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GEB4361 International Business > GEB4361 Chapter 01 Assessing the Environment - Political, Economic, Legal, Technological > Flashcards

GEB4361 Chapter 01 Assessing the Environment - Political, Economic, Legal, Technological Flashcards

1
Q

Risks associated with the Russian action in 2014

A
  • Sanctions-based retaliatory measures
  • Decline in business activity
  • Threat of backlash in Russia against Western products
  • Continued standoff between Russia and Ukraine
  • Global outcry after Malaysia Airlines Flight 17 shot down
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2
Q

Challenges Managers Face

A
  • Politics
  • Cultural differences
  • Global competition
  • Terrorism
  • Technology
  • Sustainability
  • Social obligation
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3
Q

Typical Challenges that Managers Face in the 21st Century

A
  • Political and cultural differences
  • Global competition
  • Terrorism
  • Technology
  • Finding ways to balance their social responsibilities, their images, and their competitive strategies
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4
Q

International Management

A

The process of developing strategies, designing and operating systems, and working with people around the world to ensure sustained competitive advantage

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5
Q

Has enabled a level playing field due to decreasing differences in regional output growth rates, increased economic activity, and other non-economic factors

A

Globalization

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6
Q

Five key global trends:

A
  • Changing balance of growth towards emerging markets
  • Need for increased productivity and consumption in developed countries
  • Increasing global inter-connectivity
  • Increasing gap between supply and demand of natural resources
  • Challenge for governments to develop policies for economic growth and financial stability
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7
Q

FDI

A

Foreign Direct Investment Confidence Index

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8
Q

FDI types

A

Acquisition of a subsidiary, joint ventures, licensing, and investing in new facilities or expansion

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9
Q

Challenges to Globalism

A
  • Backlash against capitalism and rekindling of nationalism
  • Increased protectionism of high-demand resources
  • Need to develop top managers with international understanding and experience
  • Increasing pressure for firms to consider the social responsibility of their actions
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10
Q

Benefits of Globalism

A
  • Access to more markets• Growth of developing economies
  • Opportunities for flexibility and efficiency (now can locate in the most suitable location
  • Opportunities for small and medium-sized enterprises (SMEs)
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11
Q

SMEs

A

small and medium-sized enterprises; firms with fewer than 500 employees)

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12
Q

Effects of Globalization on Corporations

A
  • Global companies are becoming less tied to specific locations
  • Companies that desire to remain competitive will have to develop a cadre of experienced international managers
  • Small companies are also affected by and in turn affect globalism
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13
Q

The offshoring of manufacturing jobs, and re-shoring of jobs to lower shipping costs is which form of globalization?

A

Globalization of Human Capital

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14
Q

The speed and accuracy of information transmission are changing the nature of international manager’s jobs falls under which form of globalization?

A

Globalization of Information Technology

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15
Q

Protection of intellectual property is the primary risk in which country?

A

China

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16
Q

A unified market of over 500 million people in 28 nations?

A

the European Union (EU)

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17
Q

The two challenges the EU poses for global managers?

A
  • “Fortress” Europe, i.e., preference to insiders

- Dealing with multiple cultures (i.e., Europeans still identify with their national cultures

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18
Q

They have resources and labor and have provided most of the capital and expertise for Asia’s developing countries…

A

Japan and the Four Tigers

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19
Q

Offers a large population of low-wage workers and a large consumer market, which has helped it attract manufacturing companies from around the world

A

China

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20
Q

The fastest growing free-market democracy

A

India

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21
Q

The world’s leader in outsourced back-office and high-tech services

A

India

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22
Q

Is a free trade agreement between 7 South Asian nations that will lower tariffs to 25% within 3 to 5 years and eliminate them within 7 year

A

The South Asia Association of Regional Cooperation (SAARC)

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23
Q

A free trading bloc between the US, Mexico, and Canada comprised of >470 million consumers

A

North American Free Trade Agreement (NAFTA)

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24
Q

An economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Venezuela

A

MERCOSUR

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25
Q

Modeled after NAFTA, liberalizes trade between the US and 5 Central American countries and is a stepping stone to the FTAA, which would encompass 34 economies

A

Central America Free Trade Agreement (CAFTA)

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26
Q

Characterized by economic growth, a large supply of natural resources, and a large, well-educated population—but it also is affected by corruption and government interference

A

Russian Federation

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27
Q
  • Low Gross National Product (GNP)
  • Low Gross Domestic Product (GDP)
  • Large, relatively unskilled workforce
  • High international debt
A

Less developed countries—LDCs

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28
Q

Tips for Doing Business in China

A
  • Connections are important
  • Negotiations will be different from the U.S. and difficult
  • Communication must be clear, honest, and fully prepared for
  • Culture matters!
29
Q

The Impact of Information Technology

A
  • Making Geographic barriers less relevant
  • Lowering cultural barriers
  • Encouraging convergence of consumers’ tastes and preferences
  • The growth of information Technology is a cause and effect of globalism
30
Q

The three parts of the Political and Economic Environment

A
  • Sustainability
  • Ethnicity: a driving force behind political instability around the world
  • Religion: religious disputes lie at the heart of regional instabilities (e.g., former Yugoslavia, Northern Island, the Middle East, etc.
31
Q

economic, political, social, and environmental — has become a significant worldwide issue

A

Sustainability

32
Q

a driving force behind political instability around the world

A

Ethnicity

33
Q

disputes lie at the heart of regional instabilities

A

Religion

34
Q

Any governmental action or politically motivated event that could adversely affect the long-run profitability or value of a firm

A

Political Risk

35
Q

a local government seizes and provides inadequate compensation for the foreign-owned assets of a firm.

A

Expropriation

36
Q

In a case of expropriation, If no compensation is provided, it is _____

A

Confiscation

37
Q

The forced sale of equity to host-country nations, often at or below value

A

Nationalization

38
Q

Events affect all foreign firms doing business in a country or region

A

Macropolitical risk

39
Q

Affects one industry or company or only a few companies

A

Micropolitical risk

40
Q

Typical Political Risks

A
  • Expropriation and confiscation
  • Nationalization
  • Terrorism
  • Discriminatory treatment
  • Barriers to repatriation of funds
  • Interference in managerial decision making
  • Dishonesty by government officials
41
Q

Helps companies manage exposure to risk and minimize financial loss

A

Political Risk Assessment

42
Q

Two forms of political risk assessment…

A
  • Consultation with experts

- Development of internal staff capabilities (which is increasingly common)

43
Q

Associated with command economies, wherein the state makes all decisions about what to produce, how much to produce, and what prices to charge

A

Totalitarianism

44
Q

associated with market economies and capitalism, in which decisions are largely left to market forces, that is, supply and demand

A

Democracy

45
Q

Associated with mixed economies, which have features of both market and command economies, combining state intervention and market mechanisms

A

Socialism

46
Q

keeping the subsidiary and host nation dependent on the parent firm

A

Dependecy

47
Q

There are four approaches to dependency

A
  • Input Control
  • Market Control
  • Position Control
  • Staged Contribution
48
Q

involves keeping control of raw materials, technology, and know how

A

Input Control

49
Q

keeping control of the means of distribution

A

Market control

50
Q

keeping control of key management positions

A

Position control

51
Q

involves successively increasing contributions to the host nation

A

Staged contribution

52
Q

minimizing losses through the use of political risk insurance and/or local debt financing, which is borrowing money from the host nation

A

Hedging

53
Q

Ways to manage terrorism risk

A
  • Develop a benevolent image
  • maintain low profiles in high-risk countries
  • minimize publicity
  • have teams for monitoring terrorist activities, such as kidnappings, hijackings, and blackmail
  • hire counterterrorism consultants to train employees in coping with the threat of terrorism
54
Q

Which is NOT an example of political risk that managers need to consider?

a) Expropriation
b) Nationalization
c) Macropolitical risks, like war
d) Confucianism
e) All of the above are political risk

A

d) Confucianism

55
Q

Categories of Economic Risk:

A

– Loss of profitability:
• due to abrupt changes in monetary and fiscal policies
• due to changes in foreign investment policies
– inability to repatriate earnings, interest rate volatility, and currency translation exposure

56
Q

he value of one country’s currency changes relative to that of another

A

currency translation exposure

57
Q

The four ways to manage economic risk

A
  • Quantitative approach
  • Qualitative Approach
  • Checklist Approach
  • Combination of these Methods
58
Q

derived by weighting economic variables to create an index of a country’s creditworthiness over time and to make comparisons with other countries

A

Quantitative approach

59
Q

A subjective assessment of a country’s leaders and their likely policies

A

Qualitative Approach

60
Q

Relies on easily measurable and timely indicators of creditworthiness

A

Checklist Approach

61
Q

Which is NOT an example of economic risk that managers need to consider?
A. Loss of profitability due to abrupt changes in monetary and fiscal policies
B. Loss of profitability due to changes in foreign investment policies
C. Currency exchange rate risks
D. Currency translation exposure: the value of one country’s currency changes compared to another country
E. All of the above are economic risks

A

E. All of the above are economic risks

62
Q

Consists of the local laws and legal systems of those countries in which an international company operates and of international law, which governs relationships between sovereign countries

A

The legal Environment

63
Q

Types of Legal Systems

A
  • Common Law
  • Civil Law
  • Islamic Law
64
Q

An agreement to establish the rules to govern a business transaction

A

Contract

65
Q

details must be written in the contract to be enforced

A

Common Law

66
Q

assumes promises will be enforced without specifying the details

A

Civil Law

67
Q

Which is NOT a legal issue that must be considered?
A. Types of legal systems, e.g., common, civil, or Islamic law
B. The role contract law plays in international business transactions
C. The foreign government’s protectionist policies
D. Currency exchange considerations
E. All of the above are legal issue

A

D. Currency exchange considerations

68
Q

the ability of the innovating firm to profit from its own technology by protecting it from competitors (

A

appropriability of technology

GEB4361 International Business (3 decks)

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