Question 1

_____ occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them.
A) Countertrading
B) Offsetting
C) Switch trading
D) Bartering

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 2

Which of the following terms refers to the use of a specialized third-party trading house in a countertrade arrangement?
A) Counterpurchase
B) Barter
C) Offset
D) Switch trading

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.

Question 3

A(n) _____ can help new exporters identify opportunities and avoid common pitfalls.
A) MITI
B) Export-Import Bank
C) in-house trading department
D) export management company

Accepted Answer

An export management company is an export specialist who acts as the expert marketing department or international department for its client firms. An export management company can help new exporters identify opportunities and avoid common pitfalls. However, the quality of export management companies varies. Furthermore, relying on an export management company prevents the firm from developing its own exporting capabilities.

Question 4

What are the typical problems that novice exporters face when trying to export?

Accepted Answer

The answer of What are the typical problems that novice...

Question 5

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.

Accepted Answer

The answer of Compare and contrast the export assistance provided...

Question 6

Explain the problem of trust that persists in international business.

Accepted Answer

The answer of Explain the problem of trust that persists...

Question 7

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

Accepted Answer

The answer of Explain 3M's main export principles that have...

Question 8

Which of the following is an advantage of countertrade?
A) Countertrade uses instruments such as time draft and sight draft.
B) It is an effective way of doing business with developing nations.
C) It provides exporters and opportunity to obtain direct revenue.
D) Countertrade prevents exchange of unusable or poor-quality goods.

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 9

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

Accepted Answer

The answer of Describe the information sources that are available...

Question 10

A(n) _____ 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.
A) buyback
B) barter
C) offset
D) switch trade

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 11

The main attraction of _____ is that it can give a firm a way to finance an export deal when other means are not available.
A) switch trading
B) counterpurchase
C) offsets
D) countertrade

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 12

Countertrade is:
A) most attractive to small, primarily domestic enterprises.
B) least attractive to small, primarily domestic enterprises.
C) most attractive to large, diverse multinational enterprises.
D) least attractive to large, diverse multinational enterprises.

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 13

Which of the following is a major drawback of engaging in countertrade?
A) Countertrade is not useful when trading with developing nations.
B) Financing is difficult when engaging in a countertrade.
C) It is not attractive to small organizations.
D) Countertrade may involve the exchange of unusable goods.

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 14

Compare and contrast time drafts and sight drafts.

Accepted Answer

The answer of Compare and contrast time drafts and sight...

Question 15

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?

Accepted Answer

The answer of Describe the process involved in financing imports...

Question 16

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

Accepted Answer

The answer of Why do so many firms take a...

Question 17

As a document of title, a _____ can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
A) bill of lading
B) letter of credit
C) bill of exchange
D) draft

Accepted Answer

The bill of lading is issued to the exporter by the common carrier transporting the merchandise. It serves three purposes: it is a receipt, a contract, and a document of title. As a receipt, the bill of lading indicates that the carrier has received the merchandise described on the face of the document. As a contract, it specifies that the carrier is obligated to provide a transportation service in return for a certain charge. As a document of title, it can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.

Question 18

_____ 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.
A) A buyback
B) Countertrade
C) An offset
D) Switch trading

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 19

Which of the following is a disadvantage of countertrade?
A) Countertrade contracts may involve the exchange of unusable or poor-quality.
B) Countertrade requires the firm to use an out-of-house trading company to which much of the profit will go.
C) Countertrade contracts often involve high-quality, expensive goods that the firm cannot move enough of to be profitable.
D) Countertrade requires employing lawyers who specialize in these unique types of contracts.

Accepted Answer

There are several reasons why 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. These new departments can be expensive and time-consuming.

Question 20

Which of the following is a reason that firms take a reactive approach to exporting rather than a proactive approach?
A) Most firms are familiar with the foreign market opportunities and therefore do not need to utilize proactive approaches.
B) They are intimidated by the complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from the home market.
C) Most firms already know where the market potential and opportunities are and they do not need to be proactive.
D) They are not intimidated by the complexities and mechanics of exporting to foreign countries and can, therefore, use the same reactive approaches that work in their home market.

Accepted Answer

There are several reasons why firms do not take a proactive approach while seeking export opportunities. One reason is that most firms are unfamiliar with foreign market opportunities, they do not realize how big the potential market is, or where the opportunities are. A second reason why firms take a reactive approach to exporting is because they are intimidated by the complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from the home market. A third reason for firms not being proactive about exporting is the number of problems neophyte exporters typically face when trying to do business abroad.

Quiz 16: Exporting, Importing, and Countertrade

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

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

A(n) _____ can help new exporters identify opportunities and avoid common pitfalls.

What are the typical problems that novice exporters face when trying to export?

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.

Explain the problem of trust that persists in international business.

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

Which of the following is an advantage of countertrade?

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

A(n) _____ 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.

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

Countertrade is:

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

Compare and contrast time drafts and sight drafts.

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?

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

As a document of title, a _____ can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.

_____ 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.

Which of the following is a disadvantage of countertrade?

Which of the following is a reason that firms take a reactive approach to exporting rather than a proactive approach?