International Business Chapter 13
Which of the following statements is true of licensing?
A major advantage of licensing is that it is the least risky method of international expansion.
________ is the most common form of international business activity.
Exporting
Which of the following statements best differentiates between franchising and licensing?
Franchising requires ongoing assistance from the franchiser while licensing normally involves a one-time transfer of property.
________ occur(s) when a firm sells its products to a domestic customer, which in turn exports the product, in either its original form or a modified form.
Indirect exporting
Which of the following is an advantage of wholly owned subsidiaries?
The parent company receives all profits generated by the subsidiary.
Which of the following is true of distributors?
They can stunt the growth of the exporter's market share by charging very high prices.
Which of the following is a disadvantage of strategic alliances?
They create future competitors.
When one company is hired to design, construct, and test a production facility for a client, the arrangement is called ________.
a turkey project
Which of the following is an advantage of exporting?
access to new markets
Which of the following financing methods entails the lowest risk for exporters?
advance payment
Which of the following normally takes the form of a wire transfer of money from the bank account of the importer directly to that of the exporter prior to shipment of merchandise?
advance payment
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?
an offset
Which of the following refers to the exchange of goods or services directly for other goods or services without the use of money?
barter
A document ordering the importer to pay the exporter a specified sum of money at a specified time is called a ________.
bill of exchange
The export of industrial equipment in return for products produced by that equipment is called ________.
buyback
Martin Exporting requests ABC Bank to add its own guarantee of payment to a letter of credit, which creates a(n) ________.
confirmed letter of credit
The sale of goods and services to a country by a company that promises to buy a specific product from that country in the future is called a(n) ________.
counter purchase
Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies?
direct export
________ take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales.
distributors
A(n) ________ exports products on behalf of an indirect exporter.
export management company
Which of the following is a contractual entry mode in which one company supplies another with intangible property and other assistance over an extended period?
franchising
What is the first step in selecting a foreign market?
identification of potential market
A ________ is a separate company created and owned by two or more independent entities to achieve a common business objective.
joint venture
The biggest advantage of an export management company is usually its ________.
knowledge of the target market's cultural, political, legal, and economic conditions
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?
letter of credit
Which of the following is a contractual entry mode in which a company owning intangible property grants another firm the right to use that property for a specified period of time?
licensing
Export/import financing in which an exporter ships merchandise and later bills the importer for its value is called ________.
open account
Which of the following letters of credit can be modified without obtaining approval from either the exporter or the importer, by the bank issuing the letter of credit?
revocable letter of credit
Which of the following requires an importer to pay for the imported goods when they are delivered?
sight draft
________ is a countertrade whereby one company sells to another its obligation to make a purchase in a given country.
switch trading
A ________ extends credit to the importer by requiring payment at some specified time after the importer receives the goods.
time draft
Advance payment is commonly used for export/import financing when ________.
two parties are unfamiliar with each other
