CH 16 – Global Aspects of Entrepreneur Flashcards
1
Q
1) Becoming a global entrepreneur requires ________.
A) constant innovation
B) maintaining a high level of quality and constantly improving it
C) being sensitive to foreign customers’ unique requirements and adopting a more respectful attitude toward foreign habits and customs
D) All of the above
A
D
2
Q
2) For an entrepreneur, expanding into international markets ________.
A) guarantees its success in the marketplace
B) makes it a member of GATT automatically
C) helps it grow faster and survive competition better
D) leads to business failure for companies under $100 million in annual revenue
A
C
3
Q
3) The first obstacle an entrepreneur must overcome on the way to creating a truly global business is ________.
A) finding a joint venture partner
B) learning to think globally
C) locating motivated, multilingual managers for overseas assignments
D) finding overseas distributors for the company’s products
A
B
4
Q
4) Before going global, entrepreneurs should ask themselves questions regarding ________.
A) profit potential and commitment of resources for a global effort
B) a viable exit strategy and the cost of not going global
C) the reasons, rationale, and understanding cultural differences
D) All the above
A
D
5
Q
5) Only about one-third of the world’s purchasing power lies outside the borders of the United States.
A
FALSE
6
Q
6) As the trend toward increased globalization continues, successful companies must consider themselves businesses without borders.
A
TRUE
7
Q
7) Success in the global economy requires constant innovation, high quality, and flexibility and the ability to have a new perspective about the potential of a business.
A
TRUE
8
Q
8) Small companies that take the plunge into global business can extend their products’ life cycles, raise their quality levels, and increase sales and profits.
A
TRUE
9
Q
9) Learning to think globally may be the first (and most threatening) obstacle an entrepreneur must overcome on the way to creating a truly global business.
A
TRUE
10
Q
10) Some of the strategic options entrepreneurs have when deciding to go global include the Web, joint ventures, and franchising.
A
TRUE
11
Q
11) Entrepreneurs can use the Web to generate sales leads by researching customers and market characteristics in other countries.
A
TRUE
12
Q
12) Explain why it is important to “go global.” What benefits can companies that take the plunge into global business expect?
A
Answer: Small businesses can no longer consider themselves to be domestic companies if they truly want to compete. Political, social, cultural, and economic forces are driving small businesses into international markets. Powerful, affordable technology increases access to information on conducting global business, and the growing interdependence of the world economies makes it easier for companies of all sizes to engage in international trade.
Since the global market offers more niches, the flexibility and speed of a small business can become a competitive advantage.
Advantages of going global include the following:
∙ Offsetting sales declines in the domestic market
∙ Increasing sales and profits
∙ Extending their products’ life cycles
∙ Lowering manufacturing costs
∙ Improving competitive position and enhancing reputation
∙ Raising quality levels
∙ Becoming more customer oriented
13
Q
13) All of these are steps small companies follow when they begin conducting global business on the Web except ________.
A) connecting to e-mail
B) building a globally-accessible Web site
C) setting up links to related company Web sites
D) using the Web to conduct international market research
A
C
14
Q
14) Which of the following statements is/are true regarding export management companies?
A) Most are merchant intermediaries that work on a buy-and-sell arrangement with domestic small companies.
B) They provide small businesses with a low-cost, efficient, independent, international marketing department.
C) Many specialize in particular products or product lines and offer services ranging from market research and advice or patent protection, to arranging financing and handling shipping.
D) All of the above
A
D
15
Q
15) An export trading company ________.
A) is a business that buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) typically offers a wide range of services such as exporting, shipping, storing, distributing, and others to their clients
C) is formed by an agreement by which a licenser gives a foreign licensee the right to use a patent, trademark, copyright, technology, and products in return for a percentage of the licensee’s sales or profits
D) Both A and C above
A
D
16
Q
16) Which of the following trade intermediaries lowers the risk of exporting for a small business? A) Export management companies B) Export trading companies C) Resident buying offices D) All of the above
A
D
17
Q
17) \_\_\_\_\_\_\_\_ act as international sales representatives in a limited number of markets for various noncompeting domestic companies, typically operating on a commission basis. A) Manufacturers' export agents B) Export merchants C) Resident buying offices D) Foreign distributors
A
A
18
Q
18) A resident buying office is ________.
A) a business that buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) a government-owned or business-owned facility set up in a foreign country to buy products that are made there
C) a firm in an overseas distribution network selling noncompetitive products made by other firms
D) formed by an agreement where a licenser gives a foreign licensee the right to use a patent, trademark, copyright, technology, and products in return for a percentage of the licensee’s sales or profits.
A
B
19
Q
19) \_\_\_\_\_\_\_\_ are domestic wholesalers who do business in foreign markets, buying goods from domestic companies and selling them in foreign markets, often handling competing lines. A) Resident buying offices B) Export trading companies C) Foreign distributors D) Export merchants
A
D
20
Q
20) Foreign distributors offer small businesses which of the following benefits?
A) A detailed knowledge of the local markets in which they sell.
B) The ability to cover a foreign sales territory thoroughly.
C) The ability to handle all of the marketing, distribution, and service functions in foreign markets.
D) All of the above
A
D
21
Q
21) In a(n) \_\_\_\_\_\_\_\_, two or more U.S. small businesses form an alliance for the purpose of exporting their goods and services. The companies get antitrust immunity and share responsibility for the business equally. A) foreign joint venture B) trade intermediary C) domestic joint venture D) export management company
A
C
22
Q
22) In a(n) \_\_\_\_\_\_\_\_, a domestic small business forms an alliance with a company in the target nation for the purpose of exporting to that market. A) foreign joint venture B) trade intermediary C) domestic joint venture D) export management company
A
A
23
Q
23) The most important ingredient for a successful joint venture is ________.
A) targeting the right country in which to sell
B) getting government approval and avoiding antitrust charges
C) choosing the right partner
D) splitting costs and profits equally
A
C
24
Q
24) Which of the following is a common problem in joint ventures?
A) Incompatible management styles among partners.
B) Failure of partners to establish common goals.
C) Failure of partners to carefully determine each party’s contributions and responsibilities, distribution of earnings, etc.
D) All of the above
A
D
25
25) Many joint ventures fail because the parties involved neglected to ________.
A) select a partner who shares their company's values
B) spell out in writing exactly how the venture will work and who has decision-making authority
C) select a partner whose skills are different from, but compatible with, their own
D) All of the above
D
26
26) Foreign licensing has its greatest potential in the licensing of ________.
A) products
B) intangibles (e.g., technology, copyrights, and trademarks).
C) goods
D) franchises
B
27
```
27) If a business owner cannot afford to invest in foreign facilities and does not have time to learn the foreign market, but is willing to give someone else the right to make and market her/his product for a fee and royalties, her/his best bet for entering the foreign market is ________.
A) a foreign management company
B) joint venturing
C) foreign licensing
D) international franchising
```
C
28
28) Foreign licensing is ________.
A) required when a business buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) a government-owned or business-owned facility set up in a foreign country to buy products that are made there
C) the use by one firm (the carrier) of its overseas distribution network to sell noncompetitive products made by other firms (riders)
D) an agreement in which a licenser gives a licensee in another country the right to use that licenser's patent, trademark, copyright, technology, and products in return for a percentage of the licensee's sales or profits
D
29
```
29) Domino's Pizza and McDonald's operating in Japan and Europe are examples of ________.
A) foreign management companies
B) joint venturing
C) foreign licensing
D) international franchising
```
D
30
30) The first step in establishing a successful global franchise arrangement is to ________.
A) generate lead for potential franchisees
B) structure the franchise deal
C) identify the country or countries that are best suited to the franchiser's business concept
D) select quality candidates
C
31
```
31) ________ is a transaction in which a company selling goods and services in a foreign market agrees to help promote investment and trade in that country.
A) Countertrading
B) Bartering
C) Foreign licensing
D) Exporting
```
A
32
32) The drawbacks of countertrading include which of the following?
A) Countertrade transactions can be complicated, cumbersome, and time-consuming.
B) Countertrade transactions can increase the chances that a company will be stuck with merchandise it cannot move.
C) Countertrade transactions can lead to unpleasant surprises concerning the quantity and quality of products required in the countertrade.
D) All of the above
D
33
```
33) ________, the exchange of goods and services for other goods and services, is one way of trading with countries that lack convertible currency.
A) Countertrading
B) Bartering
C) Foreign licensing
D) Exporting
```
B
34
```
34) Which of the following is/are often used by companies exporting to countries that lack a convertible currency?
A) Countertrading
B) Indirect exporting
C) Bartering
D) A and C only
```
D
35
Learning Obj: 15-2 Describe the principal strategies small businesses have for going global.
35) Nance Technologies, Inc., has agreed to sell some of its computers to a company in Bascovina, a country whose currency is worthless outside its own borders. As part of the agreement, Nance will sell the foreign customer its computers in exchange for a specified number of tons of coffee, a major export of Bascovina. Nance has already arranged to sell the coffee to a major processor for a set price in U.S. dollars. Nance has engaged in ________.
A) bartering
B) foreign licensing
C) exporting
D) countertrading
A
36
```
36) Small businesses contribute ________ percent of U.S. export sales.
A) 20
B) 25
C) 33
D) 40
```
C
37
37) The biggest barrier facing companies that have never exported is ________.
A) finding the financing to launch an export program
B) not knowing where or how to start
C) locating a trade intermediary to represent them in foreign markets
D) winning government approval to begin selling in foreign markets
B
38
38) Two valuable resources for entrepreneurs to investigate for going global should include ________.
A) U.S. Department of Commerce
B) International Trade Administration
C) A and B above
D) Neither of these resources will provide real value or insight
C
39
39) The first step to create a sound export strategy is to ________.
A) recognize that even the smallest companies and least experienced entrepreneurs have the potential to export
B) analyze your product or service
C) analyze your commitment
D) research markets and pick your target
A
40
```
40) The second step to creating a sound export strategy involves ________.
A) analyzing the product or service
B) recognizing the potential to export
C) analyze your commitment
D) research market and pick your target
```
A
41
41) One of the biggest barriers to small business exports is lack of ________.
A) access to adequate financing
B) attractive countries that are not already saturated by franchising efforts
C) effective distribution strategies
D) information to make informed decisions about franchising
A
42
```
42) The final step in creating a sound export strategy is to ________.
A) find your customer
B) ship your goods
C) collect your money
D) find financing
```
C
43
```
43) A ________ is an agreement between an exporter's bank and the foreign buyer's bank that guarantees payment to the exporter for a specific shipment of goods.
A) bank draft
B) letter of credit
C) repurchase agreement
D) trade acceptance
```
B
44
```
44) A ________ is a document an exporter draws on a foreign buyer, requiring the buyer to pay the face amount, either on sight or on a specified date, once the goods are shipped.
A) bank draft
B) letter of credit
C) repurchase agreement
D) trade acceptance
```
A
45
48) Trade intermediaries are domestic agencies that serve as distributors in foreign countries for domestic companies of all sizes.
TRUE
46
49) Most export management companies (EMCs) are merchant intermediaries that work on a buy-and-sell arrangement with domestic small companies, providing small businesses with a low-cost, efficient, independent, international marketing department.
TRUE
47
50) Export trading companies are government-owned operations established in countries around the world (including the United States) for the purpose of buying goods there.
FALSE
48
51) While export management companies tend to focus on exporting, export trading companies usually perform both import and export trades across many countries' borders.
TRUE
49
52) Unlike an EMC or an ETC, manufacturers' export agents act as international sales representatives in a limited number of markets for various noncompeting domestic companies, typically operating on a commission basis.
TRUE
50
53) Most export merchants buy goods, often competing lines, from many domestic companies and then sell them in foreign markets.
TRUE
51
54) Selling to a resident buying office is just like selling to domestic customers since the buying office handles all of the details of exporting the products.
TRUE
52
55) Most small businesses getting started in conducting global business do not need the services of trade intermediaries because "going global" has become so easy that even the smallest businesses can do it alone.
FALSE
53
56) Foreign distributors offer exporting small businesses the benefit of knowledge of the local markets in which they sell, the ability to cover a foreign sales territory thoroughly, and the ability to handle all of the marketing, distribution, and service functions in foreign markets.
TRUE
54
57) In a domestic joint venture, a domestic company forms an alliance with a company in the target nation.
FALSE
55
58) When two small businesses in the target nation form an alliance, they have formed a foreign joint venture
FALSE
56
59) Some foreign countries place limitations on joint ventures with host companies within their borders, for example by requiring the host company to own at least 51 percent of the venture.
TRUE
57
60) One reason joint ventures fail is because entrepreneurs did not select a partner who shares their company's values and standards of conduct.
TRUE
58
61) Foreign licensing is when a business buys and sells products in many countries, either in its own name, or as an agent for its buyer-seller clients.
FALSE
59
62) Foreign licensing is a relatively simple way for even the most inexperienced business owner to extend his reach into global markets.
TRUE
60
63) Before engaging in foreign licensing, a business owner should secure patent, trademark and copyright protection.
TRUE
61
64) The licensing potential for intangibles, such as technology, trademarks, and other forms of protection, is often greater than the licensing opportunities for products.
TRUE
62
65) As the domestic market for franchises has become increasingly saturated with outlets, the number of franchisers attracted to foreign markets has grown.
TRUE
63
66) Although franchising is a popular way to do business in the United States, it is not a popular strategy in international markets.
FALSE
64
67) Although franchise outlets operate throughout the world, the primary market for U.S. franchisers is Europe.
FALSE
65
68) A franchiser should have sufficient managerial and financial resources to devote to globalization.
TRUE
66
69) One reason for McDonald's success in foreign markets is its decision to stick to exactly the same menu in every country that it offers in the United States.
FALSE
67
70) A counter trade is a transaction in which a company selling goods and services in a foreign country agrees to help promote investment and trade in that country.
TRUE
68
71) If a country's currency is not convertible into any other currency, companies exporting to that country usually engage in either countertrading or bartering.
TRUE
69
72) Successful bartering is easier than countertrade but requires finding a business with complementary needs.
TRUE
70
73) Researching potential export markets is a waste of time and resources for small business owners; the best way to find export opportunities is to travel abroad and sell.
FALSE
71
74) Lack of export financing remains a significant barrier to small businesses selling in foreign markets.
TRUE
72
78) Outline the eight strategies for "going global" available to the small business owner.
Answer:
Launching a Web Site
Small businesses should follow a three-step approach to conducting global business on the Web.
Step 1: Establish an Internet connection and set up an e-mail account.
Step 2: Connect to and conduct international market research.
Step 3: Build a global Web site.
Creating a Web Site
An economical and flexible way to enter the global market 24 hours a day, 7 days a week.
Relying on Trade Intermediaries
Rather than create an export program "from scratch," small companies can rely on trade intermediaries for assistance — export management companies (EMC), export trading companies (ETC), manufacturers' export agents (MEA), export merchants, resident buying offices, and overseas distributors all provide a variety of services for a fee. Typically, at least $50,000 in sales is required to make their fees affordable.
Joint Ventures
In a domestic joint venture, two or more U.S. small businesses form an alliance for the purpose of exporting their goods and services abroad, which typically lowers their individual risk. Special antitrust immunity is typically requested, allowing them to cooperate freely. In a foreign joint venture, a domestic small business forms an alliance with a company in the target nation.
Foreign Licensing
Small companies can license businesses in other nations to use their patents, copyrights, trademarks, technology, processes, or products in return for royalty payments from sales. Risks include losing control or the possibility of creating a competitor.
International Franchising
International outlets provide new sales to boost lagging sales and saturated U.S. markets. Most franchises have found they need to modify their normally standardized products for foreign tastes. Entrepreneurs have the backing of a large organization and need help in understanding different markets.
Countertrading and Bartering
When a target nation's currency is worthless outside its borders, companies often turn to barter — the exchange of goods and services for other goods and services.
Exporting
Even the tiniest and least experienced entrepreneurs have the potential to export. The biggest barrier is not knowing where or how to start.
73
79) One of the eight strategies a company uses to "go global" includes the use of trade intermediaries. Identify the six types of trade intermediaries and explain why a small business owner might use each one.
Answer:
1. Export Management Companies (EMCs)
EMCs are merchant intermediaries that provide small businesses with a low-cost, efficient, independent international marketing department. Their focus is on exporting, and they typically do not handle competing firms.
2. Export Trading Companies (ETCs)
ETCs are businesses that buy and sell products in a number of countries and offer a wide variety of services (exporting, importing, shipping, storing, and distributing) to their clients who may be competitors. They focus on long-term relationships.
3. Manufacturers' Export Agents (MEAs)
MEAs are businesses that act as international sales representatives in a limited number of markets for various noncompeting domestic companies. They are commission based and focus on short-term commitments.
4. Export Merchants
Export merchants are domestic wholesalers who buy goods from many domestic manufacturers and then market them in foreign markets. Most export merchants specialize in particular industries and often carry competing lines.
5. Resident Buying Offices
A government- or privately-owned operation established in a country for the purpose of buying goods from businesses there. The buying office handles all the details of exporting.
6. Foreign Distributors
Domestic small companies export their products to foreign distributors who handle all of the marketing, distribution, and service functions in the foreign country. They offer exporting small businesses the benefits of knowledge in their local markets, the ability to cover a given territory thoroughly, and prompt sales and service support.
Diff: 3
AACSB: Reflective Thinking
Learning Obj: 15-2 Describe the principal strategies small businesses have for going global.
74
80) What advantages do taking on a partner in a joint venture offer a small business in an international business opportunity? Disadvantages?
Domestic Joint Venture
Two or more U.S. small businesses form an alliance for the purpose of exporting their goods and services abroad.
Foreign Joint Venture
A domestic small business forms an alliance with a company in the target nation.
Advantages of International Joint Venture
∙ Penetrate protected markets
∙ Lower production costs
∙ Share risks and high R&D costs
∙ Gain access to marketing and distribution channels
Disadvantages of International Joint Venture
∙ Failure of the venture
∙ Relationships that sour
∙ Becoming overly dependent on the partner
75
81) What strategies for trade can businesses use when exporting to countries whose currencies are not convertible to other currencies? What are the disadvantages?
Answer: Countertrade is a transaction in which a company selling goods and services in a foreign country agrees to help promote investment and trade in that country, even though profits cannot be taken in the form of currency exchange. Countertrading transactions can be complicated, cumbersome, and time-consuming. They also increase the chances that a company will get stuck with useless merchandise that it cannot move. They can also lead to surprises in the quantity and quality of products required in the counter trade.
76
84) The most frequently encountered impediment to international trade for small and medium-sized manufacturers is ________.
A) foreign sales are not sufficiently profitable
B) transportation and shipping costs
C) language and cultural barriers
D) foreign regulations
B
77
85) The most frequently encountered impediment to international trade for small and medium-sized service firms is ________.
A) foreign sales are not sufficiently profitable
B) transportation and shipping costs
C) language and cultural barriers
D) foreign regulations
A
78
86) Which of the following is a domestic barrier to small business exporting?
A) The attitude, "I'm too small to export."
B) A lack of information about how to get started in exporting.
C) A lack of export financing for small companies.
D) All of the above
D
79
87) Old assumptions regarding global business assumptions for exporting include ________.
A) I am "too small" to go global and my product or service won't sell outside the U.S.
B) Exporting is too risky for my small company and my domestic market is currently secure.
C) Getting paid is difficult and this will impede my success.
D) All of the above
D
80
87) Old assumptions regarding global business assumptions for exporting include ________.
A) I am "too small" to go global and my product or service won't sell outside the U.S.
B) Exporting is too risky for my small company and my domestic market is currently secure.
C) Getting paid is difficult and this will impede my success.
D) All of the above
D
81
88) Many nations have lowered tariffs they impose on products and services brought into their border and rely on other ________.
A) nontariff structure as protectionist trade barriers
B) taxes
C) duty fees
D) dumping
A
82
```
89) Malcolm won a contract to provide nuts, bolts, and washers to a small African country's military. Unfortunately, neither his bankers nor venture capitalists would provide the loans needed to buy the material to produce the order. The bank did not do international loans. Which barrier to international trade is Malcolm experiencing?
A) Financing
B) Information
C) Cultural
D) Attitude
```
A
83
90) A tariff is ________.
A) a law that a government uses to regulate products that are imported into the country
B) the maximum amount of a product that can be imported or exported
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a duty, or tax, that a government puts on products that are imported into the country
D
84
91) The small country of Bascovina wanted to protect its infant basket industry and imposed a 400 percent tariff on all imported baskets. The high tariff dropped the bottom out of imported basket sales, and imports of baskets stops. Why did this happen?
A) The citizens realized that because the government imposed the tariff, imported basket purchases were undesirable.
B) The tariff reduced the price of imported baskets and consumers felt that because of the low prices, the baskets were of low quality and stopped their purchases.
C) The tariff barred all shipments of baskets to Bascovina.
D) The tariff makes the price of imported baskets so high that they are not competitive.
D
85
```
92) John wants to expand into the foreign markets, but he cannot convince his partners. They believe that international markets are the domain of large corporations. John is facing which barrier to international trade?
A) Financing
B) Political
C) Cultural
D) Attitude
```
D
86
93) A quota is ________.
A) a duty or tax that a government puts on products that are imported into the country
B) the maximum amount of a product that can be imported into a country
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a law that a government uses to regulate products that are imported into the country
B
87
94) An embargo is ________.
A) a duty, or tax, that a government puts on products that are imported into the country
B) the maximum amount of a product that can be imported or exported
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a law that a government uses to regulate products that are imported into the country
C
88
95) ________ is the practice of selling substantial quantities of a product in a foreign market at prices that are below either the home-market price or below the full cost of producing it.
C
89
```
96) An American executive went to a foreign country to sign a business contract. While there, she/he found that there were numerous complex government regulations her/his company needed to meet before closing the deal. This executive was experiencing which barrier to international trade?
A) Tariff
B) Political
C) Cultural
D) Domestic
```
B
90
97) Business owners new to international business are sometimes shocked ________.
A) by the wide range of labor costs they encounter
B) that practices common in the United States (e.g., overtime, women workers, and employee benefits) are restricted, disfavored, or forbidden in other cultures
C) that what appear to be "bargain" labor rates turn out to be excessively high after accounting for the quality of the labor force and the benefits their governments mandate
D) All of the above
D
91
```
98) The ________ of a nation includes the belief, values, views, and mores that its inhabitants share.
A) political atmosphere
B) culture
C) tariffs
D) free trade area
```
B
92
```
99) An American executive went to a Middle Eastern country to sign an oil contract. Before the contract was signed, the American and the Arab official met for tea. Relaxing, the American put her/his feet up on a table. The official became angry and left the room. Later it was found that showing the soles of shoes was a serious insult. This represents which barrier to international trade?
A) Tactical
B) Political
C) Strategic
D) Cultural
```
D
93
100) Among major industrialized nations, the United States spends the greatest amount per capita to promote exports.
FALSE
94
101) The U.S. Department of Commerce and the International Trade Administration have the market research available for locating the best target markets for a particular company and specific customers in those markets.
TRUE
95
102) The Foreign Corrupt Practice Act, passed in 1977, considers bribing foreign officials to be a criminal act.
TRUE
96
103) Most small businesses begin their global ventures by establishing international locations.
FALSE
97
104) The government of Palmeria placed a high import tariff on steel from Dano. Dano's steel is higher in quality and cheaper. Palmeria's actions result in higher prices for their consumers.
TRUE
98
105) The most frequently encountered impediments to international trade for small and medium-sized manufactures relates to U.S. regulations.
FALSE
99
106) A tariff is a limit on the amount of a product imported into a country.
FALSE
100
107) The three biggest domestic barriers to exporting facing small businesses are attitude, information, and financing.
TRUE
101
108) The biggest barrier facing companies that have never exported is not knowing where or how to start.
TRUE
102
109) The first and most difficult step to exporting for the small business is breaking the psychological barrier, "My company is too small to export."
TRUE
103
112) A quota is a limit on the amount of certain products imported into a country, while an embargo is a total ban on imports of certain products.
TRUE
104
113) Dumping involves selling large quantities of a product in a foreign market below cost.
TRUE
105
115) To prove a charge of dumping under the U.S. Antidumping Act, a company must prove that a foreign company's prices on a product are lower here than in the home country and that U.S. companies are directly harmed.
TRUE
106
116) The only cultural barrier an American small business manager must overcome when conducting business internationally is the language gap.
FALSE
107
117) Learning the habits and the customs of the cultures in which they do business is essential for small business managers trying to go global.
TRUE
108
118) American business people can be on their best American behavior and go overseas and offend the locals. This is, in part, due to the fact that business customs that are acceptable, or even expected, in one country may be taboo in another.
TRUE
109
119) Fortunately for U.S. business owners, American customs and habits have become the standard for proper business behavior around the world.
FALSE
110
120) Identify and discuss the domestic barriers to trade.
Answer: Three major domestic barriers to international trade are common:
1. AnAttitude of "I'm Too Small to Export"
The first step to building an export program is recognizing that the opportunity to export exists.
2. Lack of Information
Entrepreneurs should thoroughly research the possibility of going global and use every possible resource available to them (government and private organizations' international exporting and marketing information) to make valid decisions. In addition, companies must be willing to make the necessary adjustments to their products and services, promotional campaigns, packaging, and sales techniques in foreign markets.
3. Lack of Available Financing
Many entrepreneurs cite lack of financing as a major barrier to international trade. Before embarking on an export program, entrepreneurs should have available financing lined up.
111
121) Identify and discuss the international barriers to trade.
Answer: International barriers include the following:
Tariffs
A tax, or duty, that a government imposes on goods and services imported into that country. Imposing tariffs raises the price of the imported goods (making them less attractive to consumers) and protects the makers of comparable domestic products and services.
Quotas
A limit on the amount of a product imported into a country, which helps to protect domestic markets by limiting opportunities for foreign competitors.
Embargoes
A total ban on imports of certain products, which helps to protect domestic markets by keeping foreign competitors out.
Dumping
Selling large quantities of a product in foreign countries below cost. Under the U.S. Antidumping Act, a company must prove that the foreign company's prices are lower here than in the home country and that U.S. companies are directly harmed.
112
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123) Currently, the World Trade Organization (WTO) had 155 member countries that represent over ________ percent of all world trade.
A) 97
B) 39
C) 76
D) 52
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A
113
124) The North American Free Trade Agreement (also known as NAFTA) served to ________.
A) bring South America, Mexico, the U.S., and Canada together as one market
B) eliminate all tariffs among member nations, effective immediately, and raise them to nonmembers
C) mostly benefit the trading relationship between Canada and the United States
D) create a unified market of 465 million people and $18.1 trillion in goods and services
D
114
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125) The North American Free Trade Agreement (NAFTA) created a free trade area among ________.
A) Canada, Mexico, and the United States
B) Japan, Mexico, and Canada
C) Mexico, Japan, and the United States
D) None of the above
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A
115
126) The North American Free Trade Agreement has which of the following provisions?
A) The immediate elimination of all tariff and quota barriers on all goods.
B) The elimination of tariffs on most goods.
C) A lowering of safety and air quality standards.
D) The formation of a North American Trade Organization.
B
116
127) Which of the following is a guideline for becoming a successful international competitor?
A) Make yourself at home in all of the world's key markets — North America, Europe, and Asia.
B) Become familiar with foreign customs and languages.
C) Consider using partners and joint ventures to break into foreign markets you cannot penetrate on your own.
D) All of the above
D
117
128) While the World Trade Organization had 155 member countries which represent over 97 percent of all world trade, the market formed by NAFTA has more than 465 million people and an annual output of $18.1 trillion in goods and services.
TRUE
118
129) A free trade area is an association of countries that have agreed to knock down trade barriers (both tariff and nontariff) among partner nations.
TRUE
119
130) NAFTA is an agreement among the U.S., Canada, Mexico, Argentina, and Chile, forming a free trade area among these countries.
FALSE
120
131) NAFTA includes provisions reducing tariff and nontariff barriers and toughening health and safety standards.
TRUE
121
132) An important guideline for companies wanting to successfully compete internationally is to appeal to the similarities within the various regions in which you operate, but recognize the differences in their specific cultures.
TRUE
122
133) An important guideline for companies wanting to successfully compete internationally is to familiarize yourself with foreign customs, languages, and cultures, including their lifestyles, values, customs, and business practices.
TRUE
