Chapter 13 Study Guide
Which of the following statements is true of licensing
A major advantage of licensing is that it is the least risky method of international expansion
Which of the following statements is true of countertrade
Countertrade is practiced by countries when there is a lack of hard currency
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
Which of the following statements is true of the strategic factors that influence a company's international entry mode selection
Markets that are likely to remain relatively small consider exporting as a viable option
Which of the following is an advantage of wholly owned subsidiaries
The parent company receives all profits generated by the subsidiary
Which of the following is true of distributors
They can stunt the growth of the exporter's market share by charging very high prices.
Which of the following is a disadvantage of strategic alliances
They create future competitors
Which of the following financing methods entails the greatest risk for importers
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
advance payment
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
an offset
Letters of credit are popular among traders because most of the risks are assumed by
banks
Which of the following is the oldest known form of countertrade
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
A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a
bill of exchange
Which of the following refers to a contract between the exporter and shipper that specifies merchandise destination and shipping costs
bill of lading
A ________ joint venture is formed when each partner requires the same component in its production process
buyback
A form of countertrade that usually typifies long-term relationships between the companies involved is called
buyback
A(n) ________ is guaranteed by both the exporter's bank in the country of export and the importer's bank in the country of import
confirmed letter of credit
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
Selling goods or services that are paid for, in whole or part, with other goods or services is called
counter trade
Which of the following allows a country to earn back some of the currency it pays out for imports
counterpurchase
Companies involved in direct exporting typically rely on
distributors
take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales
distributors
Export/import financing in which a bank acts as an intermediary without accepting financial risk is called
documentary collection
Which of the following is a method of export/import financing
documentary collection
is a payment method commonly used when there is an ongoing relationship between the involved parties
documentary collection
A(n) ________ exports products on behalf of an indirect exporter
export management company
Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies
export through local distributors
Which of the following is the most common method of buying and selling goods internationally
exporting and importing
An offset agreement differs from a counter purchase agreement in that an offset agreement
fails to specify the type of product that must be purchased
Which of the following types of joint ventures involve parties investing together in downstream business activities
forward integration
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
franchising
Which of the following is the first step in developing a successful export strategy
identification of a potential market
which of the following steps of the strategy development process for exports involves performing market research and interpreting results obtained from the research
identification of a potential market
Which of the following occurs when a company sells its products to intermediaries who then resell to buyers in a target market
indirect exporting
Which of the following steps of the strategy development process for exports involves establishing relationships with potential local distributors
initiation of meetings
A(n) ________ allows the bank to modify the terms of the letter only after obtaining the approval of both exporter and importer.
irrevocable letter of credit
Which of the following is an investment entry mode
joint venture
is a separate company created and owned by two or more independent entities to achieve a common business objective
joint venture
The biggest advantage of an export management company is usually its
knowledge of the target market's cultural, political, legal, and economic conditions
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
letter of credit
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
licensing
Which of the following is a strategic factor that influences a company's international entry mode selection
market size
Export/import financing in which an exporter ships merchandise and later bills the importer for its value is called
open account
Which of the following financing methods entails the greatest risk for exporters
open account
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
revocable letter of credit
Which of the following requires an importer to pay for the imported goods when they are delivered
sight draft
is a countertrade whereby one company sells to another its obligation to make a purchase in a given country
switch trading
Buyback is defined as
the export of industrial equipment in return for products produced by that equipment
A(n) ________ becomes a negotiable instrument that can be traded among financial institutions when inscribed "accepted" by an importer
time draft
When one company is hired to design, construct, and test a production facility for a client, the arrangement is called
turnkey project
Which of the following is a contractual entry mode
turnkey projects
advance payment is commonly used for export/import financing when
two parties are unfamiliar with each other