Mgmt 425 E2 Chapter 13

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  1. What do you have to consider when entering a new market?
    • business environment
    • company's competency
  2. institutional arrangement by which a firm gets its products, technologies, human skills, or other resources into a market
    entry mode
  3. What are the three types of entry mode?
    • exporting, importing, countertrade
    • contactual entry
    • investment entry
  4. What is the most common method of buying and selling goods internationally?
    exporting and importing
  5. What are the three main reasons why companies export?
    • Expand sales (domestic is saturated, lower fixed costs)
    • Diversify sales (offset slow sales)
    • Gain experience (low cost, low risk way of starting international business)
  6. What is the Four Step Model to developing an export strategy?
    • Identify a Potential Market
    • Match Needs to Abilities
    • Initiate Meeting
    • Commit Resources
  7. In the Four step model to developing an export strategy, what step seeks a market with potential demand for your product?
    1. Identify a Potential Market
  8. What should beginner in exporting do in the first step of the export strategy model?
    • focus on one or only a few markets
    • seek expert advice on regulations, processes, and special issues related to the target market
  9. In the Four step model to developing an export strategy, which step decides if you are capable of satisfying the target market's needs?
    2. Match Needs to Abilities
  10. In the Four step model to developing an export strategy, which step focuses on the initial contact with the target market? What is it's focus?
    • 3. Initiate Meetings
    • focus on building trust and cooperative climate
  11. In the Four step model to developing an export strategy, which step has the company's human, financial, and physical resources working in the target market? How long should objectives be projected for?
    • 4. Commit Resources
    • 3 - 5 years
  12. Entrepreneurs and small/medium sized firms use _____ that specialize in getting products from one market into another; while large companies usually perform all of their export activities themselves
  13. _____ is the practice by which a company sells its products directly to buyers in a target market
    direct exporting
  14. When exporting to foreign markets, what are the two methods of involvement?
    • direct exporting (sales reps, distributors)
    • indirect exporting (agents, export trading companies, export management companies)
  15. What are the forms of direct exporting?
    • sales reps (promote products, attend trade fairs)
    • distributors (take ownership of products when it enters their country)
  16. What are the forms of indirect exporting?
    • agents
    • export trading companies
    • export management companies
  17. What are the forms of entry and operations?
    • wholly-owned subsidiary
    • joint venture
    • licensing/franchising
    • contract manufacturing
    • management contracts
    • turn-key projects
  18. What are the Methods of Involvement concerning entry modes into foreign markets?
    • exporting to foreign markets
    • entry & operations in foreign markets
    • strategic alliances (partial method of involvement)
  19. What is a wholly-owned subsidiary
    own company completely in foreign market
  20. What is a joint venture agreement?
    share the ownership operation with someone in the target market
  21. What does licensing and franchising entail?
    deals with intangible property and the franchisor/licensor receives licensing
  22. What does contract manufacturing involve?
    contract out the production in the target market but does not own the production site
  23. What does management contracts involve?
    one company supplies another with managerial expertise for a specific period of time for a fee
  24. What does a turn-key project involve?
    build site and offer contract management for a certain period of time before turning it ove (only open to big companies
  25. What is involved in a strategic alliance?
    a cooperative undertaking between two or more companies for a limited purpose and duration (ex. airline lease lounges, summer abroad classes)
  26. What are the factors influencing the choice of method when selecting an entry mode?
    • amount of investment (how much $ is required)
    • return on investment (profitability)
    • payback period (# yrs to cover initial investment)
    • degree of management control
    • favorable environmental factors (cultural, political)
    • cost of doing business (rent, payroll, taxes)
    • management experiences with international business
  27. What are the methods of payment involved in exports/imports and is it more of a risk to the importer or exporter?
    • open account(exporter risk)
    • documentary collections (more exporter risk)
    • letters of credit (more importer risk)
    • advance payment (importer risk)
  28. What are the shipping documents involved in imports and exports?
    • invoice/packaging list
    • documentary collections (draft)
    • letter of credit
    • bill of lading
    • customs document
  29. What are the two types of documentary collection document?
    • sight draft - upon presentation it has to be paid
    • time draft - post-dated check
  30. What are the types of letters of credit documents?
    • revokable - can be modified by the issuing bank without approval
    • irrevocable - bank issuing letter can modify after approval from both exporter and importer
    • confirmed - guaranteed by both exporter's bank and importer's bank
  31. What are the three types of Bill of Lading documents?
    • airway bill of lading
    • ocean/sea bill of lading
    • land bill of lading
  32. What are the forms of countertrade?
    • barter¬†
    • counterpurchase (specific product, specific time)
    • offset (not specified product, not specified time)
    • switch trading (third party)
    • buyback (export of industrial equipment in return for products produced by that equipment)
  33. when a company sells its products directly to buyers in a target market using local sales reps and distributors
    direct exporting
  34. when a company sells its products to intermediaries who then resell to buyers in a target market
    indirect exporting
  35. individuals or organizations that represent one or more indirect exporters in a target market
  36. company that exports products on behalf of indirect exporters
    export management company (EMC)
  37. What is the biggest advantage of an EMC?
    its deep understanding of the cultural, political, legal, and economic conditions of the target market
  38. company that provides services to indirect exporters in addition to activities related directly to clients' exporting activities
    • export trading company (ETC)¬†
    • mostly implemented in the East
  39. specialist in export-related activities such as customs clearing, tariff schedules, and shipping and insurance fees
    freight forwarder
  40. practice of selling goods or services that are paid for, in whole or in part, with other goods or services
  41. exchange of goods or services directly for other goods or services without the use of money
  42. sale of goods or services to a country by a company that promises to make a future purchase of a specific product from the country
  43. agreement that a company will offset a hard-currency sale to a nation by making a hard-currency purchase of an unspecified product from that nation in the future
  44. practice in which on company sells to another its obligation to make a purchase in a given country
    switch trading
  45. export of industrial equipment in return for products produced by that equipment
  46. export/import financing in which an importer pays an exporter for merchandise before it is shipped
    advance payment
  47. export/import financing in which a bank acts as an intermediary without accepting financial risk
    documentary collection
  48. document ordering an importer to pay an exporter a specified sum of money at a specified time
    draft (bill of exchange)
  49. contract between an exporter and a shipper that specifies merchandise destination and shipping costs
    bill of lading
  50. export/import financing in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document
    letter of credit
  51. export/import financing in which an exporter ships merchandise and later bills the importer for its value
    open account
  52. practice by which one company owning intangible property grants another firm the right to use that property for a specified period of time
  53. practice by which companies use licensing agreements to exchange intangible property with one another
    cross licensing
  54. practice by which one company supplies another with intangible property and other assistance over an extended period
  55. practice by which one company designs, constructs, and tests a production facility for a client firm
    turn-key project
  56. relationship whereby two or more entities cooperate to achieve the strategic goals of each
    strategic alliance
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Mgmt 425 E2 Chapter 13
Mgmt 425 E 2 Ch13
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