Essentials of Entrepreneurship and Small Business Management, 9e (Scarborough)
Chapter 16 Global Aspects of Entrepreneurship
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
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
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
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
5) Only about one-third of the world’s purchasing power lies outside the borders of the United
States.
6) As the trend toward increased globalization continues, successful companies must consider
themselves businesses without borders.
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.
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.
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.
10) Some of the strategic options entrepreneurs have when deciding to go global include the
Web, joint ventures, and franchising.
11) Entrepreneurs can use the Web to generate sales leads by researching customers and market
characteristics in other countries.
12) Explain why it is important to “go global.” What benefits can companies that take the plunge
into global business expect?
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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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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) used 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
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
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
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
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
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
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
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
36) Small businesses contribute ________ percent of U.S. export sales.
A) 20
B) 25
C) 33
D) 40
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
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
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
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
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
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
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
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
45) Which of the following is not one of the three major advantages to establishing an
international location?
A) Lower production costs
B) Need for smaller staff
C) Lower marketing costs
D) Development of an intimate knowledge of customer preferences
46) In the United States alone, companies import more than ________ worth of goods and
services annually.
A) $3.2 million
B) $1.2 trillion
C) $2.7 trillion
D) $2.3 trillion
47) Entrepreneurs who are considering importing goods and services or outsourcing their
manufacturing to foreign countries should begin by ________.
A) making sure that importing or outsourcing is right for their business
B) do your research before you leave home
C) establish a target market for your product
D) do your groundwork once you arrive
48) Trade intermediaries are domestic agencies that serve as distributors in foreign countries for
domestic companies of all sizes.
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.
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.
51) While export management companies tend to focus on exporting, export trading companies
usually perform both import and export trades across many countries’ borders.
52) 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.
53) Most export merchants buy goods, often competing lines, from many domestic companies
and then sell them in foreign markets.
54) 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.
55) 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.
56) 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.
57) In a domestic joint venture, a domestic company forms an alliance with a company in the
target nation.
58) When two small businesses in the target nation form an alliance, they have formed a foreign
joint venture.
59) 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.
60) One reason joint ventures fail is because entrepreneurs did not select a partner who shares
their company’s values and standards of conduct.
61) 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.
62) Foreign licensing is a relatively simple way for even the most inexperienced business owner
to extend his reach into global markets.
63) Before engaging in foreign licensing, a business owner should secure patent, trademark and
copyright protection.
64) The licensing potential for intangibles, such as technology, trademarks, and other forms of
protection, is often greater than the licensing opportunities for products.
65) As the domestic market for franchises has become increasingly saturated with outlets, the
number of franchisers attracted to foreign markets has grown.
66) Although franchising is a popular way to do business in the United States, it is not a popular
strategy in international markets.
67) Although franchise outlets operate throughout the world, the primary market for U.S.
franchisers is Europe.
68) A franchiser should have sufficient managerial and financial resources to devote to
globalization.
69) 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.
70) 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.
71) If a country’s currency is not convertible into any other currency, companies exporting to that
country usually engage in either countertrading or bartering.
72) Successful bartering is easier than countertrade but requires finding a business with
complementary needs.
73) 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.
74) Lack of export financing remains a significant barrier to small businesses selling in foreign
markets.
75) Collecting foreign accounts is usually less complex than collecting domestic ones.
76) 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.
77) 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.
78) Outline the eight strategies for “going global” available to the small business owner.