International Business Final Exam Review: Questions and Answers, Exams of Business Administration

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GEB 3373

International Business

LATEST FINAL EXAM REVIEW

Q & S

1. Multiple Choice: Which theory explains the reasons why a company may pursue international business? a) Modernization Theory b) Dependency Theory c) Internationalization Theory d) Hymer's Theory Correct Answer : c) Internationalization Theory Rationale: Internationalization Theory suggests that firms seek to expand their operations internationally to increase their market power and gain competitive advantages over their rivals.
2. Fill-in-the-Blank: The ________ model is used to analyze the competitive advantage of nations. Correct Answer : Diamond Rationale: The Diamond model, proposed by Michael Porter, is a framework that explains why certain industries within particular nations are competitive internationally.
3. True/False: The eclectic paradigm states that ownership, location, and internalization advantages must all be present for a firm to invest overseas.

d) To monitor global outsourcing activities Correct Answer : b) To facilitate international trade negotiations Rationale: The WTO aims to provide a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development. True/False: A multinational enterprise (MNE) must always adapt its products for each individual market to be successful. Correct Answer : False Rationale: While adaptation can be beneficial, it is not always necessary or feasible for an MNE to completely tailor its products for each market. Sometimes, standardized products can be successful if they meet the needs and preferences of consumers across different markets. Question: Which of the following is NOT a primary driver of globalization? a) Technological advancements b) Political instability c) Reduced trade barriers d) Increased global competition Answer : b) Political instability

Rationale: While political instability can impact global trade, it is not a primary driver of globalization. Technological advancements, reduced trade barriers, and increased global competition are the key factors that drive globalization. Question: Which international trade agreement aims to eliminate tariffs and other trade barriers among its member countries? a) World Trade Organization (WTO) b) North American Free Trade Agreement (NAFTA) c) Association of Southeast Asian Nations (ASEAN) d) European Union (EU) Answer : d) European Union (EU) Rationale: The European Union is a regional trade bloc that has eliminated tariffs and other trade barriers among its member countries, creating a single market for goods, services, capital, and labor. Question: Which of the following is a key advantage of foreign direct investment (FDI)? a) Reduced risk of political instability b) Access to new markets and resources c) Lower labor costs d) Increased control over operations

Rationale: MNCs often face challenges in navigating cultural differences, including language barriers, customs, and values, which can impact their operations and success. Fill-in-the-Blank Question: The _ is a global organization that sets rules for international trade and resolves trade disputes. Answer : World Trade Organization (WTO) Question: The _ theory suggests that countries should specialize in producing goods and services that they can produce most efficiently. Answer : Comparative advantage Question: _ is the process of transferring ownership of a company or its assets to a foreign entity. Answer : Privatization Question: _ is a form of international business where a company grants another company the right to use its intellectual property in exchange for a fee. Answer : Licensing

Question: _ refers to the practice of sourcing goods and services from different locations around the world to reduce costs and improve efficiency. Answer : Global sourcing True/False Question: The International Monetary Fund (IMF) is a global organization that provides loans to developing countries to help them stabilize their economies. Answer : True Rationale: The IMF provides loans and technical assistance to countries facing economic difficulties, aiming to promote global monetary cooperation and financial stability. Question: A joint venture is a form of international business where two or more companies share ownership and control of a new company. Answer : True Rationale: Joint ventures involve the creation of a new entity where two or more companies share ownership and control, allowing them to pool resources and expertise.

Question: Which of the following are examples of non-tariff barriers to trade? a) Quotas b) Subsidies c) Embargoes d) Standards Answer : a) Quotas, c) Embargoes, d) Standards Rationale: Non-tariff barriers include measures other than tariffs that restrict international trade, such as quotas, embargoes, and standards. Question: Which of the following are key factors to consider when choosing an international business strategy? a) Market size and growth potential b) Political and economic stability c) Cultural differences d) Competitive landscape Answer : a) Market size and growth potential, b) Political and economic stability, c) Cultural differences, d) Competitive landscape Rationale: Companies need to carefully consider market size, political and economic stability, cultural differences, and the competitive landscape when choosing an international business strategy.

Question: Which of the following are benefits of international trade? a) Increased economic growth b) Lower prices for consumers c) Greater variety of goods and services d) Improved global cooperation Answer : a) Increased economic growth, b) Lower prices for consumers, c) Greater variety of goods and services Rationale: International trade fosters economic growth, lowers prices for consumers, and provides a wider variety of goods and services. Question: Which of the following are key challenges faced by emerging markets? a) Political instability b) Lack of infrastructure c) Corruption d) Limited access to capital Answer : a) Political instability, b) Lack of infrastructure, c) Corruption, d) Limited access to capital

• Correct Answer : B) Localization Strategy Rationale: The localization strategy tailors products and services to fit local markets.

2. What is the primary goal of a transnational strategy?

• A) To maximize local responsiveness
• B) To achieve low costs through economies of scale
• C) To balance the need for efficiency with local responsiveness
• D) To outsource all production activities
• Correct Answer : C) To balance the need for efficiency with local responsiveness Rationale: Transnational strategy seeks to achieve both global efficiency and local responsiveness.

3. Which tariff is levied as a fixed charge for each unit of goods imported?

• A) Ad valorem tariff
• B) Specific tariff
• C) Compound tariff
• D) Value-added tariff
• Correct Answer : B) Specific tariff

Rationale: A specific tariff is levied as a fixed fee per physical unit of an imported item.

4. Economies of scale can be achieved in international business by:
   • A) Increasing product varieties
   • B) Producing large volumes for a global market
   • C) Customizing products for individual markets
   • D) Decentralizing production facilities
   • Correct Answer : B) Producing large volumes for a global market Rationale: Economies of scale refer to the cost advantages of producing large volumes.
5. Which theory suggests firms undertake Foreign Direct Investment to achieve location-specific advantages?
   • A) Product Life Cycle Theory
   • B) New Trade Theory
   • C) Eclectic Paradigm
   • D) Comparative Advantage Theory
   • Correct Answer : C) Eclectic Paradigm Rationale: The eclectic paradigm posits that firms engage in FDI to exploit location-specific advantages.

• Correct Answer : Exchange rate Rationale: Exchange rate risk involves potential financial loss from fluctuating currency values.

10. Diversification of operations across different countries can reduce a firm’s ________ risk.

• Correct Answer : Systematic Rationale: Systematic risk reduction involves diversification strategies across multiple markets or countries.

True/False

11. A polycentric staffing approach encourages the employment of host-country nationals in key corporate roles.

• Correct Answer : True Rationale: Polycentric staffing focuses on hiring local nationals to manage subsidiaries in their own country.

12. The adoption of an ethnocentric approach in international operations means giving priority to local markets over the home country.

• Correct Answer : False

Rationale: An ethnocentric approach prioritizes the home country's culture and practices over host countries.

13. Globalization typically leads to decreased competition in local markets.
    • Correct Answer : False Rationale: Globalization often increases competition as it allows foreign companies to enter local markets.
14. Tariff barriers are the only types of trade barriers that affect international business operations.
    • Correct Answer : False Rationale: There are also non-tariff barriers such as quotas, subsidies, and regulations that affect trade.
15. Joint ventures in international business always minimize risks for participating firms.
    • Correct Answer : False Rationale: While joint ventures can share risks, they can also introduce additional complexities and conflicts.

Multiple Response

18. Which countries are typically favored in an international business context for outsourcing due to lower labor costs? (Select all that apply)
    • A) United States
    • B) India
    • C) Germany
    • D) Philippines
    • Correct Answer s: B) India, D) Philippines Rationale: India and the Philippines are known for lower labor costs and are preferred outsourcing destinations.
19. What are the main barriers to entry in a foreign market for international businesses? (Select all that apply)
    • A) Economies of scale
    • B) Regulatory norms
    • C) Cultural differences
    • D) High product demand
    • Correct Answer s: A) Economies of scale, B) Regulatory norms, C) Cultural differences Rationale: Barriers to entry include operational scale, regulations, and cultural barriers in a foreign market.

20. Which elements constitute a cultural framework that can impact international business negotiations? (Select all that apply)
    • A) Language
    • B) Currency
    • C) Social norms
    • D) Political systems
    • Correct Answer s: A) Language, C) Social norms Rationale: Cultural frameworks including language and social norms can significantly impact business interactions. Continuing with additional questions:

Multiple Choice

21. What is the "Born Global" phenomenon in international business?
    • A) Companies that start exporting immediately upon establishment
    • B) Companies that only operate domestically
    • C) Firms that replace imports with domestic production
    • D) Businesses that pivot to global operations after a decade