Management, 14e, Global Edition (Robbins/Coulter)

Chapter 3 Global Management

1) Employers in the global marketplace look for which one of the following?
A) a college degree in multicultural awareness
B) critical thinking skills
C) multi-lingual skills
D) respect for differences
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

2) The advantages of operating globally include ________.

A) higher profits
B) higher employee satisfaction
C) higher stock trading prices
D) lower employee turnover
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

3) American business students may be at a disadvantage because ________.

A) competition from foreign-born students makes it more difficult to be accepted at the better
universities
B) scholarships are being awarded to undocumented students
C) many colleges and universities no longer require courses in foreign language
D) tuition costs have risen beyond the reach of most high school graduates
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

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4) Only speaking one language is one sign that a nation suffers from ________.
A) parochialism
B) ethnocentrism
C) polycentrism
D) geocentrism
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

5) Parochialism is a tendency to ________.

A) think highly of the foreign country in which the organization is doing business
B) focus on best approaches and people from around the globe
C) view the world solely through one's own eyes and perspectives
D) let employees in the host country figure out how best to do things
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

6) Bill Sanderson, a manager in a manufacturing firm in New York has a tendency to view the
world only through his U.S.-based perspective. What can be deduced about his attitude?
A) He has an elitist attitude.
B) He has a polycentric attitude.
C) He has a parochialistic attitude.
D) He has a geocentric attitude.
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Application

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7) An ethnocentric attitude ________.
A) prompts managers to have a global view and look for the best approaches and people
regardless of origin
B) is the belief that the home country has the best work approaches and practices
C) is the view that employees in the host country know the best work approaches and practices
D) gives a manager a much broader understanding of what it takes to manage in a global
environment
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

8) A(n) ________ attitude is characterized by parochialism.

A) geocentric
B) acculturated
C) multilinguistic
D) ethnocentric
Answer: D
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

9) While talking with her advisor at the university, Jane deduces that she has a(n) ________
attitude, as she has never traveled abroad and relates well only to people from her home country.
A) regiocentric
B) polycentric
C) ethnocentric
D) geocentric
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Application

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10) An ethnocentric attitude stems from ________.
A) nationalism
B) parochialism
C) polycentrism
D) geocentrism
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

11) Melanie joined an international student association in order to better understand the views of
students from other countries. She is trying to become more ________ in her attitude.
A) parochialistic
B) polycentric
C) ethnocentric
D) geocentric
Answer: D
Diff: 2
AACSB: Diverse and work environments; Application of knowledge
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Application

12) A manager who wishes to be successful in international business should avoid a(n) ________
attitude.
A) multicultural
B) multiracial
C) ethnocentric
D) geocentric
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

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13) Managers with a(n) ________ attitude view every foreign operation as different and hard to
understand.
A) geocentric
B) polycentric
C) ethnocentric
D) regiocentric
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

14) A(n) ________ attitude is the view that employees in the host country know the best
practices for running their operations.
A) ethnocentric
B) polycentric
C) geocentric
D) regiocentric
Answer: B
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

15) Samanex Corporation maintains production facilities in 13 different countries on three

continents. Each facility is managed by a native of the country where it is located. This practice
is indicative of a(n) ________ attitude.
A) ethnocentric
B) geocentric
C) polycentric
D) multicentric
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Application

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16) In today's global environment, managers must have a(n) ________ attitude to be successful.
A) ethnocentric
B) parochial
C) polycentric
D) geocentric
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

17) Americans tend to suffer from parochialism.

Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

18) Managers with an ethnocentric attitude do not trust foreign employees with key decisions or
technology.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

19) Managers with a polycentric attitude tend to view every foreign operation as different and
hard to understand.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

20) The polycentric attitude is a world-oriented view focusing on using the best approaches and
people from around the globe.
Answer: FALSE
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

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21) Define parochialism. Discuss why parochialism is a problem for U.S. managers and discuss
reasons why it is important to overcome parochialism in today's business environment.
Answer: Parochialism is typically defined as viewing the world solely through one's own eyes
and perspectives. People with a parochial attitude do not recognize that others have different
ways of living and working. Parochialism is a significant obstacle for managers working in a
global business world. If managers fall into the trap of ignoring others' values and customs and
rigidly keep on applying an attitude of "ours is better than theirs" to foreign cultures, they'll find
it difficult to compete with other organizations around the world. Therefore, it is important to
overcome parochialism in order to succeed in today's global environment.
Diff: 3
AACSB: Diverse and multicultural work environments; Analytical thinking; Written and oral
communication
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Critical thinking

22) List and discuss the three attitudes managers might have toward international business.
Answer:
a. Ethnocentric attitude - This is the parochialistic belief that the best work approaches and
practices are those of the home country. Managers with an ethnocentric attitude believe that
people in foreign countries do not have the needed skills, expertise, knowledge, or experience to
make the best business decisions as people in the home country do. They don't trust foreign
employees with key decisions.
b. Polycentric attitude - This is the view that employees in the host country know the best work
approaches and practices for running their business. Managers with a polycentric attitude view
every foreign operation as different and hard to understand. Thus, these managers are likely to
leave their foreign facilities alone and let foreign employees figure out how best to do things.
c. Geocentric attitude - This is a world-oriented view that focuses on using the best approaches
and people from around the globe. Managers with this type of attitude believe that it's important
to have a global view both at the organization's headquarters in the home country and in the
various foreign work facilities. Major issues and decisions are viewed globally by looking for the
best approaches and people regardless of origin.
Diff: 2
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.1: Contrast ethnocentric, polycentric, and geocentric attitudes toward global
business
Classification: Concept

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23) The ________ was formed by twelve member countries with the primary motivation of
reasserting the region's economic position against the United States and Japan.
A) African Union
B) European Union
C) Central America Free Trade Agreement
D) Association of South-East Asian Nations
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

24) The single European Union currency is called the ________.

A) deutchmark
B) krona
C) pound
D) euro
Answer: D
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

25) The World Trade Organization was formed in the year ________.
A) 1995
B) 1967
C) 1971
D) 1983
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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26) Heinrich, a purchaser for an optics company in Germany, must place an order for materials
for use in its production process. He is most likely to order from a company ________.
A) within the European Union because there would be no barriers to trade
B) in the United States because we have the same quality as any European company
C) in Switzerland because the Swiss are known for their fine detail work
D) in Asia because labor is cheaper there
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Application

27) The World Trade Organization evolved from which of the following?
A) Mercosur
B) General Agreement on Tariffs and Trade
C) Truman Doctrine
D) Marshall Plan
Answer: B
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

28) The North American Free Trade Agreement includes ________.

A) Mexico, Canada, and the United States
B) Canada, Mexico, the United States, and Costa Rica
C) the United States, Canada, Mexico, and Honduras
D) Canada, Mexico, Panama, and the United Sates
Answer: A
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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29) The World Trade Organization ________.
A) advises developing countries on issues of trade barriers
B) promotes long-term economic development and poverty reduction
C) exists to help countries conduct trade through a system of rules
D) facilitates trade among third-world countries and developed nations
Answer: C
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

30) One advantage of NAFTA has been ________.

A) less illegal immigration into the U.S.
B) lower unemployment in the U.S.
C) a higher standard of living in Mexico
D) lower costs for consumers in the United States
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

31) The United States belongs to a trade alliance known as CAFTA, which stands for ________.
A) Canadian American Free Trade Alliance
B) Columbian Argentine Free Trade Alliance
C) China Australia Free Trade Agreement
D) Central America Free Trade Agreement
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

32) The Association of Southeast Asian Nations is a trading alliance of ________.

A) eight Southeast Asian nations and Japan
B) eight Southeast Asian nations
C) ten Southeast Asian nations
D) ten Southeast Asian nations and China
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept
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33) One of the more recent trade alliances, which came into existence in 2002, is the ________
made up of 54 nations.
A) East African Community
B) African Union
C) South Asian Association for Regional Cooperation
D) Trans-Pacific Partnership
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

34) The forerunner of the Organization for Economic Cooperation and Development was the
________ that was formed in 1947 to administer American and Canadian aid under the Marshall
Plan for the reconstruction of Europe after World War II.
A) Organization of European States
B) Organizational Council of Europe
C) Organization for European Economic Cooperation
D) Organization for European Investment
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

35) The purpose of the World Trade Organization is to ________.

A) facilitate trade among member nations through a system of rules
B) recommend legislation to lessen the advantages of more advanced nations relative to
developing countries
C) manage foreign currency exchanges to alleviate the effects of inflation
D) enforce quotas and tariffs imposed by member nations
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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36) The purpose of the OECD is ________.
A) to settle disputes arising from trade between developed and third-world countries
B) to help member countries achieve sustainable economic growth
C) to raise the standard of living in South American countries
D) to control interest rates and inflation in member countries
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

37) Critics of the WTO claim that ________.

A) global trade destroys jobs and the natural environment
B) it favors third-world countries over developed countries
C) shifting jobs to developing countries harms the economies of member nations
D) has too little power to be effective
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

38) The International Monetary Fund is an organization that ________.

A) rules on disputes over tariffs and subsidies
B) helps countries conduct trade through a system of rules
C) provides technical advice to developing countries
D) promotes international monetary cooperation
Answer: D
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

12
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39) The ________ is a group of five closely associated institutions, all owned by its member
countries, that provides vital financial and technical assistance to developing countries around
the world.
A) International Chamber of Commerce
B) World Bank Group
C) Organization for Economic Cooperation and Development
D) World Economic Forum
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

40) The OECD was formed to ________.

A) settle disputes arising from trade between developed and third-world countries
B) help member countries achieve sustainable economic growth
C) raise the standard of living in South American countries
D) control interest rates and inflation in member countries
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

41) Cypress Exports would like to establish retail outlets in Mongrovia, a quasi-democratic
African country with a growing middle class. But the national and local officials all want
"gratuities" to process the applications for permits. Cypress Exports should appeal to ________.
A) the World Trade Organization
B) the International Monetary Fund
C) the African Union
D) the Organization for Economic Cooperation and Development
Answer: D
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Application

13
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42) One case currently before the WTO involves ________.
A) the hyperinflation experienced by some small African nations that limits their ability to trade
with developed countries
B) copyright infringement–the use of intellectual materials created in the United States by mass
producers in Asia without payment of royalties to the creators
C) China's export limits of rare earth metals that are necessary for the production of high-tech
devices
D) the sale of pirated software by terrorist organizations
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

43) Solidarity in the European Union is being undermined by protectionist pressures in some
member countries.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

44) The United States, Canada, and Mexico are parties to the North American Free Trade
Association.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

45) Mercosur is a trading group made up of ten South American countries.

Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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46) When the original members formed the European Union in 1992, the primary motivation was
to reassert the region's economic position against the United States and Japan.
Answer: TRUE
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

47) The United States, Canada, Mexico, and Honduras are parties to the North American Free
Trade Association.
Answer: FALSE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

48) Explain why countries would choose to participate in a regional trading alliance.
Answer: Countries enter into regional trading alliances for a variety of political and national
security reasons. Mainly, countries choose to participate with the goal of stimulating economic
growth. Reducing trade barriers such as tariffs or taxes imposed upon imported goods opens new
markets for companies in participating countries. Firms may also be able to reduce labor costs by
employing workers in another country within the trading alliance. The interlocking trade
agreements may also discourage military conflict among trading partners. Barriers to travel,
employment, and investment may be removed, further facilitating trade. When the trading
partners subscribe to a common set of priorities, the alliance can exert considerable power such
as in the areas of climate change, energy generation and consumption, and political policy. By
combining their economic power, members of a trade alliance are in a better position to compete
against larger countries. Member nations may also see social and cultural benefits.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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49) Explain some of the benefits and challenges faced by American businesses because of
America's membership in NAFTA.
Answer: Together Canada, the United States, and Mexico comprise the second largest trading
bloc in the world. Goods travel freely among the three nations without tariffs or quotas, thereby
making consumer goods more competitive relative to goods from countries not in NAFTA. U.S.
businesses can take advantage of lower wage rates in Mexico, again making their products more
competitive in both the domestic and global markets.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

50) What is the purpose of the WTO? Give an example of the type of issue that might come
before this organization.
Answer: The goal of the World Trade Organization is to help countries conduct trade through a
system of rules. It plays a role in monitoring, promoting, and protecting global trade.
The WTO ruled that the European plane maker Airbus received improper European Union
subsidies for the A380 super jumbo jet and several other airplanes, hurting its American rival,
Boeing.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

51) What is the International Monetary Fund? What does it do?

Answer: The IMF is an organization of 188 countries that promotes international monetary
cooperation and provides member countries with policy advice, temporary loans, and technical
assistance to establish and maintain financial stability and to strengthen economies. The IMF
offers advice to countries and governments to get them through difficulties.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

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52) What is the World Bank Group and what does it do?
Answer: The World Bank Group is a group of five closely associated institutions, all owned by
its member countries, that provides vital financial and technical assistance to developing
countries around the world. The goal of the World Bank Group is to promote long-term
economic development and poverty reduction by providing members with technical and financial
support. For instance, during the recent global recession, financial commitments by the World
Bank Group reached $100 billion as it helped nations respond to and recover from the economic
downturn.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.2: Discuss the importance of regional trading alliances and global trade
mechanisms
Classification: Concept

53) According to the text, which of the following is a typical definition of a multinational
corporation?
A) It is a company that maintains operations in multiple countries.
B) It is a company that maintains franchises in multiple countries.
C) It is a company that has multiple home bases and manufacturing plants.
D) It is a company that pays corporate taxes in at least two countries.
Answer: A
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

54) Which one of the following would be considered a multinational corporation?

A) Westernet buys electricity from Canada and provides it to customers in Washington State.
B) Sherri's Shipping transports manufactured goods between the U.S. and Asia, maintaining
offices in both countries.
C) Willy's Websites maintains Internet sites for clients the world over from his offices in New
Jersey.
D) Betty's Bonnets makes women's hats in Jamaica and sells them to retailers in seven Caribbean
countries.
Answer: B
Diff: 3
AACSB: Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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55) The ________ decentralizes its management and other decisions to the local country.
A) multidomestic corporation
B) global company
C) transnational organization
D) borderless organization
Answer: A
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

56) Which of the following is a feature of a multidomestic corporation?

A) all decisions are made in the home country
B) reflects an ethnocentric attitude
C) eliminates artificial geographic borders
D) has a decentralized management
Answer: D
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

57) Multidomestic corporations reflect the ________.

A) ethnocentric attitude
B) polycentric attitude
C) geocentric attitude
D) xenophobic attitude
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

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58) Which of the following is a multinational corporation that tailors marketing strategies to the
host country's unique characteristics?
A) borderless organization
B) global company
C) multidomestic corporation
D) transnational organization
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

59) Multidomestic corporations ________.

A) maintain operations in multiple countries, but do not allow managers in each country to make
their own decisions
B) reflect ethnocentric attitudes
C) decentralize management and other decisions to the local country
D) attempt to replicate their domestic successes by managing foreign operations from the home
country
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

60) Which one of the following represents the basic difference between multidomestic
corporations and global companies?
A) Multidomestic corporations typically do business with more countries than global companies.
B) Multidomestic corporations are run by global companies but must be owned by a local,
national company.
C) Multidomestic corporations decentralize management to the local country, while global
companies centralize management in the home country.
D) Multidomestic corporations reflect an ethnocentric attitude, while global companies reflect a
polycentric attitude.
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

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61) As the international operations of their firm continues to grow, Theodore and James have
realized that decentralized management using foreign nationals to run operations in the host
countries works best. Their firm has developed into a ________ organization.
A) transnational
B) multidomestic
C) borderless
D) global
Answer: B
Diff: 2
AACSB: Analytical thinking; Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

62) A corporation drops its organizational structure based on countries and reorganizes into
industry groups. This is an example of the company becoming a(n) ________.
A) ethnocentric company
B) polycentric organization
C) borderless organization
D) global company
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

63) Marco works for a multinational corporation as a plant manager but must receive approval
from the home office for any management changes to production processes. Marco most likely
works for a ________.
A) global company
B) multidomestic corporation
C) polycentric company
D) transnational company
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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64) A global company reflects the ________.
A) pancentric attitude
B) ethnocentric attitude
C) geocentric attitude
D) polycentric attitude
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

65) Granval manages a production facility in Aughmenistan for a multinational company

headquartered in Paris. His Paris bosses emphasize the importance of operating his plant
efficiently so as to conserve scarce resources. It is likely Granval's employer is
A) polycentric company
B) global company
C) transnational company
D) multidomestic corporation
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

66) Melanie would like to become a part of the global retail community. Which of the following
options should Melanie consider as her first step?
A) She should engage in global sourcing.
B) She should engage in licensing.
C) She should engage in franchising.
D) She should develop strategic alliances with foreign companies.
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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67) If Shana's company decides to open another company in France but centralizes its
management in the United States, it would be considered a ________.
A) transnational corporation
B) global company
C) borderless organization
D) multidomestic corporation
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

68) Theodore and James decide to enter into an agreement with a firm in Europe allowing them
to use the rights to their software, brand name, and software specifications in return for a lump
sum payment. The firm is a service organization that plans to use the software to assist its
customers. Their agreement is a(n) ________.
A) export agreement
B) licensing agreement
C) franchise agreement
D) import agreement
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

69) If Marla's company changed its organizational structure from one based on country to one
based on industry groups, it would best be considered a ________.
A) borderless organization
B) foreign subsidiary
C) global company
D) multidomestic corporation
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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70) Transnational organizations are also known as ________.
A) ethnocentric organizations
B) polycentric organizations
C) borderless organizations
D) multidomestic organizations
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

71) Which one of the following types of global organizations reflects the geocentric attitude?
A) multidomestic corporation
B) transnational organization
C) global company
D) regional organization
Answer: B
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

72) Melanie had been buying raw materials locally but she is being underpriced by her
competitors. She thinks there might be lower-cost materials elsewhere. What advice would you
give Melanie?
A) She should engage in global sourcing.
B) She should engage in licensing.
C) She should engage in franchising.
D) She should develop strategic alliances with foreign companies.
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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73) Nathan uses ethnic craftsmen to make high quality oak furniture. If he decides to offer his
furniture for sale in other countries, he will be engaging in ________.
A) importing
B) exporting
C) licensing
D) franchising
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

74) Natalya operates a retail store in Romania. She buys consumer electronics from vendors in
China and Japan to sell in her store. Natalya is engaging in ________,
A) global sourcing
B) licensing
C) importing
D) franchising
Answer: C
Diff: 1
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

75) Harley Davidson makes motorcycles but in its retail stores it also sells clothing, motorcycle
accessories, jewelry, and many related products carrying the Harley trademarks made by other
companies. Harley Davidson is engaging in ________.
A) global sourcing
B) exporting
C) franchising
D) licensing
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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76) Theodore and James decide to enter into an agreement with a firm in Europe allowing them
to use their software, brand name, and business methods in return for a lump sum payment and a
percentage of sales. The European firm is a service organization that plans to use the software to
serve its customers. Their agreement is a(n) ________.
A) export agreement
B) licensing agreement
C) franchise agreement
D) import agreement
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

77) Adam has been hired by an organization that has a partnership with a foreign company. Both
the partners share resources and knowledge while developing new products. Adam's organization
has formed a ________.
A) licensing company
B) franchising company
C) strategic alliance
D) foreign subsidiary
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

78) In 1984 Toyota and General Motors formed a company called NUMMI to build cars carrying
both the General Motors and Toyota brands. NUMMI is an example of a(n) ________.
A) equity strategic alliance
B) joint venture
C) global venture
D) nonequity strategic alliance
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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79) Joint ventures are a type of ________.
A) license
B) franchise
C) foreign subsidiary
D) strategic alliance
Answer: D
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

80) A domestic firm and a foreign firm sharing the cost of developing new products or building
production facilities in a foreign country constitute a ________.
A) franchising agreement
B) strategic alliance
C) foreign subsidiary
D) joint venture
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

81) Melamark LLC has customers on four continents. It would like to increase its global
presence as a supplier to its global customers. The most expensive option would be to ________.
A) form a strategic alliance with an existing company in another country
B) directly invest in a production facility in another country
C) export from a single production plant
D) license producers in several countries
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

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82) Melamark's advisor on global affairs is concerned that ________ carries too much risk.
A) a strategic alliance
B) franchising
C) setting up a foreign subsidiary
D) a joint venture
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

83) Part of Jose's company's business plan involves setting up a foreign subsidiary. This
arrangement involves ________.
A) making products domestically and selling them abroad
B) Jose's company giving the foreign subsidiary the right to use its brand name
C) directly investing in a foreign country
D) minimum global investment
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Application

84) A transnational organization reflects an ethnocentric attitude.

Answer: FALSE
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

85) Managers who want to get into a global market with minimal investment start with global
sourcing.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

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86) The process of exporting involves acquiring products made abroad and selling them
domestically.
Answer: FALSE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

87) Licensing and franchising are similar approaches involving one organization giving another
organization the right to use its brand name, technology, or product specifications in return for a
lump sum payment or a fee usually based on sales.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

88) Licensing is primarily used by service organizations and franchising is primarily used by
manufacturing organizations.
Answer: FALSE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

89) A strategic alliance is a partnership between an organization and a foreign company partner
in which both share resources and knowledge in developing new products or building production
facilities.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

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90) Explain the differences between a multidomestic corporation, a global company, and a
borderless organization. Include examples of companies for each of the types of organizations
discussed.
Answer:
a. A multidomestic corporation is a multinational corporation (MNC) that decentralizes
management and other decisions to the local country. Local employees are hired to manage the
business and marketing strategies are tailored to that country's unique characteristics. This type
of globalization reflects the polycentric attitude. Many consumer companies manage their global
businesses using this approach because they must adapt their products and services to meet the
needs of the local markets. With operations in almost every country on the globe, Switzerland-
based Nestle's managers match the company's products to its consumers. In parts of Europe,
Nestle sells products that are not available in the United States or Latin America.
b. A global company centralizes its management and other decisions in the home country. These
companies treat the world market as an integrated whole and focus on the need for global
efficiency. Although these companies may have considerable global holdings, management
decisions with company-wide implications are made from headquarters in the home country.
This approach to globalization reflects the ethnocentric attitude. Some examples of companies
that can be considered global companies include Sony, Deutsche Bank AG, and Merrill Lynch.
c. Other companies are going international by eliminating structural divisions that impose
artificial geographical barriers. This type of MNC is called a transnational or borderless
organization, and reflects a geocentric attitude. Managers choose this form of international
organization to increase efficiency and effectiveness in a competitive global marketplace.
For example, IBM dropped its organizational structure based on country and reorganized into
industry groups. Thomson SA, based in France, has eight major locations around the globe.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

29
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91) Describe the different approaches that a company may use when it decides to go
international.
Answer: Managers who want to get into a global market with minimal investment may start with
global sourcing (also called global outsourcing). This involves purchasing materials or labor
from around the world wherever it is cheapest. The goal here is to take advantage of lower costs
to be more competitive.
The next step may involve exporting the organization's products to other countries-that is,
making products domestically and selling them abroad. In addition, an organization might
import, which involves acquiring products made abroad and selling them domestically. Both
usually entail minimal investment and risk.
Managers also might use licensing or franchising, which are similar approaches involving one
organization giving another organization the right to use its brand name, technology, or product
specifications in return for a lump sum payment or a fee usually based on sales. The only
difference is that licensing is primarily used by manufacturing organizations that make or sell
another company's products and franchising is primarily used by service organizations that want
to use another company's name and operating methods.
When an organization has been doing business internationally for a while and has gained
experience in international markets, managers may decide to make a greater direct foreign
investment. One way to increase investment is through a strategic alliance, which is a partnership
between an organization and a foreign company partner in which both share resources and
knowledge in developing new products or building production facilities.
Finally, managers may choose to directly invest in a foreign country by setting up a foreign
subsidiary as a separate and independent facility or office. This subsidiary can be managed as a
multidomestic organization (local control) or as a global organization (centralized control). This
arrangement involves the greatest commitment of resources and poses the greatest amount of
risk.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.3: Describe the structures and techniques organizations use as they go
international
Classification: Concept

92) Unlike the United States, the change from one regime to another in foreign countries can be
less than peaceful. Differences in the ________ environment can lead to uncertainty and risk for
global managers.
A) economic
B) cultural
C) political/legal
D) demographic
Answer: C
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

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93) The Corrupt Foreign Practices Act forbids U.S. citizens to offer bribes to officials in other
countries, but some of those officials depend on bribes to supplement their meager incomes. This
particular dilemma is part of the ________ environment.
A) demographic
B) political/legal
C) economic
D) cultural
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

94) If the rate of inflation in Tomturkistan increased suddenly, what effect would that have on the
exchange rate of Tomturkistan currency for U.S. dollars?
A) More U.S. dollars would be needed to purchase the same quantity of Tomturkistan goods as
before inflation.
B) One U.S. dollar would purchase more Tomturkistan currency.
C) Tomturkistan currency would purchase more U.S. goods than before.
D) There would be no change; inflation is a domestic problem only.
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

95) A ________ economy is one in which resources are primarily owned and controlled by the
private sector.
A) free market
B) planned
C) command
D) democratic
Answer: A
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

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96) In Malbadia, a central committee formed by the political powers decides what products and
how many of each will be produced. This situation is typical of a ________.
A) free market economy
B) foreign economy
C) free enterprise economy
D) planned economy
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

97) For American company Leather Exporters, first quarter sales in Italy were higher compared
to the preceding year but profits were down. What could account for this difference?
A) a difference in the currency exchange rate
B) a change in the national leadership in Italy
C) a cultural change in Italian society
D) a reduction in trade barriers with Italy
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

98) Coca-Moka, an American beverage company, sells its soft drinks in Thirstania. After earning
large profits, Coca-Moka discovered it could not export those profits back to its American banks
because of the ________ in Thirstania.
A) tax policies
B) exchange rate
C) inflation rate
D) export policies
Answer: A
Diff: 2
AACSB: Diverse and work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

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99) Hofstede's Five Dimensions of National Culture would predict which of the following?
A) American employees working in the United States prefer to work in teams and to share team
rewards.
B) The French employees believe that rank should have its privileges.
C) An Italian manager will readily and comfortably make decisions with few acts; he is willing
to take great risks.
D) A manager in Sweden will be driven to compete, to excel, and to amass wealth.
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

100) Jack moved to China to manage his company's production facility there. Immediately he
instituted the company practice of recognizing an employee of the month. The Chinese
employees were horrified. Why might this be so?
A) The employees are acting on their national cultural behavior patterns.
B) Each employee took the competition seriously and wanted to win the recognition.
C) None of them wanted to lose face by not being recognized.
D) The company culture was stronger than their national culture.
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

101) Alfredo believes that the CEO is no better than the janitor of the organization and neither
should receive preferential treatment. Using the GLOBE model, what can we infer about
Alfredo's culture?
A) Alfredo's culture is high in power distance.
B) Alfredo's culture is high in assertiveness.
C) Alfredo's culture is low in low in humane orientation.
D) Alfredo's culture is low in power distance.
Answer: D
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

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102) Bettina likes to know the end from the beginning. She gathers as much information as
possible before making a decision. Bettina likely lives in a culture ________.
A) with high power distance
B) with high uncertainty avoidance
C) with high future orientation
D) with high performance orientation
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

103) Caron admits she's a tough cookie. She thrives in an environment in which employees
compete against each other for big rewards. It is likely that Caron's culture ________.
A) is high in performance orientation
B) is high in in-group collectivism
C) is high in future orientation
D) is high in assertiveness
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

104) In South America, the Sawi tribe values deceit and treachery. Taking advantage of other
tribes is cause for celebration. This culture is ________.
A) high in assertiveness
B) low in humane orientation
C) high in future orientation
D) low in gender differentiation
Answer: B
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

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105) "Let's forget about tomorrow for tomorrow never comes." "Live for today." These
expressions would be typical of a culture that is ________.
A) high in assertiveness
B) low in humane orientation
C) high in performance orientation
D) low in future orientation
Answer: D
Diff: 2
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

106) Outsiders would call them clannish. Ianos and his family are very close. At work, he gives
his all to the team. His neighbors support each other but exclude people they do not know. This
describes a culture that is ________.
A) high in institutional collectivism
B) high in in-group collectivism
C) low in humane orientation
D) high in performance orientation
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

107) The hero is always a loner, riding off into the sunset. Employers expect key employees to
make critical decisions alone; rewards are given to individuals, not to teams. This describes a
culture that is ________.
A) low in institutional collectivism
B) high in institutional collectivism
C) high in assertiveness
D) low in in-group collectivism
Answer: A
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

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108) Helga has noticed an increasing number of female CEOs of large corporations and also that
more fathers are staying home to raise children while the mothers assume positions of leadership
in business. This is a culture with ________.
A) high gender differentiation
B) low gender differentiation
C) high humane orientation
D) low humane orientation
Answer: B
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

109) "In this company, what you do matters a whole lot more than your last name." Bill's father,
the company founder, expected Bill's supervisor to mentor the young man, to help him set goals,
to train him and to develop his managerial skills with an emphasis on continuous improvement.
Bill likely lives in a country with a ________.
A) high in-group collectivism culture
B) high institutional collectivism culture
C) high performance orientation culture
D) high assertiveness culture
Answer: C
Diff: 3
AACSB: Diverse and multicultural work environments; Application of knowledge; Analytical
thinking
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Application

110) Only when a country's political/legal environment is unstable or revolutionary is it of

concern to managers.
Answer: FALSE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

111) When an American company earns profits in a foreign country, those profits are taxed
according to the tax laws of the United States.
Answer: FALSE
Diff: 2
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept
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112) The GLOBE framework for assessing cultures is similar to Hofstede's framework, but
measures fewer dimensions.
Answer: FALSE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

113) Mexico is an example of a collectivistic nation.

Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

114) The United States is an example of a country with low power distance.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

115) A high uncertainty avoidance society is threatened by ambiguity and experiences high levels
of anxiety.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

116) A global mind-set refers to attributes that allow a leader to be effective in cross-cultural
environments.
Answer: TRUE
Diff: 1
AACSB: Diverse and multicultural work environments
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

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117) Discuss four global economic issues and how they affect management decisions, providing
examples of each.
Answer:
a. Type of economy - There are two major types of economies. A market economy is one in
which resources are primarily owned and controlled by the private sector. A command economy
is one in which economic decisions are planned by a central government. Managers need to
know about a country's economic system because it has the potential to constrain decisions and
actions. As China shifts from a more planned economy to a more free market, changing
regulations and policies affect the decisions of managers conducting business in that country.
b. Currency exchange rates - A global firm's profits can vary dramatically depending on the
strength of its home currency and the currencies of the countries in which it operates. Any
revaluation of a nation's currency can affect the managers' decisions and the level of a company's
profits. For instance, prior to the overall global economic slowdown, the rising value of the euro
against both the dollar and the yen contributed to strong profits for German companies.
c. Inflation means that prices for products and services are going up. But it also affects interest
rates, exchange rates, the cost of living, and the general confidence in a country's political and
economic system. Managers need to monitor inflation trends so that they can make good
decisions and anticipate any possible changes in a country's monetary policies. Inflation rates
from -18.7% in the South Sudan to to +48.6% in Venezuela impact the purchasing and pricing
decisions of global managers.
d. Diverse tax policies are a major worry for a global manager. Some host countries are more
restrictive than the organization's home country. Others are far more lenient. Managers need
exact information on the various tax rules in countries in which they operate to minimize their
business's overall tax obligation. For the past several years, small business investment decisions
in the United States have been affected by the uncertainty surrounding domestic tax policies.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication;
Application of knowledge
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept; Application

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118) List and explain Hofstede's five dimensions of national culture.
Answer: Geert Hofstede developed one of the most widely referenced approaches to helping
managers better understand differences between national cultures. His research found that
countries vary on five dimensions of national culture.
a. Individualism versus collectivism - Individualism refers to a social framework where people
look after their own interests and those of their immediate family. The opposite of this is
collectivism, that is characterized by a social framework where people expect others in the group
that they are a part of to look after them and to protect them when they are in trouble.
b. Power distance - A high power distance society accepts wide differences in power in
organizations. Employees show a great deal of respect for those in authority. On the other hand, a
low power distance society plays down inequalities. Employees in a low power distance
organization are not afraid to approach their boss.
c. Uncertainty avoidance - A society that is high in uncertainty avoidance is threatened with
ambiguity and characterized by a high level of anxiety among its people. A society that is low in
uncertainty avoidance is comfortable with taking risks and is also tolerant of different behavior
and opinions.
d. Achievement and nurturing - Achievement is the degree to which values such as assertiveness,
the acquisition of money and material goods, and competition prevail. Nurturing is an attribute
that emphasizes relationships and concern for others.
e. Long-term and short-term orientation - People in a long-term orientation society look to the
future and value thrift and persistence. People in short-term orientation societies value the past
and emphasize respect for tradition.
Diff: 2
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

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119) Discuss the dimensions of the Global Leadership and Organizational Behavior
Effectiveness (GLOBE) framework. Describe how each dimension compares to Hofstede's five
dimensions of national culture.
Answer: The GLOBE model uses nine dimensions on which national cultures differ:
a. Power distance: The degree to which members of a society expect power to be unequally
shared. Identical to Hofstede.
b. Uncertainty avoidance: Similar to Hofstede's description, the GLOBE team defined this
dimension as a society's reliance on social norms and procedures to alleviate the unpredictability
of future events.
c. Assertiveness: The extent to which a society encourages people to be tough, confrontational,
assertive, and competitive versus modest and tender. This is equivalent to Hofstede's
achievement-nurturing dimension.
d. Humane orientation: This is defined as the degree to which a society encourages and rewards
individuals for being fair, altruistic, generous, caring, and kind to others. This is similar to
Hofstede's nurturing dimension.
e. Future orientation: The extent to which a society encourages and rewards future-oriented
behaviors such as planning, investing in the future, and delaying gratification. This is equivalent
to Hofstede's long-term and short-term orientation.
f. Institutional collectivism: This term was defined, as Hofstede did, as the degree to which
individuals are encouraged by societal institutions to be integrated into groups within
organizations and society.
g. Gender differentiation: The extent to which a society maximizes gender role differences as
measured by how much status and decision-making responsibilities women have. This dimension
is an addition to Hofstede's framework.
h. In-group collectivism: The extent to which members of a society take pride in membership in
small groups, such as their family and circle of close friends, and the organizations in which
they're employed. This dimension has no equivalent in Hofstede's framework.
i. Performance orientation: The degree to which a society encourages and rewards group
members for performance improvement and excellence. This dimension is similar to Hofstede's
achievement orientation.
Diff: 3
AACSB: Diverse and multicultural work environments; Written and oral communication
Learning Obj: LO 3.4: Explain the relevance of the political/legal, economic, and cultural
environments to global business
Classification: Concept

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