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Exam 3: Doing Business in Global Markets

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Question 31

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The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because:

A) the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.
B) the yen is down against the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.
C) it was traditionally against Japanese culture to ride bicycles, so the U.S. bike company would be dealing with a niche market.
D) the Japanese do not permit foreign direct investment. U.S. companies will make all the bikes in the U.S. which creates more jobs on U.S. soil.

E) B) and D)
F) A) and B)

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Question 32

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Countertrading is a form of exchange where firms will put certain products "on the counter" offering them to foreign customers at a cheaper price than what they would offer them to domestic customers.

A) True
B) False

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Question 33

Multiple Choice

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is a complex form of bartering in which several countries may be involved, each trading products and services, for the products and services of another country.

Importing is the selling of products to another country.

One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need.

A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service is a:

When foreign firms build production facilities in the United States, they are engaging in:

The keiretsu tradition in Japan serves as a:

Under mercantilism, the basic economic idea was to achieve a favorable balance of trade.

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"! -Next year, in order to cut both time and cost in getting new styles to global markets, Rhett plans to a few lines. Rhett will send his designs to manufacturers in Saipan, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their respective countries. This will not only reduce the cost of labor, it will help Rhett reach regional markets in a timely manner.

If visitors from Germany spend money at Orlando, Florida's Disney World, it will increase the U.S.'s unfavorable balance of payments.

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.

On a number of issues, the strategy behind common markets is debatable, but GATT is certain that such alliances do not prohibit individual member nations from expanding globally.

When the U.S. provides foreign aid to Israel and Egypt, a balance of payments outflow occurs.

China's one-party political system, its past human rights abuses, and issues related to counterfeiting of products continue to concern some U.S. firms about doing business there.

A "second wave" of offshore outsourcing involves sizable numbers of skilled, well-educated, middle-income workers in service- sector jobs.

A devaluation of the U.S. dollar would make American goods cheaper to foreign buyers.

The outlook for growth in global trade appears to be:

Another name for a common market is:

Currently boasting a $1.6 billion Ketchup brand, the H.J. Heinz Company is flying high with a 44% increase in its sales of Indonesian based ABC, a soy sauce company that it owns. ABC is a of Heinz.