Deck 14: Global Supply Management

Question 1

When sourcing offshore,a buyer:

A)normally will let domestic suppliers counter the global supplier's offer.
B)may assume that quality control systems and processes are universal.
C)will account for unknown risks by adding 10 percent to total cost assessments.
D)will always state the price in U.S.dollars.
E)must have extensive knowledge and analysis of the country.

Answer 1

E

Question 2

Special economic zones of China (SEZs):

A)are located in Hong Kong.
B)use tax and business incentives to attract foreign investment and technology as a means of supporting economic growth.
C)allow foreign and domestic trade and investment to be conducted,with the authorization of the Chinese central government.
D)are located in Hong Kong and use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth.
E)are located in Hong Kong,use tax and business incentives to attract foreign investment and technology as a means of supporting rapid economic growth and allow foreign and domestic trade and investment to be conducted,with the authorization of the Chinese central government.

Answer 2

B

Question 3

Duty drawbacks permit a refund of duties paid on imported materials that are later exported.

Answer 3

True

Question 4

The Foreign Corrupt Practices Act (FCPA):

A)attempts to persuade other nations to adopt U.S.rules regarding payments to officials.
B)allows U.S.firms to make payments to facilitate the performance of normal duties.
C)allows U.S.firms to prosecute foreign nationals on bribery charges.
D)allows U.S.firms to make payments to facilitate normal duties and to make payments to obtain special advantages.
E)allows foreign nationals to offer payments to U.S.government officials to expedite trade agreements.

Question 5

Compared to domestic sourcing,when sourcing offshore more lead time may be needed because of:

A)inland transportation delays in the supplier's country.
B)time needed to procure payment documentation.
C)delays in domestic customs.
D)delays due to heightened security requirements.
E)inland transportation delays in the supplier's country,time needed to procure payment documentation,delays in domestic customs and delays due to heightened security requirements.

Question 6

The structure of a global purchasing organization is influenced by:

A)the location of the company's operations.
B)the overall organizational structure.
C)the location of key suppliers.
D)the structure of the purchasing function.
E)the location of the company's operations,the overall organizational structure,the location of key suppliers and the structure of the purchasing function.

Question 7

When comparing the total cost of ownership from an international supplier to that of a domestic supplier,the international supplier's:

A)lower labor costs are easily eroded by additional shipping and insurance costs.
B)lower labor rates must be considered in the context of productivity and quality.
C)lower labor costs offset the high cost of inefficient equipment and processes.
D)prices are carefully controlled by the U.S.government to prevent dumping.
E)price will be higher if the U.S.dollar is strengthening on the exchange rate.

Question 8

Some organizations have found that when entering a new market,purchasing products and/or services,before trying to sell into the market,provides several advantages.

Question 9

In international buying,the type of entity that normally assists in locating suppliers and handling documentation is a(n):

A)import broker.
B)sales agent.
C)import merchant.
D)trading company.
E)foreign import agent.

Question 10

It is as easy to compare total cost of ownership from an offshore source to that of a domestic one.

Question 11

If the purchaser wants the supplier to assume all responsibilities for all costs associated with transportation to the named place of destination,including duties and other costs payable upon import,the following Incoterm should be used:

A)Free alongside ship (FAS).
B)Free on Board (FOB).
C)Cost and Freight (CFR).
D)Delivered Duty Paid (DDP).
E)Any of the above.

Question 12

Global supply activities can be coordinated through:

A)regional purchasing offices.
B)a global commodity management organization.
C)international purchasing offices.
D)regional purchasing offices and a global commodity management organization.
E)regional purchasing offices,a global commodity management organization and international purchasing offices.

Question 13

The most-cited reason for international trade is:

A)better overall value.
B)better quality.
C)more advanced technology.
D)lower total costs.
E)lower price.

Question 14

Maquiladoras in Mexico:

A)are designed to take advantage of low Mexican labor costs.
B)are different from foreign trade zones.
C)are best suited to sophisticated manufacturing and product design.
D)are reconfiguring to focus on labor-intensive assembly.
E)cannot be owned by non-Mexicans.

Question 15

When purchasing from offshore suppliers,buyers might expect delays resulting from:

A)transportation in the supplier's country.
B)domestic customs clearance.
C)the time the goods are in port.
D)transportation in the supplier's country and domestic customs clearance.
E)transportation in the supplier's country,domestic customs clearance and the time the goods are in port.

Question 16

For the Incoterm CIF (Cost,Insurance and Freight),the seller clears the goods for export,is responsible for delivering the goods on board at the port of shipment,pays the costs associated with transport of the goods to the port of destination,and procures and pays for marine insurance in the buyer's name for the shipment.

Question 17

When purchasing goods or services from an offshore supplier,the most conservative risk management approach is to price in the currency of the supplier.

Question 18

Which of the following discourages countertrade?

A)shortage of foreign exchange.
B)shortage of available credit.
C)desire to promote labor-intensive exports.
D)well-developed domestic economy.
E)need to develop export markets for new products.

Question 19

The world's leading exporter of manufactured goods is:

A)Germany.
B)the U.S.
C)China.
D)Japan.
E)the European Union.

Question 20

The United Nations' Convention for the International Sale of Goods (CISG):

A)gives legal advantages to less economically developed countries.
B)gives legal advantages to more economically developed countries.
C)is an attempt to apply a set of uniform commercial laws to global trade in goods.
D)allows multinational companies to circumvent long-standing trade practices.
E)replaces most regional trade treaties with a common body of law.

Question 21

It is common for international trade disputes to be settled through international arbitration partly because the costs of litigation exceed the costs of arbitration.

Question 22

The growth in international trade has come from an increase in the international sale of goods but not services.

Question 23

The governing convention on shipping terms and responsibilities involved in international transportation is called FOB (Free On Board).

Question 24

A document which is drawn by the buyer's bank at the buyer's request,and guarantees that the bank will pay the agreed-on amount when all prescribed conditions,such as satisfactory delivery,have been completed,is called a sight draft.

Question 25

Typically,international purchasing offices (IPOs)are used when the company has an established presence in the same geographic region where important suppliers are located.

Question 26

Countertrade historically has been very common in the sale by U.S.firms of armaments to other nations,but very uncommon in civilian procurement projects.

Question 27

A foreign trade zone (FTZ)in the U.S.is completely different in purpose from a maquiladora in Mexico.

Question 28

Commercial letters of credit (CLCs)are the least actively used structured payment instruments in global trade.

Question 29

The NAFTA,the EU,ASEAN and the WTO are all examples of Free Trade Agreements which were designed to facilitate trade between and among member countries.

Question 30

Improvements in transportation and communications have reduced the lead time for offshore purchases.