70) Export trading companies are government-owned operations established in countries around
the world (including the United States) for the purpose of buying goods there.
71) While export management companies tend to focus on exporting, export trading companies
usually perform both import and export trades across many countries’ borders.
72) Unlike an EMC or an ETC, manufacturers’ export agents act as international sales
representatives in a limited number of markets for various noncompeting domestic companies,
typically operating on a commission basis.
73) Most export merchants buy goods, often competing lines, from many domestic companies
and then sell them in foreign markets.
74) Selling to a resident buying office is just like selling to domestic customers since the buying
office handles all of the details of exporting the products.
75) Most small businesses getting started in conducting global business do not need the services
of trade intermediaries because “going global” has become so easy that even the smallest
businesses can do it alone.
76) Foreign distributors offer exporting small businesses the benefit of knowledge of the local
markets in which they sell, the ability to cover a foreign sales territory thoroughly, and the ability
to handle all of the marketing, distribution, and service functions in foreign markets.
77) In a domestic joint venture, a domestic company forms an alliance with a company in the
target nation.
78) When two small businesses in the target nation form an alliance, they have formed a foreign
joint venture.
79) Some foreign countries place limitations on joint ventures with host companies within their
borders, for example by requiring the host company to own at least 51 percent of the venture.
80) One reason joint ventures fail is because entrepreneurs did not select a partner who shares
their company’s values and standards of conduct.
81) Foreign licensing is when a business buys and sells products in many countries, either in its
own name, or as an agent for its buyer-seller clients.
82) Foreign licensing is a relatively simple way for even the most inexperienced business owner
to extend his reach into global markets.
83) Before engaging in foreign licensing, a business owner should secure patent, trademark and
84) The licensing potential for intangibles, such as technology, trademarks, and other forms of
protection, is often greater than the licensing opportunities for products.
85) As the domestic market for franchises has become increasingly saturated with outlets, the
number of franchisers attracted to foreign markets has grown.
86) Although franchising is a popular way to do business in the United States, it is not a popular
strategy in international markets.
87) Although franchise outlets operate throughout the world, the primary market for U.S.
franchisers is Europe.
88) Based on an assessment by the international Franchise Association, the least attractive
country to enter with a franchise is Russia.
89) One reason for McDonald’s success in foreign markets is its decision to stick to exactly the
same menu in every country that it offers in the United States.
90) A countertrade is a transaction in which a company selling goods and services in a foreign
country agrees to help promote investment and trade in that country.
91) If a country’s currency is not convertible into any other currency, companies exporting to that
country usually engage in either countertrading or bartering.
92) Successful bartering is easier than countertrade but requires finding a business with
complementary needs.
93) Researching potential export markets is a waste of time and resources for small business
owners; the best way to find export opportunities is to travel abroad and sell.
94) Among major industrialized nations, the United States spends the greatest amount per capita
to promote exports.
95) The U.S. Department of Commerce and the International Trade Administration have the
market research available for locating the best target markets for a particular company and
specific customers in those markets.
96) Lack of export financing remains a significant barrier to small businesses selling in foreign
markets.
97) Collecting foreign accounts is usually less complex than collecting domestic ones.
98) A letter of credit is an agreement between an exporter’s bank and a foreign buyer’s bank that
guarantees payment to the exporter for a specific shipment of goods.
99) FOB is when the seller must deliver goods to the carrier, obtain export licenses, pay export
taxes, and bear the risk of loss until the goods are delivered to the buyer.
100) The Foreign Corrupt Practice Act, passed in 1977, considers bribing foreign officials to be a
criminal act.
101) Most small businesses begin their global ventures by establishing international locations.
102) The government of Palmeria placed a high import tariff on steel from Dano. Dano’s steel is
higher in quality and cheaper. Palmeria’s actions result in higher prices for their consumers.
103) The most frequently encountered impediments to international trade for small and medium-
sized manufactures relates to U.S. regulations.
104) A tariff is a limit on the amount of a product imported into a country.
105) The three biggest domestic barriers to exporting facing small businesses are attitude,
information, and financing.
106) The biggest barrier facing companies that have never exported is not knowing where or
how to start.
107) The first and most difficult step to exporting for the small business is breaking the
psychological barrier, “My company is too small to export.”
108) Even the smallest businesses have the potential to export.
109) The key to success in international markets is choosing the correct target market and
designing a strategy to reach it.
110) A quota is a limit on the amount of certain products imported into a country, while an
embargo is a total ban on imports of certain products.
111) Dumping involves selling large quantities of a product in a foreign market below cost.
112) Selling large quantities of a product in a foreign market below cost is the best way for a
small company to begin its export program.
113) To prove a charge of dumping under the U.S. Antidumping Act, a company must prove that
a foreign company’s prices on a product are lower here than in the home country and that U.S.
companies are directly harmed.
114) The only cultural barrier an American small business manager must overcome when
conducting business internationally is the language gap.
115) Learning the habits and the customs of the cultures in which they do business is essential
for small business managers trying to go global.
116) American business people can be on their best American behavior and go overseas and
offend the locals. This is, in part, due to the fact that business customs that are acceptable, or
even expected, in one country may be taboo in another.
117) Fortunately for U.S. business owners, American customs and habits have become the
standard for proper business behavior around the world.
118) While the World Trade Organization had 155 member countries which represent over 97
percent of all world trade, the market formed by NAFTA has more than 465 million people and
an annual output of $18.1 trillion in goods and services.
119) A free trade area is an association of countries that have agreed to knock down trade
barriers-both tariff and nontariff-among partner nations.
120) NAFTA is an agreement among the U.S., Canada, Mexico, Argentina, and Chile, forming a
free trade area among these countries.
121) NAFTA includes provisions reducing tariff and nontariff barriers and toughening health and
safety standards.
122) An important guideline for companies wanting to successfully compete internationally is to
appeal to the similarities within the various regions in which you operate, but recognize the
differences in their specific cultures.
123) An important guideline for companies wanting to successfully compete internationally is to
familiarize yourself with foreign customs, languages, and cultures, including their lifestyles,
values, customs, and business practices.
124) Explain why it is important to “go global.” What benefits can companies that take the
plunge into global business expect?
125) Outline the eight strategies for “going global” available to the small business owner.
126) One of the eight strategies a company uses to “go global” includes the use of trade
intermediaries. Identify the six types of trade intermediaries and explain why a small business
owner might use each one.
127) What advantages do taking on a partner in a joint venture offer a small business in an
international business opportunity? Disadvantages?
128) What strategies for trade can businesses use when exporting to countries whose currencies
are not convertible to other currencies? What are the disadvantages?
129) List and briefly explain the steps an entrepreneur should follow to establish an export
program.
130) Identify and discuss the domestic barriers to trade.
131) Identify and discuss the international barriers to trade.
132) Describe the other barriers to trade, including political, business, and cultural:
Mini-Case 15-1: The Grass Is Really Greener
It’s not usual for city people to be concerned about plants or grass-they see so little of them.
Nevertheless, Martha Goldman has been interested in these things since her first biology course
back in Brooklyn, New York. Martha won all the awards in the science fairs and eventually was
the recipient of a scholarship to college. She chose to major in botany and became fascinated
with the creation of hybrid plants and grasses. Martha was also concerned about the problem of
hunger around the world. She knew that improved plants and grains increased the productivity of
American agriculture, and hoped that someday she would find a way to play a small part in
reducing world hunger.
After college, with the help of her dad, she opened a small wholesale greenhouse. The business
was a modest success and allowed Martha to experiment with new growing methods. Two years
ago, Martha’s research paid off. She had been working on developing a fast-growing grass that
needed less water. One of the experiments produced a grass that seemed to have real potential.
She tested it with a local cattle rancher. All tests so far have shown that the new hybrid grass is
better for feeding cattle. Martha may have realized her dream-a grass that will grow better in
parts of the world that could not previously support cattle. High protein beef cattle may now be
able to thrive in parts of the world where previously it was not possible.
133) How should Martha proceed to determine the best way to export her new grass seed?