Test Bank For Business A Changing World Canadian 6th Edition by Ferrell

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) Exporting is the purchase of products from another nation. Answer: True False 2) Falling political barriers and new technologies have made it increasingly difficult to trade with other nations. Answer: True False 3) When a nation is importing more than it is exporting, it has a positive balance of trade. Answer: True False 4) A balance of trade refers to the buying, selling, and trading of goods and services across national boundaries. Answer: True False 5) Nations trade with other nations to obtain resources that would otherwise be unavailable to them. Answer: True False 6) An absolute advantage exists when a country has a monopoly on a natural resource. Answer: True False 7) De Beers Consolidated Mines, Ltd., has the largest deposits of diamonds in the world. As such, they are said to have a comparative advantage. Answer: True False 8) Outsourcing refers to the transfer of manufacturing and other tasks to countries where labour and supplies are less expensive. Answer: True False 9) Canada's top trading partner, in terms of both imports and exports, is China. Answer: True False 10) The trade deficit fluctuates according to such factors as the economic health of Canada and other countries, productivity, perceived quality, and exchange rates. Answer: True False 11) Trade surpluses are harmful because they can mean the failure of businesses, the loss of jobs, and a lowered standard of living. Answer: True False 12) A nation's balance of trade is the difference in value between its exports and imports. Answer: True False 13) Completely free trade always exists. Answer: True False 1 14) Protective tariffs raise the price of foreign goods to allow competition with more expensive domestic goods. Answer: True False 15) When the value of the Canadian dollar declines relative to other currencies, such as the euro, the price of imports becomes relatively less expensive for Canadian consumers. Answer: True False 16) A common reason for establishing quotas or tariffs is to prohibit dumping. Answer: True False 17) An embargo gives the importing country complete control over the domestic price of the good. Answer: True False 18) Political considerations change slowly, while laws change rapidly. Answer: True False 19) Differences in spoken language and body language have no impact on international business. Answer: True False 20) Many marketers view technological barriers to trade as opportunities to enter new markets. Answer: True False 21) Probably the most illegal cartel is OPEC, the Organization of Petroleum Exporting Countries. Answer: True False 22) The North American Free Trade Agreement (NAFTA), which went into effect on January 1, 1994, effectively merged Canada and the United States into one market of more than 440 million consumers. Answer: True False 23) The Doha Development Round collapsed in 2008 after failing to agree on farm import rules, which allow countries to protect poor farmers by imposing a tariff on certain goods in the event of a drop in prices or a surge in imports. Answer: True False 24) GATT provided a forum for tariff negotiations. Answer: True False 25) The International Monetary Fund promotes trade among member nations by eliminating trade barriers and fostering financial cooperation. Answer: True False 26) The World Bank and other multilateral development banks are the largest source of advice and assistance for developing nations. Answer: True False 2 27) Maquiladoras are possible under the Asia-Pacific Economic Cooperation. Answer: True False 28) The WTO agreements are the optional ground rules for international commerce. Answer: True False 29) Under the European Union (EU), each member nation functions as a separate market. Answer: True False 30) The prosperity of the EU has suffered in recent years. EU members experienced a severe economic crisis in 2010 that required steep bailouts from the International Monetary Fund (IMF). Answer: True False 31) The People's Republic of China has launched a program of economic reform to stimulate its economy by privatizing many industries, restructuring its banking system, and increasing public spending on infrastructure. Answer: True False 32) The World Bank is more formally known as the International Monetary Fund. Answer: True False 33) Exporting is available only to large corporations. Answer: True False 34) Licensing is a way of entering the international marketplace without spending large amounts of money abroad. Answer: True False 35) Countertrade agreements require that countries trade using the currency of the importing nation. Answer: True False 36) Direct investment is the least risky and least expensive way to participate in foreign trade. Answer: True False 37) A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. Answer: True False 38) All multinationals are Canadian firms. Answer: True False 39) Export agents produce goods and sell them in a foreign country. Answer: True False 40) An advantage of trading through an agent instead of directly is that the company does not have to deal with foreign currencies or the red tape of international business. Answer: True False 3 41) Offshoring and outsourcing mean the same thing. Answer: True False 42) The oldest trading company in Canada is the Canadian Commercial Corporation (CCC). Answer: True False 43) Canada's top global franchise is McDonald's. Answer: True False 44) Licensing and franchising enable a company to enter the international marketplace. However, this requires spending large sums of money abroad. Answer: True False 45) Companies doing business internationally have traditionally used a globalization strategy. Answer: True False 46) Even when products are standardized, advertising often has to be modified. Answer: True False 47) Many businesspeople today try to "think locally, act globally." Answer: True False 48) Globalization involves standardizing products for the whole world as if it were a single entity. Answer: True False 49) Globalization refers only to products, not promotion or distribution. Answer: True False 50) More and more companies are moving from a global strategy to a customization strategy, which involves standardizing products for the whole world, as if it were a single entity. Answer: True False MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 51) When Weseeyu, Inc., of Moose Jaw, Saskatchewan sells contact lenses to a firm in Moscow, Weseeyu is: A) exporting the lenses. B) displaying their absolute advantage. C) increasing the trade deficit. D) considered a multi-national organization. E) importing the lenses. Answer: A 4 52) When a Montreal-based company buys coffee from Colombia, it: A) is decreasing the trade deficit. B) is making a big mistake. C) is exporting the coffee. D) has an absolute advantage. E) is importing the coffee. Answer: E 53) A favourable balance of trade exists when a country: A) saves more than it spends. B) exports more than it imports. C) spends more than it saves. D) sends out more cash than it takes in. E) imports more than it exports. Answer: B 54) In 2010, Canada had a trade deficit of $10.8 billion because: A) Japan stopped exporting goods to Canada. B) Canadian consumers bought far more domestic goods and services than foreign goods and services. C) Canadian companies sold more goods to other countries than foreign companies sold here. D) Canadian consumers stopped buying Japanese goods and services. E) Canada imported more products than it exported. Answer: E 55) The balance of payments includes all the following, except: A) foreign aid and military expenditures. B) a country's balance of trade. C) foreign investments. D) domestic investments. E) tourist expenditures. Answer: D 56) When Kelly flies from Canada to Scotland on an American airline, stays in an Edinburgh hotel, and buys wool sweaters from Scotland to bring home, she: A) is disloyal and unpatriotic. B) contributes to the negative balance of payments. C) decreases the trade deficit. D) buys American-made goods. E) does all of them. Answer: B 5 57) The primary problem with a trade deficit is: A) that a country is saving more than spending. B) that a country is exporting more than it is importing. C) that export taxes are minimal. D) that more cash is leaving the country than is flowing in. E) that a country is spending more than saving. Answer: D 58) In 2014, Canada's top trading partner was: A) Germany B) China C) Mexico D) the United States E) the United Kingdom Answer: D 59) The difference between the flow of money into and out of a country is called its: A) exchange rate. B) imbalance of trade. C) balance of trade. D) trade payment balance. E) balance of payments. Answer: E 60) Colombia can produce coffee so much more efficiently than other items produced there. As a result, Colombia is said to have which of the following advantages? A) Comparative B) Positive C) Absolute D) Negative E) Marginal Answer: A 61) Because it has the largest deposits of gem-quality diamonds in the world, and is able to control the price of diamonds, De Beers Consolidated Mines, Ltd., has a(n): A) trade deficit. B) comparative advantage. C) absolute advantage. D) advantage based on efficient production. E) balance of payment. Answer: C 6 62) A trade advantage with the best chance of surviving is one based on: A) production efficiency. B) technology. C) worker know-how. D) the lack of a resource. E) the monopoly of a resource. Answer: E 63) Until recently, the United States could produce oil-drilling equipment more efficiently than other countries, and, in a sense, monopolized the industry. In the market for oil-drilling equipment, the United States had a(n): A) positive advantage. B) comparative advantage. C) absolute advantage. D) marginal advantage. E) negative advantage. Answer: C 64) In 2014, Canada had a balance of trade surplus with: A) Mexico B) France C) the United States D) China E) South Korea Answer: C 65) The purchase of goods and services from foreign sources is called: A) natural advantage. B) bartering. C) exporting. D) importing. E) comparative advantage. Answer: D 66) When a company decides to do business outside its own country, it must research several factors, including potential barriers to international trade. Which of the following is not a potential barrier cited in your text? A) Political B) Economic C) Cultural D) Scientific E) Legal Answer: D 7 67) The United States, Canada, Great Britain, and Japan are considered to be: A) third-world countries. B) industrialized nations. C) less-developed countries. D) relatively low in terms of per capita incomes. E) none of these answers apply to these countries. Answer: B 68) Which of the following terms best describes many countries in Africa, Asia, and Europe? A) High income capitals. B) Less-developed countries. C) Third-world countries. D) Industrialized nations. E) None of these answers apply to these countries. Answer: B 69) When a country devalues its currency, it encourages the sale of its: A) imports. B) international goods. C) debts. D) international services. E) domestic goods to foreign countries. Answer: E 70) The physical facilities that support a country's development is called its: A) infrastructure B) capital stock C) growth constraints D) resource base E) potential growth Answer: A 71) If Canada wanted to reduce the cost of its goods in foreign markets, it could: A) revalue its currency. B) borrow from the Exim bank. C) sell more goods abroad. D) devalue its currency. E) pay off its trade deficit. Answer: D 8 72) Critics of protective tariffs argue that their use inhibits: A) free trade and competition B) competition and demand C) demand and supply D) embargoes E) tax revenues Answer: A 73) Laws protecting copyrights and intellectual property are weak and minimally enforced in which of the following countries, resulting in a high degree of counterfeit videos, movies, CDs, computer software, furniture, and clothing? A) Greece and Portugal B) Denmark and Norway C) Canada and the United States D) Ireland and Scotland E) China and Vietnam Answer: E 74) A specific amount of money levied on each unit of a product brought into the country is a(n): A) value-added tariff. B) protective tariff. C) duty-free tariff. D) fixed tariff. E) ad valorem tariff. Answer: D 75) To reduce dollars flowing out of the country, Canada can limit the number of Japanese cars being imported by imposing a(n): A) quota. B) exchange control. C) free trade zone. D) trade deficit. E) embargo. Answer: A 76) The United States' prohibition of imported Cuban cigars is an example of: A) an embargo. B) dumping. C) a tariff. D) a quota. E) countertrade. Answer: A 9 77) By requiring products to be sold for not less than their production cost plus a percentage for overhead and profit, the United States is attempting to prohibit: A) embargoes. B) surpluses. C) dumping. D) quotas. E) shortages. Answer: C 78) A group of nations or companies that band together to act as a monopoly is known as a: A) conglomerate. B) cartel. C) multinational. D) franchise. E) licensee. Answer: B 79) The Organization of Petroleum Exporting Countries is an example of a(n): A) embargo. B) cartel. C) coalition. D) democracy. E) boycott. Answer: B 80) A change in administration in a foreign government is an example of a new: A) cultural factor. B) export quota. C) body language. D) political factor. E) exchange factor. Answer: D 81) If companies research cultural differences before engaging in foreign trade, problems that might arise from cultural differences can be: A) completely avoided. B) maximized. C) exploited. D) unaffected. E) minimized. Answer: E 82) Not all countries trading in international markets package goods in the same units. Unlike the United States, most countries rely on: A) daylight savings. B) colour coding. C) gold. D) the metric system. E) currency. Answer: D 10 83) Understanding that Arab businessmen tend to stand face-to-face with the object of their conversation reveals the importance of knowing another culture's use of: A) religious practices. B) manners. C) language. D) dialect. E) body language. Answer: E 84) The translation of product names can be crucial in the success of a foreign marketing effort because of: A) cultural barriers. B) export quotas. C) body language. D) legal barriers. E) political barriers. Answer: A 85) A forum to discuss trade problems and negotiate a reduction of trade barriers was provided by: A) the International Monetary Fund. B) the General Agreement on Tariffs and Trade. C) the World Trade Organization. D) the European Union. E) the World Bank. Answer: B 86) Which countries were merged into one market by NAFTA? A) North America and South America B) Canada and Mexico C) Canada, the U.S., and Mexico D) Canada and the U.S. E) Mexico, the U.S., and Brazil Answer: C 87) To facilitate free trade among members, the European Union is working toward all of the following, except: A) the elimination of customs checks. B) the standardization of business regulations. C) the creation of a standardized currency. D) the creation of opportunities to trade with countries in South America. E) the standardization of import duties. Answer: D 11 88) Which 21-member alliance represents approximately 41 percent of the world's population, 44 percent of world trade, and 54 percent of world GDP? A) General Agreement on Tariffs and Trade B) North American Free Trade Agreement C) European Union D) Asia-Pacific Economic Cooperation E) Free Trade Area of the Americas Answer: D 89) Which of the following countries was one of the original member nations of APEC? A) Mexico B) China C) Chile D) Japan E) Belgium Answer: D 90) Which of the following makes short-term loans to member countries with trade deficits and provides foreign currencies to member nations? A) Foreign Credit Insurance Association B) International Monetary Fund C) World Bank D) Exim bank E) General Agreement on Tariffs and Trade Answer: B 91) If Peru wants to purchase machine parts from a German company but lacks German marks, it will probably borrow the marks from which of the following institutions? A) World Bank B) International Monetary Fund C) Bank of Canada D) Citicorp Bank E) International Bank Answer: B 92) An intermediary, or middleman, who markets goods in another country is acting as a(n): A) export agent. B) contract manufacturer. C) direct investor. D) franchising agent. E) licensing agent. Answer: A 12 93) A major advantage of exporting through an agent is that the company does not have to deal with: A) discounts. B) foreign currencies and red tape. C) increasing volume. D) raising prices. E) a middleman. Answer: B 94) Trading companies offer all of the following services, except: A) manufacturing. B) foreign exchange. C) consulting. D) advertising. E) warehousing. Answer: A 95) Which of the following companies was ranked number one in global franchising? A) Kumon B) Subway C) Tim Hortons D) McDonald's E) Yogen Fruz Answer: D 96) Yoplait, a French Yogurt, allows a Canadian firm to use its name, formula, and brands in return for a royalty. This arrangement is known as: A) a direct investment. B) a joint venture. C) licensing. D) contract manufacturing. E) exporting. Answer: C 97) When two countries barter products for other products without the use of currency, it is called: A) a strategic alliance. B) countertrade. C) exporting. D) licensing. E) a joint venture. Answer: B 13 98) When Reebok has some of its athletic shoes produced by a Korean company, the Reebok name still appears on the shoes. This illustrates: A) exporting. B) licensing. C) importing. D) contract manufacturing. E) a direct investment. Answer: D 99) The purchase of overseas production and marketing facilities implies: A) a direct investment. B) exporting. C) contract manufacturing. D) using an export agent. E) licensing. Answer: A 100) The fact that the American company 3M owns a film-manufacturing facility in Italy is an example of: A) contract manufacturing. B) a direct investment. C) licensing. D) exporting. E) a trading company. Answer: B 101) Offshoring is different than outsourcing because: A) outsourcing is typically done to lower production costs, while offshoring is not. B) they are financed differently. C) the operations are run by different top executives. D) the company retains control of the offshored processes. E) offshoring requires that the company relinquish control to the offshored organization. Answer: D 102) The highest level of international business involvement is: A) exporting. B) direct foreign investment. C) a contract manufacturing arrangement. D) a joint venture. E) a countertrade agreement. Answer: B 14 103) Because many countries do not permit foreign companies to purchase and operate facilities in their countries, a company wishing to do business in such a country may share the business costs with the host country by forming a: A) sole proprietorship. B) direct investment. C) corporation. D) contract manufacturing arrangement. E) joint venture. Answer: E 104) When two computer companies join together in hopes of obtaining a competitive advantage on a worldwide basis, this exemplifies: A) a joint venture. B) contract manufacturing. C) a cartel arrangement. D) a direct investment. E) a strategic alliance. Answer: E 105) A corporation that operates in several countries but without significant ties to any of them is a(n): A) joint venture. B) multinational corporation (MNC). C) cartel. D) strategic alliance. E) exporter. Answer: B 106) All of the following organizations can help Canadian organizations meet the challenges of creating and implementing effective and sensitive business strategies for the global marketplace, except: A) Export Development Canada (EDC) B) Foreign Affairs and International Trade Canada C) Canadian Deposit Insurance Corporation (CDIC) D) Canadian Commercial Corporation (CCC) E) Canadian Trade Commissioner Service Answer: C 107) Which strategy did Starbucks use as it became a global brand? A) Multinational strategy B) Customization C) Joint venture D) Strategic alliance E) Global strategy Answer: E 15 108) Customizing products, promotion, and distribution according to cultural, technological, and national differences indicate a: A) globalization strategy. B) multinational corporation. C) multinational strategy. D) strategic alliance. E) joint venture. Answer: C 109) When many soap and detergent manufacturers change the formula of their bar soaps to match different countries' water conditions and washing habits, this is an example of a: A) globalization strategy. B) strategic alliance. C) marketing strategy. D) multinational strategy. E) joint venture. Answer: D 110) When a firm's products are standardized in all countries: A) only publicity can be used for promotion. B) advertising cannot be used. C) advertising may have to be modified. D) distribution is more expensive. E) different ads are illegal. Answer: C 111) Standardizing products for the whole world, as if it were a single entity, is a characteristic of which strategy? A) Marketing strategy B) Multilevel strategy C) National strategy D) Global strategy E) Standardization strategy Answer: D ESSAY. Write your answer in the space provided or on a separate sheet of paper. 112) What is the difference between an absolute advantage and a comparative advantage when considering international trade? Answer: Answers will vary An absolute advantage in trade exists when a nation is the only source of an item or, in some cases, when it can produce the item more efficiently than any other nation. Most international trade is based comparative advantage, which occurs when a country specializes in products that it can supply more efficiently or more cheaply than other products. 16 o 113) Compare a trade deficit with a trade surplus. Answer: Answers will vary A nation's balance of trade is the difference in value between its exports and imports. Because some nations import more products than they export, they have a negative balance of trade, or trade deficit. When a nation exports more goods than it imports, it has a favourable balance of trade, or trade surplu 114) What cultural issues should a manager consider before doing business in a foreign country? Answer: Answers will vary It is important for the manager to understand the importance of social and cultural differences between countries. As cultural norms are rarely written down, careful research is important. Cultural difference include differences in spoken and written language, body language, family roles, perceptions of time, national and religious holidays, local customs, and measurement systems. 115) Who are the less-developed countries (LDCs)? Why are they called this and what opportunities do they present to more developed nations? Answer: Answers will vary Many countries in Africa, Asia, and South America are referred to as LDCs. In general, these countrie are poorer and less economically advanced than those in North America and Europe. LDCs are characterized by low per-capita income (income generated by the nation's production of goods and services divided by the population), which means that consumers are less likely to purchase non-essential products. Nonetheless, LDCs represent a potentially huge and profitable market for many businesses because they may be buying technology to improve their infrastructures, and much of the population may desire consumer products. 116) What is the International Monetary Fund (IMF)? Answer: Answers will vary The IMF is an organization established in 1947 to promote trade among member nations by eliminatin trade barriers and fostering financial cooperation. It also makes short-term loans to member countries that have balance-of-payment deficits and provides foreign currencies to member nations. 117) Why was NAFTA controversial and what kind of disputes have arisen over the implementation of the trade agreement? Answer: Answers will vary While many Canadians feared the agreement would erase jobs in Canada, Mexicans have been disappointed that the agreement failed to create more jobs. Moreover, Mexico's rising standard of livin has increased the cost of doing business there; some 850 maquiladoras have closed their doors and transferred work to China and other nations where labour costs are cheaper. 17 s s s g 118) Explain the different levels of organizational involvement in international trade. Answer: Answers will vary Exporting occurs when a company sells its products overseas directly or through a middleman commonly called an export agent. Trading companies buy goods in one country and sell them to buyer in another. Licensing is a trade arrangement in which one company, the licensor, allows another company, the licensee, to use its name, products, brands, trademarks, and production processes in exchange for a fee or royalty. Franchising is a form of licensing. Contract manufacturing occurs when a foreign company produces a specified volume of the domestic firm's product to specification and uses the domestic firm's name on the final product. Outsourcing involves transferring manufacturing or other tasks to companies in countries where labour and supplies are less expensive. Joint ventures allow a company that wants to do business in another country to find a local partner to share the costs and operation of the business, while strategic alliances are partnerships formed to create competitive advantage on a worldwide basis. Direct investment involves firms who are willing to invest considerable resources in international business by purchasing overseas business facilities. The highest level of international involvement is the multinational corporation that operates on a worldwide scale, without significant ties to any one nation or region. 119) Describe the role of export agents in conducting international business. Answer: Answers will vary Export agents act as intermediaries between organizations trading goods overseas. Export agents seldom produce goods themselves; instead, they usually handle international transactions for other firms. Export agents either purchase products outright or take them on consignment. If they purchase them outright, they generally mark up the price they have paid and attempt to sell the product in the international marketplace. They are also responsible for storage and transportation. 120) What kind of strategy did McDonald's use when they entered the market in India? What changes, if any, were implemented in order to succeed in that market? Answer: Answers will vary McDonald's used a multinational strategy which required customizing their products, promotion, and distribution according to cultural, technological, regional, and national differences. To succeed in India, for example, McDonald's had to adapt its products to respect religious customs. McDonald's India does not serve beef or pork products and also has vegetarian dishes for its largely vegetarian consumer base. 18 s 121) Explain the phrase "Think globally, act locally." Answer: Answers will vary This refers to the philosophy followed by many successful companies in today's international marketplace. It stresses the importance of understanding the "big picture" of the worldwide acceptance and demand for the firm's product. At the same time, it emphasizes the need to adjust strategies to conform to local needs and tastes. 19 Answer Key Testname: UNTITLED3 1) FALSE 2) FALSE 3) FALSE 4) FALSE 5) TRUE 6) TRUE 7) FALSE 8) TRUE 9) FALSE 10) TRUE 11) FALSE 12) TRUE 13) FALSE 14) TRUE 15) FALSE 16) TRUE 17) FALSE 18) FALSE 19) FALSE 20) TRUE 21) FALSE 22) FALSE 23) TRUE 24) TRUE 25) TRUE 26) TRUE 27) FALSE 28) FALSE 29) FALSE 30) TRUE 31) TRUE 32) FALSE 33) FALSE 34) TRUE 35) FALSE 36) FALSE 37) TRUE 38) FALSE 39) FALSE 40) TRUE 41) FALSE 42) TRUE 43) FALSE 44) FALSE 45) FALSE 46) TRUE 47) FALSE 48) TRUE 49) FALSE 50) FALSE 20 Answer Key Testname: UNTITLED3 51) A 52) E 53) B 54) E 55) D 56) B 57) D 58) D 59) E 60) A 61) C 62) E 63) C 64) C 65) D 66) D 67) B 68) B 69) E 70) A 71) D 72) A 73) E 74) D 75) A 76) A 77) C 78) B 79) B 80) D 81) E 82) D 83) E 84) A 85) B 86) C 87) D 88) D 89) D 90) B 91) B 92) A 93) B 94) A 95) D 96) C 97) B 98) D 99) A 100) B 21 Answer Key Testname: UNTITLED3 101) D 102) B 103) E 104) E 105) B 106) C 107) E 108) C 109) D 110) C 111) D 112) Answers will vary An absolute advantage in trade exists when a nation is the only source of an item or, in some cases, when it can produce the item more efficiently than any other nation. Most international trade is based on comparative advantag which occurs when a country specializes in products that it can supply more efficiently or more cheaply than other products. 113) Answers will vary A nation's balance of trade is the difference in value between its exports and imports. Because some nations impor more products than they export, they have a negative balance of trade, or trade deficit. When a nation exports more goods than it imports, it has a favourable balance of trade, or trade surplus. 114) Answers will vary It is important for the manager to understand the importance of social and cultural differences between countries. cultural norms are rarely written down, careful research is important. Cultural differences include differences in spoken and written language, body language, family roles, perceptions of time, national and religious holidays, local customs, and measurement systems. 115) Answers will vary Many countries in Africa, Asia, and South America are referred to as LDCs. In general, these countries are poorer and less economically advanced than those in North America and Europe. LDCs are characterized by low per-capit income (income generated by the nation's production of goods and services divided by the population), which mea that consumers are less likely to purchase non-essential products. Nonetheless, LDCs represent a potentially huge and profitable market for many businesses because they may be buying technology to improve their infrastructures, and much of the population may desire consumer products. 116) Answers will vary The IMF is an organization established in 1947 to promote trade among member nations by eliminating trade barri and fostering financial cooperation. It also makes short-term loans to member countries that have balance-of-payment deficits and provides foreign currencies to member nations. 22 t A n e Answer Key Testname: UNTITLED3 117) Answers will vary While many Canadians feared the agreement would erase jobs in Canada, Mexicans have been disappointed that th agreement failed to create more jobs. Moreover, Mexico's rising standard of living has increased the cost of doing business there; some 850 maquiladoras have closed their doors and transferred work to China and other nations where labour costs are cheaper. 118) Answers will vary Exporting occurs when a company sells its products overseas directly or through a middleman commonly called an export agent. Trading companies buy goods in one country and sell them to buyers in another. Licensing is a trade arrangement in which one company, the licensor, allows another company, the licensee, to use its name, products, brands, trademarks, and production processes in exchange for a fee or royalty. Franchising is a form of licensing. Contract manufacturing occurs when a foreign company produces a specified volume of the domestic firm's product to specification and uses the domestic firm's name on the final product. Outsourcing involves transferring manufacturing or other tasks to companies in countries where labour and supplies are less expensive. Joint ventures allow a company that wants to do business in another country to find a local partner to share the costs and operation of the business, while strategic alliances are partnerships formed to create competitive advantage on a worldwide basis. Direct investment involves firms who are willing to invest considerable resources in international business by purchasing overseas business facilities. The highest level of international involvement is the multinational corporation that operates on a worldwide scale, without significant ties to any one nation or region. 119) Answers will vary Export agents act as intermediaries between organizations trading goods overseas. Export agents seldom produce goods themselves; instead, they usually handle international transactions for other firms. Export agents either purchase products outright or take them on consignment. If they purchase them outright, they generally mark up th price they have paid and attempt to sell the product in the international marketplace. They are also responsible for storage and transportation. 120) Answers will vary McDonald's used a multinational strategy which required customizing their products, promotion, and distribution according to cultural, technological, regional, and national differences. To succeed in India, for example, McDonald's had to adapt its products to respect religious customs. McDonald's India does not serve beef or pork products and also has vegetarian dishes for its largely vegetarian consumer base. 121) Answers will vary This refers to the philosophy followed by many successful companies in today's international marketplace. It stress the importance of understanding the "big picture" of the worldwide acceptance and demand for the firm's product. the same time, it emphasizes the need to adjust strategies to conform to local needs and tastes. 23 e e A