CH 16 – Global Aspects of Entrepreneur Flashcards
1) Becoming a global entrepreneur requires ________.
A) constant innovation
B) maintaining a high level of quality and constantly improving it
C) being sensitive to foreign customers’ unique requirements and adopting a more respectful attitude toward foreign habits and customs
D) All of the above
D
2) For an entrepreneur, expanding into international markets ________.
A) guarantees its success in the marketplace
B) makes it a member of GATT automatically
C) helps it grow faster and survive competition better
D) leads to business failure for companies under $100 million in annual revenue
C
3) The first obstacle an entrepreneur must overcome on the way to creating a truly global business is ________.
A) finding a joint venture partner
B) learning to think globally
C) locating motivated, multilingual managers for overseas assignments
D) finding overseas distributors for the company’s products
B
4) Before going global, entrepreneurs should ask themselves questions regarding ________.
A) profit potential and commitment of resources for a global effort
B) a viable exit strategy and the cost of not going global
C) the reasons, rationale, and understanding cultural differences
D) All the above
D
5) Only about one-third of the world’s purchasing power lies outside the borders of the United States.
FALSE
6) As the trend toward increased globalization continues, successful companies must consider themselves businesses without borders.
TRUE
7) Success in the global economy requires constant innovation, high quality, and flexibility and the ability to have a new perspective about the potential of a business.
TRUE
8) Small companies that take the plunge into global business can extend their products’ life cycles, raise their quality levels, and increase sales and profits.
TRUE
9) Learning to think globally may be the first (and most threatening) obstacle an entrepreneur must overcome on the way to creating a truly global business.
TRUE
10) Some of the strategic options entrepreneurs have when deciding to go global include the Web, joint ventures, and franchising.
TRUE
11) Entrepreneurs can use the Web to generate sales leads by researching customers and market characteristics in other countries.
TRUE
12) Explain why it is important to “go global.” What benefits can companies that take the plunge into global business expect?
Answer: Small businesses can no longer consider themselves to be domestic companies if they truly want to compete. Political, social, cultural, and economic forces are driving small businesses into international markets. Powerful, affordable technology increases access to information on conducting global business, and the growing interdependence of the world economies makes it easier for companies of all sizes to engage in international trade.
Since the global market offers more niches, the flexibility and speed of a small business can become a competitive advantage.
Advantages of going global include the following:
∙ Offsetting sales declines in the domestic market
∙ Increasing sales and profits
∙ Extending their products’ life cycles
∙ Lowering manufacturing costs
∙ Improving competitive position and enhancing reputation
∙ Raising quality levels
∙ Becoming more customer oriented
13) All of these are steps small companies follow when they begin conducting global business on the Web except ________.
A) connecting to e-mail
B) building a globally-accessible Web site
C) setting up links to related company Web sites
D) using the Web to conduct international market research
C
14) Which of the following statements is/are true regarding export management companies?
A) Most are merchant intermediaries that work on a buy-and-sell arrangement with domestic small companies.
B) They provide small businesses with a low-cost, efficient, independent, international marketing department.
C) Many specialize in particular products or product lines and offer services ranging from market research and advice or patent protection, to arranging financing and handling shipping.
D) All of the above
D
15) An export trading company ________.
A) is a business that buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) typically offers a wide range of services such as exporting, shipping, storing, distributing, and others to their clients
C) is formed by an agreement by which a licenser gives a foreign licensee the right to use a patent, trademark, copyright, technology, and products in return for a percentage of the licensee’s sales or profits
D) Both A and C above
D
16) Which of the following trade intermediaries lowers the risk of exporting for a small business? A) Export management companies B) Export trading companies C) Resident buying offices D) All of the above
D
17) \_\_\_\_\_\_\_\_ act as international sales representatives in a limited number of markets for various noncompeting domestic companies, typically operating on a commission basis. A) Manufacturers' export agents B) Export merchants C) Resident buying offices D) Foreign distributors
A
18) A resident buying office is ________.
A) a business that buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) a government-owned or business-owned facility set up in a foreign country to buy products that are made there
C) a firm in an overseas distribution network selling noncompetitive products made by other firms
D) formed by an agreement where a licenser gives a foreign licensee the right to use a patent, trademark, copyright, technology, and products in return for a percentage of the licensee’s sales or profits.
B
19) \_\_\_\_\_\_\_\_ are domestic wholesalers who do business in foreign markets, buying goods from domestic companies and selling them in foreign markets, often handling competing lines. A) Resident buying offices B) Export trading companies C) Foreign distributors D) Export merchants
D
20) Foreign distributors offer small businesses which of the following benefits?
A) A detailed knowledge of the local markets in which they sell.
B) The ability to cover a foreign sales territory thoroughly.
C) The ability to handle all of the marketing, distribution, and service functions in foreign markets.
D) All of the above
D
21) In a(n) \_\_\_\_\_\_\_\_, two or more U.S. small businesses form an alliance for the purpose of exporting their goods and services. The companies get antitrust immunity and share responsibility for the business equally. A) foreign joint venture B) trade intermediary C) domestic joint venture D) export management company
C
22) In a(n) \_\_\_\_\_\_\_\_, a domestic small business forms an alliance with a company in the target nation for the purpose of exporting to that market. A) foreign joint venture B) trade intermediary C) domestic joint venture D) export management company
A
23) The most important ingredient for a successful joint venture is ________.
A) targeting the right country in which to sell
B) getting government approval and avoiding antitrust charges
C) choosing the right partner
D) splitting costs and profits equally
C
24) Which of the following is a common problem in joint ventures?
A) Incompatible management styles among partners.
B) Failure of partners to establish common goals.
C) Failure of partners to carefully determine each party’s contributions and responsibilities, distribution of earnings, etc.
D) All of the above
D
25) Many joint ventures fail because the parties involved neglected to ________.
A) select a partner who shares their company’s values
B) spell out in writing exactly how the venture will work and who has decision-making authority
C) select a partner whose skills are different from, but compatible with, their own
D) All of the above
D
26) Foreign licensing has its greatest potential in the licensing of ________.
A) products
B) intangibles (e.g., technology, copyrights, and trademarks).
C) goods
D) franchises
B
27) If a business owner cannot afford to invest in foreign facilities and does not have time to learn the foreign market, but is willing to give someone else the right to make and market her/his product for a fee and royalties, her/his best bet for entering the foreign market is \_\_\_\_\_\_\_\_. A) a foreign management company B) joint venturing C) foreign licensing D) international franchising
C
28) Foreign licensing is ________.
A) required when a business buys and sells products in many countries, either in its own name or as an agent for its buyer-seller clients
B) a government-owned or business-owned facility set up in a foreign country to buy products that are made there
C) the use by one firm (the carrier) of its overseas distribution network to sell noncompetitive products made by other firms (riders)
D) an agreement in which a licenser gives a licensee in another country the right to use that licenser’s patent, trademark, copyright, technology, and products in return for a percentage of the licensee’s sales or profits
D
29) Domino's Pizza and McDonald's operating in Japan and Europe are examples of \_\_\_\_\_\_\_\_. A) foreign management companies B) joint venturing C) foreign licensing D) international franchising
D
30) The first step in establishing a successful global franchise arrangement is to ________.
A) generate lead for potential franchisees
B) structure the franchise deal
C) identify the country or countries that are best suited to the franchiser’s business concept
D) select quality candidates
C
31) \_\_\_\_\_\_\_\_ is a transaction in which a company selling goods and services in a foreign market agrees to help promote investment and trade in that country. A) Countertrading B) Bartering C) Foreign licensing D) Exporting
A
32) The drawbacks of countertrading include which of the following?
A) Countertrade transactions can be complicated, cumbersome, and time-consuming.
B) Countertrade transactions can increase the chances that a company will be stuck with merchandise it cannot move.
C) Countertrade transactions can lead to unpleasant surprises concerning the quantity and quality of products required in the countertrade.
D) All of the above
D
33) \_\_\_\_\_\_\_\_, the exchange of goods and services for other goods and services, is one way of trading with countries that lack convertible currency. A) Countertrading B) Bartering C) Foreign licensing D) Exporting
B
34) Which of the following is/are often used by companies exporting to countries that lack a convertible currency? A) Countertrading B) Indirect exporting C) Bartering D) A and C only
D
Learning Obj: 15-2 Describe the principal strategies small businesses have for going global.
35) Nance Technologies, Inc., has agreed to sell some of its computers to a company in Bascovina, a country whose currency is worthless outside its own borders. As part of the agreement, Nance will sell the foreign customer its computers in exchange for a specified number of tons of coffee, a major export of Bascovina. Nance has already arranged to sell the coffee to a major processor for a set price in U.S. dollars. Nance has engaged in ________.
A) bartering
B) foreign licensing
C) exporting
D) countertrading
A
36) Small businesses contribute \_\_\_\_\_\_\_\_ percent of U.S. export sales. A) 20 B) 25 C) 33 D) 40
C
37) The biggest barrier facing companies that have never exported is ________.
A) finding the financing to launch an export program
B) not knowing where or how to start
C) locating a trade intermediary to represent them in foreign markets
D) winning government approval to begin selling in foreign markets
B
38) Two valuable resources for entrepreneurs to investigate for going global should include ________.
A) U.S. Department of Commerce
B) International Trade Administration
C) A and B above
D) Neither of these resources will provide real value or insight
C
39) The first step to create a sound export strategy is to ________.
A) recognize that even the smallest companies and least experienced entrepreneurs have the potential to export
B) analyze your product or service
C) analyze your commitment
D) research markets and pick your target
A
40) The second step to creating a sound export strategy involves \_\_\_\_\_\_\_\_. A) analyzing the product or service B) recognizing the potential to export C) analyze your commitment D) research market and pick your target
A
41) One of the biggest barriers to small business exports is lack of ________.
A) access to adequate financing
B) attractive countries that are not already saturated by franchising efforts
C) effective distribution strategies
D) information to make informed decisions about franchising
A
42) The final step in creating a sound export strategy is to \_\_\_\_\_\_\_\_. A) find your customer B) ship your goods C) collect your money D) find financing
C
43) A \_\_\_\_\_\_\_\_ is an agreement between an exporter's bank and the foreign buyer's bank that guarantees payment to the exporter for a specific shipment of goods. A) bank draft B) letter of credit C) repurchase agreement D) trade acceptance
B
44) A \_\_\_\_\_\_\_\_ is a document an exporter draws on a foreign buyer, requiring the buyer to pay the face amount, either on sight or on a specified date, once the goods are shipped. A) bank draft B) letter of credit C) repurchase agreement D) trade acceptance
A
48) Trade intermediaries are domestic agencies that serve as distributors in foreign countries for domestic companies of all sizes.
TRUE
49) Most export management companies (EMCs) are merchant intermediaries that work on a buy-and-sell arrangement with domestic small companies, providing small businesses with a low-cost, efficient, independent, international marketing department.
TRUE
50) Export trading companies are government-owned operations established in countries around the world (including the United States) for the purpose of buying goods there.
FALSE
51) While export management companies tend to focus on exporting, export trading companies usually perform both import and export trades across many countries’ borders.
TRUE
