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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Global Business Today Eleventh Edition Chapter 14
14-12
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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Global Business Today Eleventh Edition Chapter 14
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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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Global Business Today Eleventh Edition Chapter 14
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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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Global Business Today Eleventh Edition Chapter 14
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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.
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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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14-17
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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Global Business Today Eleventh Edition Chapter 14
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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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Global Business Today Eleventh Edition Chapter 14
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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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Global Business Today Eleventh Edition Chapter 14
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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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Global Business Today Eleventh Edition Chapter 14
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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.
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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

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