International Business, 13e (Daniels/Radebaugh/Sullivan)Chapter 13 Export and Import Strategies

1) Which of the following refers to the sale of goods or services produced by a company based in one country to customers that reside in a different country?A) importingB) countertradingC) exportingD) freight forwardingAnswer: CDiff: 1 Page Ref: 478Skill: ConceptObjective: STUDY QUESTION 13.1: What is exporting? What is importing?

2) Which of the following refers to the purchase of goods or services produced by a company based in one country from sellers that reside in a different country?A) importingB) countertradingC) exportingD) freight forwardingAnswer: ADiff: 1 Page Ref: 478-479Skill: ConceptObjective: STUDY QUESTION 13.1: What is exporting? What is importing?

3) Which of the following is NOT an example of a service import?A) a consulting company performing services for a foreign clientB) an investment bank helping a foreign company arrange financingC) a retail clothing company opening a new retail outlet in a foreign countryD) engineering contractors building roads in a foreign countryAnswer: CDiff: 2 Page Ref: 479Skill: ConceptObjective: STUDY QUESTION 13.1: What is exporting? What is importing?

4) This spring break you are planning to leave the U.S. and go to London, England and stay at a hotel there. You will be making a ________ and the London hotel will be performing a ________.A) merchandise export; service importB) service export; merchandise exportC) service import; service exportD) service export; service importAnswer: CDiff: 3 Page Ref: 479Skill: ApplicationObjective: STUDY QUESTION 13.1: What is exporting? What is importing?AACSB: Reflective Thinking

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5) The benefits of retaining a core competency within a company and threading that core competency through the value chain are referred to as ________ advantages.A) internalizationB) domesticC) locationD) ownershipAnswer: ADiff: 2 Page Ref: 480Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

6) Companies are likely to export products abroad in all of the following situations EXCEPT which one?A) when their average cost per unit of home country production declines substantially by increasing outputB) when they want to use the riskiest method to engage in international tradeC) when they aim to increase degree of market diversificationD) when they are new to international businessAnswer: BDiff: 2 Page Ref: 480-481Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

7) Which of the following is usually NOT a factor that triggers companies to look to exports to boost total sales?A) maturity of the domestic marketB) potential to leverage their core competency in foreign marketsC) promote economic development in underdeveloped marketsD) response to the market entry of a foreign rivalAnswer: CDiff: 2 Page Ref: 480-481Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

8) In general, companies that have low levels of ownership advantages ________.A) enter foreign markets through FDIB) enter foreign markets through joint venturesC) enter foreign markets through franchisingD) do not enter foreign marketsAnswer: DDiff: 2 Page Ref: 480Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

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9) The probability of being an exporter ________.A) decreases with firm sizeB) is almost always related to firm sizeC) is rarely related to firm sizeD) increases with firm sizeAnswer: DDiff: 2 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

10) The ________ of a firm is the share of its total output that is exported.A) freight forwardB) incremental exportC) export intensityD) intermodal exportAnswer: CDiff: 1 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

11) Which of the following statements about small and medium-sized enterprises (SMEs) is true?A) SMEs are steadily reducing their exporting capabilities.B) SMEs make up the majority of U.S. exporters.C) SMEs account for the majority of the value of U.S. exports.D) Most exporters have fewer than 20 employees.Answer: BDiff: 2 Page Ref: 481Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

12) According to the research described in your text, which of the following is among the factors that would increase a firm's probability of exporting?A) low domestic productivityB) high domestic labor costsC) high level of efficiencyD) high R & D demandsAnswer: CDiff: 2 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

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13) Which of the following is NOT one of the phases in the process of incremental export development?A) serendipityB) preengagementC) initial exportingD) advancedAnswer: ADiff: 2 Page Ref: 483Skill: ConceptObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?

14) Increasingly, we see newly formed companies begin exporting sooner in their life cycle, led by a new generation of entrepreneurs and managers with a keen awareness of export opportunities. These sorts of firms are generally referred to as ________.A) first-stage exportersB) geocentricsC) born globalsD) geo-exposAnswer: CDiff: 1 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?

15) An Australian company makes athletic wear for women, men, and adults. After several years of successfully exporting its products to the U.K. and the U.S., the company began exporting to several members of the EU. This is an example of ________.A) a born-global companyB) a location advantageC) third-party exportingD) incremental internationalizationAnswer: DDiff: 2 Page Ref: 482Skill: ApplicationObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?AACSB: Reflective Thinking

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16) The perspective of ________ holds that as a company gains experience, resources, and confidence, it progressively increases its exports.A) serendipityB) export managementC) the born-global theoryD) incremental internalizationAnswer: DDiff: 1 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?

17) Which of the following is a major pitfall of exporting?A) a willingness to modify products to meet other countries' regulations or cultural preferencesB) an over-commitment by top management to exportingC) relying too much on exports when demand in the domestic market boomsD) reacting to orders from around the world rather than designing a purposeful sales strategyAnswer: DDiff: 2 Page Ref: 484Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?

18) All of the following are mistakes companies new to exporting frequently make EXCEPT which one?A) failing to treat international distributors on an equal basis with those in the home marketB) insufficient commitment by top management to overcome the initial difficulties and financial requirements of exportingC) overestimating the usefulness of public and private export expertiseD) failure to print service, sales, and warranty messages in locally understood languagesAnswer: CDiff: 2 Page Ref: 484-485Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?AACSB: Multicultural and Diversity

19) Advances in information technology have led to which of the following situations for exporters?A) increased customer expectationsB) increased cost of communicationsC) decreased contact with customersD) decreased demand of services Answer: ADiff: 2 Page Ref: 484Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?AACSB: Communication

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20) Which of the following explanations is commonly cited as a reason that firms do not seek export opportunities more aggressively?A) Exporting is an activity best left to large firms.B) Firms are unaware of foreign market opportunities.C) It is difficult for foreign customers to communicate their needs to an exporter.D) Firms are reluctant to adjust their financial practices.Answer: DDiff: 2 Page Ref: 483Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?

21) The basis for designing an effective strategy for exporting begins with ________.A) identifying how the company can potentially leverage its core competency into international salesB) hiring local personnel to help the firm establish itself in a foreign marketC) enlisting the support of an export management companyD) focusing on a large number of markets to minimize the degree of riskAnswer: ADiff: 2 Page Ref: 486Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

22) In designing an export strategy, managers typically do all of the following EXCEPT ________.A) assess their products' potential for export salesB) target promising marketsC) evaluate the fit of current resources with long-term needsD) look to extend customary forms of financial support to new marketsAnswer: DDiff: 2 Page Ref: 486-487Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

23) The manager of a small or medium-sized enterprise (SME) in the United States looking to begin exporting would most likely consult which of the following to obtain expert counseling on exporting?A) the company's export groupB) the company's international distributorC) the Federal Credit Insurance AssociationD) the U.S. Commerce DepartmentAnswer: DDiff: 2 Page Ref: 486Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

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24) The incremental internationalization view of exporting holds that companies first target countries that are ________ their home market.A) different fromB) similar toC) smaller thanD) larger thanAnswer: BDiff: 2 Page Ref: 487Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

25) An import strategy may be driven by the fact that companies ________.A) can buy goods or services at higher prices from foreign suppliersB) can find goods or services of lower quality than similar goods produced locallyC) can tap a wide range of government subsidies to support their import strategyD) cannot buy goods or services needed in their production processes from local companiesAnswer: DDiff: 1 Page Ref: 489Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

26) Many of the strategic and practical issues of the import process ________ those of the export process.A) occur afterB) occur before C) mirrorD) contradictAnswer: CDiff: 2 Page Ref: 490Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

27) Which of the following is NOT one of the three main types of importers?A) importers looking for suppliers abroad to concentrate their operating risksB) importers looking for any product around the world they can deliver to local citizens for a profitC) importers looking to foreign-sourcing to get the highest quality products at the lowest possible priceD) importers using foreign sourcing to optimize their supply chainsAnswer: ADiff: 2 Page Ref: 489-490Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

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28) A driving factor for the growth in imports is the impact of ________.A) government programsB) the specialization of laborC) consumer preferencesD) social trendsAnswer: BDiff: 2 Page Ref: 489Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?AACSB: Multicultural and Diversity

29) A broker or other import consultant can help an importer minimize import duties by ________.A) qualifying for duty charges through drawback provisionsB) incurring duties by using bonded warehouses and foreign trade zonesC) maximizing liability by properly marking an import's country of originD) valuing products in such a way that they qualify for more favorable duty treatmentAnswer: DDiff: 1 Page Ref: 491Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

30) The primary duties of the ________ are the assessment and collection of all duties, taxes, and fees on imported merchandise, the enforcement of customs and related laws, and the administration of certain navigation laws and treaties.A) Bureau of Customs and Border ProtectionB) U.S. Secret ServiceC) Internal Revenue ServiceD) Food and Drug AdministrationAnswer: ADiff: 2 Page Ref: 492Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

31) All of the following are primary duties of the Bureau of Customs and Border Protection EXCEPT which one?A) assessing all duties, taxes, and fees on imported merchandiseB) collecting import and export tariffsC) protecting the U.S. from threatening importsD) policing smuggling operationsAnswer: BDiff: 2 Page Ref: 492Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

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32) Import documents are of two different types: those that determine whether customs will release the shipment and those that contain information for ________.A) national securityB) market and industry impactsC) duty assessment and statistical purposesD) end customer profilesAnswer: CDiff: 2 Page Ref: 495Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

33) In ________, the exporter sells goods directly to or through an independent domestic intermediary in the exporter's home country that exports the products to foreign markets.A) direct sellingB) multilevel marketingC) global resource planningD) indirect sellingAnswer: DDiff: 1 Page Ref: 495Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

34) Which of the following is NOT one of the three common ways that brokers are paid by a company conducting indirect exporting?A) a commission rateB) a buy-sell basisC) a fixed salaryD) a "special event" contributionAnswer: CDiff: 2 Page Ref: 496Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

35) As companies initiate their activities in export markets with a preference for an indirect selling strategy, they tend to ________.A) establish a small cadre of export professionals to handle the specialized functions of exportingB) use external specialists to assist in the export processC) use the International Trade Administration to handle their exportsD) use freight forwarders to act as distributors in foreign marketsAnswer: BDiff: 1 Page Ref: 495Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

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36) The company that hires an intermediary in the belief that indirect selling has the most appeal in helping it manage the export process must accept ________.A) lower profit marginsB) greater control over aspects of its international salesC) more responsibility for customer satisfactionD) the need to better understand trade regulationsAnswer: ADiff: 2 Page Ref: 496Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

37) A(n) ________ operates on a contractual basis and provides exclusive representation for an exporter's goods and services in a foreign market.A) export management companyB) import brokerC) invoice agentD) horizontal financial traderAnswer: ADiff: 1 Page Ref: 497Skill: ConceptObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?

38) Which of the following is typically true of an export management company?A) It is usually a division of a manufacturing company.B) Most EMCs in the United States are large, representing a wide range of products and large number of companies.C) It operates on a contractual basis for a manufacturer by helping obtain orders for its clients' products.D) It usually takes title to products rather than act as an agent.Answer: CDiff: 2 Page Ref: 497Skill: ConceptObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?

39) Which of the following is a difference between export management companies (EMCs) and export trading companies (ETCs)?A) ETCs deal with both exports and imports, while EMCs deal only with exports.B) ETCs are subject to antitrust laws, while EMCs are not.C) ETCs typically carry inventory, while EMCs typically do not.D) ETCs operate more on the basis of demand, while EMCs operate more on the basis of supply.Answer: DDiff: 3 Page Ref: 497-498Skill: ApplicationObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?AACSB: Analytic Skills

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40) Which of the following is true of export trading companies in the United States?A) They are like independent distributors that match buyers with buyers.B) They are prohibited from working with a firm's competitors due to antitrust laws.C) They must be established independently of the company in order to avoid a conflict of interest.D) They have been a successful form of export intermediary in recent years.Answer: DDiff: 2 Page Ref: 497Skill: ConceptObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?

41) Exporters who opt for direct selling in foreign markets most commonly do so ________.A) in order to spread the riskB) by allowing export management companies to act as agents for themC) because they are usually the only ones who really understand the product characteristicsD) by working with a foreign distributorAnswer: DDiff: 2 Page Ref: 498Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?

42) An exporter that opts for a(n) ________ strategy will develop its own international marketing capability.A) indirect sellingB) freight forwardingC) direct sellingD) export intermediationAnswer: CDiff: 1 Page Ref: 498Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?

43) The Internet supports more companies' efforts to launch a direct selling strategy by ________.A) providing faster and cheaper delivery of informationB) creating high capital and infrastructure barriersC) letting software take over customer serviceD) countering the power of electronic data interchange systemsAnswer: ADiff: 2 Page Ref: 499Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?AACSB: Use of IT

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44) Which of the following is the formal export document from the exporter to the importer that outlines the selling terms, price, and delivery if the goods are actually shipped?A) the export packing listB) the pro forma invoiceC) the consular invoiceD) the bill of ladingAnswer: BDiff: 2 Page Ref: 502Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?

45) Federal, state, and local governments, seeing the benefits of international trade, actively aid the efforts of potential and active exporters as well as ________.A) ensure the quality of exported productsB) set up barriers to punish foreign competitorsC) collect a fee for each successful export saleD) protect the interests of struggling importersAnswer: DDiff: 2 Page Ref: 504Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

46) An American company looking to get into exporting could look to government agencies for assistance in all of the following ways EXCEPT which one?A) organizing trade events that help potential exporters make foreign contacts and explore export opportunitiesB) understanding how to comply with domestic and foreign trade regulationsC) acting as an export marketing department or international department for the companyD) providing information about market demographics and product demandAnswer: CDiff: 2 Page Ref: 504Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

47) A freight forwarder, the so-called "travel agent of cargo," performs which of the following functions?A) arranging the fastest and cheapest transportation of products to and from foreign suppliersB) taking title to the goods it moves from country to countryC) acting as a sales representative in a foreign marketD) concentrating activity on moving exports and imports within a company's global supply chainsAnswer: ADiff: 2 Page Ref: 505Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

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48) Trends such as more frequent shipments, lighter-weight shipments, and higher-value shipments ________.A) help standardize rates on air and ocean shipments for incoming and outgoing freightB) increase the growth of airfreight trafficC) make ocean freight more effective than it has been in the pastD) have decreased the cost of containerizationAnswer: BDiff: 2 Page Ref: 506Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

49) Countertrade is an alternative means of structuring an international sale when ________.A) an importer is able to raise the cash to settle a billB) an importer is able to obtain a bank loanC) an importer does not belong to the World BankD) conventional forms of payment are difficult, costly, or nonexistentAnswer: DDiff: 2 Page Ref: 507Skill: ApplicationObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?AACSB: Analytic Skills

50) ________ refers to any one of several different arrangements that parties negotiate so that they can trade goods and services with limited or no use of currency.A) FactoringB) OffsetC) CountertradeD) BarterAnswer: CDiff: 1 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?

51) Countertrade is an inefficient way of doing business because it ________.A) requires buyers and sellers to enter straightforward negotiations to reach a fair value on the exchangeB) requires buyers and sellers to negotiate a fair value on the exchange C) reduces the risk that the goods sent as payment may be poor quality, packaged unattractively, or difficult to sell and serviceD) eliminates the potential for price and financial distortionAnswer: BDiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?

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52) Countertrade generally increases in countries whose economies ________.A) are experiencing widespread economic problemsB) command strong negotiation positions with foreign customersC) enjoy sufficient access to cash or creditD) can easily access the technology and marketing expertise of MNEsAnswer: ADiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?AACSB: Multicultural and Diversity

53) A situation in which goods are traded for goods due to a shortage of foreign exchange is known as ________.A) barterB) bilateral tradeC) offset tradeD) multilateral tradeAnswer: ADiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?

54) A situation in which an exporter sells goods for cash but then undertakes to promote exports from the importing country in order to help it earn foreign exchange is known as ________.A) multilateral tradeB) offset tradeC) barterD) switch tradingAnswer: BDiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?

55) A situation in which an exporter sells products to a foreign country along with its promise to make a future purchase of a specific product made in that country is known as ________.A) multilateral tradeB) barterC) counter purchaseD) offset tradeAnswer: CDiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?

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56) Which of the following is an example of barter?A) A beverage maker in England provides production equipment to a state-owned bottling plant in Russia while agreeing to take payment in the form of future output generated by the Russian plant.B) Indonesia supplies Thailand with agricultural supplies in exchange for rice grown in Thailand.C) The U.S. exports goods to China and then invests in a Chinese business that is unrelated to those goods.D) An aircraft exporter partners with a company in the importing country to manufacture components that will then to be used in the assembly of the aircraft.Answer: BDiff: 2 Page Ref: 507Skill: ApplicationObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?AACSB: Reflective Thinking

57) Importing is the converse of exporting.Answer: TRUEDiff: 1 Page Ref: 478Skill: ConceptObjective: STUDY QUESTION 13.1: What is exporting? What is importing?

58) A company classified as a small and medium-sized enterprise (SME) has fewer than 500 employees.Answer: TRUEDiff: 1 Page Ref: 477Skill: ConceptObjective: STUDY QUESTION 13.1: What is exporting? What is importing?

59) Ownership advantages refer to a firm's specific assets, international experience, and the ability to develop either low-cost or highly differentiated products within the context of its particular value chain.Answer: TRUEDiff: 2 Page Ref: 479Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

60) Serendipity is often an export trigger for companies that purposefully look to internationalize their operations.Answer: FALSEDiff: 1 Page Ref: 481Skill: ConceptObjective: STUDY QUESTION 13.2: What are the strategic advantages of exporting?

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61) Export intensity, the percentage of total revenues coming from exports, is not always correlated with company size.Answer: TRUEDiff: 2 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

62) The probability of a company being an exporter is independent of the size of the company.Answer: FALSEDiff: 2 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?

63) "Born global" firms are those that step straight onto the world stage, making exporting the primary goal of the firm from day one of operations.Answer: TRUEDiff: 1 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?

64) The stages of development in a company's export expansion are tied to company size.Answer: FALSEDiff: 2 Page Ref: 482Skill: ConceptObjective: STUDY QUESTION 13.4: What are the features of the stages of export development?

65) A major pitfall of exporting is misclassifying products in terms of the destination country's tariff schedule, thereby incurring a higher tax or slower delivery.Answer: TRUEDiff: 2 Page Ref: 484Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?

66) Companies new to exporting most frequently suffer over-commitment by top management in taking on the initial difficulties and financial requirements of exporting.Answer: FALSEDiff: 2 Page Ref: 484Skill: ConceptObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?

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67) Companies that are born global can skip the step of designing an export strategy.Answer: FALSEDiff: 2 Page Ref: 486Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

68) Entrepreneurs exporting for the first time are more likely to underestimate than overestimate demand for their product.Answer: FALSEDiff: 2 Page Ref: 487Skill: ConceptObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?

69) One advantage of importing is that an importer can diversify its operating risks by developing alternative suppliers.Answer: TRUEDiff: 2 Page Ref: 490Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

70) There are three broad types of importers: those that use foreign sourcing as part of their global production network, those that look at foreign sourcing to get the highest quality products at the lowest possible price, and those that look defensively for any product around the world that they can import in order to compete with rivals.Answer: FALSEDiff: 3 Page Ref: 489Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

71) The primary duty of the customs agency of a government is the assessment and collection of all duties, taxes, and fees on imported merchandise.Answer: TRUEDiff: 1 Page Ref: 492Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

72) The U.S. government has more than 10,000 tariff classifications and more than half of them are subject to interpretation.Answer: TRUEDiff: 2 Page Ref: 492Skill: ConceptObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?

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73) Indirect exports are goods and services sold to an independent intermediary outside of the exporter's home country, which then sells the product in the export market to the final consumer.Answer: FALSEDiff: 1 Page Ref: 495Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

74) Exporters employ an export management company as part of an indirect selling strategy.Answer: TRUEDiff: 2 Page Ref: 497Skill: ConceptObjective: STUDY QUESTION 13.9: What is indirect selling?

75) Major types of indirect intermediaries include export trading companies, distributors, and freight forwarding companies.Answer: FALSEDiff: 2 Page Ref: 497Skill: ConceptObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?

76) An export trading company (ETC) works with many manufacturers rather than representing a single manufacturer.Answer: TRUEDiff: 2 Page Ref: 498Skill: ConceptObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?

77) In what is known as direct selling, the exporter sells goods directly to or through an independent domestic intermediary in the exporter's home country that then exports the products to foreign markets.Answer: FALSEDiff: 1 Page Ref: 498Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?

78) Direct exports are sold to an independent intermediary in the domestic market, which then sells the products in the export market to the final consumer.Answer: FALSEDiff: 1 Page Ref: 498Skill: ConceptObjective: STUDY QUESTION 13.11: What do we mean by direct selling?

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79) A U.S. government agency that provides assistance to companies interested in exporting is the International Trade Administration.Answer: TRUEDiff: 2 Page Ref: 504Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

80) The foreign freight forwarder is the largest export intermediary in terms of value and weight of products managed.Answer: TRUEDiff: 2 Page Ref: 505Skill: ConceptObjective: STUDY QUESTION 13.12: What sources of assistance are available to the exporter who is using the direct selling strategy?

81) Countertrade refers to any one of several different arrangements that parties negotiate so that they can trade goods and services with limited or no use of currency.Answer: TRUEDiff: 1 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?

82) Countertrade is an efficient way of doing business.Answer: FALSEDiff: 1 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?

83) Barter is a transaction in which goods or services are traded for goods or services of equal value without any exchange of cash or credit.Answer: TRUEDiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?

84) Transactions in which an exporter sells products for cash and then helps the importer find opportunities to earn hard currency for payment are known as buyback.Answer: FALSEDiff: 2 Page Ref: 507Skill: ConceptObjective: STUDY QUESTION 13.14: What are barter, buyback, and offset trade?

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85) What are some key characteristics of exporters?Answer: Research conducted on the characteristics of exporters has resulted in two basic conclusions: (1) the probability of being an exporter increases with company size, as defined by revenues and (2) export intensity, the percentage of total revenues coming from exports, is not positively correlated with company size. The greater the percentage of exports to total revenues, the greater the intensity. Exporting is engaged in by both big and small companies.Diff: 2 Page Ref: 481-482Skill: ApplicationObjective: STUDY QUESTION 13.3: What are the characteristics of exporters?AACSB: Analytic Skills

86) Discuss the potential pitfalls of exporting.Answer: Aside from problems that are common to international business in general and not unique to exporting, such as language and other cultural factors, the following are mistakes companies new to exporting most frequently make:a. underestimating the usefulness of private and public export expertiseb. insufficient commitment by top management to overcome the initial difficulties and financial requirements of exportingc. insufficient care in selecting overseas agents or distributorsd. chasing orders from around the world instead of establishing a base of profitable operations and orderly growthe. neglecting export business when the domestic market boomsf. failure to treat international distributors on an equal basis with their domestic counterpartsg. unwillingness to modify products to meet other countries' regulations or cultural preferencesh. failure to print service, sales, and warranty messages in locally understood languagesi. failure to consider use of an export management company or other marketing intermediary when the company does not have the personnel to handle specialized export functionsDiff: 2 Page Ref: 483-485Skill: ApplicationObjective: STUDY QUESTION 13.5: What are the pitfalls of exporting?AACSB: Multicultural and Diversity

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87) Discuss the various steps management must take to establish a successful export strategy.Answer: a. Assess the company's export potential by examining its opportunities and resources: First, the company needs to determine if there is a market for its goods and services. Next, it needs to make sure it has enough production capacity to deliver the goods or services to foreign customers.b. Obtain expert counseling on exporting: Most governments provide assistance for their domestic companies, although the extent of commitment varies by country. Other government agencies also assist exporters. As a company's export plan increases in scope, it probably will want to secure specialized assistance from banks, lawyers, freight forwarders, export management companies, export trading companies, and others.c. Select a market or markets: This key part of the export strategy may be done passively or actively. In the former, the company learns of markets by responding to requests from abroad that result from trade shows, advertisements, or articles in trade publications.d. Formulate and implement an export strategy: In this step, a company considers its export objectives (immediate and long term, specific tactics it will use, a schedule of activities and deadlines to achieve its objectives, and the allocation of resources to accomplish the different activities). Then it implements the strategy by getting the goods and services to foreign consumers.Diff: 2 Page Ref: 485-487Skill: ApplicationObjective: STUDY QUESTION 13.6: What are some of the characteristics of designing an export strategy?AACSB: Analytic Skills

88) What are the major types of importers?Answer: a. Those that are looking for any product around the world that they can import. They might specialize in certain types of productssuch as sports equipment or household itemsbut they are simply scanning the globe and looking for any product that will generate positive cash flow for them.b. Those that are looking at foreign sourcing to get the highest-quality products at the cheapest pricec. Those that use foreign sourcing as part of their global supply chainDiff: 2 Page Ref: 489Skill: ConceptObjective: STUDY QUESTION 13.7: What are the strategic advantages of importing?

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89) Discuss the various ways a broker or other import consultant can help an importer minimize import duties.Answer: a. Valuing products in such a way that they qualify for more favorable duty treatment: Different product categories have different duties. For example, finished goods typically have a higher duty than parts and components.b. Qualifying for duty refunds through drawback provisions: Some exporters use imported parts and components on which they paid a duty. In the United States, the drawback provision allows domestic exporters to apply for a 99 percent refund of the duty paid on their imported goods, as long as they become part of the exporter's product.c. Deferring duties by using bonded warehouses and foreign trade zones: Companies do not have to pay duties on imports stored in bonded warehouses and foreign trade zones until the goods are removed for sale or used in a manufacturing process.d. Limiting liability by properly marking an import's country of origin: Because governments assess duties on imports based partly on the country of origin, a mistake in marking the country of origin could result in a higher import duty. For example, in the United States, if a product or its container is not properly marked when it enters the country, the product could be assigned a marking duty equal to 10 percent of the customs value. This would be in addition to the normal tariff.Diff: 2 Page Ref: 491Skill: ApplicationObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?AACSB: Analytic Skills

90) What role does the customs agency of a government play?Answer: a. When importing goods into any country, a company must be totally familiar with the customs operations of the importing country. In this context, "customs" are the country's import procedures and restrictions, not its cultural aspects. The primary duties of the U.S. Bureau of Customs and Border Protection are the assessment and collection of all duties, taxes, and fees on imported merchandise, the enforcement of customs and related laws, and the administration of certain navigation laws and treaties. As a major enforcement organization, it also deals with smuggling operations.b. An importer needs to know the way to clear goods, the duties to pay, and the special laws that exist regarding the importation of products. On the procedural side, when merchandise reaches the port of entry, the importer must file documents with customs officials, who assign a tentative value and tariff classification to the merchandise. Then customs officials examine the goods to determine whether there are any restrictions on their importation. If there are restrictions, the goods may be rejected and not be allowed to enter the country.Diff: 2 Page Ref: 492Skill: ApplicationObjective: STUDY QUESTION 13.8: What are customs agencies? What is their role?AACSB: Analytic Skills

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91) What are export management companies, and how do they help potential exporters?Answer: An export management company (EMC) usually acts as the export arm of a manufacturer. The EMC primarily obtains orders for its clients' products through the selection of appropriate markets, distribution channels, and promotion campaigns. It collects, analyzes, and furnishes credit information and advice regarding foreign accounts and payment terms. The EMC also may take care of export documents, arrange transportation, set up patent and trademark protection in foreign countries, and assist in establishing alternative forms of doing business, such as licensing. EMCs operate on a contractual basis and provide exclusive representation in a foreign territory. In the United States, most EMCs are small, entrepreneurial ventures that tend to specialize by product, function, or market area. Although EMCs perform an important function for companies that need their expertise, a manufacturer that uses an EMC may lose control over foreign sales, as they are passing off that responsibility to an independent party. If the EMC does not actively promote the product, the company will not generate many exports.Diff: 2 Page Ref: 497Skill: ApplicationObjective: STUDY QUESTION 13.10: What types of third-party intermediaries assist exporters?AACSB: Analytic Skills

92) Profile the inefficiencies of countertrade.Answer: Countertrade is an inefficient way of doing business; companies prefer the straightforward efficiency of cash or credit. In the case of countertrade, rather than simply consulting current foreign-exchange rates, buyers and sellers must enter complex and time-consuming negotiations to reach a fair value on the exchange. As a result, traders often find themselves stuck in situations where the goods sent as payment may be poor quality, packaged unattractively, or difficult to sell and service. Also, there's a lot of room for price and financial distortion in countertrade deals given that nonmarket forces set the prices of these goods. Most fundamentally, the trade uncertainty and currency distortions created by countertrade threaten free market forces with protectionism and price-fixing. Diff: 2 Page Ref: 507Skill: ApplicationObjective: STUDY QUESTION 13.13: What is countertrade and what is its implication to trade?AACSB: Analytic Skills

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