Establishing International Locations
79) 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.
80) What advantages do taking on a partner in a joint venture offer a small business in an
international business opportunity? Disadvantages?
81) What strategies for trade can businesses use when exporting to countries whose currencies
are not convertible to other currencies? What are the disadvantages?
82) List and briefly explain the steps an entrepreneur should follow to establish an export
program.
Mini-Case 16-1: The Grass Is Really Greener
It’s not usual for city people to be concerned about plants or grass – they see so little of green
space. Nevertheless, Martha Goldman has been interested in these things since her first biology
course in Brooklyn, New York. Martha won all the awards in the science fairs and eventually
was the recipient of a college scholarship. 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.
83) How should Martha proceed to determine the best way to export her new grass seed?
84) The most frequently encountered impediment to international trade for small and medium–
sized manufacturers is ________.
A) foreign sales are not sufficiently profitable
B) transportation and shipping costs
C) language and cultural barriers
D) foreign regulations
85) The most frequently encountered impediment to international trade for small and medium–
sized service firms is ________.
A) foreign sales are not sufficiently profitable
B) transportation and shipping costs
C) language and cultural barriers
D) foreign regulations
86) Which of the following is a domestic barrier to small business exporting?
A) The attitude, “I’m too small to export.”
B) A lack of information about how to get started in exporting.
C) A lack of export financing for small companies.
D) All of the above
87) Old assumptions regarding global business assumptions for exporting include ________.
A) I am “too small” to go global and my product or service won’t sell outside the U.S.
B) Exporting is too risky for my small company and my domestic market is currently secure.
C) Getting paid is difficult and this will impede my success.
D) All of the above
88) Many nations have lowered tariffs they impose on products and services brought into their
border and rely on other ________.
A) nontariff structure as protectionist trade barriers
B) taxes
C) duty fees
D) dumping
89) Malcolm won a contract to provide nuts, bolts, and washers to a small African country’s
military. Unfortunately, neither his bankers nor venture capitalists would provide the loans
needed to buy the material to produce the order. The bank did not do international loans. Which
barrier to international trade is Malcolm experiencing?
A) Financing
B) Information
C) Cultural
D) Attitude
90) A tariff is ________.
A) a law that a government uses to regulate products that are imported into the country
B) the maximum amount of a product that can be imported or exported
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a duty, or tax, that a government puts on products that are imported into the country
91) The small country of Bascovina wanted to protect its infant basket industry and imposed a
400 percent tariff on all imported baskets. The high tariff dropped the bottom out of imported
basket sales, and imports of baskets stops. Why did this happen?
A) The citizens realized that because the government imposed the tariff, imported basket
purchases were undesirable.
B) The tariff reduced the price of imported baskets and consumers felt that because of the low
prices, the baskets were of low quality and stopped their purchases.
C) The tariff barred all shipments of baskets to Bascovina.
D) The tariff makes the price of imported baskets so high that they are not competitive.
92) John wants to expand into the foreign markets, but he cannot convince his partners. They
believe that international markets are the domain of large corporations. John is facing which
barrier to international trade?
A) Financing
B) Political
C) Cultural
D) Attitude
93) A quota is ________.
A) a duty or tax that a government puts on products that are imported into the country
B) the maximum amount of a product that can be imported into a country
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a law that a government uses to regulate products that are imported into the country
94) An embargo is ________.
A) a duty, or tax, that a government puts on products that are imported into the country
B) the maximum amount of a product that can be imported or exported
C) a prohibition or suspension of foreign trade of specific imports or exports
D) a law that a government uses to regulate products that are imported into the country
95) ________ is the practice of selling substantial quantities of a product in a foreign market at
prices that are below either the home-market price or below the full cost of producing it.
A) Exporting
B) Bartering
C) Dumping
D) Price discrimination
96) An American executive went to a foreign country to sign a business contract. While there,
(s)he found that there were numerous complex government regulations her/his company needed
to meet before closing the deal. This executive was experiencing which barrier to international
trade?
A) Tariff
B) Political
C) Cultural
D) Domestic
97) Business owners new to international business are sometimes shocked ________.
A) by the wide range of labor costs they encounter
B) that practices common in the United States (e.g., overtime, women workers, and employee
benefits) are restricted, disfavored, or forbidden in other cultures
C) that what appear to be “bargain” labor rates turn out to be excessively high after accounting
for the quality of the labor force and the benefits their governments mandate
D) All of the above
98) The ________ of a nation includes the belief, values, views, and mores that its inhabitants
share.
A) political atmosphere
B) culture
C) tariffs
D) free trade area
99) An American executive went to a Middle Eastern country to sign an oil contract. Before the
contract was signed, the American and the Arab official met for tea. Relaxing, the American put
her/his feet up on a table. The official became angry and left the room. Later it was found that
showing the soles of shoes was a serious insult. This represents which barrier to international
trade?
A) Tactical
B) Political
C) Strategic
D) Cultural
100) Among major industrialized nations, the United States spends the greatest amount per
capita to promote exports.
101) 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.
102) The Foreign Corrupt Practice Act, passed in 1977, considers bribing foreign officials to be a
criminal act.
103) Most small businesses begin their global ventures by establishing international locations.
104) 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.
105) The most frequently encountered impediments to international trade for small and medium-
sized manufacturers relates to U.S. regulations.
106) A tariff is a limit on the amount of a product imported into a country.
107) The three biggest domestic barriers to exporting facing small businesses are attitude,
information, and financing.
108) The biggest barrier facing companies that have never exported is not knowing where or
how to start.
109) The first and most difficult step to exporting for the small business is breaking the
psychological barrier, “My company is too small to export.”
110) Even the smallest businesses have the potential to export.
111) The key to success in international markets is choosing the correct target market and
designing a strategy to reach it.
112) 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.
113) Dumping involves selling large quantities of a product in a foreign market below cost.
114) 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.
115) 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.
116) The only cultural barrier an American small business manager must overcome when
conducting business internationally is the language gap.
117) Learning the habits and the customs of the cultures in which they do business is essential
for small business managers trying to go global.
118) 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.
119) Fortunately for U.S. business owners, American customs and habits have become the
standard for proper business behavior around the world.
120) Identify and discuss the domestic barriers to trade.
121) Identify and discuss the international barriers to trade.
122) Describe the other barriers to trade, including political, business, and cultural.
123) Currently, the World Trade Organization (WTO) has 164 member countries that represent
over ________ percent of all world trade.
A) 97
B) 39
C) 76
D) 52
124) The North American Free Trade Agreement (also known as NAFTA) served to ________.
A) bring South America, Mexico, the U.S., and Canada together as one market
B) eliminate all tariffs among member nations, effective immediately, and raise them for
nonmembers
C) mostly benefit the trading relationship between Canada and the United States
D) create a unified market of 465 million people and $18.1 trillion in goods and services
125) The North American Free Trade Agreement (NAFTA) created a free trade area among
________.
A) Canada, Mexico, and the United States
B) Japan, Mexico, and Canada
C) Mexico, Japan, and the United States
D) None of the above
126) The North American Free Trade Agreement has which of the following provisions?
A) The immediate elimination of all tariff and quota barriers on all goods.
B) The elimination of tariffs on most goods.
C) A lowering of safety and air quality standards.
D) The formation of a North American Trade Organization.
127) Which of the following is a guideline for becoming a successful international competitor?
A) Make yourself at home in all of the world’s key markets — North America, Europe, and Asia.
B) Become familiar with foreign customs and languages.
C) Consider using partners and joint ventures to break into foreign markets you cannot penetrate
on your own.
D) All of the above
128) While the World Trade Organization had 164 member countries which represent over 97
percent of all world trade, the market formed by NAFTA has more than 493 million people and
an annual output of $22 trillion in goods and services.
129) A free trade area is an association of countries that have agreed to knock down trade
barriers (both tariff and nontariff) among partner nations.
130) NAFTA is an agreement among the U.S., Canada, Mexico, Argentina, and Chile, forming a
free trade area among these countries.
131) NAFTA includes provisions reducing tariff and nontariff barriers and toughening health and
safety standards.
132) 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.
133) 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.