Test Bank For
International Business, 18th Edition ohn D. Daniels Lee H. Radebaugh Daniel P. Sullivan
Reid W. Click
Chapter 1-20
Chapter 1 Globalization and International Business
1) The widening set of interdependent relationships among people from different parts of the
world is known as ________.
A) globalization
B) offshoring
C) franchising
D) outsourcing
Answer: A
Diff: 1
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
2) Which of the following best defines international business?
A) It includes all economic flows between two or more countries.
B) It includes all private economic flows between two or more countries.
C) It includes all business transactions involving two or more countries.
D) It includes all business transactions in countries other than your home country.
Answer: C
Diff: 2
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
3) In terms of international business, it is most accurate to say that ________.
A) there is a universal "best way" to conduct business
B) global competition affects large companies but not small ones
C) most firms depend either on foreign markets and supplies or compete against companies that
do
D) government regulation of international business has little effect on a company's profits
Answer: C
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
,4) Devon, an accounts manager at a large electronics firm, does not have any direct international
responsibilities; however, Devon would most likely benefit from studying international business
issues so that he can ________.
A) conduct better job interviews
B) better understand how foreign operations affect the company's competitive position
C) supervise and evaluate subordinates who have global assignments
D) understand the legalities of importing and exporting products overseas
Answer: B
Diff: 2
Skill: Application
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
5) Which of the following is an indication of the increased globalization of business since the
end of World War II?
A) Foreign trade has largely replaced foreign ownership as a means of conducting international
business.
B) World trade has grown more rapidly than world production.
C) Globally, consumers now depend on foreign output for more than half their consumption.
D) Countries have increased their import restrictions to counter the rising tide of imports.
Answer: B
Diff: 3
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
6) According to the A.T. Kearny/Foreign Policy Globalization Index, countries ________.
A) tend to be ranked similarly on all four dimensions
B) are more globalized on the political dimension than on personal contact
C) that are large in land mass and population are less globalized than small countries
D) sometimes rank high on one dimension and low on another
Answer: D
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Diverse and multicultural work environments
,7) Globalization refers to all economic transactions among countries.
Answer: FALSE
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
8) International business includes all commercial transactions between two or more countries.
Answer: TRUE
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
9) It is difficult to compare globalization of business over time because shifting national borders
have changed the nature of transactions from domestic to international and vice versa.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
10) Most countries' imports account for more than half of their citizens' consumption.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
11) Gaining some understanding of international business is important for any business student
because global events and competition affect almost all companies.
Answer: TRUE
Diff: 1
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
, 12) What is international business? What are the primary reasons that companies engage in
international business?
Answer: International business is all commercial transactions—private and governmental—
between two or more countries. Private businesses undertake such transactions for profit;
governments may or may not do the same in their transactions. These transactions include sales,
investments, and transportation.
Firms engage in international business for three main reasons.
1. To expand sales—The number of people and the amount of their purchasing power are
higher for the world as a whole than for a single country, so companies may increase their sales
by reaching international markets.
2. To acquire resources—Manufacturers and distributors seek out products, services, and
components produced in foreign countries.
3. To minimize competitive risk—Many companies enter into international business for
defensive reasons. They want to counter advantages competitors might gain in foreign markets
that, in turn, could hurt them domestically.
Diff: 3
Learning Outcome: Define the fundamental concepts of international business
Skill: Synthesis
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Analytical thinking
13) What is globalization? What modes of international business are used by firms that want to
globalize? Briefly describe each method.
Answer: Globalization refers to the widening set of interdependent relationships among people
from different parts of a world that happens to be divided into nations. The term can also refer to
the integration of world economies through the elimination of barriers to movements of goods,
services, capital, technology, and people. Firms have many options available when they want to
globalize their operations including licensing, franchising, turnkey operations, management
contracts, and direct/portfolio investment.
a. Licensing and franchising—Licensing agreements are used when companies allow others to
use their assets, such as trademarks, patents, copyrights, or expertise under contract. Franchising
is a mode of business in which one party allows another party the use of a trademark that is an
essential asset for the franchisee's business.
b. Turnkey operations—Refers to business operations, performed under contract, that are
transferred to the owner when they are ready to begin operating.
c. Management contract—Refers to arrangements in which one company provides personnel to
perform general or specialized management functions for another company.
d. Direct and portfolio investment—A direct investment is one that gives the investor a
controlling interest in a foreign company. A portfolio investment is a noncontrolling interest in a
company or ownership of a loan to another party.
Diff: 3
Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter
into foreign markets
Skill: Synthesis
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Analytical thinking
International Business, 18th Edition ohn D. Daniels Lee H. Radebaugh Daniel P. Sullivan
Reid W. Click
Chapter 1-20
Chapter 1 Globalization and International Business
1) The widening set of interdependent relationships among people from different parts of the
world is known as ________.
A) globalization
B) offshoring
C) franchising
D) outsourcing
Answer: A
Diff: 1
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
2) Which of the following best defines international business?
A) It includes all economic flows between two or more countries.
B) It includes all private economic flows between two or more countries.
C) It includes all business transactions involving two or more countries.
D) It includes all business transactions in countries other than your home country.
Answer: C
Diff: 2
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
3) In terms of international business, it is most accurate to say that ________.
A) there is a universal "best way" to conduct business
B) global competition affects large companies but not small ones
C) most firms depend either on foreign markets and supplies or compete against companies that
do
D) government regulation of international business has little effect on a company's profits
Answer: C
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
,4) Devon, an accounts manager at a large electronics firm, does not have any direct international
responsibilities; however, Devon would most likely benefit from studying international business
issues so that he can ________.
A) conduct better job interviews
B) better understand how foreign operations affect the company's competitive position
C) supervise and evaluate subordinates who have global assignments
D) understand the legalities of importing and exporting products overseas
Answer: B
Diff: 2
Skill: Application
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
5) Which of the following is an indication of the increased globalization of business since the
end of World War II?
A) Foreign trade has largely replaced foreign ownership as a means of conducting international
business.
B) World trade has grown more rapidly than world production.
C) Globally, consumers now depend on foreign output for more than half their consumption.
D) Countries have increased their import restrictions to counter the rising tide of imports.
Answer: B
Diff: 3
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
6) According to the A.T. Kearny/Foreign Policy Globalization Index, countries ________.
A) tend to be ranked similarly on all four dimensions
B) are more globalized on the political dimension than on personal contact
C) that are large in land mass and population are less globalized than small countries
D) sometimes rank high on one dimension and low on another
Answer: D
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Diverse and multicultural work environments
,7) Globalization refers to all economic transactions among countries.
Answer: FALSE
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
8) International business includes all commercial transactions between two or more countries.
Answer: TRUE
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Reflective thinking
9) It is difficult to compare globalization of business over time because shifting national borders
have changed the nature of transactions from domestic to international and vice versa.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
10) Most countries' imports account for more than half of their citizens' consumption.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss trends in and the debate over globalization
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
11) Gaining some understanding of international business is important for any business student
because global events and competition affect almost all companies.
Answer: TRUE
Diff: 1
Skill: Concept
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Application of knowledge
, 12) What is international business? What are the primary reasons that companies engage in
international business?
Answer: International business is all commercial transactions—private and governmental—
between two or more countries. Private businesses undertake such transactions for profit;
governments may or may not do the same in their transactions. These transactions include sales,
investments, and transportation.
Firms engage in international business for three main reasons.
1. To expand sales—The number of people and the amount of their purchasing power are
higher for the world as a whole than for a single country, so companies may increase their sales
by reaching international markets.
2. To acquire resources—Manufacturers and distributors seek out products, services, and
components produced in foreign countries.
3. To minimize competitive risk—Many companies enter into international business for
defensive reasons. They want to counter advantages competitors might gain in foreign markets
that, in turn, could hurt them domestically.
Diff: 3
Learning Outcome: Define the fundamental concepts of international business
Skill: Synthesis
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Analytical thinking
13) What is globalization? What modes of international business are used by firms that want to
globalize? Briefly describe each method.
Answer: Globalization refers to the widening set of interdependent relationships among people
from different parts of a world that happens to be divided into nations. The term can also refer to
the integration of world economies through the elimination of barriers to movements of goods,
services, capital, technology, and people. Firms have many options available when they want to
globalize their operations including licensing, franchising, turnkey operations, management
contracts, and direct/portfolio investment.
a. Licensing and franchising—Licensing agreements are used when companies allow others to
use their assets, such as trademarks, patents, copyrights, or expertise under contract. Franchising
is a mode of business in which one party allows another party the use of a trademark that is an
essential asset for the franchisee's business.
b. Turnkey operations—Refers to business operations, performed under contract, that are
transferred to the owner when they are ready to begin operating.
c. Management contract—Refers to arrangements in which one company provides personnel to
perform general or specialized management functions for another company.
d. Direct and portfolio investment—A direct investment is one that gives the investor a
controlling interest in a foreign company. A portfolio investment is a noncontrolling interest in a
company or ownership of a loan to another party.
Diff: 3
Learning Outcome: Summarize the main entry strategies and modes that businesses use to enter
into foreign markets
Skill: Synthesis
Objective: 1-1 Relate globalization and international business (IB) to each other and explain
why their study is important
AACSB: Analytical thinking
