International Business: The New Realities 5th edition by S Tamer Cavusgil test bank
Answer:
a. Types of assets purchased-The first main difference between the two types of investments concerns the types of assets purchased. Portfolio investment involves the purchase of foreign securities, such as stocks and bonds, for the purpose of gaining financial returns. Foreign direct investment involves the purchase of productive assets, such as capital, technology, labor, land, plants, and equipment.
b. Types of ownership-The second main difference concerns the level or type of ownership. Portfolio investment refers to passive ownership, with no active management of or control over the assets purchased. Foreign direct investment, on the other hand, gives investors partial or full ownership of a productive enterprise typically dedicated to manufacturing, marketing, or management activities.
c. Interest timeline-The third main difference between the two types of strategies involves the length of interest maintained by investors. In international portfolio investment, investors have a relatively short-term interest in the ownership of their assets. In foreign direct investment, firms usually have a long-term investing interest.
Diff: 2: Moderate
Skill: Concept
Objective: 1-1: Describe the key concepts in international business
AACSB: Application of Knowledge
31) What is meant by the term "entrepôt economies"? In a short essay, explain the concept and provide an example.
Answer: Entrepôt is from the French for "intermediate depot." Such countries import a large volume of products, some of which they process into higher value-added products and some they simply re-export to other destinations. For example, Singapore is a major entrepôt for Southeast Asia, e.g., for transshipping petroleum products that it receives from the Middle East. Hong Kong is an entrepôt for China. The Netherlands is an entrepôt for the greater European Union.
Diff: 1: Easy
Skill: Concept
Objective: 1-1: Describe the key concepts in international business
AACSB: Application of Knowledge
32) In a short essay, describe the major trends in the growth of foreign direct investment (FDI) since the 1980s.
Answer: The dollar volume of FDI has grown immensely since the 1980s, especially in developed (advanced) economies such as Japan, Europe, and North America. FDI inflows to the developing economies began to surpass those to the advanced economies in about 2010. FDI inflows were interrupted in 2001 as investors panicked following the September 11 terrorist attacks in the United States. The inflows were interrupted again in 2008 by the global recession, but then rose sharply in subsequent years. These dips underscore the importance of maintaining stability in the world economy. Despite these setbacks, the overall trend remains strong and growing over time. Particularly significant is the growth of FDI into developing economies, much of which results from their need for modern industrial infrastructure. It reflects the importance of developing economies and emerging markets as target markets and sourcing bases.
Diff: 1: Easy
Skill: Concept
Objective: 1-1: Describe the key concepts in international business
AACSB: Analytical Thinking
33) What are the main differences between products and services? In a short essay, explain the difference between the two and provide three examples of each. Which sector has seen the greatest growth in international trade in recent years?
Answer: Products are defined as tangible merchandise, such as clothing, computers, and cars. Services, by contrast, are intangible deeds, performances, or efforts performed directly by people working in firms in the services sector. Some examples of services are creating advertising campaigns, underwriting mortgages, and managing restaurant operations. In recent years, services trade has been growing faster than products trade. International trade in services accounts for about one-quarter of all international trade and is growing rapidly.
Diff: 1: Easy
Skill: Concept
Objective: 1-1: Describe the key concepts in international business
AACSB: Application of Knowledge
34) In a short essay, identify three sectors in the service industry that are internationalizing rapidly. Explain the types of activities conducted within each sector, and provide examples of three companies that operate in each.