Deck 10: Worldwide Sourcing

Question 1

Most offshore organizations like dealing with the U.S.legal system and long contracts.

Answer 1

False

Question 2

Whether the purchase transaction is with a domestic or offshore producer, there are certain common costs.

Answer 2

True

Question 3

An inverted tariff means that no duties or quota charges will be placed on goods that are reexported from the FTZ.

Answer 3

False

Question 4

Insurance protection for international shipments is optional because oceangoing carrier liability is generally unlimited.

Question 5

Counterpurchase requires a company to fulfill its countertrade requirement by purchasing products within a country unrelated to its primary business.

Question 6

Social culture and laws, personnel skills and abilities, and business culture are three areas where differences are the greatest across different geographic units.

Question 7

A critical assessment of the increased supply risks associated with offshore sources can be made after contracting, not necessarily before a commitment is made.

Question 8

Developing countries seldom rely on personal relations and trust to cover many legal issues because of an adequate legal system.

Question 9

Buyers are never reluctant to shift business from domestic sources to unknown offshore sources.

Question 10

The use of forward exchange contracts encourages speculation.

Question 11

Sharing currency fluctuation risk with a supplier works best on items that have a set delivery date such as with capital equipment.

Question 12

A major concern with international purchasing is managing the risk associated with international currency fluctuations.

Question 13

Hedging involves the simultaneous purchase and sale of currency contracts in two markets.

Question 14

In supply management, the cost/price benefits associated with sourcing in developing countries are an insignificant motivation for remaining competitive in an increasingly global environment.

Question 15

Barter requires trading parties to enter into a series of contracts to fulfill trading requirements.

Question 16

Regardless of the technique used to overcome worldwide sourcing barriers, the effort will fail unless top management supports worldwide sourcing.

Question 17

Trade shows are often one of the worst ways to gather information on many suppliers at one time.

Question 18

The most common method for overcoming barriers to worldwide sourcing involves education and training, which can generate support for the process as well help overcome the anxiety associated with change.

Question 19

Purchasing should consider only suppliers that are capable of meeting rigid quality and delivery standards, although far too often price differentials become the primary criterion behind an offshore sourcing decision.

Question 20

Purchasing's role in countertrade is not as visible as marketing's role.

Question 21

Always assume that an offshore company can automatically satisfy a buyer's performance requirements or expectations.

Question 22

A supplier can draw against the letter of credit upon presentation of the required documents.

Question 23

Few offshore suppliers anticipate exchange rate fluctuations by incorporating a risk factor into their price.

Question 24

Buyers should not underestimate the potential effects of extended distances on their ability to plan and manage a worldwide supply chain.

Question 25

A major complaint about Americans is our ignorance of other cultures.

Question 26

Duty rates vary widely over seemingly small differences between items.

Question 27

Despite its apparent simplicity, barter is one of the least-practiced forms of countertrade today.

Question 28

Few trade consulates have trade experts who are eager to do business with American buyers.

Question 29

FTZs allow an importing company to delay, eliminate, or decrease its duty payments on foreign-sourced goods that enter the zone site.

Question 30

The largest differences in communication styles across countries are message speed and level of content.

Question 31

In some societies, such as Thailand and Indonesia, saying "yes" is merely being polite and does not necessarily mean that they agree with what you are saying.

Question 32

The use of a full-service trading company may actually result in a lower total cost for international purchases compared with performing each activity individually.

Question 33

Firms that centralize operational activities during global sourcing are likely to realize lower total cost of ownership, better inventory management, and improved performance to external customers.

Question 34

From an ethical standpoint, what is considered to be an unethical or even illegal activity in the United States is never an accepted business practice in many other regions.

Question 35

Cultural differences between countries seldom result in unwelcome surprises when buying internationally.

Question 36

There is no dollar threshold on the Foreign Corrupt Practices Act, making it illegal to offer even a dollar as a bribe.

Question 37

The United States is still the undisputed product and process technology leader in the world.

Question 38

Domestic purchasing must include the additional costs associated with conducting domestic transactions.

Question 39

U.S.purchasers stuck with domestic suppliers that produce poor quality often begin to source offshore components with the hope of improving end-product quality.

Question 40

Countries lacking foreign exchange for payment but rich in natural resources cannot benefit from buy-back or compensation trading.

Question 41

All of the following are common measures used to manage currency fluctuation in international purchasing except _____.

A)letters of credit
B)purchase in U.S.dollars
C)sharing currency fluctuation risk
D)currency adjustment contract clauses
E)currency hedging

Question 42

A FTZ _____ is typically housed in a port or an industrial park and is available to multiple companies.

A)warehouse
B)twilight zone
C)subzone
D)general-purpose zone
E)None of these answers.

Question 43

A/An _____ is issued by the purchaser's bank in conjunction with an affiliate bank in the seller's country which assures the seller that the funds are in the bank.

A)bill of lading
B)letter of credit
C)Incoterm
D)hedging contract
E)tariff

Question 44

_____ is a broad term that refers to all international and domestic trade where buyer and seller have at least a partial exchange of goods for goods.

A)Six Sigma
B)Countertrade
C)Re-shoring
D)IPO
E)CISG

Question 45

_____ involves contracting with independent suppliers located outside geographic boundaries of the United States for goods and services.

A)Re-shoring
B)Domestic sourcing
C)Nearshoring
D)Outsourcing
E)Offshoring

Question 46

All of the following are examples of why organizations source worldwide except _____.

A)access to the only source available
B)react to buying patterns of competitors
C)higher ethics
D)cost/price benefits
E)establish a market presence in another country market

Question 47

A common approach for coordinating work efforts is to rely on audio conferencing or skype type visual meetings at scheduled time intervals.

Question 48

A/An _____ is a secure location approved by the appropriate U.S.Customs and Border Protection (CBP) office.

A)offshore supplier
B)international purchasing office
C)agent
D)offset
E)foreign trade zone

Question 49

Which of the following is not an element of culture?

A)Language.
B)Religion.
C)Values and attitudes.
D)Infrastructure.
E)Social institutions.

Question 50

A FTZ _____ is approved for a specific use or a specific company.

A)general-purpose zone
B)offset zone
C)subzone
D)CISG
E)None of these answers.

Question 51

Which of the following statements regarding countertrade is false?

A)Items involving large dollar amounts, such as military contracts, are prime candidates for countertrade.
B)Companies can expect countertrade demands from a country when that country's goods may have a low or nondifferentiated perception in the world marketplace.
C)Highly valued items or those sought after by the buying country are less susceptible to countertrade demands.
D)Countertrade may include items that are available from many sources, commodity-type items, or items not perceived as technologically superior or having higher quality compared with other available products.
E)Countertrade is a simple process as it avoids currency exchange fluctuations.

Question 52

Developing countries typically offer effective protection against the piracy of intellectual property.

Question 53

All of the following are examples of how a finance department can support international currency requirements except _____.

A)pay in U.S.dollars
B)identify the currency a firm should use for payment based on projections of currency fluctuations
C)provide advice about hedging and currency forecasts
D)act as a clearinghouse for offshore currencies to make payment for offshore purchases
E)provide advice as to whether to seek a new contract or renegotiate an existing one because of currency changes

Question 54

According to Dick Locke, all of the following are advice about language and communication except _____.

A)if a supplier is using English as a second language, the buyer should be responsible for preventing communication problems
B)always pay in U.S.dollars when dealing with worldwide suppliers
C)to aid in communication, speak slowly, use more communication graphics, and eliminate jargon, slang, and sports and military metaphors from your language
D)bring an interpreter to all but the most informal meetings
E)document, in writing, the conclusions and decisions made in a meeting before adjourning

Question 55

All of the following are typical reasons why a country imposes countertrade demands except _____.

A)some countries simply lack the hard currency to purchase imported goods
B)countertrade provides a means of selling products in markets to which a company may have otherwise lacked access
C)developing nations often require Western multinationals to accept goods as at least partial payment for sales within their country
D)the country may need assistance to produce its own goods and services
E)All of these answers.

Question 56

All of the following are elements of total cost for worldwide sourcing except _____.

A)payment terms
B)customs broker fees
C)additional fees or commissions
D)domestic income taxes
E)inventory carrying costs

Question 57

Which of the following is not an example of resources that affect global sourcing success?

A)Budget support for travel.
B)A large corporate headquarters building.
C)Access to qualified personnel.
D)Time for personnel to develop global strategies.
E)Availability of required information and data.

Question 58

Which of the following is not an example of cost differentials that arise between countries?

A)Lower labor rates.
B)Fewer documentation requirements.
C)Possible willingness to accept a lower profit margin.
D)Exchange rate differences.
E)Government subsidies.

Question 59

Which of the following is not one of the usual roles of an international purchasing office?

A)Expedite and trace shipments.
B)Negotiate supply contracts.
C)Make payments and bribes to foreign officials to secure or retain business.
D)Represent the buying firm to suppliers.
E)Manage technical and commercial concerns.

Question 60

Options may be used to lock in favorable rates during negotiations or anytime a purchaser is anticipating the purchase of an item from a specific country.

Question 61

Which of the following is not one of the factors that drive global sourcing performance?

A)Availability of critical resources.
B)Information sharing with suppliers.
C)Ability to speak multiple foreign languages.
D)Sourcing and contracting systems.
E)International purchasing office support.

Question 62

_____ involves proactively integrating and coordinating common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations.

A)International purchasing
B)Sole sourcing
C)Nearshoring
D)Re-shoring
E)Global sourcing

Question 63

The _____ was passed by Congress in 1977 to prevent companies from making questionable or illegal payments to foreign government officials, politicians, and political parties.

A)Foreign Corrupt Practices Act
B)Sherman Antitrust Act
C)CISG
D)Incoterms Act
E)Clayton Act

Question 64

_____ are internationally recognized commercial terms that describe the responsibilities of the buyer and seller in the arrangement of transportation.

A)Incoterms
B)Duties
C)Letters of credit
D)Values
E)Tariffs

Question 65

_____ relates to a commercial purchase transaction between a buyer and a supplier located in different countries.

A)International purchasing
B)Re-shoring
C)Global sourcing
D)Nearshoring
E)None of these answers.

Question 66

With a _____, both parties agree that payment occurs as long as exchange rates do not fluctuate outside an agreed-upon range or band.

A)hedging agreement
B)payment in a foreign currency
C)speculation agreement
D)currency adjustment clause
E)payment in U.S.dollars

Question 67

All of the following are examples of why organizations source worldwide except _____.

A)cost/price benefits
B)access to product and process technology
C)quality
D)introduce competition to domestic suppliers
E)ability to influence domestic consumers

Question 68

_____ occurs when a selling company agrees to accept goods from the buying country as partial payment.

A)Compensation trading
B)Buy-back
C)Barter
D)Counterpurchase
E)Switch trading

Question 69

Which of the following is not one of the usual roles of an international purchasing office (IPO)?

A)Identify potential suppliers.
B)Solicit quotes or proposals.
C)Obtain product samples.
D)Manage countertrade requirements.
E)Conduct overseas sales and marketing-related activities.

Question 70

According to the CISG, a/an _____ is one of the countries that have ratified the treaty.

A)rogue state
B)independent commonwealth
C)trading block
D)contracting state
E)The CISG is no longer in force.

Question 71

If the purpose of buying currency contracts is to realize a net gain, then the purchaser is _____ and not _____.

A)hedging….speculating
B)speculating….hedging
C)speculating….financing
D)hedging….financing
E)Purchasers do not get involved in managing currency fluctuation as this is solely a finance department activity.

Question 72

_____ involves contracting with independent suppliers outside the organization (domestic or foreign) to provide products or services that were performed inside the organization.

A)Re-shoring
B)Nearshoring
C)Outsourcing
D)offshoring
E)International purchasing

Question 73

_____ agreements require the seller to purchase some agreed-upon percentage of goods from a country over a specified period but allow a company to fulfill its countertrade requirement with any company or industry in the country.

A)Offset
B)Compensation trading
C)Switch trading
D)Buy-back
E)Barter

Question 74

_____ is relocating sourcing to countries geographically closer to the United States.

A)Global sourcing
B)Nearshoring
C)Re-shoring
D)Single sourcing
E)Domestic sourcing

Question 75

All of the following are elements of total cost for worldwide sourcing except _____.

A)domestic corporate sales, general, and administrative expenses
B)packaging
C)base price
D)inventory carrying costs
E)insurance premiums

Question 76

_____ is the sum of the understandings that govern human interaction in a society.

A)Values
B)Beliefs
C)Language
D)Behavior
E)Culture

Question 77

_____ occurs when a firm physically builds a plant in another country or provides a service, equipment, or technology to support the plant; the firm then agrees to take a portion of the plant's output as payment.

A)Switch trading
B)Buy-back
C)Offset
D)Counterpurchase
E)Barter

Question 78

_____ is a process that involves the straight exchange of goods for goods with no exchange of currency.

A)Counterpurchase
B)Offset
C)Barter
D)Buy-back
E)Switch trading

Question 79

_____ requires a selling firm to purchase a specified amount of goods from the country that purchased its products.

A)Nearshoring
B)Barter
C)Compensation trading
D)Counterpurchase
E)Buy-back

Question 80

All of the following are elements of total cost for worldwide sourcing except _____.

A)payment and currency fees
B)port terminal and handling fees
C)communication costs
D)base price
E)new product advertising