Ch14 International Business
What is a disadvantage of relying on an export management company (EMC)?
A firm will fail to develop its own exporting capabilities.
The Foreign Credit Insurance Association provides coverage against which two types of risk? (Check all that apply.)
Commercial Political
______ occurs when a company agrees to purchase a certain amount of product back from a country to which a sale is made.
Counterpurchase
What is a reciprocal form of international trade in which goods or services are exchanged for other goods or services, rather than for hard currency?
Countertrade
After the exporter presents the draft to the bank in a typical international trade transaction, what happens next?
The exporter's bank presents the draft to the importer's bank.
The ______ is a document issued to the exporter by the common carrier transporting the merchandise and acts as a receipt of goods.
bill of lading
Which document indicates that the carrier has received the merchandise described in the document?
bill of lading
Ulan works for a trucking company that ships products all over the United States. She verifies the merchandise she receives from various companies against the receipt included with the materials. This receipt is a
bill of lading.
Company XYZ has an arrangement with Company Ohai in Argentina. XYZ has contributed funds to build 14 hemp processing farms. In return, Ohai agrees to supply XYZ with a certain amount of hemp for 15 years (as partial payment). This is an example of a(n) ______ agreement.
buyback
When a firm agrees to build a plant in a country or supplies technology, equipment and/or training, and then agrees to take some of the plant's output as partial payment, the firm is engaging in a(n) ______.
buyback
Countertrade is more advantageous to exporters that are
large and diverse.
A(n) _____ has two drawbacks: the fee paid by the importer to the bank and since this is a financial liability, it may affect the importer's ability to borrow for other transactions.
letter of credit
The main advantage of the ________ is that both parties are likely to trust a reputable bank even if they do not trust each other.
letter of credit
A document issued by a bank at the request of an importer that directs the bank to pay money to the exporter upon presentation of specified documents is called a
letter of credit.
The Export Legal Assistance Network is comprised of international ______ who provide free initial consultations to small businesses on export-related matters.
trade attorneys
Due to a lack of ______, special mechanisms for financing exports and imports have been created to deal with conducting transactions with strangers.
trust
XYZ Company asked an international trade partner to pay for goods prior to delivery. XYZ Company was not fully aware of the company's background and wanted to be sure that it got paid. This is an example of why the lack of ______ has resulted in the development of special mechanisms for financing exports and imports.
trust
The CIBER network provides a link between the human resource and technology needs of a company with the research capacities and language training found at _____.
universities
The United States CIBER initiative fosters exporting needs by bringing together US companies and _____.
universities
Businesses would use the CORE diagnostic tool when making decisions regarding _____.
exporting
The bill of lading serves what three purposes? (Check all that apply.)
A document of title A contract A receipt
According to calculations by the United Nations, the amount of time associated with the vast documentation required to export to Brazil can amount to _____ of the final value of the exported goods.
10%
Recent statistics from the Small Business Administration show that about _____ of US firms with fewer than 500 employees are involved in exporting.
5%
What is the biggest advantage of using an EMC?
Access to experienced specialists
Exporters involved in international trade would prefer to ship the goods------payment is received.
After
Importers involved in international trade prefer to pay----- the goods are received.
After
What type of company is normally used as a trusted intermediary for exporting situations?
Bank
______ is the direct exchange of goods between two parties without a cash transaction.
Barter
Why did many Asian countries turn to countertrade following the 1997 currency crisis?
Because of a lack of hard currency
Which department of the US federal government provides the most comprehensive source of information regarding export opportunities?
Department of Commerce
As a result of their lack of foreign exchange reserves, countertrade has grown in popularity among which type of countries?
Developing
While the Ex-Im Bank has a loan guarantee program, it also has a(n)-------- lending operation for foreign borrowers to use in purchasing US exports.
Direct
Connor runs a small business and is interested in exporting his product to Ireland, but he needs some advice on the legal issues this would entail. Which organization would provide him with a free initial consultation for his legal questions?
ELAN
Sunny Soups has never exported their products before but would like to start. What company can provide Sunny Soups with a full menu of services to handle all aspects of their exporting needs?
EMC
What firms are export specialists that act as an export department for their clients?
Export management companies (EMC)
The Foreign Credit Insurance Association and the _____ are two forms of government-backed assistance in the United States that help finance export programs.
Export-Import Bank
Which company is taking steps to minimize risk as it enters the export market?
Instead of trying to spread itself too thin by going after 22 foreign markets, Natalie's company focused on three potential foreign markets.
What three impediments would make it difficult for some companies to gain knowledge of opportunities available in foreign countries? (Check all that apply.)
Language Distance Time
How does the Ex-Im Bank fund the financing aid it provides to facilitate exports, imports, and the exchange of commodities between the US and other countries?
Loans
Which organization oversees volunteers who have international trade experience and who use this experience to provide one-on-one counseling to active and new export businesses?
Service Corps of Retired Executives
Which type of draft should a company use if it wants immediate payment from the drawee upon receipt?
Sight draft
______ are the Japanese trading houses that work with their affiliated companies to identify export opportunities.
Sogo shosha
In what way are time drafts negotiable?
The maker can sell the draft to an investor at a discount from face value.
The Export-Import Bank was chartered by the _____.
US government
Exquisite Jewelery Company, based in New York, isn't sure it wants to start exporting to Europe. The company is concerned that it won't be paid unless it receives it upfront and the European companies don't want to pay until they receive the products. This situation demonstrates how _____ can affect exporting.
a lack of trust
When an importer is in a strong bargaining position and is having suppliers compete against one another, an exporter might be forced to forgo ______ in order to get the order.
a letter of credit
What is considered the most restrictive form of countertrade?
barter
A ______ is a business tool provided by the US Department of Commerce which provides the name, address and basic business information of potential distributors in foreign markets.
best prospects list
German and Japanese firms are viewed as having a _____ advantage in exporting compared to US firms.
bigger
The draft, sometimes called the _____ is used in international commerce to effect payment.
bill of exchange
What are two problems associated with bartering?
companies may have to accept goods that they don't want goods have to be exchanged simultaneously or else one company may be subsidizing another
Offset is superior to straight counterpurchase because a(n)
company can choose the goods it wants.
For a small fee, the Department of Commerce provides a company with a market research survey on a product of its choice. This is called a(n) ______.
comparison shopping service
What two things are generally needed for successful piggyback marketing?
complementary products same target market
Manuel has been hired by a clothing distributor based in Ireland. It is his job to travel to US clothing manufacturers and try to purchase denim products at the lowest price possible. He then receives a commission based on his results. Which type of export service provider does Manuel work for?
confirming house
A reciprocal buying agreement whereby a firm agrees to buy a specific amount of goods back from a country to which a sale is made is called ______.
counterpurchase
A drawback of ______ is that unusable or poor quality goods may be exchanged in place of payment of currency.
countertrade
A major disadvantage of ______ is that firms might be paid in unsaleable or shoddy products instead of hard currency, which the firm would prefer.
countertrade
Boeing often enters into agreements in which the company has to purchase certain components parts from the country in which it hopes to do business. This arrangement is an example of _____.
countertrade
The main reason a company would consider ______ is that it provides a firm with a way to finance its export deal when other methods of financing are not available.
countertrade
When conventional means of payment are difficult in an international sale, ______ is an alternative means of structuring the sale and allows for the trade of goods and services.
countertrade
Phase Two Athletics is located in the United States. The company would like to export to Italy but preliminary meetings with representatives from Italy have proven difficult. The representatives don't understand the value of the company's fitness gear because they feel most Italians prefer to exercise at a health club where the gear is provided. What impediment to exporting is Phase Two Athletics facing?
culture
Mega Data International wants to export into South America but has no knowledge of the laws or documentation required to do so. Which of these agents can help the company with this problem?
customs broker
An order written by an exporter that instructs an importer to pay a specified amount of money at a specified time is called a _____.
draft
An exporter writes a draft on the Bank of Italy to Mercury Corp. In this case, Mercury Corp. is the
drawee
While a maker initiates a draft, the party to whom the draft is presented is called the ______.
drawee
One way to avoid payment default on a foreign export sent without a letter of credit is to purchase ______ insurance.
export credit
Carolina Sailboat contracts with a company that identifies businesses in foreign countries that will market and sell their line of sailboats. This company also provides all the documentation for the exports, coordinates logistics, and transportation. What type of company does Carolina Sailboat contract with?
export trading company
Compared to 20 years ago, exports play a _____ role in the US economy.
greater
A letter of credit is issued by a bank after being requested by an _____.
importer
In a typical international trade transaction, after the importer arranges for a letter of credit, the next step is that the
importer's bank sends a letter of credit to the exporter's bank.
Nora's company plans to export a line of boots to a French wholesaler. Since this is a new export, her company wants to be paid for the boots prior to shipping them; however, the wholesale company in France refuses to pay for the boots until they are received. To solve this problem, the companies could rely on a trusted third party such as a bank, which acts as a(n) ______.
intermediary
The CORE diagnostic tool on the globalEDGE website helps a company assess
its readiness to export a product
When a company is able to expand its operations by exporting globally, it can often achieve greater economies of scale which results in ______.
lower unit costs
The person or business who initiates the draft that instructs an importer how much and when to pay is called the ______.
maker
Of all the companies using the global marketplace, _____ prefer exporting as a form of foreign market entry.
more than 90%
When a time draft is accepted, the maker can then sell the draft to an investor at a discount. This demonstrates how time drafts are _____.
negotiable
When considering the international marketplace, small and medium-sized firms tend to
not pay attention to foreign markets; rather they focus on their energies on local market.
If a payment is made before products are shipped, an importer may be concerned about what two things?
not receiving the product receiving a defective product
One of the biggest concerns an exporter has is not receiving ______ when shipping a product to customers.
payment
Brett's Bicycle Shop has decided to export products to Finland without using a letter of credit. One way the shop can insure against payment default would be to
purchase export credit insurance.
Which type of export service provider buys a product directly from the manufacturer and then packages and labels the product based on their own specifications and sells the product under their own name?
remarketer
What is the main reason exporting is preferred by such a large portion of companies using the global marketplace?
small- and medium-sized companies view exporting as a relatively low commitment to gaining global distribution
The companies unique to Japan that trade in a wide range of products and materials and act as intermediaries to identify export opportunities are called
sogo shosha.
Corcoran Computers entered into an agreement with the Belgian government in which the company received a number of counterpurchase credits to be used to purchase goods from Belgium. The company did not need any of these goods so it sold the credits to a third-party trading house at a discount. This trading house then sold the credits at a profit to another company that wished to purchase them. This transaction is an example of _____.
switch trading
Getting a specialized third-party trading house involved in a countertrade arrangement to purchase the counterpurchase credits and sell them to another firm is called
switch trading.
What are the two negatives associated with a letter of credit?
the importer has to pay the bank's fee for the letter of credit it could limit the importer's ability to borrow since it is a liability
A(n) _____ draft allows the drawee to delay payment -- normally for 30 or more days.
time
When the warehouse manager received the draft with the shipment of textiles, he noticed that payment for the materials was not due for 60 days. This is an example of a transaction using a ______ draft.
time
