International Business - Chapter 13

Which of the following statements is true of countertrade? A) Countertrade is practiced by countries when there is a lack of hard currency. B) Countertrade involves products whose prices on world markets tend to remain steady C) Countertrade usually involves industrial products and computer softwares. D) Hedging risk in countertrade is prohibited.

A) Countertrade is practiced by countries when there is a lack of hard currency.

Scenario: Sports Stuff Inc. Herb Graham is vice president of Sports Stuff Inc., a business that develops, manufactures, and markets sports products. The company is looking to expand its operations into the European market. Herb believes that if the company expands its product line to include products reflecting sports that are popular in Europe, the company will achieve success there. Herb knows that much of the success his company enjoys is due to the patents and copyrights that protect the company's products. If Sports Stuff chooses an entry mode in which it grants another firm the right to use its intangible property for a specified period of time, it would be engaging in ________. A) licensing B) a joint venture C) franchising D) a turnkey project

A) licensing

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

B) access to new markets

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? A) bill of exchange B) letter of credit C) sight draft D) bill of lading

B) letter of credit

Which of the following is a strategic factor that influences a company's international entry mode selection? A) market consumption capacity B) market size C) market receptivity D) market intensity

B) market size

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

B) sight draft

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) a barter B) a counterpurchase C) an offset D) a buyback

C) an offset

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

C) confirmed letter of credit

Scenario: Gro-Tru Grows To Europe Gro-Tru, a maker of chemical fertilizers and pesticides, sees enormous growth potential in Central Europe. The company has received several inquiries from potential importers in the region, but in most cases, the potential importers have expressed difficulty in obtaining the hard currency to pay for Gro-Tru's products. Alistair Green, vice-president for business development, is exploring how Gro-Tru can meet the needs of the potential market. Alistair has identified an option that might help the firm deal with the importer's inability to pay with hard currency. The option involves selling goods or services that are paid for in whole or part with other goods or services. Which of the following methods is Alistair considering? A) tendering B) auction C) countertrade D) bidding

C) countertrade

Which of the following is a contractual entry mode? A) joint venture B) wholly owned subsidiaries C) licensing D) exporting

C) licensing

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

D) a turnkey project

Scenario: Owen's HomeCare Products Owen McCain, owner of Owen's HomeCare Products, is considering going international. He feels that the products he manufactures will be well-received, especially in developing countries. He wants to understand the exporting process and then scale his exporting activities accordingly. Which of the following steps would Owen implement toward the end while developing a successful export strategy? A) initiation of meetings with intermediaries B) identification of a potential market C) matching of market needs to company abilities D) commitment of resources

D) commitment of resources

Scenario: Owen's HomeCare Products Owen McCain, owner of Owen's HomeCare Products, is considering going international. He feels that the products he manufactures will be well-received, especially in developing countries. He wants to understand the exporting process and then scale his exporting activities accordingly. Through his research, Owen learns that the first step in developing a successful export strategy is ________. A) initiation of meetings with intermediaries B) matching of market needs to company abilities C) commitment of resources D) identification of a potential market

D) identification of a potential market

In a backward integration joint venture, the parties choose to invest together in downstream business activities. TRUE FALSE

FALSE

Low tariffs and high quota limits encourage market entry by means of investment. TRUE FALSE

FALSE

The open account method of export/import financing is used when the two parties are unfamiliar with each other. TRUE FALSE

FALSE

Companies can achieve economies of scale in production by expanding into international markets. TRUE FALSE

TRUE

Countertrade provides a way for firms to trade either by using a small amount of hard currency or even none at all. TRUE FALSE

TRUE

Most large companies use exporting to increase sales and open up new markets when the domestic market has become saturated. TRUE FALSE

TRUE

Products for which there are fewer substitutes can more easily absorb higher shipping and production costs. TRUE FALSE

TRUE