Chapter 21: Tapping into Global Markets
GENERAL CONCEPT QUESTIONS
Multiple Choice
1. Red Bull has gained ______of the worldwide energy drink market by skillfully connecting with global youth. a. 70 percent b. 80 percent c. 60 percent d. 50 percent e. 90 percent Answer: a Page: 667 Level of difficulty: Medium
2. Red Bull built buzz about the product through its ______. a. “buzz marketing program” b. “in program” c. “marketing program” d. “seeding program” e. “advertising campaign” Answer: d Page: 667 Level of difficulty: Medium
3. A global industry is defined as ______. a. an industry in which the strategic positions of competitors are fundamentally affected by their overall global positions b. an industry that operates in more than one country and captures R&D, marketing, and other financial advantages in its costs and reputation. c. an industry that operates in more than one country and has a strategic position in many countries d. a firm that operates in more than one country and has a sales and marketing staff in those countries e. an industry that has strategic positions in many countries but is not affected by competition Answer: a Page: 668 Level of difficulty: Medium
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4. A global firm is one that ______. a. where the strategic positions of competitors are fundamentally affected by their overall global positions b. operates in more than one country and captures R&D, marketing, and other financial advantages in its costs and reputation c. operates in more than one country and has a sales and marketing staff in those countries d. operates in more than one country and has a sales and marketing staff in those countries developing e. has strategic positions in many countries but is not affected by competition researching Answer: b Page: 668 Level of difficulty: Medium
5. International trade in 2003 accounted for over ______of U.S. GDP up from 11 percent in 1970. a. one-third b. one-eighth c. one-half d. one-quarter e. 18 percent Answer: d Page: 668 Level of difficulty: Easy
6. Global firms plan, operate, and ______their activities on a worldwide basis. a. produce b. coordinate c. distribute d. price e. service Answer: b Page: 668 Level of difficulty: Easy
7. The major decisions in international marketing include which of the following steps? a. Deciding whether to go abroad. b. Deciding which markets to enter. c. Deciding how to enter the market. d. Deciding on the marketing program. e. All of the above. Answer: e Page: 669 Level of difficulty: Medium
8. The internationalization process has four stages. These stages are ______. a. no regular export activities b. export via independent representatives (agents) c. establishment of one or more sales subsidiaries d. establishment of production facilities abroad e. all are part of the internationalization process Answer: e Page: 670 Level of difficulty: Medium
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9. Most firms work with an ______and enter a nearby or similar country. a. independent agent b. contractual export department c. import/export department d. franchisee e. management contract Answer: a Page: 670 Level of difficulty: Easy
10. A “waterfall” approach to international marketing is defined as ______. a. countries that are gradually entered sequentially b. countries in which the demand for the product is greatest is entered first c. countries in which the demand for the product is greatest is entered last d. countries in which the supply of raw material is greatest is entered first e. countries are entered based upon ease of entry Answer: a Page: 671 Level of difficulty: Medium
11. A “sprinkler” approach to international marketing is defined as ______. a. countries that are entered when timing is right b. countries that are gradually entered sequentially c. countries in which the supply of raw material is greatest is entered first d. countries in which the demand for the product is greatest is entered first e. many countries are entered simultaneously within a limited period of time Answer: e Page: 671 Level of difficulty: Medium
12. The developed nations and the prosperous parts of developing nations account for less than ______of the world’s population. a. 10 percent b. 15 percent c. 20 percent d. 25 percent e. 30 percent Answer: b Page: 671 Level of difficulty: Easy
13. Marketers must change their conventional marketing to sell their products to developing countries. One of the changes that marketers can make is to ______. a. reduce the price of the product but increase the packaging size b. reduce the size but keep the pricing the same c. reduce the price of the product d. reduce the size and price of the packaging e. increase the price and the packaging size because these countries have never seen the product before Answer: d Page: 671 Level of difficulty: Medium
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14. Factors that influence the “attractiveness” of a country to enter include which of the following? a. product, geography, income and population, political climate, and other factors b. product, geography, income, climate, and source of income c. population, incomes, competition, and political climate d. incomes, profit potentials, competition, and climate e. incomes, families, competition, and cultural differences Answer: a Page: 671 Level of difficulty: Medium
15. Regional economic integration is defined as ______. a. agreements between individual firms for the sake of commerce b. trading agreements between individual countries c. trading agreements between individual firms d. trading agreements between countries and firms e. trading agreements between blocs of countries Answer: e Page: 673 Level of difficulty: Easy
16. The European Union founded in 1957 added ______in May 2004 bringing its total membership to 25 countries. a. 10 countries b. 5 countries c. 20 countries d. 6 countries e. 4 countries Answer: a Page: 673 Level of difficulty: Easy
17. NAFTA established a free trade zone between what three countries? a. Canada, Mexico, and South America b. Canada, Mexico, and Peru c. Mexico, South America, and the United States d. Canada, Mexico, and the United States e. Canada, Mexico, and Japan Answer: d Page: 673 Level of difficulty: Medium
18. MERCOSUL is a free trade zone linking which of the following South American countries? a. Mexico, Japan, Brazil, and Paraguay b. Mexico, Brazil, and Paraguay c. Brazil, Argentina, and Paraguay d. Canada, Brazil, and Paraguay e. Brazil, Argentina, Paraguay, and Uruguay Answer: e Page: 673 Level of difficulty: Medium
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19. The five modes of entry into foreign markets generally flow by increasing commitment, risk, control, and profit potential as follows ______. a. indirect exporting, direct exporting, licensing, joint ventures, and direct investment b. direct investment, joint ventures, licensing, direct exporting, and indirect exporting. c. direct investment, joint ventures, and licensing d. direct investment, joint ventures, licensing, and indirect exporting e. none of the above Answer: a Page: 674 Level of difficulty: Hard
20. In choosing which countries to invest in, companies sometimes choose psychic proximity to their own country. Psychic proximity can best be defined as ______. a. countries close to the “host” country in which the company feels comfortable with the language, laws, and culture b. countries that “mimic” the host country in terms of language and culture c. countries that the host country’s management team have visited d. countries close to the “host” country in which the company feels that they can infiltrate quickly and profitable e. countries close to the “host” country in which the company can easily transport their products Answer: a Page: 674 Level of difficulty: Medium
21. The normal way to get involved in an international market is through exporting. Occasional exporting is defined as ______. a. when the company carries on exporting activities on the behalf of others b. when the company makes a commitment to expand into particular markets c. when the company works through independent agents d. when the company hires domestic-based agents to negotiate foreign purchases e. a passive level of involvement in which the company exports its products from time to time Answer: e Page: 674 Level of difficulty: Medium
22. Active exporting takes place when the company ______to expand into a particular market. a. forms a “skunk” group b. forms an export department c. hires an agent d. makes an effort e. makes a commitment Answer: e Page: 674 Level of difficulty: Easy
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23. Domestic-based export merchants ______. a. buy the manufacturer’s products and then sell them abroad b. buy the manufacturer’s products then sell them in the host country c. buy the manufacturer’s products then fine agents and customers in foreign countries d. seek and negotiate foreign purchases e. carry on exporting activities on behalf of several producers Answer: a Page: 674 Level of difficulty: Hard
24. Domestic based export agents perform a valuable service for the companies seeking to enter foreign markets. The primary function of these agents is to ______. a. carry on exporting activities on behalf of several producers b. buy the manufacturer’s products and then sell them abroad c. buy the manufacturer’s products then sell them in the host country d. seek and negotiate foreign purchases and are paid a commission on those sales e. export products to foreign countries Answer: d Page: 674 Level of difficulty: Medium
25. Company’s prefer to enter a country that ranks high on market attractiveness, low in market risks and ______. a. in which it would possesses a competitive advantage b. turn a quick profit c. able to dominate its foreign competitors through superior product design and performance d. gain a dominate market share within one year of exporting e. increase its foreign market share by 50 percent in one year Answer: a Page: 674 Level of difficulty: Medium
26. Indirect export has two advantages for the firm. First in involves less investment for the firm and secondly it ______. a. involves less paperwork b. involves less intrusion by the government c. involves less risk d. involves less people to manage the process e. involves less products and product lines Answer: c Page: 675 Level of difficulty: Medium
27. A company can carry on direct exporting in several ways. These include domestic- based export department or division, overseas sales branch or subsidiary, traveling export sales representatives, and ______. a. foreign-based distributors or agents b. marketing departments based in the foreign country c. export merchants in foreign countries d. export management companies e. none of the above Answer: a Page: 675 Level of difficulty: Medium
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28. According to the text, Shaper Image receives more than ______of its online business form overseas customers. a. 15 percent b. 30 percent c. 25 percent d. 40 percent e. 10 percent Answer: c Page: 675 Level of difficulty: Hard
29. “Going abroad” using the Internet has its challenges. One of the challenges that a global marketer may run up against when using the Web are ______. a. cultural restrictions b. language barriers c. pricing procedures d. monetary exchanges e. logistical limitations Answer: a Page: 675 Level of difficulty: Medium
30. Licensing is a simple way to become involved in international marketing. In licensing, the licensor issues a license to a foreign company to use a process, trademark, patent, or trade secret for a(n) ______. a. limited period of time b. fee or royalty c. exchange of information or propriety information d. exchange for access to the market place e. exchange for “their” process, trademark, patent, or secret Answer: b Page: 676 Level of difficulty: Easy
31. Companies such as Marriott and Hyatt sell a variation of the licensing agreement called ______to the owners of foreign hotels to manage these businesses for them in foreign countries. a. contract manufacturing b. management contracts c. franchising d. hotel management licensing e. none of the above Answer: b Page: 676 Level of difficulty: Medium
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32. In ______, the firm hires local manufacturers to produce the product. This gives the company less control over the manufacturing process and loss of profits of the manufacturing efficiencies. a. contract manufacturing b. management contracts c. licensing d. franchising e. none of the above Answer: a Page: 676 Level of difficulty: Easy
33. A company can enter a foreign market through ______, which is a complete form of licensing in which the company offers a complete brand concept and operating system designed to ensure that the ______operates according to the requirements of the licensor. a. contract manufactures/licensor b. contract management/firm c. management contracts/firm d. joint venture/firm e. franchising/franchisor Answer: e Page: 676 Level of difficulty: Medium
34. The definition of a joint venture company is one ______. a. in which foreign inventors join with local investors where they share ownerships and control b. in which two people or more own the firm jointly c. where foreign investors join with others to own the firm d. where ownership by local and distant investors in share ownership of a franchise e. where ownership is by investors of foreign firms Answer: a Page: 676 Level of difficulty: Medium
35. A joint venture may be necessary or desirable for economic or political reasons. Additionally, a foreign firm might lack the ______, or managerial resources to undertake the venture alone. a. resource, competency b. financial, physical c. financial, willingness d. political, financial e. political, competency Answer: b Page: 677 Level of difficulty: Medium
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36. In an adapted marketing mix, the producers’ ______the marketing program to each target market. a. reduce the importance of each element of the marketing program to adjust for cost differential between countries b. decide on which element of the marketing mix to change/country/target market prior to entering the country c. adapt the communications message to the host country d. change only one element of the marketing mix/country e. adjust Answer: e Page: 677 Level of difficulty: Medium
37. International companies must decide on how much to adapt their marketing strategy to local conditions. At one extreme are companies that use a globally standardized marketing mix worldwide. A standardized marketing mix includes ______. a. a concentric strategy which includes the product, integrated marketing communications mix, and distribution strategy b. standardization of the product, communication, and distribution channels promising lowest costs. c. changes only to the product keeping distribution channels and marketing communications consistent across countries d. changing only the distribution channels to accommodate the host country e. changes only to the product and communication message Answer: b Page: 677 Level of difficulty: Medium
38. The ultimate form of foreign involvement is direct ownership of foreign-based assembly or manufacturing facilities. One of the advantages of direct ownership can include economies of scale, creating jobs in the host country, developing deeper relations with local suppliers etcetera and the firm ______. a. retains full control over its investment b. reviews global outreach projections c. redefines the business concept d. reviews the successes from e-commerce e. receives no disadvantages to direct investment Answer: a Page: 677 Level of difficulty: Medium
39. Hofstede identifies four cultural dimensions that can differentiate countries. These are individualism versus collectivism, high versus low power distances, masculine versus feminine, and ______. a. customer relationship management versus power distances b. strategic management versus marketing management c. weak versus strong uncertainty avoidance d. total quality management versus JIT deliveries e. marketing management versus customer relationships Answer: c Page: 677 Level of difficulty: Medium
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40. Straight extension of the product means ______. a. introducing the product to the foreign market without any changes to the product. b. introducing the product to the foreign market without major changes to the product c. introducing the product to the foreign market with major changes to the product d. introducing the product to the foreign market with no major marketing program e. not introducing the product to the foreign market until changes have been made Answer: a Page: 678 Level of difficulty: Medium
41. An advantage of global marketing is that it can lower marketing costs, has economies of scale in production and distribution, can produce consistency in brand image, has the ability to leverage good ideas quickly and efficiently, and ______. a. is easier to adapt to foreign countries b. allows for the same message to be used worldwide c. allows for individual countries to add their specific needs to the message d. is easier for corporations to evaluate the marketing message e. allows for uniformity of marketing practices Answer: e Page: 678 Level of difficulty: Hard
42. Product adaptation involves ______. a. altering the product to meet local conditions or preferences b. altering the product to meet minimum acceptable standards c. changing the product periodically d. upgrading the product on a periodic basis e. changing the product to meet competition Answer: a Page: 679 Level of difficulty: Medium
43. A firm can successful introduce four versions of its products into a foreign country or a firm may select one of these for inclusion. These versions include ______. a. customer version, regional version, and city version b. customer version, country version, and retailer version c. regional version, country version, city version, and retailer version d. customer version, regional version, city version, and retailer version e. regional version, country version, city version, and market versions Answer: c Pages: 680–681 Level of difficulty: Easy
44. Product invention consists of creating something new. Backward invention is reintroducing earlier product forms that are well adapted to a foreign country’s needs. Forward invention is ______. a. creating a new product to meet a need in another country b. creating a new product to meet the need in the host country c. understanding the differences between host and foreign country markets d. increasing the control over the development of new products e. inventing something that yet has a “market” Answer: a Page: 681 Level of difficulty: Medium
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45. Companies can run the same marketing communications programs as used in the home market or change them for each local market, a process called ______. a. product communications b. brand communications c. dual adaptation d. marketing communications e. communication adaptation Answer: e Page: 682 Level of difficulty: Medium
46. Many multinationals are plagued by the gray market problem. The gray market consists of ______. a. the marketing of products to older consumers b. branded products diverted from normal distribution channels in the country of product origin c. branded products diverted from one country to another d. products being repackaged from the intended country to a diverted country e. products not having full warranties by the manufacturer Answer: b Page: 682 Level of difficulty: Medium
47. If a company adapts or changes both the product and the communications, the company engages in a process called ______. a. straight extension b. marketing communication c. product adaptation d. dual adaptation e. full adaptation Answer: d Page: 682 Level of difficulty: Medium
48. The use of media requires international adaptation because media availability varies from country to country. Norway, Belgium, and France do not allow cigarettes and alcohol to be advertised on TB. Austria and Italy regulate TV advertising ______. a. between the hours of 9 p.m. and 6 a.m. b. to children c. for those under the age of majority d. regarding content and clarity e. using women in advertising Answer: b Page: 683 Level of difficulty: Medium
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49. A Gucci bag sells for $120 in Italy and $240 in the United States. This is an example of when a firm tries to sell its products abroad. This phenomenon is called a ______. a. strategic marketing pricing problem b. market pricing problem c. tactical pricing problem d. price escalation problem e. transfer pricing problem Answer: d Page: 684 Level of difficulty: Medium
50. A firm that charges a price to another unit in the company sets the ______price for goods that it ships to its foreign subsidiaries. a. original price b. transfer price c. margin price d. break-even price e. customer value price Answer: b Page: 684 Level of difficulty: Medium
51. The cost escalation problem exists for multinationals and varies from country to country; the question is: How to set prices in different countries? Companies have three choices. One is to set a uniform price everywhere, two is to set a market-based price in each country, and three is to ______. a. set a final “cost plus” price in each country b. set a cost-based price in each country c. let the market dictate price/country d. vary the price/market/country on a daily basis to reflect consumer demand e. set the transfer price at marginal costs = marginal revenue Answer: b Page: 684 Level of difficulty: Hard
52. In 2000 Stelco a Canadian steelmaker, successfully fought dumping changes against steelmakers in Brazil and other countries. “Dumping” is defined or occurs when ______. a. a company charges either less than its costs or less than it charges in its home market b. the company charges less that its costs but more than it charges in its home market c. the company’s pricing plans are below current domestic prices d. a company must increase its prices/product prior to importing the product e. a company unloads an excess supply of the product at the best possible prices to the consumer Answer: a Page: 684 Level of difficulty: Easy
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53. The “whole channel concept for international marketing” includes the following steps______. a. seller to seller’s international marketing headquarters to channels between nations to channels within foreign nations to final buyers b. seller to marketing headquarters to channels within foreign markets to final buyers c. sellers to channels between nations to final buyers d. sellers to channels within foreign nations to final buyers e. sellers to international markets to channels within foreign nations to final buyers Answer: a Page: 685 Level of difficulty: Hard
54. In an increasingly connected, highly competitive global marketplace, government officials, and marketers are concerned with how attitudes and beliefs about their country affect consumer and business decision-making. ______is(are) the mental associations and beliefs triggered by a country. a. Corporate ownership of the firm b. Materials used in manufacturing c. Brand names and trademarks d. Country-of-origin perceptions e. Competitive positions in the marketplace Answer: d Page: 686 Level of difficulty: Medium
55. A company has several options when its products are competitively priced but their place of origin turns consumers off. The company can consider ______. a. re-packaging the product to disguise the country of origin b. co-branding c. reducing their country of origin mentions in their advertising d. re-branding the product to disguise the country of origin e. co-production with a foreign company that has a better name. Answer: e Page: 687 Level of difficulty: Medium
56. Most brands are adapted to some extent to reflect significant differences in ______, ______, competitive forces, and the legal and political environment. a. consumer behavior, brand development b. business mission, brand development c. strategy and consumer behavior d. programs and marketing communications e. political and social mores differences Answer: a Page: 677 Level of difficulty: Medium
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57. Disadvantages to global marketing include differences in consumer needs, wants, and usage patterns for products; difference in consumer response to marketing-mix elements; differences in brand and product development and the competitive environment; and ______. a. differences in marketing institutions b. differences in language and consumer expectations c. differences in product performance d. differences in management’s reaction to the marketplace e. none of the above Answer: a Page: 678 Level of difficulty: Hard
58. Marketers must also adapt sales promotion techniques to different markets. Several European countries have laws preventing or limiting sales promotion tools such as discounts. In Germany, Lands’ End could not advertise its ______. a. woman’s bathing suits b. sale price c. close-out specials d. end-of-the-season sale e. money-back guarantee Answer: e Page: 683 Level of difficulty: Hard
59. Companies can manage their international marketing activities in three ways. These include, through export departments, international divisions, ______. a. or a global organization b. or from a fixed corporate headquarters c. or through a strong marketing department in the “host” country d. and through local marketing efforts e. none of the above Answer: a Page: 688 Level of difficulty: Medium
60. Bartlett and Ghoshal have identified three organizational strategies for international firms. These are: (1) a global strategy treats the world as a single market; (2) a multinational strategy treats the world as a portfolio of national opportunities; and (3) ______. a. a local strategy standardizes all of the local elements b. the marketing strategy identifies those elements assigned to a country and uses those elements plus corporate’s contribution in the marketing plan c. a “glocal” strategy standardizes certain core elements and localizes other elements d. assumes that there are no “local” or multinational differences in formulating the marketing mix e. none of the above Answer: c Pages: 689–690 Level of difficulty: Hard
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True/False
61. A global industry is an industry in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. Answer: True Page: 668 Level of difficulty: Easy
62. A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation. Answer: True Page: 668 Level of difficulty: Easy
63. A company needs to be large to sell globally. Answer: False Page: 669 Level of difficulty: Easy
64. Major decisions to enter the international marketplace and to conduct international marketing does not include deciding on how to enter the market. Answer: False Page: 669 Level of difficulty: Medium
65. Most companies would prefer to enter the international market place because their national markets are too small for continued growth. Answer: False Page: 669 Level of difficulty: Hard
66. The internationalization process has six stages. The first stage is moving the company from no regular exports to regular export activities. Answer: False Page: 670 Level of difficulty: Hard
67. The developed nations and the prosperous parts of developing nations account for 85 percent of the world’s population. Answer: False Page: 671 Level of difficulty: Medium
68. Business can be “as usual” when selling in developing markets as consumers are “consumers” around the world. Answer: False Page: 671 Level of difficulty: Medium
69. Smaller packaging and lower sales prices are often critical in markets where incomes are limited. Answer: True Page: 671 Level of difficulty: Medium
70. Country attractiveness is influenced by product, geography, income, and populations, political climate, and other factors. Answer: True Page: 671 Level of difficulty: Medium
71. A “waterfall” approach to entering foreign markets is described as entering countries gradually and sequentially. Answer: True Page: 671 Level of difficulty: Medium
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72. A “sprinkler” approach to entering foreign markets is described as entering many countries simultaneously within a limited period of time. Answer: True Page: 671 Level of difficulty: Medium
73. Some firms are “born global” meaning that they sell and market to the world right from the outset. Answer: True Page: 671 Level of difficulty: Medium
74. We have seen a decline in the scope of and number of international trading agreements such as the European Union. Answer: False Page: 673 Level of difficulty: Medium
75. NAFTA established a free trade zone among the United States, Mexico, and Canada. Answer: True Page: 673 Level of difficulty: Easy
76. MERCOSUL links Brazil, Argentina, Paraguay, and Uruguay in a free trade area. Answer: True Page: 673 Level of difficulty: Easy
77. Occasional exporting is a passive level of involvement in which the company exports from time to time on its own initiative or in response to unsolicited orders from abroad. Answer: True Page: 674 Level of difficulty: Medium
78. Active exporting takes place when the company makes a commitment to expand into a particular market. Answer: True Page: 674 Level of difficulty: Medium
79. Once a company decides to target a particular country, it has to determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment. Answer: True Page: 674 Level of difficulty: Hard
80. Each of these strategies (indirect exporting, direct exporting, licensing, joint ventures, and direct investment) involves more commitment, risk, control, and profit potential. Answer: True Page: 674 Level of difficulty: Medium
81. Domestic based export merchants buy the manufacturer’s products and then sell them abroad. Answer: True Page: 674 Level of difficulty: Easy
82. Domestic-based export agents seek and negotiate foreign purchases and are paid a straight salary. Answer: False Page: 674 Level of difficulty: Medium
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83. Cooperative organizations carry on exporting activities on behalf of several producers and are partly under their administrative control. Answer: True Page: 674 Level of difficulty: Medium
84. Export-management companies agree to manage a company’s export activities for a fee. Answer: True Page: 675 Level of difficulty: Medium
85. Indirect export has two advantages. First, it involves less investment and second it involves less risk. Answer: True Page: 675 Level of difficulty: Medium
86. The use of a domestic-based export department or division, overseas sales branch or subsidiary, traveling export sales representatives, and foreign-based distributors or agents are all examples of how a company can carry on direct exporting on their own. Answer: True Page: 675 Level of difficulty: Hard
87. “Going abroad” on the Internet does not pose any special challenges for a firm. Answer: False Page: 675 Level of difficulty: Hard
88. In licensing, the licensor issues a license to a foreign company to use an item of value for a fee or royalty. Answer: True Page: 676 Level of difficulty: Medium
89. There are several variations of a licensing agreement. One of these that gives the licensee a complete brand concept and operating system is called franchising. Answer: True Page: 676 Level of difficulty: Medium
90. In contract manufacturing, the firm hires local manufacturers to product the product in their home country. Answer: True Page: 676 Level of difficulty: Medium
91. Management contracts offers foreign owners the opportunity to manage businesses for a fee. Answer: True Page: 676 Level of difficulty: Medium
92. Foreign investors may join with local investors to create a joint venture company in which they share ownership and control. Answer: True Page: 676 Level of difficulty: Medium
93. The ultimate form of foreign investment is direct ownership of foreign-based assembly or manufacturing facilities. Answer: True Page: 677 Level of difficulty: Easy
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94. Straight extension means introducing the product in the foreign market without any changes to the brand. Answer: True Page: 678 Level of difficulty: Medium
95. Product adaptation involves altering the product to meet local conditions or preferences. Answer: True Page: 679 Level of difficulty: Easy
96. Product invention consist of creating something new. It can take two forms. Backward invention is reintroducing earlier product forms that are well adapted to a foreign country’s needs. Answer: True Page: 681 Level of difficulty: Hard
97. Forward invention is creating a new product to meet a need in another country. Answer: True Page: 681 Level of difficulty: Medium
98. Companies can run the same marketing communications programs as used in the home market or change them for each local market, a process called communication adaptation. Answer: True Page: 682 Level of difficulty: Hard
99. If the company adapts both the product and the communications, the company engages in dual adaptation. Answer: True Page: 682 Level of difficulty: Medium
100. Global marketers know that buyers hold distinct attitudes and beliefs about brands or products from different countries. These country-of-origin perceptions do not affect consumer decision making directly or indirectly. Answer: False Page: 686 Level of difficulty: Hard
Essay
101. Most companies would prefer to remain domestic if their domestic market were large enough. Yet several factors are drawing more and more companies into the international arena. List some of these factors and explain.
Suggested Answer: Some of the factors are: (1) the company discovers that some foreign markets present higher profit opportunities; (2) the company needs a larger customer base to achieve economies of scale; (3) the company wants to reduce its dependence on any one market; (4) global firms offering better products or lower prices can attack the company’s domestic market; and 5) the company’s customers are going abroad and require international servicing. Page: 669 Level of difficulty: Hard
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102. Before making a decision to enter foreign markets, the firm must weigh several risks. List these risks and discuss each.
Suggested Answer: These risks are: (1) the company might not understand foreign customers preferences and fail to offer a competitively attractive product; (2) the company might not understand the foreign country’s business culture or know how to deal effectively with foreign nationals; (3) the company might underestimate foreign regulations and incur unexpected costs; (4) the company might realize that it lacks managers with international experience; and (5) the foreign country might change its commercial laws, devalue its currency, or undergo a political revolution and expropriate foreign property. Page: 669 Level of difficulty: Hard
103. Outline the major decisions that a firm must undergo in making a decision to market internationally.
Suggested Answer: The first step is deciding whether to go abroad; the second decision is deciding which markets to enter; the third step is deciding how to enter the market; the fourth step is deciding on the marketing program; the final step is deciding on the marketing organization. Page: 669 Level of difficulty: Medium
104. In deciding to go abroad, a company needs to define its marketing objectives and policies. Ayal and Zif have argued that a company should enter fewer countries when there were certain criteria? Please list their suggestions.
Suggested Answer: Ayal and Zif argued that a company should enter fewer countries when: (1) the market entry and market control costs are high; (2) product and communication adaptation costs are high; (3) population and income size and growth are high in the initial countries chosen; and (4) dominant foreign firms can establish high barriers to entry. Page: 670 Level of difficulty: Hard
105. Regional Free Trade Zones exist around the world. One of the oldest is the European Union formed in 1957. Describe the purpose of the EU and discuss some of the benefits to firms engaged in trade within the European Union.
Suggested Answer: The EU set out to create a single European market by reducing barriers to the free flow of products, services, finances, and labor among member countries, and by developing trade policies with nonmember nations. Members in the EU have access to 454 million consumers and accounts for 23 percent of the world’s exports. It has a common currency, the euro monetary system. Page: 673 Level of difficulty: Medium
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106. Once a company decides to target a particular country, it has to determine the best mode of entry. Each of its market entry strategies involves more commitment, risk, control, and profit potential. List these market entry strategies in order from low risk to highest risk.
Suggested Answer: The five modes of entry into foreign markets are as follows from lowest risk to highest risk: 1) indirect exporting; 2) direct exporting; 3) licensing; 4) joint ventures; 5) direct investment. Pages: 674 Level of difficulty: Medium
107. One of the best ways to initiate or extend export activities used to be to exhibit at an overseas trade show. With the Web, it is not even necessary to attend trade shows to show one’s wares. Explain how marketers are using the Web for international business.
Suggested Answer: Marketers are using the Web to reach new customers outside their home countries, to support existing customers who live abroad, to source from international suppliers, and to build global brand awareness. These companies adapt their Web sites to provide country-specific content and services to their best potential international markets, in the local language. Page: 675 Level of difficulty: Medium
108. The concept of licensing contains many dimensions. From a simply license through management contracts, contract manufacturing, and franchising, the level of commitment by the firms involved increases. Define each of these forms and list some of the pros and cons for utilizing the particular form of licensing.
Suggested Answer: A license is the permission to a foreign country to use a manufacturing process, trademark, patent, trade secret, or other item of value for a free or royalty. The licensor has less control over the licensee than it does over its own production and sales facilities. A management contract is when a firm allows others to manage their business for a fee. Again, the management contract has less control over the operations of the business than it would if it owned the business outright. A contract-manufacturing license is when the firm hires local manufacturers to product the product for the firm. Contract manufacturing gives the company less control over the manufacturing process. In franchising, the franchiser offers a complete brand concept and operating system. Here the franchisor has more control over the operation than the other forms but not complete control. Page: 676 Level of difficulty: Hard
109. Foreign investors may join with local investors to create a joint venture. Define a joint venture, and list some of the advantages and disadvantages to the firm of such a venture.
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Suggested Answer: A joint venture is when a company in which multiple investors share ownership and control. A joint venture may be necessary or desirable for economic or political reasons. The foreign firm might lack the financial, physical, or managerial resources to undertake the venture alone; or the foreign government might require joint ownership as a condition for entry. Joint ownership has certain drawbacks. The partners might disagree over investment, marketing, or other policies. Joint ownership can also prevent a multinational company from carrying out specific manufacturing or marketing policies on a worldwide basis. Pages: 676–677 Level of difficulty: Hard
110. In an increasingly connected, highly competitive global marketplace, government officials, and marketers are concerned with how attitudes and beliefs about their country affect consumer and business decision makers. What is the term for this concept and what is the position of government officials and marketers?
Suggested Answer: Country-of-origin perceptions are the mental associations and beliefs triggered by a country. Government officials want to strengthen their country’s image to help domestic marketers who export and to attract foreign firms and investors. Markets want to use country-of-origin perceptions in the most advantageous way possible to sell their products and services. Page: 686
Level of difficulty: Hard
APPLICATION QUESTIONS
Multiple Choice
111. A small firm has decided to enter the international market. At the present time, the firm has decided to enter only one country. What is the next step in the decision making process if the firm is to continue with its plans? a. Deciding on the marketing organization. b. Deciding on the marketing program. c. Deciding how to enter the market. d. Deciding whether to go abroad. e. Deciding which markets to enter. Answer: c Page: 669 Level of difficulty: Medium
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112. When Microsoft introduces a new form of Windows software, the first-mover approach is preferred. Microsoft would then tend to use which form of entry strategy? a. Market attractiveness b. Continuous c. Born global d. Sprinkler e. Waterfall Answer: d Page: 671 Level of difficulty: Hard
113. Approximately 85 percent of the world’s population lies outside of the developed nations and prosperous part of the world. In attempting to reach these markets, where income and purchasing power is diminished, marketers could review their service by ______. a. offering lower sale prices and smaller packaging b. conducting business as usual in these countries c. offering lower sales prices but higher packaging sizes d. increasing spending in these countries e. decreasing expenditures in these countries until the country has fully developed for their products. Answer: a Page: 671 Level of difficulty: Medium
114. You small firm has decided to begin exporting to a foreign country. Available to you are the five modes of entry. Your company has decided on direct exporting as its first venture into the foreign markets. What would the firm’s next step in the exporting process be, considering that the next step involves increased risk and commitment to the processes? a. Indirect exporting b. Direct exporting c. Joint venture d. Direct investment e. Licensing Answer: e Page: 676 Level of difficulty: Medium
115. James Franks works out of Miami and buys locally produced manufacturer’s products and sells them abroad mainly to Caribbean nations. Mr. Frank’s is ______. a. a domestic-based export merchant b. a domestic-based export agent c. a cooperative organization d. an export-management company e. indirect exporting Answer: a Pages: 674-675 Level of difficulty: Hard
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116. Mr. Day and Ms. Pound represent a number of producers and carry on exporting activities for each of them. As a result, Mr. Day and Ms. Pound’s firm come under the administrative control of these producers. How would you describe Mr. Day and Ms. Pound’s firm? a. Indirect exporters b. Cooperative organization c. Direct exporters d. Agents e. Joint venture Answer: b Page: 676 Level of difficulty: Medium
117. Your firm has decided to enter the international market with your product called “Trema’” a new pocket organizer/cell phone combination. In your discussions about the marketing plans, your CMO has decided that no changes will be/are necessary in either the marketing mix or product for export. What form of marketing strategy is the CMO advocating? a. Collectivism b. Individualism c. Adapted marketing mix d. Engineering-driven marketing mix e. Standardized marketing mix Answer: e Page: 677 Level of difficulty: Hard
118. For the launch of “Trema’” the CMO has decided on no changes to either the marketing mix or the product necessary. This introduction is described as ______. a. design change b. straight extension c. product adaptation d. regional version e. market version Answer: b Page: 678 Level of difficulty: Hard
119. Finnish cellular phone superstar Nokia customized its 6100 series phone for every major market in which it sells the product. In Asia, for example, the developers raised the ring volume so that it could be heard on the crowded Asian streets. This kind of adaptation is called ______. a. straight extension b. market adaptation c. regional version d. city version e. country version Answer: c Page: 679 Level of difficulty: Hard
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120. When the National Cash Register Company reintroduced its crank-operated cash registers in Latin America and Africa, it was practicing what form of invention? a. Backward invention b. Forward invention c. Product innovation d. Product invention e. None of the above Answer: a Page: 681 Level of difficulty: Medium
121. Your firm has decided to enter the international market with your product called “Trema’” a new pocket organizer/cell phone combination. In your discussions about the marketing plans, your CMO has decided that your firm will use the same advertising program from the “home” market to the new foreign markets. Your CMO is advocating ______. a. product adaptation b. dual adaptation c. straight extension d. communication adaptation e. none of the above Answer: d Page: 682 Level of difficulty: Medium
122. The Trema’ launch was a success! Now, a year later, you have been receiving calls from U.S. dealers complaining that Trema’ is available from international distributors at prices 50 percent less than the U.S. price. You are faced with the ______problem due to the international success of your product. a. gray market b. export/import problem c. overstocks d. distributor relationships e. none of the above Answer: a Page: 684 Level of difficulty: Medium
123. Too many U.S. firms think their job is done once the product leaves the factory for the foreign country. These firms do not pay attention to how the product moves within the foreign country. There are three major links between seller and ultimate buyer in the foreign country. The first link is ______. where the export department or international division makes decisions on channels and other marketing-mix elements. a. channel partners b. corporate headquarters c. seller’s international marketing headquarters d. advertising agencies e. host country corporate offices Answer: c Page: 685 Level of difficulty: Hard
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124. The second link, ______gets the products to the borders of the foreign nation and includes the types of intermediaries that will be used, the type of transportation, and the financing and risk arrangements. a. channels between nations b. channels within foreign nations c. seller’s international marketing headquarters d. seller’s corporate offices e. host country executive offices Answer: a Page: 685 Level of difficulty: Hard
125. The international division’s corporate staff consists of functional specialists who provide services to various operating units. Operating units can be organized several ways. Your firm has a president of your division who reports to the president of the international division. This defines your organization as having a ______. a. international company b. world product group c. geographical organization d. international subsidiaries e. none of the above Answer: d Page: 689 Level of difficulty: Hard
126. If you were the CEO of a company that was truly a global organization, you would have some decisions to make regarding corporate strategy. Bartlett and Ghoshal have distinguished three organizational strategies one of which is to ______. a. treat the world as a single market b. treat the world as a multiple markets c. treat the world as a set of international markets d. treat the world as a subset of the “global” market e. none of the above Answer: a Page: 689 Level of difficulty: Hard
127. The favorability of country-of-origin perceptions must be considered both from a domestic and foreign perspective. In the domestic market, country-of-origin perceptions may stir consumers’ ______or remind them of the past. a. availability of foreign products b. patriotic notions c. product-development d. diversification e. concentric Answer: b Page: 687 Level of difficulty: Medium
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128. Bartlett and Ghoshal have proposed circumstances under which different approaches work best. In their book, Managing Across Borders, they describe forces that favor “global integration” (capital-intensive production, and ______). a. homogeneous demand b. competitive positioning c. distinctive advantage d. need for market share e. corporate culture Answer: a Page: 689 Level of difficulty: Hard
129. Exxon used the slogan “Put a tiger in your tank” across countries with minor variations and gained international recognition. This is an example of ______. a. implementation b. strategy formulation c. communication adaptation d. functional analysis e. dual adaptation Answer: c Page: 682 Level of difficulty: Medium
130. Firm’s in general prefer to enter countries that: (1) rank high on market attractiveness; (2) are low in market risk; and (3) ______. a. in which they have a product alliance b. in which they would have a competitive advantage c. in which they would have a pricing advantage d. in which they would have a service advantage e. in which they would have a promotional advantage Answer: b Page: 674 Level of difficulty: Medium
Short Answer
131. If you were the marketing manager for small regional toy manufacturer who is considering exporting how would you describe the major decisions to be made prior to embarking on the international scale.
Suggested Answer: The decisions are: (1) deciding whether to go abroad; (2) deciding which markets to enter; (3) deciding how to enter the market; (4) deciding on the marketing program; and (5) deciding on the marketing organization. Page: 669 Level of difficulty: Medium
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132. In the opening vignette regarding Red Bull, the firm has achieved the status of a billion dollar brand in less than 15 years. How was this achieved?
Suggested Answer: Skillfully connected with global youth by building a buzz about the product through its seeding program; the company microtargets “in” shops, clubs, bars, and gradually moving into supermarkets. Page: 667 Level of difficulty: Medium
133. Define the internationalization process’s four stages.
Suggested Answer: The first stage is no regular export activities; followed by export via independent representatives (agents); followed by establishment of one or more sales subsidiaries; and finally establishment of production facilities abroad. Page: 670 Level of difficulty: Medium
134. Ayal and Zif have argued that a company should enter fewer countries in when certain situations are present. What are those conditions?
Suggested Answer: market entry and market control costs are high; product and communication adaptation costs are high; population and income size and growth are high in the initial countries chosen; dominant foreign firms can establish high barriers to entry Page: 670 Level of difficulty: Hard
135. A company must decided on how many countries to enter and how fast to expand. A company’s entry strategy typically follows one of two possible approaches. What are those approaches?
Suggested Answer: A waterfall approach and a sprinkler approach. Page: 671 Level of difficulty: Easy
136. Regional Free Trade Zones have intensified in recent years. Name three of the most prominent trade organizations in existence today.
Suggested Answer: The European Union, NAFTA, MERCOSUL, and APEC. Page: 673 Level of difficulty: Easy
137. Define psychic proximity and why is it important for companies exporting?
Suggested Answer: Many U.S. firms prefer to sell in Canada, England, and Australia because they feel more comfortable with the language, laws, and culture. Companies should be careful in choosing markets according to cultural distance. Besides the fact that some very real differences exist, some potentially better markets may be overlooked. Page: 674 Level of difficulty: Medium
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138. The ultimate form of foreign investment is direct ownership of foreign-based assembly or manufacturing facilities. Briefly describe the advantages to ownership.
Suggested Answer: The firm: (1) secures cost economies in the form of cheaper labor or raw materials; (2) strengthens its image in the host country; (3) develops a deeper relationship with government and consumers in the host country; (4) retains control over its investment; and (5) assures itself access to the market. Page: 677 Level of difficulty: Hard
139. International companies must decide how much to adapt their marketing strategy to local conditions. There are two strategies, one at each end of the spectrum. Identify and briefly explain these strategies.
Suggested Answer: At one end is the standardized marketing mix where no changes are made to the marketing mix when entering foreign countries. At the other end is the adapted marketing mix where the producer adjusts the marketing program to each target market. Page: 677 Level of difficulty: Hard
140. Satisfying different consumer needs and wants can require different marketing programs. Cultural differences can often be pronounced across countries. Hofstede identifies four cultural differences, his first being “individualism versus collectivism.” Briefly explain.
Suggested Answer: In collectivist societies, the self-worth of an individual is rooted more in the social system than in individual achievement. Page: 677 Level of difficulty: Medium
141. Satisfying different consumer needs and wants can require different marketing programs. Cultural differences can often be pronounced across countries. Hofstede identifies four cultural differences, his second being “high versus low power distance. Briefly explain.
Suggested Answer: High power distance cultures tend to be less egalitarian. Page: 677 Level of difficulty: Medium
142. Satisfying different consumer needs and wants can require different marketing programs. Cultural differences can often be pronounced across countries. Hofstede identifies four cultural differences, his third being “masculine versus feminine. Briefly explain.
Suggested Answer: How much the culture is dominated by assertive males versus nurturing females. Page: 677 Level of difficulty: Medium
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143. Satisfying different consumer needs and wants can require different marketing programs. Cultural differences can often be pronounced across countries. Hofstede identifies four cultural differences, his fourth being “weak versus strong uncertainty avoidance. Briefly explain.
Suggested Answer: How risk tolerant or aversive people are. Page: 677 Level of difficulty: Medium
144. When companies sell their goods abroad, they face a price escalation problem. Define price escalation.
Suggested Answer: Depending on the added costs of transportation, tariffs, importer margin, wholesaler margin, and retailer margin, as well as the currency- fluctuation risk, the product might have to sell for two to five times as much in another country to make the same profit margin for the manufacturer. Page: 684 Level of difficulty: Medium
145. Because of the price escalation problem, what are the choices available to companies when setting prices?
Suggested Answer: Set a uniform price everywhere; set a market-based price in each country; and set a cost-based price in each country. Page: 684 Level of difficulty: Medium
146. Define the gray market.
Suggested Answer: The gray market consists of branded products diverted from normal or authorized distributions channels in the country of product origin or across international borders. Page: 684 Level of difficulty: Medium
147. How do multinationals try to prevent gray markets?
Suggested Answer: Multinationals try to prevent gray markets by policing the distributors, by raising their prices to lower-cost distributors, or by altering the product characteristics or service warranties for different countries. Page: 684 Level of difficulty: Medium
148. U.S. manufacturers think their job is done once the product leaves the factory. These firms should pay attention to how the product moves within the foreign country. They should take a whole-channel view of the problem of distributing products to the final user. Describe the whole-channel concept.
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Suggested Answer: The whole-channel concept consists of: (1) a seller; (2) seller’s international marketing headquarters; (3) channels between nations; (4) channels within foreign nations; and (5) final buyers. Page: 685 Level of difficulty: Medium
149. List some of the “special challenges” in using the Web to “go abroad.”
Suggested Answer: “Going abroad” on the Internet does pose special challenges. The global marketer may run up against governmental or cultural restrictions. On a wider scale, the issue of who pays sales taxes and duties on global e-commerce is murkier still. Page: 675 Level of difficulty: Hard
150. Compare these two terms: global industry and global firm.
Suggested Answer: A global industry is one in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages in its costs and reputation that are not available to purely domestic competitors. Page: 668 Level of difficulty: Easy
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