Q&A Hero

Q: Because of the rapidity of changes in uncontrollable variables, many managers have turned to contingency plans, which are multiple, plausible stories for probable futures.

Q: Contingency plans are developed in some firms for the best-and worst-case scenarios and for critical events.

Q: Scenarios are a particularly useful approach for international companies that face high levels of change and uncertainty, because they allow management to anticipate and prepare for opportunities and threats by predicting and controlling for these developments.

Q: Scenario analysis can help managers to break away from their existing view of the world and envision alternatives that might lie outside their traditional frame of reference.

Q: Scenarios are multiple, plausible stories for probable futures.

Q: Historically, more aspects of marketing have been standardized and coordinated worldwide by companies than has been the case for other value chain activities such as research and development and manufacturing.

Q: Because large multinationals generate an average of nearly two-thirds of their revenues within their home region, some researchers have suggested that a regional strategy perspective is more appropriate than a global perspective.

Q: A benefit of global strategies is their ability to adjust quickly and effectively to changes in customer needs across national or regional markets.

Q: A global strategy tends to be used when a company faces strong pressures for reducing costs and limited pressure to adapt products for local markets.

Q: A multidomestic strategy tends to be used when a company simultaneously confronts pressures for cost effectiveness and local adaptation.

Q: With a multidomestic strategy, the cost and complexity of coordinating a range of different strategies and product offerings across national and regional markets can be substantial.

Q: Companies pursuing a home replication strategy typically centralize product development functions in their home country and then transfer innovations to foreign markets in order to capture additional value.

Q: When developing and assessing strategic alternatives, it is important to remember that companies competing in international markets confront two opposing forces: reduction of costs and adaptation to local markets.

Q: Objectives must be quantified in order to be useful.

Q: Objectives direct the firm's course of action, maintain it within the boundaries of the stated mission, and ensure its continuing existence.

Q: A broad statement that defines the organization's scope is the mission statement.

Q: After setting corporate objectives, the company management must define the company's vision and mission.

Q: Knowledge that an individual has but that is difficult to express clearly in words, pictures, or formulae, and therefore difficult to transmit to others, is called explicit knowledge.

Q: Companies have the potential to achieve competitive advantages through leveraging their organizational knowledge across national boundaries.

Q: Value chain linkages must be examined not merely across activities within the company but also in terms of managing relationships with external entities such as suppliers, alliance partners, distributors, or customers within and across nations.

Q: Value chain analysis focuses primarily on the question, "What value does the company want to deliver to these customers?"

Q: Value chain analysis is an assessment conducted on the chain of interlinked activities of an organization or set of interconnected organizations, intended to determine where and to what extent value is added to the final product or service.

Q: An analysis of the forces controlled by the firm will include a situational analysis and control analysis.

Q: According to a study by McKinsey & Company, most executives worldwide agree that environmental, social, and business trends are less critical to company strategy than was the case five years ago.

Q: The first step in the process of strategic planning is to define the company's business and mission.

Q: The ultimate managers of strategic planning and strategy making are the executive board of a corporation.

Q: Although strategic planning is not a widely used management tool among global executives, according to a Bain & Company survey there is a high level of satisfaction among those executives who do utilize strategic planning.

Q: Global strategic plans help to ensure that decision makers have a common understanding of the business and think through the impact of their decisions and actions firmwide.

Q: The basic concept behind strategic planning is to help ensure that managers have a sound understanding of the business, the strategy, the assumptions behind the strategy, the external business environment pressures, and the company's strengths and weaknesses.

Q: Competencies are skills or abilities required in order to adequately complete a task.

Q: To create a sustainable competitive advantage, an international company should try to develop competencies that are valuable, rare, difficult to imitate, and readily substitutable.

Q: The goal of international strategy is to achieve and maintain a unique and valuable competitive position both within a nation and globally, a position that has been termed comparative advantage.

Q: International strategy involves decisions that deal with a single area, such as marketing or production.

Q: International strategy helps firms to make choices about how to deploy scarce resources in order to achieve their international objectives.

Q: Scenarios are forecasts that extrapolate from past data to make predictions.

Q: Scenario planning helps to emphasize that the business environment is predictable and helps to emphasize the application of traditional perspectives when solving problems.

Q: Currency exchange controls are found most frequently in: A. developing countries. B. developed countries. C. countries with pegged exchange rates. D. nondemocratic countries.

Q: The three main approaches to exchange rate forecasting are: A. the efficient market approach, the fundamental approach, and the technical approach. B. the efficient market approach, the random walk hypothesis, and the pragmatic approach. C. the random walk hypothesis, the pragmatic approach, and the fundamental approach. D. none of the above.

Q: Exchange rate forecasting is: A. important because exchange rates influence all aspects of business. B. important because markets depend on solid information. C. unimportant because exchange rate forecasting does not have a theoretical model. D. unimportant because exchange rate movements do not impact international transactions.

Q: Purchasing power parity is a way to compare: A. the purchasing power of several currencies. B. tastes in several different cultures. C. the impact of financial aid in several economies. D. meals in the quick-service restaurant sectorvia the Big Mac index.

Q: The international Fisher effect says that the interest rate differentials in any two currencies reflect: A. the ratio of their inflation rates minus COL B. arbitrary differences in the two economies. C. PPP differences in the two economies. D. the expected change in their exchange rates.

Q: When the law of one price is applied to interest rates, it suggests that: A. interest rates do not differ much across national borders. B. inflation is not affected by interest rates. C. inflation and interest rates do not follow the law of one price. D. varying interest rates take into account anticipated differences in inflation rates.

Q: Arbitrage functions to: A. provide French markets access to other EU markets. B. exploit price differences between markets, so as to profit with no risk. C. create wealth through interest rate swaps. D. create increased trading in commodity markets.

Q: Market forces that set the relative prices of currencies are: A. not influenced by government policies. B. not influenced by world events. C. influenced by many forces including forces external to business, such as world events. D. A and B.

Q: If the Japanese yen is strengthening against the U.S. dollar, and the Japanese government wanted to boost exports, the central bank of Japan might well: A. sell U.S. dollars in large amounts in the currency markets. B. buy massive amounts of Japanese yen in the FX markets. C. sell massive amounts of Japanese yen in the FX markets. D. buy massive amounts of other hard currencies, such as the British pound sterling and the euro, to deflect the focus on dollars.

Q: The forward currency market: A. allows purchasers to lock in purchases of currencies at known rates. B. provides governments a way to manage their currency's value. C. makes trading in several currencies more efficient. D. helps managers manage domestic debt.

Q: The present floating exchange rate system is not a totally free float because: A. there is an exchange fee of 1.5 to 1.75 percent. B. some governments refuse to allow foreign traders to trade their currency. C. some central banks from time to time intervene in the market to buy or sell large amounts of currency to affect the supply and demand of a particular currency. D. A and B.

Q: Financial forces such as inflation and taxation are considered uncontrollable because: A. there is nothing a manager can do to adjust to them, so the recommended approach is to ignore them. B. they are external forces beyond the influence of the firm, around which a manager can manage. C. they are external to the firm and their influence is to be avoided. D. they are unpredictable.

Q: The present floating exchange rate system was: A. designed by the IMF and implemented flawlessly in 1973. B. established by the major trading nations in 19721 after Nixon closed the gold window. C. implemented in tandem with a reintroduction of the gold standard. D. established after several trials in which central bankers set rates incorrectly and speculators corrected them in the markets, and it was formalized after the fact in the IMF's Jamaica Agreement.

Q: Bretton Woods led to an exchange rate agreement known as the Bretton Woods System or: A. the floating-rate system. B. the India Accord system. C. the gold exchange standard. D. the French rate system.

Q: Sir Isaac Newton put England on the gold standard when he: A. declared, as master of the English mint, that he would sell gold for 1 pound, 1 shilling, 1 pence, under the law of one price. B. set a market price for gold, the British pound and the U.S. dollar. C. established a fixed equivalency between gold and the British currency. D. brought the matter to Queen Anne, who declared Britain would follow the gold standard.

Q: Historically, gold has been used as a way for people to store value because of its: A. purity and scarcity. B. high transportation and security costs. C. lack of interest-earning ability. D. all of the above.

Q: Tariffs are not a financial force; they are a political force.

Q: The random walk hypothesis suggests that the best predictor of tomorrow's currency prices are today's prices.

Q: China participates in the management of the international financial environment by managing its currency.

Q: Monetary policies control the collecting and spending of money by governments.

Q: The spot rate is the rate for exchange within two days in the currency market.

Q: Currencies float because they are allowed to make their own adjustments in the marketplace.

Q: The Bank for International Settlements is like a central bank for central bankers.

Q: One exchange arrangement is to have no separate legal tender.

Q: The Bretton Woods system worked until the late 1960s.

Q: Allied and Axis governments met in Bretton Woods in the final days of World War II.

Q: When a business pays in dollars for an import from Turkey, the dollars that leave the United States will eventually show up as a credit on the U.S. capital account.

Q: The United States in recent years has had a significant deficit in its current account. This means that U.S. citizens are exporting more than they are importing.

Q: In POB accounting, a deficit in the current account is always accompanied by a surplus in the capital account.

Q: BOP accounts are recorded in a double-entry bookkeeping method, with each transaction having debit and credit sides.

Q: When a country imports more than it exports, the currency might be expected to weaken.

Q: The balance of payments is a record of a country's transactions with its major trading partners.

Q: As global financial markets become more integrated, we can expect countries' inflation rates to vary over a small range.

Q: Inflated currencies tend to weaken.

Q: Brazil, India, and the United States are among the highest corporate tax locations.

Q: The value-added tax (VAT) can be rebated to exporters, according to WTO rules.

Q: Countries put limitations on the convertibility of their currencies when they are concerned that their foreign reserves could be depleted.

Q: Exchange rate forecasting is an advanced science; with the correct data, we can predict with accuracy exchange rate movements.

Q: The Big Mac index is an example of purchasing power parity, an international measure of junk-food consumption.

Q: The international Fisher effect states that the interest rate differentials for any two currencies reflect the expected change in their exchange rates.

Q: The Fisher effect describes interest rate parity; it's the law of one price applied to interest rates. Interest rates vary to take into account anticipated differences in inflation levels.

Q: The law of one price states that in an efficient market, like products will never have like prices.

Q: Currency exchange rate movements are well understood by economists and can be accurately forecast, which eliminates risk for the international seller operating with exposure outside the home currency.

Q: The exchange rate for today for delivery within two days is known as the current rate.