Chapter 06 - The Political Environment: A Critical ConcernChapter 06 The Political Environment: A Critical Concern True / False Questions 1. (p. 162) Companies that have thoroughly studied political considerations before constructing their business models do not have to concern themselves with the political environment when attempting to do business abroad. FALSE Difficulty: Easy Type: Comprehension 2. (p. 162) International law recognizes the sovereign right of a nation to grant or withhold permission to do business within its political boundaries and to control where its citizens conduct business. TRUE Difficulty: Moderate Type: Knowledge 3. (p. 162) Sovereignty refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. TRUE Difficulty: Moderate Type: Knowledge 6-1 Chapter 06 - The Political Environment: A Critical Concern 4. (p. 162) Adherence to World Trade Organization (WTO) rules means a loss of sovereignty to its member nations. TRUE Difficulty: Moderate Type: Comprehension 5. (p. 163) At the top of the list of political issues concerning foreign businesses is the issue of taxation and tariffs. FALSE Difficulty: Hard Type: Comprehension 6. (p. 163) According to the text if China raised the value of its currency that would make it even easier for Chinese firms and government to purchase American companies. TRUE Difficulty: Moderate Type: Knowledge 7. (p. 165) Saudi Arabia permits women to vote if they are at least 18 years old and married or 21 years old, if single. FALSE Difficulty: Moderate Type: Knowledge 8. (p. 165) The three forms of government are dictatorship, aristocracy, and democracy. TRUE Difficulty: Moderate Type: Application 6-2 Chapter 06 - The Political Environment: A Critical Concern 9. (p. 167) Knowledge of the philosophies of all major political parties within a country is important to international marketers. TRUE Difficulty: Moderate Type: Knowledge 10. (p. 167) Socialism can best be described as an intense feeling of national pride and unity, an awakening of a nation's people to pride in their country. FALSE Difficulty: Easy Type: Knowledge 11. (p. 170) Foreign investors, while sometimes feared as a dominant tyrant threatening economic development, are often sought after as a source of needed capital investment. TRUE Difficulty: Moderate Type: Knowledge 12. (p. 169-170) Foreign companies are usually not affected by changes in nationalistic feelings in the countries where they operate. FALSE Difficulty: Moderate Type: Application 13. (p. 169) A good illustration of nationalistic feelings that can cause riffs between allies is the one that occurred between France and the United States over the Iraq/U.S. war. TRUE Difficulty: Easy Type: Comprehension 6-3 169) Confiscation (as a political risk) is the seizing of a company's assets without payment. (p. 169) Three hot issues in 2008 were the undervalued Chinese currency. TRUE Difficulty: Moderate Type: Knowledge 18. 170) Exchange controls stem from shortages of foreign exchange held by a country. 169) Expropriation occurs when a host country gradually cause the transfer of foreign investment to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company's management. (p. (p.Chapter 06 . FALSE Difficulty: Hard Type: Knowledge 17. TRUE Difficulty: Moderate Type: Knowledge 15. and Chinese subsidies in apparent violation of WHO rules. TRUE Difficulty: Moderate Type: Application 6-4 . 171) As an example of what are called local-content laws NAFTA requires 62 percent local content for all cars coming from member countries. (p. the ban on beef imports into Japan.The Political Environment: A Critical Concern 14. TRUE Difficulty: Easy Type: Knowledge 16. (p. FALSE Difficulty: Moderate Type: Comprehension 6-5 .Chapter 06 . (p. 174) Nongovernment organizations (NGOs) sometimes use foreign companies and their personnel as pawns in domestic disputes. 173) The newest form of terrorism is called information terrorism because it prevents Third World countries from receiving information. 172) Political and social activists (PSAs) and nongovernmental organizations (NGOs) almost always interrupt the normal flow of trade.The Political Environment: A Critical Concern 19. FALSE Difficulty: Moderate Type: Comprehension 22. (p. 171) Taxes are always considered as a political risk by foreign and domestic investors. FALSE Difficulty: Moderate Type: Comprehension 21. (p. FALSE Difficulty: Hard Type: Knowledge 20. FALSE Difficulty: Moderate Type: Knowledge 23. (p. 172) Political sanctions have proved to be a sure-fire method of controlling outlaw nations. (p. 180) One of the methods for reducing political vulnerability and risk is to license products. 174-175) The authors state that there is reason to believe that international warfare is fast becoming obsolete. (p. (p. TRUE Difficulty: Moderate Type: Application 28. (p. services. 179) Relationships between governments and multinational corporations (MNCs) are generally positive if the investment contributes to the welfare of political leaders. (p. TRUE Difficulty: Moderate Type: Knowledge 25. 176) A good illustration of a product class that is likely to be politically sensitive is one that has an impact on exchange rates. or technology. TRUE Difficulty: Moderate Type: Comprehension 26. 180) Planned domestication is a policy that rarely has a positive impact on political vulnerability or risk. (p. FALSE Difficulty: Moderate Type: Application Multiple Choice Questions 6-6 .The Political Environment: A Critical Concern 24. FALSE Difficulty: Moderate Type: Application 27.Chapter 06 . the EU ignored the ruling. Both sides in the matter were instructed to cease and desist. The World Trade Organization E. B." what was the outcome? A. (p. (p. 162) When the United States and the European Union get into trade disputes.The Political Environment: A Critical Concern 29. The North Atlantic Treaty Organization Difficulty: Moderate Type: Application 30. E. The matter was declared a draw. (p. free-born E. bounded B.Chapter 06 . D. Global Perspective) When the World Trade Organization attempted to settle what was called a "banana war. neutral Difficulty: Easy Type: Knowledge 6-7 . A. 161. however. a _____________ state is independent and free from all external control. where do both sides go to settle the matter? A. The United Nations B. The WTO ruled in favor of the United States. legal D. The European Union won and received payments from the United States. sovereign C. The World Court C. The Organization of American States D. Difficulty: Hard Type: Application 31. The WTO ruled in favor of the United States and the matter was ended. C. 162) In the context of international law. in the context of international law. is free from all external control. enjoys full legal equality with other states. Government C. C. B. 164) The ideal political climate for a multinational firm is: A. 162) A sovereign state. a country where favors can be purchased cheaply. is obligated to be a member of the United Nations. A trade pact Difficulty: Moderate Type: Knowledge 34. C.Chapter 06 . (p. an authoritarian government that can be dealt with through non-legal channels.The Political Environment: A Critical Concern 32. (p. friendly government. E. Sovereignty B. A cartel D. D. is independent. has all of the following characteristics EXCEPT: A. a government where absolute power is a reality. A. (p. An international partnership E. governs its own territory. a stable. Difficulty: Moderate Type: Comprehension 33. B. Difficulty: Moderate Type: Comprehension 6-8 . E. 162) __________ refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. a country where there are no laws. D. the stability or instability of prevailing government policies. B. 164) At the top of the list of political issues concerning foreign businesses is the: A. changes in political parties C. nationalism D.S. __________. the voting process of a country. domestic political policies E.S. as retaliation for not allowing similar purchases in China by American firms C.Chapter 06 . the political history of a country. as a threat to United States' soverignty E. because Germany had proposal a high offer D. A. because the offer was unrealistically low B. 163) The proposed purchase of Unocal by the Chinese national oil company was opposed by the U. D. (p. (p. Difficulty: Moderate Type: Comprehension 36. E. 165) The five main causes of instability in international markets include trade disputes and all of the following EXCEPT: A. some forms of government seem to be inherently unstable B. C. U. the court system of a country. because China could divert oil from Unocal to China Difficulty: Moderate Type: Knowledge 6-9 . animosity targeted toward specific countries Difficulty: Moderate Type: Knowledge 37.The Political Environment: A Critical Concern 35. (p. ruling party of a country. Difficulty: Moderate Type: Knowledge 6-10 . (p. peaceful political change. D. cultural adjustment to global expectations. Saudi Arabia E. monarchy E. Bolivia D. overthrowing a corrupt regime. Venezuela Difficulty: Moderate Type: Knowledge 39. interference in international politics. (p. 165-166) Which of the following is NOT one of the common forms of government? A. E. 165) The only country that precludes women from voting and appears to be still completely in the dark ages with regards to suffrage. B.S. 164) The election of Vicente Fox as President of Mexico was an example of: A. aristocracy C. C. oligopoly D. (p. U. dictatorship Difficulty: Hard Type: Knowledge 40. A. corrupt national election. Iran C.Chapter 06 .The Political Environment: A Critical Concern 38. Croatia B. democracy B. E. polarism. Mercantilism E. 167) An intense feeling of national pride and unity. B.The Political Environment: A Critical Concern 41. liberal or conservative. C. (p. 166-167) For most countries around the world it is important for international marketers to know the philosophies of all the major political parties. B. Socialism B. (p. socialism.Chapter 06 . C. international support for the United Nations. since one them might become dominant and affect: A. Difficulty: Hard Type: Application 42. Nationalism D. D. E. D. Difficulty: Easy Type: Knowledge 43. the overall business climate. 167) The phrase "Buy American" would most closely be associated with which of the following? A. communism. (p. an awakening of a nation's people to pride in their country is called: A. global warming. fascism. nationalism. Polarism Difficulty: Moderate Type: Application 6-11 . the status of WTO control. Jingoism C. profitable outcome Difficulty: Easy Type: Knowledge 45. confiscation B. 169) The seizing of a company's assets without payment is called: A. 169) With respect to political risk that can be faced by a company seeking to invest abroad. A. C. sympathy for B. synergistic relationship to C. exchange controls E. domestication. domestication D. which of the following presents the most severe political risk? A.The Political Environment: A Critical Concern 44. confiscation. exchange controls. 169) No nation-state will tolerate penetration by a foreign company into its market if it perceives a(n) ______________ its well-being. economic boost D. expropriation C. expropriation. (p. local-content laws. E. Difficulty: Moderate Type: Application 6-12 . D. B. (p. threat to E. local-content laws Difficulty: Moderate Type: Application 46.Chapter 06 . (p. socialized Difficulty: Easy Type: Application 49. democratized B. 169) Often an expropriated investment becomes ____________ (i. prioritized E.The Political Environment: A Critical Concern 47. (p. nationalized D. Exchange controls E. it becomes a government-run entity). (p. expropriation. A.Chapter 06 . domesticated C. 169) When a government seizes an investment of a foreign investor but some reimbursement for the assets is made. D. A. E. B. Confiscation B. Difficulty: Moderate Type: Knowledge 48. C. local-content laws. Local-content laws Difficulty: Moderate Type: Knowledge 6-13 . confiscation. 169-170) _____________ occurs when host countries gradually cause the transfer of foreign investment to national control and ownership through a series of government decrees by mandating ownership and greater national involvement in a company's management.. Domestication D. (p.e. the government is following a process called: A. Expropriation C. exchange controls. domestication. (p. Travis facing in Chile? A. tax controls. A. (p. import restrictions. C. Difficulty: Moderate Type: Knowledge 52. D. C. E. Difficulty: Moderate Type: Comprehension 6-14 . (p. Domestication D. 170) The national telephone company in Mexico was privatized. local-content laws. democrats D. 169-170) The government in Chile recently informed Clint Travis' company that his retail grocery chain in Chile would have to be gradually turned over to the people of Chile by the year 2050. outsourcers. foreigners. Additionally. investors B. regional state regulatory groups.The Political Environment: A Critical Concern 50. Nationalism E. Dictatorship Difficulty: Moderate Type: Application 51. production costs. Expropriation C. Confiscation B. E. Which of the following political risk actions is Mr.Chapter 06 . 170-171) All of the following are considered to be economic risks that can be faced by international companies EXCEPT: A. starting next year fifty percent of the board of directors of the Chilean operation must be Chileans. B. exchange controls. this meant that the Mexican government sold its operation to _________________. Chapter 06 . local-content laws C. tax controls. E. 170) If there is a substantial amount of capital leaving the country. B. local-content laws C. 170) In Thailand. exchange controls B. import restrictions D. local-content laws. A. exchange controls B. This occurred because the United States required that 50 percent of all parts used in an automobile constructed in the United States must contain parts that were manufactured in the United States. (p. price controls Difficulty: Easy Type: Application 55. D. exchange controls. it faced economic risks associated with _____________.The Political Environment: A Critical Concern 53. 171) When Toyota Motor Company built automobile manufacturing plants in Tennessee and Ohio. (p. the country is likely to implement which of the following to control the situation? A. price controls Difficulty: Moderate Type: Comprehension 54. The United States wanted to promote it "Buy American" policy. tax controls E. (p. tax controls E. import restrictions D. This would be an illustration of which of the following economic risks faced by international producers of milk? A. Difficulty: Hard Type: Application 6-15 . C. it is required that any milk sold in the country must contain at least 50 percent milk from Thai dairy farmers. price controls. import restrictions. Chapter 06 .The Political Environment: A Critical Concern 56. 171) In North Korea there is little foreign investment. One of the reasons is the severe application of ________________. 171) Since the government of Nigeria is strapped for cash. democratization. B. 172) Stopping or refusing to trade with another nation for political reasons is called: A. A. C. exchange controls B. tax controls E. (p. local-content laws C. import restrictions D. exchange controls B. expropriation. This form of economic risk is associated with which of the following? A. tax controls E. (p. local-content laws C. E. price controls Difficulty: Moderate Type: Application 57. boycotting. Difficulty: Easy Type: Knowledge 6-16 . (p. confiscation. The Nigerian government has found that this is the handiest and quickest means of finding operating funds. D. Any foreign investor or producer is required to sell its products at prices stated by the North Korean government rather than letting market value and demand determine prices. activism. import restrictions D. price controls Difficulty: Easy Type: Application 58. it has decided to tax all foreign investments (such as oil production equipment) by up to forty percent of appraised value. 172) Which of the following statements most accurately describes the impact of boycotts? A. these policies normally control and rectify situations that caused the boycotts. B. Difficulty: Hard Type: Knowledge 61. Oxfam E. 173) Crossing Borders 6.S. The United Nations encourages boycotts as a means of settling a dispute as opposed to armed conflict. Boycotts are generally not very successful. E. Thomas Jefferson understood how to get the French and English to stop fighting. (p. FedEx Difficulty: Easy Type: Comprehension 6-17 . Amnesty International D. Boycotts are least effective against consumer goods. Boycotts are illegal. Coercion does not work. Only as a Carrot" suggests: A. In general. E. B.2 "Trade Does Not Work as a Stick.The Political Environment: A Critical Concern 59. C. C. Red Cross C. (p. Difficulty: Moderate Type: Application 60. was able to get the Soviet Union out of Afghanistan by boycotting the Moscow Olympics. needs to increase its embargo against Myanmar. exchange does. The U. (p. Red Crescent B. Industrial goods trade is less successful than consumer goods trade.Chapter 06 . The U. D. D. 174) Which of the following would NOT be the best illustration of a NGO (nongovernmental organization) group? A.S. 174) Why do terrorism experts predict multinational businesses will be targeted by terrorists more frequently? A. They are subterfuge for espionage agents. B. C. To embarrass a government. Difficulty: Moderate Type: Knowledge 64. Religion Difficulty: Hard Type: Comprehension 6-18 . They are capitalists and what they sell. D. the greater threats to peace are civil strife and terrorism. 174) __________ is fast becoming obsolete. A.Chapter 06 . To generate funds E. Difficulty: Easy Type: Comprehension 63. 174) Which of the following is NOT a common goal of terrorists? A. International prejudice E. They are rich and they are powerful. E.The Political Environment: A Critical Concern 62. (p. (p. C. Patriotism D. Print media C. D. Develop military management capability. (p. Inflict fear within a country. They are destroy the environment. International warfare B. Use victims as pawns in political or social disputes. They are less well defended and what they symbolize. B. fast-food restaurants D. A.Chapter 06 . hackers intent on attacking multinational businesses. Melissa. travel agencies Difficulty: Hard Type: Comprehension 6-19 . E. nuclear warfare. politically sensitive products C. and "Goner worm" are all examples of: A. (p. 175) The newest form of terrorism directed toward a peaceful world is: A. C. new video games espousing Internet crime. cyberterrorism. third-world diseases. viruses damaging the Internet B. clothing stores E. E. hate crimes. Difficulty: Moderate Type: Knowledge 67. ______________ have often been the lightning rods for groups opposed to foreign companies. (p. Difficulty: Easy Type: Comprehension 66. extortion. D. germ warfare. 177) Although some products are more vulnerable than others with regard to political sensitivity in foreign markets. 176) Slammer. D. B. grocery chains B.The Political Environment: A Critical Concern 65. (p. Wal-Mart stores C. products are only directed toward the consumer sector. publicly visible assets. national and economic security. Difficulty: Easy Type: Comprehension 69.Chapter 06 . E. C.The Political Environment: A Critical Concern 68. risk abatement. B. Difficulty: Moderate Type: Knowledge 70. political risk assessment. C. products can be purchased via the Internet. 179) Relations between governments and multinational corporations are generally positive if: A. (p. 177) Brian is attempting to forecast political instability and help management identify and evaluate political events and their potential influence on current and future international business decisions. the investment makes tax contributions. exchange rates. D. quantification of risk. space travel. products impact national security. E. products are only directed toward the business sector. B. (p. democratization. C. political security. Brian is engaged in: A. (p. Difficulty: Moderate Type: Application 6-20 . D. Which of the following would likely be LEAST the politically sensitive? A. B. the environment. E. D. 176) Some products and issues are more politically sensitive in international trade than others. transfers capital. D. D. To reduce the risk of political harassment she will consider using _______________ to enter the market. B. create jobs. B. C. A. (p. E. joint ventures E. C. (p.The Political Environment: A Critical Concern 71. is tied to national security. sole-proprietorships C. E. creates jobs. uses locally produced resources. importing B. makes tax contributions. Difficulty: Hard Type: Application 73. are only oriented toward the consumer sector. 179) Relations between governments and multinational corporations are generally positive if investments: A. or skills. are under $1 million. Difficulty: Moderate Type: Application 72. (p. all of the above are equal with respect to political harassment Difficulty: Easy Type: Comprehension 6-21 . multinational corporations D. do not involve extensive Internet business. technology. 179) Relations between governments and multinational corporations are generally positive if investments do all of the following EXCEPT: A. 179) Juliet is concerned with the potential for political harassment when her company enters a new international market. are tied to national security.Chapter 06 . Difficulty: Moderate Type: Comprehension 6-22 . 179-181) All of the following would be considered to be strategies that multinational corporations can use to minimize vulnerability and risk EXCEPT: A. planned domestication E. joint ventures. planned domestication. multi-facilities Difficulty: Moderate Type: Comprehension 76. licensing. (p. expanding the investment base. joint ventures. expanding the investment base. sole-proprietorship.Chapter 06 . D. C. B. E. C.The Political Environment: A Critical Concern 74. licensing. licensing C. expanding the investment base D. 179-181) All of the following strategies can be effective in forestalling or minimizing the effect of a total takeover of a multinational corporation's holdings by a foreign government EXCEPT: A. joint ventures B. (p. advertising. (p. planned domestication. E. 180) Which of the following strategies minimizes political risks for the multinational corporation that wishes to expand into overseas markets? A. B. Difficulty: Moderate Type: Comprehension 75. D. political payoffs. planned domestication. Difficulty: Moderate Type: Comprehension 78. C. expanding the investment base. A bribe may be paid as long as it is not a domestic situation. E.S. 180) The most effective solution to a situation where a foreign government is demanding local participation in a multinational corporation's business activities in the host country is: A. D. D. (p.Chapter 06 . D. make profits. E. (p. B. joint ventures. A bribe is justified is if is the documented traditional practice in a country. A bribe may be paid in a foreign country if there is a tie to national security. stall the effects of communism and socialism. accelerate the development of the Internet.S. B. Difficulty: Moderate Type: Application 79. 181) The most important reason to encourage foreign investment is to: A. government's policy toward multinational corporations that are confronted with situations where bribery is an issue? A. It is illegal for a U. licensing. citizen to pay a bribe--period. Difficulty: Hard Type: Comprehension 6-23 . B.The Political Environment: A Critical Concern 77. accelerate the development of an economy. C. 181) Which of the following best describes the U. E. (p. The issue revolves around the customs of the country and each issue is decided separately. accelerate world peace. C. E. agency that supports U. (p.S. (p. Better Business Bureau. (p. stability (instability) Difficulty: Hard Type: Comprehension 6-24 . Department of Commerce. positioning guise E. Department of Foreign Relations. public relations image C. (p. Difficulty: Easy Type: Knowledge Fill in the Blank Questions 82. deception tool B. sovereignty Difficulty: Moderate Type: Knowledge 83. A. marketing ploy D.The Political Environment: A Critical Concern 80. D. business abroad is the: A. 162) The term __________ refers to both the powers exercised by a state in relation to other countries and the supreme powers exercised over its own members. 181) A cynical way to look at the motivation behind corporate social responsibility in general is its use as a __________ with foreign publics and governments. B.Chapter 06 . 164) At the top of the list of political issues concerning foreign businesses is the ___________ of prevailing government policies. C. 182) The principle U. Department of Defense. bargaining chip Difficulty: Easy Type: Knowledge 81. State Department.S. 165) Socioeconomic and political change are sometimes caused by a surge in ________________." nationalism Difficulty: Easy Type: Application 6-25 . 167) ___________ can best be described as an intense feeling of national pride and unity. (p.The Political Environment: A Critical Concern 84. sovereignty Difficulty: Easy Type: Knowledge 85. 165) __________ is the only country that appears to be still completely in the dark ages with regards to suffrage. (p. Saudi Arabia Difficulty: Easy Type: Knowledge 86. nationalistic pride Difficulty: Moderate Type: Knowledge 87. (p. 163) Foreign investment can be perceived as a threat to __________. (p. an awakening of a nation's people to pride in their country. (p.Chapter 06 . 167) Feelings of ___________ are expressed in a variety of ways such as a call to "buy our country's products only" or "Buy American. Nationalism Difficulty: Easy Type: Knowledge 88. 170) _________ controls stem from shortages of foreign exchange held by a country. Local-content Difficulty: Easy Type: Knowledge 6-26 . (p. 169) __________ occurs when a government seizes an investment but some reimbursement for the assets is made. Confiscation Difficulty: Moderate Type: Knowledge 90. Exchange Difficulty: Easy Type: Comprehension 93. (p. (p.The Political Environment: A Critical Concern 89.Chapter 06 . Expropriation Difficulty: Moderate Type: Knowledge 91. 169) ___________ is the seizing of a company's assets without payment. (p. 170) __________________ laws require any product sold within a country to contain at least some locally made parts. _____________ has occurred. domestication Difficulty: Hard Type: Knowledge 92. 169) When host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company's management. (p. the greater threats to peace and commerce for the 21st Century remain __________ and __________. In such cases. boycott Difficulty: Moderate Type: Knowledge 96. they are raised without warning and in violation of formal agreements. (p. (p. 175) According to the text. 175-176) A virus which overload websites with a flood of electronic messages is considered to be a form of terrorism called _______________. (p.Chapter 06 . 172) Greenpeace actions to bring attention to environmental issues are an illustration of an organization that would be labeled as a __________ (PSA).The Political Environment: A Critical Concern 94. terrorism Difficulty: Easy Type: Knowledge 6-27 . Taxes Difficulty: Moderate Type: Comprehension 95. 172) When country initiates a _________________ it stops all trade between itself and another country. 171) _________ may be classified as a political risk when used as a means of controlling foreign investments. civil strife. political and social activist Difficulty: Hard Type: Comprehension 97. cyberterrorism Difficulty: Easy Type: Application 98. (p. (p. licensing Difficulty: Easy Type: Comprehension 102. 179) A ____________ with locals helps to minimize anti-MNC feelings and limit financial exposure. (p. (p. joint venture Difficulty: Moderate Type: Comprehension 101. political bargaining Difficulty: Moderate Type: Comprehension 100. 180) Many companies engage in _______________. (p. 180) A ______________ strategy minimizes or eliminates almost all risks international marketing risks. (p. Planned domestication Difficulty: Easy Type: Comprehension Essay Questions 6-28 . 180) _______________ is a gradual process of participating with nationals in all phases of company operations resulting in gradual withdrawal of the company from an ownership and control position.The Political Environment: A Critical Concern 99.Chapter 06 . lobbying and other efforts to avoid potential political risks in countries where they do business. Domestication occurs when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company's management. enjoys full legal equality with other states. and minor harassment and controls of foreign investment are supported.The Political Environment: A Critical Concern 103. This pride can take an anti-foreign business bias. governs it own territory. 169-170) Discuss and compare the terms confiscation. if not applauded.Chapter 06 . and has the power to enter into agreements with other nations. and domestication. Difficulty: Moderate Type: Comprehension 105. (p. and social systems. For additional information see page 169-170. 167) Describe the concept of nationalism. economic. expropriation. Confiscation is the seizing of a company's assets without payment. (p. Difficulty: Moderate Type: Comprehension 104. A sovereign state is independent and free from all external control. Difficulty: Moderate Type: Knowledge 6-29 . 162) Describe the characteristics of a sovereign state. an awakening of a nation's people to pride in their country. Expropriation occurs where the government seizes and investment but some reimbursement of assets is made. (p. Nationalism can best be described as an intense feeling of national pride and unity. selects its own political. (4) creates jobs. Difficulty: Hard Type: Comprehension 107. Domestication occurs when host countries gradually cause the transfer of foreign investments to national control and ownership through a series of government decrees by mandating local ownership and greater national involvement in a company's management. price controls. (p. What are the five types of benefits most local governments consider beneficial? The five situations are if the investment: (1) improves the balance of payments by increasing exports or reducing imports through import substitution. The text lists six economic risks--exchange controls. 179) Local governments are usually receptive to MNC's investment when the MNC's actions are perceived as beneficial.Chapter 06 . However. or (5) makes tax contributions. (2) uses locally produced resources. For additional information see pages 169170. Difficulty: Hard Type: Application 6-30 . (p. and labor problems. local-content laws. Cite and describe a political risk strategy that Brazil could follow that would meet the aforementioned objective. Brazil could choose domestication (planned domestication). 169-170) Brazil would like to increase its control and ownership of foreign investments in its country. Difficulty: Hard Type: Comprehension 108. (3) transfers capital. tax controls. import restrictions. 170-171) List and briefly discuss the various economic risks that international companies must face when they seek to market abroad. technology. See pages 170-171 for analysis and discussion of the various economic risks.The Political Environment: A Critical Concern 106. or skills. (p. Brazil does not want to cut off or discourage foreign investment. technology. (p. 179) Richard Branch is considering a multi-million dollar investment in Chile. Branch consider to ensure that his investment offer would be positively received by the Chilean government? According to information presented in the text. (3) transfer capital. What actions should Mr.The Political Environment: A Critical Concern 109. (2) use locally produced resources. Relations between MNC and foreign investors can be positive. or (5) make tax contributions. He does not want anti-MNC feelings to block the deal. (4) create jobs.Chapter 06 . Difficulty: Hard Type: Application 6-31 . Branch should make sure that his investment provides at least one of the following benefits to the Chilean government and/or the people of Chile--benefits should (1) improve the balance of payments by increasing exports or reducing imports through import substitution. He hopes that the investment will be positively received by the Chilean government. or skills. Mr.