978-1259578113 Chapter 16 Solutions Manual

Unlock access to all the studying documents.

View Full Document

OPENING CASE: Exporting Desserts

Summary

The opening case explores the international expansion of LuLu’s Desserts, a company based in

Torrance, California, that manufactures and distributes ready-to-eat flavored gelatin desserts

inspired by its owner’s Mexican heritage. After a decade of building brand recognition in the

United States, LuLu’s Desserts began exporting to countries throughout North America and

around the world. Discussion of the case can revolve around the following questions:

QUESTION 1: What factors do you think encouraged LuLu’s desserts to expand outside of the

United States?

ANSWER 2: In its first decade of business, LuLu’s desserts was able to generate significant sales

QUESTION 2: Why do you think it took so long for LuLu’s desserts to launch its export

business?

ANSWER 2: There are a number of challenges that a business seeking to export its products may

QUESTION 3: How was Lulu’s Desserts ultimately able to generate significant international

sales?

ANSWER 3: The owner of LuLu’s Desserts sought assistance from government agencies, such

CRITICAL THINKING AND DISCUSSION QUESTIONS

QUESTION 1: A firm based in California wants to export a shipload of finished lumber to the

Philippines. The would-be importer cannot get sufficient credit from domestic sources to pay for

shipment but insists that the finished lumber can quickly be resold in the Philippines for a profit.

Outline the steps that the exporter should take to effect the export of this shipment to the

Philippines.

ANSWER 1: The steps are as follows:

(1) The Philippine importer places an order with the U.S. exporter and asks the exporter if it

would be willing to ship under a letter of credit.

QUESTION 2: You are the assistant to the CEO of a small textile firm that manufactures quality,

premium-priced, stylish clothing. The CEO has decided to see what the opportunities are for

exporting and has asked you for advice as to the steps the company should take. What advice

would you give to the CEO?

QUESTION 3: An alternative to using a letter of credit is export credit insurance. What are the

advantages and disadvantages of using export credit insurance rather than a letter of credit for

exporting (a) a luxury yacht from California to Canada, and (b) machine tools from New York to

Ukraine?

QUESTION 4: How do you explain the use of countertrade? Under what scenarios might its use

increase still further by the year 2020? Under what scenarios might its use decline?

QUESTION 5: How might a company make strategic use of countertrade schemes as a

marketing weapon to generate export revenues? What are the risks associated with pursuing such

a strategy?

CLOSING CASE: Two Men and a Truck

Summary

The closing case explores the international expansion of the moving company Two Men and a

Truck. As its name implies, the company started with a single moving truck and two employees.

Since then, Two Men and a Truck has expanded its reach to over 6,000 employee in 320

locations around the world while maintaining its original branding strategy. The following

questions can be helpful in directing the discussion.

QUESTION 1: How does a franchise system such as the one used by Two Men and a Truck

create value for its global partners?

ANSWER 1: Two Men and a Truck is able to offer its franchisees significant operational support,

QUESTION 2: Two Men and a Truck points to the size of the middle class in a country and the

population’s mobility as the core factors that guide its market entry into a country and ultimately

its success. Explain the company’s reasoning.

QUESTION 3: Is the way Two Men and a Truck uses franchising a form of exporting or is it

simply franchising as discussed in Chapter 15. What is the company really exporting

internationally?

QUESTION 4: How would you use business analytics to identify exporting opportunities for

Two Men and a Truck?

MHE INTERNATIONAL BUSINESS VIDEO LIBRARY

Please click here to visit our International Business Video Library on Pinterest, which is updated

on a monthly basis. While there, be sure to “like” the clips that work well for you, and add notes

that might be helpful to your colleagues.

INCORPORATING globalEDGE™ EXERCISES

Use the globalEDGE™ site {globaledge.msu.edu/} to complete the following exercises:

Exercise 1

One way that exporters analyze conditions in emerging markets is through the use of

macroeconomic indicators. The Market Potential Index (MPI) is a yearly study conducted by the

Michigan State University Center for International Business Education and Research

(MSU-CIBER) to compare the market potential of emerging markets for U.S. exporters. Provide

a description of the dimensions used in the index. Which of the dimensions would have greater

importance for a company that markets wireless devices? What about a company that sells

clothing?

Exercise 2

You work in the sales department of a company that manufactures and sells medical implants. A

Brazilian company contacted your department and expressed interest in purchasing a large

quantity of your products. The Brazilian company requested an FOB price quote. One of your

colleagues mentioned to you that FOC is part of a collection of international shipping terms

called “Incoterms,” but that was all he knew. Find the Export Tutorials on the globalEDGE site,

and find a more detailed explanation of Incoterms. For an FOB quote, what line items will you

need to include in your price quote, in addition to the price your company will charge for the

products?