Chapter 13 Study Guide

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

Which of the following statements is true of countertrade

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

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

Which of the following statements is true of the strategic factors that influence a company's international entry mode selection

Markets that are likely to remain relatively small consider exporting as a viable option

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

Which of the following financing methods entails the greatest risk for importers

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

Letters of credit are popular among traders because most of the risks are assumed by

banks

Which of the following is the oldest known form of countertrade

barter

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

Which of the following refers to a contract between the exporter and shipper that specifies merchandise destination and shipping costs

bill of lading

A ________ joint venture is formed when each partner requires the same component in its production process

buyback

A form of countertrade that usually typifies long-term relationships between the companies involved is called

buyback

A(n) ________ is guaranteed by both the exporter's bank in the country of export and the importer's bank in the country of import

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

Selling goods or services that are paid for, in whole or part, with other goods or services is called

counter trade

Which of the following allows a country to earn back some of the currency it pays out for imports

counterpurchase

Companies involved in direct exporting typically rely on

distributors

take ownership of the merchandise when it enters their country and accept all the risks associated with generating local sales

distributors

Export/import financing in which a bank acts as an intermediary without accepting financial risk is called

documentary collection

Which of the following is a method of export/import financing

documentary collection

is a payment method commonly used when there is an ongoing relationship between the involved parties

documentary collection

A(n) ________ exports products on behalf of an indirect exporter

export management company

Which of the following occurs when a company sells its products to buyers in a target market without going through intermediary companies

export through local distributors

Which of the following is the most common method of buying and selling goods internationally

exporting and importing

An offset agreement differs from a counter purchase agreement in that an offset agreement

fails to specify the type of product that must be purchased

Which of the following types of joint ventures involve parties investing together in downstream business activities

forward integration

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

Which of the following is the first step in developing a successful export strategy

identification of a potential market

which of the following steps of the strategy development process for exports involves performing market research and interpreting results obtained from the research

identification of a potential market

Which of the following occurs when a company sells its products to intermediaries who then resell to buyers in a target market

indirect exporting

Which of the following steps of the strategy development process for exports involves establishing relationships with potential local distributors

initiation of meetings

A(n) ________ allows the bank to modify the terms of the letter only after obtaining the approval of both exporter and importer.

irrevocable letter of credit

Which of the following is an investment entry mode

joint venture

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

Which of the following is a strategic factor that influences a company's international entry mode selection

market size

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 financing methods entails the greatest risk for exporters

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

Buyback is defined as

the export of industrial equipment in return for products produced by that equipment

A(n) ________ becomes a negotiable instrument that can be traded among financial institutions when inscribed "accepted" by an importer

time draft

When one company is hired to design, construct, and test a production facility for a client, the arrangement is called

turnkey project

Which of the following is a contractual entry mode

turnkey projects

advance payment is commonly used for export/import financing when

two parties are unfamiliar with each other