Question 1

Describe the 14 steps in a typical international trade transaction.

Accepted Answer

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Question 2

The main attraction of ________ is that it can give a firm a way to finance an export deal when other means are not available.

Accepted Answer

The main attraction of countertrade is that it can give a firm a way to finance an export deal when other means are not available. Many developing nations have problems raising the foreign exchange necessary to pay for imports. Countertrade may be the only option available when doing business in these countries. Even when other options exist, many countries prefer countertrade to cash deals.

Question 3

Which of the following is a major drawback of engaging in countertrade?

Accepted Answer

Other things being equal, firms would normally prefer to be paid in hard currency. Countertrade contracts may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably.

Question 4

Describe the process involved in financing imports and exports using a letter of credit. Why has this system developed? What is the advantage of using this system?

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Question 5

What problems do novice exporters typically face when trying to export?

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Question 6

In ________, one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale, and this party can fulfill the obligation with any firm in the country to which the sale is being made.

Accepted Answer

An offset is similar to a counterpurchase insofar as one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale. The difference is that this party can fulfill the obligation with any firm in the country to which the sale is being made.

Question 7

________ occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.

Accepted Answer

Switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement. When a firm enters a counterpurchase or offset agreement with a country, it may receive counterpurchase credits that can be used for purchasing goods from that country. Switch trading occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.

Question 8

What is a disadvantage of countertrade?

Accepted Answer

There are several reasons a firm might avoid countertrade. Countertrade contracts may involve the exchange of unusable or poor-quality goods that the firm cannot dispose of profitably. In addition, even if the goods it receives are of high quality, the firm still needs to dispose of them profitably. Countertrade requires the firm to invest in an in-house trading department dedicated to arranging and managing countertrade deals in order to maintain a profit. An in-house trading department dedicated to arranging and managing countertrade deals can be expensive and time-consuming.

Question 9

Which of the following is an advantage of countertrade?

Accepted Answer

Countertrade's main attraction is that it can give a firm a way to finance an export deal when other means are not available. Given the problems that many developing nations have in raising the foreign exchange necessary to pay for imports, countertrade may be the only option available when doing business in these countries.

Question 10

Countertrade is

Accepted Answer

Countertrade is most attractive to large, diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrading.

Question 11

Describe the information sources that are available to American companies to learn about export opportunities.

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Question 12

________ is a reciprocal buying agreement and occurs when a firm agrees to buy a certain amount of materials back from a country to which a sale is made.

Accepted Answer

Counterpurchase is a reciprocal buying agreement. It occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

Question 13

Compare and contrast time drafts and sight drafts.

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Question 14

Compare and contrast the export assistance provided to German and Japanese companies with that given to American companies. Discuss the implications of the differences between the countries.

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Question 15

Explain 3M's main export principles that have made the company's exporting business so successful.

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Question 16

________ can be used when a government restricts the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports.

Accepted Answer

When conventional means of payment are difficult, costly, or nonexistent, firms may turn to countertrade as an alternative means of structuring an international sale. Countertrade denotes a whole range of barter-like agreements; its principle is to trade goods and services for other goods and services when they cannot be traded for money. Countertrade can be used when a government restricts the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports.

Question 17

Why is there a problem of trust that persists in international business?

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Question 18

________ occurs 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.

Accepted Answer

A buyback occurs when a firm builds a plant in a country-or supplies technology, equipment, training, or other services to the country-and agrees to take a certain percentage of the plant's output as partial payment for the contract.

Question 19

Why do so many firms take a reactive approach to exporting rather than a proactive approach?

Accepted Answer

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Question 20

Which of the following terms refers to the use of a specialized third-party trading house in a countertrade arrangement?

Accepted Answer

The term switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement. Switch trading occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.

Quiz 16: Exporting, Importing, and Countertrade