International Business: The New Realities 5th edition by S Tamer Cavusgil test bank
Although MNEs employ a range of foreign market entry strategies, they are best known for their foreign direct investment (FDI) activities. They operate in multiple countries, especially in Asia, Europe, and North America, by setting up production plants, marketing subsidiaries, and regional headquarters. MNEs such as Exxon, Honda, and Coca-Cola derive much of their total sales and profits, often more than half, from cross-border operations. In recent years, large MNEs have begun to appear in emerging market countries, such as China, Mexico, and Russia. China currently hosts 95 of the top 500 MNEs, a number that has increased from only 15 countries in the past 10 years.
Small and medium-sized enterprises (SMEs) are manufacturers or service providers with fewer than 500 employees (in the European Union and numerous other countries, they are defined as having fewer than 250 employees). SMEs now make up the majority of companies active in international business. Nearly all firms, including large MNEs, started out small. Compared to large multinationals, SMEs can be more flexible and quicker to respond to global business opportunities. They are usually less bureaucratic, more adaptable, and more entrepreneurial, and often sustain entrepreneurship and innovation in national economies.
Diff: 1: Easy
Skill: Concept
Objective: 1-3: Identify major participants in international business
AACSB: Application of Knowledge
58) In a short essay, explain why nonprofit organizations might conduct cross-border activities.
Answer: In addition to profit-seeking focal firms in international business, there are numerous nonprofit organizations that conduct cross-border activities. These include charitable groups and non-governmental organizations (NGOs). They work on behalf of special causes, such as education, research, health care, human development, and the natural environment, operating internationally either to conduct their activities or to raise funds. Examples of nonprofit organizations include the Bill and Melinda Gates Foundation and the British Wellcome Trust, both of which support health and educational initiatives. CARE is an international nonprofit organization dedicated to reducing poverty. Many MNEs operate charitable foundations that support various initiatives. GlaxoSmithKline (GSK), the giant pharmaceutical firm, operates a number of small country-based foundations in Canada, France, Italy, Romania, Spain, and the United States.
Diff: 1: Easy
Skill: Concept
Objective: 1-3: Identify major participants in international business
AACSB: Analytical Thinking
59) What is a born global firm? Explain one strategic or reactive reason why an SME might choose to start as a born global.
Answer: A born global firm is a young entrepreneurial company that initiates international business activity very early in its evolution, moving rapidly into foreign markets. Despite the scarce resources typical of most small businesses, born globals usually internationalize within three years of their founding and may export to 20 or more countries, generating over 25 percent of their sales from abroad. In countries like Australia, Denmark, Ireland, and the United States, born globals account for a substantial proportion of national exports. In many cases, born globals offer leading-edge products with strong potential to generate international sales. They leverage the Internet and communications technologies to facilitate early and efficient international operations.
An SME might start as a born global to lower its production costs by establishing manufacturing bases in foreign countries. Alternatively, the company might benefit from establishing international operations as a way to confront its industry competitors.
Diff: 2: Moderate
Skill: Synthesis; Concept
Objective: 1-3: Identify major participants in international business
AACSB: Analytical Thinking
60) The process of targeting and serving markets outside the home country is known as ________.
A) market diversification
B) competition intensity
C) reactive internationalization
D) trade protectionism
Answer: A
Diff: 1: Easy
Skill: Concept