CH-7 Global Management – Effective Management : Exam Guide

Chapter 7: Global Management TRUE/FALSE 1. In the same way that business is defined as the buying and selling of goods and services, global business is defined as the buying and selling of goods and services by people from different countries. Answer: True 2. Regional domestic investment is a method of investment in which a company builds a new business or buys an existing business in a foreign country. Answer: False Direct foreign investment is a method of investment in which a company builds a new business or buys an existing business in a foreign country. 3. Direct foreign investment is an increasingly important and common method of conducting global business. Answer: True 4. Multinational corporations are corporations that own businesses in two or more countries. Answer: True 5. Random House publishing company has signed a contract with the Korean-owned Joo-Ang Ilbo Media Network, which will sell Random House books in Asia’s third largest market. This is an example of a direct foreign investment. Answer: False A direct foreign investment means the company would build a new business or buy an existing business to expand into a foreign country. 6. No matter what part of the world they live in, most consumers prefer to buy domestically made products rather than imported products. Answer: False Although most consumers usually don’t care where the products they buy come from, national governments have traditionally preferred that consumers buy domestically made products in hopes that such purchases would increase the number of domestic businesses and workers. 7. The 20 percent tax on all leather shoes imported from China and Vietnam proposed by the European Union’s trade commission is an example of protectionism. Answer: True 8. The Maastricht Treaty of Europe was designed to create the European Union and make the euro, the one common currency, for all members. Answer: True 9. The North American Free Trade Agreement (NAFTA) is a regional trade agreement between Canada and the United States. No other nations have signed this trade agreement. Answer: False The North American Free Trade Agreement (NAFTA) is a regional trade agreement between the United States, Canada, and Mexico. 10. In a multinational company, managers at company headquarters value global consistency as a company policy over local adaptation because global consistency simplifies decision making at corporate headquarters. Answer: True 11. Customs classification is a nontariff trade barrier. It is important to international marketers because the category assigned by customs agents can affect the size of the tariff and the impact of import quotas. Answer: True 12. Multinational companies typically have no difficulty determining the correct balance between global consistency and local adaptation. Answer: False Multinational companies struggle to find the correct balance between global consistency and local adaptation, because there are significant risks in inappropriately leaning too far in either direction. 13. Historically, companies have generally followed the phase model of globalization. Answer: True 14. The phase model of globalization means that companies made the transition from a domestic company to a global company in three sequential phases. The three phases are exporting, followed by wholly owned subsidiaries, and finishing with strategic alliances. Answer: False The phase model of globalization means that companies made the transition from a domestic company to a global company in four sequential phases: exporting, followed by cooperative contracts, moving next to strategic alliances, and finishing with wholly owned affiliates. 15. It appears that all companies follow the phase model of globalization when entering foreign markets. Answer: False Evidence suggests that some companies do not follow the phase model of globalization. 16. The two kinds of cooperative contracts are licensing and franchising. Answer: True 17. The biggest disadvantage associated with licensing is that the licensor gives up control over the quality of the good or service sold by the foreign licensee. Answer: True 18. An international joint venture is an example of mutually beneficial direct foreign investment. Answer: True A joint venture is an example of a strategic alliance. 19. One of the disadvantages of global joint ventures is that, unlike licensing and franchising, they do not help companies to avoid tariff and nontariff barriers to entry. Answer: False One of the advantages of global joint ventures is that, like licensing and franchising, they help companies avoid tariff and nontariff barriers to entry. 20. Global joint ventures can be difficult to manage because they represent a merging of four cultures. Answer: True 21. Unlike licensing, franchising, or joint ventures, wholly owned affiliates are 100 percent owned by the parent company. Answer: True 22. Deciding where to go global is just as important as deciding how your company will go global. Answer: True 23. Two factors that help companies determine the growth potential of foreign markets are purchasing power and foreign competitors. Answer: True 24. The criteria for choosing an office/manufacturing location are different from the criteria for entering a foreign market. Answer: True 25. When conducting global business, companies should attempt to identify the two types of political risk, which are political uncertainty and economic uncertainty. Answer: False When conducting global business, companies should attempt to identify two types of political risk: political uncertainty and policy uncertainty. 26. The three strategies used to minimize or to adapt to the political risk inherent to global business are avoidance, control, and cooperation. Answer: True 27. A global business can prevent or reduce political risks by using a proactive strategy in which it lobbies foreign governments or international trade agencies to change laws, regulations, or trade barriers. Answer: False This describes a control strategy. 28. The difficulty that companies face when trying to adapt management practices to cultural differences is that they may be adapting the way they run their businesses based on outdated and incorrect assumptions about a country’s culture. Answer: True 29. Power distance is greatest in countries where power is distributed equally across all societies and organizations. Answer: False Power distance is weakest in countries where power is distributed equally across all societies and organizations. 30. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, will soon be available in China, but due to restrictions on conventional promotion, the event will be promoted on the Great Wall. This modification of promotional strategy reflects a local adaptation to the Chinese culture. Answer: True 31. When a company based in Singapore hires an Australian manager to run its manufacturing plant in Australia, the manager would be classified as an expatriate. Answer: False An expatriate is someone who lives and works outside of his or her own country. 32. The evidence clearly shows that how well an expatriate’s spouse and family adjust to the foreign culture is the most important factor in determining the success or failure of an international assignment. Answer: True 33. According to What Really Works, “Cross-Cultural Training,” studies have proven that such training helps employees to adjust more quickly to new cultures that they are unfamiliar with. Answer: True MULTIPLE CHOICE 1. Global business: A. is the buying and selling of goods and services to people from different countries B. includes any sale of goods and services C. only involves companies with more than 50 employees D. refers to sales made to people from different cultures, different regions, and different nations E. is unregulated Answer: A Definition of global business. 2. _____________ is a method of investment in which a company builds a new business or buys an existing business in a foreign country. A. A strategic alliance B. Direct foreign investment C. A global new venture D. A joint venture E. Direct exporting Answer: B Definition of direct foreign investment. 3. Which of the following countries has the largest direct foreign investment in the United States? A. The Netherlands B. Germany C. Japan D. Canada E. The United Kingdom Answer: E The United Kingdom has the largest direct foreign investment in the United States, followed by Japan, Canada, the Netherlands, Germany, and France. 4. Nestlé is a company based in Switzerland with manufacturing plants in Columbia, Australia, Canada, Egypt, Kenya, and more than 90 other nations. Nestlé is an example of a: A. multidomestic global company B. multinational corporation C. ethnocentric organization D. acculturated corporation E. macro-marketer Answer: B A multinational corporation is defined as a corporation that owns businesses in two or more countries. 5. Several Arab countries boycott Coca-Cola products because the soft drink company maintains product distributors in Israel. This boycott is an example of: A. geocentrism B. nationalism C. nationalization D. a trade barrier E. acculturation Answer: D Trade barriers are government-imposed regulations that increase the cost and restrict the number of imported goods. 6. The two general kinds of trade barriers are: A. government import and industry import standards B. qualitative and quantitative barriers C. voluntary and involuntary barriers D. nationalistic and geocentric barriers E. tariff and nontariff barriers Answer: E 7. Protectionism is the use of trade barriers to protect local companies and their workers from: A. international unions B. foreign competition C. trademark infringements D. patent violations E. all of these Answer: B Definition of protectionism. 8. After years of flooding international markets with surplus milk products, the European Union, under heavy pressure from member nations, has curtailed its $59 billion annual subsidy system for its dairies. This curtailment of subsidies means: A. an end to tariff barriers B. European dairy farmers will no longer be protected from international competition C. dairy products will be given a new customs classification D. government import standards on dairy products will end E. an end to voluntary export restraints Answer: B Subsidies are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect companies or special industries, such as dairy farmers. 9. The Japanese government has proclaimed that its snow is different from that found in any other region of the world. As a result, all snow skis marketed in Japan must be manufactured in Japan. This is an example of a(n): A. tariff B. nontariff barrier C. import boycott D. industry subsidy E. industry nationalization Answer: B Nontariff barriers are defined as nontax methods of increasing the cost or reducing the volume of imported goods. 10. The U.S. Rice Millers’ Association claims that if the Japanese rice market were opened to imports by lowering tariffs, the resultant lower prices would save Japanese consumers about $6 billion annually. The Japanese government continues to use the high tariffs to make sure local farmers can earn a living. The tariff on rice is an example of: A. a voluntary government restriction B. geocentrism C. protectionism D. a security quota E. a bureaucratic subsidy Answer: C The aim of the Japanese policy is to shield domestic competitors from foreign competition––an aim consistent with protectionism. 11. A _____________ is a nontax method of increasing the cost or reducing the volume of imported goods. A. tariff B. nontariff barrier C. trade roadblock D. risk-aversive boycott E. subsidy quota Answer: B 12. A(n) _____________ is a direct tax on imported goods designed to make it more expensive to buy those goods, in hopes of reducing the volume of those imported goods in a given country. A. tariff B. nontariff barrier C. trade roadblock D. boycott quota E. import subsidy Answer: A Tariffs are defined as a direct tax on imported goods. 13. The Japanese government has proclaimed that its snow is different from that found in any other region of the world. To make sure the product is safe for local use, all snow skis marketed in Japan must be manufactured in Japan. This is an example of a(n): A. tariff B. government subsidy C. voluntary export restraint D. government import standard E. subsidy Answer: D A government import standard is defined as a standard that is ostensibly established to protect the health and safety of citizens but, in reality, often is used to restrict imports. 14. Russia imposed limits on how much poultry, beef, and pork could be imported into the nation from the European Union (EU) in retaliation to limits the EU placed on how much grain Russia could export. What type of nontariff barrier did the EU use to control the amount of grain Russia exported? A. Customs classification B. Government export standards C. Voluntary export restraints D. Involuntary import restraints E. Quota classifications Answer: C Voluntary export restraints are a type of nontariff barrier where there are voluntarily imposed limits on the number or volume of products exported to a particular country. 15. Russia imposed limits on how much poultry, beef, and pork could be imported into the nation from the European Union (EU) in retaliation to limits the EU placed on how much grain Russia could export. What type of nontariff barrier did Russia use to control the amount of poultry, beef, and port it imported from the EU? A. Quotas B. Subsidies C. Boycotts D. Customs classifications E. Duties Answer: A A quota is a limit on the number or volume of imported products. 16. The European Union (EU) bans the importation of hormone-fed U.S. beef and bioengineered corn and soybeans on safety grounds although Americans eat this food every day. This ban is so consumers in the EU will buy domestic beef and products made from domestically produced corn and soybeans. This ban is an example of: A. a subsidy B. an involuntary import restraint C. geocentrism D. expropriation E. a government import standard Answer: E A government import standard is defined as a standard that is ostensibly established to protect the health and safety of citizens but, in reality, often is used to restrict imports. 17. _____________ are long-term, low-interest loans, cash grants, and tax deductions used to develop and protect companies or special industries. A. Quotas B. Voluntary export restraints C. Cooperative contracts D. Subsidies E. Tariffs Answer: D Definition of subsidies. 18. To protect its farmers, Japan put limitations on the amount of mushrooms and leeks that could be imported into Japan from China. This limitation is an example of a(n): A. tariff B. voluntary import restraint C. subsidy D. agricultural import standard E. import quota Answer: E A quota is a limit on the number or volume of imported products. 19. The trade agreement that represented the most significant change to the regulations governing global trade during the 1990s was the: A. Maastricht Treaty of Europe B. North American Free Trade Agreement C. General Agreement on Tariffs and Trade D. Mercosur E. Asian Free Trade Arrangement Answer: C The General Agreement on Tariffs and Trade was a comprehensive trading agreement originally signed by 124 countries, providing the basic framework for the World Trade Organization agreement of 1995. 20. The signing of _____________ created a regional trading zone. A. the Maastricht Treaty B. the Pact for Free Trade Agreement C. the Global Agreement for Transactional Trading D. the Southeast Asia Pact E. all of these Answer: A The Maastricht Treaty established the European Union trading zone. 21. The acronym GATT stands for: A. Global Agreement on Temporal Trade B. Governing Agreement on Trade and Transactions C. General Agreement on Tariffs and Trade D. Government Aid of Trade and Transactions E. Global Arrangement for Trade and Taxes Answer: C GATT stands for General Agreement on Tariffs and Trade. 22. The General Agreement on Tariffs and Trade: A. decreased both tariff and nontariff barriers B. put stricter limits on government subsidies C. made it easier and cheaper for consumers in all countries to buy foreign products D. protected intellectual property, such as trademarks, patents, and copyrights E. did all of these Answer: E All of these were achieved in the Uruguay round of the General Agreement on Tariffs and Trade. 23. The _____________ is a regional trade agreement that liberalizes trade between countries more than any other such agreement. A. Maastricht Treaty of Europe B. Association of Southeast Nations C. Asia-Pacific Economic Cooperation agreement D. North American Free Trade Agreement E. Free Trade Area of South America Answer: D More than any other regional trade agreement, the North American Free Trade Agreement has liberalized trade between countries so that businesses can plan for one market rather than for three separate markets. 24. One of the major questions that a company must typically answer once it has decided to go global is: A. How many additional employees will the company need? B. To what extent should the company standardize or adapt business procedures? C. To what extent should a company abide by global or regional trade agreements? D. Will the organization’s mission statement need to be changed? E. How many new shareholders will be influenced by global activities? Answer: B The question of whether to follow a strategy of global consistency or local adaptation is fundamental to multinational business. 25. When a multinational company that acts with _____________ has offices, manufacturing plants, and distribution facilities in different countries, it will run those offices, plants, and facilities based on the same rules, guidelines, policies, and procedures. A. policy certainty B. global consistency C. global adaptation D. global certainty E. regiocentrism Answer: B Definition of global consistency. 26. In a multinational firm, managers at company headquarters typically prefer an emphasis on _____________ because it simplifies decisions. A. local consistency B. local adaptation C. global adaptation D. global consistency E. domestic adaptation Answer: D This is one of the benefits of global consistency. 27. Which of the following approaches tends to be most important to making an international business successful in any given country? A. Global consistency B. Local adaptation C. Domestic synergy D. Predetermined benchmarks E. Mechanistic controls Answer: B Local adaptation is more likely to be responsive to customer needs and tastes within a particular market. 28. Historically, most companies have used the _____________ to successfully enter foreign markets. A. phase model of globalization B. global new venture approach C. ripple approach D. market echo approach E. guerrilla approach Answer: A The phase model is incremental in its approach to growing an international business and was attractive because it increased risk/exposure to foreign markets gradually over time. 29. Which of the following represents the correct sequence for the phase model of globalization? A. exporting; wholly owned affiliates; cooperative contracts; strategic alliances B. exporting; cooperative contracts; wholly owned affiliates; strategic alliances C. exporting; cooperative contracts; strategic alliances; wholly owned affiliates D. exporting; strategic alliances; cooperative contracts; wholly owned affiliates E. home country sales; exporting; job ventures; strategic alliances, and direct investment Answer: C The phase model of globalization uses the following sequential phases: exporting, cooperative contracts, strategic alliances, and wholly owned affiliates. 30. _____________ occurs when a company sells domestically produced products to customers in foreign countries. A. Direct foreign investment B. Franchising C. Licensing D. Exporting E. A joint venture Answer: D Definition of exporting. 31. Jim Beam is a distillery in the United States. In 2000, it began marketing its U.S.-made liquor to customers in 27 different European countries. Since it was at the first stage of the phase model of globalization, it used _____________ to reach European customers. A. licensing B. franchising C. strategic alliances D. exporting E. direct investment Answer: D 32. Fran Wilson Creative Cosmetics is a medium-sized U.S. company that sells 1.5 million tubes of its Moodmatcher lipstick in Japan annually. It has no physical presence within the country beyond the fact that its products are sold there. Fran Wilson Creative Cosmetics uses _____________ to reach the Japanese market. A. franchising B. direct investment C. licensing D. a strategic alliance E. exporting Answer: E Exporting occurs when a company sells domestically produced products to customers in foreign countries. 33. SpongeBob SquarePants, the animated underwater adventures of a group of sea creatures, is produced by the MTV Networks, a part of Viacom, the U.S. media group. The television show is shown in 171 international markets and has been translated into 26 different languages. Given that the show is produced in the United States, which form of global business is MTV Networks using? A. Direct foreign investment B. Franchising C. Strategic alliance D. Exporting E. A joint venture Answer: D Exporting occurs when a company sells domestically produced products to customers in foreign countries. 34. A(n) _____________ is an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country. A. exporting agreement B. cooperative contract C. joint venture D. strategic alliance E. direct investment Answer: B Definition of a cooperative contract. 35. _____________ are both examples of cooperative contracts. A. Licensing and joint ventures B. Franchising and licensing C. Direct investment and indirect investment D. Direct exporting and indirect exporting E. Joint ventures and strategies alliances Answer: B There are two kinds of cooperative contracts––licensing and franchising. 36. Sodima is a French cooperative that owns the name, the trade secrets, and the patents on Yoplait yogurt. General Mills pays Sodima for the right to sell Yoplait yogurt in the United States. This is an example of: A. licensing B. a global joint venture C. exporting D. a strategic alliance E. direct investment Answer: A Licensing is defined as an agreement in which a domestic company, the licensor, receives royalty payments for allowing another company, the licensee, to produce the licensor’s product, sell its service, or use its brand name in a specified foreign market. 37. Robert Mondavi Wineries entered into an agreement with Baron Philippe de Rothschild, owner of Bordeaux’s First Growth chateau, to produce a top-quality wine in California. The two companies working together to create a new product is an example of: A. exporting B. licensing C. a strategic alliance D. a cooperative contract E. a wholly owned subsidiary Answer: C A strategic alliance is an agreement in which companies combine key resources, costs, risk, technology, and people. 38. General Motors and Russia’s largest domestic carmaker collaborated to create a third, independent company to produce sport-utility vehicles under the Chevrolet brand name. The two companies created a: A. global new venture B. wholly owned affiliate C. joint venture D. strategic subsidy E. new franchise Answer: C A joint venture is a strategic alliance in which two existing companies collaborate to form a third, independent company. 39. Ernst & Young, and international accounting and management consulting company, entered Hungary first by establishing a joint venture with a local firm. Ernst & Young later acquired the company with which it had the alliance. Ernst & Young then had a(n) _____________ in Hungary. A. franchise B. licensing arrangement C. cooperative contract D. wholly owned affiliate E. export agency Answer: D A wholly owned affiliate is defined as foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company. 40. All global new ventures share two common factors. One is that the company founders successfully develop and communicate the company’s global vision. The other is: A. the bringing of a good or service to several different foreign markets at the same time B. the use of local adaptation strategy C. a mechanistic organizational culture D. the ability to respond quickly and efficiently to any changes in the external environment E. the development of culturally-specific implementation policies Answer: A These are defining characteristics of global new ventures, in which new companies are founded with an active global strategy and have sales, employees, and financing in different countries. 41. All global new ventures share two common factors. One is the bringing of a good or service to several different foreign markets at the same time. The other is: A. the development of culturally specific implementation policies B. the use of local adaptation strategy C. a mechanistic organizational culture D. the ability to respond quickly and efficiently to any changes in the external environment E. none of these Answer: E The other factor is that the company founders successfully develop and communicate the company’s global vision. 42. Which of the following types of global organization is most likely to suffer problems associated with being culture-bound? A. Licensing B. Franchising C. Joint ventures D. Global new ventures E. Wholly owned subsidiaries Answer: B A franchising organization is defined as a collection of networked firms in which the manufacturer or marketer of a product or service (franchisor) licenses the entire business to another person or organization (franchisee). Because franchisors are typically basing their plans on success in their home market, and because franchisees are embedded in foreign cultures, this form is especially vulnerable to cultural misunderstandings. 43. When McDonald’s entered into an agreement with a French entrepreneur who wanted to own and operate a McDonald’s fast-food restaurant in Paris, it saw the new restaurant as an opportunity. Unfortunately, the restaurant in Paris was not maintained at the cleanliness standards prescribed by McDonald’s but at the cleanliness standards acceptable to the French. McDonald’s brought legal action to have the restaurant closed. This example illustrates: A. an opportunity for McDonald’s to enter into more joint ventures B. a need for McDonald’s to curtail its international franchising C. a cultural threat against McDonald’s D. a weakness within the McDonald’s franchising system E. a problem with franchising in different cultures Answer: E Cross-cultural franchises are especially vulnerable to such conflicts and misunderstandings. 44. Proton is the national carmaker of Malaysia. A(n) _____________ with Volkswagen had been seen as vital to the survival of the company. VW promised to provide technical help in improving the quality of Proton cars, to add VW models to Proton’s product line, and to assist with expanding Proton’s small export market. In return, VW sought a degree of management control that found little favor with the Malaysian government that owns Proton. A. exporting license B. cooperative contract C. franchisee agreement D. strategic alliance E. indirect investment Answer: D A strategic alliance is an agreement in which companies combine key resources, costs, risks, technology, and people. 45. A _____________ is a strategic alliance in which two existing companies collaborate to form a third, independent company. A. joint venture B. franchise C. wholly owned affiliate D. global new venture E. cooperative contract Answer: A Definition of joint venture. 46. Which of the following forms of organizing a global business help companies to avoid tariff and nontariff barriers to entry of a given foreign market? A. Licensing B. Franchising C. Global joint ventures D. Wholly owned affiliates E. All of these Answer: E Each of these forms involves situating operations and management within a foreign country. The franchisee, licensee, foreign venture partner, or management of foreign subsidiary typically benefits from some tariff/nontariff relief over what a multinational exporter would face. 47. In Canada, General Motors and Suzuki have entered into a(n) _____________ to create CAMI Automotive. Suzuki management runs the plant, which makes GM’s Geo cars. The agreement gives Suzuki access to GM dealers to sell its brand of vehicles. A. licensing agreement B. subsidiary arrangement C. cooperative contract D. exporting agency E. joint venture Answer: E An example of a joint venture would be two existing firms pooling resources to launch and support a third, independent venture. 48. German chip manufacturer Infineon AG has joined with Motorola Inc. and Agere Systems Inc. to establish a new company to develop and license chip designs for cell phones. These three companies have created a: A. license facilitator B. subsidized corporation C. global new venture D. joint venture E. export merchant Answer: D A joint venture is a strategic alliance in which two existing companies collaborate to form a third, independent company. 49. Ford Motor Company owns and operates a $1.9 billion manufacturing plant in Brazil. What method for organizing for global business has Ford used in this example? A. Joint venture B. Strategic alliance C. Cooperative contract D. Wholly owned affiliate E. Strategic franchise Answer: D A wholly owned affiliate is defined as foreign offices, facilities, and manufacturing plants that are 100 percent owned by the parent company. 50. The primary disadvantage of using wholly owned affiliates as the means of entering a foreign market is: A. dumping B. countertrading C. nontariff barriers D. acculturation E. costs Answer: E The wholly owned affiliate is typically the most expensive form of global market entry. 51. Which of the following is a trend that has allowed companies to skip the phase model when going global? A. Quick, reliable air travel B. The globalization of the cocooning trend C. A critical mass of resources D. The metamorphosis of marketplaces E. All of these Answer: A Three factors are identified as supporting the emergence of global new ventures: (1) quick, reliable air travel, (2) low-cost communication technologies, and (3) critical mass of businesspeople with extensive international business experience. 52. New companies with sales, employees, and financing in different countries that are founded with an active global strategy are called: A. global new ventures B. strategic alliances C. wholly owned affiliates D. franchisees E. subsidized corporations Answer: A Definition of global new ventures. 53. A country or region that has an attractive business climate for companies that want to go global has: A. easy access to growing markets B. experienced marketplace metamorphosis C. eliminated all political risks D. a limited infrastructure E. all of these Answer: A Three attributes that contribute to an attractive business climate are identified as (1) easy access to growing markets, (2) cost-efficient location, and (3) lower level of political risk. 54. A country or region that has an attractive business climate for companies that want to go global has: A. a large population of unskilled workers B. an effective but cost-efficient place to build an office or manufacturing site C. a small youth population D. natural boundaries E. all of these Answer: B Three attributes that contribute to an attractive business climate are identified as (1) easy access to growing markets, (2) cost-efficient location, and (3) lower level of political risk. 55. The most important factor used by a globalizing company for determining if a country or a region has an attractive business climate is: A. easy access to growing markets B. marketplace metamorphosis C. global synergy D. a large, unskilled workforce E. natural boundaries Answer: A None of the other market factors can “compensate” for a lack of access or poor market potential. 56. In the past decade, purchasing power has doubled and poverty has been halved in Vietnam, making the nation: A. a good choice for companies looking for attractive global markets B. a potential target for nationalization activities C. a less-than-desirable choice for companies looking for new global markets D. a source of Asian protectionism E. a country that has eliminated all tariff barriers Answer: A Countries with high and growing levels of purchasing power are good choices for global expansion. 57. Which of the following factors helps a company determine the growth potential of a foreign market? A. Political uncertainty B. Purchasing power C. Type of infrastructure D. Land availability E. Natural boundaries Answer: B Purchasing power is defined as a comparison of the relative cost of a standard set of goods and services in different countries. The growth potential of a given market is determined by its purchasing power and the strength of foreign competitors. Markets are most attractive when they have solid and growing purchasing power and relatively weak existing competition. 58. A cosmetics company that is considering entering the South American market would be especially interested in the discretionary income within that country. In other words, _____________ would be a determining factor in its global strategy. A. purchasing power B. political uncertainty C. expropriation potential D. infrastructure E. sociocultural trends Answer: A Purchasing power is defined as a comparison of the relative cost of a standard set of goods and services in different countries. Discretionary income is that portion of purchasing power above and beyond income required to meet basic living expenses (i.e., “spending money”). 59. Proton is the national carmaker of Malaysia. The future for Proton looks gloomy because Malaysia plans to eliminate nearly all tariff barriers protecting its car market by 2008. With this act, the Malaysian government will: A. stop using nontax methods to increase the volume of imported goods B. eliminate most protectionism C. reduce the tax it gathers on imported cars D. nationalize the car industry E. limit the number of cars that can be exported Answer: C A tariff is a direct tax on imported goods. 60. A U.S. company that operates cinemas wants to open a chain of movie theaters in Brazil. Which of the following factors should be considered when choosing an office/manufacturing location in the Brazilian market? A. Workforce quality B. The strategy of the movie theater chain C. Tariff and nontariff barriers D. Exchange rates E. All of these Answer: E All of these factors are important when considering an office/manufacturing location. 61. What are the two types of political risk that affect companies conducting global business? A. Political uncertainty and policy uncertainty B. Policy uncertainty and expropriation potential C. Cultural strength and political risks D. Infrastructure dynamism and political uncetainty E. Nationalism and economic uncertainty Answer: A When conducting global business, companies should attempt to identify the risks of political uncertainty and policy uncertainty. 62. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the following e-mail: "We wish to warn the Chinese government and its oil companies to steer well clear of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese government, by investing in stolen crude, places its citizens in our line of fire." Thus, _____________ forced the Chinese government to rethink its investment in international petroleum. A. policy uncertainty B. economic uncertainty C. infrastructure regulation D. nationalistic equity E. political uncertainty Answer: E Political uncertainty is defined as the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events. 63. In 2006, a car bomb near a Chinese-owned oil refinery in a southern Nigerian city detonated. The Movement for Emancipation of the Niger Delta, the terrorist group responsible for the blast, sent the following e-mail: "We wish to warn the Chinese government and its oil companies to steer well clear of the Niger Delta. Chinese citizens found in oil installations will be treated as thieves. The Chinese government, by investing in stolen crude, places its citizens in our line of fire." If as a result of this terrorist act, China decided to divest itself of all of its business in Nigeria, China would have implemented a(n): A. avoidance strategy B. control strategy C. cooperative strategy D. elimination strategy E. self-protection strategy Answer: A An avoidance strategy is used when the political risks associated with a foreign country are viewed as too great. 64. Starbucks is expanding its global operations into South America despite the real probability of civil wars and terrorist activities in many of the continent’s nations. As Starbucks expands into South America, it must deal with: A. political uncertainty B. economic uncertainty C. infrastructure regulation D. nationalistic equity E. strategy risk Answer: A Political uncertainty is defined as the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events. 65. Starbucks is a chain that is rapidly expanding its global operation. As it expanded into South America, its research showed that Chileans on average drink only 150 cups of coffee annually, and people in Argentina only drink about half that amount. An average citizen of the United States drinks 345 cups annually. These differences in annual coffee consumption most likely reflect: A. policy uncertainties B. nationalistic motivations C. cultural differences D. economic uncertainties E. differences in internal marketing strategies Answer: C Cultural differences affect perceptions, understanding, and behavior––in this case, the consumption of coffee. 66. Uganda is one of only two countries in the world that produce a mineral required in the manufacturing of cell phones. Several mining companies recently moved their operations out of the region due to a bloody civil war resulting from a change in rulers. This is an example of how _____________ can influence global business. A. political uncertainty B. policy uncertainty C. economic risk D. infrastructure failure E. nationalization Answer: A Political uncertainty is defined as the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events. 67. Prior to the Japanese government decreeing that Japanese snow was different from all others and the requirement that all snow equipment marketed in the country be made in Japan for safety reasons, several companies from the U.S. and Europe had marketed their snow equipment in Japan. The elimination of non-Japanese companies from the market is an example of how _____________ can influence global business. A. infrastructure modifications B. policy uncertainty C. political uncertainty D. competitive uncertainty E. sociocultural modifications Answer: B Policy uncertainty is defined as the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business. The Japanese government changed its policy regarding snow equipment. 68. What are the strategies that can be used to minimize or adapt to the political risk inherent to global business? A. Protectionist, avoidance, and offensive strategies B. Creative, cooperative, and defensive strategies C. Cooperative, customary, and nationalistic strategies D. Avoidance, protectionist, and guerrilla strategies E. Control, avoidance, and cooperative strategies Answer: E 69. The _____________ strategy of minimizing or adapting to the political risk inherent to global business that makes use of joint ventures and collaborative contracts. A. defensive B. control C. cooperative D. avoidance E. offensive Answer: C Definition of the cooperation strategy. 70. A firm using a _____________ strategy to prevent or reduce political risks will lobby foreign governments or international trade agencies to change laws, regulations, or trade barriers that hurt their business in that country. A. defensive B. control C. cooperative D. protectionist E. avoidance Answer: B Definition of the control strategy. 71. Green Giant learned that it could not use the Jolly Green Giant character in parts of Asia where a green hat worn by a man signifies that he has an unfaithful wife. This is an example of a(n) _____________ that influenced global marketing. A. geocentric attitude B. control strategy C. cooperative strategy D. cultural difference E. avoidance strategy Answer: D Cultural differences affect perceptions, understanding, and behavior––in this case, the wearing of a green hat signifying an unfaithful wife. 72. _____________ is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the people from a particular country. A. National mindset B. National culture C. Cultural nationalization D. Cultural diversity E. National diversity Answer: B Definition of national culture. 73. Hofstede’s research has shown there are: A. no cultural differences among nations in which Spanish is the national language B. two distinct methods for dealing with cultural differences––adaptation and continuation C. direct relationships existing between type of infrastructures and growth potential D. five consistent dimensions of cultural differences across countries E. four factors upon which a company should base its decision to globalize Answer: D Hofstede identified five consistent cultural dimensions: (1) power distance, (2), individualism, (3) masculinity/femininity, (4) uncertainty avoidance, and (5) short-term versus long-term orientation. 74. A news article on Latin America read, “Mexico is the closest Latin America gets to the U.S. both geographically and culturally.” According to Hofstede, this means the Mexican culture: A. does not support individualism B. is strong in power distance C. has a masculine orientation D. is not oriented toward individualism E. is accurately described by all of these Answer: C On Hofstede’s cultural dimensions, the U.S. scores relatively high on individualism, masculinity, and short-term orientation and moderate on uncertainty avoidance. 75. According to Hofstede’s research on cultural dimensions, _____________ cultures emphasize the importance of relationships, modesty, caring for the weak, and quality of life. A. economic-based B. feminine C. relationship-oriented D. individualistic E. masculine Answer: B These are qualities of importance to feminine cultures. 76. The people who live on the island of Malta are described as happy-go-lucky people who are comfortable with an unstructured life and deal well with sudden changes. In terms of Hofstede’s cultural differences, the people of Malta have a: A. culture based on equity B. low degree of uncertainty avoidance C. masculine culture D. high degree of uncertainty avoidance E. feminine culture Answer: B Uncertainty avoidance is defined as the degree to which people in a country are uncomfortable with unstructured, ambiguous, unpredictable situations. Here, the Maltese are described in a manner consistent with a low degree of this cultural dimension. 77. The term _____________ is used by Hofstede to describe the degree to which people in a country are uncomfortable with unstructured, ambiguous, unpredictable situations. A. power distance B. masculinity C. short-term/long-term orientation D. uncertainty avoidance E. risk aversion Answer: D Definition of uncertainty avoidance. 78. According to Hofstede, the people in a culture that is described as _____________ are oriented to the present and seek immediate gratification. A. long-term orientation B. masculine C. short-term orientation D. individualistic E. feminine Answer: C This describes a short-term orientation. 79. An expatriate is someone who: A. claims dual citizenship B. lives and works outside of his or her own country C. believes strongly in nationalization D. is unhappy with his or her present residence E. desires to be employed in a country outside of his or her own Answer: B Definition of an expatriate. 80. Some 5.5 million British citizens, about 10 percent of Great Britain’s total population, now live as expatriates, with 200,000 more every year. This means that: A. about 90 percent of the people born in Great Britain are bilingual B. approximately 10 percent of people born in Great Britain do not work there C. about 10 percent of the British population is involved in global marketing at a level beyond exportation D. approximately 10 percent of the people living Great Britain were not born there E. about 10 percent of the British population works for international companies Answer: B An expatriate is someone who lives and works outside of his or her own country. 81. The purpose of predeparture language training and cross-cultural training is to: A. cater to employees who require affective learning B. increase job empathy C. encourage job specialization D. reduce the uncertainty for those becoming expatriates E. avoid legal problems in the future Answer: D Expatriates who receive predeparture language and cross-cultural training make faster adjustments to foreign cultures and perform better on their international assignments. 82. According to the What Really Works, "Cross-Cultural Training," 21 different research studies show that cross-cultural training: A. does not have any anecdotal evidence to support its usefulness B. really helps expatriates adjust to foreign cultures C. is largely a waste of resources D. does not prepare expatriates for one-to-one relationships with natives E. cannot be justified by any current research Answer: B Meta-analysis reports that cross-cultural training has a 71 percent probability of improving expatriate performance and a 79 percent probability of reporting healthy psychological well-being and self-development in a foreign assignment. 83. The evidence clearly shows that _____________ is the most important factor in determining the success or failure of an international assignment. A. the amount of language training provided to the expatriate B. the amount of cross-cultural training provided to the expatriate C. how well an expatriate’s spouse and family adjust to the foreign culture D. how willing the expatriate was to accept the foreign assignment E. the similarity of the foreign language to the expatriate’s native language Answer: C Spouses and family of the expatriate worker are often more immersed in the daily culture of the foreign country, and their adaptability exerts a strong influence on the performance and retention of the expatriate worker. 84. In order to assess how well managers and their families are likely to adjust to foreign cultures, _____________ is used. A. cultural awareness screening B. sociocultural analysis C. sensitivity screening D. sociocultural diagnostics E. adaptability screening Answer: E Definition of adaptability screening. 85. Refer to “What Would You Do?” Caterpillar has become a multinational corporation. To be considered multinational, a corporation must: A. form a joint venture B. form a strategic alliance C. own two or more wholly owned subsidiaries D. own businesses in two or more countries E. expand domestically Answer: D 86. Refer to “What Would You Do?” Rather than use its normal brochure to sell scrapers in China, Caterpillar shipped several scrapers to China and provided demonstrations. This is an example of: A. global consistency B. local adaptation C. exporting D. licensing E. joint venture Answer: B 87. Refer to “What Would You Do?” Exporting is a key part of Caterpillar’s global strategy. A disadvantage of exporting is: A. loss of control B. increased dependence on home market sales C. goods subjected to tariff and nontariff barriers D. transportation costs reduce the price of products E. increase in prices due to sales taxes Answer: C The primary disadvantage is that many exported goods are subject to tariff and nontariff barriers that can substantially increase their final cost to consumers. SHORT ANSWER 1. Define direct foreign investment. Name one of the top five countries with the largest direct foreign investment in the United States. Answer: Direct foreign investment is a method of investment in which a company builds a new business or buys an existing business in a foreign country. The top five countries with the largest direct foreign investment in the U.S. are, respectively, the United Kingdom, Japan, Canada, the Netherlands, Germany, and France. 2. What are trade barriers? Identify the two general kinds of trade barriers used by governments, and give one example of each. Answer: Trade barriers are defined as government-imposed regulations that increase the cost and restrict the number of imported goods. Governments have used two general kinds of trade barriers: tariff and nontariff barriers. A tariff is a direct tax on imported goods. Tariffs increase the cost of imported goods relative to domestic goods. For example, the U.S. import tax on trucks is 25 percent. Nontariff barriers are nontax methods of increasing the cost or reducing the volume of imported goods. There are five types of nontariff barriers: quotas, voluntary export restraints, government import standards, government subsidies, and customs valuation/classification. An example of a nontariff barrier would be the quota (or specific limit on imports) on the number of Chinese area rugs that can be imported each year. 3. During the 1990s, trade agreements were developed on the worldwide and the regional levels. Briefly describe a regional trade agreement and a worldwide trade agreement. Answer: The two geographic levels at which trade agreements have been developed during the 1990s are worldwide and regional. The original single worldwide agreement was the General Agreement on Tariffs and Trade (GATT), which was replaced by the World Trade Organization (WHO) in 1995. GATT reduced and eliminated tariffs, limited government subsidies, and protected intellectual property. In addition to this global agreement, a second major development in the historic move toward reduction of trade barriers was the creation of regional trading zones, in which tariff and nontariff barriers were reduced or eliminated for countries within the trading zone. The largest and most important trading zones are in Europe (the Maastricht Treaty), North America (the North American Free Trade Agreement [NAFTA]), Central America (Central America Free Trade Agreement [CAFTA-DR]), and Asia (Association of Southeast Asian Nations [ASEAN] and Asia-Pacific Economic Cooperation [APEC]). 4. Briefly explain the phase model of globalization. List its stages in their appropriate order. Answer: The phase model of globalization refers to a series of four sequential stages that most companies have historically gone through in growing from domestic to global companies. The four stages are (1) exporting, (2) cooperative contracts (which take the form of either licensing or franchise agreements), (3) strategic alliances (characterized by the global joint venture), and finally, (4) wholly owned affiliates. At each step, the company would grow much larger, would use those resources to enter more global markets, would be less dependent on home country sales, and would be more committed in its orientation to global business. 5. Compare and contrast global consistency and local adaptation as policies for entering foreign markets. Answer: Global business requires a balance between global consistency and local adaptation. Global consistency means using the same rules, guidelines, policies, and procedures in each foreign location. Managers at company headquarters like global consistency, because it simplifies decisions. Local adaptation means adapting standard procedures to differences in foreign markets. Local managers prefer a policy of local adaptation because it gives them more control. Not all businesses need the same combinations of global consistency and local adaptation. Some thrive by emphasizing global consistency and ignoring local adaptation. Others succeed by ignoring global consistency and emphasizing local adaptation. 6. Briefly explain how companies can assess the growth potential of new markets. Answer: When deciding where to go global, companies try to find countries or regions with promising business climates. The most important factor in an attractive business climate is access to a growing market. Two factors help companies determine the growth potential of foreign markets: purchasing power and foreign competitors. Purchasing power is measured by comparing the relative cost of a standard set of goods and services in different countries. Countries with high and growing levels of purchasing power are good choices for companies looking for attractive global markets. The second part of assessing growing global markets is to analyze the degree of global competition, which is determined by the number and quality of companies that already compete in foreign markets. Companies should look for countries where foreign competitors are weak. 7. Define the two basic types of political risk facing organizations when conducting global business. Which one is more common? Answer: When conducting global business, companies should attempt to identify two types of political risk: political uncertainty and policy uncertainty. Political uncertainty is associated with the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events. Policy uncertainty refers to the risk associated with changes in laws and government policies that directly affect the way foreign companies conduct business. This is the most common form of political risk in global business and perhaps the most frustrating. 8. Define national culture. List the five consistent cultural dimensions across countries. Answer: National culture is the set of shared values and beliefs that affects the perceptions, decisions, and behavior of the people from a particular country. The first step in dealing with culture is to recognize that there are meaningful differences in national cultures. Research shows that there are five consistent differences across national cultures: power distance, individualism, masculinity/femininity, and uncertainty avoidance. 9. Briefly comment on the types of training that should be provided (and to whom that training should be provided) when managers go on international assignments, in order to ensure the success of those managers. Answer: Managers should receive both language and cross-cultural training, such as documentary training, cultural simulations, or field experiences, before going on assignment. In addition, since the evidence clearly shows that how well an expatriate’s spouse and family adjust to the foreign culture is the most important factor in determining the success or failure of an international assignment, language and cross-cultural training should be provided for the spouses and children of expatriates as well. ESSAY 1. Explain how the concepts of global consistency and local adaptation are relevant to success of a global business. Give one example of a good or service that would be likely to succeed with the use of global consistency. Give one example of a good or service that would be likely to succeed with the use of local adaptation. Answer: Global business requires a balance between global consistency and local adaptation that is an appropriate fit for the environment facing the particular global company. Global consistency means that when a multinational company has offices, manufacturing plants, and distribution facilities in different countries, it will run those offices, plants, and facilities based on the same rules, guidelines, policies, and procedures. Managers at company headquarters value global consistency because it simplifies decisions. Local adaptation is a company policy to modify its standard operating procedures to adapt to differences in foreign customers, governments, and regulatory agencies. Local adaptation is typically more important to local managers who are charged with making the international business successful in their countries. Multinational companies struggle to find the correct balance between global consistency and local adaptation. If companies focus too much on local adaptation, they run the risk of losing the cost efficiencies and productivity that result from using standardized rules and procedures throughout the world. If they lean too much toward global consistency, they run the risk of using management procedures poorly suited to particular countries’ markets, cultures, and employees. Thus, not all businesses need the same combinations of global consistency and local adaptation. Some thrive by emphasizing global consistency and ignoring local adaptation. Others succeed by ignoring global consistency and emphasizing local adaptation. Students’ examples will vary, but most students should realize that high-tech products as simple products such as nasal strips to prevent snoring will be the easiest to use global consistency. The Tommy Hilfiger example in the text should provide students with an example of a service that requires local adaptation. 2. What is the phase model of globalization? Identify the factors that have allowed companies to follow different paths to globalization, and then explain the nature of the global new venture. Comment on the extent to which it is likely that this latter approach to globalization will increase. Answer: The phase model of globalization says that as companies move from a domestic to a global orientation, they use four organizational forms in sequence. These forms are exporting, cooperative contracts, strategic alliances, and wholly owned affiliates. The process begins with exporting, which occurs when companies produce products in their home countries and sell those products to customers in foreign countries. This phase is followed by cooperative contracts, which represent an agreement in which a foreign business owner pays a company a fee for the right to conduct that business in his or her country (such contracts may take the form of either licensing or franchising). The third stage is strategic alliances, where companies combine key resources, costs, risk, technology, and people, as, for example, in the joint venture, which is a strategic alliance in which two existing companies collaborate to form a third, independent company. Finally, the company would move to the wholly owned affiliate phase, where foreign offices, facilities, and manufacturing plants are 100 percent owned by the parent company. At each step, the company would grow much larger, would use those resources to enter more global markets, would be less dependent on home country sales, and would be more committed in its orientation to global business. However, evidence suggests that some companies do not follow the phase model of globalization. Some skip phases on their way to becoming more global and less domestic. Others, known as new global ventures, don’t follow the phase model at all. Three trends have combined to allow companies to skip the phase model when going global. First, quick, reliable air travel can transport people to nearly any point in the world within one day. Second, low-cost communication technologies, such as e-mail, teleconferencing, and phone conferencing, make it easier to communicate with global customers, suppliers, managers, and employees. Third, there is now a critical mass of businesspeople with extensive personal experience in all aspects of global business. This combination of events has made it possible to start companies that are global from inception. With sales, employees, and financing in different countries, global new ventures are new companies founded with an active global strategy. While there are several different kinds of global new ventures, they share two common factors. First, the company founders successfully develop and communicate the company’s global vision. Second, rather than going global one country at a time, new global ventures bring a product or service to market in several foreign markets at the same time. It is highly likely that this latter approach to globalization will increase. Each of the three trends that has enabled the development of global new ventures is continuing, and will undoubtedly accelerate. As the technology and human resources necessary to develop global businesses grow, companies will pursue such growth, as it creates a global win–win situation. That is, companies win by increasing market share and profitability, consumers win through decreasing costs and increasing product selection, and national economies win through industrialization and economic growth. 3. Identify and discuss the basic components of an attractive business climate. Also comment on the extent to which a fast-food restaurant franchise might make a different assessment of relevant factors than would a capital-intensive business such as an oil refinery and pipeline company. Answer: An attractive global business climate has three characteristics: (1) it positions the company for easy access to growing markets, (2) it is an effective but cost-efficient place to build an office or manufacturing site, and (3) it minimizes the political risk to the company. A fast-food company would probably make a very different assessment of several relevant factors than would a capital-intensive business such as an oil refinery and pipeline company. Comments on these differences will be clarified in the ensuing discussion. Regarding the first factor, positioning the company for easy access to growing markets, this is most clearly relevant to the fast-food company, which must have its stores located directly in the growth area. An oil refinery/pipeline company would need to be located reasonably close to the source of the crude oil but would not have to be directly within the actual market for the sale of the product. On the other hand, since transportation costs for oil can be significant, the company should be as close as feasible to the target market. Growth potential is determined through an evaluation of purchasing power and foreign competitors. The purchasing power dimension would be more relevant to the fast-food company, since it is selling a discretionary product. The product mix of the oil company would determine the relevance of this dimension (e.g., gasoline, diesel fuel, or heating oil combinations, depending upon the needs of the relevant target market). Foreign competitors may be less relevant to the fast-food company than the oil company, which may be competing with state-owned and -operated facilities. With regard to the second factor, locating an effective but cost-efficient place to build an office or manufacturing site, we would find significantly greater relevance to the oil company since the fast-food company could license or franchise to foreign markets. While the oil company could export, the conditions in the host country would be crucial to its long-term viability, as political factors could ultimately determine its success or failure. Both companies would need to consider the qualitative factors of workforce quality and company strategy, though the oil company is less labor intensive, and may find it easier to bring in qualified technical personnel than would the fast-food company. In addition, quantitative factors would need to be taken into account by both companies. Among these, tariff and nontariff barriers, exchange rates, and transportation and labor costs would be relevant to both companies. The kind of facility being built would be of greater significance to the oil company. The final factor, minimizing political risk to the company, would be acutely important to the oil company but less so to the fast-food company. Since the fast-food company can readily use licensing or franchising to overcome trade barriers and insulate itself from political risk with a cooperative strategy of risk management, it may be in a better position on this dimension. The oil company could be at significant risk from both political uncertainty (associated with the risk of major changes in political regimes that can result from war, revolution, death of political leaders, social unrest, or other influential events) and policy uncertainty (associated with changes in laws and government policies that directly affect the way foreign companies conduct business). For the oil company, careful selection of the site for the facility beforehand is probably the most crucial step (i.e., an avoidance strategy). Assuming that a reasonable and relatively stable country has been selected, the control strategy (lobbying foreign governments) and cooperative strategy (using joint ventures) can help to reduce the political risk. 4. A married manager with two children has been offered the opportunity to go abroad on an expatriate assignment for the company in a foreign country for a period of three years. If the manager chooses to accept the assignment, he or she wants to perform very well in order to continue moving up the corporate ladder. What sorts of preparations should the manager expect the company to provide in order to ensure his or her success in the assignment? Comment on these training and preparatory expectations in an ideal world as well as the real world that the manager probably will face. Answer: Many expatriates return prematurely from international assignments because of poor performance. For example, it is estimated that 5 to 20 percent of American expatriates sent abroad by their companies will return to the United States before they have successfully completed their international assignments. Of those who do complete their international assignments, about one-third are judged by their companies to be no better than marginally effective. Thus, the manager who wants to continue moving up the corporate ladder must be critically concerned with obtaining the proper screening and support to ensure that the overseas assignment will be successful. Considerable research shows that expatriates are much more likely to be successful if they receive language and cross-cultural training, such as documentary training, cultural simulations, or field experiences, before going on assignment. Such training has been shown to impact positively on five separate dimensions: (1) psychological well-being and self-development, (2) fostering relationships with native citizens, (3) accurate cultural perceptions, (4) rapid adjustment to a foreign cultures and countries, and (5) on-the-job performance. Adjustment of expatriates’ spouses and families, which is the most important determinant of success in international assignments, can be improved through adaptability screening and intercultural training. Adaptability screening is not just companies assessing employees; it can also mean that employees screen international assignments for desirability. Since more employees are becoming aware of the costs of international assignments (spouses having to give up or change jobs, children having to change schools, having to learn a new language, etc.), some companies are willing to pay for a preassignment trip for the employee and his or her spouse to investigate the country before accepting the international assignment. In our ideal-world example, this option should be taken by the manager considering a three-year assignment, as the average cost of sending and employee on such an assignment is $1 million. Language and cross-cultural training for families is just as important as language and cross-cultural training for expatriates. In fact, it may be more important, because unlike expatriates, whose professional jobs often shield them from the full force of a country’s culture, spouses and children are often fully immersed in foreign neighborhoods and schools. Households must be run, shopping must be done, and bills must be paid. Likewise, children and their parents must deal with different cultural beliefs and practices about discipline, alcohol, dating, and other issues. Thus, in an ideal world, all of these procedures, which have been shown to contribute to the success of the expatriate, should be employed. Unfortunately, in the real world, only a third of the managers who go on international assignments receive any kind of predeparture training. Thus, our manager’s decision of whether or not to accept the assignment should be very carefully considered, based upon the likely impact of strong or weak performance on his or her future career prospects and the level of support the company is willing and able to provide. Test Bank for Effective Management Chuck Williams 9781285866246