Globalizing Business – 3rd Edition (Peng) – Comprehensive Study Summary and Exam Preparation Material

,Chapter 1—Globalizing Business


TRUE/FALSE

1. A multinational enterprise is a firm that engages in foreign direct investment by directly managing
value-added activities in other countries.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 4 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

2. The term “emerging markets” refers to all markets other than the developed markets.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

3. Gross domestic product (GDP) is the sum of value added by resident firms, households, and
governments operating in an economy.

ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

4. Majority of the global GDP is contributed by the emerging markets.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

5. 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: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

6. Purchasing power parity (PPP) is calculated as the sum of value added by resident firms, households,
and governments operating in an economy.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 5 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

7. Emerging markets contribute about 26% of global GDP without adjusting for purchasing power parity
(PPP).

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

8. More than half the GDP produced by emerging markets comes from outside the BRIC countries.

, ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 7 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

9. On the global economic pyramid, the Triad refers to developed economies consisting of North
America, Western Europe, and Japan.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

10. All the countries of the BRIC belong to the top tier of the global economic pyramid.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

11. The second tier of the global economic pyramid is made up of countries with a per capita annual
income of more than $20,000.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

12. The emerging markets of the world are placed at the top of the global economic pyramid.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

13. The global economic pyramid does not represent countries that have a per capita annual income of less
than $2,000.

ANS: F PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

14. The term "base of the pyramid" represents economies where individuals make less than $2,000 a year.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

15. Reverse innovations are innovations that are adopted first in the Triad-based multinationals and then
diffused around the world.

ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 9 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

16. Reverse innovation is an example of bottom up innovation.

ANS: T PTS: 1 DIF: Difficulty: Moderate

, REF: p. 10 OBJ: LO: 1-1 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

17. The Group of 20 includes the European Union (EU)—a regional bloc.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 11 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

18. Globalization has driven up the salaries of low-level jobs.

ANS: F PTS: 1 DIF: Difficulty: Moderate
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension

19. An international premium is a significant pay raise awarded to expatriate employees working abroad.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 12 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

20. Approximately 80 million people worldwide are employed by foreign-owned firms.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 13 OBJ: LO: 1-2 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

21. Overall, the focus on firm performance around the globe defines the field of global business more than
anything else.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

22. An institution-based view suggests that the success and failure of firms are enabled and constrained by
business norms of the host nation.

ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Comprehension

23. Formal institutions include laws, regulations, and rules.

ANS: T PTS: 1 DIF: Difficulty: Easy
REF: p. 15 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge

24. The institution-based view places emphasis on the external factors that could affect a firm.

ANS: T PTS: 1 DIF: Difficulty: Moderate
REF: p. 16 OBJ: LO: 1-3 NAT: BUSPROG: Analytic
KEY: Bloom's: Knowledge