Motivations For International Business Operations

Question 1

What are three motivations for international business operations?

Answer 1

Comparative advantage
Imperfect markets
Product cycle

Question 2

Used to maximize the value of effort and resources. Specialization in the production and trade of specific products in relation to trading partners is this:

Answer 2

Comparative advantage

Question 3

Bermuda produces no gasoline or vehicles, but the country specializes in tourism. The country maximizes its resources by specializing in tourism and importing vehicles from other countries. This is an example of what?

Answer 3

Comparative advanage

Question 4

The ability to trade freely between markets is often limited by the physical immobility of the resources or regulatory barriers. This is due to:

Answer 4

Imperfect markets

Question 5

The key point of this theory is that an entity is motivated to establish a business outside its boundaries to differentiate itself more effectively and to compete with foreign businesses. It is the theory that domestic success will create domestic competition, encouraging the export of goods. Foreign success will promote foreign competition.

Answer 5

Product cycle theory

Question 6

What are the 6 method for conducting international business?

FIL JVs with direct foreign investment and global sourcing

Answer 6

Franchising
International trade
Licensing
Joint ventures
Direct foreign investment 
Global sourcing

Question 7

Companies exporting/importing goods are conducting what international business operation?

Answer 7

International trade

Question 8

Companies provide the right to use processes or technologies in exchange for a fee are engaging in what international business operation?

Answer 8

Licensing

Question 9

Companies whose marketing service or delivery tragedy provides training and related service delivery resources in exchange for a fee are conducting what international business operation?

Answer 9

Franchise

Question 10

Companies that take advantage of comparative advantage of one or both of the participants in marketing or delivering a product are conducting what international business operation?

Answer 10

Joint venture

Question 11

Companies purchasing a foreign company as a subsidiary OR by starting a subsidiary operation within the borders of a foreign company are conducting what international business operation?

Answer 11

Direct foreign investment

Question 12

Companies synchronizing all levels of product manufacturing including R&D, production, and marketing on an international basis is using what international business operation?

Answer 12

Global sourcing

Question 13

What does expropriation mean?

Answer 13

To take away - this usually relates to a government taking assets

Question 14

Factors of production like capital, land, etc. are owned by the government and subject to restriction in this type of economy:

Answer 14

Centrally planned economies

China is an example

Question 15

Most industrialized economies are this type of economy. The factor of production are owned by the individual in what type of economy?

Answer 15

Market economies

U.S. and Japan are examples

Question 16

This type of economy creates self-sustaining entities that have fully integrated financing, manufacturing, and supply chains. This economy could not exist in the u.s.

Answer 16

Conglomerates

Question 17

What are the 3 inherent risks of international business operations?

Answer 17

Political risk
Exchange rate risk
Economic risk

Question 18

What are common risks under the umbrella that is exchange rate risk?

Answer 18

Transaction risk - the risk that AR or AP denominated in a foreign currency will fluctuate for the worse
Economic risk - the risk that if LC will go up in value causing exports to be more expensive but imports to be cheaper or vice versa
Translation risk - only applies to companies with subsidiaries

Question 19

What are risks under the umbrella of economic risk that would be bad for a company trying to penetrate a foreign country?

Answer 19

Weakening foreign demand
Higher interest rates in foreign countries means slower economics growth and reduced demand
Higher inflation reduces purchasing power and makes importing goods more expensive
Weakening local currency reduces the demand for foreign goods

Question 20

What are common political risks?

Answer 20

Expropriation of productive resources is the most extreme
Bureaucracies
Corruption
Attitudes toward foreign firms
War
Inconvertibility of foreign currency