Quiz #2 (ch. 3-4)

Question 1

Consider the four risks in international marketing. Which one is closely related with the political and legal systems?

Answer 1

Country risk (harmful or unstable political system, unfavorable laws to foreign firms, bad legal system, etc.)

Question 2

MCE hopes to expand into Switzerland but decides to partner with a company with little knowledge of the Swiss landscape. This is an example of what risk?

Answer 2

Commercial risk (weak partner)

Question 3

I move to Japan to source better talent but all of my new employees are averse to challenging authority. Which risk did I forget to account for?

Answer 3

Cross-cultural risk

Question 4

I take 50% of my business’s liquid assets and convert it to Venezuelan currency. What is the most prevalent risk involved here?

Answer 4

Currency/financial risk

Question 5

China does not have good protections of IP - what type of risk does Tesla have expanding there?

Answer 5

Country risk

Question 6

Country risk

Answer 6

Exposure to company operations and profitability risks caused by developments in a country’s political and/or legal environments.

Question 7

What is the example given in class for country risk? Hint: Coca-Cola

Answer 7

Germany gov. enacted new recycling plan requiring consumers to return soft-drink containers to stores for 0.25 euro refund. Big chains pulled Coke products from shelves.

Question 8

Political system

Answer 8

A set of formal institutions that constitute a government and how the groups interact with each other.

Question 9

What are the three major types of political systems?

Answer 9

1. Totalitarian
2. Socialism
3. Democracy

Can be mixed!

Question 10

Totalitarianism

Answer 10

Government controls all economic and political matters

Question 11

Theocratic

Answer 11

A religion-based totalitarian regime

Question 12

How is power sustained in a totalitarianism

Answer 12

Secret police, propaganda, regulation of free discussion (think The Lives of Others)

Question 13

Socialism

Answer 13

Government’s role is to control the basic means of production, distribution, and commercial activity.

Question 14

In a socialist country, (group/individual) welfare outweighs (group/individual) welfare

Answer 14

In a socialist country, group welfare outweighs individual welfare

Question 15

Is a socialist or democratic country more economically and politically free?

Answer 15

Democracy

Question 16

Command economies are most associated with which political system?

Answer 16

Totalitarianism

Question 17

Command economy

Answer 17

The state makes all decisions on what to produce, how much to produce, and what prices to charge (ex. Russia)

Question 18

Mixed economies are most associated with which political system?

Answer 18

Socialism

Question 19

Mixed economy

Answer 19

Combines state intervention and market mechanisms (ex. Sweden, Singapore)

Question 20

Market economies are most associated with which political system?

Answer 20

Democracy

Question 21

Market economy

Answer 21

Decisions are largely left to market forces (supply and demand)

Question 22

What are the four major types of legal systems?

Answer 22

1. Common Law
2. Civil Law
3. Religious Law
4. Mixed systems

Question 23

Three traits of a legal system

Answer 23

1. Applied to all citizens equally.
2. Issued via recognized gov. authorities.
3. Enforced fairly and systematically.

Question 24

Common law is relatively (flexible/rigid)

Answer 24

Flexible. It can change depending on the outcomes of cases.

Question 25

Common law is mainly ______ in origin whereas civil law is mainly _______ .

Answer 25

Common law is mainly judicial in origin whereas civil law is mainly legislative.

Question 26

What are the three country risks produced by political systems?

Answer 26

1. Confiscation: Seizure of corporate assets without compensation. 2. Expropriation: Asset seizure with compensation. 3. Nationalization: Takeover of an entire industry, with or without compensation.

Question 27

What is the Bolivian example of country risk produced by a political system?

Answer 27

The Bolivian government nationalized the oil and gas industry in 2006.

Question 28

What is the most common country risk today of the three (confiscation, expropriation, nationalization)?

Answer 28

Expropriation, seizing assets with compensation.

Question 29

What was the example for expropriation given in class?

Answer 29

PayPal will suspend its operations in Turkey because the Turkish government wants the company to set up an IT center within the country and share its IP.

Question 30

Sanctions vs. embargoes against a country

Answer 30

Sanctions only concern a specific industry or set of products while embargoes bans exports or imports to the entire country.

Question 31

The Anheuser-Busch example given in class is an example of what?

Answer 31

Country risk due to political system. Closing brewery in Russia due to tougher regulations and higher taxes.

Question 32

Conciliation

Answer 32

Formal process of negotiation to resolve differences. It is the least adversarial method (similar to mediation)

Question 33

Arbitration

Answer 33

A neutral third party hears both sides of a case and decides in favor of one party or the other. Can be binding.

Question 34

Iceberg concept of culture shows three layers of awareness. What are they?

Answer 34

High culture, folk culture, and deep culture

Question 35

High culture

Answer 35

Cultural makeup that is visible. Ex. Fine arts, music, architecture

Question 36

Folk culture

Answer 36

Cultural makeup we are aware of. Ex. Humor, religion, cooking, dress

Question 37

Deep culture

Answer 37

Cultural makeup we are unaware of. Ex. Conversational patterns, concepts of beauty, beliefs on right vs. wrong

Question 38

According to Hall's high and low context typology, establishing social trust and ritualistic negotiations are what level?

Answer 38

High context, found in many Asian countries.

Question 39

Does Germany have a high context or low context culture?

Answer 39

Low context

Question 40

What are Hofstede's five dimensions of cultural differences?

Answer 40

1. Power distance 2. Uncertainty avoidance 3. Individualism - collectivism 4. Masculinity - femininity 5. Time orientation

Question 41

Ethnocentric orientation (managerial)

Answer 41

Using our own culture as the standard for judging other cultures

Question 42

Polycentric orientation (managerial)

Answer 42

Where the manager develops a greater affinity for the country where he/she works than for their own country.

Question 43

Geocentric orientation (managerial)

Answer 43

A global mindset where the manager is able to understand a business/market without regard to national boundaries.