TEST BANK FOR INTERNATIONAL
BUSINESS, 3RD EDITION BY
MICHAEL GERINGER & JEANNE
MCNETT CHAPTER 1-15
Comprehensive Test Bank: International Business 3rd Edition by Michael Geringer & Jeanne McNett
Module 1: Introduction to International Business
1) Discuss the three environments in which an international company operates.
Answer: Answers will vary, but should address each of the three kinds of environments that firms
operating across borders must deal with: domestic, foreign, and international. The domestic
environment involves all of the uncontrollable forces originating in the home country that surround and
influence the firm's life and development. The foreign environment involves all of the uncontrollable
forces originating outside the home country that surround and influence the firm. The international
environment involves the interaction between domestic and foreign environmental forces, or between
sets of foreign environmental forces.
Rationale: International companies must navigate three distinct environments: the domestic
environment (home country forces), the foreign environment (host country forces), and the
international environment (interactions between domestic and foreign forces). Understanding these
environments is crucial because they present different challenges and opportunities that affect how
firms operate across borders.
2) Identify and give an example of each of the five major kinds of drivers that are leading international
firms to the globalization of their operations.
Answer: Answers will vary, but should address each of the five major kinds of drivers: political,
technological, market, cost, and competitive.
Political: Preferential trading agreements that group several nations into a single market (e.g.,
European Union, USMCA)
Technological: Advances in global communications networks enabling coordination of
production worldwide
Market: Suppliers following their major customers to new countries
, Cost: Companies engaging in exporting to increase economies of scale
Competitive: Companies defending home markets by entering competitors' home markets
Rationale: These five drivers represent the major forces pushing companies toward globalization.
Political drivers involve trade agreements and reduced barriers; technological drivers include
communication advances; market drivers involve customer-following behavior; cost drivers relate to
economies of scale; and competitive drivers involve defensive moves against rivals.
3) Discuss the arguments supporting and opposing globalization of trade and investment. Do you
think globalization is, overall, a positive development or a negative one for the world? Explain.
Answer: Answers will vary, but arguments supporting globalization should include discussion about how
free trade enhances socioeconomic development and about how free trade promotes more and better
jobs. Arguments opposing globalization of trade and investment should include discussion of how
globalization has produced uneven results across nations and people, has had deleterious effects on
labor and labor standards, and has contributed to a decline in environmental and health conditions.
Opinions will vary but should be supported with logic.
Rationale: Supporters argue that free trade is the best strategy for advancing world economic
development, creates jobs, and has lifted millions out of poverty. Opponents contend that globalization
increases inequality, harms labor standards, damages the environment, and erodes cultural diversity.
Both perspectives have merit based on different interpretations of economic data and social priorities.
4) The operations of a company outside its home or domestic market are known as ______ business.
Options:
A) domestic
B) foreign
C) international
D) global
Correct Answer: B) foreign
Rationale: Foreign business specifically refers to the operations of a company outside its home or
domestic market. This term distinguishes activities conducted abroad from those conducted
domestically. While "international" and "global" are related concepts, "foreign business" is the precise
term for operations conducted outside the home country.
5) A(n) ______ company is a company with operations in multiple nations.
,Options:
A) multinational
B) international
C) global
D) transnational
Correct Answer: B) international
Rationale: An international company (IC) is defined as a company with operations in multiple nations.
This includes companies that may not have any investment in nations other than their home nation,
such as those involved only in exporting and selling goods or services in other nations. While
"multinational" is sometimes used synonymously, the textbook specifically defines "international
company" as having operations in multiple nations.
6) The term ______ refers to all the forces influencing the life and development of the firm.
Options:
A) environment
B) culture
C) economy
D) politics
Correct Answer: A) environment
Rationale: The term environment, as used in international business, means all the forces influencing the
life and development of the firm. These forces can be classified as external (uncontrollable) or internal
(controllable). The environment encompasses all factors—political, economic, social, technological,
legal, and physical—that affect how a firm operates and develops.
7) The internal forces over which management does have some control, such as the factors of
production and the activities of the organization, are called the ______ forces.
Options:
A) controllable
B) uncontrollable
C) external
D) environmental
Correct Answer: A) controllable
Rationale: Internal forces over which management has some control are called controllable forces.
These include factors of production and organizational activities that management administers to adapt
, to changes in uncontrollable forces. Examples include human resources, finance, production, and
marketing decisions. External forces, by contrast, are uncontrollable.
8) A company uses a foreign agent to warehouse and deliver its goods in a foreign country. This
illustrates the ______ external force.
Options:
A) distributive
B) legal
C) physical
D) competitive
Correct Answer: A) distributive
Rationale: National and international agencies that distribute goods and services illustrate the
distributive external force. This includes warehousing and delivery systems that help move products to
customers. The distributive force encompasses all the channels and methods by which goods reach
consumers in foreign markets.
9) When a home country does business in a foreign country, it must obey all the laws of the host
country. This represents the ______ external force.
Options:
A) political
B) legal
C) economic
D) competitive
Correct Answer: B) legal
Rationale: A home country doing business in a foreign country must obey all the laws of the host
country, thus illustrating the legal external force. Legal forces include all laws, regulations, and legal
systems that affect business operations. These vary significantly from country to country and must be
understood and complied with for successful international operations.
10) A jewelry company opened offices in Botswana to be closer to the diamond mines that supplied
their business. This illustrates the effect of the ______ external force in international business.
Options:
A) competitive
BUSINESS, 3RD EDITION BY
MICHAEL GERINGER & JEANNE
MCNETT CHAPTER 1-15
Comprehensive Test Bank: International Business 3rd Edition by Michael Geringer & Jeanne McNett
Module 1: Introduction to International Business
1) Discuss the three environments in which an international company operates.
Answer: Answers will vary, but should address each of the three kinds of environments that firms
operating across borders must deal with: domestic, foreign, and international. The domestic
environment involves all of the uncontrollable forces originating in the home country that surround and
influence the firm's life and development. The foreign environment involves all of the uncontrollable
forces originating outside the home country that surround and influence the firm. The international
environment involves the interaction between domestic and foreign environmental forces, or between
sets of foreign environmental forces.
Rationale: International companies must navigate three distinct environments: the domestic
environment (home country forces), the foreign environment (host country forces), and the
international environment (interactions between domestic and foreign forces). Understanding these
environments is crucial because they present different challenges and opportunities that affect how
firms operate across borders.
2) Identify and give an example of each of the five major kinds of drivers that are leading international
firms to the globalization of their operations.
Answer: Answers will vary, but should address each of the five major kinds of drivers: political,
technological, market, cost, and competitive.
Political: Preferential trading agreements that group several nations into a single market (e.g.,
European Union, USMCA)
Technological: Advances in global communications networks enabling coordination of
production worldwide
Market: Suppliers following their major customers to new countries
, Cost: Companies engaging in exporting to increase economies of scale
Competitive: Companies defending home markets by entering competitors' home markets
Rationale: These five drivers represent the major forces pushing companies toward globalization.
Political drivers involve trade agreements and reduced barriers; technological drivers include
communication advances; market drivers involve customer-following behavior; cost drivers relate to
economies of scale; and competitive drivers involve defensive moves against rivals.
3) Discuss the arguments supporting and opposing globalization of trade and investment. Do you
think globalization is, overall, a positive development or a negative one for the world? Explain.
Answer: Answers will vary, but arguments supporting globalization should include discussion about how
free trade enhances socioeconomic development and about how free trade promotes more and better
jobs. Arguments opposing globalization of trade and investment should include discussion of how
globalization has produced uneven results across nations and people, has had deleterious effects on
labor and labor standards, and has contributed to a decline in environmental and health conditions.
Opinions will vary but should be supported with logic.
Rationale: Supporters argue that free trade is the best strategy for advancing world economic
development, creates jobs, and has lifted millions out of poverty. Opponents contend that globalization
increases inequality, harms labor standards, damages the environment, and erodes cultural diversity.
Both perspectives have merit based on different interpretations of economic data and social priorities.
4) The operations of a company outside its home or domestic market are known as ______ business.
Options:
A) domestic
B) foreign
C) international
D) global
Correct Answer: B) foreign
Rationale: Foreign business specifically refers to the operations of a company outside its home or
domestic market. This term distinguishes activities conducted abroad from those conducted
domestically. While "international" and "global" are related concepts, "foreign business" is the precise
term for operations conducted outside the home country.
5) A(n) ______ company is a company with operations in multiple nations.
,Options:
A) multinational
B) international
C) global
D) transnational
Correct Answer: B) international
Rationale: An international company (IC) is defined as a company with operations in multiple nations.
This includes companies that may not have any investment in nations other than their home nation,
such as those involved only in exporting and selling goods or services in other nations. While
"multinational" is sometimes used synonymously, the textbook specifically defines "international
company" as having operations in multiple nations.
6) The term ______ refers to all the forces influencing the life and development of the firm.
Options:
A) environment
B) culture
C) economy
D) politics
Correct Answer: A) environment
Rationale: The term environment, as used in international business, means all the forces influencing the
life and development of the firm. These forces can be classified as external (uncontrollable) or internal
(controllable). The environment encompasses all factors—political, economic, social, technological,
legal, and physical—that affect how a firm operates and develops.
7) The internal forces over which management does have some control, such as the factors of
production and the activities of the organization, are called the ______ forces.
Options:
A) controllable
B) uncontrollable
C) external
D) environmental
Correct Answer: A) controllable
Rationale: Internal forces over which management has some control are called controllable forces.
These include factors of production and organizational activities that management administers to adapt
, to changes in uncontrollable forces. Examples include human resources, finance, production, and
marketing decisions. External forces, by contrast, are uncontrollable.
8) A company uses a foreign agent to warehouse and deliver its goods in a foreign country. This
illustrates the ______ external force.
Options:
A) distributive
B) legal
C) physical
D) competitive
Correct Answer: A) distributive
Rationale: National and international agencies that distribute goods and services illustrate the
distributive external force. This includes warehousing and delivery systems that help move products to
customers. The distributive force encompasses all the channels and methods by which goods reach
consumers in foreign markets.
9) When a home country does business in a foreign country, it must obey all the laws of the host
country. This represents the ______ external force.
Options:
A) political
B) legal
C) economic
D) competitive
Correct Answer: B) legal
Rationale: A home country doing business in a foreign country must obey all the laws of the host
country, thus illustrating the legal external force. Legal forces include all laws, regulations, and legal
systems that affect business operations. These vary significantly from country to country and must be
understood and complied with for successful international operations.
10) A jewelry company opened offices in Botswana to be closer to the diamond mines that supplied
their business. This illustrates the effect of the ______ external force in international business.
Options:
A) competitive
