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Essentials of Entrepreneurship and Small Business Management, 8e (Scarborough)

Chapter 15 Global Opportunities

1) Becoming a global entrepreneur requires ________.A) constant innovation

B) maintaining a high level of quality and constantly improving itC) being sensitive to foreign customers' unique requirements and adopting a more respectfulattitude toward foreign habits and customs) All of the aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

) /or an entrepreneur0 e,panding into international mar%ets ________.

A) guarantees its success in the mar%etplaceB) ma%es it a member of A$$ automaticallyC) helps it grow faster and survive competition better) leads to business failure for companies under 2133 million in annual revenueAnswer! Ciff! AAC"B! Analytical $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

4) $he first obstacle an entrepreneur must overcome on the way to creating a truly global

business is ________.A) finding a (oint venture partnerB) learning to thin% globallyC) locating motivated0 multilingual managers for overseas assignments) finding overseas distributors for the company's productsAnswer! Biff! 1AAC"B! #eflective $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

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9) Before going global0 entrepreneurs should as% themselves questions regarding ________.A) profit potential and commitment of resources for a global effortB) a viable e,it strategy and the cost of not going globalC) the reasons0 rationale0 and understanding cultural differences) All the above

Answer! iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

) nly about one*third of the world's purchasing power lies outside the borders of the :nited"tates.Answer! /A&"+iff! AAC"B! Analytical $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

6) As the trend toward increased globali;ation continues0 successful companies must considerthemselves businesses without borders.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.


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>) &earning to thin% globally may be the first ?and most threatening) obstacle an entrepreneurmust overcome on the way to creating a truly global business.Answer! $#:+iff! AAC"B! #eflective $hin%ing

&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

13) "ome of the strategic options entrepreneurs have when deciding to go global include the@eb0 (oint ventures0 and franchising.Answer! $#:+iff! 1AAC"B! 8nformation $echnology&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

11) +ntrepreneurs can use the @eb to generate sales leads by researching customers and mar%etcharacteristics in other countries.Answer! $#:+iff! 1AAC"B! 8nformation $echnology&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

1) +,plain why it is important to -go global.- @hat benefits can companies that ta%e the plungeinto global business e,pectAnswer! "mall businesses can no longer consider themselves to be domestic companies if theytruly want to compete. 7olitical0 social0 cultural0 and economic forces are driving smallbusinesses into international mar%ets. 7owerful0 affordable technology increases access toinformation on conducting global business0 and the growing interdependence of the worldeconomies ma%es it easier for companies of all si;es to engage in international trade."ince the global mar%et offers more niches0 the fle,ibility and speed of a small business canbecome a competitive advantage.Advantagesof going global include the following! ffsetting sales declines in the domestic mar%et 8ncreasing sales and profits +,tending their products' life cycles &owering manufacturing costs 8mproving competitive position and enhancing reputation

#aising quality levels Becoming more customer orientediff! 4AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*1 +,plain why -going global- has become an integral part of many smallcompanies' mar%eting strategies.

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14) All of these are steps small companies follow when they begin conducting global business onthe @eb except________.A) connecting to e*mailB) building a globally*accessible @eb siteC) setting up lin%s to related company @eb sites

) using the @eb to conduct international mar%et researchAnswer! Ciff! AAC"B! 8nformation $echnology&earning b(! 1* escribe the principal strategies small businesses have for going global.

19) @hich of the following statements isDare true regarding e,port management companiesA) ost are merchant intermediaries that wor% on a buy*and*sell arrangement with domesticsmall companies.B) $hey provide small businesses with a low*cost0 efficient0 independent0 international mar%etingdepartment.C) any speciali;e in particular products or product lines and offer services ranging from mar%etresearch and advice or patent protection0 to arranging financing and handling shipping.) All of the aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

1) An e,port trading company ________.A) is a business that buys and sells products in many countries0 either in its own name or as anagent for its buyer*seller clientsB) typically offers a wide range of services such as e,porting0 shipping0 storing0 distributing0 andothers to their clientsC) is formed by an agreement by which a licenser gives a foreign licensee the right to use apatent0 trademar%0 copyright0 technology0 and products in return for a percentage of the licensee'ssales or profits) Both A and C aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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16) @hich of the following trade intermediaries lowers the ris% of e,porting for a smallbusinessA) +,port management companiesB) +,port trading companiesC) #esident buying offices

) All of the aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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3) /oreign distributors offer small businesses which of the following benefitsA) A detailed %nowledge of the local mar%ets in which they sell.B) $he ability to cover a foreign sales territory thoroughly.C) $he ability to handle all of the mar%eting0 distribution0 and service functions in foreign

mar%ets.) All of the aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

1) 8n a?n) ________0 two or more :.". small businesses form an alliance for the purpose ofe,porting their goods and services. $he companies get antitrust immunity and shareresponsibility for the business equally.A) foreign (oint venture

B) trade intermediaryC) domestic (oint venture) e,port management companyAnswer! Ciff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

) 8n a?n) ________0 a domestic small business forms an alliance with a company in the targetnation for the purpose of e,porting to that mar%et.A) foreign (oint ventureB) trade intermediaryC) domestic (oint venture) e,port management companyAnswer! Aiff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

4) $he most important ingredient for a successful (oint venture is ________.A) targeting the right country in which to sellB) getting government approval and avoiding antitrust chargesC) choosing the right partner

) splitting costs and profits equallyAnswer! Ciff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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9) @hich of the following is a common problem in (oint venturesA) 8ncompatible management styles among partners.B) /ailure of partners to establish common goals.C) /ailure of partners to carefully determine each party's contributions and responsibilities0distribution of earnings0 etc.

) All of the aboveAnswer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

) any (oint ventures fail because the parties involved neglected to ________.A) select a partner who shares their company's valuesB) spell out in writing e,actly how the venture will wor% and who has decision*ma%ing authorityC) select a partner whose s%ills are different from0 but compatible with0 their own) All of the above

Answer! iff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

6) /oreign licensing has its greatest potential in the licensing of ________.A) productsB) intangibles ?e.g.0 technology0 copyrights0 and trademar%s).C) goods) franchisesAnswer! Biff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.


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=) /oreign licensing is ________.A) required when a business buys and sells products in many countries0 either in its own name oras an agent for its buyer*seller clientsB) a government*owned or business*owned facility set up in a foreign country to buy productsthat are made there

C) the use by one firm ?the carrier) of its overseas distribution networ% to sell noncompetitiveproducts made by other firms ?riders)) an agreement in which a licenser gives a licensee in another country the right to use thatlicenser's patent0 trademar%0 copyright0 technology0 and products in return for a percentage of thelicensee's sales or profitsAnswer! iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

>) omino's 7i;;a and conald's operating in Eapan and +urope are e,amples of ________.

A) foreign management companiesB) (oint venturingC) foreign licensing) international franchisingAnswer! iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

43) $he first step in establishing a successful global franchise arrangement is to ________.A) generate lead for potential franchiseesB) structure the franchise dealC) identify the country or countries that are best suited to the franchiser's business concept) select quality candidatesAnswer! Ciff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

41) ________ is a transaction in which a company selling goods and services in a foreign mar%etagrees to help promote investment and trade in that country.A) CountertradingB) Bartering

C) /oreign licensing) +,portingAnswer! Aiff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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4) $he drawbac%s of countertrading include which of the followingA) Countertrade transactions can be complicated0 cumbersome0 and time*consuming.B) Countertrade transactions can increase the chances that a company will be stuc% withmerchandise it cannot move.C) Countertrade transactions can lead to unpleasant surprises concerning the quantity and quality

of products required in the countertrade.) All of the aboveAnswer! iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

44) ________0 the e,change of goods and services for other goods and services0 is one way oftrading with countries that lac% convertible currency.A) CountertradingB) Bartering

C) /oreign licensing) +,portingAnswer! Biff! 1AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

49) @hich of the following isDare often used by companies e,porting to countries that lac% aconvertible currencyA) CountertradingB) 8ndirect e,portingC) Bartering) A and C onlyAnswer! iff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

4) Fance $echnologies0 8nc.0 has agreed to sell some of its computers to a company inBascovina0 a country whose currency is worthless outside its own borders. As part of theagreement0 Fance will sell the foreign customer its computers in e,change for a specifiednumber of tons of coffee0 a ma(or e,port of Bascovina. Fance has already arranged to sell thecoffee to a ma(or processor for a set price in :.". dollars. Fance has engaged in ________.

A) barteringB) foreign licensingC) e,porting) countertradingAnswer! Aiff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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46) "mall businesses contribute ________ percent of :.". e,port sales.A) 3B) C) 44

) 93Answer! Ciff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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93) $he second step to creating a sound e,port strategy involves ________.A) analy;ing the product or serviceB) recogni;ing the potential to e,portC) analy;e your commitment) research mar%et and pic% your target

Answer! Aiff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

91) ne of the biggest barriers to small business e,ports is lac% of ________.A) access to adequate financingB) attractive countries that are not already saturated by franchising effortsC) effective distribution strategies) information to ma%e informed decisions about franchisingAnswer! A

iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

9) $he final step in creating a sound e,port strategy is to ________.A) find your customerB) ship your goodsC) collect your money) find financingAnswer! Ciff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

94) A ________ is an agreement between an e,porter's ban% and the foreign buyer's ban% thatguarantees payment to the e,porter for a specific shipment of goods.A) ban% draftB) letter of creditC) repurchase agreement) trade acceptanceAnswer! Biff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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99) A ________ is a document an e,porter draws on a foreign buyer0 requiring the buyer to paythe face amount0 either on sight or on a specified date0 once the goods are shipped.A) ban% draftB) letter of creditC) repurchase agreement

) trade acceptanceAnswer! Aiff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

9) @hich of the following is notone of the three ma(or advantages to establishing aninternational locationA) &ower production costsB) Feed for smaller staffC) &ower mar%eting costs

) evelopment of an intimate %nowledge of customer preferencesAnswer! Biff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

96) 8n the :nited "tates alone0 companies import more than ________ worth of goods andservices annually.A) 24. millionB) 21. trillionC) 2.< trillion) 2.4 trillionAnswer! Ciff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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9=) $rade intermediaries are domestic agencies that serve as distributors in foreign countries fordomestic companies of all si;es.Answer! $#:+iff! 1AAC"B! #eflective $hin%ing

&earning b(! 1* escribe the principal strategies small businesses have for going global.

9>) ost e,port management companies ?+Cs) are merchant intermediaries that wor% on abuy*and*sell arrangement with domestic small companies0 providing small businesses with alow*cost0 efficient0 independent0 international mar%eting department.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

3) +,port trading companies are government*owned operations established in countries aroundthe world ?including the :nited "tates) for the purpose of buying goods there.Answer! /A&"+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

1) @hile e,port management companies tend to focus on e,porting0 e,port trading companiesusually perform both import and e,port trades across many countries' borders.Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

) :nli%e an +C or an +$C0 manufacturers' e,port agents act as international salesrepresentatives in a limited number of mar%ets for various noncompeting domestic companies0typically operating on a commission basis.Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

4) ost e,port merchants buy goods0 often competing lines0 from many domestic companiesand then sell them in foreign mar%ets.

Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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9) "elling to a resident buying office is (ust li%e selling to domestic customers since the buyingoffice handles all of the details of e,porting the products.Answer! $#:+iff! AAC"B! Analytical $hin%ing


) ost small businesses getting started in conducting global business do not need the servicesof trade intermediaries because -going global- has become so easy that even the smallestbusinesses can do it alone.Answer! /A&"+iff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

6) /oreign distributors offer e,porting small businesses the benefit of %nowledge of the localmar%ets in which they sell0 the ability to cover a foreign sales territory thoroughly0 and the abilityto handle all of the mar%eting0 distribution0 and service functions in foreign mar%ets.Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

) "ome foreign countries place limitations on (oint ventures with host companies within theirborders0 for e,ample by requiring the host company to own at least 1 percent of the venture.

Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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63) ne reason (oint ventures fail is because entrepreneurs did not select a partner who sharestheir company's values and standards of conduct.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing


61) /oreign licensing is when a business buys and sells products in many countries0 either in itsown name0 or as an agent for its buyer*seller clients.Answer! /A&"+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

6) /oreign licensing is a relatively simple way for even the most ine,perienced business ownerto e,tend his reach into global mar%ets.

Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

64) Before engaging in foreign licensing0 a business owner should secure patent0 trademar% andcopyright protection.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

69) $he licensing potential for intangibles0 such as technology0 trademar%s0 and other forms ofprotection0 is often greater than the licensing opportunities for products.Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

6) As the domestic mar%et for franchises has become increasingly saturated with outlets0 thenumber of franchisers attracted to foreign mar%ets has grown.Answer! $#:+iff! 1

AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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66) Although franchising is a popular way to do business in the :nited "tates0 it is not a popularstrategy in international mar%ets.Answer! /A&"+iff! AAC"B! iverse and ulticultural @or% +nvironments


6) ne reason for conald's success in foreign mar%ets is its decision to stic% to e,actly thesame menu in every country that it offers in the :nited "tates.Answer! /A&"+iff! AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1* escribe the principal strategies small businesses have for going global.


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Establishing !nternational Locations

"etting up an international office can require a significant investment.iff! 4AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

) ne of the eight strategies a company uses to -go global- includes the use of tradeintermediaries. 8dentify the si, types of trade intermediaries and e,plain why a small businessowner might use each one.Answer!1. Export Management Companies %EMCs&+Cs are merchant intermediaries that provide small businesses with a low*cost0 efficient0independent international mar%eting department. $heir focus is on e,porting0 and they typicallydo not handle competing firms.. Export rading Companies %ECs&+$Cs are businesses that buy and sell products in a number of countries and offer a wide variety

of services ?e,porting0 importing0 shipping0 storing0 and distributing) to their clients who may becompetitors. $hey focus on long*term relationships.4. Manufacturers' Export (gents %ME(s&+As are businesses that act as international sales representatives in a limited number ofmar%ets for various noncompeting domestic companies. $hey are commission based and focuson short*term commitments.9. Export Merchants+,port merchants are domestic wholesalers who buy goods from many domestic manufacturersand then mar%et them in foreign mar%ets. ost e,port merchants speciali;e in particularindustries and often carry competing lines.. Resident Buying )fficesA government* or privately*owned operation established in a country for the purpose of buyinggoods from businesses there. $he buying office handles all the details of e,porting.6. $oreign *istributorsomestic small companies e,port their products to foreign distributors who handle all of themar%eting0 distribution0 and service functions in the foreign country. $hey offer e,porting smallbusinesses the benefits of %nowledge in their local mar%ets0 the ability to cover a given territorythoroughly0 and prompt sales and service support.iff! 4AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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=3) @hat advantages do ta%ing on a partner in a (oint venture offer a small business in aninternational business opportunity isadvantagesAnswer!*omestic "oint #enture

$wo or more :.". small businesses form an alliance for the purpose of e,porting their goods and

services abroad.

$oreign "oint #enture

A domestic small business forms an alliance with a company in the target nation.

(d+antages of !nternational "oint #enture

7enetrate protected mar%ets &ower production costs "hare ris%s and high #I costs ain access to mar%eting and distribution channels

*isad+antages of !nternational "oint #enture /ailure of the venture #elationships that sour Becoming overly dependent on the partneriff! 4AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

=1) @hat strategies for trade can businesses use when e,porting to countries whose currenciesare not convertible to other currencies @hat are the disadvantagesAnswer! Countertradeis a transaction in which a company selling goods and services in aforeign country agrees to help promote investment and trade in that country0 even though profitscannot be ta%en in the form of currency e,change. Countertrading transactions can becomplicated0 cumbersome0 and time*consuming. $hey also increase the chances that a companywill get stuc% with useless merchandise that it cannot move. $hey can also lead to surprises inthe quantity and quality of products required in the counter trade.

Barteringis the e,change of goods and services for other goods and services. :sually the tradedgoods are sold to a third party for cash. Barter transactions require finding a business withcomplementary needs0 but they are much simpler than countertrading.iff! AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

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=) &ist and briefly e,plain the steps an entrepreneur should follow to establish an e,portprogram.Answer! $he following steps provide guidance to an entrepreneur on how to establish ane,porting program!1. Recognie -our .otential Regardless of -our Sie

#ecogni;e that even the tiniest companies and least e,perienced entrepreneurs have the potentialto e,port.$he si;e of the firm has nothing to do with the demand for its products. 8f the productsmeet the needs of global customers0 there is a potential to e,port.. (nalye -our .roduct or Ser+ice8s it special 8s it new 8s it unique 8s it of high quality 8s it priced favorably because of lowercosts or e,change rates 8n which countries would there be sufficient demand for it4. (nalye -our CommitmentAre you willing to devote the time and energy to develop e,port mar%ets oes your companyhave the necessary resources +,port start*ups can ta%e from si, to eight months ?or longer)0 butentering foreign mar%ets isn't as tough as most entrepreneurs thin%.9/ Research Mar0ets and .ic0 -our arget

Before investing in a costly sales trip abroad0 entrepreneurs should ma%e a trip to the locallibrary or the nearest branch of the epartment of Commerce. +,porters can choose from amultitude of guides0 manuals0 boo%s0 newsletters0 videos0 and other resources to help themresearch potential mar%ets. Armed with research0 small business owners can avoid wasting a lotof time and money on mar%ets with limited potential for their products and can concentrate onthose with the greatest promise. #esearch shows e,port entrepreneurs decide whether they needto modify their e,isting products and services to suit the tastes and preferences of their foreigntarget customers. "ometimes foreign customers' lifestyles0 housing needs0 body si;e0 and culturesrequire e,porters to ma%e alterations in their product lines. "uch modifications can sometimesspell the difference between success and failure in the global mar%et.. *e+elop a *istribution Strategy"hould you use an e,port middleperson or sell directly to foreign customers "mall companies(ust entering international mar%ets may prefer to rely on e,port middlepersons to brea% newground.6. $ind -our Customer"mall businesses can rely on a host of e,port specialists to help them trac% down foreigncustomers. $he :.". epartment of Commerce and the 8nternational $rade Administrationshould be the first stops on an entrepreneur's agenda for going global. $hese agencies have themar%et research available for locating the best target mar%ets for a particular company andspecific customers in those mar%ets. $hey also have %nowledgeable staff specialists e,periencedin the details of global trade and in the intricacies of foreign cultures.7. $ind $inancingne of the biggest barriers to small business e,ports is lac% of financing. Access to adequatefinancing is a crucial ingredient in a successful e,port program because the cost of generatingforeign sales often is higher and collection cycles are longer than in domestic mar%ets. $hetrouble is that ban%ers and other sources of capital don't always understand the intricacies ofinternational sales and view financing them as e,cessively ris%y. Also0 among ma(orindustriali;ed nations0 the :.". government spent the least per capita to promote e,ports. 8t isimportant to note that several federal0 state0 and private programs are wor%ing to fill this e,portfinancing void.

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=. Ship -our 1oods+,port novices usually rely on international freight forwarders and custom*house agents?e,perienced specialists in overseas shipping) for help in navigating the bureaucratic morass ofpac%aging requirements and paperwor% demanded by customs. $hese specialists0 also %nown astransport architects0 are to e,porters what travel agents are to passengers and normally charge

relatively small fees for a valuable service. $hey move shipments of all si;es to destinationsall over the world efficiently0 saving entrepreneurs many headaches.>. Collect -our MoneyCollecting foreign accounts can be more comple, than collecting domestic ones0 but by pic%ingtheir customers carefully and chec%ing their credit references closely0 entrepreneurs canminimi;e bad*debt losses. /inancing foreign sales often involves special credit arrangementssuch as letters of credit and ban% ?or documentary) drafts.iff! 4AAC"B! #eflective $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

Mini-Case 15-1: The Grass Is Really Greener

8t's not usual for city people to be concerned about plants or grass H they see so little of greenspace. Fevertheless0 artha oldman has been interested in these things since her first biologycourse in Broo%lyn0 Few Jor%. artha won all the awards in the science fairs and eventuallywas the recipient of a college scholarship. "he chose to ma(or in botany and became fascinatedwith the creation of hybrid plants and grasses. artha was also concerned about the problem ofhunger around the world. "he %new that improved plants and grains increased the productivity ofAmerican agriculture0 and hoped that someday she would find a way to play a small part inreducing world hunger.

After college with the help of her dad0 she opened a small wholesale greenhouse. $he businesswas a modest success and allowed artha to e,periment with new growing methods. $wo yearsago0 artha's research paid off. "he had been wor%ing on developing a fast*growing grass thatneeded less water. ne of the e,periments produced a grass that seemed to have real potential."he tested it with a local cattle rancher. All tests so far have shown that the new hybrid grass isbetter for feeding cattle. artha may have reali;ed her dream H a grass that will grow better inparts of the world that could not previously support cattle. Kigh protein beef cattle may now beable to thrive in parts of the world where previously it was not possible.



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=4) Kow should artha proceed to determine the best way to e,port her new grass seedAnswer! 8t appears that artha's product has definite potential. Fow0 she must target specifice,port mar%ets0 develop an e,port mar%eting strategy0 and then implement it. 8nitially0 she shouldtarget one or two -prime- mar%ets using the wealth of published data from the :.". epartmentof Commerce. artha should e,plore many of the developing nations in arid regions. "he should

see% advice and assistance from e,port trading companies and e,port management companies."he should also contact the 8nternational $rade Association and conduct searches on the @orld@ide @eb to determine which mar%ets could be best to target first. artha should focus onlocating dependable foreign distributors and invoice all sales in :.". dollars.iff! 4AAC"B! Analytical $hin%ing&earning b(! 1* escribe the principal strategies small businesses have for going global.

=9) $he most frequently encountered impediment to international trade for small and medium*si;ed manufacturers is ________.A) foreign sales are not sufficiently profitable

B) transportation and shipping costsC) language and cultural barriers) foreign regulationsAnswer! Biff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

=) $he most frequently encountered impediment to international trade for small and medium*si;ed service firms is ________.A) foreign sales are not sufficiently profitableB) transportation and shipping costsC) language and cultural barriers) foreign regulationsAnswer! Aiff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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=6) @hich of the following is a domesticbarrier to small business e,portingA) $he attitude0 -8'm too small to e,port.-B) A lac% of information about how to get started in e,porting.C) A lac% of e,port financing for small companies.) All of the above

Answer! iff! AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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>3) A tariff is ________.A) a law that a government uses to regulate products that are imported into the countryB) the ma,imum amount of a product that can be imported or e,portedC) a prohibition or suspension of foreign trade of specific imports or e,ports

) a duty0 or ta,0 that a government puts on products that are imported into the countryAnswer! iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>1) $he small country of Bascovina wanted to protect its infant bas%et industry and imposed a933 percent tariff on all imported bas%ets. $he high tariff dropped the bottom out of importedbas%et sales0 and imports of bas%ets stops. @hy did this happenA) $he citi;ens reali;ed that because the government imposed the tariff0 imported bas%et

purchases were undesirable.B) $he tariff reduced the price of imported bas%ets and consumers felt that because of the lowprices0 the bas%ets were of low quality and stopped their purchases.C) $he tariff barred all shipments of bas%ets to Bascovina.) $he tariff ma%es the price of imported bas%ets so high that they are not competitive.Answer! iff! AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>) Eohn wants to e,pand into the foreign mar%ets0 but he cannot convince his partners. $heybelieve that international mar%ets are the domain of large corporations. Eohn is facing whichbarrier to international tradeA) /inancingB) 7oliticalC) Cultural) AttitudeAnswer! iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.



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>4) A quota is ________.A) a duty or ta, that a government puts on products that are imported into the countryB) the ma,imum amount of a product that can be imported into a countryC) a prohibition or suspension of foreign trade of specific imports or e,ports) a law that a government uses to regulate products that are imported into the country

Answer! Biff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>9) An embargo is ________.A) a duty0 or ta,0 that a government puts on products that are imported into the countryB) the ma,imum amount of a product that can be imported or e,portedC) a prohibition or suspension of foreign trade of specific imports or e,ports) a law that a government uses to regulate products that are imported into the country

Answer! Ciff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>) ________ is the practice of selling substantial quantities of a product in a foreign mar%et atprices that are below either the home*mar%et price or below the full cost of producing it.A) +,portingB) BarteringC) umping) 7rice discriminationAnswer! Ciff! 1AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>6) An American e,ecutive went to a foreign country to sign a business contract. @hile there0sheDhe found that there were numerous comple, government regulations herDhis company neededto meet before closing the deal. $his e,ecutive was e,periencing which barrier to internationaltradeA) $ariffB) 7oliticalC) Cultural) omesticAnswer! Biff! 1AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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>=) $he ________ of a nation includes the belief0 values0 views0 and mores that its inhabitantsshare.A) political atmosphere

B) cultureC) tariffs) free trade areaAnswer! Biff! AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

>>) An American e,ecutive went to a iddle +astern country to sign an oil contract. Before thecontract was signed0 the American and the Arab official met for tea. #ela,ing0 the American putherDhis feet up on a table. $he official became angry and left the room. &ater it was found thatshowing the soles of shoes was a serious insult. $his represents which barrier to internationaltradeA) $acticalB) 7oliticalC) "trategic) CulturalAnswer! iff! 1AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

133) Among ma(or industriali;ed nations0 the :nited "tates spends the greatest amount per capitato promote e,ports.Answer! /A&"+iff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.


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13) $he first and most difficult step to e,porting for the small business is brea%ing thepsychological barrier0 -y company is too small to e,port.-Answer! $#:+iff! AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

113) +ven the smallest businesses have the potential to e,port.Answer! $#:+iff! 1AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

111) $he %ey to success in international mar%ets is choosing the correct target mar%et anddesigning a strategy to reach it.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

11) A quota is a limit on the amount of certain products imported into a country0 while anembargo is a total ban on imports of certain products.Answer! $#:+iff! 1AAC"B! Analytical $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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114) umping involves selling large quantities of a product in a foreign mar%et below cost.Answer! $#:+iff! 1AAC"B! +thical :nderstanding and #easoning&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on the

global economy.

119) "elling large quantities of a product in a foreign mar%et below cost is the best way for asmall company to begin its e,port program.Answer! /A&"+iff! AAC"B! +thical :nderstanding and #easoning&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

11) $o prove a charge of dumping under the :.". Antidumping Act0 a company must prove thata foreign company's prices on a product are lower here than in the home country and that :.".companies are directly harmed.Answer! $#:+iff! AAC"B! +thical :nderstanding and #easoning&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

116) $he only cultural barrier an American small business manager must overcome whenconducting business internationally is the language gap.Answer! /A&"+iff! 1AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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11=) American business people can be on their best American behavior and go overseas andoffend the locals. $his is0 in part0 due to the fact that business customs that are acceptable0 oreven e,pected0 in one country may be taboo in another.Answer! $#:+iff! 1

AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

11>) /ortunately for :.". business owners0 American customs and habits have become thestandard for proper business behavior around the world.Answer! /A&"+iff! AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

13) 8dentify and discuss the domestic barriers to trade.Answer! $hree ma(or domestic barriers to international trade are common!1. (n(ttitude of 2!'m oo Small to Export2$he first step to building an e,port program is recogni;ing that the opportunity to e,port e,ists.. Lac0 of !nformation+ntrepreneurs should thoroughly research the possibility of going global and use every possibleresource available to them ?government and private organi;ations' international e,porting andmar%eting information) to ma%e valid decisions. 8n addition0 companies must be willing to ma%ethe necessary ad(ustments to their products and services0 promotional campaigns0pac%aging0 and sales techniques in foreign mar%ets.4. Lac0 of (+ailable $inancingany entrepreneurs cite lac% of financing as a ma(or barrier to international trade. Beforeembar%ing on an e,port program0 entrepreneurs should have available financing lined up.iff! AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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11) 8dentify and discuss the international barriers to trade.Answer! 8nternational barriers include the following!ariffs

A ta,0 or duty0 that a government imposes on goods and services imported into that country.8mposing tariffs raises the price of the imported goods ?ma%ing them less attractive to

consumers) and protects the ma%ers of comparable domestic products and services.3uotasA limit on the amount of a product imported into a country0 which helps to protect domesticmar%ets by limiting opportunities for foreign competitors.Embargoes

A total ban on imports of certain products0 which helps to protect domestic mar%ets by %eepingforeign competitors out.*umping

"elling large quantities of a product in foreign countries below cost. :nder the :.". AntidumpingAct0 a company must prove that the foreign company's prices are lower here than in the homecountry and that :.". companies are directly harmed.

iff! AAC"B! #eflective $hin%ing&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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1) escribe the other barriers to trade0 including political0 business0 and cultural.Answer!.olitical Barriers

Although many :.". business owners complain of e,cessive government regulation in the :nited"tates0 they are often astounded by the comple, web of governmental and legal regulations and

barriers they encounter in foreign countries. Companies doing business in politically*ris%y landsface the very real dangers of government ta%eovers of private propertyG attempts at coups tooverthrow ruling partiesG %idnappingG bombingsG other violent acts against businesses and theiremployeesG and other threatening events. $heir investments of millions of dollars may evaporateovernight in the wa%e of a government coup or the passage of a law nationali;ing an industry?giving control of an entire industry to the government).

Business Barriers

American companies doing business internationally quic%ly learn that business practices andregulations in foreign lands can be quite different from those in the :nited "tates. "implyduplicating the practices they have adopted ?and have used successfully) in the domestic mar%et

and using them in foreign mar%ets is not always a good idea. 7erhaps the biggest shoc% comes inthe area of human resources management0 where international managers discover that practicescommon in the :nited "tates0 such as overtime0 women wor%ers0 and employee benefits arerestricted0 disfavored0 or forbidden in other cultures. Business owners new to internationalbusiness sometimes are shoc%ed at the wide range of labor costs they encounter and theaccompanying wide range of s%illed labor available. 8n some countries0 what appear to be-bargain- labor rates turn out to be e,cessively high after accounting for the quality of the laborforce and the benefits their governments mandate. 8n many nations0 labor unions are present inalmost every company0 yet they play a very different role from the unions in the :nited "tates.Although management*union relations are not as hostile as in the :nited "tates and stri%es arenot as common0 unions can greatly complicate a company's ability to compete effectively.

Cultural Barriers

$he culture of a nation includes the beliefs0 values0 views0 and mores that its inhabitants have.ifferences in cultures among nations create another barrier to international trade. $he diversityof languages0 business philosophies0 practices0 and traditions ma%e international trade morecomple, than selling to the business down the street. $he assumption that the American way ofdoing things is universal is false. any international business deals fail because businesspersonsdo not understand the importance of valuing diversity0 or being sensitive and respectful todifferent ways of doing business. +ntrepreneurs who want to be successful in internationalmar%ets must understand the culture in which they plan to do business and adapt their businessstyles and their products to suit that culture.iff! 4AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*4 iscuss the ma(or barriers to international trade and their impact on theglobal economy.

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14) Currently0 the @orld $rade rgani;ation ?@$) had 1 member countries that representover ________ percent of all world trade.A) >C)


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14) An important guideline for companies wanting to successfully compete internationally is toappeal to the similarities within the various regions in which you operate0 but recogni;e thedifferences in their specific cultures.Answer! $#:+iff!

AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*9 escribe the trade agreements that will have the greatest influence onforeign trade in the twenty*first century.

144) An important guideline for companies wanting to successfully compete internationally is tofamiliari;e yourself with foreign customs0 languages0 and cultures0 including their lifestyles0values0 customs0 and business practices.Answer! $#:+iff! AAC"B! iverse and ulticultural @or% +nvironments&earning b(! 1*9 escribe the trade agreements that will have the greatest influence on

foreign trade in the twenty*first century.

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