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business
introduction global business

Questions and Answers of Introduction Global Business

13-3 Identify the factors that influence a firm’s choice of entry mode.
13-2 Compare and contrast the different modes that firms use to enter foreign markets.
13-1 Explain the three basic decisions that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale.
5. What do you see as the main organizational problems that are likely to be associated with implementation of a transnational strategy?
4. Reread the Management Focus on Procter & Gamble and then answer the following questions:a. What strategy was Procter & Gamble pursuing when it first entered foreign markets in the period up until
3. In what kind of industries does a localization strategy make sense? When does a global standardization strategy make most sense?
2. Plot the position of the following firms on Figure 12.8:Procter & Gamble, IBM, Apple, Coca-Cola, Dow Chemical, U.S. Steel, McDonald’s. In each case, justify your answer.
1. In a world of zero transportation costs, no trade barriers, and nontrivial differences between nations with regard to factor conditions, firms must expand internationally if they are to survive.
2. The top management of your company, a manufacturer and marketer of smartphones, has decided to pursue international expansion opportunities in eastern Europe. To ensure success, management’s
1. Several classifications and rankings of the world’s largest companies are prepared by a variety of sources.Find one such composite ranking system and identify the criteria that are used to rank
3. Does the One Ford initiative imply that Ford will now ignore national and regional differences in demand?When Ford CEO Alan Mulally arrived at the company in 2006 after a long career at Boeing, he
2. What strategy is Mulally trying to get Ford to pursue with his One Ford initiative? What are the benefits of this strategy? Can you see any drawbacks?When Ford CEO Alan Mulally arrived at the
1. How would you characterize the strategy for competing internationally that Ford was pursuing prior to the arrival of Alan Mulally in 2006?What were the benefits of this strategy? What were the
13-4 Recognize the pros and cons of acquisitions versus greenfield ventures as an entry strategy.
13-3 Identify the factors that influence a firm’s choice of entry mode.
13-2 Compare and contrast the different modes that firms use to enter foreign markets.
13-1 Explain the three basic decisions that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on what scale.
5. Imagine that Canada, the United States, and Mexico decide to adopt a fixed exchange rate system. What would be the likely consequences of such a system for(a) international businesses and (b) the
4. Debate the relative merits of fixed and floating exchange rate regimes. From the perspective of an international business, what are the most important criteria in a choice between the systems?
3. Do you think the standard IMF policy prescriptions of tight monetary policy and reduced government spending are always appropriate for developing nations experiencing a currency crisis? How might
2. What opportunities might current IMF lending policies to developing nations create for international businesses? What threats might they create?
1. Why did the gold standard collapse? Is there a case for returning to some type of gold standard? What is it?
2. An important element to understanding the international monetary system is keeping updated on current growth trends worldwide. A German colleague told you yesterday that Deutsche Bank Research
1. The Global Financial Stability Report is a semiannual report published by the International Capital Markets division of the International Monetary Fund (IMF).The report includes an assessment of
3. Now that Malawi’s currency has been devalued, what do you think the economic consequences will be? Is this good for the economy?When the former World Bank economist Bingu wa Mutharika became
2. Why did Mutharika resist IMF calls for currency devaluation? If he had lived and remained in power, what do you think would have happened to the economy of Malawi assuming that he did not change
1. What were the causes of Malawi’s currency troubles?When the former World Bank economist Bingu wa Mutharika became president of the East African nation of Malawi in 2004, it seemed to be the
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 the
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 mid-December.You expect the yen to rise from its present rate of$1 5
3. Reread the Management Focus on Volkswagen; then answer the following questions:a. Why do you think management at Volkswagen decided to hedge only 30 percent of the automaker’s foreign currency
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.a.
1. The interest rate on South Korean government securities with one-year maturity is 4 percent, and the expected inflation rate for the coming year is 2 percent. The interest rate on U.S. government
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 purchasing-power
1. One of your company’s essential suppliers is located in Japan. Your company needs to make a 1 million Japanese yen payment in six months. Considering that your company primarily operates in U.S.
6. What does this case teach you about the way foreign exchange markets work?During the first half of the 2000s, the Japanese yen was relatively weak against the U.S. dollar. This was a boon for
5. Who in Japan benefits from devaluation of the yen? Who does this hurt in Japan?During the first half of the 2000s, the Japanese yen was relatively weak against the U.S. dollar. This was a boon for
4. Do you think the Japanese government is engaging in currency manipulation? If so, what should other nations do about this?During the first half of the 2000s, the Japanese yen was relatively weak
3. Why did the policy of the Abe government to purchase government securities help to drive down the value of the yen? What was the mechanism at work here?During the first half of the 2000s, the
2. What drove an increase in the value of the yen between 2008 and 2011?During the first half of the 2000s, the Japanese yen was relatively weak against the U.S. dollar. This was a boon for Japan’s
1. Why did the yen carry trade work during the early 2000s? Why did it stop working after 2008?During the first half of the 2000s, the Japanese yen was relatively weak against the U.S. dollar. This
11-6 Explain the implications of the global monetary system for currency management and business strategy.
11-5 Understand the debate surrounding the role of the IMF in the management of financial crises.
11-4 Identify exchange rate regimes used in the world today and why countries adopt different exchange rate regimes.
11-3 Compare and contrast the differences between a fixed and a floating exchange rate system.
11-2 Explain the role played by the World Bank and the IMF in the international monetary system.
11-1 Describe the historical development of the modern global monetary system.
9. Would establishment of a Free Trade Area of the Americas (FTAA) be good for the two most advanced economies in the hemisphere, the United States and Canada? How might the establishment of the FTAA
8. After a promising start, Mercosur, the major Latin American trade agreement, has faltered and made little progress since 2000. What problems are hurting Mercosur? What can be done to solve these
7. How should a firm with self-sufficient production facilities in several ASEAN countries respond to the creation of a single market? What are the constraints on its ability to respond in a manner
6. How should a U.S. firm that currently exports only to ASEAN countries respond to the creation of a single market in this regional grouping?
5. What were the causes of the 2010–2012 sovereign debt crisis in the EU? What does this crisis tell us about the weaknesses of the euro? Do you think the euro will survive the sovereign debt
4. Do you think it is correct for the European Commission to restrict mergers between American companies that do business in Europe? (For example, the European Commission vetoed the proposed merger
3. What in general was the effect of the creation of a single market and a single currency within the EU on competition within the EU? Why?
2. What are the economic and political arguments for regional economic integration? Given these arguments, why don’t we see more substantial examples of integration in the world economy?
1. NAFTA has produced significant net benefits for the Canadian, Mexican, and U.S. economies. Discuss.
2. Your company has assigned you with the task of investigating the various trade blocs in Africa to see if your company can benefit from these trade agreements while expanding into African
1. The World Trade Organization maintains a database of regional trade agreements. You can search this database to identify all agreements that a specific country participates in. Search the database
4. If you were running the English Premier League, what would your strategy be on broadcast rights going forward?It’s now almost two decades since the member-states of the European Union (EU)
3. Who benefits from the EU ruling? Who will the losers be?It’s now almost two decades since the member-states of the European Union (EU) started to implement a treaty calling for the establishment
2. Do you think the European Court of Justice was right to rule that the league could not stop people from buying Premier League soccer feeds from other countries? Explain your reasoning?It’s now
1. Why do you think the English Premier League has historically charged different prices for broadcasting rights in different European markets?It’s now almost two decades since the member-states of
11. Home countries can adopt policies designed to both encourage and restrict FDI. Host countries try to attract FDI by offering incentives, and try to restrict FDI by dictating ownership restraints
10. The costs of FDI to the home country include adverse balance-of-payments effects that arise from the initial capital outflow and from the export substitution effects of FDI. Costs also arise when
9. The benefits of FDI to the home (source) country include improvement in the balance of payments as a result of the inward flow of foreign earnings, positive employment effects when the foreign
8. The costs of FDI to a host country include adverse effects on competition and balance of payments and a perceived loss of national sovereignty.
7. Benefits of FDI to a host country arise from resourcetransfer effects, employment effects, and balance-ofpayments effects.
6. Political ideology is an important determinant of government policy toward FDI. Ideology ranges from a radical stance that is hostile to FDI to a noninterventionist, free market stance. Between
5. Dunning has argued that location-specific advantages are of considerable importance in explaining the nature and direction of FDI. According to Dunning, firms undertake FDI to exploit resource
4. Knickerbocker’s theory suggests that much FDI is explained by imitative behavior by rival firms in an oligopolistic industry.
3. Firms often prefer FDI to licensing when (a) a firm has valuable know-how that cannot be adequately protected by a licensing contract, (b) a firm needs tight control over a foreign entity in order
2. High transportation costs or tariffs imposed on imports help explain why many firms prefer FDI or licensing over exporting.
1. Any theory seeking to explain FDI must explain why firms go to the trouble of acquiring or establishing operations abroad when the alternatives of exporting and licensing are available to them.
5. You are the international manager of a U.S. business that has just developed a revolutionary new personal computer that can perform the same functions as existing PCs but costs only half as much
4. Read the Management Focus on Cemex, and then answer the following questions:a. Which theoretical explanation, or explanations, of FDI best explains Cemex’s FDI?b. What is the value that Cemex
3. What are the strengths of the eclectic theory of FDI?Can you see any shortcomings? How does the eclectic theory influence management practice?
2. Compare and contrast these explanations of FDI:internalization theory and Knickerbocker’s theory of FDI. Which theory do you think offers the best explanation of the historical pattern of FDI?
1. In 2008, inward FDI accounted for some 63.7 percent of gross fixed capital formation in Ireland, but only 4.1 percent in Japan (gross fixed capital formation refers to investments in fixed assets
2. An integral part of successful foreign direct investment is to understand the target market opportunities as well as the nature of the risk inherent in possible investment projects, particularly
1. The World Investment Report published annually by UNCTAD provides a summary of recent trends in FDI as well as quick access to comprehensive investment statistics. Identify the table of largest
4. Why do you think reform of FDI regulations in India has been so difficult?For years now, there has been intense debate in India about the wisdom of relaxing the country’s restrictions on foreign
3. Who stands to lose as a result of foreign entry into the Indian retail sector?For years now, there has been intense debate in India about the wisdom of relaxing the country’s restrictions on
2. What are the potential benefits to India of entry by foreign retail establishments?For years now, there has been intense debate in India about the wisdom of relaxing the country’s restrictions
1. Why do you think that the Indian retail sector is so fragmented?For years now, there has been intense debate in India about the wisdom of relaxing the country’s restrictions on foreign direct
9-5 Understand the implications for business that are inherent in regional economic integration agreements.
9-4 Explain the history, current scope, and future prospects of the world’s most important regional economic agreements.
9-3 Understand the economic and political arguments against regional economic integration.
9-2 Understand the economic and political arguments for regional economic integration.
9-1 Describe the different levels of regional economic integration.
10. Business may have more to gain from government efforts to open protected markets to imports and foreign direct investment than from government efforts to protect domestic industries from foreign
9. Trade barriers act as a constraint on a firm’s ability to disperse its various production activities to optimal locations around the globe. One response to trade barriers is to establish more
8. The completion of the Uruguay Round of GATT talks and the establishment of the World Trade Organization have strengthened the world trading system by extending GATT rules to services, increasing
7. The GATT was a product of the postwar free trade movement. The GATT was successful in lowering trade barriers on manufactured goods and commodities.The move toward greater free trade under the
6. The problems with strategic trade policy are twofold:(a) Such a policy may invite retaliation, in which case all will lose, and (b) strategic trade policy may be captured by special-interest
5. Strategic trade policy suggests that with subsidies, government can help domestic firms gain first-mover advantages in global industries where economies of scale are important. Government
4. The infant industry argument for government intervention contends that to let manufacturing get a toehold, governments should temporarily support new industries. In practice, however, governments
3. A common political argument for intervention is that it is necessary to protect jobs. However, political intervention often hurts consumers, and it can be selfdefeating.Countries sometimes argue
2. There are two types of arguments for government intervention in international trade: political and economic. Political arguments for intervention are concerned with protecting the interests of
1. Trade policies such as tariffs, subsidies, antidumping regulations, and local content requirements tend to be pro-producer and anticonsumer. Gains accrue to producers (who are protected from
5. Reread the Management Focus, “Protecting U.S.Magnesium.” Who gains most from the antidumping duties levied by the United States on imports of magnesium from China and Russia? Who are the
4. You are an employee of a U.S. firm that produces personal computers in Thailand and then exports them to the United States and other countries for sale. The personal computers were originally

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