Chapter10

1) How does the WTO differ from the GATT?

Answer: While the GATT agreement was incorporated into the WTO agreement, there are two
important differences. The GATT focuses on promoting trade in goods, whereas the WTO's mandate
is broader. The WTO is responsible for trade in goods, trade in services, international intellectual
property protection, and trade-related investment. Also, the WTO's enforcement powers are much
stronger than those of the GATT.
2) Explain the five forms of economic integration.
Answer: The five forms of integration are free trade area, customs union, common market,
economic union, and political union. The free trade area represents the lowest form of economic
integration while the political union represents the highest level of economic integration. A free
trade area encourages trade among members by eliminating trade barriers. A customs union
combines the elimination of internal trade barriers among its members with the adoption of
common external trade policies toward nonmembers. In a common market, members eliminate
internal trade barriers among themselves and adopt a common external trade policy toward
nonmembers, plus it eliminates barriers that inhibit the movement of factors of production among
its members. An economic union represents full integration of the economies of two or more
countries. In addition to all the requirements of a customs union, an economic union also requires
its members to coordinate their economic policies to blend their economies into a single entity. A
political union is the complete political as well as economic integration of two or more countries,
thereby effectively making them one country.
3)What two factors led to the creation of the ASEAN trading bloc?
Answer: A decrease in government control of national economies that stimulated local
entrepreneurs and attracted FDI, and a defensive response to the growth of other regional trading
blocs led to the creation of ASEAN.
Chapter12
1) What are

the five primary types of entry modes for foreign markets?

Answer: The five primary ways to enter a foreign market include exporting, international
licensing, international franchising, specialised modes, and foreign direct investment.
2) What are the steps involved in foreign market analysis?
Answer: When assessing foreign markets, firms must first assess alternative markets. This process
involves considering market potential, levels of competition, the legal and political environment,
and sociocultural influences. Then, the firm should evaluate the respective costs, benefits, and risks
of entering each, and finally, select those that hold the most potential for entry or expansion.

3) Describe the specialised entry modes for international business.

Answer: Companies can take advantage of international business opportunities without making
long-term investments by using specialised entry modes like contract manufacturing, management
contracts, and turnkey projects. Contract manufacturing involves outsourcing manufacturing to
other companies. A management contract is an agreement whereby one firm provides managerial
assistance, technical expertise, or specialised services to a second firm for some agreed-upon time
in return for monetary compensation. A turnkey project is a contract under which a firm agrees to
fully design, construct, and equip a facility and then turn the project over to the purchaser when it is
ready for operation.
Chapter 11
1) Explain the purpose of a mission statement.
Answer: The mission statement clarifies the organization's purpose, values, and directions.
2) What differences exist between the strategic management process for domestic operations and
international operations? Identify five differences
Answer: Some possible answers include language, culture, politics, economy, governmental
interference, and labor.
3) What are the three sources of competitive advantage that are unavailable to domestic businesses
that international business can exploit?
Answer: The three sources of competitive advantage are global efficiencies, worldwide learning,
and multinational flexibility. Global efficiencies can be captured through location efficiencies, or
locating facilities anywhere in the world that yields the lowest production or distribution costs, or
that best improves the quality of service. Global efficiencies can also be captured through
economies of scale and economies scope. Worldwide learning is accomplished by working within
the diverse operating environments of an MNC. A firm can learn from differences in one country
and transfer the learning to operations in other countries. Multinational flexibility means that
international businesses respond to a change in one country by implementing a change in
4) Describe the steps in the international strategic formulation process.
Answer: The steps in the process are to 1) develop a mission statement, 2) perform a SWOT
analysis, 3) set strategic goals, 4) develop tactical goals and plans, and 5) develop a control
framework.
Chapter 13
1)What are the four factors that should be considered prior to selecting a partner?

Answer: Compatibility, the nature of the potential partner's products, the relative safeness of the
alliance, and the learning potential of the alliance.
2)What are the benefits of strategic alliances?
Answer: Benefits of strategic alliances include ease of market entry, shared risk, shared
knowledge, and synergy/competitive advantage.
3)Are strategic alliances important in the airline industry?
Answer: Strategic alliances are very important in the airline industry. Three mega-alliances
together account for about 69 percent of the world's air revenue passenger miles.
4) What kinds of things might cause incompatibility among partners in a strategic alliance?
Answer: Corporate culture, national culture, goals, and objectives can all contribute to
incompatibility among partners.
5)Explain why Boeing established a strategic alliance with several Japanese partners to help
develop its 777 jet.
Answer: Boeing formed a strategic alliance with several Japanese partners to help reduce the risk
involved in developing its 777 aircraft. Developing the new plane required billions of dollars of
R&D up front. Because Boeing could not be sure how well the new aircraft would be received, the
company looked for ways to reduce its financial exposure, and established an alliance with Fuji,
Mitsubishi, and Kawasaki. Boeing is the controlling partner in the alliance
6)Why have strategic alliances become so important to the international airline industry?
Answer: Mega alliances dominate the international airline industry. By linking up with other
firms, airlines can offer customers more flights and more destinations, easier transfers between
alliance members' flights, and the opportunity to use frequent flyer miles earned on one carrier to
fly on another. In addition, alliances provide airlines with the ability to advertise to a larger
audience.
Chapter 16
1) What reason related to marketing prompted many firms to form joint ventures with local firms in
India, Mexico, and China?
Answer: For many years, local laws made it difficult for many firms to establish distribution
systems in India, Mexico, and China. Consequently, firms often formed joint ventures with local
firms to take advantage of their distribution systems.
2)Why is fit between business strategy and marketing strategy so important in international
business?
Answer: A firm's business strategy and marketing strategy must be in sync. If a firm is pursing a
cost leadership strategy, then it must also seek out low-cost suppliers and sell its product in discount

stores. A firm that is following a differentiation strategy where its product is positioned as a luxury
item should not sell at a discount store.
3) What are the advantages and disadvantages of standardized international marketing?
Answer: The advantages of standardized international marketing are 1) reduces marketing costs, 2)
facilitates centralized control of marketing, 3) promotes efficiency in R&D, 4) results in economies
of scale in production, and 5) reflects the trend toward a single global marketplace. The
disadvantages are that it 1) ignores different conditions of product use, 2) ignores local legal
differences, 3) ignores differences in buyer behavior patterns, 4) inhibits local marketing initiatives,
and 5) ignores other differences in individual markets.