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IBUS 401 - Quiz 1 With Actual Correct Answers
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IBUS 401 - Quiz 1 With Actual Correct Answers
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IBUS 401 - Quiz 1 With Actual CorrectAnswers
As a US resident, a _________________ dollar indicates cheaper imported goods.
CORRECT ANSWERS stronger
As a US resident, a _________________ dollar indicates more expensive imported
goods. CORRECT ANSWERS weaker
Agency Cost CORRECT ANSWERS cost of ensuring that managers maximize
shareholder wealth
MNCs usually have ______________ agency cost. Why? CORRECT ANSWERS
Higher, for several reasons:
- monitoring managers of distant subsidiaries in foreign countries is more difficult
- foreign subsidiary managers raised in different cultures may not follow uniform goals
- sheer size of larger MNCs can create large agency problems
- some non-US managers tend to downplay the short-term effects of decisions
Theories of International Business CORRECT ANSWERS 1. Theory of Competitive
Advantage
2. Imperfect Market Theory
3. Product Cycle Theory
Theory of Competitive Advantage CORRECT ANSWERS Specialization increases
production efficiency. (a country does something better than another country so you
should do work with them)
Imperfect Markets Theory CORRECT ANSWERS Factors of production are somewhat
immobile providing incentive to seek out foreign opportunities
Product Cycle Theory CORRECT ANSWERS As a firm matures, it recognizes
opportunities outside its domestic market. Ex: moving VA factory to Thaiwan -
outsourcing)
How firms engage in international business CORRECT ANSWERS 1. International
Trade
2. Licensing
3. Franchising
4. Joint Ventures
5. Acquisitions of existing operations
6. Establishing new foreign subsidiaries
, International Trade CORRECT ANSWERS Penetrating markets by exporting and
obtaining supplies at a low cost by importing.
Licensing CORRECT ANSWERS Allow another company to use your know-how and
they pay for it.
Franchising CORRECT ANSWERS Firm provides a specialized sales or service
strategy, support assistance, and possibly an initial investment in the franchise in
exchange for periodic fees (will teach you how to do everything for money)
Joint Ventures CORRECT ANSWERS Two or more companies form a venture and own
that company. Problem - somebody owns more than the other, problem if you are the
minority party)
Acquisitions of existing operations CORRECT ANSWERS Go and buy business outside
of country. Allows firms to have full control over their foreign businesses and to quickly
obtain a large portion of foreign market share.
Establishing new foreign subsidiaries CORRECT ANSWERS Go and build up a
company outside of country.
Cost (order from least to greatest) CORRECT ANSWERS International trade (least),
Licensing, financing, joint ventures, acquisitions, new foreign subsidiaries (most)
Risk (order from least to greatest) CORRECT ANSWERS International trade (least),
licensing, financing, joint ventures, acquisitions, new foreign subsidiaries (most) *joint
ventures probably riskier
Payoff (order from least to greatest) CORRECT ANSWERS International trade (least),
licensing, franchising, joint ventures, acquisitions, new foreign subsidiaries (most)
Valuation of MNC CORRECT ANSWERS Present value of dollar cash flows discounted
by cost of capital. US Company - dollar cash flow. Foreign company - forecast currency
exchange rates to get back to dollars.
International flow of funds CORRECT ANSWERS accounting for cash (positive if cash
comes in, negative if cash goes out)
Balance of payments CORRECT ANSWERS transactions between domestic and
foreign residents for a specific country over a specific period of time (the plus and
minuses)
Components of the balance of payments statement CORRECT ANSWERS Current
Account, Capital Account, Financial Account
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