ model.

A. domestic

B. international

C. multinational

D. transnational

E. global


AACSB: Analytic



74. In which two models of global strategy do manufacturing costs remain relatively high?

A. Global and transnational.

B. International and transnational.

C. Multinational and international.

D. Global and international.

E. Multinational and transnational.

One disadvantage of the international model is that it frequently does not provide the opportunity to achieve a low-cost position via scale economies. One disadvantage of the multinational form is higher manufacturing costs and duplication of effort.

AACSB: Analytic



75. Heineken, a Netherlands-based brewing company, produces more than 170 different brands around the world, some of them international but many of them specialty brews for regional and local tastes. This illustrates the


B.Multinational model.

C. Global model.



The multinational model uses subsidiaries in each country in which the company does business and provides a great deal of discretion to those subsidiaries to respond to local conditions.

AACSB: Analytic



76. The __________ organizational model is designed to enable a company to market a standardized product in the global marketplace and to manufacture that product in a limited number of locations where the mix of costs and skills is most favorable.

A. international

B. multinational

C. global

D. transnational

E. multimedia

The global model is designed to enable a company to market a standardized product in the global marketplace and to manufacture that product in a limited number of locations where the mix of costs and skills is most favorable.

AACSB: Analytic



77. Competing globally under the assumption that no tangible differences exist among consumer tastes and preferences in varying countries is referred to as a __________ model.

A. multinational

B. consumer-focused

C. transnational

D.global

E. domestic

The global model has been adopted by companies that view the world as one market and assume that no tangible differences exist among countries with regard to consumer tastes and preferences.

AACSB: Analytic



78. An organizational model that consists of a company's overseas subsidiaries and is characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations is called the



C. Global model.



The global model is an organizational model consisting of a company's overseas subsidiaries and characterized by centralized decision making and tight control by the parent company over most aspects of worldwide operations.

AACSB: Analytic



79. When a company such as Procter & Gamble approaches the European market as a unified whole, thus reducing costs and improving efficiency, it is using the __________ model of organizational structure.

A. international

B. multinational

C. transnational

D.global

E. intranational

Procter & Gamble has been successful in Europe against Unilever because it has approached the entire continent as a unified whole.

AACSB: Analytic



80. The __________ model of organizational structure has a disadvantage in that it may result in a product that fails to satisfy anyone.

A. international

B. multinational

C. transnational

D.global

E. intranational

Because a company pursuing a purely global approach tries to standardize its goods and services, it may be less responsive to consumer tastes and demands in different countries. Attempts to lower costs through global product standardization may result in a product that fails to satisfy anyone.

AACSB: Analytic



81. Candace Apparel, a women's clothing manufacturer, assumes that people all over the world will view and use its products in the same way. Therefore it produces standardized versions of its apparel in several countries with attractive labor rates, and offers them to all of its international markets. Candace Apparel uses the __________ model of global strategy.

A. international

B. multinational

C. global

D. transnational

E. intranational model


AACSB: Analytic



82. The organizational structure that enables managers to "think globally but act locally" is called the

A. Intranational model.

B. International model.

C. Multinational model.

D. Global model.

E. Transnational model.

The transnational model is designed to help managers to simultaneously pursue local responsiveness, transfer of know-how, and cost economies. It is an approach that enables managers to "think globally but act locally."

AACSB: Analytic



83. In companies that adopt the __________ model of organizational structure, functions are centralized where it makes sense to do so, but a great deal of decision making also takes place at the local level.

A. international

B. multinational

C. global

D.transnational

E. multimedia

In companies that adopt the transnational model, functions are centralized where it makes sense to do so, but a great deal of decision making also takes place at the local level.

AACSB: Analytic



84. Transnational companies

A. Require effective communication and coordination networks among subsidiaries.

B. Respond to pressures for both local responsiveness and cost economies.

C. May centralize production facilities in one location and marketing functions in separate locations.

D. Must effectively transfer core skills or know-how.

E. Do all of these.

The transnational model is designed to help managers to simultaneously pursue local responsiveness, transfer of know-how, and cost economies. It is an approach that enables managers to "think globally but act locally."

AACSB: Analytic



85. The transnational model of organizational structure may be characterized by

A. Large low-cost manufacturing facilities in selected locations with products exported to various markets.



D.Manufacturing major components at appropriate lower-cost sites and assembling the components at national subsidiaries to assure local responsiveness.

E. Marketing a standardized product throughout the world.

With the transnational model, major components may be manufactured in centralized production plants to realize scale economies and then shipped to local plants, where the final products are assembled and customized to fit local needs.

AACSB: Analytic



86. Which of the following companies is an example of a transnational company?

A. Sony.

B. IBM.

C. Coca Cola.

D.Caterpillar.

E. Unilever.

Caterpillar is a transnational company. The need to compete with low-cost competitors has forced it to look for greater cost economies by centralizing global production at locations where the mix of costs and skills is most favorable. At the same time, variations in construction practices and government regulations across countries mean that it must be responsive to local needs.

AACSB: Analytic



87. Which of the models of organization structure depends most heavily on communication and coordination between subsidiaries?

A. The global model.

B.The transnational model.

C. The international model.

D. The worldwide model.

E. The multinational model.

The most important distinguishing characteristic of the transnational organization is the fostering of communications among subsidiaries and the ability to integrate the efforts of subsidiaries when doing so makes sense.

AACSB: Analytic



88. In order to achieve cost economies, Apex Manufacturing bases its production plants in Mexico and gets its engineering services from skilled workers in Germany. Apex is using the __________ model of organizational structure.

A. international

B. multinational

C. global

D.transnational

E. intranational

To achieve cost economies with a transnational model, companies may base global-scale production plants for labor-intensive products in low-wage countries such as China and production plants that require a skilled workforce in high-skill countries such as Germany and Japan.

AACSB: Analytic



89. Mercury Fire Protection manufactures engines for its fire trucks in a central location in order to attain cost economies and then sends these engines to various subsidiaries for final assembly of the truck bodies in order to meet local safety specifications. Mercury uses the __________ model for global strategy.

A. global

B. transnational

C. international

D. maquilladora

E. worldwide

With the transnational model, major components may be manufactured in centralized production plants to realize scale economies and then shipped to local plants, where the final product is assembled and customized to fit local needs.

AACSB: Analytic



90. Exporting, licensing, franchising, joint ventures, and wholly owned subsidiaries are all methods of

A. Identifying lucrative consumers on a global scale.

B. Operating a transnational business.

C. Entering overseas markets.

D. Optimizing global profit.

E. Reducing costs.

The five basic ways to expand overseas are exporting, licensing, franchising, entering into a joint venture with a host-country company, and setting up a wholly owned subsidiary in the host country. Table 6.2 compares the entry modes.

Refer To: Table 6.2

AACSB: Analytic

Blooms: RememberLearning Objective: 06-04 Compare the various entry modes organizations use to enter overseas markets.

Level of Difficulty: 1 EasyTopic: Entry Mode

91. Most manufacturing companies begin global expansion through which entry mode?

A.Exporting.

B. Wholly owned subsidiary.

C. Franchising.

D. Licensing.

E. Joint venture.

Most manufacturing companies begin global expansion as exporters and later switch to one of the other modes for serving an overseas market.

AACSB: Analytic



92. Exporting is

A.A common entry strategy for global expansion.

B. Manufacturing a product in several international locations for consumers in those global markets.

C. Inconsistent with a pure global strategy.

D. Expensive.

E. Not able to achieve scale economies.

Most manufacturing companies begin global expansion as exporters and later switch to one of the other modes for serving an overseas market. The advantages of exporting are that it (1) provides scale economies by avoiding the costs of manufacturing in other countries and (2) is consistent with a pure global strategy.

AACSB: Analytic



93. An advantage of exporting as a global expansion entry mode is that

A.Economies of scale may be realized.

B. The target site may have lower production costs.

C. Transportation costs are generally lower.

D. It is considered responsive to local needs.

E. Trade barriers may be removed.

The advantages of exporting are that it (1) provides scale economies by avoiding the costs of manufacturing in other countries and (2) is consistent with a pure global strategy.

Refer To: Table 6.2

AACSB: Analytic



94. A disadvantage of exporting is that

A. It is quite risky.

B.The company may face tariff barriers.

C. It is the most expensive method of expanding globally.

D. The company risks losing control of its intellectual property.

E. It is inconsistent with a pure global strategy.

Exporting has a number of drawbacks, including higher domestic production costs, high transportation costs, and potential tariff barriers.

AACSB: Analytic



95. __________ is an arrangement by which an organization in another country buys the rights to manufacture another organization's product in its own country for a negotiated fee.

A. Franchising

B. International licensing

C. Entering a joint venture

D. Exporting

E. Royalty facilitation

International licensing is an arrangement by which a licensee in another country buys the rights to manufacture a company's product in its own country for a negotiated fee (typically royalty payments on the number of units sold). The licensee then puts up most of the capital necessary to get the overseas operation going.

AACSB: Analytic



96. An advantage of licensing as a method of entering global competition is that the

A.Licensing company need not bear the costs and risks of opening up an overseas market.

B. Licensing company has control over its technology.

C. Licensing company has control over quality levels.

D. Licensing company has lower communication costs.

E. Licensee has lower production costs.

The advantage of licensing is that the company need not bear the costs and risks of opening up an overseas market.

AACSB: Analytic



97. A disadvantage of licensing is that the licensing company (licensor)

A.May lose control over its technology.

B. Takes on greater political risk.

C. Takes on greater development costs.

D. Realizes higher profit margins.

E. Frequently grows too fast as a result.

A problem arises with international licensing when a company licenses its technological expertise to overseas companies when technological know-how is the basis of the competitive advantage. It may lose control over the technology by licensing it.

AACSB: Analytic



98. Selling the rights to use your company's brand name in return for a lump-sum payment and a share of the buyer's profits is referred to as

A. Licensing.

B. Entering a joint venture.

C. Exporting.

D.Franchising.

E. Royalty facilitation.

In franchising, the company sells limited rights to use its brand name to franchisees in return for a lump-sum payment and a share of the franchisee's profits. Unlike most licensing agreements, the franchisee has to agree to abide by strict rules regarding how it does business.

AACSB: Analytic



99. The most significant disadvantage of franchising concerns

A. The very low level of profit potential.

B. The loss of control over technology that may affect an organization's ability to sustain a competitive advantage.

C. High development costs related to a higher level of risk in worldwide operations.

D. Loss of identification with local markets.

E. Quality control.

If overseas franchisees are less concerned about quality than they should be, the impact can go beyond lost sales in the local market to a decline in the company's reputation worldwide. To make matters worse, the geographic distance between the franchisor and its overseas franchisees makes poor quality difficult to detect.

AACSB: Analytic



100. An advantage of joint ventures in the international marketplace is that

A. The local partner may have a greater knowledge of local consumer tastes and preferences.

B. The local partner may have a greater understanding of local business practices and regulations.

C. The costs of developing the new market are shared with the joint venture partner.

D. The risks of entering the new market are shared with the joint venture partner.

E. All of these are advantages of joint ventures.

Joint ventures benefit a company through (1) the local partner's knowledge of the host country's competitive conditions, culture, language, political systems, and business systems and (2) the sharing of development costs and/or risks with the local partner.

AACSB: Analytic



101. A disadvantage of entering global competition through a joint venture is that

A. It often aggravates political issues and incurs protectionist measures.

B. The partner's ideas about local tastes and preferences may interfere with standardized operations.

C. Conflict over control within joint ventures causes many of them to fail.

D. It is the most expensive and risky option for entering a global market.

E. There is seldom a formal agreement in place covering the joint venture.

The disadvantages of joint ventures include running the risk of losing control over its technology to the venture partner, as well as conflict over who controls what within a joint venture, which causes many joint ventures to fail.

AACSB: Analytic



102. When a company sets up its own overseas operations, independent of foreign partners or governments, it has established a(n)

A. Purely global strategy.

B. Competitive venture.

C. Wholly owned subsidiary.

D. Independent venture.

E. Multinational contract.

Establishing a wholly owned subsidiary, which is an independent company owned by the parent corporation, is the most costly method of serving an overseas market.

AACSB: Analytic



103. A major disadvantage of operating a wholly owned subsidiary is that

A. A loss of technology is likely to occur.

B. Quality levels are difficult to monitor overseas.

C. High costs and risk are associated with this type of operation.

D. Overseas consumers are often resentful of foreigners.

E. Host countries can impose higher tariffs on the firm.

Establishing a wholly owned subsidiary, which is an independent company owned by the parent corporation, is the most costly method of serving an overseas market. Companies that use this approach must bear the full costs and risks associated with setting up overseas operations.

AACSB: Analytic



104. Which of the following is an advantage of a wholly owned subsidiary as a global entry strategy?

A. The company may gain access to new knowledge or technologies.

B. The partner will share the costs of operating overseas.

C. This method has the highest transportation costs for finished goods.

D. This method minimizes the risks of overseas operations.

E. This method gives a company tight control over operations in other countries.

Establishing a wholly owned subsidiary, which is an independent company owned by the parent corporation, gives the parent tight control over operations in other countries, which is necessary if the company chooses to pursue a global strategy.

AACSB: Analytic



105. Individuals sent from a company's parent country to work in overseas operations are referred to as

A. Third-country nationals.

B. Host-country nationals.

C. Globalite executives.

D.Expatriates.

E. Inpatriates.

Expatriates are parent-company nationals who are sent to work at a foreign subsidiary.

AACSB: Analytic

Blooms: RememberLearning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.


106. Carrie Pinon, a chemical engineer from New Jersey, is being sent by her company, L'Oreal of France, to work in product development in China. Carrie would be considered a(n)

A.Third-country national.



D. Expatriate.

E. Inpatriate.

Carrie is a third-country national: a native of the United States rather than the home country (France) or the host country (China).

AACSB: Analytic

Blooms: ApplyLearning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.

Level of Difficulty: 3 HardTopic: Managing across Borders

107. Which of the following is a reason why some companies prefer to use expatriates at their overseas operations?

A. It can cost three to four times as much to use host-country nationals, compared to expatriates.

B.Expatriates are often able to transfer the corporate culture and best practices to other countries.

C. The personal security of host-country nationals may be an issue in some developing countries.

D. Governments may provide incentives to employ expatriates.

E. All of these are reasons why some organizations prefer to use expatriates.

AT&T and Toyota have used expatriates to transfer their corporate cultures and best practices to other countries, in Toyota's case to its U.S. plants.

AACSB: Analytic

Blooms: UnderstandLearning Objective: 06-05 Explain how companies can approach the task of staffing overseas operations.


108. Marielle has just been offered her first expatriate experience, an assignment in Germany. Before she accepts, her employer should

A. Seek advice from locals and the expatriate network on her behalf.

B. Provide cultural training.

C. Clarify home country rules and how to apply them abroad.

D.Encourage her to perform self- and family evaluation.

E. Reinforce dual identification.

According to Table 6.3, when an expatriate is selected the appropriate employer coping response is to encourage the expatriate's self- and family evaluation before he or she accepts the assignment.

Refer To: Table 6.3

AACSB: Analytic



109. The biggest cause of failure of overseas managers is

A. A lower salary level.

B. Lack of adequate housing.

C. Inadequate access to health benefits.

D.Personal and social issues.

E. Little vacation time.

Typically, the causes for failure overseas extend beyond technical capability and include personal and social issues such as dissatisfaction of the employee's spouse or partner.

AACSB: Analytic



110. Which of the following characteristics is most likely associated with an international executive?

A. Ethnocentric.

B.Flexible.

C. Extremely self-confident and assertive.

D. Likes familiarity.

E. Avoids criticism.

International executives have characteristics such as flexibility, openness to criticism, ability to use feedback, and other dimensions listed in Table 6.4.

Refer To: Table 6.4

AACSB: Analytic



111. __________ is the tendency to judge others by the standards of one's group or culture, which are seen as superior.

A. Individualism

B. Power distance

C. Uncertainty avoidance

D.Ethnocentrism

E. Expatriotism

Without realizing it, some managers may act out of ethnocentrism, a tendency to judge foreign people or groups by the standards of one's own culture or group, and to see one's own standards as superior.

AACSB: Analytic



112. Josh, an American, was visiting South Korea to do business with some Samsung managers located in Seoul. When his Korean counterpart, Jun-suh, arrived for a meeting, he wanted to chat about family and life before doing business. Josh felt impatient, and thought it rude for someone to assume he had no other important commitments that morning. In this scenario, Josh is best described as exhibiting

A.Ethnocentrism.

B. Individualism.

C. Culture shock.

D. Uncertainty distance

E. Power distance

Ethnocentrism is a tendency to judge foreign people or groups by the standards of one's own culture or group, and to see one's own standards as superior.

AACSB: Analytic

Blooms: ApplyLearning Objective: 06-07 Identify ways in which cultural differences across countries influence management.


113. The disorientation and stress associated with being in a foreign environment is termed

A. International mores.

B. Homesickness.

C. Culture shock.

D. Out-of-country experience.

E. Uncertainty distance.

People traveling abroad frequently experience culture shock, which is the disorientation and stress associated with being in a foreign environment. Managers are better able to navigate this transition if they are sensitive to their surroundings, including social norms and customs, and readily able to adjust their behavior to such circumstances.

AACSB: Analytic



114. Jennifer has been assigned to manage an operation in Venezuela. Upon her arrival she encouraged all of her employees (native Venezuelans) to feel free to individually approach her with ideas on improving operations. After many months, no employees had offered suggestions. Jennifer should have realized that Venezuelan culture not only has a _________ degree of collectivism but accepts a _________ power distance.

A. low; small

B. low; large

C. high; large

D. high; small

E. There is not enough information in this example to determine an answer.

Power distance is the extent to which a society accepts the fact that power in organizations is distributed unequally. Individualism/collectivism is the extent to which people act on their own or as a part of a group. Figure 6.7 shows that Venezuela has a large power distance and a high collectivism.


AACSB: Analytic



115. In Hofstede's depiction of countries' individualism/collectivism and power distance, the United States is most like

A. France.

B. Mexico.

C. New Zealand.

D. Austria.

E. Japan.

The United States is high in individualism and has a medium level of power distance. Among the countries listed, the United States is most similar to New Zealand on these dimensions.


AACSB: Analytic



116. __________ are foreign nationals who are brought in to work at the parent company.

A. Expatriates

B. Third-level nationals

C. Second-party nationals

D.Inpatriates

E. Foreign cohorts

Cross-cultural management includes effective management of inpatriates, who are foreign nationals brought in to work at the parent company. These employees provide a valuable service to global companies because they bring extensive knowledge about how to operate effectively in their home countries.

AACSB: Analytic



117. Steps for establishing and reinforcing the codes of conduct for international business include which of the following?

A. Communicating the company's values.

B. Taking action when standards are violated.

C. Measuring ethical performance.

D. Rewarding people for meeting ethical standards.

E. All of the above are steps for establishing and reinforcing international codes of conduct.

Companies with global operations should be at least as engaged in establishing and enforcing standards for ethical behavior as domestic corporations. These corporations should take all of the steps mentioned in the question to establish and reinforce their codes of conduct.

AACSB: Analytic



118. Despite differences across cultures, research suggests that regardless of nationality or religion, most people embrace which of the following values?

A. Individualism.

B. Competitiveness.

C. Responsibility.

D. Persistence.

E. Sincerity.

Regardless of nationality or religion, most people embrace a set of five core values: compassion, fairness, honesty, responsibility, and respect for others.

AACSB: Analytic



Scenario A

Suppose you are a consultant for three companies with international operations. Each of them has selected a different global strategy. Alpha Company uses its established skills in producing widgets that it will sell in foreign markets. Beta Company produces locally targeted wines for which it has built specialized plants in each local region. Gamma Company has a single worldwide corporate headquarters from which it centrally manages the entire company's operations. Finally, Delta company is located in Wazomia where wages are quite low, and produces large pieces of widgets that are fairly easy to manufacture, requiring little employee skill. These pieces are then sent to its locations abroad to be finished by a more skilled workforce, taking into account the customs and benefits desired by each of those particular populations.

119. Which global strategy is Alpha Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

In the international model, managers use their organization's existing core capabilities to expand into foreign markets.

AACSB: Analytic



120. Which global strategy is Beta Company using?

A. Global.

B. International.

C. Transnational.

D.Multinational.

E. Domestic.

The multinational model uses subsidiaries in each country in which the company does business and provides a great deal of discretion to those subsidiaries to respond to local conditions.

AACSB: Analytic



121. Which global strategy is Delta Company using?

A. Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.

The transnational model centralizes functions where it makes sense to do so, but a great deal of decision making also takes place at the local level.

AACSB: Analytic



122. Which global strategy is Gamma Company using?

A.Global.

B. International.

C. Transnational.

D. Multinational.

E. Domestic.


AACSB: Analytic



Scenario B

Tim was having a few friends over for dinner, many of whom Tim knew from an international management association. Tim's company provides services to create detailed maps of world areas from satellites, which the firm then sells via the Internet to firms, countries, and others around the world. One guest, Lucia, bakes cookies for a living. Her recipe is so well-liked that her company has grown dramatically. She has just sold the right to manufacture her cookies to a firm in eastern Europe. Another, Mac, is a director at Hilton, and his wife Chandra works for a partnership between Hershey and an Indian firm. Finally, Samantha works for EDS and is soon to go abroad to visit a firm that EDS is considering acquiring so that it can keep its technology proprietary. The guests were speaking about how their companies decided to "go global."

123. Tim's company uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


Tim's firm develops the product in the home country and then exports it to the global marketplace.

AACSB: Analytic

Blooms: ApplyLearning Objective: 06-04 Compare the various entry modes organizations use to enter overseas markets.

Level of Difficulty: 3 HardTopic: Entry Mode

124. Lucia's company is using __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


International licensing is an arrangement by which a licensee in another country buys the rights to manufacture a company's product in its own country for a negotiated fee.

AACSB: Analytic



125. Hilton uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


McDonald's, Hilton International, and many other companies have expanded overseas by franchising.

AACSB: Analytic



126. Hershey uses __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D.joint ventures


Hershey recently announced a joint venture with India's Godrej Beverages and Foods as a way to achieve growth in an industry that has matured in the United States.

AACSB: Analytic



127. Samantha's company wants to use __________ to participate in the global marketplace.

A. licensing

B. franchising

C. exporting

D. joint ventures


When a company's competitive advantage is based on technology, a wholly owned subsidiary normally is the preferred entry mode because it reduces the risk of losing control over the technology.

AACSB: Analytic



Scenario C

Rebecca is an American who has just accepted her first international assignment in Sweden. On her first day in the office, she met several new colleagues. Lars is the manager of the office and is a Swedish citizen; he has been with the company for five years. Wen is from China and has also just come to Sweden to work for the company, which is based in the United States.

128. 128.Rebecca would be referred to as a(n)




D.Expatriate.

E. Inpatriate.

Rebecca is an expatriate, a parent-company national (from the United States) who is sent to work at a foreign subsidiary in Sweden.

AACSB: Analytic



129. Lars would be referred to as a(n)


B.Host-country national.


D. Expatriate.

E. Inpatriate.

Lars is a host-country national; he is a native of the country (Sweden) where an overseas subsidiary is located.

AACSB: Analytic



130. Wen would be referred to as a(n)

A.Third-country national.



D. Expatriate.

E. Inpatriate.

Wen is a third-country national since she is a native of a country (China) other than the home country (United States) or the host country (Sweden) of an overseas subsidiary.

AACSB: Analytic



131. Because Rebecca has never worked outside the United States before, how should she approach her new assignment now that she has arrived in the office in Sweden? Refer To: Table 6.3

A. She should engage in self-evaluation.

B. She should think of the assignment as a vertical promotion.

C. She should assume Sweden is very similar to the United States.

D. She should behave as she did at home in the meetings she will attend.

E. She should seek social support.

Rebecca should seek social support, according to Table 6.3, because, having just arrived, she may be suffering a bit from cultural shock.

AACSB: Analytic



Scenario D

A group of managers was recently reunited after completing overseas assignments, and they were telling stories of their experiences. Alfredo was surprised by employees in his host nation because he found them reluctant to take personal credit for good work. Bernie had employees that were not anxious to adopt any of the changes he recommended, even though they were accepted best practices at home. Ed noticed that his employees did not seem to take much pleasure in financial rewards but loved additional vacation days as a perk. Sarah's local counterpart told her she would need to fly in coach because employees would be intolerant of her traveling in first class.

132. Alfredo experienced employees exhibiting Hofstede's cultural dimension of



C. Individualism.

D.Collectivism.


Hofstede's individualism/collectivism dimension refers to the extent to which people act on their own or as a part of a group. Alfredo's employees were more collective than he anticipated.

AACSB: Analytic



133. Bernie had employees who would best be described as exhibiting Hofstede's dimension of


B. Masculinity.

C. Individualism.

D. Collectivism.


Hofstede's dimension of uncertainty avoidance is the extent to which people in a society feel threatened by uncertain and ambiguous situations.

AACSB: Analytic



134. Ed's employees exhibited Hofstede's dimension of



C. Individualism.

D.Femininity.


Hofstede's dimension of masculinity/femininity is the extent to which a society values quantity of life (e.g., accomplishment, money) over quality of life (e.g., compassion, beauty).

AACSB: Analytic



135. Sarah's employees exhibited Hofstede's dimension of


B.Low power distance.

C. Individualism.

D. Femininity.


Hofstede's dimension of power distance is the extent to which a society accepts the fact that power in an organization is distributed unequally. Here the society has a low power distance.

AACSB: Analytic



Essay Questions

136. Explain the consequences of the increasing integration of the global economy.

Answers will vary.

AACSB: Analytic




137. Describe how the global economy is becoming more integrated than ever before. Include a discussion of the European Union, China, and NAFTA in your answer.

Answers will vary.

AACSB: Analytic



138. Discuss how an organization should identify the best strategy for competing in a global marketplace and the four approaches typically used.

Answers will vary.

AACSB: Analytic



139. Discuss the advantages of licensing and franchising. In what situations are each of these strategies most appropriate?

Answers will vary.

AACSB: Analytic



140. What are the pros and cons of using expatriates, host-country nationals, and third-country nations to run overseas operations? If you were expanding your business, which approach would you use?

Answers will vary.

AACSB: Analytic



141. Summarize the skills and knowledge managers need to manage globally.

Answers will vary.

AACSB: Analytic



142. Discuss the four dimensions identified by Geert Hofstede to analyze cultural differences among countries. Explain the classification for a country of your choosing according to Hofstede's model.

Answers will vary.

AACSB: Analytic



143. Discuss how culture plays out in terms of ethical behavior. What can organizations do to manage these issues more effectively?

Answers will vary.

AACSB: Analytic



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