Deck 10: Understanding Emerging Markets

Question 1

China is an example of an advanced economy.

Answer 1

False

Question 2

New global challengers are large, highly diversified companies in advanced economies that are privately owned.

Answer 2

False

Question 3

Certain emerging markets that have evolved from centrally planned economies to liberalized markets are called transition economies.

Answer 3

True

Question 4

Privatization has provided many opportunities for foreign firms to enter transition economies by purchasing former state enterprises.

Question 5

Economists estimate real buying power by calculating GDP statistics based on purchasing power parity.

Question 6

Governments and state enterprises in emerging markets are major targets for sales of infrastructure-related products and services.

Question 7

Outsourcing enables foreign firms to increase efficiency by limiting corruption in the emerging markets.

Question 8

An economy is categorized as advanced, developing, or emerging based on per capita income and the level of economic development.

Question 9

Developing economies are countries that have achieved substantial industrialization, modernization, and rapid economic growth since the 1980s.

Question 10

Per-capita GDP converted at market exchange rates paints an accurate picture of market potential.

Question 11

Businesses in emerging markets are far less important targets for machinery and equipment sales compared to those in advanced economies.

Question 12

Bureaucracy and red tape in developing economies deter firms from these countries from participating in the global economy.

Question 13

Emerging markets are home to low-wage, high-quality labor for manufacturing and assembly operations.

Question 14

Developing countries lack numerous conditions needed for successful economic development, including low trade barriers and substantial international trade and investment.

Question 15

Adjusted per-capita GDP does not represent the amount of products consumers can buy in a given country.

Question 16

In the early stages of market research, managers examine three important statistics to estimate market potential: per-capita income, size of the middle class, and market potential indicators.

Question 17

When sourcing relies on foreign suppliers or production bases, it is known as global sourcing or offshoring.

Question 18

The lack of confidence among foreign investors with regard to Russia stems from the nation's unstable political conditions and its favoritism toward local firms.

Question 19

Demographic trends indicate that, in the coming two decades, the proportion of middle-class households in emerging markets will become much smaller.

Question 20

In emerging markets, the size and growth rate of conglomerates serve as signals of a dynamic market economy.

Question 21

China, Indonesia, and Russia are examples of advanced economies with strong intellectual property protection.

Question 22

Which of the following is an example of a developing economy?

A) Australia
B) Bangladesh
C) France
D) Brazil

Question 23

________ are low-income countries characterized by limited industrialization and stagnant economies.

A) Developing economies
B) Emerging markets
C) Developed economies
D) Transition economies

Question 24

Counterfeiting is fairly uncommon in China, Indonesia, and Russia.

Question 25

Advanced economies account for about ________ percent of the world population.

A) 14
B) 42
C) 61
D) 5

Question 26

________ make up the largest group of countries and include Bangladesh, Nicaragua, and Zaire.

A) Advanced economies
B) Capitalist economies
C) Emerging markets
D) Developing economies

Question 27

Many emerging market economies are dominated by family-owned rather than publicly owned businesses.

Question 28

Emerging markets are ________.

A) developing economies where goods and services are directly exchanged for other goods and services
B) post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure
C) low-income countries characterized by limited industrialization and stagnant economies
D) former developing economies that have achieved substantial industrialization, modernization, and rapid economic growth since the 1980s

Question 29

________ refer to post-industrial countries characterized by high per-capita income, highly competitive industries, and well-developed commercial infrastructure.

A) Underground economies
B) Emerging markets
C) Advanced economies
D) Transition economies

Question 30

Samsung is an example of family conglomerate based in South Korea.

Question 31

Africa's GDP has improved substantially since the 1960s.

Question 32

Developing economies ________.

A) account for nearly two-thirds of world GDP
B) are often highly developed in historical and cultural terms
C) are characterized by high purchasing power
D) have a high literacy rate

Question 33

For foreign firms wanting to do business in emerging markets, family conglomerates can make valuable venture partners.

Question 34

Microfinance provides large-scale financial services mainly to global conglomerates.

Question 35

MNEs must set high prices in emerging markets because emerging market consumers have high spending power.

Question 36

Which of the following is a characteristic of advanced economies?

A) poor quality of life
B) low life expectancy
C) high purchasing power
D) high infant mortality rate

Question 37

________ in developing economies deter firms from these countries from participating in the global economy.

A) Low trade volumes
B) Bureaucracy and red tape
C) High inward FDI
D) Lack of a rich cultural heritage

Question 38

The "cookie-cutter" strategies that MNEs developed decades ago are considered most suitable for achieving success in emerging markets.

Question 39

Businesses foster economic development via modernization projects and entrepreneurial activity in emerging markets and developing economies. Such efforts are a form of corporate social
responsibility.

Question 40

Which of the following is typical of developing economies?

A) low levels of bureaucracy and red tape
B) low debt levels
C) lack of cultural history
D) poor education systems

Question 41

Which of the following is true about emerging market economies in international business?

A) They account for nearly two-thirds of world GDP and host the world's largest MNEs.
B) They have tremendous purchasing power with minimal restrictions on international trade and investment.
C) These markets have evolved from manufacturing economies to service-based economies.
D) Businesses in emerging markets are important targets for machinery and equipment sales.

Question 42

The per-capita GDP of the United States converted at market exchange rates is ________.

A) $49,055
B) $5,715
C) $11,000
D) $87,300

Question 43

Emerging markets act as manufacturing bases for global MNEs because of ________.

A) high regulations
B) high availability of low-wage ,highly skilled labor
C) well-developed infrastructure
D) strong intellectual property laws

Question 44

Demographic trends indicate that, in the coming two decades, ________.

A) the spending power of middle-class households will substantially decline
B) the GDP of advanced economies will decline
C) the spending power of low-income households will increase tremendously
D) the proportion of middle-class households in emerging markets will become much bigger, acquiring enormous spending power

Question 45

In an informal economy ________.

A) market value of all officially recognized final goods and services produced within a country is substantially lowered
B) economic transactions are not officially recorded and are therefore left out of national GDP calculations
C) exchange rates are low
D) the household income is substantially larger than that in a formal economy

Question 46

The purchasing power parity concept suggests that ________.

A) in emerging markets, the ability to buy goods and services depends on the influx of FDI from international MNEs
B) the fluctuation in exchange rates disrupts international trade because the value of goods and services is mostly inconsistent
C) in the future, a unified currency should be used to create equality in the global marketplace and to eliminate disparity
D) in the long run, exchange rates should move toward levels that would equalize the prices of an identical basket of goods and services in any two countries

Question 47

Economic Development Workshop (Scenario)
Members of 50 different countries attended a workshop on economic development hosted by an international organization based in Geneva, Switzerland. Attendees of the workshop learned about techniques designed to assist countries in expanding their degree of economic development.
The workshop participants are divided into groups of three. For learning purposes, each group must be made up of individuals from countries with similar degree of economic development. Which of the following might be grouped together?

A) Representatives from Mongolia, Iran, and Sudan
B) Representatives from Germany, China, and Sudan
C) Representatives from the U.S., China, and Belarus
D) Representatives from Sudan, Spain, and France

Question 48

Which of the following is characteristic of emerging markets?

A) low inward foreign direct investment
B) minimum regulations
C) major focus on services and branded products
D) rapidly declining trade barriers

Question 49

Purchasing power parity is ________.

A) the total income received by all sectors of an economy within a nation
B) the value of goods and services that can be purchased with one unit of a country's currency
C) an adjustment for prices that reflects the amount of goods that consumers can buy in their home country, using their own currency and consistent with their own standard of living
D) the exchange rate in the international currency market

Question 50

Class Reports (Scenario)
Prof. Jacob Middleton has divided students in his international business class into three groups. Each group has been assigned the task of presenting an overview of a major country group and outlining its distinguishing characteristics. Three students have been selected as group leaders: Jordan, Elaine, and Andrei. Jordan's group will discuss advanced economies, Elaine's group will address the characteristics of developing economies, and Andrei's groups will focus on emerging markets.
Which of the following refers to a distinctive trait of the type of economy discussed by Elaine's group?

A) substantial competition
B) minimal trade barriers
C) poor industrialization
D) high inward FDI

Question 51

Which of the following is an example of global sourcing?

A) After the recent global recession, major banks in Palladia were funded more quickly under national ownership and control.
B) Titania, a country with a major stake in automobile manufacturing, employs citizens to keep its level of quality and commitment to the automobile industry.
C) Camden Ltd., a Berylia-based pharmaceutical company has opened manufacturing centers in Rhodia.
D) To manage the steel industry in Cadmia, over 900 coal mines were taken under public ownership.

Question 52

Which of the following is characteristic of emerging markets?

A) minimal trade barriers
B) high trade volume
C) low inward FDI
D) highly developed industry

Question 53

Privatization has provided many opportunities for foreign firms to enter transition economies by ________.

A) initiating joint ventures with local businesses
B) purchasing former state enterprises
C) exporting products with a high mark-up price
D) exporting products of inferior quality

Question 54

Which of the following countries has the highest per-capita GDP using PPP exchange rates in US$?

A) Brazil
B) China
C) Turkey
D) South Korea

Question 55

Per-capita GDP converted at market exchange rates paints an inaccurate picture of the market potential of an emerging market because ________.

A) it tends to over-emphasize the role of pricing in driving growth in emerging markets
B) it overlooks the substantial price differences between advanced economies and emerging markets
C) prices are usually higher for most products and services in emerging markets
D) emerging markets do not support inward FDI

Question 56

Class Reports (Scenario)
Prof. Jacob Middleton has divided students in his international business class into three groups. Each group has been assigned the task of presenting an overview of a major country group and outlining its distinguishing characteristics. Three students have been selected as group leaders: Jordan, Elaine, and Andrei. Jordan's group will discuss advanced economies, Elaine's group will address the characteristics of developing economies, and Andrei's groups will focus on emerging markets.
Which of the following refers to a distinctive trait of the type of economy discussed by Jordan's group?

A) minimal trade barriers
B) low trade volume
C) low inward FDI
D) poor industrialization

Question 57

Class Reports (Scenario)
Prof. Jacob Middleton has divided students in his international business class into three groups. Each group has been assigned the task of presenting an overview of a major country group and outlining its distinguishing characteristics. Three students have been selected as group leaders: Jordan, Elaine, and Andrei. Jordan's group will discuss advanced economies, Elaine's group will address the characteristics of developing economies, and Andrei's groups will focus on emerging markets.
Which of the following refers to a distinctive trait of the type of economy discussed by Andrei's group?

A) low inward FDI
B) rapidly liberalizing trade barriers
C) highly developed industry
D) low trade volume

Question 58

When sourcing relies on foreign suppliers or production bases, it is known as ________.

A) offshoring
B) protectionism
C) insourcing
D) subsidizing

Question 59

________ is the procurement of selected value-chain activities, including production of intermediate goods or finished products, from independent suppliers.

A) Purchasing power parity
B) Outsourcing
C) Privatization
D) Nationalization

Question 60

Transition economies are characterized by ________.

A) low inward FDI
B) high trade barriers
C) low energy consumption
D) privatization of state-owned industries

Question 61

Vytel Communications (Scenario)
Vytel Communications is a U.S.-based telecommunications company that is considering doing business in Argentina. Vytel managers hire a consulting firm to investigate the risks and benefits related to doing business in Argentina. The consulting firm identifies a number of challenges that might prohibit Vytel from entering Argentina. In addition, the consultants conduct surveys which indicate a demand for Vytel's products and services.
Which of the following should be considered by the consulting firm before recommending that Vytel should do business in Argentina?

A) What other emerging markets are dominated by family conglomerates?
B) What has been the historical economic effect of family conglomerates in Argentina?
C) Do family conglomerates control the telecommunications industry in Argentina?
D) What benefits and loans are received by family conglomerates in Argentina?

Question 62

Which of the following countries has weak intellectual property protection?

A) China
B) the United States
C) Australia
D) France

Question 63

Which of the following is a benefit to a foreign firm collaborating with a family conglomerate in an emerging market?

A) reduced capital requirements
B) complete exemption from paying taxes
C) complete protection from intellectual property rights violations
D) low dependence on technology

Question 64

In emerging markets, MNEs must set prices appropriate for local conditions because ________.

A) research and development is relatively cheaper in emerging markets
B) of high corruption and bureaucracy
C) of inadequate legal framework
D) emerging market consumers cannot pay high prices

Question 65

Which of the following situations will discourage business activities of foreign firms in an emerging market?

A) allowing foreign firms to access the country's energy resources
B) increasing the requirements for licenses, approvals, and paperwork
C) using a strong legal framework and patent laws
D) investing in a strong Internet infrastructure

Question 66

The new global challengers have become formidable competitors primarily because ________.

A) of instant brand recognition
B) of the easy availability of low-cost labor, skilled workforces, government support, and family conglomerates
C) of superior market research and customer service
D) substantial government funding, high wages, and value-chain diversification

Question 67

Emerging markets are important in international business and trade due to ________.

A) large informal economy
B) low rates of energy consumption
C) high growth rate of middle class population
D) low inward FDI

Question 68

________ are formal offers made by a buyer to purchase certain products or services.

A) Quotas
B) Tariffs
C) Tenders
D) Microloans

Question 69

The absence of reliable or consistent governance from recognized government authorities ________.

A) decreases risks
B) increases managers' ability to forecast business conditions
C) increases business costs
D) increases inward FDI

Question 70

Which of the following emerging market economies has the lowest middle-class population?

A) Indonesia
B) Thailand
C) China
D) India

Question 71

Excessive bureaucracy is usually associated with ________.

A) strong legal framework
B) low country risk
C) lack of transparency
D) low trade barriers

Question 72

Which of the following emerging market economies has the largest middle-class population?

A) India
B) Russia
C) Brazil
D) China

Question 73

Vytel Communications (Scenario)
Vytel Communications is a U.S.-based telecommunications company that is considering doing business in Argentina. Vytel managers hire a consulting firm to investigate the risks and benefits related to doing business in Argentina. The consulting firm identifies a number of challenges that might prohibit Vytel from entering Argentina. In addition, the consultants conduct surveys which indicate a demand for Vytel's products and services.
Which of the following most likely supports the consulting firm's recommendation that Vytel proceed with plans to do business in Argentina?

A) The political conditions in Argentina are stable.
B) Government bureaucrats favor domestic firms to foreign firms.
C) Potential local partners have few government contacts.
D) The Argentine government lacks transparency.

Question 74

Vytel Communications (Scenario)
Vytel Communications is a U.S.-based telecommunications company that is considering doing business in Argentina. Vytel managers hire a consulting firm to investigate the risks and benefits related to doing business in Argentina. The consulting firm identifies a number of challenges that might prohibit Vytel from entering Argentina. In addition, the consultants conduct surveys which indicate a demand for Vytel's products and services.
Which of the following would be most important for the consulting firm to evaluate when making a recommendation to Vytel about doing business in Argentina?

A) Is work-life balance uniformly enjoyed by the Argentine workforce?
B) Do Argentine firms frequently outsource their key operations abroad?
C) Would government regulations significantly impede Vytel's ability to make profits?
D) What benefits have been gained in the past by Vytel using foreign distributors?

Question 75

Which of the following is characteristic of family conglomerates?

A) low access to capital than most other firms
B) wholly owned or controlled by the government
C) extensive networks in various industries
D) inferior market knowledge

Question 76

Which of the following countries is home to the Hyundai Group?

A) India
B) South Korea
C) Russia
D) Taiwan

Question 77

Family conglomerates (FCs) might pose a challenge to firms trying to enter emerging markets because ________.

A) FCs have no more knowledge in manufacturing and distribution than other private players
B) FCs are not required to pay taxes
C) the owners of FCs are often overly sympathetic to the bureaucratic state machinery
D) FCs enjoy substantial competitive advantages that overwhelm late entrants

Question 78

Which of the following best explains the growth of family conglomerates in emerging markets?

A) declining importance of entrepreneurship
B) high rate of innovation
C) highly competitive markets
D) government protection

Question 79

Vytel Communications (Scenario)
Vytel Communications is a U.S.-based telecommunications company that is considering doing business in Argentina. Vytel managers hire a consulting firm to investigate the risks and benefits related to doing business in Argentina. The consulting firm identifies a number of challenges that might prohibit Vytel from entering Argentina. In addition, the consultants conduct surveys which indicate a demand for Vytel's products and services.
Which of the following most likely supports the consulting firm's recommendation that Vytel should NOT do business in Argentina?

A) Government bureaucracy in Argentina is limited and is not characterized by red tape.
B) Qualified suppliers and distributors who are eager to work are readily available in Argentina.
C) Import restrictions do not apply to the telecommunications industry in Argentina.
D) In the past, intellectual property rights law have not been enforced in Argentina.

Question 80

Foreign firms should seek alliances with well-qualified local companies in countries characterized by inadequate legal and political frameworks because ________.

A) such alliances help eliminate business risks completely
B) through such partners, foreign firms can access local market knowledge
C) such alliances help foreign firms function without distributor networks
D) the dominance of family conglomerates in emerging economies are fast declining