Question 1

Which of the following factors helps a company determine the growth potential of a foreign market?

Accepted Answer

Purchasing power is a critical factor for any company to determine the growth potential of a foreign market. The level of purchasing power of the target market will determine the demand for the company's products or services. Political uncertainty, type of infrastructure, and land availability may affect the business operations of the company, but they do not directly impact the growth potential of the market.

Question 2

What is the primary disadvantage of using wholly owned affiliates as the means of entering a foreign market?

Accepted Answer

Wholly owned affiliates require significant investment and costs such as establishing a new entity, acquiring assets, building infrastructure, and hiring local employees. This can be a disadvantage compared to other modes of entry such as exporting, licensing, or franchising, which may require fewer resources and lower costs.

Question 3

What is the term for a strategic alliance in which two existing companies collaborate to form a third,independent company?

Accepted Answer

A joint venture is a strategic alliance between two or more companies to create a new entity to pursue a specific objective. This new entity is independent of the two original companies and has its own management, staff, and assets. It allows both companies to leverage their strengths, share resources, and reduce risks and costs.

Question 4

Uganda is one of only two countries in the world that produce a mineral required in the manufacturing of cellphones. Several mining companies recently moved their operations out of the region due to a bloody civil war resulting from a change in rulers. Which of the following influences on global business were the companies responding to?

Accepted Answer

The companies were responding to political uncertainty resulting from a bloody civil war caused by a change in rulers.

Question 5

What trend has allowed companies to skip the phase model when going global?

Accepted Answer

Quick and reliable air travel has allowed companies to quickly and easily reach global markets, reducing the need for a structured phase model approach. Companies can now directly enter foreign markets and establish their presence without first testing the waters through a phased approach.

Question 6

What is the most important factor used by a globalizing company for determining whether a country or a region has an attractive business climate?

Accepted Answer

Easy access to growing markets is a crucial factor for a globalizing company because it wants to expand its business to new markets and tap into the potential customer base. A favorable business climate in terms of market size, growth potential, and stability is essential for a company to make profitable investments and generate revenue. Other factors like infrastructure, political stability, technological advancements, and workforce skills are also crucial but access to growing markets is the most significant factor. Therefore, option A is the correct choice.

Question 7

What are the two types of political risk that affect companies conducting global business?

Accepted Answer

Political uncertainty refers to the risk associated with changes in government policies that can affect business operations, while policy uncertainty involves the unpredictability in the enactment, modification, or interpretation of laws and regulations that can impact businesses.

Question 8

Anthony is expanding his business into foreign markets. Anthony is providing a licence to a foreigner to use his business model,name,and know-how. Anthony will help the foreigner get the business started and provide ongoing support. To whom is Anthony providing a licence as he grows his business globally?

Accepted Answer

Anthony is providing a licence to someone who will use his business model, name, and know-how, and he will provide ongoing support. This describes a franchise agreement, in which an individual or company (the franchisee) pays for the right to use the franchisor's name, brand, and operating system, and receives ongoing support in exchange. A sales agent typically sells goods or services on behalf of a company, but doesn't have the right to use the company's name or operating system. A distributor buys goods from a company and sells them to others, but again, doesn't generally have the right to use the company's name or operating system. An importer brings goods into a country from overseas, but this doesn't apply to Anthony's situation.

Question 9

A cosmetics company that is considering entering the South American market would be especially interested in the discretionary income within that country. In other words,what would be a determining factor in the company's global strategy?

Accepted Answer

Discretionary income refers to the money that a person has left over after paying for necessities like housing, food, and utilities. A cosmetics company would be interested in this because it would indicate whether people in the country have enough money to spend on non-essential items like cosmetics. Purchasing power is directly related to discretionary income and would be a determining factor in the company's global strategy. The other options are also important considerations for global strategy, but not as directly related to a cosmetics company's market entry decision as purchasing power.

Question 10

In Canada,General Motors and Suzuki have entered into an agreement to create CAMI Automotive. Suzuki management runs the plant,which makes GM's Geo cars. The agreement gives Suzuki access to GM dealers to sell its brand of vehicles. What kind of agreement do General Motors and Suzuki have?

Accepted Answer

The agreement between General Motors and Suzuki to create CAMI Automotive, where Suzuki manages the plant and has access to GM dealers, is a joint venture.

Question 11

Starbucks is a chain that is rapidly expanding its global operation. As it expanded into South America,its research showed that Chileans,on average,drink only 150 cups of coffee annually,and people in Argentina drink only about half that amount. An average citizen in Canada drinks 950 cups annually. What do these variations in annual coffee consumption most likely reflect?

Accepted Answer

The variations in annual coffee consumption are most likely reflecting cultural differences between these countries. Different cultures may have different attitudes and preferences towards drinking coffee, which result in varying levels of consumption.

Question 12

Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. Which method of organizing for global business has Ford used in Brazil?

Accepted Answer

Ford Motor Company's ownership and operation of the manufacturing plant in Brazil indicate that it has used the wholly owned affiliate method of organizing for global business. In this method, the company fully owns and controls the foreign operation, which gives it greater autonomy and control over its operations and decision-making.

Question 13

What type of entity are companies with sales,employees,and financing in different countries that are founded with an active global strategy?

Accepted Answer

Companies with sales, employees, and financing in different countries that are founded with an active global strategy are called global new ventures. These companies have a strong commitment to international markets and often have a unique business model that allows them to navigate different cultures and economies. Strategic alliances and wholly owned affiliates are also used by companies to expand internationally, but global new ventures are specifically focused on building a global presence from the outset. Franchisees are a type of business model but do not necessarily have an active global strategy.

Question 14

Which of the following is an attribute of a country or region that has an attractive business climate for companies that want to go global?

Accepted Answer

An effective but cost-efficient location is an attractive attribute for companies that want to go global. This means that the infrastructure and resources should be good enough to support the operations of the company, but it should also be cost-effective to keep the operational expenses down. A large population of unskilled workers and a small youth population are not always desirable attributes for businesses, and natural boundaries may not necessarily contribute to a company's success in the global market.

Question 15

Which of the following is an attribute of a country or region that has an attractive business climate for companies that want to go global?

Accepted Answer

Political risk can greatly impact the success of a company entering a new market. A country or region with no political risks would be considered more attractive for companies looking to go global. Easy access to stagnant markets, experienced marketplace metamorphosis, and limited infrastructure are not necessarily attractive attributes for a business climate.

Question 16

Before the Japanese government announced that Japanese snow was different from all other snow and required that all snow equipment marketed in the country be made in Japan for safety reasons,several companies from the United States and Europe had marketed their snow equipment in Japan. Which of the following influences on global business is the elimination of non-Japanese companies from the Japanese market an example of?

Accepted Answer

The elimination of non-Japanese companies from the Japanese market due to government policy demonstrates policy uncertainty, as the government's sudden announcement created uncertainty about the regulatory environment for foreign companies selling snow equipment in Japan.

Question 17

When McDonald's initially entered into an agreement with a French entrepreneur who wanted to own and operate a McDonald's fast-food restaurant in Paris,it saw the new restaurant as an opportunity. Unfortunately,the restaurant in Paris was not maintained at the cleanliness standards prescribed by McDonald's but at the cleanliness standards acceptable to the French. McDonald's brought legal action to have the restaurant closed. What does this situation provide an example of?

Accepted Answer

This situation provides an example of the problem with franchising in different cultures, as the cleanliness standards acceptable in one culture may not align with the standards prescribed by the franchise company. This highlights the importance of understanding and adapting to local cultural norms and practices when franchising internationally.

Question 18

A Canadian company that operates cinemas wants to open a chain of movie theatres in Brazil. What is the most important factor to the company as it tries to grow in the Brazilian market?

Accepted Answer

Purchasing power is the most important factor for the Canadian cinema company as it tries to grow in the Brazilian market. Brazil has a large population but there is significant income inequality in the country, which means that a significant portion of the population may not have the means to pay for cinema tickets. Therefore, the company needs to consider the purchasing power of the Brazilian market before opening its chain of movie theatres. Factors such as workforce quality, strategy, and tariff and nontariff barriers are also important but not as critical as purchasing power in this case.

Question 19

German chip manufacturer Infineon Technologies AG has joined with Motorola Inc. and Agere Systems Inc. to establish a new company to develop and license chip designs for cellphones. What type of entity have these three companies created?

Accepted Answer

The three companies have established a new company together, which means they have formed a joint venture.

Question 20

Which type of global organization is most likely to suffer problems associated with being culture bound?

Accepted Answer

Franchising is most likely to suffer problems associated with being culture bound because it relies heavily on a specific business model and brand identity, which may not always translate well across different cultural contexts. This can lead to challenges in adapting products, services, and marketing strategies to local tastes and preferences.

Quiz 7: Global Management

Which of the following factors helps a company determine the growth potential of a foreign market?

What is the primary disadvantage of using wholly owned affiliates as the means of entering a foreign market?

What is the term for a strategic alliance in which two existing companies collaborate to form a third,independent company?

What trend has allowed companies to skip the phase model when going global?

What is the most important factor used by a globalizing company for determining whether a country or a region has an attractive business climate?

What are the two types of political risk that affect companies conducting global business?

A cosmetics company that is considering entering the South American market would be especially interested in the discretionary income within that country. In other words,what would be a determining factor in the company's global strategy?

In Canada,General Motors and Suzuki have entered into an agreement to create CAMI Automotive. Suzuki management runs the plant,which makes GM's Geo cars. The agreement gives Suzuki access to GM dealers to sell its brand of vehicles. What kind of agreement do General Motors and Suzuki have?

Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. Which method of organizing for global business has Ford used in Brazil?

What type of entity are companies with sales,employees,and financing in different countries that are founded with an active global strategy?

Which of the following is an attribute of a country or region that has an attractive business climate for companies that want to go global?

Which of the following is an attribute of a country or region that has an attractive business climate for companies that want to go global?

A Canadian company that operates cinemas wants to open a chain of movie theatres in Brazil. What is the most important factor to the company as it tries to grow in the Brazilian market?

German chip manufacturer Infineon Technologies AG has joined with Motorola Inc. and Agere Systems Inc. to establish a new company to develop and license chip designs for cellphones. What type of entity have these three companies created?

Which type of global organization is most likely to suffer problems associated with being culture bound?