Midterm4_Study_Guide - MKT 310 Fall 2010 International...

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MKT 310 – Fall 2010 International Business Midterm Exam 4 – Study Guide The study guide below lists the book sections as well as slides in the modules that will be featured in the exam questions. Therefore, please focus your studying on these sections. Also, please remember that there will be questions from the in-class lectures. Book Chapter 13: Exporting, Importing, and Countertrade The Promise and Pitfalls of Exporting o Firms that do not export might lose opportunities for growth and cost reduction o Large firms are more pro-active in seeking foreign opportunities o Medium and small-sized firms slow to respond because: Too busy with local side of business Lack of knowledge of potential opportunities Intimidated by mechanics of exporting o Common pitfalls for exporters include: Poor market analysis Poor understanding of competitive conditions A lack of customization for local markets, poor distribution arrangements, bad promotional campaigns A general underestimation of the differences and expertise required for foreign market penetration Difficulty dealing with the tremendous paperwork and formalities involved Export/Import Transactions o Exporters and importers have to trust someone who may be very difficult to track down if they default on an obligation
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o Each party has a different set of preferences regarding the configuration of the transaction Exporters prefer to be paid in advance, while importers prefer to pay after shipment arrives o Problems arising from the lack of trust can be solved by using a third party who is trusted by both – normally a reputable bank A Typical International (export) Transaction o 1. Importer orders goods o 2. Exporter agrees to fill order o 3. Importer arranges for letter of credit o 4. Bank of Paris sends letter of credit to Bank of New York o 5. Bank of New York informs exporter of letter of credit o 6. Goods shipped to France o 7. Exporter presents draft to bank o 8. Bank of New York presents draft and bill of lading to Bank of Paris o 9. Bank of Paris returns accepted draft o 10/11. Bank sells draft to Bank o 12. Bank tells importer documents arrive o 13. Importer pays bank o 14. Bank of New York presents matured draft and gets payment Letter of Credit o A letter of credit is issued by a bank at the request of an importer and states the bank will pay a specified sum of money to a beneficiary,
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Midterm4_Study_Guide - MKT 310 Fall 2010 International...

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