UNIT 3 Flashcards
the factors/activities that surround or encircle international business
International business environment
refers to the factors that affect or influence multinational corporations.
business environment
They include human resource management, trade unions, organizational structure, financial management, marketing management and production management, as well as management/leadership styles.
Internal environmental factors
include competitors, customers, market intermediaries, raw material suppliers, finance providers, shareholders, and stakeholders.h
Micro-external environmental factors
include social and cultural factors, technological, economic, political, and government factors, and international and natural factors.
External macroenvironmental factors
prioritized to protect people, animals, and plants while maintaining ecological balance.
Environmental protection
reveal a company’s strengths and weaknesses
Internal environmental factors
highlight growth opportunities.
highlight growth opportunities
forces in the global environment that directly increase or decrease a company’s sales revenues or operating costs
External Microenvironment
the individuals and companies that provide a company with the resources that it needs to produce goods and services
Suppliers
responsible for searching out the lowest cost, best quality inputs no matter where they are located
purchasing managers of MNCs
link the companies that make products with the customers who buy them; make it easier for stores to locate the goods they will sell
Distributors
MNC should know how to segment its market
Customers
competitors they vie to obtain a larger share of the market
Competitors
refers to a country’s desire to assert its authority over foreign business through various sanctions
Political sovereignty
refers to an instant upheaval on a massive scale against an established regime
Turmoil
large scale, organized violence against a government
Internal War
represents an instant, planned act of violence against those in power
Conspiracy
official seizure of foreign property by a host country whose intention is to use the seized property in the interest of the public.
Expropriation
expropriation without compensation
Confiscation
creeping expropriation
Domestication
process by which controls and restrictions placed on a foreign firm gradually reduce the control of the owners
Domestication
to regulate hard currency balances (hard currencies are stable currencies which can be traded and exchanged internationally
Exchange Control
to support native industries
Import Restrictions
MNCs may be forced to depend on local sources of supply for the needed raw materials
Import Restrictions
government of a country sometimes imposes control to prevent foreign companies from competing in certain markets.
Market Control
government may also impose excessive and unconventional taxes on foreign business
Tax Control
price regulations on basic commodities, utilities and gasoline
Price Control
presence of labor unions; labor demands transformed into law
Labor Restrictions
formed through regular elections and have different party systems (different parties hold different views on how the country’s economy can be strengthened)
Democracy
strict obedience to authority;
Authoritarianism and totalitarianism
lack of personal freedom
Authoritarianism and totalitarianism
rigidly regulated by complete government control of all business activities
Communism
Countries that practice Communism
North Korea, Cuba, Myanmar/Burma
authoritarian regimes
Dictatorship
run by military / civilian dictators
Dictatorship
Countries that has Political System Based on Religious Principles
Saudi Arabia (monarch)
Iran (democratically electedPresident)
Islamic Republic
government whose ruler derives power through inheritance; power is in a single individual
Monarchy
one head of state and head of the government
Pure Monarchy
one titular head of the state and one head of the government (Chancellor, Prime Minister, President)
Constitutional Monarchy
Country with Pure Monarchy
Brunei
Country with Constitutional Monarchy
Great Britain
a tax that government levies on exports/imports
tariffs
offering large blocks of products on a market at low prices to undercut competition
Dumping
obtaining licenses before engaging in trade across national boundaries
Export/import licensing
includes policies on screening criteria, ownership, fiancé, employment and training, technology transfer, dispute settlement
Foreign investment regulations
T/F
Tariffs are a tax that governments impose on exports and imports.
T
T/F
An export duty is a tax levied on imports.
False
An import/customs duty is a tax imposed on goods brought into a country.
True
A subsidy is considered a reverse tariff because it provides financial assistance to foreign products.
True
T/F
Dumping refers to selling products at prices higher than the market value in a foreign country to undercut competition.
F
T/F
Dumping refers to selling products at prices higher than the market value in a foreign country to undercut competition.
F
T/F
Anti-dumping laws are implemented to prevent unfair competition from foreign companies.
T
T/F
Dumping typically involves selling large amounts of products in a market at very low prices to gain market share.
T
T/F
Export licensing is the process of obtaining government authorization before shipping goods abroad.
T
T/F
One reason for requiring an export license is to track export activities.
T
T/F
An import license is necessary to track which goods are exported from a country.
F
T/F
An import license is necessary to track which goods are exported from a country.
F
T/F
Export/import licenses help in controlling the unnecessary purchase of goods from other countries.
T
T/F
Foreign investment regulations often include policies regarding ownership structures in joint ventures.
T
T/F
Foreign investment regulations focus only on financial transactions between countries.
F
T/F
Technology transfer regulations are part of foreign investment laws to ensure that a country gains technology when it allows foreign investments.
T
T/F
Employment and training requirements for foreign investors are usually included in foreign investment regulations.
T
T/F
Dispute settlement mechanisms in foreign investment laws are established to protect investors from unfair treatment by host countries.
T
T/F
Foreign investment regulations are irrelevant to the control of labor and training standards.
F
T/F
Anti-dumping laws discourage companies from selling products at below-market prices in foreign markets.
True
T/F
Subsidies are typically used to make domestic goods more competitive compared to foreign imports.
T
T/F
An export duty is typically applied to control the outflow of goods from a country.
T
T/F
Host country laws are enacted to control foreign businesses operating within their economies.
T
T/F
Countries enact laws to control ownership and taxes related to foreign businesses.
T
T/F
Countries enact laws to control ownership and taxes related to foreign businesses.
T
T/F
Reciprocity laws are not important for countries when forming trade agreements with other nations.
F
T/F
ASEAN is a regional organization that includes countries like Brunei Darussalam, Cambodia, and Vietnam.
T
T/F
Under the ASEAN-Korea Free Trade Agreement, zero tariffs apply to all products exported to Korea, including rice and sugar.
F
T/F
The Rules of Origin (ROO) determine which goods qualify for preferential tariff treatment under free trade agreements.
T
T/F
Wholly-obtained goods are considered to have originated from a country for tariff purposes.
T
T/F
Substantially-transformed goods are those that have undergone significant changes to qualify for preferential tariff treatment under the Rules of Origin.
T
T/F
Under the ASEAN-Australia-New Zealand Free Trade Area, no citizen of these countries can work while on holiday.
F
T/F
The Working Holiday Scheme allows 100 citizens from each participating country to work while on holiday in the other country.
F
T/F
The Working Holiday Scheme is only available to citizens of ASEAN countries.
False
T/F
Under the ASEAN-Korea Free Trade Agreement, certain products, such as rice and sugar, are exempt from the zero tariff law.
True
T/F
The political aim of host country laws can include protection of some local industries.
T
T/F
Host country laws always provide complete tariff exemptions for foreign businesses.
F
T/F
Foreign businesses must comply with specific regulations such as the Rules of Origin (ROO) to qualify for preferential tariff treatment.
T
T/F
ASEAN-Korea trade agreements allow zero tariffs for all products except motor vehicle parts.
F
T/F
In the ASEAN-Australia-New Zealand Free Trade Area, tourists can work while holding a tourist visa if they are from the participating countries.
T
T/F
Under the ASEAN-Korea Agreement, products like motor vehicle parts are included in the zero-tariff treatment.
F
T/F
Host country laws regarding foreign investment are often influenced by political goals.
T
T/F
The primary goal of host country laws is to encourage unlimited foreign investment and trade.
F
T/F
Democracies are formed through regular elections where different political parties hold different views on how to strengthen the economy.
T
T/F
Authoritarianism and totalitarianism involve strict obedience to authority and typically lack personal freedom.
T
T/F
Communist nations, such as North Korea and Cuba, have complete government control over all business activities.
T
T/F
In a dictatorship, the government is typically run by a military or civilian dictator who holds absolute power.
T
T/F
Religious-based political systems are only found in Islamic countries, such as Saudi Arabia and Iran.
F
T/F
A monarchy is a system of government where the ruler derives power through inheritance, and the power is held by a single individual.
T
T/F
Absolute monarchy is where the monarch is both the head of state and head of government, with no separation of powers (e.g., Brunei).
T
T/F
Constitutional monarchy includes a monarch who serves as the ceremonial head of state, while another individual (such as a prime minister) holds executive powers (e.g., Great Britain).
T
T/F
Government stability is important because changes in government may affect the implementation of agreements made by the previous regime.
T
T/F
Public unrest such as demonstrations and riots can be a symptom of government instability.
T
T/F
Government crises, including opposition conflicts, are often signs of a stable government.
F
T/F
Armed attacks by groups within the country or from neighboring countries may indicate government instability.
T
T/F
Politically motivated assassinations may point toward a government’s instability.
T
T/F
A coup is an event that typically strengthens a government, rather than destabilizing it.
F
T/F
Host countries must manage their economies according to “sound economic principles,” not based on “political emotions.”
T
T/F
Many developing countries have a fear of domination and exploitation by foreign investors.
T
T/F
A government’s international stance can be measured by its relationship with other countries, respect for international laws, and its membership in international organizations.
T
The relationship between a host country and the parent company’s home government has little effect on foreign investment decisions.
False
T/F
The relationship between a host country and the parent company’s home government has little effect on foreign investment decisions.
F
T/F
Administrative procedures in host countries can vary significantly and impact the ease of doing business there.
T
T/F
Expropriation refers to the official seizure of foreign property by a host country with the intention of using the seized property in the interest of the public.
T
T/F
Expropriation always involves the confiscation of foreign property without any compensation.
F
T/F
Confiscation is the same as expropriation, but without the compensation given to the firm for the seized property.
T
T/F
Domestication is a gradual process that involves reducing the control of foreign firms through various measures such as transferring ownership to nationals.
T
T/F
In domestication, a host country may promote nationals to higher levels of management in foreign firms.
T
T/F
A key feature of domestication is the gradual transfer of ownership to foreign nationals over time.
T
T/F
Exchange controls regulate the flow of soft currencies that are not stable for international trade
F
T/F
Under exchange controls, MNCs may face difficulties in transferring profits or capital back to the parent company.
T
T/F
Exchange controls allow MNCs to import raw materials and machinery freely without restrictions.
F
T/F
Import restrictions are often imposed to support local industries, making it difficult for MNCs to source
T
T/F
Import restrictions apply only to specific companies and not to entire industries within the host country.
F
T/F
When faced with import restrictions, MNCs may have to rely on local raw materials, which could affect the quality of the finished product.
T
T/F
In some cases, MNCs may face shortages of local raw materials, which could hinder production in the host country.
T
T/F
Market control refers to the ability of a government to prevent foreign companies from competing in certain markets.
T
T/F
Host countries often impose market control to encourage competition from foreign firms, rather than discourage it.
F
T/F
Tax control is a method used by host countries to impose excessive and unconventional taxes on foreign businesses.
T
T/F
Tax controls are often used as an indirect way of signaling that an MNC is no longer welcome in the host country.
T
T/F
Price control is commonly applied to regulate the prices of basic commodities, utilities, and gasoline in the host country.
T
T/F
Price control is commonly applied to regulate the prices of basic commodities, utilities, and gasoline in the host country.
T
T/F
Labor unions generally have no impact on the operations of foreign firms in host countries.
F
T/F
Labor restrictions can result from the demands of labor unions, which may be transformed into laws that affect foreign firms’ operations.
T
