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Exam 3: Doing Business in Global Markets

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Question 41

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The __________ is the difference between money flowing into a country from exports,and money leaving the country for imports,plus money flows coming from other factors such as tourism,foreign aid,military expenditures,and foreign investment.

A) balance of payments
B) balance of trade surplus
C) balance of cash flows
D) balance of trade

E) None of the above
F) A) and D)

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Question 42

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Mini-Case Since he was five years old,Rhett Tenna struggled with poor eyesight.He suffered through all the names that went along with wearing eyeglasses for most of his young life.Rhett eventually switched from traditional eyeglasses to contact lens,but he always wondered why glasses were considered to be "ugly" and not fashionable.After graduation from college,Rhett set out on a lifelong goal: to make eye wear synonymous with high fashion.He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses,and replace it with a sense of flair and high fashion.From the day he opened his first store,Rhett's plan met with resounding success.Today,"The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states,and a manufacturing plant that turns out designer frames. A recent internal audit,however,suggested a problem that Rhett had not anticipated.The study indicated that the U.S.market is just about saturated and growth of "The Eyes Have It" stores will be very limited.The audit concerned Rhett until he recognized an untapped market existed overseas.If people all over the world have the same problem,the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"! -Rhett heard predictions that the value of the U.S.dollar is likely to decline substantially over the next six months.This should:

A) hurt his overseas efforts since his prices will be very high.
B) stop overseas efforts because dollars will not be negotiable.
C) help his overseas efforts since his prices will be lower.
D) force him into accepting no other currency except the dollar.

E) A) and B)
F) All of the above

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Question 43

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The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called:

A more recent free trade agreement between Cost Rica,the Dominican Republic,El Salvador,Guatemala,Honduras,Nicaragua,and the U.S. ,is known as the Central American Free Trade Agreement.Its strategy is to open new markets for all member countries and to lower tariffs between participating nations.

A Chinese steel manufacturer is selling certain types of steel in the United States at a price significantly lower than it sells the same steel in its home market.This practice may be a violation of U.S.law.

According to the theory of comparative advantage,a country should buy from other countries those goods it produces most efficiently.

As students think about a career in the business world today,which of the following is a good strategic suggestion?

Export trading companies assist businesses in reaching buyers,and dealing with customs,documentation,and payment.

China and Russia present enormous trading opportunities.However,due to political risks in those counties,foreign direct investment is halted.

A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports.

Many of the toy products sold in the United States are imported from Taiwan because the Taiwanese can produce these products more efficiently than U.S.companies.This is an example of:

_________________ differences such as insufficient electrical power and transportation systems can present special problems for U.S.firms when attempting to enter global markets.

The World Trade Organization (WTO)was established to mediate trade disputes among nations.

Nontariff barriers can be just as detrimental to free trade as tariffs.

Mini-Case Since he was five years old,Rhett Tenna struggled with poor eyesight.He suffered through all the names that went along with wearing eyeglasses for most of his young life.Rhett eventually switched from traditional eyeglasses to contact lens,but he always wondered why glasses were considered to be "ugly" and not fashionable.After graduation from college,Rhett set out on a lifelong goal: to make eye wear synonymous with high fashion.He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses,and replace it with a sense of flair and high fashion.From the day he opened his first store,Rhett's plan met with resounding success.Today,"The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states,and a manufacturing plant that turns out designer frames. A recent internal audit,however,suggested a problem that Rhett had not anticipated.The study indicated that the U.S.market is just about saturated and growth of "The Eyes Have It" stores will be very limited.The audit concerned Rhett until he recognized an untapped market existed overseas.If people all over the world have the same problem,the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"! -Rhett spoke with a Korean company that said it might be interested in producing his products in their market.They would pay him a royalty for what they sold and would bear all the start-up expenses of this effort.This Korean company is proposing a:

Currency fluctuations can be an advantage to firms trading in the global market.

Which of the following statements describes laws and regulations in global markets?

The United States currently enjoys a favorable balance of trade with the rest of the world.

A trade deficit is the same as a favorable balance of trade.

Pepsi Cola entered into a long-term contract with a South African beverage company.The contract calls for the South African firm to produce and market Pepsi Cola in South Africa.Pepsi will receive royalties on each case of beverage sold.This is an example of: