Purchasing - Chapter 10
A critical assessment of the increased supply risks associated with offshore sources must be made after contracting, not before a commitment is made.
False
Always assume that an offshore company can automatically satisfy a buyer's performance requirements or expectations.
False
An inverted tariff means that no duties or quota charges will be placed on goods that are reexported from the FTZ.
False
Barter requires trading parties to enter into a series of contracts to fulfill trading requirements.
False
Buyers are never reluctant to shift business from domestic sources to unknown offshore sources.
False
Countries lacking foreign exchange for payment but rich in natural resources cannot benefit from buy-back or compensation trading
False
Cultural differences between countries seldom result in unwelcome surprises when buying internationally.
False
Developing countries offer effective protection against the piracy of intellectual property.
False
Developing countries seldom rely on personal relations and trust to cover many legal issues because of an adequate legal system.
False
Domestic purchasing must include the additional costs associated with conducting domestic transactions.
False
Few trade consulates have trade experts who are eager to do business with American buyers.
False
Firms that centralize operational activities during global sourcing are likely to realize lower total cost of ownership, better inventory management, and improved performance to external customers.
False
In supply management, the cost/price benefits associated with sourcing in developing countries are an insignificant motivation for remaining competitive in an increasingly global environment.
False
Insurance protection for international shipments is optional because oceangoing carrier liability is generally unlimited.
False
Most offshore organizations like dealing with the U.S. legal system and long contracts.
False
The United States is still the undisputed product and process technology leader in the world.
False
The use of forward exchange contracts encourages speculation.
False
Trade shows are often one of the worst ways to gather information on many suppliers at one time.
False
What is an illegal activity in the United States is never an accepted business practice in many other regions.
False
Few offshore suppliers anticipate exchange rate fluctuations by incorporating a risk factor into their price.
False
Purchasing should consider only suppliers that capable of meeting rigid quality and delivery standards, although far too often price differentials become the primary criterion behind an offshore sourcing decision.
True
Purchasing's role in countertrade is not as visible as marketing's role.
True
Regardless of the technique used to overcome worldwide sourcing barriers, the effort will fail unless top management supports worldwide sourcing.
True
Sharing currency fluctuation risk with a supplier works best on items that have a set delivery date such as with capital equipment.
True
Social culture and laws, personnel skills and abilities, and business culture are three areas where differences are the greatest across different geographic units.
True
The largest differences in communication styles across countries are message speed and level of content.
True
The most common method for overcoming barriers to worldwide sourcing involves education and training, which can generate support for the process as well help overcome the anxiety associated with change.
True
The use of a full-service trading company may actually result in a lower total cost for international purchases compared with performing each activity individually.
True
There is no dollar threshold on the Foreign Corrupt Practices Act, making it illegal to offer even a dollar as a bribe.
True
U.S. purchasers stuck with domestic suppliers that produce poor quality often begin to source offshore components with the hope of improving end-product quality.
True
Whether the purchase transaction is with a domestic or offshore producer, there are certain common costs.
True
A common approach for coordinating work efforts is to rely on audio conferencing of skype type visual meeting at scheduled time intervals.
True
A major complaint about Americans is our ignorance of other cultures.
True
A major concern with international purchasing is managing the risk associated with international currency fluctuations.
True
A supplier can draw against the letter of credit upon presentation of the required documents.
True
Buyers should not underestimate the potential effects of extended distances on their ability to plan and manage a worldwide supply chain.
True
Counterpurchase requires a company to fulfill its countertrade requirements by purchasing products within a country unrelated to its primary business.
True
Despite its apparent simplicity, barter is one of the least-practiced forms of countertrade today
True
Duty rates vary widely over seemingly small differences between items.
True
FTZs allow an importing company to delay, eliminate, or decrease its duty payments on foreign-sourced goods that enter the zone site.
True
Hedging is a form of risk insurance that can protect both parties from currency fluctuations.
True
In some societies, such as Thailand and Indonesia, saying "yes" is merely being polite and does not necessarily mean that they agree with what you are saying.
True
Options may be used to lock in favorable rates during negotiations or anytime a purchaser is anticipating the purchase of an item from a specific country.
True
The _____ was passed by Congress in 1977 to prevent companies from making questionable or illegal payments to foreign government officials, politicians, and political parties. a. Foreign Corrupt Practices Act (FCPA) b. Sherman Antitrust Act c. CISG d. Incoterms Act e. Clayton Act
a. Foreign Corrupt Practices Act (FCPA)
_____ relates to a commercial purchase transaction between a buyer and a supplier located in different countries. a. International purchasing b. Re-shoring c. Global sourcing d. Nearshoring e. None of the above.
a. International purchasing
_____ agreements require the seller to purchase some agreed-uponpercentage of goods from a country over a specified period but allow a company to fulfill its countertrade requirement with any company or industry in the country. a. Offset b. Compensation trading c. Switch trading d. Buy-back e. Barter
a. Offset
All of the following are elements of total cost for worldwide sourcing except _____. a. domestic corporate sales, general, and administrative expenses b. packaging c. base price d. inventory carrying cost e. insurance premiums
a. domestic corporate sales, general, and administrative expenses
All of the following are common measures used to manage currency fluctuation in international purchasing except _____. a. letters of credit b. purchase in U.S. dollars c. sharing currency fluctuation risk d. currency adjustment contract clauses e. currency hedging
a. letters of credit
All of the following are examples of how a finance department can support international currency requirements except _____. a. pay in U.S. dollars b. identify the currency a firm should use for payment based on projections of currency fluctuations c. provide advice about hedging and currency forecasts d. act as a clearinghouse for offshore currencies to make payment for offshore purchases e. provide advice as to whether to seek a new contract or renegotiate an existing one because of currency changes
a. pay in U.S. dollars
All of the following are considered barriers to worldwide sourcing except _____. a. use of simplified Incoterms compared to complex domestic terms of sale b. lack of knowledge and skills concerning global sourcing c. different business customs, language, and culture d. currency fluctuations e. resistance to change
a. use of simplified Incoterms compared to complex domestic terms of sale
_____ are internationally recognized commercial terms that describe the responsibilities of the buyer and seller in the arrangement of transportation and clarify when the ownership of the merchandise takes place. a. Incoterms b. Duties c. Letters of credit d. Values e. Tariffs
a. Incoterms
_____ is relocating sourcing to countries geographically closers to the United States. a. Global sourcing b. Nearshoring c. Re-shoring d. Single sourcing e. Domestic sourcing
b. Nearshoring
Which of the following is not an example of resources that affect global sourcing success? a. Budget support for travel. b. A large corporate headquarters building. c. Access to qualified personnel. d. Time for personnel to develop global strategies. e. Availability of required information and data.
b. A large corporate headquarters building.
_____ occurs when a firm physically builds a plant in another country or provides a service, equipment, or technology to support the plant; the firm then agrees to take a portion of the plant's output as payment. a. Switch trading b. Buy-back c. Offset d. Counterpurchase e. Barter
b. Buy-back
_____ is a broad term that refers to all international and domestic trade where buyer and seller have at least a partial exchange of goods for goods. a. Six Sigma b. Countertrade c. Re-shoring d. IPO e. CISG
b. Countertrade
A/An _____ is issued by the purchaser's bank in conjunction with an affiliate bank in the seller's country which assures the seller that the funds are in the bank. a. bill of lading b. letter of credit c. Incoterm d. hedging contract e. tariff
b. letter of credit
If the purpose of buying currency contracts is to realize a net gain, then the purchaser is _____ and not _____. a. hedging....speculating b. speculating....hedging c. speculating....financing d. hedging....financing e. Purchasers do not get involved in managing currency fluctuation as this is solely a finance department activity.
b. speculating....hedging
Which of the following is not an example of cost differentials that arise between countries? a. Lower labor rates. b. Fewer documentation requirements. c. Possible willingness to accept a lower profit margin. d. Exchange rate differences. e. Government subsidies.
b. Fewer documentation requirements.
According to Dick Locke, all of the following are advice about language and communication except _____. a. if a supplier is using English as a second language, the buyer should be responsible for preventing communication problems b. always pay in U.S. dollars when dealing with worldwide suppliers c. to aid in communication, speak slowly, use more communication graphics, and eliminate jargon, slang, and sports and military metaphors from your language d. bring an interpreter to all but the most informal meetings e. document, in writing, the conclusions and decisions made in a meeting before adjourning
b. always pay in U.S. dollars when dealing with worldwide suppliers
All of the following are examples of why organizations source worldwide except _____. a. access to the only source available b. react to buying patterns of competitors c. higher ethics d. cost/price benefits e. establish a presence in another country market
c. higher ethics
Which of the following is not one of the factors that drive global sourcing performance? a. Centrally coordinated and centrally led decision making. b. Site-based control of operational activities. c. Ability to speak multiple foreign languages. d. Sourcing and contracting systems. e. International purchasing office support.
c. Ability to speak multiple foreign languages.
Which of the following is not one of the usual roles of an international purchasing office? a. Expedite and trace shipments. b. Negotiate supply contracts. c. Make payments and bribes to foreign officials to secure or retain business. d. Represent the buying firm to suppliers. e. Manage technical and commercial concerns.
c. Make payments and bribes to foreign officials to secure or retain business.
_____ involves contracting with independent suppliers outside the organization (domestic or foreign) to provide products or services that were performed inside the organization. a. Re-shoring b. Nearshoring c. Outsourcing d. offshoring e. International purchasing
c. Outsourcing
A/An _____ can be changed or canceled at any time by the buyer without the seller's consent. a. irrevocable letter of credit b. Incoterm c. revocable letter of credit d. CISG e. switch trade
c. revocable letter of credit
A FTZ _____ is approved for a specific use or a specific company. a. general-purpose zone b. offset zone c. subzone d. CISG e. None of the above.
c. subzone
. _____ is a process that involves the straight exchange of goods for goods with no exchange of currency. a. Counterpurchase b. Offset c. Barter d. Buy-back e. Switch trading
c. Barter
_____ is/are shared beliefs or group norms that are internalized and affect(s) the way people think, while _____ is/are based on values and attitudes and affect(s) the people act. a. Behavior...values b. Culture...infrastructure c. Values...behavior d. Infrastructure...behavior e. Jurisprudence...culture
c. Values...behavior
_____ requires a selling firm to purchase a specified amount of goods from the country that purchased its products. a. Nearshoring b. Barter c. Compensation trading d. Counterpurchase e. Buy-back
d. Counterpurchase
_____ mean(s) that no duties or quota charges will be placed on goods that are reexported from the FTZ. a. Inverted tariff b. Duty deferral c. EXW d. Duty exemption e. Streamlined customs procedures
d. Duty exemption
Which of the following is not an element of culture? a. Language. b. Religion. c. Values and attitudes. d. Infrastructure. e. Social institutions.
d. Infrastructure.
According to the CISG, a/an _____ is one of the countries that have ratified the treaty. a. rogue state b. independent commonwealth c. trading block d. contracting state e. The CISG is no longer in force.
d. contracting state
With a _____, both parties agree that payment occurs as long as exchange rates do not fluctuate outside an agreed-upon range or band. a. hedging agreement b. payment in a foreign currency c. speculation agreement d. currency adjustment clause e. payment in U.S. dollars
d. currency adjustment clause
All of the following are elements of total cost for worldwide sourcing except _____. a. payment terms b. customs brokers fees c. additional fees or commissions d. domestic income taxes e. inventory carrying costs
d. domestic income taxes
A FTZ _____ is typically housed in a port or an industrial park and is available to multiple companies. a. warehouse b. twilight zone c. subzone d. general-purpose zone e. None of the above.
d. general-purpose zone
All of the following are common methods for overcoming barriers to worldwide sourcing except _____. a. education and training b. publicizing success stories c. measurement and reward systems d. payment only in foreign currency e. use of third party or external agents
d. payment only in foreign currency
All of the following are typical reasons why a country imposes countertrade demands except _____. a. some countries simply lack the hard currency to purchase imported goods b. countertrade provides a means of selling products in markets to which a company may have otherwise lacked access c. developing nations often require Western multinationals to accept goods as at least partial payment for sales within their country d. the country may need assistance to produce its own goods and services e. All of the above.
d. the country may need assistance to produce its own goods and services
Which of the following is not one of the usual roles of an international purchasing office (IPO)? a. Identify potential suppliers. b. Solicit quotes or proposals.. c. Obtain product samples. d. Manage countertrade requirements. e. Conduct overseas sales and marketing-related activities.
e. Conduct overseas sales and marketing-related activities.
Which of the following statements regarding countertrade is false? a. Items involving large dollar amounts, such as military contracts, are prime candidates for countertrade. b. Companies can expect countertrade demands from a country when that country's goods may have a low or nondifferentiated perception in the world marketplace. c. Highly valued items or those sought after by the buying country are less susceptible to countertrade demands. d. Countertrade may include items that are available from many sources, commodity-type items, or items not perceived as technologically superior or having higher quality compared with other available products. e. Countertrade is a simple process as it avoids currency exchange fluctuations.
e. Countertrade is a simple process as it avoids currency exchange fluctuations.
_____ involves proactively integrating and coordination common items and materials, processes, designs, technologies, and suppliers across worldwide purchasing, engineering, and operating locations. a. International purchasing b. Sole sourcing c. Nearshoring d. Re-shoring e. Global sourcing
e. Global sourcing
_____ involves contracting with independent suppliers located outside geographic boundaries of the United States for goods and services. a. Re-shoring b. Domestic sourcing c. Nearshoring d. Outsourcing e. Offshoring
e. Offshoring
_____ occurs when a selling company agrees to accept goods from the buying country as partial payment. a. Compensation trading b. Buy-back c. Barter d. Counterpurchase e. Switch trading
e. Switch trading
All of the following are examples of why organizations source worldwide except _____. a. cost/price benefits b. access to product and process technology c. quality d. introduce competition to domestic suppliers e. ability to influence domestic consumers
e. ability to influence domestic consumers
A/An _____ is a secure location approved by the appropriate U.S. Customs and Border Protection (CBP) office. a. offshore supplier b. international purchasing office c. agent d. offset e. foreign trade zone
e. foreign trade zone
A/An _____ can only be changed or canceled upon agreement of all parties. a. compensation trade b. revocable letter of credit c. buy-back d. optional commission e. irrevocable letter of credit
e. irrevocable letter of credit
All of the following are elements of total cost for worldwide sourcing except _____. a. payment and currency fees b. port terminal and handling fees c. communication costs d. base price e. new product advertising
e. new product advertising
All of the following are examples of the reliable and timely information required for successful global sourcing except _____. a. a listing of existing contracts and suppliers b. reports on supplier capabilities and performance c. worldwide volumes by purchase type and location d. information about potential new suppliers e. truck traffic patterns around the supplier's facility
e. truck traffic patterns around the supplier's facility
_____ is the sum of the understandings that govern human interaction in a society. a. Values b. Beliefs c. Language d. Behavior e. Culture
e. Culture