Chapter 13 Study Quiz: Selecting and Managing Entry Modes

time draft

A ________ extends credit to the importer by requiring payment at some specified time after the importer receives the goods. bill of exchange time draft bill of lading sight draft

joint venture

A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective. strategic alliance joint venture wholly owned subsidiary turnkey project

an offset

A company proposes that in exchange for a hard-currency sale, it will make a hard-currency purchase of an unspecified product from the buyer nation in the future. Which of the following is the company proposing? a counter purchase a buyback an offset a barter

bill of exchange

A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________. bill of lading bill of exchange management contract letter of credit

export management company

A(n) ________ exports products on behalf of an indirect exporter. local distributor export management company subsidiary sales representative

two parties are unfamiliar with each other

Advance payment is commonly used for export/import financing when ________. two parties are unfamiliar with each other the buyer has obtained credit for the transaction the transaction is for a relatively high amount the buyer has good credit rating at banks

open account

Export/import financing in which an exporter ships merchandise and later bills the importer for its value is called ________. a letter of credit documentary collection open account advance payment

confirmed letter of credit

Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of credit, which creates a(n) ________. unconfirmed letter of credit irrevocable letter of credit confirmed letter of credit advised letter of credit

knowledge of the target market's cultural, political, legal, and economic conditions

The biggest advantage of an export management company is usually its ________. knowledge of the target market's cultural, political, legal, and economic conditions financial understanding of investment projects and its manufacturing expertise well-developed and extensive distribution channels and storage facilities well-rounded experience in countertrade-related activities

buyback

The export of industrial equipment in return for products produced by that equipment is called ________. buyback franchising offset barter

counter purchase

The sale of goods and services to a country by a company that promises to buy a specific product from that country in the future is called a(n) ________. counter purchase barter offset joint venture

identification of potential market

What is the first step in selecting a foreign market? monitoring major markets assessing general legal and political environments identification of potential market evaluating host country's trade policies

a turkey project

When one company is hired to design, construct, and test a production facility for a client, the arrangement is called ________. a turkey project franchising joint venture licensing

advance payment

Which of the following financing methods entails the lowest risk for exporters? open account advance payment supersedeas bond letter of credit

licensing

Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time? strategic alliance management contract licensing franchising

franchising

Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period? management contract licensing strategic alliance franchising

They create future competitors.

Which of the following is a disadvantage of strategic alliances? They are the most expensive among the investment entry modes. They increase the likelihood that one partner will try to take advantage of the other. They create future competitors. They fail to tap into their competitors' specific strengths.

letter of credit

Which of the following is a method of export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document? bill of exchange sight draft bill of lading letter of credit

access to new markets

Which of the following is an advantage of exporting? vulnerability to tariffs access to new markets potential conflicts with distributors logistical complexities

The parent company receives all profits generated by the subsidiary.

Which of the following is an advantage of wholly owned subsidiaries? They are the least expensive investment entry modes. They help in the sharing of the cost of an international investment project. The parent company receives all profits generated by the subsidiary. They are the least risky when compared to other investment entry modes.

They can stunt the growth of the exporter's market share by charging very high prices.

Which of the following is true of distributors? They can stunt the growth of the exporter's market share by charging very high prices. The use of distributors increases the exporter's control over the price buyers are charged. They are compensated with a fixed salary plus commissions based on the value of their sales. They are seldom required to take ownership of the merchandise when it enters their country.

revocable letter of credit

Which of the following letters of credit can be modified without obtaining approval from either the exporter or the importer, by the bank issuing the letter of credit? confirmed letter of credit revocable letter of credit at sight letter of credit irrevocable letter of credit

advance payment

Which of the following normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter prior to shipment of merchandise? documentary collection open account letter of credit advance payment

direct export

Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies? licensing contract manufacturing indirect export direct export

barter

Which of the following refers to the exchange of goods or services directly for other goods or services without the use of money? barter offset counter purchase switch trading

sight draft

Which of the following requires an importer to pay for the imported goods when they are delivered? time draft sight draft air way bill of lading onboard bill of lading

Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property.

Which of the following statements best differentiates between franchising and licensing? Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property. Franchising is common in manufacturing industries while licensing is primarily used in service industries. Licensing gives a company greater control than franchising over the sale of its product in a target market. Licensees must often meet strict guidelines on product quality, day-to-day management duties, and marketing promotions, unlike franchisees.

A major advantage of licensing is that it is the least risky method of international expansion.

Which of the following statements is true of licensing? Cross licensing grants a company the right to use a property but does not grant it sole access to a market. A major advantage of licensing is that it is the least risky method of international expansion. Licensing restricts finances needed for international expansion. Licensing increases the likelihood that a licensor's product will appear on the black market.

switch trading

________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country. barter franchising joint venture switch trading

Exporting

________ is the most common form of international business activity. countertrade licensing joint venture Exporting

Indirect exporting

________ occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form. Indirect exporting Intracorporate transfers Direct exporting Intercorporate transfers

distributors

________ take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales. agents Sales representatives Freight forwarders distributors