International Business Chapter 14 Homework Soviet Various mechanisms such as letters of credit have evolved over time to help exporters deal with issues related to trust

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A TYPICAL INTERNATIONAL TRANSACTION

G) The entire process for conducting a trade transaction is summarized in Figure 14.7.

CONNECT

Click and Drag

Financing Exports and Imports

Summary

This activity focuses on export financing. Various mechanisms such as letters of credit have

evolved over time to help exporters deal with issues related to trust, currencies, differing legal

systems, and the like.

Activity

Students are asked to put the steps involved in an international transaction using a letter of credit

into the correct order.

Class Discussion

Exporters must deal with issues related to trust, foreign currencies, differing legal systems, and

so forth. Discuss the mechanisms that have evolved over time to deal with these issues.

Export Assistance

A) Prospective U.S. exporters can draw on two forms of government-backed assistance to help

their export programs. They can get financing aid from the Export-Import Bank and export credit

insurance from the Foreign Credit Insurance Association.

Video Note: To explore an international example of export assistance from the World Bank,

consider World Bank: Helping Moldovan Wine Exports in the International Business Library at

http://bit.ly/MHEIBVideo. Click “Ctrl+F” on your keyboard to search for the video title.

Additionally, our McGraw-Hill Education International Business Video Library at

http://bit.ly/MHEIBVideo provides an ongoing stream of updated video suggestions correlated

by key concept and major topic. Every new clip posted is supported by teaching notes and

discussion questions. Please feel free to leave comments in the library that you feel might be

helpful to your colleagues.

CONNECT

Video Case

Trump Tariffs Force Companies to Rework Supply Chains

Summary

This activity explores exporting and specifically how trade policy can force companies to change

their export strategies.

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Activity

Students are asked to watch a video on the impact of Trump’s tariffs on exports and then respond

to questions about the video.

more go to http://www.bloomberg.com/politics/articles/2016-08-30/export-import-bank-fight-

on-deck-in-congress-senate-campaigns.

EXPORT CREDIT INSURANCE

C) In the U.S., export credit insurance is provided by the Foreign Credit Insurance Association

(FCIA). FCIA provides coverage against commercial risks and political risks.

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Barter

D) Barter is a direct exchange of goods and/or services between two parties without a cash

transaction. Barter is viewed as the most restrictive countertrade arrangement. It is used

G) Switch trading refers to the use of a specialized third-party trading house in a countertrade

arrangement. When a firm enters a counterpurchase or offset agreement with a country, it often

ends up with what are called counterpurchase credits, which can be used to purchase goods from

that country. Switch trading occurs when a third-party trading house buys the firm’s

counterpurchase credits and sells them to another firm that can better use them.

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CONNECT

Case Analysis

Wanna Trade?

Summary

This activity explores countertrade. As Venezuela continues to deal with its economic crisis,

multinational companies have been forced to withdraw from the country. Those that are still

trying to be paid for products they have sold are finding that they may get paid in other products.

Activity

Students are asked to read a short case on countertrade and then respond to questions about the

case.

Class Discussion

Receiving goods for goods may not be a preferred method of exchange for many companies, but

in some cases, it may be the only choice. Discuss the situation in Venezuela and how companies

should respond.

Global Business Today Eleventh Edition Chapter 14

End-of-Chapter Resources

Critical Thinking and Discussion Questions

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 the

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

Outline the steps the exporter should take to effect this export to the Philippines.

2. You are the assistant to the CEO of a small technology 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 the CEO?

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?

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4. How do you explain the use of countertrade? Under what scenarios might its use increase

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

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?

globalEDGE™ Research Task

Use the globalEDGE™ site (globaledge.msu.edu) to complete the exercises in the text.

Exercise 1

Search phrase: Market Potential Index

Resource Name: Market Potential Index (MPI)

Website: http://globaledge.msu.edu/mpi

globalEDGE™ Category: Knowledge Tools

Additional Info:

MPI is an annual ranking study, developed and maintained by the Michigan State University

CIBER to demonstrate how companies can use macro-economic variables to rank the potential

of foreign markets for identification of commercial opportunities. The ranking on the site is

generic to U.S. exporters, but MSU-CIBER has developed several industry-specific or company-

specific versions of the index over the years.

Exercise 2

Search phrase: Export Tutorials

Resource Name: Export Tutorials

Website: http://globaledge.msu.edu/reference-desk/export-tutorials

globalEDGE™ Category: Reference Desk

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Additional Info:

Export Tutorials have been developed by the globalEDGE™ Team based on the most commonly

asked questions about the exporting process from Small to Medium-size Enterprises. Each

question is answered briefly on the page. Links to additional resources for more detailed answers

are also provided.

Tata Motors and Exporting

closing case

Summary

The closing case explores the international expansion of Tata Motors. The Indian multinational

exports cars and other vehicles worldwide under its Tata Motor Cars, Jaguar Land Rover, Tata

Daewoo, and Tata Hispano brand names. Tata Motors wants to double its exports within two

years, with a particular emphasis on expanding its exports to the Middle East, Africa, and Latin

America.

Case Discussion Questions

1. Tata Motors is an Indian multinational automotive company headquartered in Mumbai and a

core member of the very successful Tata Group. India is a potentially enormous market, and Tata

Motors is doing well in that market. How can Tata Motors use their core competencies in doing

well in India as a way to also do well in exporting?

2. Jaguar Land Rover Automotive PLC is the holding company of Jaguar Land Rover Limited, a

British automotive company which has its headquarters in the United Kingdom. It is also

subsidiary of Indian automotive company Tata Motors. How can Tata Motors leverage Jaguar

Land Rover in its exporting? How can Jaguar Land Rover leverage Tata Motors in its exporting?

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3. The Volvo Group is a manufacturer of trucks, buses, and construction equipment, which is

owned by Swedish interests. Volvo Car Corporation or Volvo Cars, on the other hand, is owned

by the Zhejiang Geely Holding Group (and formerly owned by Ford Motor Company). Should

Tata Motors use this Volvo Group example and focus more or exclusively on buses and trucks in

its exporting (since they are already successful in the market in much of the world)?

4. Tata Motors is primarily targeting emerging countries (e.g., Africa, Asia Pacific, Middle

Eastern, and Latin America) for its future exporting growth. Is this a viable and logical exporting

strategy?

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CONNECT

Geography

Summary

This activity is designed to test the student’s knowledge of geography. Questions related to

chapter material are asked, requiring students to understand the topics and the locations of the

countries involved.

Activity

Students are asked to respond to a series of question related to the geographic location of several

countries.

Class Discussion

Understanding the geographic location of countries is essential to the understanding of

international business. Ask students to discuss the implications of the geographic locations of the

countries in this exercise on the subject matter.

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Continuous Case Concept

One of the issues that the world’s automakers must contend with as they search the world for the

most efficient suppliers and locate production in the most optimal location is importing and

exporting, and the costs involved in the process. China and India have attracted significant

attention recently as both production locations and as growth markets. For suppliers, the

globalization of the industry implies that supplier operations become international too, and

consequently introduces new risks and concerns.

• Ask students to consider production in China and India. Costs have been rising for

imports, and shipping finished cars out is also becoming more expensive. Hyundai India

for example, recently shifted production of its premium hatchback to Europe to save on

import duties and transportation costs. Is there still any benefit to locating production in

China or India given these rising costs?

• Autos are an important source of exports for Central and Eastern European countries.

Numerous automakers including VW, Toyota, Peugeot, and Skoda have production

facilities in Central and Eastern European countries. What makes these countries

attractive export bases?

• As a supplier, how can you protect yourself when dealing with companies from foreign

countries? Does the fact that you are dealing with Toyota or BMW mitigate the need for

letters of credit? Why or why not?

• The U.S. Small Business Administration offers assistance to individuals wishing to

become registered vehicle importers. What types of assistance are available to suppliers

seeking to sell their products to automakers located in foreign markets?

This exercise works well as a summary for the material discussed in the chapter. The first

question can also be used as an introductory discussion. To extend the material and incorporate

the discussion of previous chapters, ask students to develop a plan using the various websites

given within this chapter, or ones they have found on their own, to market their products

internationally. The plan should include a description of their product, the identification of

prospective customers and their locations, a discussion of issues that could affect exporting to

those destinations, and the ways the supplier can protect itself financially.

Global Business Today Eleventh Edition Chapter 14

Additional Readings and Sources of Information

These 10 U.S. Seaports’ Exports Are Growing The Most This Year, And Here’s Why

https://www.forbes.com/sites/kenroberts/2017/12/12/these-10-u-s-seaports-exports-are-growing-

the-most-this-year-and-heres-why/#bd0c5c768030

China hits the United States with tariffs on $3 billion of exports

https://money.cnn.com/2018/04/02/news/economy/china-us-tariffs-trade/index.html

Why Your Business Should Get Into The Export Market

https://www.forbes.com/sites/forbescommunicationscouncil/2017/07/06/why-your-business-

should-get-into-the-export-market/#397c4ade4aea

The U.S.–China trade war has begun. Here’s how things got to this point.

Video: https://www.washingtonpost.com/news/worldviews/wp/2018/07/05/a-timeline-of-how-

the-u-s-china-trade-war-led-us-to-this-code-red-situation/?utm_term=.ef9bb94573a4

Nation That Suffered Worst Drought in Decades Is Water Exporter

http://www.bloomberg.com/news/articles/2016-07-11/nation-that-suffered-worst-drought-in–

decades-is-water-exporter

U.S. Gas Export Boom Could In Fact Benefit Russia

https://www.forbes.com/sites/joharper/2018/11/27/us-gas-export-boom-could-in-fact-benefit-

russia/#31db4d5236f0

A Russian-Cuban Entrepreneur Is New Face of Florida

https://www.bloomberg.com/view/articles/2016-03-11/a-russian-cuban-entrepreneur-is-new-

face-of-florida

How the NBA went global

https://www.washingtonpost.com/news/made-by-history/wp/2017/12/26/how-the-nba-went-

global/?utm_term=.bdebeb3782b1

6 of Top 10 U.S. Imports Are Also Top 10 Exports

https://www.forbes.com/sites/kenroberts/2018/02/28/six-of-top-10-u-s-imports-are-also-top-10-

exports/#31535d032edb

Apple, Nike and Starbucks Will Be the Biggest Victims of Trump’s China Tariffs

https://www.forbes.com/sites/johntamny/2018/04/22/apple-nike-and-starbucks-will-be-the-

biggest-victims-of-trumps-china-tariffs/#3c0863b11b48