Ch. 13- Quiz Flashcards
Company X’s product has reached its maximum market share in the domestic market. The company has the capacity to operate another shift to increase production if it increases sales and can realize an overall reduction in production costs, which is the most important priority for the company. Which one of the following is the number one compelling reason for the company to begin exporting?
A. Gain experience in a foreign market
B. Avoid economies of scale
C. Establish global brand recognition
D. Expand total sales
E. Increase market share
D. Expand total sales
Which one of the following occurs when a company sells its products directly to buyers in a target market?
A. Foreign direct Investment
B. Franchising
C. Countertrade
D. Direct exporting
E. Indirect exporting
D. Direct exporting
Which one of the following statements BEST describes direct exporting?
A. Direct exporting can rely on either local sales representatives or distributors.
B. Direct exporting is exporting through export management companies only.
C. Direct exporting is a management agreement between manufacturers and end users overseas.
D. Direct exporting occurs when selling to export trading company.
E. Direct exporting is limited to industrial products only.
A. Direct exporting can rely on either local sales representatives or distributors.
Which one of the following occurs when a company sells its products to intermediaries that then resell to buyers in a target market?
A. Indirect exporting
B. Distributors
C. Sales representatives
D. Portfolio investment
E. Direct exporting
A. Indirect exporting
Which one of the following BEST describe agents?
A. An agent is a company that provides services to indirect exporters in addition to activities directly related to clients’ exporting activities
B. An agent can sell in the target market through distributors, which take ownership of the merchandise when it enters their country
C. Agents receive compensation in the form of commissions on the value of sales
D. An agent represents only his/her own company’s products, not those of other companies
E. Agents operate contractually, either as an agent (being paid through commissions based on the value of sales) or as a distributor (taking ownership of the merchandise and earning a profit from its resale)
C. Agents receive compensation in the form of commissions on the value of sales
Some companies place reliance for their international sales on distributors or sales representatives. Which of the following is a key function of distributors?
A. Assigning risk associated with local sales to the producer of the goods
B. Taking ownership of the merchandise when it enters their country.
C. Selling similar products from multiple producers
D. Selling only to end users
E. Attending trade fairs on behalf of the producer
B. Taking ownership of the merchandise when it enters their country.
Which of the following is a service provided by export management companies (EMCs)?
A. Accepting all risks related to local sales
B. Gathering market information
C. Taking ownership of merchandise
D. Providing import, export, and countertrade services
E. Lobbying for favorable treatment in the target country
B. Gathering market information
Which one of the following is a disadvantage of hiring an export management company (EMC)?
A.Hinders the development of the exporter’s own international expertise
B. Exploits contacts predominantly in one industry
C. Operates contractually
D. Involved strictly in exporting
E. Exploits contacts in one geographic area
A.Hinders the development of the exporter’s own international expertise
To better ensure that companies will not make embarrassing blunders, an inexperienced exporter might also want to engage the services of a freight forwarder. Freight forwarders are expert in which one of the following areas?
A. Developing distribution channels
B. Providing storage facilities
C. Shipping and insurance fees
D. Tax schedules
E. Taking ownership of merchandise
C. Shipping and insurance fees
Which one of the following types of countertrade practice typifies long-term relationships between the companies involved?
A. Offset
B. Buyback
C. Barter
D. Switch trading
E. Counterpurchase
B. Buyback
What is the main difference between offset and counterpurchase?
A. Offset requires an exchange of goods to reduce the transfer of hard currency; counterpurchase does not.
B. Offset requires a seller of equipment to buy products made with that equipment; counterpurchase does not.
C. Counterpurchase identifies the amount of a future purchase; offset does not.
D. Counterpurchase is product-specific; offset is not.
E. Counterpurchase requires that one company sells to another its obligation to make a purchase in a given country; offset does not.
D. Counterpurchase is product-specific; offset is not.
Which one of the following is the sale of goods or services to a country by a company that promises to make a future purchase of a specific product from that country?
A. Switch trading
B. Offset
C. Barter
D. Buyback
E. Counterpurchase
E. Counterpurchase
Which payment method is commonly used when there is an on-going business relationship between the exporter and the importer?
A. Advance payment
B. A sight draft
C. Irrevocable letter of credit
D. Documentary collection
E. Open account
D. Documentary collection
Which one of these types of payments represents the highest risk exposure to the importer?
A. Revocable letter of credit
B. Documentary collection
C. Advance payment
D. Irrevocable letter of credit
E. Open account
C. Advance payment
Which one of the following is an arrangement in which an exporter ships merchandise and later bills the importer for its value?
A. Irrevocable letter of credit
B. Open account
C. A sight draft
D. Revocable letter of credit
E. Advance payment
B. Open account
