Deck 4: Methods of Entry into Foreign Markets

Question 1

A distributor takes much less risk in its relationship with an exporter than does an agent and experiences much lower costs.

Answer 1

False

Question 2

An agent often has several principals and generally sells a group of complementary products rather than products that compete directly with one another.

Answer 2

True

Question 3

Because of action by the World Trade Organization to lower tariffs in the future,there should be an increase in the importance of foreign trade zones.

Answer 3

False

Question 4

Most governments make a substantive differentiation in the way agents and distributors are considered by their judiciary systems.

Question 5

When a distributor is involved in international trade,there are two sets of invoices: one set between the exporter and the distributor (who is also the importer),and a set of domestic invoices between the distributor and its customers.

Question 6

Among all marketing mix decisions,distribution is the part of the mix that is the easiest or most likely to be adjusted.

Question 7

An advantage of gray markets is the increased amount of control that a company has over a product after it has been sold.

Question 8

Parallel imports are sometimes called gray market goods.

Question 9

The company that develops a business product or concept and grants rights to a large number of intellectual property items all bundled in a business package is called a franchisor.

Question 10

There are two types of factors included in the entry decision for an exporter: factors that are market-driven and factors that are company- or product-driven.

Question 11

When a successful exporter involves one of its suppliers-or a company that makes a complementary product-in the markets that this exporter has developed,it results in a form of piggy-backing sometimes called collaborative exporting.

Question 12

Not only are export trading companies helpful for organizations who are novices at international trade,but as an organization becomes more involved in international trade,the export trading company becomes more of a necessity.

Question 13

Joint ventures were developed as ways to partner with a politically well-connected company in a foreign country to help prevent things like nationalization of a foreign company by the host government.

Question 14

When they first go into international trading,most companies first do so after careful planning and thoughtful strategic planning.

Question 15

An export trading company is an intermediary which will purchase goods in the exporting country and will resell them to a customer in a foreign country.

Question 16

When a principal is allowed to negotiate directly with the importer,then the principal's agent is considered by a large number of countries' governments as a binding agent.

Question 17

Most export management corporations are small firms,typically with fewer than fifteen employees.

Question 18

If tariffs on a finished product are higher than tariffs on the parts of the product,the product is said to be in an inverted tariff structure.

Question 19

Joint ventures are becoming more and more attractive to foreign investors.

Question 20

The granting of rights to intellectual property owned by a company to another company for a fee is the definition of a licensing agreement between two corporations.

Question 21

What strategy is often followed when access to the market is limited by high tariffs or non-tariff barriers,when shipping costs are prohibitive,or when the exporter is not interested in pursuing the market?

A) use of a foreign trade zone
B) use of an agent
C) use of an export management company
D) use of a maquiladora
E) None of the above

Question 22

Attempts to reduce business practices that include corruption and bribery have been made by the

A) W.O.F.E.
B) sogo shosha.
C) Organisation for Economic Co-operation and Development.
D) foreign labor laws that protect agents.
E) None of the above

Question 23

An export management company earns its revenue through

A) sales commissions.
B) receiving quantity discounts by buying in bulk and reselling products at a higher price.
C) charging fixed fees to exporters.
D) All of the above
E) None of the above

Question 24

When manufacturing costs are lower abroad,when shipping costs are prohibitive,when domestic manufacturing capacity is reached,or when the product has significant intangible content,such as services,a company may consider

A) indirect exporting.
B) piggy-backing.
C) using a foreign trade zone.
D) production abroad.
E) All of the above

Question 25

When a company has a subsidiary in a foreign country,as far as the foreign country's government is concerned that subsidiary is

A) an agent of the exporter.
B) an exporter.
C) a foreign trade zone.
D) the importer of record.
E) None of the above

Question 26

In its relationship with an agent,an exporter is known as the

A) originator.
B) commissioner.
C) principal.
D) pre-agent.
E) None of the above

Question 27

Agents usually sell more than one product and represent more than one company.The products they sell are

A) complementary.
B) competitive.
C) owned by the agent.
D) inexpensive.
E) None of the above

Question 28

A customer of a firm enters a foreign market by setting up a manufacturing facility.It tells its suppliers that they will need to supply parts for assembly at the manufacturing facility and for customer service.Therefore,the suppliers are engaged in what kind of exporting?

A) piggy-backing
B) direct exporting
C) franchising
D) a joint venture
E) None of the above

Question 29

When a firm realizes that it wants to exploit the possibilities that sales abroad can bring,and decides to become directly involved in its exporting activities,it is said to be involved in

A) indirect exporting.
B) parallel imports.
C) foreign trade zones.
D) active exporting.
E) None of the above

Question 30

By channeling its export sales through a foreign sales corporation,a U.S.company can reduce its tax rate on profits from export sales from 45 percent to 30 percent.

Question 31

The customs status of a maquiladora is similar to that of

A) a foreign trade zone located only in the United States.
B) a foreign trade zone located only in Mexico.
C) a Customs office.
D) what is outlined in the Foreign Corrupt Practices Act.
E) None of the above

Question 32

A foreign sales corporation is a device used by U.S.exporters to reduce taxes.To qualify,the goods exported must have _____ percent U.S.content.This results in a tax reduction of _____ percent.

A) 75, 10
B) 50, 15
C) 80, 20
D) 100, 25
E) None of the above

Question 33

An intermediary that purchases goods in the exporting country and resells them to a customer in a foreign country is called a(n)

A) agent.
B) export management corporation.
C) principal.
D) contract manufacturer.
E) None of the above

Question 34

Because agents tend to be individuals or very small firms,governments in some countries put them under

A) high tariffs.
B) labor law.
C) contract law.
D) maritime law.
E) None of the above

Question 35

As a company grows in exporting sophistication,it should not become involved with an export trading company because

A) fixed costs are too high.
B) variable costs are too high.
C) it is a violation of international law.
D) customers abroad are customers of the export trading company, not the exporter.
E) None of the above

Question 36

An exporter has the most control over its foreign sales through a(n)

A) sales or marketing subsidiary.
B) export trading company.
C) export management company.
D) agent.
E) distributor.

Question 37

Unique,powerful Japanese trading companies are called

A) Nissans.
B) sogo shosha.
C) export trading companies.
D) exporters.
E) None of the above

Question 38

If an exporting firm wants to change from a strategy where it has used agents or distributors to a strategy based upon sales subsidiaries,it is usually easy and painless to make this switch.

Question 39

Usually,a distributor is located

A) near the exporter.
B) in the importing country.
C) near the capital city of the importing country.
D) in a neighboring country.
E) None of the above

Question 40

_____ is not truly a method of entry into a country for an exporter.

A) Active exporting
B) A marketing subsidiary
C) Contract manufacturing
D) A wholly-owned subsidiary
E) Franchising

Question 41

The European Union has complained to the World Trade Organization (WTO)that American foreign sales corporations result in a(n)____________________ to exports,which is prohibited by the WTO.

Question 42

____________________ is a form of exporting by which a firm can benefit by not having to lay out any capital but is able to generate world-wide income from its intellectual property fairly rapidly.

Question 43

United States companies are prohibited from giving bribes in foreign countries by the ____________________ Act.

Question 44

In an international environment some companies choose to ____________________ their intellectual property,such as trademarks,copyrights,or designs to foreign firms.

Question 45

Maquiladoras are located on the border between

A) France and Germany.
B) Spain and Portugal.
C) Quebec and Ontario.
D) the United States and Mexico.
E) None of the above

Question 46

While agents,because they are small businesses,are in many countries protected by that country's labor law,distributors,because they tend to be larger and are assumed to be more sophisticated,are covered in most countries by ____________________ law.

Question 47

An exporter invests in a facility abroad,but finds one or more partners with which to share the costs of the venture and it results in creation of a new corporation in a foreign country.This is an example of a(n)____________________ venture.

Question 48

A company has a foreign subsidiary (a wholly-owned foreign enterprise,WOFE)for which it builds a brand new facility.This facility is called a(n)____________________ operation.

Question 49

A form of piggy-backing in which a successful exporter involves one of its suppliers-or a company that makes a complementary product-in the markets that the exporter has developed is sometimes referred to as ____________________ exporting.

Question 50

In a franchising arrangement,the ____________________ pays fees to the company that owns the bundle of intellectual property items.

Question 51

If an American cement company were to make an agreement with a cement producer in a foreign country to produce the American company's cement,this would be an example of ____________________ manufacturing.

Question 52

The fee a licensee pays a licensor for each use of an intellectual property is called a(n)

A) tariff.
B) excise.
C) royalty.
D) finder's fee.
E) None of the above