Chapter 16

b) a firm agrees to buy a certain amount of materials back from a country to which a sale is made.

A counterpurchase occurs when: a) a direct exchange of goods and services takes place between two parties without a cash transaction. b) a firm agrees to buy a certain amount of materials back from a country to which a sale is made. c) exchange of goods and services occur through a bank in the exporter's country. d) a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract.

helps firms finance export deals when there are no other means.

A major advantage of countertrade is that it:

buyback

Blaise works for a beverage manufacturing company. His company recently built a manufacturing facility in Ireland and agreed to take 15 percent of the beverages produced as partial payment over a 10-year period. What form of countertrade is his company pursuing?

the U.S. Department of Commerce.

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

.

Improving Exporting Strategies and Operations Firms begin exporting with the promise of large revenue and profit opportunities. There are also many potential problems. Fortunately, there are strategies and tactics firms can use to achieve large revenue and profit opportunities. By expanding the size of a firm's market, a firm can achieve economies of scale and significant growth. Even inexperienced exporters can earn profits by using proven methods, available resources, and a strategic approach. To achieve these results, firms need to dedicate time, resources, and management attention to make exporting an important, viable, and strategic element. Read the case below and answer the questions that follow. Your firm has had success in selling some of your products overseas. What began with a few inquiries—often via the Internet—has grown steadily. You have the capacity to increase production to supply overseas markets, even though up to this point you have simply sold existing inventory. You already know that you will need more information, and you may need outside assistance. None of your immediate competitors, who are mostly small and medium-sized firms, have taken an aggressive approach toward exporting. Your firm has built an attractive surplus from operations, and you are willing to invest this in a solid strategic venture. While your product is in a strong domestic position, it does not depend on faddish sales nor does the market demand significant changes. Your underlying strategy will be built on finding new markets for the moment, not in developing new products.

A. before product shipment.

In a letter of credit transaction, the importer secures the letter of credit with the bank A. before product shipment. B. after product shipment. C. from the exporter's bank. D. after receiving the product.

barter

Mica's company would like to sell its products to a company in Ecuador, but it fears that the company will not pay for the products in a timely manner. Instead of asking for cash, Mica's company decides to ask for a shipment of coffee and tobacco products in exchange for their products. What type of countertrade is Mica's company using?

hire an export management company

One way for first-time exporters to identify the opportunities in exporting and to avoid many of the associated pitfalls is to: a) avoid the use of foreign distributors, who may not understand the exporter's business. b) hire an export management company. c) rely heavily on the in-house expertise that has proven to be the driver of the firm's previous success.

c) a matchmaker program

Tahlia is interested in exporting. She is accompanying representatives of the U.S. Department of Commerce to London where she will meet with qualified agents, distributors, and customers to help her make contacts and explore export opportunities in London. Tahlia is participating in a) "best prospects" search b) the SCORE program c) a matchmaker program d) an import-export expo.

matchmaker

The _________________ program organized by the Department of Commerce provides representatives who accompany groups of U.S. businesses abroad to meet with qualified agents, distributors, and customer

True

True/ False - An export management company (EMC) is a service provider that acts as an export management consultant for companies interested in exporting.

True

True/ False - Exporting is attractive to businesses because it represents a way to increase market size and profits.

True

True/ False - Nearly every state in the United States maintains an active trade commission to promote exports

False

True/ False - Small firms often proactively seek new exporting opportunities

True

True/ False - Surprisingly, the vast majority of U.S. exporters are small to medium sized businesses.

True

True/ False - The U.S. Small Business Association realizes that ignorance of the potential international opportunities is a huge barrier to exporting.

False

True/False: A slight draft allows for a delay in payment—typically, 30, 60, 90, or 120 days.

False

True/False: Companies that have well-established exporting procedures typically use an export management company to handle financial transactions.

D. Exporters often face voluminous paperwork and complex formalities.

What is a common difficulty that traders face when exporting goods or services to other countries? A. Small firms tend to be more aggressive than larger firms in global trade. B. Governments do not provide much assistance to exporters. C. Growth opportunities are often limited in global markets. D. Exporters often face voluminous paperwork and complex formalities.

B. They consider exporting only after their domestic market is saturated.

What is characteristic of reactive firms? A. Reactive firms consider a variety of markets for selling their products and services. B. They consider exporting only after their domestic market is saturated. C. They systematically scan foreign markets for profitable export opportunities. D. They create excess productive capacity and actively hunt for opportunities in foreign markets

All of the above

What matters when exporting? A. Marketing and cultural fit B. Foreign currency fluctuation C. Transportation costs D. Understanding of business challenges - tariffs, etc.

c) Assistance from export management company

Which of the following is NOT a common pitfall of exporting: a) Problem securing financing b) Poor understanding of competitive conditions c) Assistance from export management company d) Underestimation of the expertise required to successfully export

a lack of knowledge of the size and location of export opportunities

Which of the following is not a huge barrier to exporting for small and medium-sized firms? a) a lack of understanding of competitive conditions in the foreign market b) a lack of knowledge of the size and location of export opportunities c) a lack of success at achieving domestic scale economies d) a lack of knowledge of the complexities and mechanics of exporting to countries with different languages and business practices

be reactive and wait for opportunities to come to them.

With regard to exporting, studies have shown that unlike big firms, small and medium-sized firms tend to: