Chapter 1—Globalizing Business
TRUE/FALSE
1. Terms International Business (IB) and the term global business are synonymous.
ANS: F PTS: 1 DIF: Easy REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
2. Multinational enterprise is a firm that engages in foreign direct investment by directly
investing in, controlling, and managing value-added activities in other countries.
ANS: T PTS: 1 DIF: Moderate REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
3. The term International Business should always refer to business activities conducted
abroad.
ANS: F PTS: 1 DIF: Difficult REF: p. 5
OBJ: 1.1 NAT: AACSB: Tier 1 Communication; Tier 2 Environmental Influence
4. Global business includes both international (cross-border) activities as well as domestic
business activities.
ANS: T PTS: 1 DIF: Moderate REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
,5. Gross domestic product (GDP) is the sum of value added by resident firms, households, and
government operating in an economy.
ANS: T PTS: 1 DIF: Moderate REF: p. 7
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
6. Emerging markets contribute about 25% of global GDP when adjusted for purchasing
power parity, PPP.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
7. Purchasing power parity (PPP) is a conversion that determines the equivalent amount of
goods and services different currencies can purchase.
ANS: T PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
8. Purchasing power parity (PPP) is an adjustment that reflects the differences in cost of living
in countries.
ANS: T PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
9. Gross national product (GNP) is the sum of value added by resident firms, households, and
government operating in an economy.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
,10. Brazil, Russia, Indonesia, and China are commonly referred to as BRIC countries.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
11. Although GDP, GNP, and GNI are often used as yardsticks of economic development,
differences in cost of living make such a direct comparison less meaningful.
ANS: T PTS: 1 DIF: Easy REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
12. The term "base of the pyramid" represents economies where individuals make less than
$2,000 a year.
ANS: T PTS: 1 DIF: Easy REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
13. The greatest number of opportunities for the global businesses is opened at the "top of the
pyramid," where individuals have the greatest purchasing power.
ANS: F PTS: 1 DIF: Moderate REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
14. Triad refers to developed economies consisting of North America, Western Europe, and
Japan.
ANS: T PTS: 1 DIF: Moderate REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
, 15. The group of 20 (G-20) includes 20 member countries.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
16. Most top managers of large firms lack significant global competence.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
17. Expatriate managers make ideal candidates for top management positions.
ANS: T PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Motivation Concepts
18. Expatriate managers are usually paid salaries coinciding with the salaries paid to foreign
local managers of similar rank.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
19. International premium is a significant pay raise awarded to expatriate employees working
abroad.
ANS: T PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
20. Expatriate employees face fewer and lower-ranked employment opportunities upon return
to the US.
TRUE/FALSE
1. Terms International Business (IB) and the term global business are synonymous.
ANS: F PTS: 1 DIF: Easy REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
2. Multinational enterprise is a firm that engages in foreign direct investment by directly
investing in, controlling, and managing value-added activities in other countries.
ANS: T PTS: 1 DIF: Moderate REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
3. The term International Business should always refer to business activities conducted
abroad.
ANS: F PTS: 1 DIF: Difficult REF: p. 5
OBJ: 1.1 NAT: AACSB: Tier 1 Communication; Tier 2 Environmental Influence
4. Global business includes both international (cross-border) activities as well as domestic
business activities.
ANS: T PTS: 1 DIF: Moderate REF: p. 4
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
,5. Gross domestic product (GDP) is the sum of value added by resident firms, households, and
government operating in an economy.
ANS: T PTS: 1 DIF: Moderate REF: p. 7
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
6. Emerging markets contribute about 25% of global GDP when adjusted for purchasing
power parity, PPP.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
7. Purchasing power parity (PPP) is a conversion that determines the equivalent amount of
goods and services different currencies can purchase.
ANS: T PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
8. Purchasing power parity (PPP) is an adjustment that reflects the differences in cost of living
in countries.
ANS: T PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
9. Gross national product (GNP) is the sum of value added by resident firms, households, and
government operating in an economy.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
,10. Brazil, Russia, Indonesia, and China are commonly referred to as BRIC countries.
ANS: F PTS: 1 DIF: Moderate REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
11. Although GDP, GNP, and GNI are often used as yardsticks of economic development,
differences in cost of living make such a direct comparison less meaningful.
ANS: T PTS: 1 DIF: Easy REF: p. 8
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
12. The term "base of the pyramid" represents economies where individuals make less than
$2,000 a year.
ANS: T PTS: 1 DIF: Easy REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental
Influence
13. The greatest number of opportunities for the global businesses is opened at the "top of the
pyramid," where individuals have the greatest purchasing power.
ANS: F PTS: 1 DIF: Moderate REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
14. Triad refers to developed economies consisting of North America, Western Europe, and
Japan.
ANS: T PTS: 1 DIF: Moderate REF: p. 10
OBJ: 1.1 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
, 15. The group of 20 (G-20) includes 20 member countries.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
16. Most top managers of large firms lack significant global competence.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.1 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
17. Expatriate managers make ideal candidates for top management positions.
ANS: T PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Motivation Concepts
18. Expatriate managers are usually paid salaries coinciding with the salaries paid to foreign
local managers of similar rank.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
19. International premium is a significant pay raise awarded to expatriate employees working
abroad.
ANS: T PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Creation of Value
20. Expatriate employees face fewer and lower-ranked employment opportunities upon return
to the US.
