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Exam 3: Doing Business in Global Markets

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Question 71

Multiple Choice

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Licensing is a popular strategy because

A) it boosts domestic market revenues.
B) the licensee has incentive to work hard and succeed because he/she has borne the cost.
C) licensees spend little or no money to produce and market their products.
D) there are seldom any long-term contractual requirements.

E) None of the above
F) All of the above

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Question 72

True/False

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A free-trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the U.S. is known as the Central American Free Trade Agreement. Its strategy is to open new markets for all member countries and to raise tariffs among participating nations.

A) True
B) False

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Question 73

Multiple Choice

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The largest importer in the global market today is

________ is lowering the value of a nation's currency relative to other currencies.

In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations.

Since 1975, the U.S. has had a(n) ________.

Mini-Case Ever since he was five years old, Rhett Tenna has had poor eyesight and as an eyeglass wearer he suffered through all the names that went along with it. Rhett eventually switched from glasses to contacts, but he always wondered why his glasses were not fashionable. After graduation from college, Rhett set out on a lifelong goal: to make eyewear synonymous with fashion. He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses, and replace it with a sense of flair and high fashion. From the day he opened his first store, Rhett's plan met with resounding success. Today, "The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states, and a manufacturing plant that turns out designer frames. A recent internal audit, however, suggested a problem that Rhett had not anticipated. The study indicated that the U.S. market is just about saturated and growth of "The Eyes Have It" stores will be very limited. The audit concerned Rhett until he recognized an untapped market existed overseas. If people all over the world have the same problem, the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"! -Next year, in order to cut both time and cost in getting new styles to global markets, Rhett plans to ________ a few of his designer lines. Rhett will send his designs to manufacturers in India, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their respective countries. This will not only reduce the cost of labor, it will help Rhett reach regional markets in a timely manner.

James's family business, J&J Interiors, sells and installs tile in bathrooms and kitchens. More and more of J&J's customers are asking for heater coils under bathroom floors, and James thinks there is a greater opportunity in heated tiles. In his effort to avoid domestic competition, he sets his sights on the vast Hasalot market. Much to his surprise, most of Hasalot's citizens do not yet have indoor plumbing and are accustomed to government-run communal baths. James realizes that his global marketing effort is hampered by

There's a problem overseas of the reproduction of music originally recorded by popular American artists. It seems that a recording made in the U.S. can be copied within a couple of hours and then immediately sold abroad. The U.S. government is able to readily prosecute these foreign companies.

In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge.

The concept of free trade means

A ________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk.

Effective human resource management styles are transferable from one culture to another.

________ is buying products from another country.

A ________ is a partnership in which two or more companies (often from different countries) join together and share the risk and costs in order to undertake a major project.

Tebeau Partners of France and Morimoto Management based in Japan recently produced a new electric car with rechargeable batteries that can be driven at high speeds for long distances. They shared the investment, each contributing important technological expertise to the effort. These firms entered into a(n) ________ to build this car.

Strategic alliances almost always result in one company taking over the financial interests of another company.

A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product.

Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently.

In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient.