International Business: Environments and Operations, 16e (Daniels et al.

)
Chapter 14 Export and Import

1) Which of the following transactions refers to the sale of goods or services produced by a
company based in one country to customers that reside in a different country?
A) importing
B) countertrading
C) exporting
D) freight forwarding
Answer: C
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

2) Small and medium-size enterprises, such as SpinCent as seen in the opening case for chapter
14, account for ________ of all U.S. exporters.
A) 38%
B) 54%
C) 79%
D) 98%
Answer: D
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

3) ________ are among the fastest-growing economic activities in the world.

A) Global manufacturing and supply-chain management
B) Accounting and taxation
C) Finance and human resources
D) Exporting and importing
Answer: D
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

1
Copyright © 2018 Pearson Education, Inc.
4) Which of the following best explains why SpinCent decided to export?
A) growth opportunities in Asia
B) labor demands in the U.S.
C) declining tariffs in the EU
D) promising market locations in South America
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

5) Iverson Products is a U.S. firm that is considering expanding internationally by exporting.

Which of the following is the LEAST likely benefit for Iverson?
A) boosting marketplace flexibility
B) improving economies of scale
C) facing lower business risk compared to other foreign market entry options
D) requiring fairly few resources
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

6) Which of the following is NOT an example of a service export?

A) a management firm providing advice to a foreign client
B) an investment bank arranging financing for a foreign firm
C) a coffee chain opening a new store in a foreign country
D) an engineering firm building roads in a foreign country
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

2
Copyright © 2018 Pearson Education, Inc.
7) This spring break you are planning to leave the United States and visit London, where you
will stay in a hotel for 10 days. The London hotel will be performing a(n) ________.
A) indirect merchandise export
B) merchandise export
C) service export
D) service import
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

8) The benefits of retaining a core competency within a company and purposefully threading that
core competency through the value chain are referred to as ________ advantages.
A) internalization
B) domestic
C) location
D) ownership
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

9) Companies are likely to export products abroad in all of the following situations EXCEPT
________.
A) when their average cost per unit of home country production declines substantially by
increasing output
B) when they want to use the riskiest but most profitable method to engage international trade
C) when they aim to increase degree of market diversification
D) when they are new to international business
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

3
Copyright © 2018 Pearson Education, Inc.
10) Boyce Dynamics, a U.S. maker of LED flashlights, fills unsolicited orders from foreign
buyers. It has not proactively investigated international trade options. Boyce Dynamics is best
categorized as a ________.
A) regular exporter
B) non-exporter
C) sporadic exporter
D) domestic exporter
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

11) The CEO of Coffman Enterprises wants to export products to foreign markets. However, top
executives at Coffman are concerned that the firm will face fierce competition from foreign
rivals because Coffman lacks significant core competencies. The executives are most likely
worried that Coffman lacks ________.
A) capital advantages
B) internalization advantages
C) location advantages
D) ownership advantages
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Reflective thinking

12) Barton Accessories has two retail stores and one production facility where the firm's line of
leather belts and purses are assembled. Barton employs 430 people and generates nearly $1
million in revenue each year through domestic and international sales. Which term best describes
the status of Barton?
A) SME
B) MNE
C) MNC
D) FDI
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

4
Copyright © 2018 Pearson Education, Inc.
13) The ________ of a firm is the share of its total output that is exported.
A) freight forward
B) incremental export
C) export intensity
D) intermodal export
Answer: C
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

14) Which of the following statements about small and medium-sized enterprises (SMEs) is
true?
A) SMEs are steadily reducing their export intensity ratios.
B) SMEs make up the majority of all U.S. exporters.
C) SMEs are the source of more than half of the monetary value of U.S. exports.
D) SMEs that export goods have fewer than 20 employees.
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

15) According to the research described in your text, which of the following is among the factors
that would increase a firm's probability of exporting?
A) low domestic productivity
B) high domestic labor costs
C) high level of efficiency
D) high R & D demands
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

5
Copyright © 2018 Pearson Education, Inc.
16) Which of the following has been the LEAST likely outcome of e-commerce on exporting?
A) enhancing supply chains
B) triggering a rise in born globals
C) overcoming capital limitations for SMEs
D) expanding market opportunities for traders
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Information technology

17) As described in the opening case, SpinCent's CEO analyzed foreign markets, assessed
industries, prepped his company, traveled overseas, and hired trustworthy distributors. SpinCent
manages the export process including making and marketing its products for foreign buyers. The
nature of these activities shows that the leadership of SpinCent is committing the company to
________.
A) countertrade
B) direct exporting
C) indirect exporting
D) third party logistics
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

18) The opportunity to increase profitability is the primary reason that firms decide to export.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

6
Copyright © 2018 Pearson Education, Inc.
19) A company classified as a small and medium-sized enterprise (SME) has fewer than 500
employees.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

20) Ownership advantages refer to a firm's specific assets, international experience, and the
ability to develop either low-cost or highly differentiated products within the context of its
particular value chain.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

21) Export intensity, the percentage of total revenues coming from exports, is not always
correlated with company size.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

22) The stages of development in a company's export expansion are tied to company size.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

7
Copyright © 2018 Pearson Education, Inc.
23) Smithson Pottery is considered a regular exporter because the firm fills unsolicited orders
from foreign buyers and passively investigates international trade options.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

24) Pender Pet Products is considered an opportunistic importer because the firm seeks products
around the world that it can import and sell profitably to domestic consumers.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Application of knowledge

25) What is the difference between exporting and importing? What are the unique characteristics
of service exports and service imports?
Answer: Exporting is the sale of goods or services produced by a firm based in one country to
customers that reside in another country. Exports involve any good or service that is traded from
sellers in one country to buyers in another country. Exportable products can include goods,
services, or intellectual property. Importing is the purchase of a good or service by a buyer in one
country from a seller in another. The import of services has subtle characteristics. For example,
the installation of nuclear power equipment in Sweden by French firm Areva, even though it is a
hard good, qualifies as a service import for Sweden. The standard to keep in mind is that an
import of a service consists of any transaction that (1 ) does not result in ownership and (2 ) is
rendered by non-residents to residents. Lastly, it clarifies matters by defining what is not a
service export. Opening a Starbucks in a foreign market, which is generally regarded as a service
enterprise, is not a service export. Foreign ownership of some or all of the productive assets of
the local operation qualifies it as a foreign direct investment. Service exports typically include
higher education, management consultants, and investment banks.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Synthesis
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

8
Copyright © 2018 Pearson Education, Inc.
26) What are the three main types of exporters? What are the three main types of importers?
Briefly describe the characteristics of each.
Answer: Occasional exporters are firms that have filled unsolicited orders from foreign buyers
but passively, if at all, investigate international trade options. A regular exporter aggressively
pursues export sales and has extensive experience with its practicalities, complexities, and
technicalities. A non-exporter commands little to no knowledge about exporting and often
professes no intention, now or in the future, to engage international trade.
An input optimizer is an importer that uses foreign sourcing to optimize, in terms of price or
quality, the inputs fed into a supply chain. An opportunistic importer looks for products around
the world that it can import and profitably sell to local citizens. An arbitrageur looks to foreign
sourcing to get the highest-quality products at the lowest possible price.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Synthesis
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Analytical thinking

27) What is a born global? How has technology triggered the growth of born globals?
Answer: Rather than methodically engaging foreign markets, born globals immediately step
onto the world stage, exporting from inception. International markets are not simply places it
turns to when sales slow in the home market. The born global regards the domestic market as one
of many opportunities in the world. E-commerce continues turbo charging the born-global trend.
A generation ago, going global involved slow-acting trade officials directing slow-moving flows
between tough-to-understand markets that differed on innumerable characteristics. Hence,
incremental, market-by-market export expansion was not only practical, it was arguably the only
feasible option. Now, e-commerce immediately gives small start-ups global reach, providing a
platform that efficiently overcomes historic barriers to internationalization.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Synthesis
Objective: 14-1 Explain the principles and practices of exporting
AACSB: Information technology

28) The probability that a business is engaged in exporting tends to ________.

A) decrease with the size of the firm
B) increase with the product life cycle
C) decrease with the product life cycle
D) increase with the size of the firm
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-2 Articulate the motivations and methods of exporting
AACSB: Analytical thinking

9
Copyright © 2018 Pearson Education, Inc.
29) What are some reasons that firms decide to export their products or services? What does a
firm need to consider when developing an export plan?
Answer: Several reasons motivate exporting. Companies that are capital- and research-intensive,
such as pharmaceuticals or avionics, export to amortize the steep costs of product development
and production. Many, such as advertisers, lawyers, and consultants, export their services to meet
the needs of clients working abroad. They either follow their clients abroad or risk losing them to
the rival that does. Companies that are not leaders in their domestic markets may export as an
indirect way to counter the volume advantage commanded by the industry leader. Finally, some
companies export rather than invest abroad because of the higher risk of running international
operations. Serving foreign markets from the home office imposes far fewer operational
requirements than other modes. The decision to go international influences resource allocation,
executive effectiveness, and financial stability.
Successful exporters report that developing an export plan is useful. Defining its present status,
specifying objectives, and formalizing commitment requires that the company set precise
objectives, sequence tactics, and set timelines. In addition, an export plan identifies useful
resources, assigns responsibility, and stipulates controls. Collectively, it prevents losing track of
the company's export strategy in the face of endless decisions and details.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Synthesis
Objective: 14-2 Articulate the motivations and methods of exporting
AACSB: Analytical thinking

30) Vandelay Designs is a small firm based in Boston that makes and sells scrapbooking
products through its retail store and Web site. Many of Vandelay's first sales were made to
customers located in Canada, England, and Japan. Vandelay Designs would best be identified as
a(n) ________.
A) incremental exporter
B) occasional exporter
C) born global
D) geo-expo
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-3 Understand export startup and expansion
AACSB: Reflective thinking

10
Copyright © 2018 Pearson Education, Inc.
31) An Australian company makes athletic wear for women, men, and children. After several
years of successfully exporting its products to the U.K. and the U.S., the company began
exporting to Japan. This is an example of ________.
A) a born-global company
B) a location advantage
C) third-party exporting
D) incremental internationalization
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-3 Understand export startup and expansion
AACSB: Application of knowledge

32) The perspective of ________ holds that as a company gains experience, resources, and
confidence, it progressively increases its scope of countries to which it exports.
A) serendipity
B) export management
C) the born-global theory
D) incremental internationalization
Answer: D
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

33) Which of the following BEST describes the concept of serendipity in exporting?
A) modifying products to meet cultural preferences
B) initiating global sales through e-commerce methods
C) relying too much on exports when domestic sales suddenly increase
D) opportunistically responding to unsolicited orders from foreign customers
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

11
Copyright © 2018 Pearson Education, Inc.
34) The incremental internationalization view of exporting holds that companies first target
countries that are ________ their home market.
A) different from
B) similar to
C) smaller than
D) larger than
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

35) In conducting ________, a business sells goods directly to or through an independent

domestic intermediary in the exporter's home country that exports the products to foreign
markets.
A) direct exporting
B) global marketing
C) strategic planning
D) indirect exporting
Answer: D
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

36) An exporter that implements a(n) ________ strategy does so with the intent to develop its
own international marketing capability.
A) indirect selling
B) freight forwarding
C) direct exporting
D) export intermediation
Answer: C
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

12
Copyright © 2018 Pearson Education, Inc.
37) The Internet supports more companies' efforts to launch a direct exporting strategy by
________.
A) providing information quickly and inexpensively
B) eliminating the need for highly detailed export plans
C) letting software take over customer service responsibilities
D) countering the power of electronic data interchange systems
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Information technology

38) Serendipity is often an export trigger for companies that purposefully look to internationalize
their operations.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Reflective thinking

39) "Born global" firms are those that step straight onto the world stage, making exporting the
primary goal of the firm from day one of operations.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

40) Advocates of exporting e-waste assert that the activity helps entrepreneurs in developing
countries create value by recovering and recycling scarce resources such as copper.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Diverse and multicultural work environments

13
Copyright © 2018 Pearson Education, Inc.
41) Exporters employ an export management company as part of an indirect exporting strategy.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

42) In what is known as direct exporting, the exporter sells goods directly to or through an
independent domestic intermediary in the exporter's home country that then exports the products
to foreign markets.
Answer: FALSE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Analytical thinking

43) In the U.S., international trade is hampered by homeland security issues and delays.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-3 Understand export startup and expansion
AACSB: Application of knowledge

44) Why are financial risks a key concern of SMEs considering international trade?
Answer: Financial constraints are arguably the greatest impediment to international traders. A
survey of 978 SMEs asked their perceptions of trade barriers; the top ranked factor was the
"shortage of working capital to finance export." Traders often reason that export or import offer
low profitability given unexpected costs and unknown financial constraints, both of which are
aggravated by fluctuating exchange rates. Managing these risks involves currency and credit
processes that call for relatively sophisticated financial expertise. Moreover, completing
international sales may require helping foreign customers obtain credit, whether in the form of
trade credits, government-financed support, or bank guarantees. Firms accustomed to offering
financing in terms of the traditional 30- or 60-day trade-credit cycle at home regard the need for
different arrangements abroad as excessively escalating risk.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Critical Thinking
Objective: 14-3 Understand export startup and expansion
AACSB: Reflective thinking

14
Copyright © 2018 Pearson Education, Inc.
45) Which of the following is NOT one of the three main types of importers?
A) importers looking for suppliers abroad to concentrate their operating risks
B) importers looking for any product around the world they can deliver to local citizens for a
profit
C) importers looking to foreign-sourcing to get the highest quality products at the lowest possible
price
D) importers using foreign sourcing to optimize their supply chains
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-4 Explain the principles and practices of importing
AACSB: Analytical thinking

46) What are export management companies, and how do they help potential exporters?
Answer: An export management company (EMC) usually acts as the export arm of a
manufacturer. The EMC primarily obtains orders for its clients' products through the selection of
appropriate markets, distribution channels, and promotion campaigns. It collects, analyzes, and
furnishes credit information and advice regarding foreign accounts and payment terms. The
EMC also may take care of export documents, arrange transportation, set up patent and
trademark protection in foreign countries, and assist in establishing alternative forms of doing
business, such as licensing. EMCs operate on a contractual basis and provide exclusive
representation in a foreign territory. In the United States, most EMCs are small, entrepreneurial
ventures that tend to specialize by product, function, or market area. Although EMCs perform an
important function for companies that need their expertise, a manufacturer that uses an EMC
may lose control over foreign sales, as they are passing off that responsibility to an independent
party. If the EMC does not actively promote the product, the company will not generate many
exports.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Critical Thinking
Objective: 14-4 Explain the principles and practices of importing
AACSB: Reflective thinking

15
Copyright © 2018 Pearson Education, Inc.
47) A driving factor for the growth in imports is the impact of ________.
A) government programs
B) labor specialization
C) consumer preferences
D) social trends
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-5 Articulate the motivations and methods of importing
AACSB: Analytical thinking

48) One advantage of importing is that an importer can diversify its operating risks by
developing alternative suppliers.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-5 Articulate the motivations and methods of importing
AACSB: Analytical thinking

49) An arbitrageur is an exporter that seeks to conduct countertrade in emerging markets.

Answer: FALSE
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-5 Articulate the motivations and methods of importing
AACSB: Analytical thinking

50) What is the most likely reason that firms avoid aggressively seeking export opportunities?
A) Exporting is an activity best left to large, resource-rich firms.
B) Firms are unaware of opportunities in foreign markets.
C) Foreign customers cannot easily communicate their needs.
D) Firms are reluctant to adjust their established business practices.
Answer: D
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

16
Copyright © 2018 Pearson Education, Inc.
51) All of the following are common problems associated with exporting and importing
EXCEPT ________.
A) managing financial risks
B) finding reliable intermediaries
C) matching foreign rivals' prices
D) establishing distribution networks
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

52) The primary responsibilities of the ________ are the assessment and collection of all duties,
taxes, and fees on imported merchandise, the enforcement of customs and related laws, and the
administration of certain navigation laws and treaties.
A) U.S. Customs and Border Protection
B) U.S. Secret Service
C) Internal Revenue Service
D) Food and Drug Administration
Answer: A
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

53) Which of the following is NOT a primary duty of the U.S. Customs and Border Protection?
A) assessing all duties, taxes, and fees on imported merchandise
B) collecting import and export tariffs
C) protecting the U.S. from threatening imports
D) policing smuggling operations
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

17
Copyright © 2018 Pearson Education, Inc.
54) A major pitfall of exporting is misclassifying products in terms of the destination country's
tariff schedule, thereby incurring a higher tax or slower delivery.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

55) Companies new to exporting most frequently suffer over-commitment by top management in
taking on the initial difficulties and financial requirements of exporting.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Application of knowledge

56) According to surveys, the most common concern regarding international trade is a shortage
of working capital to finance exporting activities.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Analytical thinking

57) According to the text, technological advances such as e-mail and VoIP have increased the
appeal of international trade because it is now easy and inexpensive to manage customer needs
and communicate with customers frequently.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Information technology

18
Copyright © 2018 Pearson Education, Inc.
58) Why is countertrade considered inefficient?
Answer: Countertrade is an inefficient way of doing business; companies prefer the
straightforward efficiency of cash or credit. In the case of countertrade, rather than simply
consulting current foreign-exchange rates, buyers and sellers must enter complex and time-
consuming negotiations to reach a fair value on the exchange. As a result, traders often find
themselves stuck in situations where the goods sent as payment may be poor quality, packaged
unattractively, or difficult to sell and service. Also, there's a lot of room for price and financial
distortion in countertrade deals given that nonmarket forces set the prices of these goods. Most
fundamentally, the trade uncertainty and currency distortions created by countertrade threaten
free market forces with protectionism and price-fixing.
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Critical Thinking
Objective: 14-6 Describe the problems and pitfalls that challenge international traders
AACSB: Reflective thinking

59) You are the manager of an SME in the United States, and your firm wants to begin
exporting. Since you have never been involved with exporting, there are many compelling
reasons that encourage contacting the ________ to obtain expert counseling on exporting.
A) U.S. Treasury Department
B) Small Business Administration
C) Federal Credit Insurance Association
D) U.S. Commerce Department
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Application of knowledge

60) A customs broker or other import consultant can help an importer minimize import duties by
________.
A) bypassing duty rebates available through drawback provisions
B) incurring duties by using non-bonded warehouses and foreign trade zones
C) maximizing liability by improperly marking an import's country of origin
D) valuing products in such a way that they qualify for more favorable duty treatment
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

19
Copyright © 2018 Pearson Education, Inc.
61) Which of the following is NOT one of the three common ways that private trade
intermediaries are paid by exporters?
A) commission rate
B) buy-sell basis
C) fixed salary
D) special event contribution
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

62) A(n) ________ operates on a contractual basis and provides exclusive representation for an
exporter's goods and services in a foreign market.
A) export management company
B) import broker
C) invoice agent
D) countertrader
Answer: A
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

63) Which of the following is typically true of an export management company?

A) It is usually a division of a manufacturing company.
B) Most EMCs in the United States are large, representing a wide range of products and large
number of companies.
C) It operates on a contractual basis for a manufacturer by helping obtain orders for its clients'
products.
D) It usually takes title to products rather than acting as an agent.
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

20
Copyright © 2018 Pearson Education, Inc.
64) Which of the following is a difference between export management companies (EMCs) and
export trading companies (ETCs)?
A) ETCs deal with both exports and imports, while EMCs deal only with exports.
B) ETCs are subject to antitrust laws, while EMCs are not.
C) ETCs typically carry inventory, while EMCs typically do not.
D) ETCs operate more on the basis of demand, while EMCs operate more on the basis of supply.
Answer: D
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

65) Which of the following is true of export trading companies in the United States?
A) They are like independent distributors that match buyers with buyers.
B) They are prohibited from working with a firm's competitors due to antitrust laws.
C) They must be established independently of the company in order to avoid a conflict of
interest.
D) They have been a successful form of export intermediation in recent years.
Answer: D
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

66) Federal, state, and local governments that recognize the benefits of international trade,
actively aid the efforts of potential and active exporters and ________.
A) ensure the quality of exported products
B) establish barriers to punish foreign rivals
C) collect a fee for each successful export sale
D) protect the interests of struggling importers
Answer: D
Diff: 2
Learning Outcome: Discuss arguments for and against government intervention in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Diverse and multicultural work environments

21
Copyright © 2018 Pearson Education, Inc.
67) Morris Lighting is a U.S. firm that wants to start exporting its high-end lighting fixtures to
foreign markets. Morris Lighting should seek assistance from U.S. government agencies for all
of the following EXCEPT ________.
A) organizing trade events that help potential exporters make foreign contacts and explore export
opportunities
B) understanding how to comply with domestic and foreign trade regulations
C) acting as an export marketing department or international department for the company
D) providing information about market demographics and product demand
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Application of knowledge

68) A freight forwarder performs which of the following functions?

A) arranging the fastest and cheapest transportation of products to and from foreign suppliers
B) taking title to the goods it exports and imports from country to country
C) acting as a sales representative in a foreign market
D) valuing products that qualify for favorable tariffs
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

69) Which of the following types of agents moves international cargo, facilitates shipment
tracking, and handles product returns for exporters and importers?
A) trade intermediaries
B) third party logistics
C) customs brokers
D) freight forwarders
Answer: B
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

22
Copyright © 2018 Pearson Education, Inc.
70) The primary duty of the customs agency of a government is the assessment and collection of
all duties, taxes, and fees on imported merchandise.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Application of knowledge

71) The U.S. government has more than 10,000 tariff classifications and more than half of them
are subject to interpretation.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

72) Major types of indirect intermediaries include export trading companies, distributors, and
freight forwarding companies.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

73) An export trading company (ETC) works with many manufacturers rather than representing
a single manufacturer.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Application of knowledge

23
Copyright © 2018 Pearson Education, Inc.
74) The foreign freight forwarder is the largest export intermediary in terms of value and weight
of products managed.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

75) What difficulties of exporting can be minimized by customs brokers?

Answer: A battery of documents regulates international trade. Duty rates, customs clearance,
and entry processes, though overlapping, differ. Tariff classifications, value declarations, and
duty management spawn confusion and boost costs. Customs and security initiatives impose
regulations on international traders. Navigating these obstacles requires that traders manage the
paper trail that documents, certifies, and legalizes transactions. Exporters hire customs brokers to
manage trade documentation and obtain appropriate government permissions.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Synthesis
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

24
Copyright © 2018 Pearson Education, Inc.
76) Discuss the various ways a broker or other import consultant can help an importer minimize
import duties.
Answer:
a. Valuing products in such a way that they qualify for more favorable duty treatment: Different
product categories have different duties. For example, finished goods typically have a higher
duty than parts and components.
b. Qualifying for duty refunds through drawback provisions: Some exporters use imported parts
and components on which they paid a duty. In the United States, the drawback provision allows
domestic exporters to apply for a 99 percent refund of the duty paid on their imported goods, as
long as they become part of the exporter's product.
c. Deferring duties by using bonded warehouses and foreign trade zones: Companies do not
have to pay duties on imports stored in bonded warehouses and foreign trade zones until the
goods are removed for sale or used in a manufacturing process.
d. Limiting liability by properly marking an import's country of origin: Because governments
assess duties on imports based partly on the country of origin, a mistake in marking the country
of origin could result in a higher import duty. For example, in the United States, if a product or
its container is not properly marked when it enters the country, the product could be assigned a
marking duty equal to 10 percent of the customs value. This would be in addition to the normal
tariff.
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Critical Thinking
Objective: 14-7 Differentiate the resources and assistance that help international traders
AACSB: Analytical thinking

77) The basis for designing an effective export strategy most likely begins with ________.
A) identifying and developing the firm's core competencies
B) hiring local personnel in target markets to build the business
C) enlisting the support of an export management company
D) simultaneously targeting a large number of foreign markets
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-8 Define the standards of an export plan
AACSB: Analytical thinking

25
Copyright © 2018 Pearson Education, Inc.
78) In designing an export plan, managers initially do all of the following EXCEPT ________.
A) sequence tactics
B) specify objectives
C) assess resources
D) organize financial support
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-8 Define the standards of an export plan
AACSB: Analytical thinking

79) Corbin Coffee plans to initiate activities in foreign markets through indirect exporting. The
firm is most likely to use ________.
A) local managers to pay tariffs and duties
B) external specialists to assist in the export process
C) the International Trade Administration to monitor exports
D) freight forwarders to act as distributors in foreign markets
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-8 Define the standards of an export plan
AACSB: Application of knowledge

80) What is typically the most difficult aspect of an export plan for SMEs?
A) finding a freight forwarder
B) identifying core competencies
C) creating countertrade activities
D) targeting the right foreign market
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-8 Define the standards of an export plan
AACSB: Analytical thinking

26
Copyright © 2018 Pearson Education, Inc.
81) Jordan Jewelry is a U.S. firm that designs, manufactures, and sells inexpensive jewelry and
accessories. Executives at the firm believe that Jordan Jewelry could significantly increase its
profitability by exporting products to foreign markets. Before engaging in international trade,
Jordan executives need to develop an export plan. Which of the following questions is LEAST
relevant to this activity?
A) Would Jordan's resources be better utilized developing business in the United States?
B) How much will it cost to get Jordan's products to the targeted markets?
C) What marketing campaign would be best for Jordan's foreign markets?
D) Is exporting consistent with Jordan's long-term goals?
Answer: C
Diff: 3
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Critical Thinking
Objective: 14-8 Define the standards of an export plan
AACSB: Reflective thinking

82) Countertrade is an alternative means of structuring an international sale when ________.

A) natural resources are highly desirable
B) an importer is able to obtain a bank loan
C) an importer does not belong to the World Bank
D) conventional forms of payment are difficult, costly, or nonexistent
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

83) ________ refers to any one of several different arrangements that business parties negotiate
so that they can trade goods and services with limited or no use of currency.
A) Factoring
B) Offset
C) Countertrade
D) Barter
Answer: C
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

27
Copyright © 2018 Pearson Education, Inc.
84) Ultimately, countertrade is an inefficient way of doing business because it ________.
A) encourages buyers and sellers to use customs brokers to handle exchanges
B) requires buyers and sellers to negotiate a fair value on the exchange
C) reduces the risk that the goods sent as payment are of poor quality
D) eliminates the potential for price and financial distortion
Answer: B
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Reflective thinking

85) Procter & Gamble exchanges cleaning products for machinery with Russia and Hungary. The
nature of this transaction indicates that Procter & Gamble is engaging in ________.
A) third-party logistics
B) freight forwarding
C) countertrade
D) e-commerce
Answer: C
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Application
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Application of knowledge

86) Fundamentally, countertrade is best described as a(n) ________ transaction.

A) simple
B) common
C) desirable
D) inefficient
Answer: D
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

28
Copyright © 2018 Pearson Education, Inc.
87) All of the following are benefits of countertrade EXCEPT ________.
A) decreasing trade protectionism
B) increasing access to innovative technology
C) developing new trade relationships with foreign companies
D) preserving foreign-exchange reserves
Answer: A
Diff: 2
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

88) Countertrade refers to any one of several different arrangements that parties negotiate so that
they can trade goods and services with limited or no use of currency.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

89) Countertrade is an efficient way of doing business.

Answer: FALSE
Diff: 1
Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international
business
Skill: Concept
Objective: 14-9 Distinguish the principles and practices of countertrade
AACSB: Analytical thinking

29
Copyright © 2018 Pearson Education, Inc.