,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.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 1
duplicated, or posted to a publicly accessible website, in whole or in part.
, 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.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 2
duplicated, or posted to a publicly accessible website, in whole or in part.
, 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.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
21. Approximately 80 million people worldwide are employed by foreign-owned firms.
ANS: T PTS: 1 DIF: Difficult REF: p. 13
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
22. Both, institution- and resource-based views are two core perspectives answering the fundamental
question: "What determines the success and failure of firms around the globe?"
ANS: T PTS: 1 DIF: Moderate REF: p. 13
OBJ: 1.3 NAT: AACSB: Tier 1 Communication; Tier 2 Strategy
23. Possessing intimate knowledge about the formal and informal rules governing competition in various
countries is sufficient to succeed globally.
ANS: F PTS: 1 DIF: Moderate REF: p. 14
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
24. Formal rules refer to government regulations regarding foreign and domestic firms. In most emerging
environments of today, formal rules ensure equal playing field for all companies, regardless of origin.
ANS: T PTS: 1 DIF: Moderate REF: p. 14
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
25. Due to following informal rules such as culture and ethics, some developed economies have a hard
time fostering entrepreneurship.
ANS: T PTS: 1 DIF: Difficult REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
26. Firms that are able to succeed in the difficult, harsh, even hostile foreign environments, established by
unfavorable formal and informal rules, possess unique firm-specific resources and capabilities not
shared by competitors.
ANS: T PTS: 1 DIF: Moderate REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Communication; Tier 2 Strategy
27. Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties
because of their non-native status.
ANS: T PTS: 1 DIF: Easy REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
28. Most globalization opponents view globalization as a long-run historical evolution since the dawn of
human history.
ANS: F PTS: 1 DIF: Easy REF: p. 16
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 3
duplicated, or posted to a publicly accessible website, in whole or in part.
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.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 1
duplicated, or posted to a publicly accessible website, in whole or in part.
, 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.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 2
duplicated, or posted to a publicly accessible website, in whole or in part.
, 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.
ANS: F PTS: 1 DIF: Easy REF: p. 12
OBJ: 1.2 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
21. Approximately 80 million people worldwide are employed by foreign-owned firms.
ANS: T PTS: 1 DIF: Difficult REF: p. 13
OBJ: 1.2 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
22. Both, institution- and resource-based views are two core perspectives answering the fundamental
question: "What determines the success and failure of firms around the globe?"
ANS: T PTS: 1 DIF: Moderate REF: p. 13
OBJ: 1.3 NAT: AACSB: Tier 1 Communication; Tier 2 Strategy
23. Possessing intimate knowledge about the formal and informal rules governing competition in various
countries is sufficient to succeed globally.
ANS: F PTS: 1 DIF: Moderate REF: p. 14
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Strategy
24. Formal rules refer to government regulations regarding foreign and domestic firms. In most emerging
environments of today, formal rules ensure equal playing field for all companies, regardless of origin.
ANS: T PTS: 1 DIF: Moderate REF: p. 14
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
25. Due to following informal rules such as culture and ethics, some developed economies have a hard
time fostering entrepreneurship.
ANS: T PTS: 1 DIF: Difficult REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Environmental Influence
26. Firms that are able to succeed in the difficult, harsh, even hostile foreign environments, established by
unfavorable formal and informal rules, possess unique firm-specific resources and capabilities not
shared by competitors.
ANS: T PTS: 1 DIF: Moderate REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Communication; Tier 2 Strategy
27. Liability of foreignness is the inherent disadvantage experienced by foreign firms in host counties
because of their non-native status.
ANS: T PTS: 1 DIF: Easy REF: p. 15
OBJ: 1.3 NAT: AACSB: Tier 1 Analytic; Tier 2 Environmental Influence
28. Most globalization opponents view globalization as a long-run historical evolution since the dawn of
human history.
ANS: F PTS: 1 DIF: Easy REF: p. 16
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or 3
duplicated, or posted to a publicly accessible website, in whole or in part.
