Quiz 3

1/ Case: A European electronics firm is experiencing currency fluctuations as it imports components from Asia. The company must decide whether to raise prices or absorb the costs.

Question: Which of the following strategies can the firm use to minimise the negative impact of currency fluctuations?

• • Raise prices to protect against any fluctuation.

• • Export only to countries using the euro.

• • Use financial instruments to hedge against currency risks.

• • Stop importing from Asia altogether.

2/ Case: An U.S. businesswoman is exporting her products to Germany, but the exchange rate between the U.S. dollar and the euro is fluctuating. She is concerned about the impact on her profits.

Question: How can the business woman protect herself against negative fluctuations in exchange rates?

• • By limiting her exports to only low-value products.

• • By negotiating a fixed exchange rate for her transactions.

• • By entering into countertrade agreements to avoid currency exchange.

• • By avoiding all exports to countries with different currencies.

3/ Case: A Brazilian company has a trade surplus, where its exports exceed its imports. The government wants to maintain this favourable balance of trade.

Question: Which action would help Brazil maintain this surplus?

• • Implementing an embargo on key trading partners.

• • Expanding export opportunities in other countries.

• • Lowering tariffs on imports.

• • Increasing domestic consumption of foreign goods.

4/ Case: A European clothing manufacturer is dumping its products in the U.S. market at prices lower than those in its home country, significantly harming local U.S. clothing businesses.

Question: What actions are likely to be taken by the U.S. government to address this issue?

• • Increase imports from other countries to balance the competition.

• • Encourage local companies to lower their prices to compete.

• • Impose anti-dumping tariffs to protect local industries.

• • Issue a trade embargo against the European company.

5/ Case: An U.S. software company is entering a strategic alliance with an Indian tech firm to develop innovative solutions. They don’t share profits or risk but aim to create competitive advantages.

Question: What is a primary benefit of this strategic alliance for both companies?

• • Complete control over intellectual property.

• • Access to new markets and technical expertise.

• • Increased production capabilities.

• • Shared marketing expenses.

6/ Case: A small startup in India is planning to sell its software services to U.S. clients. The CEO is concerned about the value of the Indian rupee in relation to the U.S. dollar.

Question: Which of the following forces will most affect the CEO’s concern?

• • Sociocultural forces

• • Exchange rate fluctuations

• • Physical and environmental forces

• • Legal and regulatory forces

7/ Case: A major U.S. retailer has been penalised for selling goods that violate trade embargoes imposed on a foreign country.

Question: What is the most likely reason for this trade embargo?

• • To promote economic growth in the foreign countries.

• • As a political response to disagreements with the foreign government.

• • To protect domestic industries from foreign competition.

• • To encourage free trade with the foreign countries.

8/ A French automotive manufacturer wants to set up a foreign subsidiary in Canada to take advantage of local manufacturing capabilities and maintain complete control over its technology.

Question: What is the primary disadvantage of this foreign direct investment for the French manufacturer?

• • Dependence on the Canadian government for technology.

• • Shared risks and profits with local partners.

• • Full responsibility for legal and financial obligations in a foreign country.

• • Loss of control over the production process.

9/ Case: A multinational company enters a joint venture with a local firm in Brazil to produce and sell energy-efficient machinery. Both companies share technology and expertise.

Question: What is the primary advantage of this joint venture for both companies?

• • Ensuring total control of profits.

• • Avoiding local laws and regulations.

• • Gaining entry into a restricted market while sharing risks.

• • Complete ownership of both companies.

10/ Case: An international company uses a franchising model to expand into global markets. The company adapts its product to fit local tastes and preferences.

Question: What is a key advantage of the franchising strategy in this scenario?

• • The franchisee can operate with complete autonomy.

• • The franchisor avoids all risks associated with the local market.

• • The franchisor benefits from localised market knowledge and brand recognition.

• • The franchisee maintains full control over the brand.