Study Guide. Scoring Record. Chapter 4. International Environment of Business. Name. Perfect score Date. My score

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1 44703_04_ch04_p qxd 8/2/07 10:37 am Page 27 Chapter 4 International Environment of Business Name Date Scoring Record Part A Part B Part C Total Perfect score My score Study Guide Part A Directions: Indicate your answer to each of the following questions by writing either or in the Answers column. 1. Have trade patterns on an international level shifted from services to goods? Is buying goods and services made in other countries called importing? Do Americans export goods from France when they buy French perfume? Is a parent firm a business that owns or controls production or service facilities in more than one country? Are most of the world s smallest corporations multinationals? Is one reason for imposing tariffs to earn revenue for the country? Does dumping lower the price of goods sold in a foreign market? Do quotas limit the number of goods permitted to enter a country? Do tariffs raise the price of foreign products? Do ntariff barriers increase the number of imports that enter a country? Are governments allowed to restrict investments made by foreigners? Is profit usually the main reason why firms sell abroad? Does the WTO create and enforce rules governing trade within the United States? Does a trading bloc discourage free trade among its members? Is the IMF s main purpose to provide low-cost loans for roads and electric power plant development in less-developed countries? Do sales level off during the maturity stage of a product? Do American companies move to foreign countries when sales at home begin to grow? Does a balance of payments deficit exist when more money leaves a country than comes in? 19. Might countries with prolonged trade deficits have to restrict the activities of foreign businesses in their countries? When the demand for foreign currency decreases, does the value of the dollar increase? Answers Total Score 27

2 44703_04_ch04_p qxd 8/2/07 10:37 am Page 28 Part B Directions: For each of the following statements, select the word, or group of words, that best completes the statement. In the Answers column, write the letter corresponding to the answer selected. 1. Which method is likely to be the least costly and risky way to expand abroad? (a) franchising, (b) licensing, (c) dumping, (d) exporting Two or more firms sharing the costs of doing business in foreign countries and also sharing the profits are (a) joint ventures, (b) strategic alliances, (c) wholly owned subsidiaries, (d) licensed enterprises If the United States sets a tariff of 15 percent on $150 cameras that are made in Germany, the cost of the camera in the United States will rise to (a) $155.50, (b) $165, (c) $172.50, (d) $ How do tariffs affect the prices of foreign goods? (a) Prices increase. (b) Prices decrease. (c) Prices remain the same. (d) Prices fluctuate at a quick pace Nontariff barriers (a) increase the number of imports that enter a country, (b) increase the value of one currency to ather, (c) protect domestic producers, (d) protect foreign producers In a high-context culture such as Japan, communication would NOT likely be (a) direct, (b) gestures, (c) indirect, (d) vague If a U.S. company overproduces, the best way to dispose of its surplus goods profitably is to (a) advertise widely to attract buyers, (b) drop the price of the surplus goods to attract buyers, (c) create a trading bloc to create demand for the goods, (d) sell the surplus goods abroad In order to gain a trade advantage, a country specializes in a product it can provide more efficiently than can other countries. What theory is the country practicing? (a) balance of trade theory, (b) comparative advantage theory, (c) product life cycle theory, (d) balance of surplus theory The first two stages that a product goes through are the (a) introductory and growth stages, (b) introductory and decline stages, (c) growth and maturity stages, (d) growth and decline stages If the Canadians keep increasing the number of American cars purchased, (a) American products will become more expensive for Canadians, (b) Canadian products will become more expensive for Americans, (c) American products will become less expensive for Canadians, (d) Canadian products will become less expensive for Americans.... Answers 1. d 2. a 3. c 4. a 5. c 6. a 7. d 8. b 9. a 10. a Total Score Part C Directions: In the Answers column, write the letter of the word or expression in Column I that most closely matches each statement in Column II. Column I A. culture B. dumping C. EU D. exports E. free trade F. imports G. quotas Column II 1. An example of a trading bloc Restrictions on quantities permitted to enter a country 3. Selling goods below cost in a foreign market Goods and services purchased from other countries Customs, beliefs, values, and patterns of behavior of the people of a country or group... Total Score Answers C G B F A 28

3 44703_04_ch04_p qxd 8/2/07 10:37 am Page 29 Chapter 4: Controversial Issues Name Directions: Study each controversial issue carefully. Follow the advice of your teacher before listing in the columns provided reasons why people might answer Yes or No. Your teacher may want you to work with a classmate, talk with others in your community to gather information, or use the library or Internet to gather facts Should South America form a trading bloc that might be called SAFTA (South American Free Trade Association)? Reasons for Yes Reasons for No 4-2. Because of the growing importance of international trade and relations, should all students be required to study a foreign language and take a course dealing with world cultures? Reasons for Yes Reasons for No Teaching suggestion: You may want to form two teams of students to debate the issues. The remaining students can serve as judges to determine the winning team. 29

4 44703_04_ch04_p qxd 8/2/07 10:37 am Page 30 PROBLEMS 4-A. Listed below are the names of ten of the world s largest firms. Use the library, the Internet, or other sources to name the home country and the main industry or product for each. Company Country Industry Aerospatiale Bayer Citizens Watch E. I. DuPont de Nemours Electrolux Kia Motor Northern Telecom Petrofina Siemens Smithkline Beecham France Germany Japan United States Sweden S. Korea Canada Belgium Germany Britain aerospace healthcare chemicals jewelry, watches chemicals electrical equipment motor vehicles electrical equipment petroleum electronics pharmaceuticals 4-B. Listed below is the value of exports shown in millions of dollars for three fictitious countries for selected products. Study the figures and answer the questions that follow. 1. Which country is likely to have the competitive advantage for each of the following products? a. Lumber b. Coffee c. Rice Galafo Minion Ungwa 2. How could Galafo best trade with Minion? Galafo should trade lumber for coffee. Galafo Minion Ungwa Lumber $1,350 $ 700 $ 0 Coffee 50 7, Rice ,900 Fish How could Minion best trade with Ungwa? Minion should trade coffee for rice. 4. If Ungwa had an embargo on Galafo s lumber, what might Ungwa do to obtain lumber? Minion might be persuaded to import Galafo s lumber for coffee and then trade it to Ungwa for rice. 30

5 44703_04_ch04_p qxd 8/2/07 10:37 am Page 31 Name 4-C. Assume that the following chart shows the cost (in U.S. dollars) for selected products available to customers in four major world cities in a recent year. Study the chart and answer the questions below. New York London Tokyo Mexico City Compact disc $ $ $ $ Movie Sony Walkman (mid-range) Cup of coffee Designer jeans Nike Air Jordans If you lived in Japan, which city would you most like to visit to get the best buys for your money? New York 2. If you did t live in any of the countries represented by these cities, which city would you least like to visit if you decided to go on a shopping spree to buy some of the items listed above? Tokyo 3. What percentage more would an American pay for a movie in London than in New York? $10.50 $7.50 $3.00; $3.00/$ % 4. What percentage less would a New Yorker pay for a movie in Mexico City? $7.50 $4.55 $2.95; $2.95/$ % 5. What purchasing advice would you give to an American who wants to travel to London? Take eugh money to cover the higher costs. Do t buy items in London that you could buy in the United States. 4-D. Indicate whether each situation described below is an embargo, tariff, quota, sanction, or ntariff barrier. 1. The United States limits the number of Japanese cars that may be imported each year The Japanese do t permit the importing of certain American products The U.S. government forbids U.S. companies from conducting business with Cuba France places a tax on alcoholic beverages imported from the United States Some countries do t buy VCRs from many producers because they are made mostly in black, which is the color of death The U.S. government might take this action if a foreign firm attempted to dump its products here.... Nontariff Embargo Tariff Quota Sanction Barrier 31

6 44703_04_ch04_p qxd 8/2/07 10:37 am Page 32 4-E. Assume that the U.S. Department of Commerce reported the following figures on imports and exports of selected products in millions of dollars. Study the figures and answer the questions that follow. 1. Calculate the total exports and imports and record each total in the space provided. 2. By how much did the imports exceed the exports? 3. Which goods are imported in greater quantity than exported? 4. Which goods are exported in greater quantity than imported? 5. Based on these products only, does a balance of trade surplus or deficit exist? 6. Which one item most contributed to the difference between the total imports and exports? 4-F. Assume that the following exchange rates for four countries equals one American dollar. 1. Assume you bought the following products while vacationing over the last two years. Determine how much you paid in American dollars in the currency of the country you visited. a. Camera for 150 Canadian dollars (Year 1) b. Perfume for 110 French francs (Year 2) c. Jewelry for 50 Mexican pesos (Year 1) Exports Imports Coffee $ 9.8 $ 1,735.6 Rice Wheat 3, Clothing 3, ,205.8 Motorcycles/bicycles 1, ,635.9 Scientific instruments 13, ,757.4 Total $22,111.9 $36,481.1 Year 1 Year 2 Canadian dollar French franc Japanese yen Mexican peso /1.28 $ U.S. 110/5.56 $19.78 U.S. 50/3.35 $14.93 U.S. 2. Assume you bought biculars in Japan in Year 1 for 8,700 yen and in Year 2 you returned to Japan for a second visit and you saw the item at the same store for 11,500 yen. a. In Year 1, what was the price for the biculars in American dollars? b. What was the dollar price in Year 2? 11,500/112 $ U.S. 4-G. Many countries belong to trading blocs. Place a check mark in the appropriate column to indicate whether the country is a member of the European Union (EU), North American Free Trade Association (NAFTA), or neither. Country EU NAFTA Neither 1. Greece 2. Britain 3. Mexico 4. Japan 5. Canada 6. Brazil 7. Italy 32 $36,481.1 $22,111.9 $14,369.2 million coffee, clothing, motorcycles/bicycles rice, wheat, scientific instruments deficit clothing 8,700/106 $82.08 U.S.

7 44703_04_ch04_p qxd 8/2/07 10:37 am Page 33 Name 4-H. Assume that you have been working in an American company for several years and you w have the opportunity to work in one of its branch offices located in ather country. Answer the following questions before you leave for your new job abroad. 1. Provide the name of the country to which you wish to be assigned. 2. Why did you select this country? 3. What is the currency, and how many units of that currency are equal to one American dollar? 4. Assume that your salary in the United States is $25,000 a year. What is it worth in the currency of your new country? 5. What are two main products that this country exports? 6. What are two main imports of this country? 7. What is the language of your new country? 8. Write the following sentence in the language of the country: My name is... and I live in the United States of America. 9. What are the average temperatures for the following months: June October January March 10. Identify several different customs practiced in this country regarding such items as being on time for appointments, working hours, table etiquette, popular food dishes, eye contact, dress, holidays, and religion. 33

8 44703_04_ch04_p qxd 8/2/07 10:37 am Page 34 SMALL GROUP ACTIVITIES Group Activity 1 Your instructor will place you into groups of two. With your partner, make a list of five nbook items in your possession. Examples might include watches, jewelry, wallets/purses, sneakers, backpacks, pens, beepers, personal digital assistants, and cell phones. Next to each item, identify the country of origin. Report your results to the class. After all pairs have reported their findings and recorded them on the board, the class should answer these questions together: 1. What are the top three countries identified? 2. How many countries in all are identified? 3. Which continents or regions of the world are most represented? 4. Are any particular industries more dominant than others? Which ones? Answers will vary to a great extent among classes and over time. You may want to have student pairs write the names of their products and countries on the board. Students generally enjoy this simple exercise. It can be used to focus attention on the importance of international business. It will also cause students to think about where major commercial centers are located in the world. Finally, it will raise their interest in traveling to and working in other nations. Group Activity 2 Find someone who recently came to this country from ather country, either to live or as a visitor. Then ask that person the following questions and write tes summarizing the person s answers. Later you will be asked to share this information with your class. 1. When you first arrived in this country, what practices or behavior seemed most different from your country? 2. In your home country, if you need to tell someone on the job that you disagree with him or her, do you tell the person directly or do you only imply or hint that you disagree? 3. What time do people go to work on day jobs in your country and what time do they leave at the end of the day? How long is their lunch period? When do they have breaks during the day? 4. What is the procedure for obtaining a pay increase in your country when you believe you have earned it? 5. In your country, if you have been improperly treated or discriminated against on the job by your supervisor or other employees, would you have the right legally to sue your employer? 6. If an American went to your country, what things would you tell him or her to avoid doing? 7. How do you greet someone in person in your country and on the telephone? How do you say goodbye? After obtaining answers to the above questions, your teacher will place you into groups based upon the language, country, or region of the world that you selected. Compare your answers with those of other members of your group to see whether your answers are similar or different. Your group should select a leader to report your results to the entire class. 34