International Business Exam III

Advantages of Turnkey contracts

Ability to earn returns from process technology skills in countries where FDI is restricted

Advantages of Joint Ventures

Access to local partner's knowledge, sharing development costs and risks, politically acceptable

Export-Import Bank

Agency of the US government whose mission is to provide aid in financing and facilitate exports and imports.

Identify an advantage of a low minimum efficient scale

Allows the firm to accommodate demands for local responsiveness

Types of Countertrade

Barter, counter purchase, offset, switch trading, buyback

Disadvantages of Turnkey contracts

Creating efficient competitors, lack long-term market presence

Who and what activities are involved in export and import financing?

Export and Import Financing, Lack of Trust, Letter of Credit, Draft, Bill of Lading, A Typical International Trade Transaction

The Advantages and disadvantages of international Strategic Alliances? Strategic alliances are attractive because they

Facilitate entry into a foreign market because a local partner will be familiar with operating in the market, allow firms to share the fixed costs and risks of developing new products or processes, bring together complementary skills and assets that neither partner could easily develop on its own, help a firm establish technological standards for the industry that will benefit the firm

True or False: Concentration of production is not favored when important exchange rates are expected to remain relatively stable

False

True or False: The case 'Microsoft in India', shows that Microsoft has changed its marketing approach of developing products specifically designed to meet the needs of the Indian market to a highly standardized approach.

False

True or False: The main principle of countertrade is to accept advance payments for goods and services that are exported to another country

False

Which of the following is an advantage of engaging in in-house production of the entire product?

Firms can lower costs through in-house production if it is more efficient than other companies.

The Advantages of Buy

Gives the firm greater flexibility, Helps the firm capture orders from international customers

How can a firm protect its proprietary information in a joint venture?

Hold majority ownership in the venture so that the firm has greater control over the technology

Before a firm is allowed access to the European marketplace, the European Union requires that the quality of the firm's manufacturing processes and products be certified under a quality standard known as

ISO 9000

Which of the following statements about franchising is true?

It is a specialized form of licensing

Which of the following is an advantage of countertrade?

It is an effective way of doing business with developing nations

Which of the following is a valid observation of the Export-Import (Ex-Im) Bank?

It is an independent agency of the U.S government and promotes international trade.

Disadvantages of Joint Ventures

Lack of control over technology, Inability to engage in global strategic coordination, Inability to realize location and experience economies

Disadvantages of Licensing

Lack of control over technology, inability to realize location and experience curve economies, inability to engage in global strategic coordination

Advantages of Franchising

Low development costs and risks

Advantages of Licensing

Low development costs and risks

The Advantages of Make

Lowers costs, Facilitates investments in highly specialized assets, Protects proprietary technology, Facilitates the scheduling of adjacent processes

Which of the following statements about retail systems is true?

One factor contributing to greater retail concentration is an increase in car ownership

What are promises and risks associated with exporting?

Pitfalls Of Exporting

The popularity of Countertrade

Popular among developing nations that lack the foreign exchange reserves required to purchase necessary imports

Advantages of Wholly owned subsidiaries

Protection of technology, ability to engage in global strategic coordination, ability to realize location and experience economies

Four main different distribution systems

Retail concentration, . Channel length, Channel exclusivity, Channel quality

Mergers and Acquisitions

The cross-border purchase or exchange of equity involving two or more companies

True or False: A relatively low level of fixed costs can make it economical to perform a particular activity in several locations at once.

True

True or False: Concentration of production is favored when important exchange rates are expected to remain relatively stable

True

True or False: Countertrade denotes a whole range of barter-like agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money

True

True or False: It shows that Microsoft has changed its marketing approach of developing products specifically designed to meet the needs of the Indian market to a localized approach

True

True or False: The more fragmented the retail system, the more expensive it is for a firm to make contact with each individual retailer

True

For U.S. firms, the most comprehensive source of export opportunities information is the:

U.S. Department of Commerce

Which of the following countries has a concentrated retail system?

USA

Countertrade

a form of trade in which all or part of the payment for goods or services is in the form of other goods or services

Bill of Lading

a legal contract that defines responsibility for goods while they are in transit

The Duchess and the Duke sells through an import agent, a wholesaler, and a retailer. In this case,

a long channel exists

Demand is said to be elastic when

a small change in price produces a large change in demand.

Advantages of exporting

ability to realize location and experience curve economies

Trade-offs

alternative that must be given up when one choice is made rather than another

Favorable markets

are politically stable have free market systems have relatively low inflation rates have low private sector debt Markets are also more attractive when the product in question is not widely available and satisfies an unmet need

Pioneering costs:

arise when the foreign business system is so different from that in a firm's home market that the firm must devote considerable time, effort and expense to learning the rules of the game

Cultural barriers means it can

be difficult to communicate messages across cultures

Forming a strategic alliance is a way to

bring together complementary skills

The "Swiss Made" label has leveraged several watch-making companies (for example, TAG Heuer) for decades now. This is an example of a ____ effect

country of origin

The effectiveness of a firm's international communication can be jeopardized by

cultural barriers

What are the barriers to International communication?

cultural barriers, source and country of origin effects, noise levels

Pull strategy

emphasizes mass media advertising, can be cheaper for a large market segment

Push strategy

emphasizes personnel selling, requires intense use of a salesforce, relatively costly

What is the strategic role of foreign factories?

factories established to take advantage of low cost labor can evolve into facilities with advanced design capabilities

How to remove cultural barriers

firms need to develop cross-cultural literacy, and hire a local advertising agency, and use a local sales force where possible when developing marketing messages

Pros of Countertrade

gives a firm a way to finance an export deal when other means are not available, gives the firm a competitive edge over a firm that is unwilling to enter a countertrade agreement

The benefits of making all or part of a product in-house seem to be greatest when the firm _____.

has highly specialized assets

Disadvantages of Wholly owned subsidiaries

high costs and risks

Disadvantages of exporting

high transport costs, trade barriers, problems with local marketing agents

A typical International Trade Transaction

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

Other things being equal, the rate of new product development seems to be greater in countries where

intense competition is present

Wholly Owned Subsidiaries

is a foreign subsidiary that is totally owned and controlled by an organization

Letter of Credit

issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary

Cons of Countertrade

it may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably it requires the firm to establish an in-house trading department to handle countertrade deals

Disadvantages of Franchising

lack of control over quality, inability to engage in global strategic coordination

A _____ states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents

letter of credit

Joint Ventures

new entities formed within a strategic alliance in which two or more firms, the parents, contribute equity to form the new legal entity

In highly developed countries

noise is very high

In developing countries

noise levels tend to be lower

Choosing a Distribution Strategy

number of levels, channel relationships, distribution intensity

Source effects

occur when the receiver of the message evaluates the message on the basis of status or image of the sender (can counter negative source effects by deemphasizing their foreign origins)

International Communication

occurs whenever a firm uses its marketing message to sell its products in another country

Export Credit Insurance

provided in the U.S. by the Foreign Credit Insurance Association (FICA) Provides coverage against commercial risks and political risks

Export Assistance

provided in the form of gathered market-analysis data that may be used to attract more international travelers.

Firms have to choose between two types of communication strategies

push and pull strategy

Differences between Countries

retail concentration, channel length, channel exclusivity, channel quality

Exporting

selling domestically produced products to buyers in other countries

What should managers do to improve export performance?

selling domestically produced products to buyers in other countries

Licensing

selling the right to use some process, trademark, patent, or other right for a fee or royalty

Franchising

selling to a foreign organization the rights to use a brand name and operating know-how in return for a lump-sum payment and a share of the profits

Bank charges on letters of credit will depend on the

size of the transaction

First Mover Advantages

the ability to pre-empt rivals by establishing a strong brand name the ability to build up sales volume and ride down the experience curve ahead of rivals and gain a cost advantage over later entrants the ability to create switching costs that tie customers into products or services making it difficult for later entrants to win business

Noise levels

the amount of other messages competing for a potential consumer's attention

First Mover Disadvantages

the costs of business failure if the firm, due to its ignorance of the foreign environment, makes some major mistakes the costs of promoting and establishing a product offering ,including the cost of educating customers Studies have shown that the probability of failure is lower if a company enters a market after several other firms have already successfully entered the market

Country of origin effects

the extent to which the place of manufacturing influences product evaluations

An advantage of buying component parts, or even an entire product, from independent suppliers is that:

the firm can maintain its flexibility by switching orders according to circumstances

Concentration of production is appropriate when

the product's value-to-weight ratio is high

What factors may influence firm's basic entry decisions?

transport costs, trade barriers, political risks, economic risks, costs, firm strategy

In ____, the contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel

turnkey projects

Standardized advertising makes sense in all of the following situations except

when cultural differences among nations are significant

Firms pursuing global standardization or transnational strategies tend to prefer _____arrangements.

wholly owned subsidiary

When an exporting firm finds that its local agent is also carrying competitors' products, the firm may switch to a _____ to handle local marketing, sales, and service

wholly owned subsidiary

How do most firms begin their international expansion?

with exporting