lesson 4: entry modes

Question 1

Is the direct sale of goods and / or services in another country. It is possibly the best-known method of entering a foreign market, as well as the lowest risk.

Answer 1

EXPORTING

Question 2

allows another company in your target country to use your property. The property in question is normally intangible

requires very little investment and can provide a high return on investment.

Answer 2

LICENSING

Question 3

• somewhat similar to licensing in that intellectual property rights are sold to a franchisee.
• the rules for how the franchisee carries out business are usually very strict

Answer 3

FRANCHISING

Question 4

consists of two companies establishing a jointly owned business. One of the owners will be a local business (local to the foreign market). The two companies would then provide the new business with a management team and share control of the joint venture.

Answer 4

JOINT VENTURE

Question 5

when you directly invest in facilities in a foreign market. It requires a lot of capital to cover costs such as premises, technology, and staff. FDI can be done either by establishing a new venture or acquiring an existing company

Answer 5

FOREIGN DIRECT INVESTMENT

Question 6

provides a set of international rules for the interpretation of the most commonly used terms of delivery in foreign trade.

Answer 6

INTERNATIONAL CHAMBER OF COMMERCE

Question 7

• Came into being in 1936
• It delineates the responsibilities of the seller (or exporter) to the buyer (or importer)
• They also become a component or part of a price quotation for the foreign buyer

Answer 7

INCOTERMS

Question 8

MEANING OF INCOTERMS

Answer 8

INTERNATIONAL COMMERCIAL TERMS

Question 9

RULES ACCORDING TO CLASSES

Answer 9

1. RULES FOR ANY MODE OR MODES OF TRANSPORTATION
2. RULES FOR SEA AND INLAND WATERWAY TRANSPORT

Question 10

RULES FOR ANY MODES OF TRANSPORT

Answer 10

1. ex-works factory
2. free carrier
3. carrier paid to
4. carriage and insurance paid to
5. delivered at terminal
6. delivered at place
7. delivered duty paid (ddp)

Question 11

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

Answer 11

1. FREE ONBOARD VESSEL (FOB), NAMED OCEAN PORT OF SHIPMENT
2. COST AND FREIGHT (CFR), NAMED OCEAN PORT OF SHIPMENT
3. COST, INSURANCE, AND FREIGHT (CIF), NAMED OCEAN PORT OF SHIPMENT

Question 12

• The seller is responsible for the goods only inside/within the factory premises
• The responsibility for the goods is transferred to the buyer once he/she picks it up from the seller’s factory
• The seller is not responsible for loading the goods on a ship, in an airplane, etc.

Answer 12

EXWORK FACTORY

Question 13

is a trade term dictating that a seller of goods is responsible for the delivery of those goods to a destination specified by the buyer. When used in trade, the word “free” means the seller has an obligation to deliver goods to a named place for transfer to a carrier. The destination is typically an airport, shipping terminal, warehouse, or other location where the carrier operates. It might even be the seller’s business location.

Answer 13

FREE CARRIER (FCA)

Question 14

• This term is used for air or ocean containerized and roll-on/roll-off shipments
• is an international trade term that means the seller delivers the goods at their expense to a carrier or another person nominated by the seller. The seller assumes all risks, including loss, until the goods are in the care of the nominated party.

Answer 14

CARRIER PAID TO (CPT), NAMED PLACE OR PORT OF DESTINATION

Question 15

• Means that the seller has already delivered, when the goods—once unloaded from the arriving means of transport– are placed at the disposal of the buyer at the named terminal at the named port or place of destination

Answer 15

DELIVERED AT TERMINAL (DAT)

Question 16

includes a place, whether covered or not, such as a quay, warehouse, container yard road, rail, or air cargo terminal

Answer 16

TERMINAL

Question 17

is an international trade term used to describe a deal in which a seller agrees to pay all costs and suffer any potential losses of moving goods sold to a specific location. In ______, the buyer is responsible for paying import duties and any applicable taxes, including clearance and local taxes, once the shipment has arrived at the specified destination.

Answer 17

DELIVERED AT PLACE

Question 18

• Used for any mode of transportation
• is a delivery agreement whereby the seller assumes all of the responsibility, risk, and costs associated with transporting goods until the buyer receives or transfers them at the destination port. This agreement includes paying for shipping costs, export and import duties, insurance, and any other expenses incurred during shipping to an agreed-upon location in the buyer’s country.

Answer 18

DELIVERED DUTY PAID (DDP), NAMED PLACE OF DESTINATION

Question 19

• This term is used for ocean shipments that are not containerized
• With a cost and freight sale, the seller is not responsible for procuring marine insurance against the risk of loss or damage to the cargo during transit. Cost and freight is a term used strictly for cargo transported by sea or inland waterways

Answer 19

COST AND FREIGHT (CFR), NAMED OCEAN PORT OF SHIPMENT

Question 20

Cost, insurance, and freight (CIF) is an international shipping agreement, which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer’s order while the cargo is in transit. Cost, insurance, and freight only applies to goods transported via a waterway, sea, or ocean.

Answer 20

COST, INSURANCE, AND FREIGHT (CIF), NAMED OCEAN PORT OF SHIPMENT

Question 21

FOUR MOST COMMONLY USED INCOTERMS IN THE PHILIPPINES

Answer 21

• Ex-Works Factory
• Free on-Board Port of Shipment
• Cost and Freight Port of Destination
• Cost, Insurance, and Freight Port of Destination