Deck 10: Worldwide Sourcing

Question 1

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

Answer 1

False

Question 2

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

Answer 2

True

Question 3

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

Answer 3

False

Question 4

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 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

What is an illegal activity in the U.S.is never an accepted business practice in many other regions.

Question 10

In order to gain access to the lowest costs,cutting-edge technology,and best capabilities,organizations must scan the global landscape in search of the best suppliers.

Question 11

The U.S.is still the undisputed product and process technology leader in the world.

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

Legal systems minimally differ from country to country.

Question 18

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

Question 19

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 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

Duty rates vary widely over seemingly small differences between items.

Question 28

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

Question 29

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

Question 30

Forward exchange contracts have a different focus than futures exchange contracts,in that they allow a purchaser to pay a preestablished rate for a currency in the future.

Question 31

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

Question 32

International purchasing does not create additional costs that are not part of domestic purchasing.

Question 33

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

Question 34

The use of forward exchange contracts encourages speculation.

Question 35

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

Question 36

All countries offer effective protection against the piracy of intellectual property.

Question 37

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

Question 38

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

Question 39

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

Question 40

Hedging is a form of risk insurance that can protect both parties from currency fluctuation.

Question 41

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 use English in 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 42

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

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

Question 43

____ 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 44

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

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

Question 45

____ is/are shared beliefs or group norms that are internalized and affect(s)the way people think.

A) Behavior
B) Culture
C) Values
D) Infrastructure
E) Jurisprudence

Question 46

All of the following are common methods for overcoming barriers to worldwide sourcing except ____.

A) education and training
B) publicizing success stories
C) measurement and reward systems
D) payment in U.S. dollars
E) use of third party or external agents

Question 47

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

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

Question 48

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) sourcing in a particular country expedites the sales by the company into that specific country

Question 49

____ are internationally recognized standard definitions that describe the responsibilities of a buyer and seller in a commercial transaction.

A) Incoterms
B) Duties
C) BOLs
D) Values
E) Tariffs

Question 50

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

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

Question 51

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 to foreign officials to secure or retain business.
D) Represent the buying firm to suppliers.
E) Manage technical and commercial concerns.

Question 52

All of the following are considered barriers to worldwide sourcing except ____.

A) inability to communicate across national boundaries
B) lack of knowledge and skills concerning global sourcing
C) offshore business practices, language, and culture
D) currency fluctuations
E) resistance to change

Question 53

____ 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) Strategic sourcing
D) IPO
E) CISG

Question 54

A common approach for coordinating work on global sourcing is to rely on audio conferencing with a scheduled time for conference calls,usually on a weekly basis.

Question 55

The ____ was passed by Congress in 1977 to prevent companies from making questionable or illegal payments to foreign government officials,politicians,and political parties and requires accurate recordkeeping and adequate controls for company transactions.

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

Question 56

Which of the following is not an element of culture?

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

Question 57

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 consumers

Question 58

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.
E) Countertrade is a simple process as it avoids currency exchange fluctuations.

Question 59

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 60

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 presence in another country market

Question 61

A/An ____ can be changed or canceled at any time by the buyer without the seller's consent.

A) irrevocable letter of credit
B) incoterm
C) revocable letter of credit
D) CISG
E) switch trade

Question 62

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 the foreign currency
C) speculation agreement
D) currency adjustment clause
E) payment in U.S. dollars

Question 63

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

A) corporate sales, general, and administrative expenses
B) packaging
C) transportation
D) customs duty
E) insurance premiums

Question 64

____ 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 65

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 66

A/An ____ can only be changed or canceled upon agreement of all parties.

A) compensation trade
B) revocable letter of credit
C) buy-back
D) optional commission
E) irrevocable letter of credit

Question 67

____ occurs when a selling company agrees to accept goods from the buying country as partial payment,even if it does not want them,and then sells,at a discount,the credits for these goods to a third-party trader,which sells or markets the goods.

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

Question 68

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 due to currency changes

Question 69

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

A) payment terms
B) customs brokers fees
C) additional fees or commissions
D) direct labor in production
E) inventory carrying costs

Question 70

All of the following are examples of the reliable and timely information required for successful global sourcing except ____.

A) listing of existing contracts and suppliers
B) reports on supplier capabilities and performance
C) worldwide volumes by purchase type and location
D) information about potential new suppliers
E) truck traffic patterns around the supplier's facility

Question 71

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

A) Centrally coordinated and centrally led decision making.
B) Site-based control of operational activities.
C) Ability to speak multiple foreign languages.
D) Sourcing and contracting systems.
E) International purchasing office support.

Question 72

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

Question 73

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) commission

Question 74

____ 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 75

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 76

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.