【正文】 e international business will be successful. c. Many international joint ventures are intended to circumvent barriers that normally prevent foreign petition. What barrier in Japan is AnheuserBusch circumventing as a result of the joint venture? What barrier in the United States is Kirin circumventing as a result of the joint venture? ANSWER: AnheuserBusch is able to benefit from Kirin’s distribution system in Japan, which would not normally be so accessible. Kirin is able to learn more about how AnheuserBusch expanded its product across numerous countries, and therefore breaks through an ―information‖ barrier. d. Explain how AnheuserBusch could lose some of its market share in countries outside Japan as a result of this particular joint venture. ANSWER: AnheuserBusch could lose some of its market share to Kirin as a result of explaining its worldwide expansion strategies to Kirin. However, it appears that AnheuserBusch expects the potential benefits of the joint venture to outweigh any potential adverse effects. 24. Global Competition. Explain why more standardized product specifications across countries can increase global petition. ANSWER: Standardized product specifications allow firms to more easily expand their business across other countries, which increases global petition. 4 Chapter 2 4. Free Trade. There has been considerable momentum to reduce or remove trade barriers in an effort to achieve ―free trade.‖ Yet, one disgruntled executive of an exporting firm stated, ―Free trade is not conceivable。 we are always at the mercy of the exchange rate. Any country can use this mechanism to impose trade barriers.‖ What does this statement mean? ANSWER: This statement implies that even if there were no explicit barriers, a government could attempt to manipulate exchange rates to a level that would effectively reduce foreign petition. For example, a . firm may be discouraged from attempting to export to Japan if the value of the dollar is very high against the yen. The prices of the . goods from the Japanese perspective are too high because of the strong dollar. The reverse situation could also be possible in which a Japanese exporting firm is priced out of the . market because of a strong yen (weak dollar). [Answer is based on opinion.] 8. International Investments. In recent years many MNCs have increased their investments in foreign securities, which are not as susceptible to negative shocks in the . market. Also, when MNCs believe that . securities are overvalued, they can pursue . securities that are driven by a different market. Moreover, in periods of low . interest rates, . corporations tend to seek investments in foreign securities. In general, the flow of funds into foreign countries tends to decline when . investors anticipate a strong dollar. a. Explain how expectations of a strong dollar can affect the tendency of . investors to invest abroad. ANSWER: A weak dollar would discourage . investors from investing abroad. It can cause the investors to purchase foreign currency (when investing) at a higher exchange rate than the exchange rate at which they would sell the currency (when the investment is liquidated). b. Explain how low . interest rates can affect the tendency of MNCs to invest abroad. ANSWER: Low . interest rates can encourage MNCs to invest abroad, as investors seek higher returns on their investment than they can earn in the . c. In general terms, what is the attraction of foreign investments to . investors? ANSWER: The main attraction is potentially higher returns. The international stocks can outperform . stocks, and international bonds can outperform . bonds. However, there is no guarantee that the returns on international investments will be so favorable. Some investors may also pursue international investments to diversify their investment portfolio, which can possibly reduce risk. 10. Exchange Rate Effects on Trade. a. Explain why a stronger dollar could enlarge the . balance of trade deficit. Explain why a weaker dollar could affect the . balance of trade deficit. ANSWER: A stronger dollar makes . exports more expensive to importers and may reduce 5 imports. It makes . imports cheap and may increase . imports. A weaker home currency increases the prices of imports purchased by the home country and reduces the prices paid by foreign businesses for the home country’s exports. This should cause a decrease in the home country’s demand for imports and an increase in the foreign demand for the home country’s exports, and therefore increase the current account. However, this relationship can be distorted by other factors. b. It is sometimes suggested that a floating exchange rate will adjust to reduce or eliminate any current account deficit. Explain why this adjustment would occur. ANSWER: A current account deficit reflects a sale of the home currency in exchange for other currencies. This places downward pressure on that home currency’s value. If the currency weakens, it will reduce the home demand for foreign goods (since goods will now be more expensive), and will increase the home export volume (since exports will appear cheaper to foreign countries). c. Why does the exchange rate not always adjust to a current account deficit? ANSWER: In some cases, the home currency will remain strong even though a current account deficit exists, since other factors (such as international capital flows) can offset the forces placed on the currency by the current account. 13. Effects of Tariffs. Assume a simple world in which the . exports soft drinks and beer to France and imports wine from France. If the . imposes large tariffs on the French wine, explain the likely impact on the values of the . beverage firms, . wine producers, the French beverage firms, an