Which method of expanding into international markets is most likely the riskiest?
Answer(s): C
Direct investment has many advantages:(1) cheaper materials or labor, (2) receipt of investment incentives from the host government, (3) a strong relationship with interested parties in the host country, (4) control of the investment, (5) a better image in the host country, (6) market access when domestic contest rules are in effect. However, direct investment is risky because of exposure to currency fluctuations, expropriation, potentially high exit barriers, and restraints on sending profits out of the country.
Which strategy for a global marketing organization emphasizes relatively strong central control?
Answer(s): A
A global strategy regards the world as one market. The product is essentially the same in all countries. Central control of the production process is relatively strong. Faster product development and lower production cost are typical.
Which of the following is a regional free-trade zone currently limited to South American nations?
Answer(s): B
Mercosul is a free-trade agreement among South American nations. They include Argentina, Brazil, Uruguay, and Paraguay. Chile and Bolivia are associate members.
A country has a comparative advantage in international trade when
Answer(s): D
A country has a comparative advantage when it can achieve a lower cost of production due to a focus on and a cooperative specialization in a particular product. The greatest advantage from trade is obtained when each nation specializes in producing what it can produce most efficiently. If nations specialize and then exchange with others, more is produced and consumed than if each nation tries to be self-sufficient. Specialization of labor is beneficial for individuals; the same principle applies to nations.
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