Hong Kong’s Business Environment Flashcards
New technology
(i) helps improve the productivity of workers.
(ii) facilitates the movement of people between different countries.
(iii) reduces production and distribution costs.
(iv) helps globalisation.
A. (i) and (ii)
B. (ii) and (iii)
C. (i), (iii) and (iv)
D. All of the above
Answer: D
Which of the following(s) is/are considered Hong Kong’s favourable physical factor(s)?
(i) Rich in natural resources
(ii) Well-developed infrastructure
(iii) Natural deep-water harbour
(iv) Proximity to the Mainland
A. (i) and (iii)
B. (ii) and (iv)
C. (iii) and (iv)
D. (ii), (iii) and (iv)
Answer: D
A country’s infrastructure (e.g., roads, ports) is an example of a/an A. economic factor. B. technological factor. C. physical factor. D. social and cultural factor.
Answer: C
The culture of a country
(i) can increase the labour supply of the country.
(ii) can improve the labour productivity of the country.
(iii) can affect the tastes and preferences of consumers.
A. (iii) only
B. (i) and (ii)
C. (ii) and (iii)
D. All of the above
Answer: D
\_\_\_\_\_\_\_\_\_\_ is currently Hong Kong’s largest trading partner. A. China B. The United States C. The European Union D. Japan
Answer: A
In the past, Hong Kong served as \_\_\_\_\_\_\_\_\_\_ for the Mainland. Nowadays, it is also \_\_\_\_\_\_\_\_\_\_ for the Mainland. A. a manufacturing centre…an entrepot B. an entrepot…a services centre C. an entrepot…a manufacturing centre D. a services centre…an entrepot
Answer: B
Foreign direct investment in the Mainland mainly comes from A. Japan. B. the U.S. C. the European Union. D. Hong Kong.
Answer: D
With the introduction of the Individual Visit Scheme,
(i) the number of Mainland visitors has increased sharply.
(ii) more Hong Kong residents are going to the Mainland for business and tourism.
(iii) talent and professionals from the Mainland are attracted to settle in Hong Kong.
A. (i) only
B. (ii) only
C. (i) and (ii)
D. All of the above
Answer: A
Which of the following statements about CEPA is false?
A. CEPA gives Hong Kong firms a first-mover advantage for early entry into the Mainland market.
B. Under CEPA, all products produced in Hong Kong and exported to the Mainland can enjoy zero tariff.
C. The objective of CEPA is to reduce or eliminate barriers on substantially all trade in goods between the two sides.
D. Under CEPA, Hong Kong firms are given preferential treatment upon entering into a number of service sectors in the Mainland.
Answer: B
Which of the following(s) is /are the driver(s) of globalisation?
(i) Decrease in the cost of transportation
(ii) Improvement in living standards of people in developing countries
(iii) Reducing barriers in trade and investment
A. (i) and (ii)
B. (i) and (iii)
C. (ii) and (iii)
D. All of the above
Answer: B
As a result of globalisation,
(i) the production costs of many products are greatly reduced.
(ii) the specialisation of goods and services is becoming more popular.
(iii) there is increasing competition for capital and labour.
(iv) cultural differences are gradually disappearing.
A. (i) and (iv)
B. (iii) and (iv)
C. (i), (ii) and (iii)
D. All of the above
Answer: C
Which of the following is the meaning of outsourcing?
A. The transfer of production processes from being carried out inside the firm to being done by outside firms.
B. The transfer of production processes from being carried out by outside firms to being carried out inside the firm.
C. The transfer of sourcing processes from being carried out by outside firms to being carried out inside the firm.
D. The transfer of sourcing processes from being carried out inside the firm to being done by outside firms.
Answer: A
Which of the following are advantages of global sourcing of inputs? (i) Increase in the mobility of factors of production such as capital and labour. (ii) Reduction in production costs. (iii) Cultural distance is reduced. (iv) Encourages technology transfers. A. (i) only B. (i) and (ii) C. (ii) and (iii) D. All of the above
Answer: B
How can a shipping company make use of technology to expand its market? (6 marks)
Answer:
Ways to expand its market:
- The shipping company can provide better service to customers by building a system which allows its customers to trace their shipments anytime on its website.
- The shipping company can search information about their customers on the Internet. It can thus better know their customers and tailor products to their needs.
- The shipping company can find new customers via the Internet. By using search engines such as Google and Yahoo!, it can locate customers it intends to target.
- The shipping company can build a website so that customers can easily get information about the company online.
- Advances in information and communication technology may help lower transport costs. The shipping company can thus develop new routes to penetrate new markets.
(Any three of the above, 2 marks each)
State three reasons why multinational corporations often locate their production facilities, marketing and head offices in different countries. (3 marks)
Answer:
Reasons:
● The company can escape tariffs.
● The company can lower its production costs.
● Labour costs and land may be cheaper in other countries.
● The company can enter into foreign markets.
(Any three of the above, 1 mark each)
YY Company Ltd is a Hong Kong-based household products manufacturer. It set up its own factory in China many years ago. Its products are mainly sold in the US and Europe. Due to the sharp increases in wages, rent and operating costs in Hong Kong, the board of directors of YY Company Ltd decided to shut down its head office in Hong Kong and relocate to China. They believe China will become more international after the country hosts the Olympic games.
They relocation will not change any managerial jobs. However, all junior staff will be laid off.
State three factors that a firm must consider in deciding whether to relocate its head office to another country. (6 marks)
Answer:
Factors to be considered:
- Economic factors: tax rate, price level, inflation, interest rate, foreign exchange control
- Technological factors: Information and Communication Technology, communication network
- Social and cultural factors: population structure, age distribution, sex ratio, working norm and culture
- Physical factors: infrastructure(e.g., roads, ports), climate, natural environment and physical location
- Political factors: legal system, laws and regulations of the government
(Any three of the above, 2 marks each)
(a) How can a company take advantage of globalisation? (4 marks)
(b) Suggest three advantages a high-tech company can gain from outsourcing. (6 marks)
(c) Despite the advantages of outsourcing, some manufacturers dislike outsourcing. Suggest three potential problems associated with outsourcing. (6 marks)
Answer:
(a)
It can enjoy the following advantages:
It can lower its production costs by outsourcing and global sourcing.
It can reduce its market risks by expanding its market.
By expanding its market to developing countries, it can enjoy economies of scale and production costs can be reduced.
With advances in technology, it can improve labour productivity and product quality.
New technology can reduce production and distribution costs.
(Any four of the above, 1 mark each)
(b)
Outsourcing providers usually specialise in one area of production of goods and services. A high-tech company can produce better products by outsourcing.
A high-tech company can concentrate on its core functions.
Due to specialisation, outsourcing providers can easily gain access to the latest technology of which a high-tech company can take advantage. Products and services of the high-tech company can thus be improved.
By associating with quality providers, a high-tech company can improve its credibility and build a good image.
A high-tech company can purchase the best products and services.
Since a high-tech company does not own its production facilities, it can more flexibly adjust its production plans. In the fast-changing high-tech industry, this can give a high-tech company greater flexibility in responding to market changes.
A high-tech production facility involves a huge investment. If the product fails, a high-tech company will suffer a huge loss. It is thus less risky to outsource production.
(Any three of the above, 2 marks each)
(c)
There is a long lead time.
Manufacturers may find it difficult to control outsourcing providers. As outsourcing providers may not deliver the products or services on time, this may delay the whole production process.
The company will find it difficult to monitor and control product quality.
If outsourcing is carried out in another country, the company may need to adjust to different time zones.
(Any three of the above, 2 marks each)
ShoesLand Company manufactures shoes and has its own retail shops in the US, Canada, England, Germany, Italy, Finland, Spain, Singapore, Japan, Taiwan and Hong Kong. The company has two factories: one in China and one in Thailand. They manufacture the same kind of products under the ShoesLand brand name for worldwide distribution. As a result, ShoesLand’s products are sold with a different country of origin in different countries.
ShoesLand’s headquarters is located in the US and it is mainly responsible for research, design and product development. ShoesLand has its own distributors which are mostly department stores and shoe chain stores. Recently, sales revenues at department stores have been declining.
(a) Is ShoesLand a multinational corporation? Why? (2 marks)
(b) Why are ShoesLand’s products sold with a different country of origin in different countries? Suggest two reasons for this. (4 marks)
(c) Give two reasons why ShoesLand would like to keep selling its shoes in department stores despite declining sales? (2 marks)
Answer:
(a) ShoesLand is a multinational corporation because it has operations in many countries. (2 marks)
(b)
Reason:
This helps differentiate its products from its competitors.
Country of origin can affect consumers’ buying decision and impressions.
With a different country of origin, ShoesLand can take advantage of the admissibility, rates of duty, tax treatment and trade preference programmes in different countries.
It may be easier for ShoesLand to comply with a government’s rules and regulations regarding advertising, marketing and distribution in different countries.
(Any two of the above, 2 marks each)
(c)
ShoesLand can maintain its image.
With mere exposure in department stores, ShoesLand can advertise its products.
ShoesLand can build up a good reputation.
(Any two of the above, 1 mark each)
Which of the following are the common arguments for globalization?
(1) It promotes free trade
(2) It facilitates specialization
(3) It fulfils world responsibility and solves poverty problems
(4) It enables people to enjoy a wider variety of goods and services
A. (1) and (2) only
B. (3) and (4) only
C. (1), (2) and (3) only
D. (1), (2) and (4) only
Answer : D
