Global Supply Chain Management: Strategies and Risks, Exams of Business Management and Analysis

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MANAGING IN A GLOBAL BUSINESS ENVIRONMENT QUESTIONS

WITH CORRECT ANSWERS 2024

1. Examine considerations for locating and relocating production facilities: - Global

supply chain management can be divided into two categories: the traditional push model and the modern pull model. The push model focuses on the product's needs to manage the supply line, while the pull model, such as just-in-time (JIT), emphasizes lean manufacturing based on customer demand, producing only what is ordered. When selecting production sites in a global supply chain, several factors should be considered: production methods, shipping costs and logistics, available raw materials, workforce quality, taxes, local costs, business culture, and community incentives. Companies must assess and adapt to changing circumstances, which sometimes requires relocating to grow, reduce costs, or innovate.

2. Supply chain networks: A complex, evolved form of a supply chain that includes

secondary support and multiple, interrelated supply and distribution lines.

3. Supply Chains: From Push to Pull: A supply chain refers to the flow of goods and

information from the source to the consumer, encompassing production plan- ning, purchasing, materials management, distribution, customer service, and sales forecasting. Traditionally, supply chains followed a push model, focused on products and driven by suppliers. However, with the rise of e-commerce, many companies have shifted to a customer-driven pull model, emphasizing individual

consumer needs. This shift allows companies to better serve customers, reduce inventory, offer customized products, and bring products to market more quickly, effectively redistributing power from suppliers to customers.

4. Supply chain management: The management of the flow of goods or services

through the process of moving from production to customer.

5. Production planning: The allocation of resources in the production process.

6. Distribution: The process of supplying goods to customers.

7. Push model: Theory in supply chain management that focuses decisions on the

needs of the product.

8. Production cycle: All the activities involved in creating a product.

9. Pull model: Theory in supply chain management that bases decisions and activ-

ities on the needs of the customer.

10. Global Manufacturing Networks: Modern global supply chain models empha- size

lean manufacturing and flexible networks of partnerships to adapt to changing needs. Instead of choosing a single site for production, companies select various partners across different countries, aligning with specific manufacturing needs. This approach allows parts to be produced near raw material sources and assembled elsewhere by a skilled workforce or in locations with favorable tax incentives. Multi- national production maximizes efficiency and mitigates risks, such as disruptions from natural disasters. For example, a computer company manufacturing casings in China, Indonesia, and Brazil can maintain production

even if one site is compro-

mised. This networked model also supports customization, allowing different plants to produce varied product versions. Managing a global supply chain is complex, re- quiring the coordination of raw materials, multistage manufacturing, and distribution in a rapidly changing business environment.

11. Lean manufacturing principles: A collection of methods or theories for reduc-

ing waste in manufacturing.

12. Multinational production: Manufacturing process that spans multiple countries

outside a firm's country of origin, usually in a coordinated multistage system.

13. Supply Chain Management: The Council of Supply Chain Management Pro-

fessionals (CSCMP) defines supply chain management as the planning and man- agement of all activities involved in sourcing, procurement, conversion, and lo- gistics, including coordination with channel partners like suppliers, intermediaries, third-party service providers, and customers. For international companies, this also means operating across borders. Efficient supply chain management is crucial to keep customers satisfied and minimize costs. It involves creating the supply chain network, developing business processes, and managing supply chain activities. The shift from the traditional push to the modern pull model, facilitated by e-commerce, has enhanced cost efficiency, distribution flexibility, customer service, and shipment tracking. Effective supply chain management reduces inventory, improves order accuracy, shortens product development cycles, and yields significant financial benefits, ultimately enhancing customer value and

providing peace of mind.

14. Which model of supply chain management focuses on the product and its

production?: Push; In this model of supply chain management, all parts of the production process focus on how to produce the product and then move it through the distribution channel to the customer. The marketing process focuses on pushing the product on the consumer.

15. An aircraft manufacturer uses a supply chain management system in which

parts of the aircraft are made in different countries and assembled at the company's headquarters. Which type of supply chain is the company using?: Multinational; Multinational supply chains seek to use production strengths and low costs of different suppliers around the world. Using a multinational supply chain reduces the risk of a catastrophic event, reducing a company's ability to produce a product.

16. Strategic Choices - Export, Local Assembly, and Local Production: When

deciding on production strategies for international markets, companies typically choose from three options, each with different levels of risk, cost, and benefits. The first strategy is manufacturing in the home country and exporting, which is low-investment but incurs higher shipping costs and importation delays. The second strategy is using global components with local assembly, as Dell Latin America does, combining global sourcing with local customization to enhance sales and service

but requiring careful supplier coordination. The third strategy is local production, ex- emplified by Nokia in India, leveraging local resources and knowledge but involving high investment and exposure to political risks. Each strategy should be tailored to the company's product and the target country's characteristics.

17. Country-of-origin effect: The effect the consumer's perception or opinion of the

country where a product is made has on the consumer's perception or opinion of the product itself.

18. Planning the Production Process: Decisions made during the planning stage

have long-term implications and are crucial for a firm's success. Determining the production method first clarifies other needs when selecting a production site, such as the availability of raw materials, workforce requirements, and technological ca- pabilities. Key considerations include the level of customer input before production, whether the goods are customized or standardized, and if customers can cus- tomize standardized goods. Operations managers must work with other managers to choose the best process for their customers' needs, considering production methods and capacity. The three main production processes are make-to-order (customized products), mass production (high- volume standardized goods), and mass customization (combining customization with mass production benefits).

19. Make-to-order: A manufacturing method that allows customers to customize the

product.

20. Mass production: A manufacturing method that creates large amounts of iden-

tical products.

21. Mass customization: A manufacturing method that combines the flexibility of

custom production with the scale of mass production by allowing the customer to dictate some of the design elements in products that will have a wide distribution.

22. Factors in Production Site Selection: After selecting the best production strat-

egy, managers must decide on the manufacturing location, facility size, and layout. Key factors include minimizing shipping costs by situating plants near suppliers or customers, accessing a skilled workforce in industry hubs, and managing costs for resources like land and labor. Community quality of life, cultural norms, and political stability are also important, as are favorable business environments with financial incentives. Additionally, managers must consider public relations, as negative re- actions to relocating production can impact branding and revenue. Ultimately, they prioritize the most critical criteria, such as PowerSki's choice of San Clemente for its proximity to suppliers and skilled labor.

23. Value-to-weight ratio: The value of a product per pound or kilogram.

24. Fixed costs: The necessary expenses of the manufacturing process other than

the cost of materials or labor used in production.

25. A company wishes to expand internationally in countries that have high tariffs on

the product the company makes. The company decides to use foreign direct

investment because the labor costs are low and the country is politically stable. Which type of production is the company using?: Production in the host country then local retailing; In countries with high tariffs on a product, for example an automobile, a company will produce the vehicle in the host country and sell that automobile in the host country thus avoiding the tariffs.

26. Factors in Relocation: Many factors affect the desirability of a production

location, some of which are outside the company's control, such as changing tax requirements, rising costs of living for employees, or shifting laws governing production processes. Companies must continually assess how well a production site meets their needs, considering reasons for relocation like growth, government incentives, costs, and innovation. Growth in emerging economies often attracts companies seeking expansion, while incentives like tax breaks and infrastructure improvements can lure businesses to new areas. Cost reduction is another signifi- cant driver, though it must be balanced against potential increases in logistics and quality assurance expenses. Innovation also plays a crucial role, as companies may relocate to harness local expertise and low-cost manufacturing solutions. Overall, businesses must weigh these drivers against their capacity to manage associated risks, ensuring that relocation decisions align with long-term strategic goals.

27. How Well Companies Adapt to Different Circumstances: Many factors affect the

desirability of a production location, including changing tax requirements, ris- ing

living costs for employees, and shifting laws governing production processes. Companies must continually assess how well a production site meets their needs, considering relocation reasons like growth, government incentives, costs, and in- novation. Emerging economies often attract companies seeking expansion, while incentives such as tax breaks and improved infrastructure can lure businesses to new areas. Cost reduction is a significant driver, though it must be balanced against potential increases in logistics and quality assurance expenses. Innovation also plays a crucial role, as companies may relocate to harness local expertise and low-cost manufacturing solutions. Overall, businesses must weigh these factors against their capacity to manage associated risks, ensuring that relocation decisions align with long-term strategic goals.

28. A company wishes to make a foreign direct investment in a new country where it

can make and test products more easily. While local suppliers would not normally meet the requirements for its products, this new plant will accept them. Which factor affected the company's production location?: Innovation; The company is using the foreign direct investment to use local suppliers to make and test the new products. The company is using the location to promote innovation.

29. Explain outsourcing and insourcing and the reasoning for each: Outsourc- ing

involves a company hiring another company to manage business tasks that would usually be done by in-house employees. This strategy allows businesses to leverage external expertise or reduce costs by shifting production to more cost-effective regions. However, outsourcing carries risks and may not be suitable for all functions, such as human resources or customer relations. In such cases, companies may opt for insourcing, which involves keeping or bringing back these responsibilities to internal staff.

30. Outsourcing: Hiring staff or business outside the company to complete busi-

ness activities.

31. Insourcing: Using in-house staff to complete a business task.

32. Advantages of Outsourcing: Outsourcing involves a company hiring an exter-

nal firm to produce goods or provide services that were previously handled in- house, often to reduce costs. Some advantages of outsourcing include lower costs due to economies of scale, greater flexibility in adjusting production levels, enhanced expertise from specialized suppliers, increased discipline through transparency and accountability, and the ability to focus on core activities. Outsourcing is often driven by wage-cost differentials between developed and developing nations, but other factors such as quality, reliability, continuous improvements, and political stability also play crucial roles. For example, Diageo selected Budapest, Hungary,

for its offshore shared-services operations based on criteria including a low-cost base, fa- vorable business environment, availability of skilled staff, accessibility, attractiveness for international staff, and a robust regulatory framework.

33. A company wants to move production offshore to a low-skilled labor company

because the company's machines will make the product and it only needs these low- skilled operators to work the machines. Which advantage of outsourcing does the company seek to take?: Lower costs; In this advantage, the company seeks another to produce the products in a place of lower labor cost. The company in the scenario is seeking these low-skilled operators to reduce costs.

34. Risks of Outsourcing and Reasons for Insourcing: Outsourcing can offer

significant benefits but comes with risks. Some risks, like potentially higher out- sourcing costs due to the eroding value of the U.S. dollar, can be mitigated through financial hedging strategies. However, other risks are harder to predict and manage. Functions that could disrupt the flow of products or services to customers are the riskiest to outsource. The second riskiest activities to outsource are those that impact the relationship between a company and its employees. In such cases, insourcing may be preferred to maintain control over quality and delivery.

35. Categories of Risks Associated with Outsourcing: Outsourcing risks typ- ically

fall into categories such as loss of control, innovation, and organizational trust, along with higher-than-expected transaction costs. Loss of control occurs

when managers can no longer oversee process technologies and quality standards, leading to potential disruptions and opportunistic behavior from outsourcers. Geo- graphic distance exacerbates these control issues, especially with offshore vendors. Companies also risk losing control over intellectual property, which is particularly concerning in sensitive fields like banking and information management. Loss of innovation can result when support services critical to innovative processes are outsourced, disrupting cooperative work patterns. Organizational trust may erode as employees see outsourcing as a breach of the employer-employee relationship, leading to uncertainty and conflicted loyalties. Additionally, unforeseen transaction costs can arise, complicating the make-or-buy decision. Companies must consider various factors, including tax consequences, political risk, and synergies with overall strategy, to manage these risks effectively. When supplier problems cannot be resolved, companies may opt for insourcing to regain control and ensure quality and reliability. Which company relationship is negatively affected if the company uses outsourcing to reduce costs?: Employee; Outsourcing will cause some employees to lose their jobs. Fear can grip the company if outsourcing of production or another major element of the company is outsourced or moved offshore.

36. Identify distribution strategies and their advantages and disadvantages-

: Distribution strategies fall into two categories: indirect, which includes interme- diaries, and direct, which is between the producer and the consumer only. Both have advantages and disadvantages. Global distribution faces special challenges

because of cultural differences and unpredictable conditions in some countries.

37. Identifying Distribution Channels: The specific avenue through which a seller

makes a finished good or service available for purchase is known as the product's marketing or distribution channel. The shortest channel, the direct channel, involves only the producer and the consumer, such as when buying an apple from a local farmer. An indirect channel includes one or more intermediaries, like distributors, wholesalers, agents, brokers, and retailers, between the producer and the con- sumer. Each distribution strategy has its advantages and disadvantages, and a company must choose the one that best fits its product and business model. For instance, while Levi's markets directly to consumers through ads, they also rely on intermediaries to sell their products. Managing these distribution channels effectively is crucial for business success.

38. Marketing channel: The way a seller connects with a customer; sometimes

called a distribution channel.

39. Distribution channel: The way a seller makes a product available to a customer

to buy; sometimes used interchangeably with marketing channel.

40. Direct channel: The shortest path between a producer and a consumer.

41. Direct distribution strategy: Distribution strategy that reaches customer direct-

ly without any intermediaries; distribution channel and distribution strategy are often used interchangeably.

42. Indirect channel: An indirect path between producer and consumer with inter-

mediaries.

43. Indirect distribution strategy: Distribution strategy that uses intermediaries to

reach customers; distribution channel and distribution strategy are often used interchangeably.

44. Advantages and Disadvantages of an Indirect Strategy: Using an indirect

distribution strategy has its advantages and disadvantages. Companies partner with intermediaries because these partners often have capabilities that the companies themselves lack, such as access to a wide customer base, marketing expertise, and shipping and handling capabilities. For example, a strong channel partner like Walmart can promote and sell large quantities of a product that might otherwise struggle to be profitable. In turn, Walmart relies on dependable partners to supply it with high-quality products that sell well. However, this strategy comes with draw- backs, such as reduced control over product marketing and customer relationships. Additionally, profits must be shared with channel partners, and the more partners involved, the more complex and error-prone the distribution process becomes.

45. Pros and Cons of a Direct Strategy: Many small businesses use the direct

channel, selling directly to consumers without intermediaries. This approach allows close contact with customers and full control over marketing. Direct channels are not limited to small businesses; for instance, Soylent, a high-tech food replace- ment company, also sells directly to consumers. The growth of the internet and

e-commerce has made direct channels more accessible, allowing start-ups to build quickly without the need for physical storefronts. This trend has led many traditional businesses to adopt direct channels to remain competitive. Service businesses, like tanning salons and legal services, inherently use direct channels since services are performed and consumed simultaneously.

46. Direct Channel Advantage/Disadvantages: The direct distribution channel of- fers

several advantages, including full control over the product, marketing, and costs, faster delivery to consumers, lower long-term expenses, and a stronger connection to the customer base. However, it also has disadvantages, such as higher initial costs for setting up facilities and hiring staff, difficulties in managing large-scale operations, the need to handle logistics and shipping issues independently, and navigating government restrictions without prior experience. The Advantages and Disadvantages of Direct and Indirect Strategies: The choice between direct and indirect depends on balancing the need for control over the product with the need for support and expertise from intermediaries to deliver the product to market

47. Indirect Channel Advantages/Disadvantages: The indirect distribution chan- nel

offers advantages such as no up-front costs when using existing channels, intermediaries' market expertise, and a faster sales process. However, it also comes with drawbacks, including the need to trust intermediaries to represent your brand, potential loss of control over marketing efforts, the risk of intermediaries developing a sense of ownership over your products, competition from other products within the same channel, and added costs and bureaucracy from multiple intermediaries. The Advantages and Disadvantages of Direct and Indirect Strategies: The choice between direct and indirect depends on balancing the need for control over the product with the need for support and expertise from intermediaries to deliver the product to market

48. A farmer sells sweet corn to customers at a local farmers market. Which marketing

channel is being used by the farmer?: Direct; When a producer sells to customers, it is a direct marketing channel.

49. Which advantage do intermediaries offer when a manufacturer uses an in- direct

marketing channel to distribute its products?: Broader knowledge about the existing markets; One of the main reasons to use an indirect channel is that the marketing intermediaries to which the producer sells may know more about the markets.

50. International Distribution Management: Selling internationally requires care- ful

consideration of how to distribute goods in diverse markets. Developed countries boast robust infrastructure, including reliable roads for trucks, established

retailers, and strong communication networks. In contrast, emerging markets often face fragmented distribution networks, limited logistics, and smaller retail outlets. Here, small shops, door-to-door peddlers, and street vendors are crucial. For instance, in parts of Africa, books may be sold from the back of a moped. Additionally, standards of living in emerging markets vary, with a significant rural population facing unique logistical challenges such as narrow dirt roads and seasonal obstacles like mud. These barriers must be addressed to effectively reach customers.

51. Distribution Management Options: There are typically three distribution

strategies for entering a new market. First, companies can form a joint venture or partnership with a local company, as Walmart did in Mexico. Second, acquiring a local company provides immediate access to large-scale distribution, exemplified by Home Depot's strategy in China. Third, building distribution from scratch allows a company to develop its own local capabilities, as Carrefour did in China. The choice of strategy depends on factors such as the company's timetable for market volume, local foreign ownership laws, and the availability of suitable partners or acquisition targets. Additionally, international business often involves more intermediaries due to import/export regulations, including agents, brokers, and international freight

forwarders. These added intermediaries increase the cost of the product, requiring firms to either raise prices or accept lower margins.

52. Unilever Solves Distribution Issues in India: There are three primary distrib-

ution strategies for entering a new market. First, companies can form a joint venture or partnership with a local firm, as Walmart did in Mexico. Second, acquiring a local company provides immediate access to large-scale distribution, exemplified by Home Depot's approach in China. Third, building distribution from scratch allows a company to develop its own local capabilities, as Carrefour did in China. The choice of strategy depends on factors such as the company's timeline for market volume, local foreign ownership laws, and the availability of suitable partners or acquisition targets. Additionally, international business often involves more intermediaries due to import/export regulations, increasing product costs and requiring firms to raise prices or accept lower margins.

53. Which advantage is an outcome of exporting products to a developed country?:

Better established infrastructure; Developed countries have better estab- lished infrastructures that make it easier to distribute products.

54. Which distribution system should be used by a company wanting to max- imize its

control over the distribution of its products when entering a new country?: Building its own; A company that wants to control the distribution process should create its own system.

55. Funding global processes or organizations is a complex financial process with a

variety of options, each with varying rates of risk and return: Funding options for international business include cash, debt (loans and bonds), and equity (shares). Sources of funding also include VCs, angel investors, and crowdsourcing. Multinational firms structure their financial assets to minimize risk. Often they use a combination of long-term debt and equity to raise capital. Exporters sometimes have special financing based on collateral or financing supplied by foreign governments.

56. Types of Funding for Large International Businesses: International busi- nesses

utilize similar funding sources as other organizations, focusing primarily on debt and equity. Large organizations often rely on traditional forms of funding, such as internally generated cash flows, bank loans, bonds, and equity financing. While debt options like loans and bonds offer lower costs of capital and priority in bankrupt- cy repayments, equity financing involves selling ownership stakes, which, although riskier and costlier, does not require fixed repayments. Additionally, multinational firms might raise funds through global equity and debt markets to take advantage of lower costs and diverse investor bases, despite the complexities of foreign currency and exchange rates.

57. Debt: Amount owed to someone.

58. Equity: Value of the shares of a company.

59. Assets: A useful or valuable thing; something you own such as building, inven-

tory, or cash.

60. Foreign currency: Any form of money in circulation in a different country.

61. Exchange rates: The price of one currency expressed in terms of units of

another currency.

62. Types of Funding for Small International Businesses: For small organiza- tions,

debt and equity are often supplemented by venture capital (VC) and crowd- sourcing, especially in the start-up world. These organizations typically have less collateral and limited financial leverage, making global venture funding challenging. Venture capitalists and angel investors provide substantial capital and strategic guid- ance, while funding from personal connections (FFF: Friends, Family, or Fools) offers more straightforward monetary support. Crowdsourcing platforms like Kickstarter and Indiegogo allow entrepreneurs to raise small amounts of capital from many individuals, reducing reliance on traditional bank loans. This evolving investment landscape lowers globalization barriers and enables small organizations to expand with relatively modest seed capital.

63. Venture capital (VC): A type of high-risk investing.

64. Crowdsourcing: Enlisting the help of a large number of people, often via the

internet.

65. Which type of investor secures funding from a number of speculative fi- nanciers

and pursues strong global business opportunities still in the start-up phase?: Venture

capitalists; Venture capitalists provide high amount of capital to early-stage, emerging firms that are deemed to have high growth potential.

66. Which source permits a high number of funders to each participate with a small

amount of capital and cumulatively contribute to a new venture?: Crowd- sourcing; Crowdsourcing is a model in which finances are gathered from a large group of funders. It divides investments between participants to achieve a cumulative result.

67. Which financing source provides funding for capital through private con- nections

with help limited to monetary contributions?: Personal contacts; Per- sonal contacts can provide funding, which is usually only for capital, and do not include help beyond monetary contribution.

68. Sources of Funding: for Exporters: Exporters require funding to produce or

acquire products for export, often utilizing similar methods as other corporate investments but with additional options due to the higher perceived risk by com- mercial banks. A common approach is secured financing, where contracts serve as collateral, allowing banks to advance funds against payment obligations, shipment, or storage documents. Exporters can also obtain loans from commercial banks, intermediaries like export management companies, suppliers, corporate parents,

or government organizations. Additionally, government-supported entities like the Japan External Trade Organization (JETRO) and the Export-Import Bank of the United States (Ex-Im Bank) offer various forms of assistance and financing to facilitate export activities.

69. Which organization formed in 1970 supplements the funding available from

commercial banks and other lenders to support U.S. exports?: Private Export Funding Corporation (PEFCO); This is a private-sector organization formed in 1970. It aims to support the funding of U.S. exports by supplementing the funding available from commercial banks and other lenders.

70. Identify the functions of generally accepted accounting principles (GAAP) and the

international accounting standards board: No language can enable communication without some standardization and rules. In the United States, this structure is created by U.S. GAAP, which is constantly evolving as accountants seek better methods of providing financial information. The main authority for the development of GAAP lies with the FASB. At some point, GAAP may be replaced by IFRS to provide consistent accounting and financial reporting globally. Historically, countries have followed different accounting standards, but the FASB and IASB are working on harmonizing these to facilitate global comparisons.

71. What Is GAAP?: The purpose of accounting is to communicate an organiza-

tion's financial position to company managers, investors, banks, and the govern- ment. Accounting standards provide a system of rules and principles that

prescribe the format and content of financial statements. Through this consistent reporting, a firm's managers and investors can assess the financial health of the firm. Investors and banks use these financial statements to determine whether to invest in or loan capital to the firm, while governments use the statements to ensure that the companies are paying their fair share of taxes. Accounting standards cover topics such as how to account for inventories, depreciation, research and development costs, income taxes, investments, intangible assets, and employee benefits.

72. GAAP: A collection of generally accepted accounting principles used in the

United States.

73. International Accounting Standards Board (IASB): An independent group that

oversees the development and revision of the IFRS.

74. International Financial Reporting Standards (IFRS): A collection of account- ing

principles used through much of the world outside the United States.

75. What Is FASB?: Since 1973, the primary authoritative body in charge of pro-

ducing GAAP has been the Financial Accounting Standards Board (FASB). FASB is an independent group supported by the U.S. government, various accounting organizations, and private businesses. It is charged with establishing and improving the standards by which businesses and not-for-profit organizations produce the

financial information that they distribute to decision makers. In 2009, FASB combined all authoritative accounting literature into a single source for GAAP, known as the Accounting Standards Codification. This effort made GAAP both more understand- able and easier to access by bringing together hundreds of official documents in a logical fashion so that all rules on each topic are in one location.

76. Financial Accounting Standards Board (FASB): An independent group that

oversees the development and revision of the GAAP.

77. Which U.S.-based set of accounting principles was created to establish rules and

regulations for financial accounting?: GAAP; Generally Accepted Accounting Principles (GAAP) were created in the United States to deliver financial accounting direction and regulation.

78. Which self-governing group is supported by the U.S. government, various

accounting establishments, and privately owned companies to establish ac- counting standards?: FASB; The Financial Accounting Standards Board (FASB) is self- governing and supported by the U.S. government, various accounting estab- lishments, and privately owned companies.\

79. Which set of standards establish international accounting regulations and

reporting expectations?: IFRS; International Financial Reporting Standards (IFRS) is a set of standards by the International Accounting Standards Board (IASB) that establishes international accounting standards and reporting expectations.

80. Accounting in International Business: As countries developed different cul-

tures, languages, and social and economic traditions, they developed different accounting practices as well. In an increasingly globalized world, however, these differences are not optimal for the smooth functioning of international business. The International Accounting Standards Board (IASB) is the major entity proposing international standards of accounting, developing standards known as International Financial Reporting Standards (IFRS). Adherence to IASB standards is voluntary, but many countries have mandated the use of IFRS to ensure consistency in financial reporting. The primary reason for adopting one standard internationally is to make it easier for investors or lenders to compare the financial health of companies located in different countries.

81. What is the purpose of the IASB?: Creating international standards of ac-

counting; The IASB is responsible for creating international standards of accounting.

82. Even with the best planning, globalization carries substantial risks. Many

globalization strategies represent a considerable stretch of the company's experience base, resources, and capabilities: Global businesses face a variety of risks. Most managers focus on the direct financial risks, but political, legal, and sociocultural situations may arise that put a business in jeopardy, which can indirectly cause financial harm. Business leaders should evaluate the short-term and