CBA 396 Ch. 15 & 16 Exam

____ occurs when a firm supplies technology, equipment, training, or other services in a country and agrees to take a certain percentage of the resultant output as partial payment for the contract.

A buyback

____ allow a firm to rapidly build its presence in the target foreign market.

Acquisitions

____ can help new exporters identify opportunities and avoid common pitfalls.

An export management company

____ is viewed as the most restrictive countertrade arrangement and is primarily used for onetime-only deals in transactions with trading partners who are not creditworthy or trustworthy.

Barter

____ is a reciprocal buying agreement and occurs when a firm agrees to buy a certain amount of materials back from a country to which a sale is made.

Counterpurchase

____ can be used when a government restricts the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports.

Countertrade

____ denotes a range of barter-like agreements and its principle is to trade goods and services for other goods and services when they cannot be traded for money.

Countertrade

____ can be used to formalize arrangements to swap skills and technology in a strategic alliance.

Cross-licensing agreements

Which of the following is a nationwide group of international trade attorneys who provide free initial consultations to miniature businesses on export-related matters?

ELAN

Which of the following statements is true of export management companies (EMCs)?

EMCs are export specialists that act on behalf of their client firms.

T or F. A good ally will expropriate the firm's technological know-how while giving away little in return.

False

T or F. A letter of credit states that an export has availed credit from the bank to manufacture goods.

False

T or F. A letter of credit states that an exporter has availed credit from the bank to manufacture goods.

False

T or F. A sight draft allows for a delay in payment.

False

T or F. A strategic commitment can be reversed by the top management at will.

False

T or F. A wholly owned subsidiary limits a firm's control over marketing and sales in different countries.

False

T or F. Acquisitions rarely produce disappointing results.

False

T or F. Barter is a reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

False

T or F. Contractual safeguards cannot be written into an alliance agreement to guard against the risk of opportunism by a partner.

False

T or F. Contractual safeguards cannot be written into an alliance agreement to guard against the risks of opportunism by a partner.

False

T or F. Countertrade is least attractive to large, diverse multinational enterprises.

False

T or F. Exporting from a firm's home base is most appropriate when lower-cost locations for manufacturing the product can be found abroad.

False

T or F. If a firm's core competence is proprietary technological knowledge, a joint venture is preferable.

False

T or F. Proactive firms do not consider exporting until their domestic market is saturated.

False

T or F. Tangible property includes patents, designs, copyrights, and trademarks.

False

T or F. The Japanese sogo shosha have offices all over Japan, and companies wishing to trade with Japan must go through them.

False

T or F. The Small Business Administration organizes trade events that help potential exporters make foreign contacts and explore export opportunities, held in major cities worldwide.

False

T or F. The bill of lading does not serve as a document of title as such.

False

T or F. The choice of which international markets to enter should be driven by an assessment of absolute short-run growth and profit potential.

False

T or F. The most typical joint venture is a 60-40 venture, in which one party holds most of the ownership stake.

False

T or F. Time drafts cannot be sold to investors at a discount from face value.

False

T or F. Unlike joint ventures, strategic alliances require the firm to bear all the costs and risks of foreign expansion.

False

____ are the advantages associated with entering a market early.

First-mover advantages

There are several disadvantages of franchising as an entry mode. Which of the following is one of them?

Franchising may inhibit the firm's ability to use the profits out of one country to support competitive attacks in another.

Which of the following is a disadvantage of licensing?

It does not give a firm the tight control over strategy that is required for realizing experience curve and location economies.

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 true of wholly owned subsidiaries?

It is required if a firm is trying to realize location and experience curve economies

Through its ____ program, the SBA oversees about 11,500 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.

SCORE

____ refers to cooperative agreements between potential or actual competitors.

Strategic alliances

Which of the following is true of licensing?

The firm does not have to bear the development costs and risks associated with opening a foreign market.

What is true of reactive firms?

They consider exporting only after their domestic market is saturated.

T or F. A draft is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.

True

T or F. A joint venture is often politically more acceptable than a wholly owned subsidiary and brings a degree of local knowledge to the subsidiary.

True

T or F. An export packer can advise companies who are unfamiliar with exporting on appropriate design and materials for the packaging of their items.

True

T or F. Brand names such as Starbucks and Subway are well protected by international laws pertaining to trademarks.

True

T or F. By producing its product in a centralized location, licensing limits a firm's ability to realize experience curve and location economies.

True

T or F. Countertrade denotes a whole range of barter-like agreements that involve trading goods and services when they cannot be traded for money.

True

T or F. Educating customers is an element of pioneering costs.

True

T or F. Ex-Im Bank has a direct lending operation under which it lends dollars to foreign borrowers.

True

T or F. Exporters often face voluminous paperwork and complex formalities.

True

T or F. Franchising enables a firm to quickly build a global presence.

True

T or F. Gadgets, Inc., wants to enter a foreign market on a small scale. This will allow it to learn about the market while limiting the firm's exposure to that market.

True

T or F. Greenfield ventures are less risky than acquisitions in the sense that there is less potential for unpleasant surprises.

True

T or F. Hiring an export management company (EMC) will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.

True

T or F. Ignorance of the potential opportunities is a huge barrier to exporting.

True

T or F. Johan's firm is considering entering a country where there are no incumbent competitors to be acquired. Its best option is likely to be a greenfield venture.

True

T or F. Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter.

True

T or F. Nearly every state in the US maintains active trade commissions to promote exports.

True

T or F. Overpayment for assets of an acquired firm is one reason acquisitions fail.

True

T or F. The attractiveness of a country as a potential market for an international business depends on balancing the benefits, costs, and risks associated with doing business in that country.

True

T or F. The bank promises to pay on behalf of the importer when a bank is used as a third party in international transactions.

True

T or F. The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank.

True

T or F. The greater the pressure for cost reductions, the more likely a firm will want to pursue some combination of exporting and wholly owned subsidiaries.

True

T or F. The most comprehensive source of information for US firms on exporting opportunities is the US Department of Commerce.

True

T or F. The term switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement.

True

T or F. To maximize the learning benefits of an alliance, a firm must try to learn from its partner and then apply the knowledge within its own organization.

True

T or F. When a time draft is drawn on and accepted by a business firm, it is called a trade acceptance.

True

T or F. When determining the value of a foreign market, an international firm must consider both its products and the competition.

True

Under ____ agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

a cross-licensing

Firms commonly employ ____ as a third party international transactions.

a reputable bank

Which of the following is a first-mover advantage?

ability to preempt rivals and capture demand by establishing a strong brand name

If a firm is trying to enter a market where there are already well-established companies, and where global competitors are also interested in establishing a presence, the firm should choose

an acquisition

In ____, one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale, and this party can fulfill the obligation with any firm in the country to which the sale is being made.

an offset

The valuable asset of firms, whose competitive advantage is based on management know-how, is their

brand name

A ____ is the instrument normally used in international commerce to effect payment.

draft

Early entrants to a market that are able to create switching costs that tie customers into their products or services are capitalizing on

first-mover advantages

Cross-licensing agreements are increasingly common in the ____ industries.

high-technology

In a typical international trade transaction, the

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

Patents, inventions, formulas, processes, designs, copyrights, and trademarks are all forms of

intangible property

A draft used in international transactions

is a document requesting payment

Which of the following statements is true of exporting?

it helps a firm achieve economies of scale

What is the primary advantage of licensing?

it helps a firm avoid the development costs and risks associated with opening a foreign market

Which of the following is a major advantage of using a letter of credit?

it helps international traders engage in trade with trust

Most service firms have found that ____ with local partners work best for the master controlling subsidiaries.

joint ventures

____ is pursued primarily by manufacturing firms and ____ is employed primarily by service firms.

licensing; franchising

Switching costs may

make it difficult for later entrants to win business

The person or business initiating a draft is known as the

maker

In the ____ program organized by the US Department of Commerce, department representatives accompany groups of US businesspeople abroad to meet with qualified agents, distributors, and customers.

matchmaker

Other things being equal, the benefit-cost-risk trade-off is likely to be most favorable in

politically stable developed and developing nations that have free market systems

The Export-Import Bank

provides finance to facilitate cross-border trade between the US and other countries

A large-scale entrant is more likely than a small-scale entrant to be able to capture first-mover advantages associated with

scale economies

An advantage of forming a strategic alliance is that is helps firms

share the risks of developing new products or processes

Bank charges on letters of credit will depend on the

size of the transaction

Japan's ____ have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small.

sogo shosha

Which of the following is a disadvantage of using a letter of credit (L/C)?

the importer must pay a bank fee for the letter of credit

A ____ allows for a delay in payment.

time draft

A disadvantage of ____ is that the firm that enters into such an arrangement will have no long-term interests in the foreign country.

turnkey projects

If a high-tech firm sets up operations in a foreign country to profit from a core competency in technological know-how, which of the following entry strategy is best?

wholly owned subsidiaries

In a ____, the firm owned 100 percent of the stock.

wholly owned subsidiary