Chapter 1—Globalizing Business
TRUE/FALSE
1. Terms International Business (IB) and the term global business are synonymous.
ANS: F PTS: 1 DIF: Easy 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 OBJ: 1.4
NAT: AACSB: Tier 1 Communication; Tier 2 Environmental Influence
29. Globalization is a relatively new phenomenon triggered by information revolution of late 1980s
and early 1990s.
ANS: F PTS: 1 DIF: Moderate OBJ: 1.4
NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Information Technologies
30. According to the pendulum view, the globalization is a positive phenomenon and perceived both
positively and negatively throughout the history.
ANS: F PTS: 1 DIF: Difficult OBJ: 1.4
TRUE/FALSE
1. Terms International Business (IB) and the term global business are synonymous.
ANS: F PTS: 1 DIF: Easy 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 OBJ: 1.4
NAT: AACSB: Tier 1 Communication; Tier 2 Environmental Influence
29. Globalization is a relatively new phenomenon triggered by information revolution of late 1980s
and early 1990s.
ANS: F PTS: 1 DIF: Moderate OBJ: 1.4
NAT: AACSB: Tier 1 Reflective Thinking; Tier 2 Information Technologies
30. According to the pendulum view, the globalization is a positive phenomenon and perceived both
positively and negatively throughout the history.
ANS: F PTS: 1 DIF: Difficult OBJ: 1.4
