03 Tif

Exam
Name___________________________________
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
1)
Americans tend to suffer from parochialism.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 99
Created On Oct 20 2006
Modified On May 13 2011
Topic What's Your Global Perspective?
Skill
Objective 1
AACSB Easy
Classification Conceptual
2)
Managers with an ethnocentric attitude do not trust foreign employees with key decisions or technology.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 99
Skill
Objective 1
AACSB Easy
3)
Managers with a polycentric attitude tend to view every foreign operation as difficult and hard to understand.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Skill
Objective 1
AACSB Easy
4)
The polycentric attitude is a world-oriented view focusing on using the best approaches and people from around the
globe.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Skill
Objective 1
AACSB Easy
5)
When the twelve 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
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Topic Understanding the Global Environment
Skill
Objective 2
AACSB Easy
6)
Norway is a member of the European Union.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 101

Skill
Objective 2
AACSB Easy
7)
The United States, Canada, and Mexico are parties to the North American Free Trade Association.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 102
Skill
Objective 2
AACSB Easy
8)
Mercosur is a trading group made up of ten South American countries.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 103

Skill
Objective 2
AACSB Easy
9)
A transnational organization reflects an ethnocentric attitude.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
10)
Managers who want to get into a global market with minimal investment start with global sourcing.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 106

Skill
Objective 3
AACSB Easy
11)
The process of exporting involves acquiring products made abroad and selling them domestically.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 107
Skill
Objective 3
AACSB Easy
12)
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
False
Type TF
WS 0
Var 1
Explanation
Comment
Diff 0
Page Ref 107

Skill
Objective 3
AACSB Easy
13)
Licensing is primarily used by service organizations and franchising is primarily used by manufacturing organizations.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 107
Skill
Objective 3
AACSB Easy
14)
Strategic alliance is a partnership between an organization and a foreign company partner or partners in which both share
resources and knowledge in developing new products or building production facilities.
Answer
True
False
Type TF
WS 0
Explanation
Comment
Diff 0
Var 1
Page Ref 107
Skill
Objective 3
AACSB Easy
15)
Only when a country's political/legal environment is unstable or revolutionary is it of concern to managers.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 108
Topic Managing in a Global Environment
Skill
Objective 4
AACSB Easy
16)
Mexico is an example of a Collectivistic nation.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
17)
The United States is an example of a country with low power distance.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
18)
A high uncertainty avoidance society is threatened by ambiguity and experiences high levels of anxiety.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
19)
The GLOBE framework for assessing cultures is similar to Hofstede's framework, but measures fewer dimensions.
Answer
True
False
Type TF
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 110 - 111
Skill
Objective 4
AACSB Easy
20)
A global mind-set refers to attributes that allow a leader to be effective in cross-cultural environments.
Answer
True
False
Explanation
Comment
Diff 0
Type TF
WS 0
Var 1
Page Ref 113
Skill
Objective 4
AACSB Easy
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
21)
Monolingualism is one sign that a nation suffers from ________.
A)
parochialism
B)
ethnocentrism
C)
polycentrism
D)
geocentrism
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 99
Created On Jan 4 2011
Topic
Skill
Objective 1
A)
B)
C)
D)
AACSB Easy
22)
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
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 99
Skill
Objective 1
AACSB Easy
23)
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
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 99
Skill Analytic Skills
Objective 1
AACSB Moderate
Classification Application
24)
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
Explanation
Comment
A)
B)
C)
D)
Type MC
Diff 0
WS 0
Var 1
Page Ref 99
Skill
Objective 1
AACSB Easy
25)
A manager who wishes to be successful in international business should avoid a(n) ________ attitude.
A)
multicultural
B)
multiracial
C)
ethnocentric
D)
geocentric
C
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 99
Skill
Objective 1
A)
B)
C)
D)
AACSB Moderate
26)
A(n) ________ attitude is characterized by parochialism.
A)
geocentric
acculturated
B)
C)
multilinguistic
D)
ethnocentric
Answer
D
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 99
Skill
Objective 1
AACSB Easy
27)
Managers with a(n) ________ attitude view every foreign operation as different and hard to understand.
A)
geocentric
polycentric
B)
C)
A)
B)
C)
D)
ethnocentric
D)
regiocentric
Answer
B
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 100
Skill
Objective 1
AACSB Easy
28)
A(n) ________ attitude is the view that employees in the host country know the best practices for running their operations.
A)
ethnocentric
polycentric
geocentric
B)
C)
D)
regiocentric
Answer
B
Explanation
Comment
Diff 0
A)
B)
C)
D)
Type MC
WS 0
Var 1
Page Ref 100
Skill
Objective 1
AACSB Easy
29)
In today's global environment, managers must have a(n) ________ attitude in order to be successful.
A)
ethnocentric
parochial
bigoted
geocentric
D
Type MC
B)
C)
D)
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Skill
Objective 1
AACSB Easy
A)
B)
C)
D)
30)
The ________ was formed by twelve original members 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
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Skill
Objective 2
AACSB Easy
31)
The single European Union currency is called the ________.
A)
krone
krona
B)
C)
A)
B)
C)
D)
pound
euro
D
Type MC
D)
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 101
Skill
Objective 2
AACSB Easy
32)
Which of the following countries is a member of the European Union?
A)
Ireland
Iceland
Norway
B)
C)
D)
Switzerland
Answer
A
Explanation
Comment
Diff 0
A)
B)
C)
D)
Type MC
WS 0
Var 1
Page Ref 101
Skill
Objective 2
AACSB Easy
33)
The North American Free Trade Agreement includes ________.
A)
Mexico, Canada, and the United States
B)
Canada, Mexico, and Costa Rica
C)
the United States, Canada, and Honduras
D)
Columbia, Mexico, and the United Sates
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 102
Skill
Objective 2
AACSB Easy
A)
B)
C)
D)
34)
Which of the following is currently under negotiation by 34 countries in the Western Hemisphere?
A)
African Union
B)
Free Trade Area of the Americas
C)
Mercosur
D)
African Community
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 102
Skill
Objective 2
AACSB Moderate
35)
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
A)
B)
C)
D)
D)
ten Southeast Asian nations and China
Answer
C
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 103
Skill
Objective 2
AACSB Easy
36)
Which of the following is a member of the Association of Southeast Asian Nations?
A)
China
B)
Japan
South Korea
Myanmar
D
Type MC
C)
D)
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 103
Skill
Objective 2
AACSB Easy
37)
How many members does The African Union have?
A)
78
53
64
49
B
Type MC
B)
C)
D)
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 104
Skill
Objective 2
AACSB Easy
A)
B)
C)
D)
38)
Nepal belongs to which of the following regional trade alliances?
A)
Asia-Pacific Economic Cooperation
B)
South Asian Association for Regional Cooperation
C)
Common Wealth of Independent States
D)
Association of Southeast Asian Nations
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 104
Skill
Objective 2
AACSB Easy
39)
The World Trade Organization was formed in the year ________.
A)
1995
1967
1971
B)
C)
D)
A)
B)
C)
D)
1983
A
Type MC
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 104
Topic
Skill
Objective 2
AACSB Easy
40)
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
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 104
Skill
Objective 2
AACSB Easy
41)
The World Trade Organization has ________ member countries and ________ observer governments.
A)
176; 50
188; 60
153; 30
161; 40
C
Type MC
B)
C)
D)
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 104
Topic
Skill
Objective 2
AACSB Easy
A)
B)
C)
D)
42)
The International Monetary Fund is an organization of ________ 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.
A)
193
172
160
185
D
Type MC
B)
C)
D)
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 105
Topic
Skill
Objective 2
AACSB Easy
43)
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)
A)
B)
C)
D)
Organization for Economic Cooperation and Development

D)
World Economic Forum
Answer
B
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 105
Topic
Skill
Objective 2
AACSB Easy
44)
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
Explanation
A)
B)
C)
D)
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 105
Topic
Skill
Objective 2
AACSB Easy
45)
The ________ is a Paris-based international economic organization whose mission is to help its 30 member countries
achieve sustainable economic growth and employment and raise the standard of living in member countries while
maintaining financial stability in order to contribute to the development of the world economy.
A)
Organization for European Economic Cooperation
B)
Organizational Council of Europe
C)
Organization of European States
D)
Organization for Economic Cooperation and Development
Answer
D
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 105
A)
B)
C)
D)
Topic
Skill
Objective 2
AACSB Easy
46)
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
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
47)
The ________ decentralizes its management and other decisions to the local country.
A)
multidomestic corporation
A)
B)
C)
D)
B)
global company
C)
transnational organization
D)
borderless organization
Answer
A
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Topic
Skill
Objective 3
AACSB Easy
48)
Multidomestic corporations reflect the ________.
A)
ethnocentric attitude
B)
polycentric attitude
C)
geocentric attitude
D)
xenophobic attitude
Answer
B
Explanation
A)
B)
C)
Type MC
Comment
Diff 0
D)
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
49)
Which of the following is a multinational corporation that tailors marketing strategies to the host country's unique
characteristics?
A)
B)
global company
C)
D)
Answer
C
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
A)
B)
C)
D)

Skill
Objective 3
AACSB Easy
50)
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
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
51)
Which of the following is a feature of a multidomestic corporation?
A)
decisions are taken in the home country
A)
B)
C)
D)
B)
reflects an ethnocentric attitude
C)
eliminates artificial geographic borders
D)
has a decentralized management
Answer
D
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
52)
A ________ centralizes its management and other decisions in the home country.
A)
global company
B)
C)
multicultural company
D)
multifaceted corporation
Answer
A
Explanation
A)
B)
C)
Type MC
Comment
Diff 0
D)
WS 0
Var 1
Page Ref 106
Topic
Skill
Objective 3
AACSB Easy
53)
A global company reflects the ________.
A)
regiocentric attitude
B)
ethnocentric attitude
C)
geocentric attitude
D)
polycentric attitude
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Topic
A)
B)
C)
D)
Skill
Objective 3
AACSB Easy
54)
Which of the following is 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
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
55)
An organization drops its organizational structure based on countries and reorganizes into industry groups. This is an
example of the company becoming a(n) ________.
A)
A)
B)
C)
D)
ethnocentric company
B)
polycentric organization
C)
D)
global company
Answer
C
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
56)
Transnational organizations are also known as ________.
A)
ethnocentric organizations
B)
polycentric organizations
C)
borderless organizations
D)
multidomestic organizations
Answer
C
Explanation
A)
B)
Type MC
Comment
Diff 0
C)
D)
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Easy
57)
Which of the following types of global organizations reflects the geocentric attitude?
A)
B)
C)
global company
D)
regional organization
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 106
A)
B)
C)
D)

Skill
Objective 3
AACSB Easy
58)
An organization decides to go international. Which of the following steps should it take to do so with a minimal
investment?
A)
It should indulge in global sourcing.
B)
It should indulge in licensing.
C)
It should indulge in franchising.
D)
It should indulge in forming strategic alliances.
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 107
Topic
Skill
Objective 3
AACSB Easy
59)
When an organization makes products domestically and sells them abroad, it indulges in ________.
A)
A)
B)
C)
D)
importing
exporting
licensing
B)
C)
D)
franchising
Answer
B
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 107
Topic
Skill
Objective 3
AACSB Easy
60)
When an organization acquires products made abroad and sells them domestically, it indulges in ________.
A)
global sourcing
B)
licensing
C)
importing
D)
franchising
Answer
C
Explanation
A)
B)
Type MC
Comment
Diff 0
C)
D)
WS 0
Var 1
Page Ref 107
Topic
Skill
Objective 3
AACSB Easy
61)
________ is the practice wherein an organization gives another organization the right to use its brand name, technology, or
product specifications in return for a fee usually based on sales.
A)
Global sourcing
B)
Exporting
C)
Subsidizing
D)
Licensing
D
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 107
A)
B)
C)
D)

Topic
Skill
Objective 3
AACSB Easy
62)
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
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 107
Objective 3
AACSB Moderate
63)
A(n) ________ is a specific type of strategic alliance in which the partners form a separate, independent organization for
some business purpose.
A)
equity strategic alliance
B)
joint venture
C)
global venture
D)
nonequity strategic alliance
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 108
Topic
Skill
Objective 3
AACSB Easy
64)
Joint ventures are a type of ________.
A)
licensee
franchisee
B)
C)
foreign subsidiary
D)
strategic alliance
Answer
D
Explanation
A)
B)
C)
D)
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 108
Skill
Objective 3
AACSB Easy
65)
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)
joint venture
C)
foreign subsidiary
D)
brokering agreement
Answer
B
Explanation
Type MC
WS 0
Var 1
Comment
Diff 0
A)
B)
C)
D)
Page Ref 108

Skill
Objective 3
AACSB Easy
66)
Which of the following is a method that companies might adopt in order to increase their direct foreign investment?
A)
exporting
B)
global sourcing
C)
strategic alliances
D)
licensees
C
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 107
Skill
Objective 3
AACSB Easy
67)
Which of the following arrangements involves the greatest commitment of resources and poses the greatest amount of
A)
B)
C)
D)
risk?
A)
exporting
franchising
B)
C)
foreign subsidiary
D)
global sourcing
Answer
C
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 108
Topic
Skill
Objective 3
AACSB Easy
68)
A ________ economy is one in which resources are primarily owned and controlled by the private sector.
A)
free market
planned
command
B)
C)
D)
technocratic
Answer
A
A)
B)
C)
D)
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 109
Topic
Skill
Objective 4
AACSB Easy
69)
Geert Hofstede's research found that countries varied on ________ dimensions of national culture.
A)
eleven
five
seven
nine
B
Type MC
WS 0
Var 1
B)
C)
D)
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
Page Ref 110

Topic
Skill
Objective 4
AACSB Easy
70)
________ is a cultural dimension in which people expect others in their group to look after them and protect them.
A)
Low uncertainty avoidance
B)
Achievment
C)
Collectivism
D)
High power distance
Answer
C
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
71)
A country with ________ is comfortable with risks and is tolerant towards different behavior and opinions.
A)
B)
C)
D)
A)
low uncertainty avoidance
B)
short-term orientation
C)
low power distance
D)
performance orientation
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
72)
A country that is assertive, believes in acquiring money and goods, and is competitive in nature is said to ________.
A)
be a collectivist
B)
have a high power distance
C)
be achievement oriented
D)
have a long-term orientation
Answer
C
Explanation
A)
B)
C)
D)
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
73)
A country where people look to the future and value thrift and persistence is said to ________.
A)
have an individualistic attitude
B)
have a long-term orientation
C)
be nurturing
D)
be achievement oriented
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 111
A)
B)
C)
D)

Topic
Skill
Objective 4
AACSB Easy
74)
Christopher, who is based in the U.S. has been offered a chance to work in Thailand. He finds that in this society people
are expected to look after others in their family (or organization) and protect them when they are in trouble. This society
tends to support ________.
A)
collectivism
B)
parochialism
C)
individualism
D)
monotheism
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Objective 4
AACSB Moderate
75)
A)
B)
C)
D)
The Global Leadership and Organizational Behavior Effectiveness program identified ________ dimensions on which
national cultures differ.
A)
five
seven
nine
eleven
C
Type MC
B)
C)
D)
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
76)
Which of the following two dimensions of the Global Leadership and Organizational Behavior Effectiveness program fit
directly with Hofstede's dimensions?
A)
power distance and uncertainty avoidance
B)
power distance and gender differentiation
C)
uncertainty avoidance and in-group collectivism
D)
gender differentiation and in-group collectivism
Type MC
Answer
Explanation
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
77)
The Global Leadership and Organizational Behavior Effectiveness program's ________ dimension is similar to Hofstede's
achievement-nurturing dimension.
A)
uncertainty avoidance
B)
humane orientation
C)
assertiveness
D)
power distance
Answer
C
Explanation
Type MC
WS 0
Comment
Diff 0
A)
B)
C)
D)
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
78)
Which of the following dimensions of the Global Leadership and Organizational Behavior Effectiveness program is
similar to Hofstede's nurturing dimension?
A)
in-group collectivism
B)
humane orientation
C)
future orientation
D)
institutional collectivism
Answer
B
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
A)
B)
C)
D)
79)
________ is a measure of the degree to which people rely on social norms and procedures to alleviate the unpredictability
of future events.
A)
Power distance
B)
Uncertainty avoidance
C)
Achievement
D)
Nurturing
B
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Easy
80)
________ is the extent to which a society encourages people to be tough, confrontational, and competitive rather than
modest and tender.
A)
Future orientation
B)
Institutional collectivism
C)
Assertiveness
A)
B)
C)
D)
D)
Humane orientation
Answer
C
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 111
Topic
Skill
Objective 4
AACSB Easy
Cultural Training (Scenario)

Jane wants to expand her career opportunities in the international operations of a company. She is 19 years old and
currently attends a university. She has only lived in her home country and has never traveled to any foreign country.
81)
While talking with her advisor at the university, Jane deduces that she has a(n) ________ attitude, as she has never
traveled abroad and only relates well to people from her home country.
A)
regiocentric
polycentric
ethnocentric
geocentric
C
B)
C)
D)
Answer
Explanation
A)
Type MC
Comment
Diff 0
B)
C)
D)
WS 0
Var 1
Page Ref 99
Objective 1
AACSB Moderate
82)
Jane joins 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
D
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 100
A)
B)
C)
D)

Objective 1
AACSB Moderate
A Foreign Alliance Talk (Scenario)

As manager of the international department of your company, you have been asked by the local Chamber of Commerce to
deliver a speech on foreign trade. The chamber president even goes so far as to say "and be sure to include the EU,
NAFTA, and all that stuff because we're afraid that Ross Perot is rightall the good jobs will leave the United States." As
you pour over your notes, you try to choose the best information to present in the allotted half hour.
83)
You plan to explain during your talk that the acronyms EU, NAFTA, and ASEAN refer to ________.
A)
regional trade alliances
B)
foreign airlines
C)
soccer teams in Europe
D)
new multinational corporations
Answer
A
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 100
Objective 2
AACSB Easy
A)
B)
C)
D)
84)
One of the hottest topics of your talk will be the North American Free Trade Agreement. One of the points that you will
emphasize is that ________.
A)
between 1994 and 2007, merchandise trade between the United States, Canada, and Mexico has decreased from 6.6 percent
to 4.4 percent
B)
a large number of people have started migrating from the United States to Mexico in search of jobs and prosperity
C)
as of 2010, it remains the largest trade bloc in the world in terms of combined gross domestic product of its members
D)
the United States, Canada, Mexico, Costa Rica and El Salvador are its members
Answer
C
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 102
Objective 2
AACSB Moderate
Business Expansion Plan (Scenario)

As business expansion director, Shana's goal is to scout for potential locations and provide input on how her company
should proceed with its planned expansion to Europe. There are many options, which include maintaining the company's
head office in the United States and sending over company representatives when necessary or establishing a separate
operations facilities abroad and hiring locals as managers.
85)
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)
D)
Answer
B
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Objective 3
AACSB Moderate
86)
If Shana's company decides to open a completely new operation in Germany, tailoring the company to local customs and
marketing strategies and hiring local managers, it would be then considered a ________.
A)
transnational corporation
B)
global company
C)
D)
Answer
D
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Objective 3
AACSB Moderate
87)
If Shana's company dropped its organizational structure based on country and reorganized into industry groups, it would
best be considered a ________.
A)
B)
foreign subsidiary
C)
global company
D)
Answer
A
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 106
Objective 3
AACSB Moderate
88)
One section of Shana's company's business plan involves setting up a foreign subsidiary. This arrangement involves
________.
A)
making products domestically and selling them abroad
B)
Shana'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
Explanation
Type MC
Comment
Diff 0
WS 0
Var 1
Page Ref 108
Objective 3
AACSB Moderate
A)
B)
C)
D)
Software Entrepreneurial Venture (Scenario)

Theodore and James have formed an entrepreneurial venture to develop software for banks and other financial
institutions. Their company is growing, and in exploring future opportunities decides to initiate international operations.
89)
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
B
Type MC
Answer
Explanation
Comment
Diff 0
WS 0
Var 1
Page Ref 106
Objective 3
AACSB Moderate
90)
T h e o d o r e a n d J a m e s d e c i d e t o e n t e r i n t o a n a g r e e m e n t w i t h a fi r m i n E u r o p e
allowing them to use the rights to their software, brand name, and software
A)
B)
C)
D)
s p e c i fi c a t i o n s i n r e t u r n f o r a l u m p s u m p a y m e n t . T h e fi r m i s a s e r v i c e
organization that plans to use the software to assist its customers. Their
a g r e e m e n t i s a(n) ________.
A)
export agreement
B)
licensing agreement
C)
franchise agreement
D)
import agreement
Answer
C
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 107
Objective 3
AACSB Moderate
Global Management Perspectives

Global firms normally carry three global perspectives or attitudes for work approaches and practices. These perspectives
include ethnocentric, polycentric, and geocentric attitudes.
91)
Which of the following statements, if true, would support an ethnocentric attitude for a global firm?
A)
The firm is extremely flexible and responsive to the needs and demands of local markets in host countries.
B)
The firm's hierarchical structure ensures that data flows extensively from the subsidiaries to the home location reducing
the potential for duplication.

C)
The firm uses a loose federation of associated business units, each of which is rather independent in their strategic
decisions.
D)
The firm has been successful in striking the right balance between centralization and decentralization of resources.
Answer
B
Explanation
Type MC
Comment
Diff 0
A)
B)
C)
D)
WS 0
Var 1
Page Ref 99
Created On Feb 5 2011
Topic
Skill Reflective Thinking Skills
Objective 1
AACSB Difficult
Classification Critical Thinking
92)
Which of the following statements, if true, would support a polycentric attitude for a global firm?
A)
The firm has been successful in striking the right balance between centralization and decentralization of resources.
B)
The firm utilizes multiple networks between the home office and the subsidiaries to facilitate both communication and
data sharing.
C)
The firm is extremely flexible and responsive to the needs and demands of local markets in host countries.
D)
The firm's hierarchical structure ensures that data flows extensively from the subsidiaries to the home location reducing
the potential for duplication.
Answer
C
Explanation
A)
Type MC
Comment
Diff 0
B)
C)
D)
WS 0
Var 1
Page Ref 100
Created On Feb 5 2011
Topic
Skill Reflective Thinking Skills
Objective 1
AACSB Difficult
Classification Critical Thinking
ESSAY. Write your answer in the space provided or on a separate sheet of paper.
93)
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.
Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 99
Skill
Objective 1
AACSB Moderate
94)
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. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 99 - 100
Skill
Objective 1
AACSB Moderate
95)
Write a short essay on the European Union.
Answer
The European Union (EU) is an economic and political partnership of 27 democratic European countries. Three countries
(Croatia, Macedonia, and Turkey) have applied for membership. When the 12 original members formed the EU in 1992,
the primary motivation was to reassert the region's economic position against the United States and Japan. Before then,
each European nation had border controls, taxes, and subsidies; nationalistic policies; and protected industries. These
barriers to travel, employment, investment, and trade prevented European companies from developing economic
efficiencies. Now with these barriers removed, the economic power represented by the EU is considerable. Its current
membership covers a population base of nearly half a billion people and accounts for approximately 31 percent of the
world's total economic output. The euro that is the common European currency is currently in use in 16 of the 27 member
states and all new member countries must adopt the euro. Only Denmark, the United Kingdom, and Sweden have been
allowed to opt out of using the euro. The euro zone is the world's largest unified economy after the United States and a
major source of world demand for goods and services. Therefore, the importance of this regional trading alliance will
continue to evolve as EU members work together to assert the region's economic power with successful European
businesses continuing to play a crucial role in the global economy.
Comment
Type ES
Diff 0
WS 0
Var 1
Page Ref 100 -101
Topic
Skill
Objective 2
AACSB Moderate
96)
Write a short essay on the North American Free Trade Agreement and other Latin American Agreements.
Answer
The North American Free Trade Agreement (NAFTA) - When agreements in key issues covered by the NAFTA were
reached by the Mexican, Canadian, and U.S. governments in 1992, a vast economic bloc was created. As of 2010, it remains
the largest trade bloc in the world in terms of combined gross domestic product of its members. Between 1994 and 2007
merchandise trade between the United States and Canada and Mexico increased from 4.4 percent to 6.6 percent.
Eliminating the barriers to free trade (tariffs, import licensing requirements, customs user fees) has strengthened the
economic power of all three countries, but not equally. Mexico, especially, has struggled to prosper from free trade.
Although Mexico's exports increased dramatically under NAFTA, large numbers of people still migrate to the United
States in search of jobs and prosperity.
Other Latin American nations have become part of the free trade blocs, as well. Colombia, Mexico, and Venezuela led the
way when all three signed an economic pact in 1994 eliminating import duties and tariffs. Another agreement, the U.S.
Central America Free Trade Agreement (CAFTA), promotes trade liberalization between the United States and five Central
American countries Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. However, only El Salvador and Costa
Rica have joined. The other countries have yet to change laws to be in line with the agreement.
Negotiators from 34 countries in the Western Hemisphere continue work on a Free Trade Area of the Americas (FTAA)
agreement, which was to have been operational no later than 2005, a missed targeted deadline. However, another free
trade bloc of 10 South American countries known as the Southern Common Market or Mercosur already exists. Some
South Americans see Mercosur as an effective way to combine resources to better compete against other global economic
powers, especially the EU and NAFTA. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 102- 103
Topic A Manager's Dilemma
Skill
Objective 2
AACSB Moderate
97)
Create short notes on the World Trade Center (WTO), the International Monetary Fund (IMF), the World Bank Group, and
the Organization for Economic Cooperation and Development (OECD).
Answer
The World Trade Organization (WTO) is a global organization of 153 countries that deals with the rules of trade among
nations. Formed in 1995, the WTO evolved from the General Agreement on Tariffs and Trade (GATT), a trade agreement
in effect since the end of World War II. Today, the WTO is the only global organization that deals with trade rules among
nations. Its membership consists of 153 member countries and 30 observer governments (which have a specific time frame
within which they must apply to become members). The goal of the WTO is to help countries conduct trade through a
system of rules.
The International Monetary Fund (IMF) is an organization of 185 countries that promotes international monetary
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.
The forerunner of the OECD, the Organization for European Economic Cooperation, was formed in 1947 to administer
American and Canadian aid under the Marshall Plan for the reconstruction of Europe after World War II. Today, the
Organization for Economic Cooperation and Development (OECD) is a Paris-based international economic organization
whose mission is to help its 30 member countries achieve sustainable economic growth and employment and raise the
standard of living in member countries while maintaining financial stability in order to contribute to the development of
the world economy. When needed, the OECD gets involved in negotiations with OECD countries so they can agree on
"rules of the game" for international cooperation. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 104 -105
Topic
Skill
Objective 2
AACSB Moderate
98)
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. This type of organization doesn't attempt to replicate its domestic successes by managing foreign
operations from its home country. Instead, 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. For example, Switzerland-based Nestle can be described as a
multidomestic corporation. With operations in almost every country on the globe, its 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 second type of MNC, called 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. Spain's
Telefonica eliminated the geographic divisions between Madrid headquarters and its widespread phone companies. The
company will be organized, instead, along business lines such as Internet services, cellular phones, and media operations.
Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 106
Skill
Objective 3
AACSB Moderate
99)
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 in order to be more competitive.
The next step in going international may involve exporting the organization's products to other countriesthat is, making
products domestically and selling them abroad. In addition, an organization might do importing, which involves
acquiring products made abroad and selling them domestically. Both usually entail minimal investment and risk, which is
why many small businesses often use these approaches to doing business globally.
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 more of a 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 or partners 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. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 106 - 108
Topic
Skill
Objective 3
AACSB Moderate
100)
Discuss four economic issues that affect management.
Answer
A global manager must be aware of economic issues when doing business in other countries. First, it's important to
understand a country's type of economic system.
a. Type of economy - The two major types of economies are market economies and command 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. Other economic issues a manager might need to
understand include currency exchange rates, inflation rates, and diverse tax policies.
b. Currency strength - 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.
c. Inflation - It 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.
d. Diverse tax policies - 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. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 109
Skill
Objective 4
AACSB Moderate
101)
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. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 111
Skill
Objective 4
AACSB Moderate
102)
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 research team identified 9 dimensions on which national cultures differ
a. Assertiveness The extent to which a society encourages people to be tough, confrontational, assertive, and competitive
versus modest and tender. This is essentially equivalent to Hofstede's achievement-nurturing dimension.
b. 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 essentially equivalent to Hofstede's long-term and short-term
orientation.
c. 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 additional dimension to Hofstede's
framework.
d. 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.
e. Power distance As did Hofstede, the GLOBE team defined this as the degree to which members of a society expect
power to be unequally shared.
f. Individualism/collectivism Again, 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. In-group collectivism This dimension encompasses 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.
h. Performance orientation This refers to 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.
i. 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. Comment
Diff 0
Type ES
WS 0
Var 1
Page Ref 111-112
Skill
Objective 4
AACSB Moderate
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93)
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.
94)
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.
95)
The European Union (EU) is an economic and political partnership of 27 democratic European countries. Three countries
(Croatia, Macedonia, and Turkey) have applied for membership. When the 12 original members formed the EU in 1992,
the primary motivation was to reassert the region's economic position against the United States and Japan. Before then,
each European nation had border controls, taxes, and subsidies; nationalistic policies; and protected industries. These
barriers to travel, employment, investment, and trade prevented European companies from developing economic
efficiencies. Now with these barriers removed, the economic power represented by the EU is considerable. Its current
membership covers a population base of nearly half a billion people and accounts for approximately 31 percent of the
world's total economic output. The euro that is the common European currency is currently in use in 16 of the 27 member
states and all new member countries must adopt the euro. Only Denmark, the United Kingdom, and Sweden have been
allowed to opt out of using the euro. The euro zone is the world's largest unified economy after the United States and a
major source of world demand for goods and services. Therefore, the importance of this regional trading alliance will
continue to evolve as EU members work together to assert the region's economic power with successful European
businesses continuing to play a crucial role in the global economy.
96)
The North American Free Trade Agreement (NAFTA) - When agreements in key issues covered by the NAFTA were
reached by the Mexican, Canadian, and U.S. governments in 1992, a vast economic bloc was created. As of 2010, it remains
the largest trade bloc in the world in terms of combined gross domestic product of its members. Between 1994 and 2007
merchandise trade between the United States and Canada and Mexico increased from 4.4 percent to 6.6 percent.
Eliminating the barriers to free trade (tariffs, import licensing requirements, customs user fees) has strengthened the
economic power of all three countries, but not equally. Mexico, especially, has struggled to prosper from free trade.
Although Mexico's exports increased dramatically under NAFTA, large numbers of people still migrate to the United
States in search of jobs and prosperity.
Other Latin American nations have become part of the free trade blocs, as well. Colombia, Mexico, and Venezuela led the
way when all three signed an economic pact in 1994 eliminating import duties and tariffs. Another agreement, the U.S.
Central America Free Trade Agreement (CAFTA), promotes trade liberalization between the United States and five Central
American countries Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. However, only El Salvador and Costa
Rica have joined. The other countries have yet to change laws to be in line with the agreement.
Negotiators from 34 countries in the Western Hemisphere continue work on a Free Trade Area of the Americas (FTAA)
agreement, which was to have been operational no later than 2005, a missed targeted deadline. However, another free
trade bloc of 10 South American countries known as the Southern Common Market or Mercosur already exists. Some
South Americans see Mercosur as an effective way to combine resources to better compete against other global economic
powers, especially the EU and NAFTA.
97)
The World Trade Organization (WTO) is a global organization of 153 countries that deals with the rules of trade among
nations. Formed in 1995, the WTO evolved from the General Agreement on Tariffs and Trade (GATT), a trade agreement
in effect since the end of World War II. Today, the WTO is the only global organization that deals with trade rules among
nations. Its membership consists of 153 member countries and 30 observer governments (which have a specific time frame
within which they must apply to become members). The goal of the WTO is to help countries conduct trade through a
system of rules.
The International Monetary Fund (IMF) is an organization of 185 countries that promotes international monetary
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.
The forerunner of the OECD, the Organization for European Economic Cooperation, was formed in 1947 to administer
American and Canadian aid under the Marshall Plan for the reconstruction of Europe after World War II. Today, the
Organization for Economic Cooperation and Development (OECD) is a Paris-based international economic organization
whose mission is to help its 30 member countries achieve sustainable economic growth and employment and raise the
standard of living in member countries while maintaining financial stability in order to contribute to the development of
the world economy. When needed, the OECD gets involved in negotiations with OECD countries so they can agree on
"rules of the game" for international cooperation.
98)
a. A multidomestic corporation is a multinational corporation (MNC) that decentralizes management and other decisions
to the local country. This type of organization doesn't attempt to replicate its domestic successes by managing foreign
operations from its home country. Instead, 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. For example, Switzerland-based Nestle can be described as a
multidomestic corporation. With operations in almost every country on the globe, its 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 second type of MNC, called 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. Spain's
Telefonica eliminated the geographic divisions between Madrid headquarters and its widespread phone companies. The
company will be organized, instead, along business lines such as Internet services, cellular phones, and media operations.
99)
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 in order to be more competitive.
The next step in going international may involve exporting the organization's products to other countriesthat is, making
products domestically and selling them abroad. In addition, an organization might do importing, which involves
acquiring products made abroad and selling them domestically. Both usually entail minimal investment and risk, which is
why many small businesses often use these approaches to doing business globally.
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 more of a 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 or partners 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.
100)
A global manager must be aware of economic issues when doing business in other countries. First, it's important to
understand a country's type of economic system.
a. Type of economy - The two major types of economies are market economies and command 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. Other economic issues a manager might need to
understand include currency exchange rates, inflation rates, and diverse tax policies.
b. Currency strength - 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.
c. Inflation - It 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.
d. Diverse tax policies - 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.
101)
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.
102)
The GLOBE research team identified 9 dimensions on which national cultures differ
a. Assertiveness The extent to which a society encourages people to be tough, confrontational, assertive, and competitive
versus modest and tender. This is essentially equivalent to Hofstede's achievement-nurturing dimension.
b. 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 essentially equivalent to Hofstede's long-term and short-term
orientation.
c. 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 additional dimension to Hofstede's
framework.
d. 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.
e. Power distance As did Hofstede, the GLOBE team defined this as the degree to which members of a society expect
power to be unequally shared.
f. Individualism/collectivism Again, 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. In-group collectivism This dimension encompasses 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.
h. Performance orientation This refers to 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.
i. 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.

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