Chapter 1

Question 1

Importance of IB

Answer 1

• most organizations are either international or compete with international companies
• modes of operations may differ from those used domestically
• it helps managers to decide where to find resources and where to sell
• the best way of conducting business may differ by country
• an understanding helps you make better career decisions
• an understanding helps you decide what governmental policies to support

Question 2

Globalization

Answer 2

• has been growing , although sporadically
• is less pervasive than generally thought
• has economic and noneconomic dimensions
• is stimulated by several factors

Question 3

Factors in Increased Globalization

Answer 3

1. Rise in & application of technology
2. Liberalization of cross-border trade & resource movements
3. Development of services that support IB
4. Growth of consumer pressures
5. Increase in global competition
6. Changes in political situations and government policies
7. Expansion of cross-national cooperation

Question 4

Governments have reduced Cross-Border Trade Restrictions for 3 reasons:

Answer 4

1. Their citizens want a greater variety of goods and services at lower prices.
2. Competition spurs domestic producers to become more efficient
3. They hope to induce other countries to lower their barriers in turn

Question 5

Expansion of Cross-National Cooperation

Answer 5

1. To gain reciprocal advantages
2. To attack problems jointly that one country acting alone cannot solve
3. To deal with areas of concern that lie outside the territory of any nation

Question 6

Critics of globalization claim

Answer 6

• countries’ sovereignty is diminished
• the resultant growth hurts the environment
• some people lose both relatively and absolutely
• greater insecurity increases personal stress

Question 7

Pursuing international sales

Answer 7

usually increases the potential sales and potential profits

Question 8

Foreign locations may give companies

Answer 8

• lower costs
• new or better products and components
• additional operating knowledge

Question 9

International operations may reduce operating risk by:

Answer 9

• smoothing sales, profits, and supplies
• preventing competitors from gaining advantages

Question 10

Merchandise exports and imports

Answer 10

and the most popular IB modes.

Question 11

Service exports and imports are international ‘nonproduct’ sales and purchases

Answer 11

• include travel, transportation, banking, insurance, and the use of assets such as trademarks, patents, and copyrights
• very important for some countries
• include many specialized IB operating modes

Question 12

Key components of Portfolio Investment

Answer 12

• noncontrolling interest of a foreign operation
• extension of loans

Question 13

A Multinational Enterprise (MNE)

Answer 13

is a company with foreign direct investments.

Question 14

IB

Answer 14

consists of all commercial transactions between two or more countries

Question 15

Goals of IB

Answer 15

• The IB boal of private business is to make profits
• Government IB may or may not be motivated by profit