Question 1

In international trade transactions, an open account is considered as a more secure method of payment than a letter of credit.

Accepted Answer

This statement is incorrect. A letter of credit is generally considered a more secure method of payment in international trade transactions. It provides more guarantees for both the buyer and the seller, as the bank acts as a trusted third party to facilitate the transaction and ensure that the agreed-upon terms are met before release of the funds. An open account, on the other hand, relies on the trust and relationship between the buyer and seller, which may not always be reliable in cross-border trade situations.

Question 2

Reva Inc. is a U.S.-based automobile manufacturing company that sets up manufacturing bases in India. Its suppliers followed them to India. This is an example of a proactive move.

Accepted Answer

False

Question 3

The pre-internationalization stage of internationalization is followed by the committed involvement stage.

Accepted Answer

The pre-internationalization stage is typically followed by the initial internationalization stage, not the committed involvement stage.

Question 4

Cash in advance is the most secure method of getting paid in international business.

Accepted Answer

Cash in advance means the buyer pays for the goods or services before they are delivered. It is the most secure method for the seller as they receive payment upfront and are protected from any risk of non-payment or fraud. However, it may not be the most convenient or practical option for the buyer as it requires them to have the full amount of payment available upfront.

Question 5

Exporting and importing collectively refer to international trade.

Accepted Answer

Exporting and importing both involve the exchange of goods and services between countries, and therefore are related to international trade.

Question 6

Incoterms are universally accepted terms of sale that specify how the buyer and the seller share the cost of freight and insurance in an international transaction and at which point the buyer takes title to the goods.

Accepted Answer

This statement is true.

Question 7

Exporting, licensing, and franchising require a relatively low level of managerial commitment and dedicated resources.

Accepted Answer

Exporting, licensing, and franchising typically involve less direct control and investment compared to wholly-owned subsidiaries or joint ventures, thus requiring lower managerial commitment and resources.

Question 8

Firms that internationalize their operations in order to reap the profits of a high-growth market are exhibiting a proactive business strategy.

Accepted Answer

The statement is true. Internationalizing operations to gain access to a high-growth market is a strategy that involves taking proactive steps to expand the business.

Question 9

Compared to other entry strategies, exporting minimizes risk and maximizes flexibility.

Accepted Answer

Exporting allows companies to enter foreign markets with minimal investment and risk, and can be easily scaled up or down depending on market conditions. This gives companies more flexibility in their international expansion compared to other entry strategies such as joint ventures or wholly owned subsidiaries.

Question 10

Global sourcing and exporting can be classified as equity or ownership-based international business activities.

Accepted Answer

Global sourcing and exporting are non-equity modes of international business activities, as they do not involve ownership or equity investment in foreign markets.

Question 11

The Internet provides the means to export pure services.

Accepted Answer

The answer of The Internet provides the means to export...

Question 12

Large MNEs use exporting as a manner of initial internationalization, but once they build large manufacturing facilities abroad, the firm no longer exports many products due to the high costs involved.

Accepted Answer

The answer of Large MNEs use exporting as a manner...

Question 13

When government agencies cite statistics on trade deficits, trade surpluses, and the volume of merchandise trade for individual countries, these data generally refer to firms' collective exporting and importing activities.

Accepted Answer

Government agencies typically collect data on the aggregate exporting and importing activities of firms within a country, which is then used to calculate trade deficits, surpluses, and volume of merchandise trade for individual countries.

Question 14

Licensing and franchising are typical examples of home-based international exchange activities.

Accepted Answer

Licensing and franchising are examples of international business strategies, not home-based activities, as they involve expanding a company's operations into foreign markets.

Question 15

Countertrade refers to an international business transaction in which full or partial payments are made in kind rather than cash.

Accepted Answer

Countertrade is indeed a type of international business transaction where payment is made in kind rather than cash, either partially or in full. The goods or services provided in such transactions can be of equal or unequal value to the product or service being exchanged. Examples of countertrade include bartering, offsets, and buyback agreements.

Question 16

The bill of lading is the "birth certificate" of the goods being shipped and indicates the country where they originate.

Accepted Answer

The bill of lading is a document issued by a carrier to acknowledge receipt of goods for shipment. It includes details such as the description of the goods, the names of the consignor and the consignee, and the place of origin and destination, but it does not necessarily indicate the country where the goods originate.

Question 17

Push factors include unfavorable trends in the domestic market that compel firms to explore opportunities beyond national borders.

Accepted Answer

Push factors, such as domestic market trends, can drive firms to pursue opportunities abroad.

Question 18

Indirect exporting is exporting that is accomplished by contracting with intermediaries located in the foreign market.

Accepted Answer

The answer of Indirect exporting is exporting that is accomplished...

Question 19

National governments require exporters to obtain a license to protect the exported goods against damage, loss, pilferage, and delay.

Accepted Answer

National governments may require exporters to obtain licenses for a variety of reasons, such as ensuring compliance with trade regulations, controlling the export of sensitive items, or collecting data for statistical purposes. However, the protection of exported goods against damage, loss, pilferage, and delay is generally the responsibility of the exporter and shipping company, not the government licensing authority.

Question 20

The exporter usually first issues a quotation or pro forma invoice upon request by potential customers.

Accepted Answer

This statement is true. The exporter typically provides a quotation or pro-forma invoice when a potential customer requests one.

Quiz 14: Exporting and Countertrade