Question 1

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

Accepted Answer

The correct answer is licensing.

Question 2

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

Accepted Answer

W.O.F.E.is a wholly-owned foreign enterprise.A sogo shosha is a Japanese trading company.Foreign labor laws are not normally designed to address corruption and bribery in international trade.The Organisation for Economic Co-operation and Development developed an Anti-Bribery Convention.

Question 3

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

Accepted Answer

An export management company is an agent,therefore it is paid by commission.

Question 4

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

Accepted Answer

Another alternative to exporting for a company,under these circumstances,is production abroad.

Question 5

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

Accepted Answer

A subsidiary is not an agent and is receiving the goods,so it is not an exporter.Foreign trade zone is incorrect,as a company cannot be a "zone." The subsidiary is incorporated in the foreign market,so it is the importer of record.

Question 6

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

Accepted Answer

An exporter is known as the principal.The concepts of "originator," "commissioner," and "pre-agent" do not exist.

Question 7

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

Accepted Answer

Products are complementary,rather than competitive.Since an agent does not take title,the goods are not owned by the agent.The price of the goods has no impact.

Question 8

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

Accepted Answer

Direct exporting,franchising,and a joint venture would suggest relatively aggressive action by the suppliers to enter the market.In this case,they are entering by default.They are piggy-backing on the strategy of an existing customer.

Question 9

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

Accepted Answer

Only active exporting is correct,as the company becomes involved in export activities.

Question 10

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.

Accepted Answer

By channelling its export sales through a foreign sales corporation, a U.S. company can indeed reduce its tax rate on profits from export sales from 45 percent to 30 percent. This is because foreign sales corporations are designed to provide tax incentives to American companies engaged in foreign trade, allowing them to defer or reduce taxes on their overseas earnings.

Question 11

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

Accepted Answer

The customs status of a maquiladora is similar to that of a foreign trade zone located both in the United States and Mexico.

Question 12

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

Accepted Answer

If the products have 50 percent U.S.content,then the company is eligible for a reduction in its tax rate of 15 percentage points.

Question 13

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

Accepted Answer

The correct answer is an export trading company.Agents and export management corporations do not take title to the goods,while an export trading company does.A principal is the term for an exporter who deals with an agent.A contract manufacturer is a company with which an exporter forms an agreement to have products manufactured in the foreign market.

Question 14

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

Accepted Answer

Because agents are small businesses,some governments feel they should be protected from exploitation by large exporters,so they are placed under labor law,which is the code of laws that deals with the relationships between employers and employees.Distributors,on the other hand,because they are larger and are assumed to be more sophisticated,are placed under contract law.

Question 15

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

Accepted Answer

Fixed and variable costs are not relevant to the exporter since the export trading company takes title to the product.The reference to international law is incorrect.An export trading company can help the novice exporter,but as an exporter becomes more experienced and sophisticated it should want the direct contact with foreign customers it does not have through an export trading company.

Question 16

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.

Accepted Answer

An export trading company and a distributor provide the least amount of control over foreign sales since they take title to the goods and resell them themselves; an export management company and an agent provide a bit more control for the exporter since they do not take title of the goods,yet they make the sales aboard.A marketing subsidiary is incorporated into the foreign market by an exporting firm,making foreign sales easier.

Question 17

Unique,powerful Japanese trading companies are called
A) Nissans.
B) sogo shosha.
C) export trading companies.
D) exporters.
E) None of the above

Accepted Answer

Sogo shosha is a specific name for a unique type of trading company used by Japan.

Question 18

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.

Accepted Answer

Changing from a strategy based on agents or distributors to one based on sales subsidiaries involves setting up new entities, hiring staff, and making significant capital investments, which can be time-consuming and costly.

Question 19

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.

Accepted Answer

A distributor is rarely located in a neighboring country; rather,the distributor is in the importing country.A distributor could possibly be "near the exporter," and "near the capital city of the importing country," but these answers are incorrect,as a distributor is not "usually" there.

Question 20

_____ 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

Accepted Answer

Contract manufacturing is a way to get the product manufactured in a foreign country,but the marketing and distribution of the product remain to be done,so contract manufacturing is not a T method of entry.The other named methods are definitely methods of entry.

Quiz 4: Methods of Entry into Foreign Markets

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?

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

An export management company earns its revenue through

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

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

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

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

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?

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

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.

The customs status of a maquiladora is similar to that of

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.

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

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

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

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

Unique,powerful Japanese trading companies are called

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.

Usually,a distributor is located

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