1. When they first go into international trading, most companies first do so after careful planning and thoughtful strategic planning. 
a. True
*b. False

2. Most export management corporations are small firms, typically with fewer than fifteen employees. 
*a. True
b. False

3. The company that develops a business product or concept and grants rights to a large number of intellectual property items all bundled in a business package is called a franchisor. 
*a. True
b. False

4. Joint ventures are becoming more and more attractive to foreign investors. 
a. True
*b. False

5. Parallel imports are sometimes called gray market goods. 
*a. True
b. False

6. If tariffs on a finished product are higher than tariffs on the parts of the product, the product is said to be in an inverted tariff structure. 
a. True
*b. False

7. An export trading company is an intermediary which will purchase goods in the exporting country and will resell them to a customer in a foreign country. 
*a. True
b. False

8. Not only are export trading companies helpful for organizations who are novices at international trade, but as an organization becomes more involved in international trade, the export trading company becomes more of a necessity. 
a. True
*b. False

9. An agent often has several principals and generally sells a group of complementary products rather than products that compete directly with one another. 
*a. True
b. False

10. When a principal allows an agent is allowed to negotiate directly with the importer, then the agent is considered by a large number of countries governments as a binding agent. 
*a. True
b. False

11. When a distributor is involved in international trade, there are two sets of invoices: one set between the exporter and the distributor (who is also the importer), and a set of domestic invoices between the distributor and its customers. 
*a. True
b. False

12. There are two types of factors included in the entry decision for an exporter: factors that are market-driven and factors that are company- or product-driven. 
*a. True
b. False

13. The granting of rights to intellectual property owned by a company to another company for a fee is the definition of a licensing agreement between two corporations. 
*a. True
b. False

14. Joint ventures were developed as ways to partner with a politically well-connected company in a foreign country to help prevent things like nationalization of a foreign company by the host government. 
*a. True
b. False

15. An advantage of gray markets is the increased amount of control that a company has over a product after it has been sold. 
a. True
*b. False

16. Because of action by the World Trade Organization to lower tariffs in the future, there should be an increase in the importance of foreign trade zones. 
a. True
*b. False

17. Among all marketing mix decisions, distribution is the part of the mix that is the easiest or most likely to be adjusted. 
a. True
*b. False

18. When a successful exporter involves one of its suppliersor a company that makes a complementary productin the markets that this exporter has developed, it results in a form of piggy-backing sometimes called collaborative exporting. 
*a. True
b. False

19. A distributor takes much less risk in its relationship with an exporter than does an agent and experiences much lower costs. 
a. True
*b. False

20. Many governments make a substantive differentiation in the way agents and distributors are considered by their judiciary systems. 
*a. True
b. False

21. 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. 
a. True
*b. False

22. 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. 
*a. True

23. When an exporter grants access to its foreign distribution channels to a corporation that sells complementary products, the exporter is said to have piggy backed on the complementary-product company. 
a. True
*b. False

24. Foreign Sales Corporations and IC-DISC are means of methods of entry that eliminate government intermediaries and customs duty. 
a. True
*b. False

25. The Foreign Corrupt Practices Act is enforced by all but a handful of countries. 
a. True
*b. False


1. Unique, powerful Japanese trading companies are called
~ Sogo shosha is a specific name for a unique type of trading company used by Japan. 
@ Sogo shosha is a specific name for a unique type of trading company used by Japan. 
a. Nissans. 
*b. sogo shosha. 
c. export trading companies. 
d. exporters. 
e. nishi kawa. 

2. As a company grows in exporting sophistication, it should not become involved with an export trading company because
~ 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. 
@ 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. 
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. it would have to pay a commission on all transastions to the export trading company. 
 
3. An export management company earns its revenue through
~ An export management company is an agent, therefore it is paid by commission. 
@ An export management company is an agent, therefore it is paid by commission. 
*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. commissions paid by the importing country's customs office. 
e. fees paid by the International Chamber of Commerce. 
 
4. In its relationship with an agent, an exporter is known as the 
~  An exporter is known as the principal. The concepts of originator, commissioner, and pre-agent do not exist. 
@  An exporter is known as the principal. The concepts of originator, commissioner, and pre-agent do not exist. 
a. originator. 
b. commissioner. 
*c. principal. 
d. pre-agent. 
e. primary. 

5. Because agents tend to be individuals or very small firms, governments in some countries put them under
~ 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. 
@ 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. 
a. high tariffs. 
*b. labor law. 
c. contract law. 
d. maritime law. 
e. corporate law. 

6. An exporter has the most control over its foreign sales through a(n)
~ 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. 
@ 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. 
*a. sales or marketing subsidiary. 
b. export trading company. 
c. export management company. 
d. agent. 
e. distributor. 

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

~ 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. 
@ 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. 
a. agent. 
b. export management corporation. 
c. principal. 
d. contract manufacturer. 
*e. export trading comany. 


8. Agents usually sell more than one product and represent more than one company. The products they sell are
~ 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. 
@ 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. 
*a. complementary. 
b. competitive. 
c. owned by the agent. 
d. inexpensive. 
e. similar. 

9. Usually, a distributor is located
~ 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. 
@ 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. 
a. near the exporter. 
*b. in the importing country. 
c. near the capital city of the importing country. 
d. in a neighboring country. 
e. in the economic capital of the importing country. 

10. 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
~ Another alternative to exporting for a company, under these circumstances, is production abroad. 
@ Another alternative to exporting for a company, under these circumstances, is production abroad. 
a. indirect exporting. 
b. piggy-backing. 
c. using a foreign trade zone. 
*d. production abroad. 
e. subcontracting. 

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

12. _____ is not truly a method of entry into a country for an exporter. 
~ 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 true method of entry. The other named methods are definitely methods of entry. 
@ 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 true method of entry. The other named methods are definitely methods of entry. 
a. Active exporting 
b. A marketing subsidiary
*c. Contract manufacturing
d. A wholly-owned subsidiary
e. Franchising

13. 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
~ Only active exporting is correct, as the company becomes involved in export activities. 
@ Only active exporting is correct, as the company becomes involved in export activities. 
a. indirect exporting. 
b. parallel imports. 
c. foreign trade zones. 
*d. active exporting. 
e. passive exporting. 

14. 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?
~ Licensing allows a firm to enter a market by getting another company to manufacture the product and collecting royalities. 
@ Licensing allows a firm to enter a market by getting another company to manufacture the product and collecting royalities. 
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. use of licensing. 

15. Attempts to reduce business practices that include corruption and bribery have been made by the
~ 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. 
@ 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. 
a. W. O. F. E. 
b. sogo shosha. 
*c. Organisation for Economic Co-operation and Development. 
d. foreign labor laws that protect agents. 
e. United Nations 

16. 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?
~ 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. 
@ 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. 
*a. piggy-backing
b. direct exporting
c. franchising
d. a joint venture
e. free loading

17. When a company has a subsidiary in a foreign country, as far as the foreign countrys government is concerned that subsidiary is
~ 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. 
@ 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. 
a. an agent of the exporter. 
b. an exporter. 
c. a foreign trade zone. 
*d. the importer of record. 
e. a distributor. 


18. 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. 
~ 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. 
@ 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. 
a. 75, 10
*b. 50, 15
c. 80, 20
d. 100, 25
e. 25, 50 

19. The fee a licensee pays a licensor for each use of an intellectual property is called a(n)
~ The royalty is the amount of money paid by the licensee to the licensor. 
@ The royalty is the amount of money paid by the licensee to the licensor. 
a. tariff. 
b. excise. 
*c. royalty. 
d. finders fee. 
e. commission. 

20. Maquiladoras are located on the border between
~ Maquiladoras are companies in Mexico that import goods from the United States to transform them into products to export back to the United States. 
@ Maquiladoras are companies in Mexico that import goods from the United States to transform them into products to export back to the United States. 
a. France and Germany. 
b. Spain and Portugal. 
c. Quebec and Ontario. 
*d. the United States and Mexico. 
e. Mexico and Guatemala

Type: F
1. In a franchising arrangement, the ____________________ pays fees to the company that owns the bundle of intellectual property items. 
a. franchisee

Type: F
2. In an international environment some companies choose to ____________________ their intellectual property, such as trademarks, copyrights, or designs to foreign firms. 
a. license

Type: F
3. United States companies are prohibited from giving bribes in foreign countries by the ____________________ Act. 
a. Foreign Corrupt Practices Act
b. FCPA
c. Foreign Corrupt Practice Act

Type: F
4. If an American cement company were to make an agreement with a cement producer in a foreign country to produce the American companys cement, this would be an example of ____________________ manufacturing. 
a. contract

Type: F
5. A company has a foreign subsidiary (a wholly-owned foreign enterprise, WOFE) for which it builds a brand new facility. This facility is called a(n) ____________________ operation. 
a. green field

Type: F
6. A form of piggy-backing in which a successful exporter involves one of its suppliersor a company that makes a complementary productin the markets that the exporter has developed is sometimes referred to as ____________________ exporting. 
a. collaborative

Type: F
7. While agents, because they are small businesses, are in many countries protected by that countrys labor law, distributors, because they tend to be larger and are assumed to be more sophisticated, are covered in most countries by ____________________ law. 

a. contract

Type: F
8. An exporter invests in a facility abroad, but finds one or more partners with which to share the costs of the venture and it results in creation of a new corporation in a foreign country. This is an example of a(n) ____________________ venture. 
a. joint

Type: F
9. The European Union has complained to the World Trade Organization (WTO) that American foreign sales corporations result in a(n) ____________________ to exports, which is prohibited by the WTO. 
a. subsidy

Type: F
10. ____________________ is a form of exporting by which a firm can benefit by not having to lay out any capital but is able to generate world-wide income from its intellectual property fairly rapidly. 
a. licensing