IB Chapter 13

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

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

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

C. The parent company receives all profits generated by the subsidiary.

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

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

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

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

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

D. They create future competitors.

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

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

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

D. two parties are unfamiliar with each other

________ 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. Intracorporate transfers Intercorporate transfers Direct exporting Indirect exporting

Indirect exporting

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

a turnkey project

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

access to new markets

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

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? letter of credit documentary collection open account advance payment

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? a barter an offset a counter purchase a buyback

an offset

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

barter

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

bill of exchange

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

buyback

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

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) ________. barter counter purchase offset joint venture

counter purchase

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

direct export

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

distributors

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

export management company

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

exporting

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? strategic alliance licensing management contract franchising

franchising

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

identification of potential market

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

joint venture

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 letter of credit bill of lading sight draft

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? strategic alliance franchising management contract licensing

licensing

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

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? at sight letter of credit confirmed letter of credit irrevocable letter of credit revocable letter of credit

revocable letter of credit

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

sight draft

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

switch trading

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

time draft