Bông – ESP231.

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Lesson 1: Practice
I. Gap Filling
1. If a country can produce something more cheaply than anywhere else in the world, it has a (an)
absolute advantage.
2. A country exporting more than it imports has a trade surplus.
3. Autarky is the (impossible) situation in which a country is completely self-sufficient and has no
foreign trade.
4. Countries that export a lot of oil or manufactured goods tend to have a positive balance of trade.
5. The WTO has established rules for trade between nations.
6. Balance of Payment is the difference between what a country pays for all its imports and receives
for all its exports.
7. Many economists encourage governments to abolish import taxes and have complete free trade.
8. Exporting and Importing are the two aspects of foreign trade; a country spends money on goods
it imports and gains money through its exports.
9. Unlike quotas, tariffs produce revenue for the government
II. Q&A
1. What brings the absolute advantage or comparative advantage to a country?
+ Abundant natural resources and materials
+ Cheap labor costs
+ High Technology
+ Expertise
2. What are the reasons for imposing tariffs?
+ Generate revenue for the Government
+ Protect domestic/ infant industries
+ Protect local jobs
+ Make imports more expensive than the home-produce substitutes
+ Protection against dumping
5. What is the difference between the balance of trade and the balance of payment?
BOT includes imports and exports only. BOP considers all business transactions with other
countries including imports and exports of goods and services and money earned from and paid for
services and investments.
6. Why would the government impede free trade?
* Cultural motives:
- Preserve national identity (Cultural of countries is slowly altered by exposure to the people and
products of other cultures)
* Political motives
- Protect jobs
- Preserve national security
- Respond to “unfair” trade
- Gain influence
* Economic motives
7. What are the methods used by the government to restrict trade?
- Tariffs
- Quotas
- Embargoes
- Local content requirements
- Administrative delays
- Currency controls
8. Explain the different ways of promoting international trade.
- Subsidy
- Export financing
- Foreign Trade Zones

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- Special government Agency
III. Essay
1. What are the pros and cons of free trade?
Pros
- FT increases production – countries specialize in the production of those commodities in which
they hold a comparative advantage
- FT improves the efficiency of resource allocation
- Customers have access to a wider choice of products and services available – updated styles,
international trends
- Foreign exchange gains
- FT is an engine of economic growth
- Generate revenues
- Create jobs
Cons:
- Unfair trade
- Sumping
- Domestic industries may be harmed
- Resources may be excessively exploited
- Environment problems
2. What are the advantages of international trade? (to businesses)
* Government:
- Better allocation and utilization of natural resources
- Create more jobs
- Economies of scale
- Maintain sufficient supplies
- Diverse product ranges
- Foster peace, harmony, and understanding among nations, Economic interdependence among
countries leads to close cultural relations, thus avoiding wars.
* Consumers/ Customers
- A greater variety of Goods/ services available
- Lower prices offered
- More job opportunities
* Businesses:
- Access new markets, and new materials which open up new production possibilities
- Gains a global market share and reduce dependence on existing markets
- Deal with new trading partners
- Promote sales and profitability
- Encourage innovation by facilitating the exchange of know-how, technology, and investment in
research and development
- Extend the customer base of the existing market
- Maintain cost competitiveness in your domestic market
- Obtain raw materials from abroad

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Lesson 2: Practice
I. Gap Filling
1. A cash grant is called an investment incentives, whose purpose is to attract/lure/promote FDI.
2. Most companies give foreign companies tax incentives to attract new investment.
3. What kind of return can I expect on my investment?
II. Q&A
1. What are the differences between FDI and FPI?
Foreign direct investment (FDI): Purchase of physical assets or a significant amount of the
ownership (stock) of a company in another country to gain a measure of management control.
Portfolio investment (PI): Investment that does not involve obtaining a degree of control in a
company.
2. What are some financial considerations in making a foreign direct investment?
- Exchange rates
- Rate of returns on investment
- Production Costs
- Investment incentives
- Interest rates
- Cash flow
- Sources of working capital
- Tax rates
3. What are the important management issues in the FDI decision?
- Control: controlling activities occurring in the local market
- Purchase-or-Build Decision: purchase an existing business or build an international subsidiary
from the ground up
- Production Costs: the firm's costs of production: Labor regulations
- Customer Knowledge: gain valuable knowledge about the behavior of buyers that it could not
obtain from the home market.
- Following Clients: putting them close to firms for which they act as a supplier
- Following Rivals: Companies engage in FDI simply because a rival does
4. For what reason do host countries intervene in FDI?
- To protect their Balance of Payment: a nation also gets a balance-of-payments boost from an
initial FDI inflow.
- Obtain Resources and Benefits:
Access to Technology: Local investment in technology also tends to increase the productivity and
competitiveness of the nation.
Management skills: By encouraging FDI, nations can also bring in people with management skills
who can train locals and thus improve the competitiveness of local companies.
Employment: Many local jobs are also created as a result of incoming FDI.
5. For what reasons do home countries intervene in FDI?
- Investing in other nations sends resources out of the home country - lowering the
balance of payments.
- Outgoing FDI may ultimately damage a nation's balance of payments by taking the
place of its exports.
- Jobs resulting from outgoing investment may replace jobs at home that were based on exports to
the host country.
6. What are the main methods used by host countries to restrict and promote FDI?
Restriction
- Ownership restrictions: Governments can impose ownership restrictions that prohibit nondomestic
companies from investing in businesses in cultural industries and those vital to national security.
- Performance demands: Performance demands can take the form of stipulations regarding the
portion of the product's content originating locally, the portion of output that must be exported, or
requirements that certain technologies be transferred to local businesses.

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Promotion
- Financial incentives: Host governments can also grant companies tax incentives such as lower tax
rates or offer to waive taxes on local profits for some time.
A country may also offer low-interest loans to investors.
- Infrastructure improvements
Some governments prefer to lure investment by making local infrastructure improvements - better
sports suitable for containerized shipping, improved roads, and increased telecommunications
systems.
7. What methods do home countries use to restrict and promote FDI?
Home countries: Restriction
- Differential tax rates: Impose differential tax rates that charge income from earnings abroad at a
higher rate than domestic earnings
- Outright sanctions: Impose outright sanctions that prohibit domestic firms from making
investments in certain nations
Home countries: Promotion
- Offer insurance: to cover the risks of investments abroad.
- Grant loans: to firms wishing to increase their investments abroad.
A home-country government may also guarantee the loans that a company takes from financial
institutions.
- Offer tax breaks: on profits earned abroad or negotiate special trade treaties.
- Apply political pressure: on other nations to get them to relax their restrictions on inbound
investments
III. Essay
1. What are the advantages and disadvantages of FDI in VN?
Ads:
- Raise national output
- Enhance the standard of living for their people
- New jobs are created
- Generate tax revenues
- External capital is bumped into the economy
- The host country obtains high technology, new and advanced business practices, global
management styles, and new economic concepts.
Disads:
- May affect the ecosystem and environment
- Local resources are vulnerable to exploitation by foreign firms
- BOP may decrease when direct investors return profits made locally back to their home country
- FDI flows can overheat the economy

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Lesson 3: Practice
I. Gap Filling
1. Foreign Exchange Market is a market in which currencies are bought and sold and in which
currency prices are determined.
2. Dealers using two foreign exchange markets to benefit from rate differentials are said to engage
in (currency) arbitrage.
3. Speculators buy currencies when they expect their value to increase.
4. Increasing currency speculation is making exchange rates more volatile.
5. Hedging is the attempt to reduce risk; speculating is the opposite.
6. The Bretton Woods Agreement stipulated that all members would express their currencies in
USD.
7. Gold standard is an international monetary system in which nations link the value of their paper
currencies to a specific amount of gold.
8. Brettion Woods Agreement was an accord among nations to create a new international monetary
system based on the value of the dollar.
9. Hedging is the attempt to reduce risks; speculating is the opposite.
10. Bartering is based on the exchange of goods for goods.
11. When central banks intervene in the foreign exchange markets all the intervention points, are
called the system of fixed exchange rates. The opposite is called the system of floating exchange
rates.
12. Central banks of the member countries were required to intervene in the foreign exchange
markets to keep the value of their currencies within 1 percent of the par value.
13. A forward transaction/contract means that delivery of a currency is specified to take place at a
future date.
14. (Currency) Arbitrage is the practice of transferring funds from one currency to another to
benefit from rate differentials.
15. Another verb for fixing exchange rates against something else is to peg them.
16. A currency can appreciate if lots of speculators buy it.
17. we have managed floating exchange rates because governments and central banks sometimes
intervene in currency markets.
18. Commodities are raw materials such as agriculture products and metals that are traded
on special exchanges.
19. If you hedge you make transactions that are designed to reduce risks regarding a
particular price, interest rate, or exchange rate.
20. A speculator anticipates future changes in a market and makes risky transactions,
hoping to make a gain.
21. The FOREX is the mechanism through which foreign currencies are traded
II. Q&A
1. For what four reasons do investors use the foreign exchange market?
First, individuals, companies, and governments use it, directly or indirectly, to convert one currency
into another. Second, it offers tools with which investors can insure against adverse changes in
exchange rates. Third, it is used to earn a profit from arbitrage – the purchase and sale of a currency,
or other interest-paying security, in different markets. Finally, it is used to speculate about a change
in the values of a currency
2. What is the foreign exchange market?
The foreign exchange market is the market in which currencies are bought and sold and in which
currency prices are determined
The foreign exchange market is the mechanism through which foreign currencies are traded. It is
not an actual marketplace but a system of telephone or telex communications between banks,
customers, and middlemen (foreign exchange brokers, acting for a client vis-à-vis the bank). It is an
extremely valuable mechanism for world trade. Its main function is to reduce the risk of fluctuating
exchange rates or a change in the parity of currencies (devaluation or revaluation)

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3. Distinguish between spot rate and forward rate. How is cash used in the foreign exchange
market?
A spot rate is an exchange rate that requires delivery of the traded currency within two business
days. This rate is normally obtainable only by large banks and foreign exchange brokers. The
forward rate is the rate at which two parties agree to exchange currencies on a specified future date.
Forward exchange rates represent the market's expectation of what the value of a currency will be at
some point in the future.
4. Explain the differences among currency swaps, options, and futures
Companies involved in international business make extensive use of certain financial instruments to
reduce exchange-rate risk.
5. Describe the three main institutions in the foreign exchange market
The world’s largest banks exchange currencies in the interbank market. These banks locate and
exchange currencies for companies and sometimes provide additional services.
Securities exchanges are physical locations at which currency futures and options are bought and
sold (in smaller amounts than those traded in the interbank market). The over-the-counter (OTC)
market is an exchange that exists as a global computer network linking traders to one another.
The over-the-counter (OTC) market is an exchange that exists as a global computer network linking
traders to one other
6. Why are restrictions placed on currency conversion: What policies can governments use to
restrict currency conversion?
There are four main goals of currency restriction.
First, a government may be attempting to preserve the country’s hard currency reverses to repay
debts owed to other nations.
Second, convertibility might be restricted to preserve hard currency to pay for needed imports or to
finance a trade deficit.
Third, restrictions might be used to protect a currency from speculators.
Finally, such restrictions can be an attempt to keep badly needed currency from being invested
abroad
Policies used to enforce currency restrictions include government approval for currency exchange,
imposed import licenses, a system of multiple exchange rates, and imposed quantity restrictions.

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Lesson 4: Practice
I. Gap Filling
1. In the documentary collection, if the importer dishonors the bill, the exporter may have to find an
alternative buyer or ship the goods back.
2. The first step of the procedure for documentary collection, the exporter's task is to ask his bank to
draw. a bill of exchange on the overseas buyer.
3. Documentary Collection is payment by bill of exchange to which commercial documents and
sometimes a document of title are attached.
4. A document by which a buyer undertakes to pay a seller through a bank if the seller delivers the
goods according to the terms of the contract. It can be documentary or irrevocable: L/C (letter of
credit).
5. An open account is the most secure mode of payment for the importer.
6. Advance payment is the most secure mode of payment for exporters
7. In some parts of the world, banks may be slow to remit payments to the exporter's banks.
8. Export/ import financing in which a bank acts as an intermediary without accepting financial
risks: documentary collection.
9. Export/import financing in which an exporter ships merchandise and later bills the importer for
its value is open account.
10. Export/import financing in which an importer pays an exporter for merchandise before it is
shipped is an advance payment.
II. Q&A
1. What are the roles of banks in the four common payment methods?
Active Role: Banks get involved in the payment process, supporting both [m & Ex -L/C-check the
accuracy of does and guarantee payment
Passive Role: transfer does and funds- DC, open account, advance payment
4. What is the difference between documents against payment (D/P) and documents against
acceptance (D/A)?
D/P: The B can only receive the documents once he has paid the sight draft. The S retains title to
and control over the Goods until he gets payment
D/A: The B can get the documents just by accepting payment on a future date. The B writes the
word "ACCEPTED" on the draft and signs it
5. How does a documentary collection differ from a letter of credit as a means of financing
international trade?
- Documentary Collection: The bank acts as an intermediary. The Banks do not verify the
documents, take risks, or guarantee payment. The banks just control the flow of documents
- LIC provides increased assurance to both Ex and Im so long as they fulfill their obligations. The
bank not only verifies the document's accuracy and authenticity but also guarantees payment
8. Why would an exporter ask for a confirmed letter of credit?
The risks of issuing banks are borne by the confirming bank. If the issuing bank gets out of biz, the
confirming is obliged to pay the L/C
11. When do people use the 4 payment methods?
Open account: 2 sides have long-established trading relation
Advance Payment: 2 sides are unfamiliar
L/C: the I's credit rating is questionable, The E needs an L/C to obtain financing
Collection: there is ongoing biz relation between the Parties
III. Essay
1. Why is a letter of credit the commonest method of payment in international trade?
L/C – provides security for both Ex and Im
Ex is protected against the risk of non-payment – The issuing bank (confirming bank) will pay the
Ex
(L/C is a separate contract in its own right, unconnected with the Sales Contract. Despite the
disputes between the Ex and Im, the bank is obliged to pay the L/C

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L/C protects the Im against the risks of receiving wrong goods, missing goods, and inferior goods.
(the B/L required for payment by an L/C must be cleaned the Goods and shipped in perfect
condition)
Banking fees/ high bank charges
The process is complicated – time and money

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Lesson 5: Practice
I. Gap Filling
1. Countermarketing is the attempt to destroy unwholesome demand for products that are
considered undesirable, e.g. cigarettes, drugs, handguns, or extremist political parties.
2. Point of sale are places where goods are sold to the public- shops, stores, kiosks, markets, stalls,
etc.
3. Conventional marketing is the difficult task of reversing negative demand
4. Stimulation marketing is necessary where there's no demand,
5. The classic product life cycle is Introduction, Growth, Maturity, and Decline
6. Distribution channel refers to all companies or individuals involved in moving a particular good
or service from the producer to the consumer.
7. Developmental marketing involves developing a product or service for which there is a talent
demand
8. Word of mouth is free advertising when satisfied customers recommend the product to their
friends.
9. Existing customers tell their friends or colleagues about your product and hopefully recommend
it to them: free. advertising.
10. Synchromarketing involves altering the time pattern of irregular demand
11. The best form of advertising is free word of mouth advertising, which occurs when satisfied
customers recommend products or services to their friends.
12. Remarketing involves revitalizing falling demand, for example, for churches, inner city areas, or
aging film stars.
13. Demarketing.is the attempt (by governments rather than private businesses) to reduce overfull
demand, permanently or temporarily.
14. Maintenance marketing is a matter of retaining a current (maybe full) level of demand.
(to) comply with = (to) be subjected to
II. Q&A
1. What is the difference between a selling concept and a marketing concept?
Selling: Persuading the customers to buy products that you already have, rather than producing new
products that customers may want
Marketing: finding out what kinds of products customers want and then producing them
Finding wants and filling them.
2. Distinguish needs, wants, demands
Needs are basic human requirements
Wants are needs directed to specific objects that might satisfy the need
Demands are wanted for specific products backed by an ability to pay
3. Identify at least four factors that influence a company’s product policies in international
markets (4 out of 6 factors)
- Companies undertake mandatory product adaptation in response to a target market's laws and
regulations.
- Companies also adapt their products to suit cultural differences
- Although companies keep their brand names consistent across markets, they often create new
product names or modify existing ones to suit local preferences.
- The image of a nation where a company is located that designs, manufactures, or assembles a
product influences buyers' perceptions of quality and reliability.
- Counterfeit goods can damage buyers' image of a brand when the counterfeits are of inferior
quality.
- Shortened product life cycles are affecting the timing of when to market internationally
4. Briefly describe the difference between push and pull strategies. What are some factors that
affect the choice of an appropriate strategy?
- Pull strategy: A promotional strategy designed to create buyer demand that will encourage channel
members to stock a company's product.

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Eg: Creating consumer demand through direct marketing techniques is a common example of a pull
strategy
- Push strategy: A promotional strategy designed to pressure channel members to carry a product
and promote it to final users of the product.
Eg: A push strategy is often used by manufacturers of all sorts of products commonly sold through
department and grocery stores
5. What are the five generic strategies for blending product and promotional policies for
international markets? Describe each briefly
- Product/communications extension (dual extension) extends the same home-market product and
marketing promotion into target markets.
- Product extension, communications adaptation extends the same product into new target markets
but alters its promotion.
- Product adaptation, communications extension adapts a product to the requirements of the
international market while retaining the product's original marketing communication,
- Product/communications adaptation (dual adaptation) adapts both the product and its marketing
communication to suit the target market.
- Product invention requires that an entirely new product be developed for the target market
6. What is the difference between exclusive and intensive channels of distribution? Give an
example of a product sold through each.
- An exclusive channel is one in which a manufacturer grants the right to sell its product to only one
or a limited number of resellers.
New car dealerships, for example, in most countries reflect exclusive distribution. Thus Honda
dealerships cannot normally sell Toyotas and Chrysler dealers cannot sell Fords.
- An intensive channel is one in which a producer grants the right to sell its product to many
resellers.
Large companies whose products are sold through grocery stores and department stores typically
take an Intensive channel approach to distribution.
III. Essay
1. How important is Marketing to the Society?
- A connection between the consumer and the producer which brings new items to retail stores/
shops - from where the consumers can buy them.
Through marketing campaigns, people are better informed of the products and services available on
the market, thus making good choices about.... to satisfy their needs (Without M, businesses cannot
create awareness about their products or build their brands and consumers cannot have a wide
variety of choices to make the best purchasing decisions for themselves) => M creates a win-win
situation for both sizes, who can increase their sales and profits and consumers who can satisfy their
needs with the most suitable products
- M enhances employment opportunities - For continuous production, continuous marketing is
needed. Increased activities provide more jobs for many people. (Eg. Nowadays M is regarded as a
separate field itself with various career paths such as advertising, sales, public relations, and
customer services. Almost all companies have their own M depts. with different positions,
providing jobs for millions of people.)
- M helps in selling surplus items abroad/ to other countries, raising the national income and
generating government revenue. (This is because advertising creates demand for products and
services, which results in increased exports and even foreign exchange earnings.)

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Lesson 6: Practice
I. Gap Filling
1. Outbound Logistics is the process related to the storage and movement of the final product and
the related information flows from the end of the production to the end user.
2. Inbound logistics is the flow, or management, of goods into a production unit or warehouse.
3. Logistics is the management of the flow of goods, information, and other resources between
the point of origin and the point of consumption.
4. Supply chain is a network of facilities that perform the function of procurement of materials,
the transformation of these materials into finished products, and the distribution of these
products to customers.
5. Logistics management is a part of supply chain management, which plans, implements, and
controls the flow and storage of goods between the point of origin and the point of consumption.
6. Customs clearance is the act of passing goods through customs so that they can enter or leave
the country.
7. Inventory contains the raw materials, the work in process, and all the finished products of a
supply chain.
8. Transportation is the movement of a product from one location to another as if makes its way
from the beginning of a supply chain to the customer’s hand.
9. Supply chain management is the management of materials, information, and, finances as they
move in a process from supplier to consumer.
10. Reverse logistics is the process of moving products from the end-user back to the origin to
recover value for proper disposal.
(n) lower inventory level = optimal distribution
II. Q&A
1. What are the major benefits of efficient logistics operations?
Cost-savings
Faster fulfillment of orders
Improved cash flows
Optimiez distribution
2. What may cargo handling services include?
Cargo collection and consolidation
Cargo forwarding
Transit warehousing
Cargo tracking and tracing
Documentation handling
Customs clearance
3. In what ways would the supply chain be optimized?
 Communicating with suppliers to eliminate bottlenecks in the supply chain
 Maintaining the right mix and location of factors and warehouse to serve customer markets
 Using location and distribution analysis, vehicle routing analysis, and traditional logistics
optimization methods to maximize the efficiency of the distribution
4. What are the five major logistics activities?
Demand forecasting/planning
Material Handling
Inventory management
Logistics communications
Customer service
5. What business functions does the supply chain involve? (11 functions)
These functions include not only logistics, transportation, and warehousing, but also sourcing and
procurement, manufacturing, materials handling, forecasting, order processing, inventory
management, and customer service.
III. Essay

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1. What are the benefits of supply chain management?
Customer Satisfaction
- With effective SCM, companies are able to respond to customer’s needs and make punctual
deliveries
- A streamlined SC process can improve the total order cycle time (the a/m of time b/t an order
being placed and when it is delivered to a customer)
-> This not only pulls new customers but also influences the Cu’s brand loyalty
Effective/Controlled Inventory Management
- The right SCM system ensures that Cos have a well-organized warehousing and inventory control
system in place to reduce holding costs on excess inventory while still meeting customers’ needs.
-> This mitigates potential risks of late shipments and increases customer retention
Improved Quality Assurance
- SCM incorporates quality techniques to improve operations such as quality management systems.
- SC professionals incorporate regular audits of their vendors and raw materials into the SCM
process to enhance the consistent level of product quality.
Reduced Costs
The SCM enables the manufacturers to assess their current manufacturing processes, identify flaws
and inefficiencies, and determine the best course of action to address the issues
The smooth process of production reduces costs and increases profits
Shipping Optimization
Recognizing the most efficient shipping methods for small packages, large bulk orders and other
shipping scenarios helps Cos deliver orders to customers faster while keeping costs. Minimum.

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