BBB4M – International Business
FINAL EXAM REVIEW QUESTIONS
This is the content that will be highlighted on the final exam WEDNESDAY, JUNE 22, 9 AM, ROOM 356. Bring writing equipment and a calculator.
References: How to Prep for a Final Exam.
http://homeworktips.about.com/od/schooltests/a/studyfinals.htm
http://history.wisc.edu/sommerville/Administrative/essays.htm
http://www.studytechniques.org/
[ mark estimates]
1. / The country of Italio has high unemployment. The government is considering ways to reduce it.Explain how each of the following actions by the government would, in the long term, lower the unemployment rate.
In questions like these, it is important that you clearly state what effect each action will have and why.
If the question has a mark total of 2, you will need to provide at least two solid points and defend them. Do not give a vague answer that requires the teacher to suppose what you mean, or to finish off your thinking by extension. In a final exam situation you only have one opportunity remaining to demonstrate your knowledge and mastery of the course content.
If the question asks you to answer briefly, do so. It makes no sense to write volumes to earn 2 or 3 marks.
If a question asks for three reasons, for example, and you only know two, write your answer with the two you know, leave some space, and return to the question later.
(a) / Lowering the central bank rate. [2]
(b) / Entering into a free trade agreement with three other countries. [3]
(c) / Devaluing the country’s currency relative to its top five trading partners. [2]
(d) / Offering tax incentives to small and medium sized businesses willing to shift from the production of low value added products to higher value added products. [2]
2. / Here are some sample questions connected with the history of trade and globalization. Don’t forget to support any points you make with references or examples and to keep your responses brief. Be brief, clear and concise.
Check to see whether or not point form is allowed. Don’t write more than you need to or you will run out of time.
(a) / Globalization is the outcome of nations choosing interdependence over self-sufficiency. Discuss. Provide examples to support your comments. [3]
(b) / The Roman Empire created and supported conditions that brought about an era of globalization. Explain. [3]
(c) / North American aboriginals were early victims of globalization. Do you agree or disagree with this statement? Explain. [3]
(d) / The American and Canadian economies evolved along different paths. Discuss by highlighting the key differences in their evolutions. [4]
3. / The World Trade Organization and the International Monetary Fund are two organizations that were created to ensure that economic development and global trade activities continue in an orderly fashion. The organizations and their roles are different, however.
Discuss briefly the role of each of these organizations in sustaining global trade and economic activity. Select an example to illustrate how these organizations function. [6]
4. / BRM is an American manufacturer based in Ohio that manufactures bathroom accessories (sinks, toilets, faucets, etc.). The company’s executives have decided to move some of its manufacturing activities to a Maquiladora located along the Mexican border.
(a) / What is a Maquiladora, and why has BRM made the decision to move some manufacturing activities there? [3]
(b) / Maquiladoras may provide benefits for the companies that set up in them, but the same can’t always be said for the employees that work there. Discuss. [3]
5. / The text identifies advantages and disadvantages of trade (Section 1.4). Select two advantages and two disadvantages from the text list and discuss them briefly. [4]
6. / Trade activity increases and business costs can be reduced when several countries join to form a trade bloc or an economic union.
(a) / Give an example of an existing free trade agreement between countries; a trade block; and an economic union. [3]
(b) / Explain how trade is enhanced when nations participate in these kinds of trade associations. [3]
(c) / List at least two reasons that explain why business costs are reduced. [2]
(d) / Has Canada benefited from its participation in NAFTA? Why/Why not? [3]
7. / RJY Minerals, a multinational mining companies operating in 23 countries, was awarded the Corporate Citizens Award for the implementation of its Corporate Social Responsibility (CSR) policy.
Why would ensuring the success of its CSR policy be an important part of RJY’s ability to compete in the international mining industry? [3]
8. / RJY Minerals in question 6 also announced that it had received its ISO certification. What is an ISO certification and what benefits does RJY hope to obtain now that it is certified? [3]
9. / FunTime Toys is a medium-sized company with manufacturing operations in Hamilton, Ontario. It employs 100 full time workers and 25 part-time workers. FunTime produces low value-added specialty toys and games that are exported mostly to US and Mexican buyers. Export sales to the US accounted for 80% of total earnings. FunTime profits have been slowly decreasing as the company finds itself pressured by foreign competition and a high Canadian dollar. Management realizes that it’s time to do something to save the company from closure and layoffs.
(a) / FunTime managers are thinking about incorporating either Kaizen or Six Sigma systems into its manufacturing operations.
Choose one of these systems. Describe what it is and the benefits managers hope to gain by its implementation? [3]
(b) / Why is a strong Canadian dollar a threat to FunTime’s future earnings? [2]
(c) / You are a consultant hired by FunTime. You suggest to the managers that they consider a factory re-design that would allow FunTime to assemble higher-value added electronic games and toys, like programmable robots. What rationale would you present at the meeting to support this action? [3]
(d) / The CEO of FunTime met with government officials and requested subsidies to help the company get by until it can implement its survival strategy. Should the government give them subsidies? Why/Why not? [3]
10. / (a) / Kaizen and Six Sigma are systems that companies can put in place to become more competitive. Describe these systems and discuss the benefits the companies can expect to receive from their implementation. Provide at least 1 example of how a manufacturer benefited from the implementation of either of these systems. [4]
(b) / Creating standards that are adhered to around the world promotes global business and trade. Comment on this statement and provide an example. [3]
11. / There are winners and loser when tariffs and quotas are applied to the trade in goods and services. Discuss briefly. [3]
12. / An African leader was quoted as saying that as long as there is bribery and corruption there can be no economic future for African countries.
(a) / What are the main causes of bribery? [2]
(b) / Is the African leader’s comment about bribery and corruption accurate? Comment with examples. [3]
(c) / What is Transparency International and what significance is its Transparency Index?
(d) / What is the connection between a country’s position on the Transparency International Corruption index, its GDP, and the level of foreign investment into the country? [3]
13. / Explain how the video COAT OF MANY COUNTRIES illustrated three facts connected with international business:
(a) / the interdependence of nations; [2]
(b) / the importance of having good transportation and communication infrastructures in a developing economy; and [3]
(c) / the collection of characteristics a person needs to withstand the demands of a career in international business. [2]
Comment on these facts and provide examples to illustrate your points. [2]
(d) / the importance of creating and managing a supply chain to remain competitive [3]
14. / (a) / List three factors that affect the value of a country’s currency. [1]
(b) / How is the exchange rate value of a country’s currency determined on world markets? [2]
(c) / What are the advantages of using a common currency within a trade bloc, like the Euro? [2]
(d) / Why have some countries decided not to use the Euro? [1]
15. / (a) / Currency fluctuations are considered a barrier to trade. Explain. [2]
(b) / Why do investors shy away from investing in countries where the inflation rate is high? [1]
(c) / What is a forward contract and why might a business decide to use it? [2]
16. / (a) / Why do countries, corporations, cities, etc. issue (sell) bonds? [1]
(b) / Describe the relationship between the interest rate paid to the investor by the bond and the bond issuer’s credit rating? [2]
(c) / Why do bond prices (the cost of buying a bond) fall when bank interest rates rise? [2]
(d) / The interest rate paid on bonds rise when inflation rises. Why? [2]
(e) / What circumstances can lead to a corporate bond becoming junk? [2]
17. / (a) / Why do countries strive to produce higher value goods and services? Provide an example.
(b) / Industrial economies that produce and export high value added goods and services are able to do so because they have what are called “enablers”. Identify two of these enablers and explain why they are so important for sustaining a competitive advantage in the global economy. [4]
18. / (a) / List two advantages and two disadvantages associated with a Joint Venture. [1]
(b) / Why do multinational firms seek out Joint Venture partners in other countries? [2]
(c) / What are the risks associated with this entry method? [2]
19. / (a) / A Canadian investor owns 30 000 USD, 10 000 AUD, 4 000 €, and 8 000 £ in a currency portfolio. If she decides to convert each of foreign currencies to CAD today, how many CAD will she own? [2]
(b) / A Mexican company buys 50 Canadian made machines for its factory. Each machine costs 30 000 CAD. The Mexicans agree to pay in CAD at today’s spot rate (www.xe.com).
What is the final import cost of a machine if there is a tariff of 17% and a tax of 5%, each applied to the import cost?
Suppose the Mexican peso was 3% stronger than the spot rate. How much would the Mexicans save on the purchase of each machine? [3]
(c) / What is a forward contract? When would a company consider using one? [3]
(d) / What are the advantages and disadvantages associated with pegging a currency’s exchange rate with that of another country’s? [2]
(e) / The price of many commodities like gold and oil have become more expensive as the USD loses value against other currencies. Why does the price of oil, for example, increase when the USD weakens? [2]
(f) / Why would a stronger Chinese Yuan deliver a “shock” to the Chinese economy? [2]
(g) / Why does the value of foreign assets help by Canadian investors decrease in value when the dollar strengthens? [2]
QUESTION 20 focuses on the content in the class handout and the video clips we viewed during class.
(b) / In your opinion should Terra Nova Boots (video viewed in class) use a centralized or de-centralized strategy to sell its shows in international markets? Justify your response by considering the differences in each method. [3]
(c) / E-commerce has been termed the “great leveller” in international business. What does this term imply and provide an example to support your explanation. Provide and example. [2]
(d) / How does B2B differ from B2C? Give an example for each. [1]
(e) / List three advantages a company gains by using a sales agent in a foreign market rather than sending a person from their sales staff to the foreign market. (There are some points that could be included that are beyond what was mentioned in the hand out.) [1]
(f) / Suppose the owners of Beaver Tails (a snack food) were to present their product at a trade fair located in the foreign market they are considering expanding into. What are the advantages of doing so? [3]
(g) / Many international companies like Honda and Toyota set up branch plants in foreign markets. Why? [3]
(h) / List the different licensing agreements that international businesses enter into to generate revenue. Choose one and provide a description of how that revenue is generated. [3]
(i) / An American fruit company aims to enter into the South African market. The managers decide to acquire several smaller South African firms to become established in the market. Why would the managers of this firm consider this entry strategy? Are there risks to doing so? [3]
(j) / List the factors that must be considered when establishing a selling price in a foreign market. Provide a brief explanation as to how each of these factors affects the selling price. [4]
(k) / The managers of Beaver Tails would be wise to conduct thorough marketing research (demographics, life style, spending habits, etc) and avoid ethnocentrism. Why? [3]
(l) / Provide an example(s) of a product(s) that would be in direct and indirect competition to Beaver Tails in a foreign country you are most familiar with. [2]
(m) / List and describe briefly the ways a company can achieve a competitive advantage in a market. Arrange each of these in order from least temporary to most temporary. Justify your choices. [3]
(n) / What challenges do companies face when deciding on the design and delivery of ads and other promotions directed at consumers in foreign markets? How has the internet been a benefit in this regard? [3]
Using your knowledge of the course content you may be asked to apply that knowledge to comment/discuss the significance and relevance of the following newspaper headlines. Each response would be worth 2 – 3 marks depending upon the expectations assigned to the response.