Ba 251 Chapter 13

Front 1

Entry mode

Back 1

is the institutional arrangement by which a firmgets its products, technologies, human skills, or other resources into a market

Front 2

Main reasons for exporting

Back 2

expand sales, diversify sales and gainexperience

Front 3

Direct exporting

Back 3

occurs when a company sells its productsdirectly to buyers in a target market

Front 4

Indirect exporting

Back 4

occurs when a company sells itsproducts to intermediaries who then resell to buyers in a target market.

Front 5

Different types of intermediaries

Back 5

are agents, export managementcompanies (EMC) and export trading companies (ETC).

Front 6

Agents

Back 6

represent one or more indirect exporters in atarget market

Front 7

EMC

Back 7

is a company that exports products on behalf ofindirect exporters

Front 8

ETC

Back 8

is a company that provides services to indirectexporters in addition to activities related directly to clients’ exportingactivities

Front 9

Countertrade

Back 9

is a practice of selling goods or services thatare paid for, in whole or in part, with other goods or services

Front 10

Types of countertrade

Back 10

are barter, counterpurchase, offset, switchtrading and buyback

Front 11

Barter

Back 11

is the exchange of goods or services directlyfor other goods or services without the use of money.

Front 12

Counterpurchase

Back 12

is the sale of goods or services to a country bya company that promises to make a future purchase of a specific product fromthat country

Front 13

Offset

Back 13

is an agreement that a company will offset ahard-currency sale to a nation by making a hard-currency purchase of anunspecified product from that nation in the future

Front 14

Switch trading

Back 14

is countertrade whereby one company sells toanother its obligation to make a purchase in a given country

Front 15

Buyback

Back 15

is the export of industrial equipment in returnfor products produced by that equipment

Front 16

Methods of export/import financing

Back 16

are advance payment, documentary collection,letter of credit and open account.

Front 17

Advance payment

Back 17

is an export/import financing in which animporter pays an exporter for merchandise before it is shipped.

Front 18

Documentary collection

Back 18

is an export/import financing in which a bankacts as an intermediary without accepting financial risk

Front 19

Bill of lading

Back 19

is a contract between the exporter and shipperthat specifies merchandise destination and shipping costs

Front 20

Bill of exchange

Back 20

is a document ordering an importer to pay anexporter a specified sum of money at a specified time

Front 21

Letter of credit

Back 21

is an export/import financing in which theimporter’s bank issues a document stating that the bank will pay the exporterwhen the exporter fulfills the terms of the document

Front 22

Open account

Back 22

is an export/import financing in which anexporter ships merchandise and later bills the importer for its value

Front 23

Contractual entry modes

Back 23

are licensing, franchising, management contractsand turnkey projects

Front 24

Licensing

Back 24

is a contractual entry mode in which a companythat owns intangible property (the licensor) grants another firm (the licensee)the right to use that property for a specified period of time

Front 25

Franchising

Back 25

is a contractual agreement in which one company(the franchiser) supplies another (the franchisee) with intangible property andother assistance over an extended period

Front 26

Management contract

Back 26

is a practice by which one company suppliesanother with managerial expertise for a specific period of time

Front 27

Turnkey project

Back 27

is a practice when one company designs,constructs, and tests a production facility for a client firm

Front 28

Investment entry modes

Back 28

are wholly owned subsidiaries, joint venturesand strategic alliances

Front 29

Wholly owned subsidiary

Back 29

subsidiary isa facility entirely owned and controlled by a single parent company

Front 30

Joint venture

Back 30

is a separate company that is created andjointly owned by two or more independent entities to achieve a common businessobjective

Front 31

In forward integration joint venture

Back 31

the parties choose to invest together indownstream business activities- activities further along in the “value system”.

Front 32

In backward integration joint venture

Back 32

the parties choose to invest together inupstream business activities- activities earlier in the “value system”

Front 33

Buyback joint venture

Back 33

is formed when each partner requires the samecomponent in its production process

Front 34

Multistage joint venture

Back 34

results when one company produces a god orservice required by another.

Front 35

Strategic alliance

Back 35

is a relationship whereby two or more entitiescooperate (but do not form a separate company) to achieve the strategic goalsof each

Front 36

Strategic factors in selecting an entry mode

Back 36

cultural environment, political and legalenvironments, market size, production and shipping costs, and internationalexperience