Global Business ch 13 – Flashcards

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True/False: The great promise of exporting is that large revenue and profit opportunities are to be found in foreign markets for most firms in most industries.
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True
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True/False: Medium-sized and small firms are typically more proactive than large firms about finding export opportunities.
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False
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Smaller firms are not proactive about finding exporting opportunities because (a) they are __________ with foreign market opportunities, (b) they are ___________ by the complexities of exporting to foreign countries, and/or (c) they have significant problems with their ___________ attempt at doing business abroad.
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Unfamiliar, intimidated, initial
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First-time exporters tend to ______estimate the time and expertise needed to cultivate business in foreign countries.
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Under
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Definition: Japan's great trading houses.
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Sogo shosha
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Small firms can overcome ignorance of export opportunities by consulting the US's most comprehensive source of information, the ______ ____________ ______ ____________.
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US Department of Commerce
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The US Department of Commerce has 2 departments that provide businesses with intelligence and help entering foreign markets: the ____________ _____________ ____________ and the ___________ ___________ ____ ____________ ____________ ___________.
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International Trade Administration, United States and Foreign Commercial Service
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The International Trade Administration and the United States and Foreign Commercial Service provide potential exporters with a "________ ________" list of markets and a "__________ __________ ___________" for 14 countries that are major markets for US exports.
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Best prospects, comparison shopping service
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A government organization, the ___________ ____________ ____________, helps potential exporters through its Service Corps of Retired Executives program and 850 volunteers who provide one-on-one counseling to businesses.
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Small Business Administration
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The Small Business Administration helps potential exporters with its ___________ (abbreviation) program, 850 volunteers who give individual ___________, and the __________ (abbreviation) group.
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SCORE, counseling, ELAN
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The Small Business Administration's ___________ ___________ ____________ __________ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
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Export Legal Assistance Network
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True/False: Almost every state and many large cities maintain active trade commissions whose purpose is to promote exports.
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True
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Definition: Export specialists who act as the export marketing department for client firms.
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Export management company
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Export management companies (a) __________ export operations for a firm that the firm will take over after they are established or (b) perform start-up services that the EMC will _________ to manage.
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Start, continue
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The chances of exporting successfully can be increased by: (1) hiring an _______; (2) initially focusing on a ________ number of markets; (3) entering a market on a ________ scale; (4) _________ additional personnel to oversee exporting; (5) devoting attention to building _________ with local distributors; (6) hiring local personnel to help the firm _________ itself; (7) being _________ about seeking opportunities; and (8) retaining the option of _________ production.
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EMC, small, small, hiring, relationships, establish, proactive, local
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The problem with beginning an exporting relationship is that there can be a lack of _________. This can be solved by using a third party that serves as an _________.
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Trust, intermediary
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Importer Company and Exporter Company are going to use a third party for their transaction. IC gets a ________ __ ________ from the bank, so EC ships their product. EC gives the bank a ________ __ ________, and then presents the bank with a ________ to get its money. The bank gives the IC the ________ to the product, and IC pays the bank back.
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Letter of credit, bill of lading, draft, title
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Definition: Issued by a bank, indicating that the bank will make payments under specific circumstances.
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Letter of credit
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What is the abbreviation for a letter of credit?
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L/C
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Definition: An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.
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Bill of exchange
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A bill of exchange is also known as a __________.
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Draft
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Definition: A draft payable on presentation to the drawee.
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Sight draft
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Definition: A promise to pay by the accepting party at some future date.
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Time draft
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What are the two categories of drafts?
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Sight, time
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When a time draft is drawn on and accepted by a bank, it is called a __________ __________. When it is drawn on and accepted by a business firm, it is called a __________ ___________.
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Banker's acceptance, trade acceptance
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Time drafts are __________ instruments, meaning that once the draft is stamped with an acceptance, the maker can sell the draft to an investor at a discount from its face value.
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Negotiable
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An exporter may _______ a time draft immediately if he needs the funds to finance merchandise in transit and/or to cover cash flow shortfalls.
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Sell
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Definition: A document issued to the exporter by the common carrier transporting the merchandise; it serves as a receipt, a contract, and a document of title.
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Bill of lading
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A bill of lading serves as a ________, a _________, and a _________ ___ _________.
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Receipt, contract, document of title
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The typical trade transaction involves ____ steps.
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14
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Step 1 of a typical trade transaction: Importer Company _________ ___ _________ with Exporter Company and asks EC if he will ship under a __________ ___ __________.
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Places an order, letter of credit
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Step 2 of a typical trade transaction: Exporter Company agrees to ship under a __________ ___ __________ and specifies relevant information like prices and __________ terms.
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Letter of credit, delivery
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Step 3 of a typical trade transaction: Importer Company applies to its bank for a _________ ___ _________ to be issued in favor of Exporter Company for the merchandise that IC wants to buy.
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Letter of credit
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Step 4 of a typical trade transaction: Importer Company's bank issues a __________ ___ _________ in IC's favor and _________ it to Exporter Company's bank.
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Letter of credit, sends
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Step 5 of a typical trade transaction: Exporter Company's bank __________ the exporter of the opening of a __________ ___ __________ in his favor.
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Advises, letter of credit
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Step 6 of a typical trade transaction: Exporter Company __________ the goods to Importer Company on a _________ _________. An official of the carrier gives the exporter a _________ ___ _________.
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Ships, common carrier, bill of lading
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Step 7 of a typical trade transaction: Exporter Company presents a 90-day ________ ________ drawn on Importer Company's bank in accordance with its letter of credit and the bill of lading to EC's bank. EC endorses the ________ ___ ________ so title to the goods is transferred to EC's bank.
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Time draft, bill of lading
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Step 8 of a typical trade transaction: Exporter Company's bank sends the _________ and _________ ___ __________ to Importer Company's bank. IC's bank accepts the draft, taking possession of the documents and promising to pay the _________ in 90 days.
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Draft, bill of lading, draft
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Step 9 of a typical trade transaction: Importer Company's bank returns the accepted _________ to Exporter Company's bank.
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Draft
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Step 10 of a typical trade transaction: Exporter Company's bank tells EC that it has received the accepted bank _________, which is payable in 90 days.
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Draft
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Step 11 of a typical trade transaction: Exporter Company sells the __________ to EC's bank at a discount from its face value and receives the discounted __________ value of the draft in return.
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Draft, cash
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Step 12 of a typical trade transaction: Importer Company's bank notifies IC of the arrival of the documents. IC agrees to pay its bank in 90 days. Ic's bank releases the documents so the importer can take ____________ of the shipment.
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Possession
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Step 13 of a typical trade transaction: In 90 days, Importer Company's bank receives IC's payment, so it has funds to pay the maturing __________.
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Draft
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Step 14 of a typical trade transaction: In 90 days, the holder of the __________ acceptance presents it to Importer Company's bank for payment. IC's bank __________.
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Matured, pays
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Prospective US exporters can get government help by (1) getting financing aid from the __________-__________ __________ and (2) getting export credit insurance from the __________ __________ __________ ___________.
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Export-Import Bank, Foreign Credit Insurance Association
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Definition: Agency of the US government whose mission is to provide aid in financing and facilitate exports and imports.
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Export-Import Bank
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What is the Export-Import Bank sometimes referred to as?
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Ex-Im Bank
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The Export-Import Bank guarantees ____________ of medium and long-term loans US commercial banks make to foreign borrowers for purchasing US exports.
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Repayments
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The Export-Import Bank has a _________ __________ operation under which it lends dollars to foreign borrowers for use in purchasing US exports.
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Direct lending
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The FCIA provides coverage against commercial and political __________.
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Risks
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Losses due to __________ risk result from the buyer's insolvency or payment default. __________ losses arise from actions of governments that are beyond the control of either buyer or seller.
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Commercial, political
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___________ implies that the exporter may not be paid in his or her home country.
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Nonconvertibility
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Definition: The trade of goods or services for other goods or services.
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Countertrade
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Countertrade arose in the 1960s as a way for the __________ __________ and __________ states of Eastern Europe to purchase imports. During the 1980s, it became popular in ___________ nations that lacked the foreign exchange reserves required to purchase necessary imports.
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Soviet Union, Communist, developing
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A short-term spike in the volume of countertrade can follow __________ financial crisis.
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Periodic
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What are the five types of countertrade?
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Barter, counterpurchase, offset, switch trading, compensation
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Definition: The direct exchange of goods and/or services between two parties without a cash transaction.
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Barter
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There are two problems with bartering: (1) If goods are not exchanged _____________, one party ends up financing the other for a period; and (2) Firms engaged in barter run the risk of having to accept goods they do not __________, cannot __________, or have difficulty __________.
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Simultaneously, want, use, reselling
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Definition: A reciprocal buying agreement.
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Counterpurchase
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Definition: A buying agreement where the exporting country can then fulfill the agreement with any firm in the country to which the sale is being made.
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Offset
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Definition: The use of a specialized third-party trading house in a countertrade agreement.
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Switch trading
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Switch trading occurs when a third-party trading house buys the firm's __________ _________ and sells them to another firm that can better use them.
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Counterpurchase credits
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Definition: 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.
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Buyback
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True/False: A company would generally prefer countertrade over simply receiving payment.
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False
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True/False: Countertrade is most attractive to large, diverse multinational companies.
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True
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The masters of countertrade are Japan's giant trading firms, the _________ _________.
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Sogo shosha
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