IBUS 13, 15, 16, and 18

A wholly owned subsidiary is appropriate when the firm wants

100 percent of the profits generated in a foreign market

Which statement about price discrimination is true?

A necessary condition for profitable price discrimination is different price elasticities of demand in different countries.

Which is a successful exporting strategy used by 3M?

Add additional products once exporting becomes successful.

__________ agreements enable firms to hold each other "hostage," thereby reducing the risk they will behave in an opportunistic manner toward each other.

Cross-licensing

Dylan owns an epoxy company and is seeking information on export opportunities. What government resource will provide Dylan with the most comprehensive information about exporting?

Department of Commerce

Which statement is true of export management companies (EMCs)?

EMCs are export specialists that act on behalf of their client firms.

Repayment of medium- and long-term loans that U.S. commercial banks make to foreign borrowers for purchasing U.S. exports is guaranteed by the

EXIM Bank

Prior to the introduction of the euro, several member states of the European Union participated in a __________ system, in which the values of a set of currencies are fixed against each other at some mutually agreed upon exchange rate.

Fixed exchange rate

What is the primary advantage of licensing?

It helps a firm avoid the development costs and risks associated with opening a foreign market.

What is a disadvantage of using a rigid policy of fixed exchange rates?

It is likely to create high unemployment in some cases

Which argument would support the use of global advertising?

Standardized advertising lowers the costs of value creation by spreading the fixed costs of developing the advertisements over many countries.

Which statement is true of export credit insurance?

The Foreign Credit Insurance Association provides coverage against commercial risks and political risks.

Which statement is true of licensing?

The firm does not have to bear the development costs and risks associated with opening a foreign market.

What is a reason that firms take a reactive approach to exporting rather than a proactive approach?

They are intimidated by the complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from the home market.

Which argument strengthens the idea of floating exchange rates?

Trade deficits can be corrected through changes in exchange rates

Many firms pursuing __________ pricing strategy on an international scale will price low worldwide in attempting to build global sales volume as rapidly as possible, even if this means taking large losses initially.

an experience curve

This step in international market research often relates to the cost of collecting primary data that can address the research problem and objectives directly versus using available secondary data.

assessing the costs and benefits of the research

Countertrade is a form of

bartering

Anna, the international sales manager for Luxury Lighting, is trying to determine the channel length for France, a market the company hopes to enter. What is the most important consideration she should take into account?

degree to which the retail system is fragmented

Those against the use of fixed exchange rates would argue that

each country has the freedom to choose its own inflation rate

The world's four major trading currencies—the U.S. dollar, the European Union's euro, the Japanese yen, and the British pound—are all free to float against each other. This characterizes a

floating exchange rate regime

The monetary autonomy argument is supported by the advocates of

floating exchange rates

If Mexico suffered from "fundamental disequilibrium," and its government chose not to devalue its currency, a likely consequence would be

high unemployment

In a typical international trade transaction, the

importer's bank sends a letter of credit to the exporter's bank.

Leatherworks manufactures wallets specifically geared to young men between the ages of 18 to 25. The company markets its wallets both domestically and internationally believing its target market spans multiple countries, transcending national borders. The company's target segment is a(n) ______ segment.

intermarket

A U.S. company would invest in export credit insurance when it

is exposed to the risk that an importer may default on payment

Contracting out manufacturing allows companies to reduce economic exposure because

it allows companies to shift suppliers from country to country

What is an advantage of establishing cross-functional product development teams?

it is one way to achieve cross-functional integration

In many countries, political considerations make __________ the only feasible entry mode.

joint ventures

A common criticism against the powerful International Monetary Fund is that the IMF

lacks any real mechanism for accountability

__________ is pursued primarily by manufacturing firms and __________ is employed primarily by service firms.

licensing; franchising

It is difficult if not impossible to get adequate insurance coverage for exchange rate changes that

might occur several years in the future

Consumers in the most developed countries are

often not willing to sacrifice their preferred attributes for lower prices.

Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in

politically stable developed and developing nations that have free market systems.

A __________ strategy is generally favored by consumer goods firms that are trying to sell to a large segment of the market.

pull

A country with high car ownership, a large number of households with refrigerators, and a large number of two-income families tends to have greater

retail concentration

To increase the potential for a successful acquisition, a firm should

screen the foreign enterprise to be acquired

During the 1960s, the old Soviet Union and the then-communist states of eastern Europe used countertrade to purchase imports because

their currencies were generally nonconvertible

Which entry mode into a foreign market best serves a high-tech firm because it reduces the risk of losing that competence?

wholly owned subsidiaries

Firms entering a market via a __________ must bear all the costs and risks associated with the venture.

wholly owned subsidiary