11) Gucci, the maker of luxury fashion and leather goods, plans to expand its sales market. The firm needs to compare countries for the market potential of its products. Which of the following is the best indicator for Gucci to use?
A) per capita income in each country
B) population size of each country
C) the number of millionaires in each country
D) gross domestic product for each country
12) When examining economic and demographic variables to compare countries' sales potential for your product, you should most likely consider all the following EXCEPT which one?
A) The demand for food is more elastic than the demand for most other products.
B) Consumers in some countries may more conveniently substitute certain products than consumers in some other countries.
C) Consumers in developing countries may leapfrog technologies by first purchasing the latest products.
D) Trading blocs may enhance sales potential above what is indicated in individual country figures.
13) Which of the following is most likely a true statement about acquiring resources abroad?
A) Cheap labor is the most sought after resource.
B) Resource availability limits a firm's location choices.
C) Raw materials are the most sought after resource.
D) Risks are highest for resource-seeking foreign operations.
14) The ability to compare production costs among countries in an effort to determine where to locate production is significantly hampered by ________.
A) the number of ways the same product can be made
B) restrictions on the international flow of data
C) different tax rates established by trade blocs
D) restrictions on the remission of earnings
15) In which of the following situations would tax rate differences among countries be most important for deciding where to place an investment?
A) Companies find advantages in being located near specialized private and public institutions.
B) Companies must compare the benefits of labor- versus capital-intensive production.
C) Companies want to serve an entire region within a regional trading bloc.
D) Companies must deal with difficult start-up regulations.
16) Labor cost advantages gained by moving into a country with low wages may be short-lived because ________.
A) transport costs go up to cancel out the cost savings
B) tax increases cancel out all labor cost differentials
C) rivals adopt capital-intensive production methods
D) competitors follow leaders into low-wage areas
17) Which of the following statements is NOT true about risk as it affects companies' choice of locations for foreign operations?
A) Companies and their managers differ in their perception of what is risky.
B) One company's risk may be another company's opportunity.
C) There are means to reduce risk other than avoiding locations.
D) Companies choose the cheapest location regardless of risks.
18) A company's operations are most likely to be taken over by a host government when ________.
A) the operations are relatively small and the takeover is unlikely to incur the wrath of the company's home government
B) the operations are substantial and have a widespread effect on the country because of the company's size
C) the host country becomes involved in a regional war
D) the firm produces discretionary products
19) In terms of political risk, it is most accurate to state that high risk ________.
A) affects all geographic regions of a country equally
B) affects all foreign companies in the same manner
C) usually leads to high returns for investors
D) triggers government turnovers
20) Fidelity Manufacturing is considering expanding its operations into the Phillipines. Glenn, a manager at Fidelity, has been given the task of predicting political risk in the Phillipines. Which of the following approaches would Glenn LEAST likely use to accomplish his task?
A) analyzing the actions of competitors in the country
B) analyzing the country's past political patterns and trends
C) seeking and analyzing opinions of influencers in the country
D) examining social and economic conditions within the country