Deck 10: Exporting and Countertrade

Question 1

Global sourcing and exporting are most often managed from a firm's home country.

Answer 1

True

Question 2

International business transactions that involve countertrade are typically handled with cash payments.

Answer 2

False

Question 3

A long-term commitment, as well as a large amount of financial and human resources, are required of firms that enter foreign markets through licensing agreements.

Answer 3

False

Question 4

The bilateral trade relationship between Canada and the United States is larger than the two-way trade relationship between China and the United States.

Question 5

Compared to other entry strategies, exporting is less subject to tariff and other trade barriers.

Question 6

Disputes often arise between exporters and intermediaries regarding pricing, policies, and inventory levels.

Question 7

To ensure creditworthiness, exporters can purchase insurance to cover their inability to pay buyers.

Question 8

Barter, the oldest form of commerce, has been totally replaced by countertrade in modern global markets.

Question 9

When a firm invests capital in a foreign market in order to gain ownership of a facility it is known by which of the following terms?

A) FDI
B) global procurement
C) exporting
D) outsourcing

Question 10

Licensing and franchising are both ________ relationships.

A) joint venture
B) intermediary
C) contractual
D) competitive

Question 11

A focal firm that maintains a relatively low degree of control over foreign operations is most likely using which of the following foreign market entry strategies?

A) countertrade
B) minority-owned equity joint venture
C) wholly owned subsidiary (FDI)
D) majority-owned equity joint venture

Question 12

A focal firm that requires a low-risk foreign market entry strategy would most likely choose which of the following approaches?

A) minority-owned equity joint venture
B) project-based (nonequity) collaborative venture
C) global sourcing
D) wholly owned subsidiary (FDI)

Question 13

Which of the following is an example of push factors?

A) government incentives
B) falling profit margins
C) business plans
D) increasing demand

Question 14

A risk-taking manager at a Canadian firm would most likely pursue initial internationalization in which of the following foreign markets?

A) Saudi Arabia
B) Great Britain
C) Australia
D) United States

Question 15

Why would a firm with a domestic market focus never go beyond the first step of internationalization?

A) Too much time is needed for employee training and business plan development.
B) Managers have to become familiar with the local regulations and procedures for doing business in an overseas market.
C) Tax liabilities assume new complexities.
D) all of the above

Question 16

A firm allocates resources based on available international business opportunities during which of the following internationalization stages?

A) Experimental Involvement
B) Committed Involvement
C) Active Involvement
D) Collaborative Involvement

Question 17

Governments use data on exporting and importing activities to calculate which of the following?

A) import taxes and duties
B) trade deficit statistics
C) cost-of-living index
D) inflation predictions

Question 18

The increase in China's export of IT products has most harmed which of the following?

A) Taiwan
B) United States
C) Europe
D) Japan

Question 19

All of the following are advantages that firms often experience through exporting except ________.

A) increased economies of scale
B) stabilized sales fluctuations
C) reduced dependence on domestic sales
D) amplified country and corporate risk

Question 20

Which of the following is most likely a disadvantage to firms who use exporting as an entry strategy?

A) unqualified foreign market managers
B) difficulties withdrawing from foreign markets
C) lack of detailed knowledge about foreign customers
D) high levels of political risk

Question 21

Which of the following can negatively impact exporters more than firms that are involved in collaborative ventures?

A) global purchasing
B) franchising restrictions
C) unskilled foreign labor pool
D) exchange rate instability

Question 22

After managers have chosen an appropriate market to which to export, they next need to make which of the following decisions?

A) how much resources can be committed
B) how to deal with domestic competitors
C) which country has the fewest barriers
D) which freight forwarder to use

Question 23

During the global market opportunity assessment phase, managers will most likely do which of the following?

A) identify qualified distributors and other foreign business partners
B) perform a test-run by exporting a small amount of products to potential markets
C) send out a survey to foreign suppliers and distributors to learn about the culture
D) collaborate with another trading company for a short period of time

Question 24

Which of the following would most likely be used in a high-volume market?

A) joint venture
B) indirect exporting
C) direct exporting
D) company-owned subsidiary

Question 25

Which of the following terms refers to purchasing foreign merchandise and bringing it into the home market?

A) exporting
B) global sourcing
C) global bartering
D) offshoring

Question 26

Among the following firms, which one imports the most from China?

A) Dow Chemical
B) Rolls Royce
C) Walmart
D) Zara

Question 27

All of the following are reasons that national governments might require exporters to obtain a license to export except ________.

A) protection against theft
B) limited product supply
C) national security concerns
D) foreign policy issues

Question 28

Why is a letter of credit most likely a popular method of payment in export transactions?

A) the process is simple and banking officials are in control
B) the method requires a limited amount of documentation
C) the exporter bills customers with strong credit ratings
D) the interests of the seller and buyer are protected simultaneously

Question 29

Relational assets are defined as which of the following?

A) long-term, advantageous business relationships with foreign facilitators
B) mutually beneficial relationships with members of an economic bloc
C) profitable business partnerships with foreign agents and franchisors
D) brief partnerships between licensors and exporters in a foreign market

Question 30

In countertrade transactions, developing countries typically offer all of the following except ________.

A) coal
B) spring water
C) tires
D) maize

Question 31

Organic Towel Exports
The Organic Towel Company (OTC) employs 400 workers at its facility in Liverpool, England, where the firm has been manufacturing 100% organic cotton towels for five years. OTC sells towels in the United Kingdom primarily to boutique hotels and specialty retail stores, as well as to individual consumers through the company's website. Recently, OTC managers attended a trade show in London where they made contact with numerous foreign market managers. OTC received a request from Earth Waves, an organic clothing store in Toronto, Canada for a large order of towels. OTC had not been looking into expanding, but firm managers are seriously considering the opportunity to reach a global niche market with their towels.

-Which of the following questions would most likely be more important for OTC managers to evaluate when making the decision whether to export their towels to Earth Waves?

A) What are the risks involved in exporting OTC towels to Earth Waves?
B) Do Canadian towel companies have success when they export?
C) Will OTC save money on domestic marketing by exporting?
D) How intense is the organic food and clothing industry in Canada?

Question 32

Organic Towel Exports
The Organic Towel Company (OTC) employs 400 workers at its facility in Liverpool, England, where the firm has been manufacturing 100% organic cotton towels for five years. OTC sells towels in the United Kingdom primarily to boutique hotels and specialty retail stores, as well as to individual consumers through the company's website. Recently, OTC managers attended a trade show in London where they made contact with numerous foreign market managers. OTC received a request from Earth Waves, an organic clothing store in Toronto, Canada for a large order of towels. OTC had not been looking into expanding, but firm managers are seriously considering the opportunity to reach a global niche market with their towels.

-Which of the following should be considered in making the decision to export OTC towels to Canada?

A) What is the probability of OTC and Earth Waves entering into a joint venture?
B) How much fluctuation occurs in the exchange rate between the Canadian dollar and the British
Pound?
C) What is the likelihood of Earth Waves opening a subsidiary in Canada?
D) What documentation would be required for OTC to export towels to Asia?

Question 33

Lamp Shade Imports
The ABC Lamp Company is an SME that designs and manufactures high quality lamps that are sold in high-end furniture stores across Canada and the United States. ABC imports lamp shades from Asia where costs are lower than in North America. ABC has received a large order from a hotel chain that wants to purchase 5,000 lamps in the next three months, and ABC will need to import corresponding lamp shades. ABC recently ended a relationship with a Chinese supplier due to the poor quality of shades that were shipped. ABC managers are seeking a new Asian supplier that can fill the hotel lamp order.

-Which of the following factors should be considered in ABC's search for a new lamp shade supplier?

A) Where is the manufacturing facility of the Asian exporter located?
B) Does the Asian lamp shade supplier sell to ABC's competitors?
C) What is the creditworthiness of the Asian lamp shade exporter?
D) At what bank does the Asian lamp shade supplier do business?

Question 34

Small Business Intermediaries
Mary's Mosaics is a small business in California that creates custom-designed decorative items from mosaic tiles and glass. The website created for Mary's Mosaics generates the majority of the firm's business, although the firm also sells items to U.S. retailers for domestic sale. Mary Boyd, the CEO of Mary's Mosaics, recently received an order from a Spanish retailer for $20,000 worth of mosaic items. Similar orders have been placed from importers in Australia, England, and Canada. Mary needs to identify appropriate foreign intermediaries for each market.

-Which of the following is most likely an important characteristic for the Canadian intermediaries used by Mary's Mosaics?

A) quality of sales force and experience with target customers
B) ability to secure intellectual property rights and patents
C) willingness to make connections with government agencies
D) reputation for simultaneously handling competing clients

Question 35

Small Business Intermediaries
Mary's Mosaics is a small business in California that creates custom-designed decorative items from mosaic tiles and glass. The website created for Mary's Mosaics generates the majority of the firm's business, although the firm also sells items to U.S. retailers for domestic sale. Mary Boyd, the CEO of Mary's Mosaics, recently received an order from a Spanish retailer for $20,000 worth of mosaic items. Similar orders have been placed from importers in Australia, England, and Canada. Mary needs to identify appropriate foreign intermediaries for each market.

-Which of the following should be established by Mary's Mosaics to avoid intermediary difficulties?

A) a long-term joint venture partnership
B) bonuses for meeting sales quotas
C) permanent employment with the firm
D) contractual clarification of responsibilities

Question 36

In a short essay, describe at least six of the numerous variables important to managers as they determine the best entry strategy for their firm.

Question 37

In a short essay, describe, with an example, why exporting is a flexible entry strategy for focal firms.

Question 38

In a short essay, describe three disadvantages firms face when internationalizing through exporting.

Question 39

What is the four-step process many managers use to achieve successful exporting? Explain your answer in a short essay.

Question 40

In a short essay, compare the advantages of using direct exporting and indirect exporting.

Question 41

In a short essay, describe the four primary factors that determine the cost of export financing.

Question 42

In a short essay, describe how governments assist exporters with their financial needs. Provide an example of a government agency that aids exporters.

Question 43

What are the criteria used by exporters to screen prospective foreign intermediaries? What are reasons that a relationship between an exporter and an intermediary might become strained? Provide your answers in a short essay.

Question 44

In a short essay, describe the four types of countertrade.