Chapter 1

Question 1

Globalization

Answer 1

networks of international linkages comprising economic, financial, political and
social markets that bind countries, institutions, and people in an interdependent economy

Question 2

Protectionism

Answer 2

quotas are an example of protectionism

Question 3

Nationalism

Answer 3

forced sale of an MNC’s assets to local buyers.

Question 4

Expropriation

Answer 4

when a local government seizes and provides inadequate compensation for the
foreign-owned assets of a multinational enterprise. Most likely to occur in a country with constant political upheaval and change

Question 5

Economic integration

Answer 5

results from the lessening of trade barriers and the increased flow of
goods and service, cap9ital, labor, and technology around the world. Disadvantage-loss of
sovereignty.

Question 6

(1) Free trade area

Answer 6

the simplest and most basic form a regional integration. E.g USMCA
(formerly NAFTA); European Free Trade Association

Question 7

2) Customs union

Answer 7

Allows free trade between members and agree to adopt common tariffs and non-tariff barriers that are applied to imports from nonmember countries. a group of countries committed to (1) removing all barriers to the free flow of goods and services between each other and (2) the pursuit of a common external trade policy. E.g. Andean Community

Question 8

(3) Common market

Answer 8

a group of countries committed to (1) removing all barriers to the free flow
of goods, services, and factors of production between each other and (2) the pursuit of a
common external trade policy. E.g. Mercosur

Question 9

(4) Economic union

Answer 9

-describes a deeper level of economic integration between member
countries compared with a common market, customs union, and free trade areas. May adapt a
common currency, may establish uniform tax rates, and may establish common trade policy
with non-member countries. E.g. European Union

Question 10

(5) Political Union

Answer 10

consists of central political system that directs and oversees economic, social
and foreign policies of the members states. E.g. United States

Question 11

MERCOSUR

Answer 11

South American trading block. 4th largest trading bloc after the EU, USMCA and
ASEAN

Question 12

USMCA

Answer 12

US, Mexico and Canada free-trade agreement. Replaced NAFTA

Question 13

Top 3 trade blocs

Answer 13

USMCA, EU, and ASEAN

Question 14

The European Union (EU)

Answer 14

Regional economic group with 27 countries. Reasons for forming includes increasing the scale of the marketplace for firms inside the economic bloc, help firms increase the scale of operations and enhance productivity, attract direct investment from
outside the bloc

Question 15

European Commission

Answer 15

Responsible for implementing the decisions of the European Parliament and the European Council

Question 16

Free trade agreement

Answer 16

a formal arrangement between two or more countries to reduce or eliminate tariffs.

Question 17

Regional economic group

Answer 17

an agreement among countries in a geographic region to reduce or
ultimately remove tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other

Question 18

World’s leader for outsources back-office services and increasingly high-tech services.

Answer 18

India

Question 19

Political risk (country risk)-

Answer 19

the chance that political forces may change a country’s business
environment in ways that lead investors to lose some or all of the value of their investment or
be forced to accept a lower-than-projected rate of return. (e.g. expropriation). Country risk is always present but its nature and intensity vary over time and from country to country. Iraq and
Afghanistan have high levels of political risk. Low levels of political risk occur in Canada.

Question 20

Ways to deal with political risk-

Answer 20

Hedging (e.g. local debt financing); create dependency (e.g. provide control distribution); emphasize adaptation (e.g. development assistance).

Question 21

Adaptation

Answer 21

best suited for firms that decide a high-risk environment is worth the potential
returns

Question 22

Participative management

Answer 22

means of adaption to political risk that requires that a firm actively
involve nationals in the management of its subsidiary

Question 23

Macropolitical risk

Answer 23

terrorist attack

Question 24

Micropolitical risk-

Answer 24

factors that affect one industry or company or a few companies. E.g. oil
industry problems

Question 25

Creeping expropriation

Answer 25

micropolitical action affecting one or company or a few companies
indicating a government’s gradual and subtle action against foreign firms

Question 26

Economic risk

Answer 26

a country’s ability or intention to meet its financial obligations determines it
economic risk

Question 27

Equity sharing

Answer 27

includes the initiation of joint ventures with national (individuals or those in
firms, labor unions, or government) to reduce political risks

Question 28

Terrorism

Answer 28

poses a severe and random political risks to company personnel and assets, and
interrupts the conduct of business

Question 29

Hedging

Answer 29

political risk insurance and local debt financing.

Question 30

Local debt financing-

Answer 30

a way to manage political risk in which a foreign-based firm borrows money
from a host country bank as a hedge against being forces out of operation without adequate compensation

Question 31

Common law

Answer 31

Past court decisions serve as precedents to the interpretation of the law. Details
of the promises must be written into a contract in order for it to be enforced. (e.g. U.S.). 28
countries. Primarily in countries of English origin and influence

Question 32

Civil law

Answer 32

is based on a comprehensive set of laws (written rules and statutes) organized into a
code. (e.g. France, Germany, Japan, Louisiana). Approximately 70 countries.

Question 33

Islamic law-Sharia law

Answer 33

based on religious beliefs. It dominates all aspects of life. Often combines
to varying degrees, civil, common and indigenous law. approximately 27 countries.

Question 34

Contracts for International Sale of Goods

Answer 34

an international agreement which regulates
international business by spelling out the rights and obligations of the seller and buyer/

Question 35

Contract

Answer 35

agreement by the parties concerned to establish a set of rules for governing a business transaction

Question 36

Trademarks

Answer 36

words or symbols that distinguish a product and its manufacturer from
competitors

Question 37

Trademark infringement-

Answer 37

Manufacturers who sell counterfeit products under the names and logos of more famous brands.

Question 38

Copyright

Answer 38

gives creators of original work the freedom to publish or dispose of them as they
choose.