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international business
Questions and Answers of
International business
=+2. Hyundai and Kia are both expanding their presence in the United States.
=+1. Explain how the rise in the value of the Korean currency, the won, against the dollar impacts upon the competitiveness of Hyundai and Kia’s exports to the United States?
=+with the lowest purchasing-power parity according to this classification.Which currencies, if any, are overvalued?
=+countries based on the price of a Big Mac. Locate the latest edition of this index that is accessible. Identify the five countries (and their currencies)
=+Exercise 2 Sometimes, analysts use the price of specific products in different locations to compare currency valuation and purchasing power. For example, the Big Mac Index compares the
=+Considering that your company possesses only U.S. dollars, identify the spot and forward exchange rates. What are the factors that influence your decision to use each? Which one would you choose?
=+currency market. As such, you are assigned the duty of ensuring the availability of 100,000 yen for a payment scheduled for next month.
=+Exercise 1 One component of learning about another country or region is to understand the relationship of its currency with others on the world
=+the United States. One of your analysts told you that the Mexican peso is expected to depreciate by 30 percent against the dollar on the foreign exchange markets over the next year. What actions,
=+5. You are the CFO of a U.S. firm whose wholly owned subsidiary in Mexico manufactures component parts for your U.S. assembly operations. The subsidiary has been financed by bank borrowings in
=+¥130 to $1 = ¥100 by December. You can borrow yen at 6 percent a year. What should you do?
=+4. You manufacture wine goblets. In mid-June you receive an order for 10,000 goblets from Japan. Payment of ¥400,000 is due in midDecember. You expect the yen to rise from its present rate of $1 =
=+what else can Volkswagen do to reduce its exposure to future declines in the value of the U.S. dollar against the euro?
=+3. Apart from hedging through the foreign exchange market,
=+2. Why do you think the value of the U.S. dollar declined against that of the euro in 2003?
=+What would have happened if they had hedged 70 percent of their exposure?
=+1. Why do you think management at Volkswagen decided to hedge only 30 percent of their foreign currency exposure in 2003?
=+3. Reread the Management Focus feature on Volkswagen in this chapter, then answer the following questions:
=+3. Given your answers to parts a andb, and given that the current interest rate in the United States is 10 percent, what would you expect the current interest rate to be in Britain?
=+2. Suppose the price of beef is expected to rise to $3.10 in the United States and to £4.65 in Britain. What should the one-year forward dollar/pound exchange rate be?
=+1. According to PPP theory, what should the dollar/pound spot exchange rate be?
=+2. Two countries, Great Britain and the United States, produce just one good: beef. Suppose the price of beef in the United States is $2.80 per pound and in Britain it is £3.70 per pound.
=+securities with one-year maturity is 7 percent, and the expected rate of inflation is 5 percent. The current spot exchange rate for Korean won is $1 = W1,200. Forecast the spot exchange rate one
=+1. The interest rate on South Korean government securities with oneyear maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government
=+LO6 Understand the differences between translation, transaction and economic exposure, and what managers can do to manage each type of exposure.
=+LO5 Be familiar with the merits of different approaches towards exchange rate forecasting.
=+LO4 Understand the different theories explaining how currency exchange rates are determined and their relative merits.
=+LO3 Appreciate the role that forward exchange rates play in insuring against foreign exchange risk.
=+LO2 Understand what is meant by spot exchange rates.
=+LO1 Be conversant with the functions of the foreign exchange market.
=+4. Which theory of FDI best explains the international expansion strategy adopted by Starbucks?
=+occasion, Starbucks has chosen a wholly owned subsidiary to control its foreign expansion (e.g., in Britain and Thailand). Why?
=+Starbucks over entering through wholly owned subsidiaries? On
=+3. What are the advantages of a joint-venture entry mode for
=+2. Why do you think Starbucks has now elected to expand internationally primarily through local joint ventures, to whom it licenses its format, as opposed using to a pure licensing strategy?
=+1. Initially Starbucks expanded internationally by licensing its format to foreign operators. It soon became disenchanted with this strategy.Why?
=+10. Now that the dispute has gone to the World Trade Organization, what do you think would be a fair and equitable outcome?
=+ Are they reasonable?
=+What about the EU’s countercharges?
=+ Do you think the U.S. position is reasonable?
=+9. Why did the U.S. government decide to reopen the long-running trade dispute between Boeing and Airbus in 2004?
=+ Was Boeing right to make significant concessions to the EU? What might have occurred if the concessions were not made?
=+8. Do you think the EU Commission had a strong case in its attempts to wring concessions from Boeing regarding the merger with McDonnell Douglas?
=+7. Was the threat by EU authorities to declare the Boeing–McDonnell Douglas merger illegal a violation of U.S. national sovereignty?
=+6. In an era of global competition, what is the case for antitrust authorities to permit the formation of large domestic firms through mergers and acquisitions?
=+5. Why do you think that the U.S. industry reacted with caution to attempts by politicians to reopen the trade dispute in 1993?
=+4. Do you think that the 1992 trade agreement was reasonable?
=+3. Is Airbus’s position with regard to the long-running dispute over subsidies reasonable?
=+2. Why do you think the four European governments agreed to subsidize the establishment of Airbus?
=+1. Do you believe Airbus could have become a viable competitor without subsidies?
=+ What other solutions might there be to the problems created by barriers to trade in agriculture?
=+agriculture. So far, however, the talks have made little concrete progress on this issue and as of mid-2007 they are stalled. Why do you think this is the case?
=+4. The current Doha Round of trade talks organized by the World Trade Organization is trying to reduce barriers to free trade in
=+3. Why do you think governments in developed nations continue to lavish extensive support on agricultural producers, even though those producers constitute a very small segment of the population?
=+nations more, increasing foreign aid or removing all agricultural tariffs and subsidies?
=+2. Which do you think would help the citizens of the world’s poorest
=+Do you think the total benefits outweigh the total costs, or vice versa?
=+What would be the impact on the average farmer?
=+1. If agricultural tariffs and subsidies to producers were removed overnight, what would the impact be on the average consumer in developed nations such as the Untied States and the EU countries?
=+5. What would you do if you were John Martin?
=+4. What seems to be the most ethical action?
=+production to Mexico independent of each other?
=+3. Are the economic and social costs and benefits of moving
=+2. What are the social costs and benefits to Martin’s Textiles of shifting production to Mexico?
=+1. What are the economic costs and benefits to Martin’s Textiles of shifting production to Mexico?
=+ What would the costs be?
=+inful winds of change that follow entering into free trade agreements? What would the benefits of costs of protection be?
=+3. With hindsight, do you think it is better to protect vulnerable industries such as textiles, or to let them adjust to the pa
=+2. Who gained from the process of readjustment in the textile industry after NAFTA? Who lost?
=+1. Why did many textile jobs apparently migrate out of the United States in the years after the establishment of NAFTA?
=+4. Why do you think progress towards the liberalization of the EU energy market has been fairly slow so far?
=+3. Why is the deintegration of large energy companies seen as such an important part of any attempt to liberalize the EU energy market?
=+What actions will they have to take?
=+How will the environment they face change after liberalization?
=+2. What are the implications of liberalization for energy producers in the EU?
=+ Who stands to gain the most from liberalization?
=+1. What do you think are the economic benefits of liberalizing the EU energy market?
=+company. Identify the main negotiating groups a country must consider when a member. Choose two negotiating groups and justify their importance to member countries.
=+Exercise 2 Trade agreements can impact the cultural interactions between countries. In fact, the establishment of the Free Trade Area of the Americas(FTAA) can be considered a threat as well as an
=+executive summary describing the features you consider crucial in completing your report.
=+comprehensive source to assist in your project. After evaluating the state of the EU based on the statistics and publications available, prepare an
=+investment is significant and top management wishes to have a clearer picture of the current and probable future status of the EU. A colleague who spent some time living in the EU indicated that
=+Exercise 1 Your company is seeking to expand by opening new customer representative and sales offices in the European Union (EU). The size of the
=+What are the implications for managers of foreign enterprises with substantial operations in Europe?
=+3. What precedent do the actions of the European Commission in this case set?
=+2. Were the concessions extracted by the European Commission from AOL and Time Warner reasonable? Whose interests was the Commission trying to protect?
=+companies, do you think the European Commission had a right to review and regulate their planned merger?
=+1. Given that both AOL and Time Warner were U.S.-based
=+9. Reread the Management Focus case on the European Commission and Media Industry Mergers, then answer the following questions:
=+United States and Canada? How might the establishment of the FTAA impact the strategy of North American firms?
=+8. Would establishment of a Free Trade Area of the Americas (FTAA)be good for the two most advanced economies in the hemisphere, the
=+What problems are hurting MERCOSUR? What can be done to solve these problems?
=+7. After a promising start, MERCOSUR, the major Latin American trade agreement, has faltered and made little progress since 2000.
=+What are the constraints on its ability to respond in a manner that minimizes production costs?
=+several ASEAN countries respond to the creation of a single market?
=+6. How should a firm with self-sufficient production facilities in
=+between WorldCom and Sprint, both U.S. companies, and it carefully reviewed the merger between AOL and Time Warner, again both U.S.companies.)
=+mergers between American companies that do business in Europe?(For example, the European Commission vetoed the proposed merger
=+4. Do you think it is correct for the European Commission to restrict
=+ Given these arguments, why don’t we see more substantial examples of integration in the world economy?
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