Global 13

Large firms generally tend to be _____ about seeking opportunities for profitable exporting, whereas medium-sized and small firms are _____.
A. passive; aggressive
B. risk averse; risk takers
C. cautious; adventurous
D. proactive; reactive
D
Which of the following statements about medium and small-sized firms is true?
A. Most of these firms are proactive about seeking opportunities for profitable exporting.
B. They consider exporting only after domestic markets are saturated.
C. These firms go out in the world to seek opportunities.
D. These firms have a high degree of familiarity with the foreign market opportunities.
B
Why are small and medium-sized firms not proactive in seeking export opportunities?
A. They are familiar with the foreign market and know where they lie.
B. The export market is similar to the home market in terms of legal and business practices.
C. They are intimidated by the complexities and mechanics of exporting to countries.
D. Domestic regulations limit their ability to export profitably.
C
The combination of _____ and _____ associated with foreign market opportunities probably explains why exporters still account for only a tiny percentage of U.S. firms.
A. unfamiliarity; intimidation
B. unpredictability; regulations
C. unviability; volatility
D. lack of financing; marketing know-how
A
Exporting is nearly always a way to increase the company’s revenue and profit base because
A. there is little competition in the international market.
B. foreign governments welcome imports from other countries.
C. international markets are less complex than domestic ones.
D. the international market is normally so much larger than the firm’s domestic market.
D
By expanding the size of the market, exporting can enable a firm to achieve _____, thereby lowering its unit costs.
A. economies of scale
B. returns to scale
C. diseconomies of scale
D. network externalities
A
According to Don Gallion, president of FCX Systems, finding a good _____ is a critical factor in achieving success in exporting that will keep the firm out of trouble when it comes to customs and what one should and shouldn’t do.
A. local representative
B. home-country financier
C. location in the host country
D. local market
A
The United Nations has calculated that the time involved in preparing documentation, along with the costs of common errors in paperwork, often amounts to _____ percent of the final value of goods exported.
A. 75
B. 25
C. 10
D. 50
C
Faced with complexity and diversity, firms sometimes hesitate to seek export opportunities. The way to overcome ignorance is to
A. make commitments.
B. create revenue.
C. make decisions.
D. collect information.
D
Great trading houses in Japan are called:
A. kaizen.
B. sogo shosha.
C. MITI.
D. guanxi.
B
The sogo shosha of Japan:
A. proactively, continuously seek export opportunities for their affiliated companies.
B. exclusively serve the largest and most prestigious companies in Japan.
C. have offices concentrated in the business district of Tokyo.
D. have monopolized the export market in the country.
A
Which of the following is true about international comparisons in exporting?
A. The United States has long made its living as a trading nation.
B. Historically, Germany has been a relatively self-contained continental economy.
C. Unlike Japan, U.S. firms have a strong information advantage when they seek export opportunities.
D. The United States has not yet evolved an institutional structure for promoting exports similar to that of Germany.
D
For U.S. firms, the most comprehensive source of export opportunities information is the:
A. Small Business Administration.
B. U.S. Department of Commerce.
C. Federal Trade Commission.
D. Federal Bank.
B
Which of the following institutions within the U.S. Department of Commerce is dedicated to providing businesses with intelligence and assistance for attacking foreign markets?
A. The International Trade Administration
B. The Small Business Administration
C. The Federal Trade Commission
D. The Department of State
A
A _____ gives the names and addresses of potential distributors in foreign markets along with businesses they are in, the products they handle, and their contact person.
A. matchmaker list
B. best prospects list
C. potential exporter list
D. SCORE list
B
Which of the following is one of the ways in which the U.S. Department of Commerce helps potential exporters?
A. It oversees about 850 volunteers with international trade experience.
B. It has assembled a “comparison shopping service” for 14 countries that are major markets for U.S. exports.
C. It coordinates a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
D. It provides export specialists who act as the export marketing department or international department for their client firms.
B
The International Trade Administration and the United States and Foreign Commercial Service are both:
A. private organizations that assist U.S. exporters.
B. great trading houses of the U.S.
C. organizations within the U.S. Department of Commerce.
D. departments in Small Business Administration.
C
A program in which department representatives accompany groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers is called the:
A. matchmaker program.
B. best prospects program.
C. SCORE program.
D. STAR program.
A
The _____ is a government organization that helps potential exporters. It employs 76 district international trade officers and 10 regional international trade officers throughout the United States as well as a 10-person international trade staff in Washington, D.C.
A. United States International Trade Commission
B. United States and Foreign Commercial Service
C. International Trade Administration
D. Small Business Administration
D
Which organization is affiliated with the Service Corps of Retired Executives?
A. Foreign Credit Insurance Association
B. International Trade Administration
C. Small Business Administration
D. U.S Department of Commerce
C
The _____ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
A. TradeNet Export Advisor
B. Export Trade Assistance Partnership
C. United States Trade Service
D. Export Legal Assistance Network
D
The _____ program has about 850 volunteers with international trade experience providing one-on-one counseling to active and new-to-export businesses.
A. Export Legal Assistance Network (ELAN)
B. Service Corps of Retired Executives (SCORE)
C. International Trade Veteran’s (ITV)
D. Network of Foreign Trade Executives (NFTE)
B
A company of export specialists that acts as an export marketing department for client firms is called a(n):
A. export management company.
B. export-import firm.
C. foreign direct investment management firm.
D. strategy-management company.
A
EMCs normally accept two types of export assignments. One, startup services are performed with the understanding that the EMC will have continuing responsibility for selling the firm’s products. Two, they
A. start exporting operations for a firm with the understanding that the firm will take over operations after they are well established.
B. collect duties on exported products and convert the currency of one country into the currency of another.
C. serve firms in particular industries and in different areas of the world.
D. collect duties on exported products and set interest rates charged to foreign investors.
A
A good EMC has all of the following qualities EXCEPT:
A. a network of contacts in potential markets.
B. a good knowledge of different business mores.
C. be fully conversant with the ins and outs of the exporting process and with local business regulations.
D. a staff comprising English-speaking employees alone.
D
Which of the following is a drawback of relying on an EMC?
A. They do not provide references and have no antecedents.
B. The exporting company can fail to develop its own exporting capabilities.
C. They do not constitute of expert specialists to help the neophyte exporter identify opportunities.
D. They typically lack knowledge about the local business regulations.
B
M has built its export success on all of the following principles EXCEPT:
A. adding additional product lines once exporting operations are successful.
B. getting into a market first and then learning about the country.
C. hiring locals to promote the firm’s products.
D. entering on a small scale to reduce risks.
B
Which of the following steps can increase a firm’s probability of exporting successfully?
A. Avoid hiring EMCs to contain costs
B. Enter several markets simultaneously to hedge risk
C. Enter a foreign market on a small scale
D. Wait for export opportunities to come
C
The text suggests that exporting is not an end in itself, but merely a step toward:
A. self-sufficiency in domestic markets.
B. foreign production.
C. market saturation.
D. product standardization.
B
International trade often occurs between parties who may never have met, live in different countries, speak different languages, and abide by different legal systems. These factors could result in:
A. parties being easy to track.
B. a lack of trust between the parties.
C. good enforcement of contractual obligations.
D. acculturation.
B
In international trade, the supplier (exporter) of a good wants to be paid before he ships his consignment. Correspondingly, the buyer (importer) wants to make payment only upon the receipt of the good. These varying, often conflicting, preferences of parties to a trade are a manifestation of:
A. corporate greed.
B. acculturation.
C. their lack of trust.
D. an absence of commitment.
C
Lack of trust between two parties engaged in international trade is accentuated by:
A. similar preferences as to how the transaction should be configured.
B. narrowing distance between two parties due to technological advances.
C. the problems of using an underdeveloped international legal system to enforce contractual obligations.
D. the possibility of doing business with someone from another country with whom they have been associated for a long time.
C
When an exporter ships goods to the bank which issued a letter of credit, it gives the bank title to the goods in the form of a:
A. merchandise bill.
B. bill of lading.
C. bill of exchange.
D. draft.
B
Which of the following stands at the center of international commercial transactions?
A. Bill of lading
B. Time draft
C. Letter of credit
D. Sight draft
C
The letter of credit is issued by a bank at the request of a(n):
A. exporter.
B. government.
C. importer.
D. shipping company.
C
The letter of credit
A. states that the bank will pay a specified sum of money to a beneficiary on presentation of particular, specified documents.
B. is an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
C. serves as a receipt, a contract, and a document of title.
D. indicates that the carrier has received the merchandise described on the face of the document.
A
When a letter of credit is used in exporting arrangements
A. no cash deposit or collateral is required from the importer.
B. the exporter pays the bank a fee for the service.
C. the letter of credit becomes a financial contract between the bank and the exporter.
D. the importer directly pays the exporter upon delivery of goods.
C
Which of the following is an advantage of the letter of credit system to the exporter?
A. Payment for merchandise only after delivery is made
B. Facilitates obtaining of preexport financing
C. Higher price is obtained for goods
D. Lower shipping costs are incurred
B
Which of the following is an advantage of the letter of credit system to the importer?
A. Payment for merchandise is made only after receiving the documents.
B. It facilitates the obtaining of preexport financing.
C. Lower price for goods.
D. Lower shipping costs.
A
What is the drawback for the importer in using a letter of credit?
A. The importer loses control over the process of trading.
B. The system is skewed heavily in favor of the exporter.
C. It may reduce his ability to borrow funds for other purposes.
D. The loan must be repaid even before the merchandise has been sold.
C
Why does a letter of credit reduce an importer’s ability to borrow funds?
A. The importer has to pay fees to the bank for the letter of credit.
B. It is a financial liability against the importer.
C. The importer has to pay for the merchandise immediately.
D. The importer has to pay for unsatisfactory products.
B
A draft is sometimes referred to as a:
A. bill of exchange.
B. letter of credit.
C. bill of lading.
D. counterpurchase.
A
A _____ is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
A. bill of lading
B. draft
C. letter of credit
D. barter
B
How does the international practice of settling trade transactions differ from domestic practice?
A. In international business, a formal promise to pay is required before obtaining the merchandise.
B. In international business, the seller usually ships merchandise on an open account.
C. In domestic business, a draft is used to settle trade transactions.
D. In international business, the exporter sends a commercial invoice that specifies the amount due and the terms of payment to the importer.
A
A party initiating a draft is known as the _____, while the party to whom the draft is presented is known as the _________________
A. maker; drawee
B. importer; exporter
C. buyer; vendor
D. agent; principal
A
The two categories of drafts are:
A. contract drafts and lending drafts.
B. single-party drafts and multi-party drafts.
C. title drafts and quantity drafts.
D. sight drafts and time drafts.
D
Which of the following is payable on presentation to the drawee?
A. Bill of lading
B. Sight draft
C. L/C
D. Time draft
B
Which of the following allows for a delay in payment?
A. Sight draft
B. Time draft
C. Bill of lading
D. Barter
B
When a time draft is presented to the drawee, he signifies acceptance of it by:
A. delivering the goods in the agreed time.
B. paying the draft amount immediately.
C. providing a collateral for the amount specified in the bill.
D. writing or stamping a notice of acceptance on its face.
D
Once accepted, a time draft becomes a(n):
A. asset for the drawee.
B. in-transit bill.
C. promise to pay by the accepting party.
D. bill of lading.
C
When a time draft is drawn on and accepted by a bank, it is called a:
A. trade acceptance.
B. banker’s check.
C. banker’s acceptance.
D. bill of lading.
C
When a time draft is drawn on and accepted by a business firm, it is called a(n):
A. trade acceptance.
B. in-transit bill.
C. banker’s acceptance.
D. bill of lading.
A
Time drafts:
A. have no value given the deferred nature of document.
B. are generally not preferred in international transaction.
C. are negotiable instruments.
D. are also called bills of lading.
C
A _____ is issued to the exporter by the common carrier transporting the merchandise and it serves as a receipt, a contract, and a document of title.
A. bill of lading
B. collateral
C. draft
D. letter of credit
A
As a _____, a bill of lading specifies that the carrier is obligated to provide a transportation service in return for a certain charge.
A. contract
B. receipt
C. document of title
D. letter of credit
A
A bill of lading serves all of the following purposes EXCEPT:
A. receipt.
B. contract.
C. letter of credit
D. document of title.
C
As a collateral, the bill of lading:
A. can be used to advance funds to the exporter by its local bank before or during shipment.
B. specifies that the carrier is obligated to provide a transportation service in return for a certain charge.
C. can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
D. states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
A
As a _____, a bill of lading can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
A. document of title
B. contract
C. receipt
D. time draft
A
In the U.S., export credit insurance is provided by the _____, an association of private commercial institutions.
A. FCC
B. FTC
C. FCIA
D. FDIC
C
The _____ guarantees repayment of medium and long-term loans U.S. commercial banks make to foreign borrowers for purchasing U.S. exports.
A. United Nations
B. Central Bank
C. World Bank
D. Ex-Im Bank
D
The mission of the _____ is to provide financing aid that will facilitate exports, imports, and the exchange of commodities between the United States and other countries.
A. sogo shosha
B. World Bank
C. Overseas Commercial Service
D. Ex-Im Bank
D
Exporters clearly prefer to get a _____ from importers.
A. promissory note
B. credit insurance
C. letter of credit
D. bill of lading
C
When does an exporter have to forgo a letter of credit?
A. When competing exporters also require a letter of credit
B. When the importer is facing stiff competition from other importers
C. When the exporter is a dominant player in a noncompetitive market
D. When the importer is in a strong bargaining position
D
The Ex-Im Bank provides _____ for the repayment of medium and long-term loans U.S. commercial banks make to foreign borrowers for purchasing U.S. exports. This makes the commercial banks more willing to lend cash to foreign enterprises.
A. export credit insurance
B. direct lending option
C. bank guarantee
D. interest
C
In some cases, the Ex-Im Bank grants loans that commercial banks would not if it sees a(n):
A. dire personal need to do so.
B. small business heading for bankruptcy.
C. potential benefit to the United States in doing so.
D. expression of good faith in the loan applicant.
C
The lack of a letter of credit exposes the exporter to the risk that the foreign importer will default on payment. The exporter can insure against this possibility by:
A. approaching the World Bank.
B. buying export credit insurance.
C. obtaining preexport financing.
D. filing a suit against the importer in court.
B
When should an exporter get export credit insurance?
A. When the exporter is facing a situation where the importer may default on payment.
B. When the exporter is dealing with a country that has a nonconvertible currency.
C. When the exporter is unable to obtain any preexport financing.
D. When the exporter has received a letter of credit from the importer’s bank.
A
The Foreign Credit Insurance Association (FCIA) is an association of private commercial institutions operating under the guidance of the
A. Federal Mediation and Conciliation Service.
B. U.S. Department of Commerce.
C. Export-Import Bank.
D. International Trade Administration.
C
What is the advantage of export credit insurance?
A. A third party will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.
B. It will cover losses due to the buyer’s insolvency or payment default.
C. It will put the importer in a strong bargaining position.
D. It will provide financing aid that will facilitate exports.
B
Countries might be forced to use countertrade when a currency is
A. externally convertible.
B. internally convertible.
C. nonconvertible.
D. freely convertible.
C
_____ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.
A. Forfeiting
B. Factoring
C. Securitization
D. Countertrade
D
A range of barter like agreements by which goods and services can be traded for other goods and services is known as:
A. countertrade.
B. protracted trade.
C. intermediate sales.
D. counter sale.
A
The principle of a _____ is to trade goods and services when they cannot be traded for money.
A. letter of credit
B. draft
C. bill of exchange
D. countertrade
D
When do firms engage in countertrade?
A. When the exporter may not be paid in his/her home currency due to nonconvertibility
B. When the exporter can convert the currency only in U.S. dollars
C. When the exporter is dealing with a country that has huge foreign reserves
D. When the exporter has easy access to export credit to fund its international trade
A
Saudi Arabia agreed to buy ten 747 jets from Boeing with payment in crude oil, discounted at 10 percent below posted world oil prices. This is an example of:
A. a letter of credit.
B. a time draft.
C. countertrade.
D. buyback.
C
In the modern era, countertrade arose in the 1960s as a way for _____ to purchase imports.
A. the United States
B. the Soviet Union
C. Germany
D. Japan
B
Which of the following is true about the incidence of countertrade?
A. During the 1980s, countertrade sharply declined in popularity among developing nations.
B. Today, some successor states to the former Soviet Union periodically use countertrade.
C. In the modern era, countertrade arose in the 1980s.
D. In the modern era, countertrade arose as a way for the United States to purchase imports.
B
Estimates of the percentage of world trade covered by some sort of countertrade agreement range from about _____ percent.
A. 2 to 10
B. 15 to 20
C. 30 to 40
D. 50 to 60
A
Which of the following is NOT a distinct countertrade arrangement?
A. Barter
B. Counterpurchase
C. Switch trading
D. Merger
D
The direct exchange of goods and/or services between two parties without a cash transaction is referred to as:
A. switch trading.
B. counterpurchase.
C. barter.
D. offset.
C
Which type of countertrade is the simplest arrangement of the kind, although not common?
A. Switch trading
B. Counterpurchase
C. Barter
D. Offset
C
The most restrictive countertrade arrangement is:
A. counterpurchase.
B. offset.
C. barter.
D. switch trading.
C
Why is barter not a common arrangement?
A. It is a very complex arrangement.
B. It is primarily used with trading partners who are generally considered creditworthy.
C. Firms run the risk of having to accept goods they do not want.
D. When the goods are exchanged simultaneously, one partner ends up financing the other.
C
Albania offered such items as spring water, tomato juice, and chrome ore in exchange for a $60 million fertilizer and methanol complex. Which type of countertrade is this?
A. Offset
B. Switch trading
C. Buyback
D. Barter
D
Counterpurchase:
A. is the most restrictive countertrade arrangement.
B. is a reciprocal buying agreement.
C. is the simplest countertrade arrangement.
D. uses a specialized third-party trading house.
C
When a firm agrees to purchase a certain amount of materials back from a country to which a sale is made, it is engaging in a(n):
A. barter.
B. counterpurchase.
C. offset.
D. switch trading.
B
A U.S. firm sells some products to China. China pays the U.S. firm in dollars, but in exchange, the U.S. firm agrees to spend some of its proceeds from the sale on textiles produced by China. Which type of countertrade is this?
A. Switch trading
B. Buyback
C. Counterpurchase
D. Barter
C
In a(n) _____ one party can fulfill the obligation with any firm in the country to which the sale is being made.
A. switch trade
B. offset
C. buyback
D. merger
B
From an exporter’s perspective, why is an offset more attractive than a straight counterpurchase agreement?
A. It is the simplest countertrade arrangement.
B. It gives the exporter greater flexibility to choose the goods that it wishes to purchase.
C. It allows the use of a specialized third-party trading house in the arrangement.
D. It gives the exporter counterpurchase credits, which can be used to purchase goods from another country.
B
When a specialized third-party trading house is used in a countertrade arrangement, it is called:
A. a counterpurchase.
B. an offset.
C. switch trading.
D. a buyback.
C
When a firm enters a(n) _____ agreement with a country, it often ends up with what are called counterpurchase credits, which can be used to purchase goods from that country.
A. barter
B. offset
C. switch trading
D. buyback
B
_____ occurs when a third-party trading house buys the firm’s counterpurchase credits and sells them to another firm that can better use them.
A. Barter
B. Switch trading
C. An offset
D. A buyback
B
A U.S. firm concludes a counterpurchase agreement with Poland for which it receives some number of counterpurchase credits for purchasing Polish goods. The U.S. firm does not want any Polish goods, however, so it sells the credits to a third-party trading house at a discount. The trading house finds a firm that can use the credits and sells them at a profit. This is an example of
A. barter.
B. switch trading.
C. an offset.
D. a buyback.
B
When a firm builds a plant in a country and agrees to take a certain percentage of the plant’s output as partial payment for the contract, it is called:
A. a counterpurchase.
B. an offset.
C. switch trading.
D. a buyback.
D
What is the main attraction of countertrade?
A. Firms can avoid setting up in-house trading departments.
B. It addresses the issue of lack of trust in international business.
C. A firm can finance an export deal when other means are not available.
D. Firms usually do not prefer to be paid in hard currency.
C
Occidental Petroleum negotiated a deal with Russia under which Occidental would build several ammonia plants in Russia and as partial payment receive ammonia over a 20-year period. This is an example of:
A. switch trading.
B. a buyback.
C. a counterpurchase.
D. an offset.
B
_____ agreement may be required by the government of a country that has a problem in paying for imports.
A. Foreign exchange
B. Countertrade
C. Letter of credit
D. Export purchase
B
untertrade is most attractive to:
A. small exporters.
B. large multinational enterprises.
C. only U.S. firms.
D. any firm in democratic nations.
B
Which of the following is a drawback of countertrade?
A. It fails to give firms a way to finance an export deal.
B. It is detrimental to the economy of the importing country.
C. Developing nations may have trouble raising the foreign exchange necessary to pay for imports.
D. It requires the firm to invest in an in-house trading department dedicated to arranging and managing deals.
D
Identify a drawback to countertrade.
A. It fails to give firms a way to finance an export deal.
B. It may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably.
C. It is detrimental to the economy of the importing country.
D. Developing nations may have trouble raising the foreign exchange necessary to pay for imports
B