MKTG 5 5th Edition by Charles W. Lamb - Test Bank

MKTG 5 5th Edition by Charles W. Lamb – Test Bank

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Sample Questions Are Posted Below

Chapter 5—Developing a Global Vision

TRUE/FALSE

Having a global vision means that management recognizes and reacts to international marketing opportunities, uses effective marketing strategies, and is aware of threats from foreign competitors in all markets.

ANS: T PTS: 1 REF: 55 OBJ: 05-1

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Knowledge

Global trade has reached over $11 trillion a year.

ANS: T PTS: 1 REF: 55 OBJ: 05-1

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Comprehension

About 85 percent of U.S. companies export their products to other countries on a regular basis.

ANS: F

About 85 percent of all U.S. exports of manufactured goods are shipped by less than 10 percent of all manufacturing businesses.

PTS: 1 REF: 56 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

Multinational companies typically begin the development of their global business with direct investment and continue using this strategy throughout the company’s life span.

ANS: F

Multinational companies often develop their global business in four stages. In the first stage, companies operate in one country and sell to others.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

Global marketing standardization presumes that the markets throughout the world are becoming more alike.

ANS: T PTS: 1 REF: 58 OBJ: 05-2

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Knowledge

The same environmental factors that operate in the domestic market also exist internationally. These factors (culture, economic and technological development, political structure and actions, demographic makeup, and natural resources) should be examined regardless of the country.

ANS: T PTS: 1 REF: 59 OBJ: 05-3

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Comprehension

Even if all parties to a global business transaction are fluent in a common language, other cultural factors could interfere with the communication process.

ANS: T PTS: 1 REF: 59-60 OBJ: 05-3

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Comprehension

While some countries have elements of both capitalism and socialism, most nations are at one political extreme or the other.

ANS: F

Rarely will a political environment be at one extreme or the other. Rather, elements of many systems are often present.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

According to research done by the World Bank, countries with the greatest amount of business regulation foster the strongest economies.

ANS: F

Those with the least amount of business regulation foster the strongest economies.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

The U.S. government limits the amount of sugarcane that is imported into the country. This is an example of a quota.

ANS: T PTS: 1 REF: 61 OBJ: 05-3

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Application

The U.S. government prohibits the importation of Havana cigars because of political differences with Cuba. This is an example of an import exchange control.

ANS: F

This is an example of a boycott.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

To protect its local vodka industry, Russia allows foreign manufacturers to have only one percent of the Russian vodka market. This is an example of using tariffs to control foreign competition.

ANS: F

This is an example of using quotas to control foreign competition.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

GATT, NAFTA, and the EU are all examples of market groupings.

ANS: F

GATT and NAFTA are trade agreements, and the EU is the best-known market grouping.

PTS: 1 REF: 61-62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

The Uruguay Round of trade negotiations dramatically increased trade barriers worldwide.

ANS: F

It lowered trade barriers.

PTS: 1 REF: 62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

NAFTA is the New American Foreign Trade Amendment, which allows for balanced trade with the European Union.

ANS: F

NAFTA is the North American Free Trade Agreement, which creates a free trade zone among Canada, the United States, and Mexico.

PTS: 1 REF: 62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

Vast differences in natural resources create international dependence and huge shifts of wealth.

ANS: T PTS: 1 REF: 66 OBJ: 05-3

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective

MSC: BLOOMS Comprehension

Even though it is not actively involved in global marketing, Hennessey Enterprises, a U.S.-based business, agreed to sell two thousand of its stress-reducing products to a distribution company in Norway. This would be an example of direct investment.

ANS: F

This is an example of exporting.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Licensing agreements reduce the risk for manufacturers and sometimes even remove the requirement for a manufacturer to produce its own product.

ANS: T PTS: 1 REF: 67 OBJ: 05-4

TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

The major disadvantage of licensing agreements is that international companies cannot maintain control over their licensees.

ANS: F

Two common ways of maintaining effective control over licensees are shipping one or more critical components from the United States or locally registering patents and trademarks to the U.S. firm.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

U.S.-based Procter & Gamble and Italian-based Fater agreed to produce and market diapers for the European market. This is an example of a joint franchise.

ANS: F

This is a an example of a joint venture.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

The form of global organization that provides the highest potential for return on investment as well as the highest level of risk is contract manufacturing.

ANS: F

Direct foreign investment carries the highest risk level and the greatest potential return on investment.

PTS: 1 REF: 68 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

Global marketing research is not any more difficult than domestic marketing research.

ANS: F

Global marketing research is conducted in vastly different environments and can be very difficult in developing countries.

PTS: 1 REF: 68 OBJ: 05-5 TOP: AACSB Diversity

KEY: CB&E Model Research | CB&E Model International Perspective

MSC: BLOOMS Evaluation

If a country’s currency appreciates, more of that currency will be needed to buy another country’s currency.

ANS: F

If a country’s currency appreciates, less of that currency is needed to buy another country’s currency.

PTS: 1 REF: 71 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

The rules, regulations, and habits used for brick-and-mortar stores tend to restrain and limit the success of those retailers engaged in e-commerce.

ANS: T PTS: 1 REF: 73 OBJ: 05-6

TOP: AACSB Technology

KEY: CB&E Model Online/Computer | CB&E Model International Perspective

MSC: BLOOMS Comprehension

MULTIPLE CHOICE

Individuals and organizations utilizing a global vision to effectively market goods and services across the world are engaged in:

a.	international selling schemes
b.	borderless commerce
c.	global marketing standardization
d.	global logistics
e.	global marketing

ANS: E

Global marketing targets markets throughout the world.

PTS: 1 REF: 55 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

Basketball is played nearly everywhere in the world and is an easily understood sport. The National Basketball Association (NBA) finals reached more than 600 million televisions in 195 countries. From this information, you should be able to infer that the NBA is:

a.	developing international selling schemes
b.	implementing standard international marketing
c.	implementing global marketing standardization
d.	supplementing its foreign vision
e.	practicing global marketing

ANS: E

Global marketing targets markets throughout the world.

PTS: 1 REF: 55 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Sawyer Components manufactures high-cost, customized roller parts for paper mills and is expanding into China because of the opportunity for significant growth in this developing country. The owner uses effective global strategies and is aware of threats from foreign competitors. This illustrates that the owner has a global:

a.	advantage
b.	imperative
c.	vision
d.	outsource
e.	introspection

ANS: C

A global vision is recognizing and reacting to international marketing opportunities.

PTS: 1 REF: 55 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

All of the following statements about global marketing are true EXCEPT:

a.	Marketing to target markets throughout the world has become imperative for business.
b.	Often a U.S. firm’s toughest domestic competition comes from foreign companies.
c.	Marketing managers must develop a global vision not only to recognize and react to international marketing opportunities but also to remain competitive at home.
d.	Adopting a global vision can be lucrative for a company, and global marketing can offset weak domestic performance.
e.	Foreign competitors have not gained significant market share in the United States.

ANS: E

Many U.S. businesses have lost significant market share to imported products.

PTS: 1 REF: 56 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

Gillette gets about two-thirds of its revenue from its international divisions. This shows that:

a.	U.S. citizens are shaving less
b.	their market share should increase
c.	more men and women need to shave
d.	sales need to be increased domestically
e.	adopting a global vision can pay off

ANS: E

Adopting a global vision can be very lucrative to a company.

PTS: 1 REF: 56 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

The primary reason large U.S. companies send U.S. jobs abroad is because labor costs are higher in the United States. They are engaging in:

a.	outsourcing
b.	global trade
c.	multinational employee searches
d.	employee export
e.	global employment

ANS: A

Job outsourcing is sending U.S. jobs abroad.

PTS: 1 REF: 56 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

Many people fear world trade because it:

a.	will inevitably lead to inflation
b.	will cause living standards to increase at a slower rate
c.	causes some people to lose their jobs as production shifts abroad
d.	has brought entire nations out of poverty
e.	has increased per capita income for some countries

ANS: C

Global competition and cheap imports help keep inflation down, and world trade has caused the standards of living for many countries to increase at a faster rate. The other options describe advantages.

PTS: 1 REF: 56 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

A(n) _____ is a company that is heavily engaged in global trade and moves its resources, goods, services, and skills across national boundaries.

a.	international facilitator
b.	global trader
c.	multinational corporation
d.	exporting company
e.	international merchant

ANS: C

A multinational corporation is a company that is heavily engaged in international trade, beyond exporting and importing.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

Which of the following statements about multinational firms is true?

a.	Multinationals typically do not change their methods of reaching their global markets if they are successful with their initial strategy.
b.	Multinationals are defined as companies heavily engaged in exporting and importing.
c.	All multinationals must enter the fourth stage of globalization before they are fully internationalized.
d.	Multinationals often develop their global businesses in stages.
e.	The five stages of globalization closely mirror the five stages of the product life cycle.

ANS: D

Multinationals can go through up to four stages in their quest to globalize their business. Generally, only high-tech firms ever reach the fourth stage. Multinationals are companies that heavily engage in international trade beyond exporting and importing.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Evaluation

When European demand for a certain solvent declined, Dow Chemical instructed its German plant to switch to manufacturing a chemical that had been imported from Louisiana and Texas. Dow Chemical would be best described as a(n):

a.	global enterprise
b.	global trader
c.	cultural marketer
d.	exporting company
e.	multinational corporation

ANS: E

A company that is heavily engaged in global trade and moves resources, goods, services, and skills across national boundaries is called a multinational corporation.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Apple, Inc. has partnerships with wireless carriers in Japan, Spain, and a handful of other European countries. Apple works with suppliers and retailers worldwide. This means that Apple is a:

a.	multinational corporation
b.	worldwide competitor
c.	marketplace competitor
d.	domestic corporation
e.	foreign investor

ANS: A

Multinational corporations are heavily engaged in international trade beyond exporting and importing.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Otis Elevators has entered into a strategic alliance with a company in France from which it gets its elevator door systems. It has a similar agreement with a manufacturer in Japan that provides it with special motor drives. A manufacturer in Spain has worked closely with Otis to create small geared parts necessary for the manufacture of elevators. The component parts are assembled at its plant in the United States. Otis elevators can be found in buildings all over the world. Otis Elevators is an example of a(n):

a.	cultural marketer
b.	global trader
c.	multinational corporation
d.	exporting company
e.	global enterprise

ANS: C

Otis Elevators is heavily engaged in international trade beyond exporting and importing.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Claiborne, Inc. produces leather accessories for motorcycle riders and is in the first stage of creating its global business. This means that Claiborne:

a.	operates in one country and sells to others
b.	has set up a foreign subsidiary
c.	operates an entire line of business in another country
d.	has top executives and core corporate functions in different countries
e.	operates in every country in the world

ANS: A

The first stage is where companies operate in one country and sell to other countries.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Defeet International creates its apparel in North Carolina and sells it domestically and abroad. The company is in which stage of global business?

a.	Stage one
b.	Stage two
c.	Stage three
d.	Stage four
e.	Stage five

ANS: A

Defeet is in stage one, where the company is creating the product in one country, the United States, and selling to other countries.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

In which stage do multicultural companies operate when they set up foreign subsidiaries to handle sales in one country?

a.	Stage one
b.	Stage two
c.	Stage three
d.	Stage four
e.	Stage five

ANS: B

Stage two is characterized by a multinational company setting up foreign subsidiaries to handle sales in one country.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

Cooley Manufacturing is a multinational company selling plumbing components around the world. This company has progressed to the point that it operates an entire of line of business in several other countries. Which stage of multinational business does this represent?

a.	Stage one
b.	Stage two
c.	Stage three
d.	Stage four
e.	Stage five

ANS: C

Stage three is characterized by operating an entire line of business in another country.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Which of the following is a criticism of multinational corporations?

a.	Multinationals sometimes support reactionary and oppressive regimes.
b.	Multinationals require excessive employment information.
c.	Countertrading
d.	The transference of labor-intensive technology
e.	Multinationals do not do enough to standardize their marketing mixes.

ANS: A

Multinationals sometimes support reactionary and oppressive regimes if it is in their best interests to do so.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

A company that is capital intensive:

a.	has an altered fiscal strategy for overseas operations
b.	spends more on equipment than on labor
c.	makes better use of benchmarking than other types of business
d.	creates employment monopolies
e.	must engage in countertrading due to restrictive foreign legislature

ANS: B

Capital intensive means the company spends more for equipment than for labor and is a criticism of multinational companies because it does need a significant labor force.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model Strategy MSC: BLOOMS Knowledge

With a _____, a firm produces standardized products to be sold the same way all over the world.

a.	traditional marketing strategy
b.	global marketing standardization approach
c.	product extension approach
d.	culturally based marketing strategy
e.	synergistic approach to marketing

ANS: B

Global marketing standardization is the production of uniform products that can be sold the same way all over the world.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

Global marketing standardization:

a.	is becoming less popular with the large multinationals
b.	encourages product, packaging, and advertising variations for each nation or local market
c.	actually raises production costs
d.	presumes markets throughout the world are becoming more alike
e.	is more popular with consumer products than with industrial goods

ANS: D

With a global marketing standardization approach, a firm produces standardized products to be sold the same way worldwide. This approach assumes all customers have the same needs and wants.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Analysis

The Victorinox Swiss Army Knife is found all over the world. It is manufactured and marketed similarly to all consumers. Victorinox uses a(n):

a.	ethnocentric strategy
b.	global marketing standardization approach
c.	synergistic approach to globalization
d.	cultural marketing strategy
e.	traditional approach to marketing

ANS: B

Global standardization produces uniform products that can be sold the same way all over the world.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Cardiac Science, a U.S. manufacturer of defibrillators, heart monitoring devices, and other medical-related devices, sells 85 percent of its products outside the United States. It sells basically the same product to a hospital in London, Tokyo, Pretoria, or Sydney. It uses the same promotional tactics in all of its markets. Cardiac Science:

a.	is not concerned about media and messages used for international promotional efforts
b.	uses global marketing standardization
c.	assumes cultural uniformity and lifestyle differences occur across cultural settings
d.	desires technological receptivity from country to country
e.	assumes language acceptance in each country

ANS: B

Global marketing standardization is the production of uniform products that can be sold the same way all over the world.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Analytic

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

A business thinking of expanding into global markets needs to examine all of the following external environments EXCEPT:

a.	culture
b.	political structure and actions
c.	its marketing mix
d.	natural resources
e.	demographic makeup

ANS: C

The marketing mix is the keystone of a company’s internal environment.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Analysis

Central to any society is a common set of values shared by its citizens that determines what is socially acceptable. Marketers refer to these values collectively as a country’s:

a.	ethical system
b.	culture
c.	ethnocentrism
d.	national personality
e.	socialization

ANS: B

This is the definition of culture.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model Customer MSC: BLOOMS Knowledge

A soft drink manufacturer thinking of investing in a bottling plant in the Czech Republic should know the nation is proud of the fact it is among the world’s biggest beer drinkers. Czechs consume an average of one-half liter of beer a day for every man, woman, and child in the country. The _____ environment of this country could very easily prevent the soft drink bottling company from succeeding.

a.	demographic
b.	economic
c.	cultural
d.	political
e.	technological

ANS: C

Culture influences product preferences.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model International Perspective | CB&E Model Customer

MSC: BLOOMS Application

Muslim countries are receptive to most Disney products, but they have asked Disney not to include Piglet when it sells its Winnie the Pooh characters because Muslims (as a part of their religious beliefs) contend that pork in any form is unclean. This is an example of a _____ factor that directly affects Disney’s global operation.

a.	political structure
b.	cultural
c.	technological
d.	competitive
e.	natural resource

ANS: B

Religious beliefs are part of the cultural environment.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model International Perspective | CB&E Model Customer

MSC: BLOOMS Application

Which of the following is an important cultural factor that should be considered by global marketers?

a.	Competitive synergy
b.	Language
c.	Natural resources
d.	Technology sensitivity
e.	Level of economic development

ANS: B

Language is an important aspect of culture that can create problems for marketers.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Comprehension

In China, August 15 is “the Chinese Saint Valentine’s Day,” in memory of two ancient lovers who were separated by a goddess and only allowed to meet once a year on that date. Flower and candy sales typically increase that day, as they do on February 14 in the United States. This would be an important part of the international _____ environment for a flower wholesaler or a confectionery company.

a.	cultural
b.	legal
c.	economic
d.	technological
e.	natural

ANS: A

Important holidays are determined by cultures.

PTS: 1 REF: 59-60 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model International Perspective | CB&E Model Customer

MSC: BLOOMS Application

When IKEA, the Swedish home furnishings retailer, first entered the Japanese market, it failed. It was more successful in its second try because it was aware of the need to adapt its furnishings to fit the smaller Japanese homes. The _____ environment had the greatest influence on IKEA’s first failure in Japan.

a.	demographic
b.	economic
c.	cultural
d.	political
e.	technological

ANS: C

The smaller homes are part of the tradition and culture of Japan.

PTS: 1 REF: 59-60 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

A U.S. executive had no idea the Japanese go through a very elaborate ritual when exchanging business cards. When he arrived at a meeting in Tokyo, he sat down and tossed some of his business cards across the table at a group of stunned Japanese businesspeople. Due to the U.S. executive’s rudeness, the multimillion dollar deal failed. The U.S. executive overlooked the importance of which environmental factor?

a.	Culture
b.	Demographics
c.	Natural resources
d.	Economic development
e.	Political structure

ANS: A

Central to any society is its culture––a common set of values shared by its citizens. These values determine what is socially acceptable.

PTS: 1 REF: 59-60 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Who are the richest people in the world?

a.	Americans
b.	Chinese
c.	British
d.	French
e.	Luxembourgers

ANS: E

The residents of Luxembourg earn an average income of $64,320.

PTS: 1 REF: 60 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

The fact that Russia’s inflation rate has increased 15.1% since May 2007 would be an important _____ factor for a company that wanted to do business in Russia.

a.	legal
b.	economic
c.	culture
d.	technological
e.	natural

ANS: B

Inflation is an important economic issue in the external environment.

PTS: 1 REF: 60 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

A tax levied on the goods entering a country is called a(n):

a.	license
b.	quota
c.	boycott
d.	exchange control
e.	tariff

ANS: E

This is the definition of a tariff.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

Consumers purchasing an automobile in Hong Kong must pay a 100% tax on it. This tax is imposed by the government on all automobiles entering the country and is called a(n):

a.	tariff
b.	quota
c.	license
d.	boycott
e.	exchange control

ANS: A

A tariff is a tax on the goods entering a country.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

A(n) _____ is a limit on the amount of a specific product that can enter a country.

a.	quota
b.	tariff
c.	boycott
d.	exchange control
e.	transfer limit

ANS: A

This is the definition of a quota.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

Since 1953, the United States has limited the amount of raw peanuts that can be imported to 1.7 million pounds a year. This is only about one-tenth of 1 percent of all domestic edible peanut consumption in the United States. This limitation is an example of a(n):

a.	natural resource barrier
b.	quota
c.	tariff
d.	exchange control
e.	boycott

ANS: B

A quota is a limit on the amount of a specific product that can enter a country.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

An exclusion of all products from certain countries or companies by a government or group is called a(n):

a.	expropriation
b.	quota
c.	tariff
d.	exchange control
e.	boycott

ANS: E

This is the definition of a boycott.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

In 1764, the British Sugar and Currency Acts created such economic difficulty in the American colonies that soon-to-be Americans refused to buy British goods in protest. This refusal marked one of the first examples of the use of the:

a.	transfer limit
b.	quota
c.	tariff
d.	exchange control
e.	boycott

ANS: E

An exclusion of all products from certain countries or companies by a government or group is a boycott.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

A(n) _____ is a law that compels a company earning foreign currency from its exports to sell it to a central bank rather than sending the money out of the country.

a.	tariff
b.	quota
c.	fiscal prerequisite
d.	exchange control
e.	transfer barrier

ANS: D

A company wishing to buy goods abroad must first obtain foreign currency from the control exchange control agency.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

_____ are trade alliances in which several countries agree to work together to form a common trade area that enhances trade opportunities among those countries.

a.	Boycotts
b.	Regional unifications
c.	Market groupings
d.	Free trade nations
e.	Expropriation members

ANS: C

Market groupings are trade alliances to benefit the common good of its members.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective| CB&E Model Strategy

MSC: BLOOMS Knowledge

_____ is a trade agreement that includes Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, and Uruguay. This agreement eliminated the tariffs among these trading partners.

a.	NAFTA
b.	Maastricht
c.	WTO
d.	GATT
e.	Mercosur

ANS: E

Mercosur is the largest Latin American trade agreement among these countries.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

Negotiations (such as GATT or the Uruguay Round) between countries that are made to stimulate global exchange and remove barriers are called _____ agreements.

a.	trade
b.	joint venture
c.	CRM
d.	exchange
e.	licensing

ANS: A

A trade agreement is an agreement to stimulate international trade.

PTS: 1 REF: 61-62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

The _____ is the most ambitious global trade agreement ever negotiated; the agreement has reduced tariffs by one-third worldwide.

a.	Uruguay Round
b.	Mercosur
c.	GATT
d.	NAFTA
e.	Maastricht Treaty

ANS: A

The Uruguay Round is an agreement that has dramatically lowered trade barriers worldwide (i.e., has reduced tariffs by one-third worldwide).

PTS: 1 REF: 62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

The _____ of trade negotiations created the _____, which replaces GATT. This trade agreement dramatically lowers trade barriers worldwide.

a.	Uruguay Round; World Trade Organization
b.	Doha Round; European Union
c.	Doha Round; NAFTA
d.	Paraguay Round; South American Free Trade Agreement
e.	Mercosur; European Union

ANS: A

The Uruguay Round created the WTO.

PTS: 1 REF: 62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

Which of the following is the latest round of World Trade Organization?

a.	Mercosur covenant
b.	CAFTA Alliance
c.	Doha Round
d.	Uruguay Round
e.	WTO Round

ANS: C

The Doha Round began in Doha, Qatar, in 2001.

PTS: 1 REF: 62 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

The North American Free Trade Agreement did all of the following EXCEPT:

a.	created the world’s largest free trade zone, which includes Canada, the United States, and Mexico
b.	substantially reduced economic growth in Mexico
c.	allowed U.S. and Canadian financial-services companies to own subsidiaries in Mexico
d.	removed many tariffs and duties so that Mexico, Canada, and the United States can trade more freely
e.	expanded opportunities for U.S. businesses in Mexico

ANS: B

Over the years, Mexico has made economic gains due to NAFTA.

PTS: 1 REF: 62-63 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

All of the following are countries included in the Central America Free Trade Agreement EXCEPT:

a.	the United States
b.	Nicaragua
c.	El Salvador
d.	Guatemala
e.	Mexico

ANS: E

CAFTA includes Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the United States.

PTS: 1 REF: 63 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

The goal of the Central America Free Trade Agreement is to:

a.	create free trade agreements between the United States and other industrialized nations
b.	eliminate all protectionism
c.	raise prosperity levels in all industrializing nations
d.	establish a free trade agreement between the United States and certain Latin American countries
e.	make sure all nations achieve the economic and technological development of a takeover economy or better

ANS: D

The countries included in CAFTA are the United States, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.

PTS: 1 REF: 63 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Analysis

Which of the following statements about the European Union (EU) is true?

a.	The EU creates a single Europroduct for a generic Euroconsumer.
b.	The EU removes all internal trade barriers and standardizes regulations in European countries for easier trade.
c.	The EU can correctly be called the “United States of Europe” because all European voters have agreed to these changes.
d.	The existence of the EU eliminates protectionist movements by United Europe against the Japanese and the United States.
e.	The EU is the largest economy in the world.

ANS: E

The EU encompasses most of Europe, making it the largest economy in the world.

PTS: 1 REF: 64 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Evaluation

Who offers low-interest loans to developing nations?

a.	World Bank
b.	International Monetary Fund
c.	Federal Reserve
d.	International Reserve
e.	United Nations

ANS: A

The World Bank offers low-interest loans to developing nations.

PTS: 1 REF: 64 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

When developing countries began encouraging foreign investors and imports, companies like Black & Decker and Pillsbury offered a wide array of products to countries throughout the world. Because of enormous populations in developing countries, these companies predicted a potential for strong annual sales. However, in addition to total population, companies must not overlook _____ factors such as distribution of people within a country and household incomes.

a.	demographic
b.	political
c.	cultural
d.	educational
e.	country resource

ANS: A

Important factors for marketers to consider about an international market are the distribution of the wealth, the average household income, and the division of the population between rural and urban areas. Demography is the study of statistics of populations and their changes in age, income, distribution, and so on.

PTS: 1 REF: 65 OBJ: 05-3

TOP: AACSB Reflective Thinking | AACSB International Perspective

KEY: CB&E Model Customer MSC: BLOOMS Application

A multinational company that makes a labor-intensive product would be interested in the _____ makeup of countries. Factors such as median age, gender, and literacy rates would determine the success of its global expansion.

a.	demographic
b.	lifestyle
c.	natural
d.	cultural
e.	economic

ANS: A

Demographics include age and educational levels as well as ethnicity and gender.

PTS: 1 REF: 65 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Zambia is internationally recognized as the world’s second leading producer of cobalt, which is used to make high-speed and high-temperature cutting tools and dyes. A company that wanted to manufacture tools for shaping steel would be most attracted to which element of the Zambian environment?

a.	Culture
b.	Legal
c.	Economic
d.	Technological
e.	Natural resources

ANS: E

The text concentrates on the importance of petroleum to global marketing, but other minerals are of equal or greater value to some companies.

PTS: 1 REF: 65-66 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Vast differences in natural resources create all of the following EXCEPT:

a.	potential for military intervention
b.	shifts in wealth between nations
c.	inflation and recession
d.	global international dependencies
e.	export opportunities for countries with no natural resources

ANS: E

While differences do create shifts in wealth, dependencies, inflation, recession, and the potential for conflict, they only hinder opportunities for the countries that do not have resources.

PTS: 1 REF: 66 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model Strategy MSC: BLOOMS Analysis

Which method of entering the global marketplace would be LEAST risky?

a.	Exporting
b.	Licensing
c.	Contract manufacturing
d.	Joint ventures
e.	Direct investment

ANS: A

See Exhibit 5.3.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Evaluation

Which method of entering the global marketplace would be most risky?

a.	Licensing
b.	Direct investment
c.	Contract manufacturing
d.	Joint ventures
e.	Exporting

ANS: B

See Exhibit 5.3.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Evaluation

The United States is selling more domestically produced products in other countries than any other country in the world. This means the United States is the world leader in:

a.	quota making
b.	exporting
c.	tariff trading
d.	dumping
e.	licensing

ANS: B

Exporting is selling domestically produced products to buyers in other countries.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Which list correctly ranks the methods of entering the global marketplace in increasing order of risk?

a.	Exporting, licensing and franchising, contract manufacturing, joint venture, and direct investment
b.	Importing, contract manufacturing, licensing and franchising, joint venture, and direct investment
c.	Licensing, franchising, contract manufacturing, joint venture, direct investment, and exporting
d.	Franchising, contract manufacturing, joint venture, direct investment, importing, and licensing
e.	Importing, contract manufacturing, joint venture, direct investment, and exporting

ANS: A

Exporting, licensing and franchising, contract manufacturing, joint venture, and direct investment are methods of entering the global marketplace in order of risk.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Analysis

The role of a domestic company that sells to an export merchant (also called a buyer for export) is to:

a.	guide the marketing actions of the merchant as the goods are sold in foreign countries
b.	pay all transportation, warehousing, and marketing expenses
c.	sell the product to that merchant who resells the product in the foreign country without the aid or input of the original manufacturer
d.	broker a partnership agreement such as a joint venture
e.	dictate conditions of sale in foreign countries

ANS: C

After the manufacturer sells to the export merchant, the manufacturer has no more control or involvement with the product.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

The _____ is an intermediary in the global market who assumes all risks and sells globally internationally for its own account. The domestic manufacturer usually treats it like a domestic customer.

a.	buyer for export
b.	export agent
c.	joint venturer
d.	contract manufacturer
e.	market group

ANS: A

This is the definition of a buyer for export.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

Carlos Hernandez owns a company in Miami that purchases products from U.S. manufacturers for export to several countries in Central and South America. Carlos is a(n):

a.	licensing agent
b.	buyer for export
c.	export broker
d.	export agent
e.	export importer

ANS: B

A buyer for export, also called an export merchant, is usually treated like a domestic customer by the domestic manufacturer because it buys products and sells them globally.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

A(n) _____ is a global intermediary who brings the buyer and seller together.

a.	buyer for export
b.	export agent
c.	license agent
d.	import agent
e.	export broker

ANS: E

An export broker is an intermediary who plays the traditional broker’s role by bringing buyer and seller together.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

DeLouis owns an agency that specializes in bringing international buyers in contact with U.S. companies to facilitate global trade. What type of intermediary is DeLouis?

a.	Buyer for export
b.	Export broker
c.	License agent
d.	Import agent
e.	Export agent

ANS: B

An export broker is an intermediary who plays the traditional role by bringing buyer and seller together.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

_____ are foreign sales agents-distributors who live in a foreign country and represent a domestic company in sales situations. They perform the same functions as domestic manufacturers’ agents who help with financing and shipping.

a.	Export agents
b.	Export brokers
c.	Import broker
d.	Buyers for export
e.	Licensing agents

ANS: A

This is the definition of an export agent.

PTS: 1 REF: 66-67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Knowledge

International Marketing, Inc. is a company located in Brazil that assists businesses exporting products to Brazil. This company helps with financing, shipping, and any aspect of marketing a product from another country to Brazil. This company is an example of a(n):

a.	agent broker
b.	export agent
c.	export broker
d.	buyer for export
e.	import broker

ANS: B

A export agent is an intermediary who acts like a manufacturer’s agent for the exporter and lives in the foreign market.

PTS: 1 REF: 64 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

_____ is a legal process whereby a firm agrees to let another firm use its manufacturing process, trademarks, patents, trade secrets, or other proprietary knowledge in return for a fee or royalty.

a.	A joint venture
b.	Divestment
c.	Licensing
d.	A principal-agent agreement
e.	A contract manufacturing arrangement

ANS: C

The is the definition of licensing.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model Strategy MSC: BLOOMS Knowledge

Franchising is a form of:

a.	contract marketing
b.	international exporting
c.	licensing
d.	direct exporting
e.	countertrading

ANS: C

Franchising is a form of licensing that has grown rapidly in recent years.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model Strategy MSC: BLOOMS Comprehension

When Krispy Kreme decided to expand its operation internationally, it chose to first make its doughnuts available in Canada to minimize its risk. In accordance with the policy of risk minimization, the company sold the right to manufacture and sell its doughnuts to Canadians. In other words, Krispy Kreme used:

a.	contract manufacturing
b.	direct investment
c.	importing
d.	a strategic alliance
e.	licensing

ANS: E

Krispy Kreme used franchising, which is a form of licensing. Franchising offers only slightly more risk than exporting.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

A U.S. licensor can try to prevent a licensee from voiding its contract and using what it has learned to create a competitor by:

a.	using lawyers from both countries to write the licensing agreement
b.	insisting that all licensees have a published code of ethics
c.	having the licensee pay a fee for the use of the manufacturing process, trademark, patent, or other proprietary knowledge
d.	locally registering patents and trademarks to the U.S. firm, not to the licensee
e.	avoiding the use of any patents and trademarks

ANS: D

Even with lawyers writing it and a code of ethics, there is nothing to prevent a licensee from voiding the contract. Licensees typically pay a fee or a royalty to the licensor. Without patents and trademarks, protection becomes almost impossible.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Comprehension

Disney sells the rights for an investment company to run a Disneyland theme park in Tokyo. The investment company gains most of the profits from the enterprise while paying Disney a percentage in royalties. This is an example of:

a.	a joint venture
b.	exporting
c.	direct investment
d.	licensing
e.	capital-intensive manufacturing

ANS: D

This kind of arrangement is licensing because Disney is only selling the right to run the park. If the investment company does a poor job, Disney can seek out another to replace it.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Patch Products is an Australian company that has given permission to several Latin American companies to manufacture and market its patented Spanish/English children’s frame tray puzzles. Because Patch uses licensing as its global marketing strategy, it:

a.	must only pay a minimal royalty to the licensed companies
b.	cannot control how the puzzles are manufactured
c.	has involved itself in the global marketing strategy that gives it the greatest amount of control
d.	cannot have any control over how the puzzles are promoted or distributed
e.	chose a method of global marketing that created minimal risk

ANS: E

A licensing company has control over all of the marketing activities associated with making its product. The licensed company pays the royalty to Patch.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Mitsubishi Heavy Industries and Kawasaki Heavy Industries produce McDonnell Douglas F-15 fighter planes in Japan. The two Japanese companies pay McDonnell Douglas royalties for use of its manufacturing processes and patents. This is an example of:

a.	contract manufacturing
b.	exporting
c.	joint venture
d.	licensing
e.	strategic investment

ANS: D

A firm can do business internationally with relatively low risk by selling a license to manufacture its product to someone in a foreign country. For a royalty or fee, the selling firm agrees to let the buying firm use its manufacturing processes, trademarks, patents, trade secrets, and so on.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Sony, Panasonic, and other Japanese manufacturers that build products to customer order instead of churning out products in anticipation of demand have decided to hire U.S. companies to produce electronics for them. The Japanese companies will handle the marketing of the products. Japanese electronics companies are using:

a.	contract manufacturing
b.	direct investment
c.	franchising
d.	direct exporting
e.	countertrading

ANS: A

Contract manufacturing takes place when a foreign company produces goods to specification set by a domestic company, with the domestic firm’s brand name affixed to the goods. In this case, the “domestic” companies are in Japan selling in a foreign market for them––the United States.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

_____ takes place when a foreign company produces goods to specification set by a domestic company, with the domestic firm’s brand name affixed to the goods.

a.	Importing
b.	Joint venturing
c.	Exporting
d.	Contract manufacturing
e.	Direct investing

ANS: D

Contract manufacturing is private-label manufactured by a foreign company.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model Strategy MSC: BLOOMS Knowledge

With _____, a domestic firm buys part of a foreign company or joins with a foreign company to create a new entity.

a.	direct investment
b.	a joint venture
c.	a buying-for-export agreement
d.	a contractual agreement
e.	a franchise relationship

ANS: B

This is the definition of joint venture.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

Caterpillar, Inc. is the world’s largest manufacturer of earthmoving and construction equipment. Kirovsky is a large Russian manufacturer of the same type of products. The two companies entered into a(n) _____ and created NEVAMASH, a new company.

a.	import/export partnership
b.	countertrade
c.	disintermediation agreement
d.	joint venture
e.	franchise

ANS: D

A joint venture occurs when a domestic firm buys part of a foreign company or joins with a foreign company to create a new entity .

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Belgian Beer brewer InBev bought Anheuser-Busch for $52 billion. This is an example of a(n):

a.	export
b.	joint venture
c.	franchise
d.	licensed agreement
e.	direct foreign investment

ANS: E

Active ownership of a foreign company or of overseas manufacturing or marketing facilities is direct foreign investment. InBev has invested in the United States through its purchase of Anheuser-Busch.

PTS: 1 REF: 68 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

_____ is a global marketing strategy that requires active ownership (either a controlling interest or large minority interest) of a foreign company or overseas manufacturing or marketing facilities.

a.	Market grouping
b.	Import brokering
c.	Export subsidizing
d.	Licensing
e.	Direct foreign investment

ANS: E

This is the definition of direct foreign investment.

PTS: 1 REF: 68 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Knowledge

To enter the German market, BDO, an international accounting company, purchased an existing accounting firm. BDO entered the German market through the use of:

a.	contract marketing
b.	direct foreign investment
c.	franchising
d.	direct exporting
e.	countertrading

ANS: B

Active ownership (either a controlling interest or large minority interest) of a foreign company or overseas manufacturing or marketing facilities is an example of direct foreign investment.

PTS: 1 REF: 68 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective |CB&E Model Strategy

MSC: BLOOMS Application

The first step in creating the global marketing mix is to:

a.	create a new product
b.	select the method of promotion
c.	develop a thorough understanding of the global target market
d.	set pricing policies
e.	decide whether product modification is necessary

ANS: C

Developing an understanding of the global target market is the first step, and market research results in knowledge of customer needs and wants that will guide product, price, promotion, and distribution decisions.

PTS: 1 REF: 68 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model Research MSC: BLOOMS Comprehension

Apple, Inc. used its Mac and PC guy ad in countries around the world. The company simply modified the characters a bit to fit the culture. Apple is attempting to market the Mac using:

a.	standardized marketing practices
b.	mixed marketing
c.	character standardization
d.	global marketing standardization
e.	product invention

ANS: D

Global marketing standardization is developing a single product for all markets and promoting it the same way all over the world.

PTS: 1 REF: 69 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

According to the text, which of the following is an example of a product strategy that would be appropriate for a global marketing company to implement?

a.	Product adaptation
b.	Product divestment
c.	Product penetration
d.	Market substitution
e.	Product licensing

ANS: A

Product invention and product adaptation are the two product strategies discussed in the textbook.

PTS: 1 REF: 70 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Product

MSC: BLOOMS Comprehension

When IKEA, the Swedish home furnishings retailer, first entered the Japanese market, it failed. It was more successful in its second try because it was aware of the need to adapt its furnishings to fit the smaller Japanese homes. It success on its second foray into Japan was based on its ability to give the Japanese consumer what he or she needed without abandoning its product strategy. IKEA had to adopt a _____ strategy.

a.	product substitution
b.	market differentiation
c.	message adaptation
d.	product invention
e.	product adaptation

ANS: E

Product adaptation is the slight alteration of the basic product (in this case, making it smaller.)

PTS: 1 REF: 70 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Product

MSC: BLOOMS Application

Maybelline formulated cosmetics that were designed to complement the complexions of women with various skin types around the world. Which of the marketing mix strategies did Maybelline use?

a.	Countertrading
b.	Product invention
c.	Global market standardization
d.	Product licensing
e.	Product adaptation

ANS: E

A basic product (cosmetics) was changed.

PTS: 1 REF: 70 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Product

MSC: BLOOMS Application

Procter & Gamble’s Vidal Sassoon shampoo smells the same worldwide, but the amount of scent used varies from country to country. This is an example of which type of marketing mix strategy?

a.	Countertrading
b.	Product invention
c.	Global market standardization
d.	Product licensing
e.	Product adaptation

ANS: E

A basic product (shampoo) was changed.

PTS: 1 REF: 70 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Product

MSC: BLOOMS Application

AFLAC has had to ditch the AFLAC duck in its Japanese commercials because the Japanese consumer does not like to be yelled at. Since Japan is the source of about 70 percent of the insurance company’s business, it had no trouble adopting a _____ strategy.

a.	product substitution
b.	market differentiation
c.	promotion adaptation
d.	product invention
e.	market diversification

ANS: C

AFLAC altered its promotional strategy to reach the Japanese market.

PTS: 1 REF: 70 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Promotion

MSC: BLOOMS Application

Once marketing managers have determined a global product and promotion strategy, they can select the remainder of the marketing mix. However, entry into many developing nations presents special pricing problems because:

a.	the rate of capital accumulation exceeds the rate of population growth
b.	of exchange rate caps
c.	of price discrimination
d.	there is a lack of mass purchasing power
e.	advertising time on television is available for sale in all developed countries

ANS: D

Developing nations typically do not have mass purchasing power.

PTS: 1 REF: 71 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Comprehension

The pricing component of the global marketing mix is:

a.	the same in domestic and foreign markets
b.	fairly simplistic due to the strength of the U.S. dollar abroad
c.	the easiest element to implement successfully
d.	complicated by product penetration strategies
e.	a complex matter due to tariffs, exchange rates, and transportation costs, insurance, and taxes.

ANS: E

In domestic pricing decisions, tariffs and exchange rates are not considered. Local government regulations are more likely to be known and understood. These are just some of the issues that make global pricing difficult.

PTS: 1 REF: 71-72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Comprehension

Currency markets operate under a system in which the prices of different currencies move up or down based on the demand for and supply of each currency. This practice is called:

a.	countertrading
b.	floating exchange rates
c.	variable purchasing power
d.	flexible monetary policies
e.	purchasing power elasticity

ANS: B

This is the definition of floating exchange rates.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Knowledge

_____ is generally defined as the sale of an exported product at a price lower than that charged for the same or a like product in the home market of the exporter.

a.	Export reengineering
b.	Crossdocking
c.	Boycotting
d.	Dumping
e.	Countertrading

ANS: D

This is the definition of dumping.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Knowledge

All of the following are reasons for dumping EXCEPT:

a.	lowering unit costs by exploiting large-scale productions
b.	attempting to avoid costly tariffs in the country to which the product is exported
c.	attempting to maintain stable prices during periods of exchange rate fluctuations
d.	temporarily distributing products in overseas markets to offset slack demand in the home market
e.	trying to increase an overseas market share

ANS: B

Dumping is the sale of an exported product at a price lower than that charged for the same or a like product in the “home” market of the exporter.

PTS: 1 REF: 72 OBJ: 05-05 TOP: AACSB Reflective Thinking

KEY: CB&E Model Pricing MSC: BLOOMS Analysis

The European Union accused South Korea of selling ships at a loss in an attempt to push its European rivals out of the market. In other words, South Korea was accused of:

a.	dumping
b.	illegal importing
c.	countertrading
d.	fiscal impropriety
e.	using an illegal cartel

ANS: A

Dumping is the sale of an exported product at a price lower than that charged for the same product in the home market of the exporter (South Korea).

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Application

The Canadian magazine industry accused U.S. magazine publishers of _____, or selling the magazines in Canada at a lower price than in the United States.

a.	dumping
b.	offloading
c.	boycotting
d.	repatriating
e.	crossdocking

ANS: A

Dumping is selling a product in a foreign market at a price below the price charged in the home market.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Application

In a newspaper release, Corning, Inc. announced it had received a favorable ruling from China’s Ministry of Commerce on allegations that it was selling its fiber more cheaply in China than in other countries. Corning was falsely accused of:

a.	dumping
b.	offloading
c.	boycotting
d.	repatriating
e.	crossdocking

ANS: A

Dumping is selling a product in a foreign market at a price below the price charged in the home market.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Application

International trade does not always involve cash. Sometimes companies accept all or part of the payment for goods or services in the form of other goods or services. This is known as:

a.	export trading
b.	crossdocking
c.	exchange modification
d.	domestic barter
e.	countertrade

ANS: E

In countertrade, all or part of the payment for goods or services is in the form of other goods.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Knowledge

All of the following statements about the use of the Internet in global marketing are true EXCEPT:

a.	Opening an e-commerce site on the Internet immediately puts a company in the international marketplace.
b.	The new Internet economy is being restrained by the old brick-and-mortar rules, regulations, and habits.
c.	Software has been developed to ease currency conversions by allowing customers to pay for products in the currency of their choice.
d.	FedEx is a global shipper that helps solve international e-commerce distribution.
e.	Language barriers are limiting the potential of the Internet in international marketing.

ANS: E

Sophisticated language translation software can make any site accessible to persons around the world.

PTS: 1 REF: 73 OBJ: 05-6 TOP: AACSB Technology

KEY: CB&E Model International Perspective | CB&E Model Online/Computer

MSC: BLOOMS Evaluation

Breathe Right

CNS, Inc. is the manufacturer of Breathe Right nasal strips, a spring-loaded adhesive device that can be stuck on your nose to open up the nasal passages. Since their introduction in the United States, Breathe Right strips have been used by athletes hoping to improve their performance through increased oxygen flow, snorers hoping for a sound night’s sleep, and allergy and cold sufferers looking for relief from their stuffed noses. Because CNS is a small company, it initially had trouble promoting its product. Then San Francisco 49er Jerry Rice started regularly wearing them, and U.S. sales took off. Today, Breathe Right strips are marketed in more than 40 countries. When CNS decided to expand globally, its size made it look for a partner. It chose 3M because 3M already had a global market distribution system and because the Breathe Right strips complemented the 3M first aid product line.

Refer to Breathe Right. 3M is an example of a(n):

a.	ethnocentric organization
b.	standard international market
c.	multinational corporation
d.	expatriated organization
e.	organization with no domestic base

ANS: C

A multinational corporation is a company that is heavily engaged in international trade, beyond exporting and importing.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Refer to Breathe Right. The same Breathe Right nasal strips you can buy in any pharmacy in the United States can also be purchased in 40 other countries. CNS used a _____ strategy.

a.	mass marketing
b.	product invention
c.	market substitution
d.	product adaptation
e.	global market standardization

ANS: E

Global marketing standardization is production of uniform products that can be sold the same way all over the world.

PTS: 1 REF: 58 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Breathe Right. How people value a sound night’s sleep is an example of which element of the global environment?

a.	Culture
b.	Natural
c.	Socioeconomic
d.	Technical
e.	Regulatory

ANS: A

Culture to any society is the common set of values shared by its citizens that determines what is socially acceptable.

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Diversity

KEY: CB&E Model Customer MSC: BLOOMS Application

Refer to Breathe Right. In the United States, one of the standard methods for introducing a new product is couponing, but many countries prohibit the issuing of coupons. This prohibition would represent a(n) _____ element of the global environment.

a.	cultural
b.	economic
c.	legal
d.	technological
e.	demographic

ANS: C

Many legal structures are designed to either encourage or limit trade.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Promotion

MSC: BLOOMS Application

Refer to Breathe Right. 3M and CNS entered into a:

a.	franchise
b.	licensing agreement
c.	direct countertrade
d.	joint venture
e.	contract manufacturing agreement

ANS: D

A joint venture occurs when a domestic firm buys part of a foreign company or joins with a foreign company to create a new entity.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Breathe Right. To market the nasal strips in countries outside the United States, CNS and 3M provided the strips to the national sports teams. For example, sales in South Africa took off when the entire South African rugby team wore the strips when they won the World Cup of rugby. This example primarily illustrates the use of which element of the global marketing mix?

a.	Production
b.	Publicity
c.	Promotion
d.	Distribution
e.	Product

ANS: C

This is an example of using the same product but altering the promotional strategy.

PTS: 1 REF: 69 OBJ: 05-5 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Promotion

MSC: BLOOMS Application

Boeing Company

Boeing Company has spent more than $100 million to create a major presence in China, complete with a major office complex, a large spare-parts facility, extra training programs for Chinese air crews, and a deal to buy fuselage sections for the 737 from local manufacturers. Asia is the fastest-growing aircraft market in the world. Asian carriers have been a major part of Boeing’s sales, and Boeing predicts 40 percent of future air-traffic growth will come from Asia-Pacific travel, and it wants those passengers flying on Boeing jets. So, Boeing is jointly designing and building an American-Japanese-Chinese plane, all to lock out any European, South American, or even Asian threat to its market. To keep the fate of Asian aerospace in its hands, Boeing is steadily broadening its contractual relationship with Japan’s three major players––Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and Fuji Heavy Industries. The Japanese “heavies” make part of the airframe of the Boeing 767 and 20 percent of one of Boeing’s newest planes, the 777. This strategy should ensure Boeing’s dominance in Japan.

Refer to Boeing Company. Boeing has utilized a global vision in marketing its planes in Asia. The company realizes different countries require different strategies but that effective global marketing is a key to success. Boeing is practicing:

a.	global marketing
b.	standard international marketing
c.	global marketing standardization
d.	the foreign vision
e.	international selling schemes

ANS: A

Boeing is practicing global marketing by utilizing a global vision to effectively market goods and services across national boundaries.

PTS: 1 REF: 55 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Boeing Company. The Boeing facility in China is only one branch of this huge organization. Boeing can be called a(n):

a.	domestic trader
b.	cultural trader
c.	multinational corporation
d.	export agent
e.	localized corporation

ANS: C

Boeing is heavily involved in international marketing and sales worldwide and is a multinational organization.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Refer to Boeing Company. The new American-Japanese-Chinese plane Boeing plans to design and build gives partial ownership to the manufacturing partners involved in the project. This is an example of:

a.	direct investment
b.	a joint venture
c.	buying-for-export agreements
d.	market groupings
e.	a contract manufacturing agreement

ANS: B

A joint venture occurs when a domestic firm buys part of a foreign company or joins with a foreign company to create a new entity.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Boeing Company. Boeing has chosen the _____ method of entering the Japanese market.

a.	dumping
b.	contract manufacturing
c.	licensing
d.	direct investment
e.	joint venture

ANS: B

Contract manufacturing is private-label manufacturing by a foreign company. Boeing has entered into a contractual agreement with Japanese manufacturers.

PTS: 1 REF: 67 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Wataniya Mobile

Wataniya Mobile is offering cellular service in the Palestinian territories. It is only the second cell phone carrier in the region and is significant because it is owned by foreign companies and investors like the Qatari royal family and the Palestine Investment Fund. The new service is aimed at increasing cell phone penetration, which is only 35 percent, in this economically challenged area. It has not been easy for Wataniya, though. It took two years to gain the required license from Israel, which controls the Palestinian territories’ airwaves and bandwidth required for the service. Even though Wataniya is allowed bandwidth, it has only received 3.8 megahertz of bandwidth from Israel, which is not enough for it to offer 3G mobile services that enable Web browsing and e-mail.

Refer to Wataniya Mobile. In which stage of globalization is Wataniya Mobile?

a.	Stage one
b.	Stage two
c.	Stage three
d.	Stage four
e.	Stage five

ANS: C

Wataniya Mobile is operating an entire line of business in another country, which is characteristic of the third stage.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Wataniya Mobile. Israel and the Palestinian territories have vastly different religious beliefs and are frequently at war. The differences between these two are attributed to which environmental factor?

a.	Technology
b.	Culture
c.	Demographics
d.	Economic
e.	Natural

ANS: B

Religion is part of a country’s cultural environment.

PTS: 1 REF: 59 OBJ: 05-3

TOP: AACSB Reflective Thinking | AACSB Diversity

KEY: CB&E Model International Perspective MSC: BLOOMS Application

Refer to Wataniya Mobile. The need for greater bandwidth to be able to provide 3G mobile capabilities is part of which environment?

a.	Cultural
b.	Technological
c.	Economic
d.	Natural
e.	Legal

ANS: B

To offer 3G level of services, Wataniya Mobile needs access to greater bandwidth, which is part of the technological environment.

PTS: 1 REF: 60 OBJ: 05-3 TOP: AACSB Technology

KEY: CB&E Model International Perspective | CB&E Model Online/Computer

MSC: BLOOMS Application

Refer to Wataniya Mobile. Israel’s control of licensing and the limitation on the amount of bandwidth allotted to Wataniya Mobile is part of which environment?

a.	Cultural
b.	Economic
c.	Political and legal
d.	Demographic
e.	Resource

ANS: C

The political/legal environment is placing restrictions on the operation of this business.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

Refer to Wataniya Mobile. Wataniya Mobile has spent $100 million on infrastructure so far and will spend another $700 million over the next ten years. This is an example of which method of entering the global marketplace?

a.	Exporting
b.	Licensing
c.	Contract manufacturing
d.	Direct foreign investment
e.	Complete

ANS: D

Direct foreign investment is active ownership of a foreign company or of overseas manufacturing or marketing facilities, which is what Wataniya Mobile is doing.

PTS: 1 REF: 68 OBJ: 05-4 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Application

ESSAY

Why is developing a global vision important for firms in the United States?

ANS:

Foreign competition is found in almost every industry. In fact, the United States has lost market share to imported products in many industries. U.S. managers must develop a global vision not only to recognize and react to international marketing opportunities but also to remain competitive at home. Often a U.S. firm’s toughest domestic competition comes from foreign companies. A global vision also enables managers to understand that customer and distribution networks operate worldwide. Adopting a global vision can be lucrative for a company, and in some industries a global vision is a business imperative.

PTS: 1 REF: 55-56 OBJ: 05-1 TOP: AACSB Communication

KEY: CB&E Model Strategy MSC: BLOOMS Synthesis

What is a multinational corporation? Discuss two multinational corporations with which you are familiar.

ANS:

A company that is heavily engaged in international trade, beyond exporting and importing, is called a multinational corporation. This type of firm moves resources, goods, services, and skills across national boundaries without regard to the country in which its headquarters is located. Most multinational corporations are enormous. Examples from the text include Caterpillar, General Electric, United Technologies, Deere, and Honeywell. See Exhibit 5.1.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Communication

KEY: CB&E Model International Perspective MSC: BLOOMS Synthesis

Describe the four stages of business globalization. Why do most companies stop when they reach the third stage?

ANS:

Multinationals often develop their global business in stages. In the first stage, companies operate in one country and sell into others. Second-stage multinationals set up foreign subsidiaries to handle business in one country. In the third stage, they operate an entire line of business in another country. The fourth stage has evolved primarily due to the Internet. Generally, only high-tech companies can ever reach this stage. For these firms, the executive suite is virtual.

PTS: 1 REF: 57 OBJ: 05-2 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Traditionally, marketing-oriented multinational corporations have operated somewhat differently in each country, with segmentation strategies providing different marketing mixes. Today, there has been a trend toward global marketing standardization. What is global marketing standardization? Can companies truly follow the basic premise of the global marketing standardization concept?

ANS:

Global marketing standardization presumes that world markets are becoming more alike. Communication and technology have made the world smaller, so people everywhere want all the things they have heard about, seen, or experienced. Therefore, serving global markets with standardized consumer products on a large scale is an alternative to marketing global products on a segmentation basis. Firms practicing global marketing standardization produce “globally standardized products” to be sold the same way all over the world. True global marketing standardization is not entirely evident, because marketing mix variations still exist. However, companies are moving toward variations of global marketing in which marketing mix modifications are kept to a minimum. While marketing mixes can be similar, variations in products, pricing, promotional copy, and distribution types may be necessary for each country.

PTS: 1 REF: 58-59 OBJ: 05-2 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Assume that you are the president of a company that manufactures wooden bowls, cutting boards, and spoons. Your company is considering marketing its kitchen items globally. List the five important external environmental factors that should be examined for each country you are considering for this global venture.

ANS:

Culture

Economic and technological development

Political structure and actions

Demographic makeup

Natural resources

PTS: 1 REF: 59 OBJ: 05-3 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Global legal structures are designed to either encourage or limit trade. Name and define five of these legal structures.

ANS:

There are six legal structures described in the chapter, and students can discuss any five:

TARIFF. A tax levied on the goods entering a country.

QUOTA. A limit on the amount of a specific product that can enter a country.

BOYCOTT. The exclusion of all products from certain countries or companies.

EXCHANGE CONTROL. A law compelling a company earning foreign exchange from its exports to sell it to a control agency, usually a central bank.

MARKET GROUPING. Occurs when several countries agree to work together to form a common trade area that enhances trade opportunities.

TRADE AGREEMENT. An agreement to stimulate international trade.

PTS: 1 REF: 61 OBJ: 05-3 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

An important factor in the global external environment that has become more evident in the past decade is the shortage of natural resources. Choose two different natural resources and describe how shortages of each of these resources affect global trade.

ANS:

Petroleum shortages have caused the transfer of wealth from Japan, the United States, and western Europe to Norway, Saudi Arabia, and the United Arab Emirates. Other countries such as Indonesia, Mexico, and Venezuela were able to borrow heavily against oil reserves in order to develop more rapidly.

Warm climate and lack of water will mean that many of Africa’s countries will remain importers of foodstuffs because of low agricultural production. The United States, on the other hand, relies on Africa for precious metals.

PTS: 1 REF: 65-66 OBJ: 05-3 TOP: AACSB Communication

KEY: CB&E Model Strategy MSC: BLOOMS Synthesis

Assume that you are a global marketing consultant for a U.S. manufacturer of light fixtures and have been asked to name the available options or methods of entry into the global marketplace. Name five methods of entry in the order of high risk/high return to low risk/low return for the lighting company.

ANS:

The five methods of entering the global marketplace from high risk/high return to low risk/low return are direct investment, joint venture, contract manufacturing, licensing, and exporting.

PTS: 1 REF: 66 OBJ: 05-4 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Define and describe exporting. Briefly describe the three types of export intermediaries.

ANS:

Exporting is selling domestically produced products in other countries. It is the least complicated and least risky alternative for entering the global market.

A company deciding to export may sell directly to foreign importers or buyers, or it may sell to independent exporting intermediaries located in its domestic market. The most common intermediary is the export merchant, or a buyer for export. This intermediary is treated like a domestic customer; the buyer assumes all risks and sells globally for its own account. Export brokers play the traditional broker’s role by bringing buyer and seller together. The manufacturer still retains the title and assumes all the risks. Export agents include foreign sales agents-distributors. They live in the foreign country and perform the same functions as domestic manufacturers’ agents, helping with international financing, shipping, and so on.

PTS: 1 REF: 66-67 OBJ: 05-4 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Briefly define licensing and joint ventures as means of engaging in global marketing. Be sure to demonstrate both the similarities of the two processes and how they differ.

ANS:

Both are effective methods for a firm to move into the global market.

LICENSING is the legal process whereby a licensor allows another firm to use its manufacturing processes, trademarks, patents, trade secrets, or other knowledge of a proprietary nature. The licensee then agrees to pay the licensor a royalty or fee. This method has lower risk than direct or contract manufacturing. Franchising is one form of licensing that has grown rapidly in global markets in recent years.

JOINT VENTURES are somewhat similar to licensing agreements, except that the domestic firm buys part of a foreign company or joins with a foreign company to create a new entity. This is more risky but gives management a voice in company affairs that it might not have under licensing.

PTS: 1 REF: 67-68 OBJ: 05-4 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Assume that you are the marketing manager for a leading U.S. manufacturer of earthmoving equipment. Your company would like to become heavily involved in global marketing (especially in India) but has some capital limitations. Your job is to evaluate whether it should use contract manufacturing or direct foreign investment. Compare and contrast these two options and make a recommendation.

ANS:

CONTRACT MANUFACTURING is private-label manufacturing by a foreign company. The foreign company produces a certain volume of products to specification, with the domestic firm’s brand name affixed to the goods. The domestic company usually handles the marketing. This method carries medium levels of risk and return.

DIRECT FOREIGN INVESTMENT is active ownership, either a controlling interest or a large minority interest, of a foreign company or of overseas manufacturing or marketing facilities. This option offers the greatest potential rewards but carries the highest risk.

The U.S. manufacturer should consider contract manufacturing for two reasons: (1) the company has a well-established brand name that would be easily recognized on the foreign goods and (2) contract manufacturing will enable the firm to broaden its global marketing base without direct investment of limited capital in plant and equipment.

PTS: 1 REF: 67-68 OBJ: 05-4 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Strategy

MSC: BLOOMS Synthesis

Assume that you are the promotions manager for a lingerie company that has decided to market its product line in Brazil, Mexico, Italy, France, and Japan. Your company wishes to use a global marketing standardization strategy. In general terms, explain how your company would advertise in these different countries.

ANS:

Global marketing standardization means production of uniform products that can be sold the same way all over the world. In this case, marketers should attempt to standardize as much of their advertisements as possible. Advertising elements (such as a model or picture) should have universal appeal so they can appear in many different countries. Commercials with no voice-over or dialogue will not need translation, while print ads could share the same pictures and models and just use translated copy. Care should be taken that advertising elements are not culturally offensive in the different countries.

PTS: 1 REF: 69-70 OBJ: 05-5 TOP: AACSB Communication

KEY: CB&E International Perspective | CB&E Model Promotion

MSC: BLOOMS Synthesis

In the 1980s, Japanese computer chip manufacturers were accused of dumping in the United States. Explain what this means and discuss why a company would do this.

ANS:

Dumping is the sale of an exported product at a price lower than that charged for the same or a like product in the “home” market of the exporter. The practice is regarded as a form of price discrimination that can potentially harm the importing nation’s competing industries. Dumping may occur as a result of exporter business strategies that include (1) trying to increase an overseas market share, (2) temporarily distributing products in overseas markets to offset slack demand in the home market, (3) lowering unit costs by exploiting large-scale production, and (4) attempting to maintain stable prices during period of exchange fluctuations.

PTS: 1 REF: 72 OBJ: 05-5 TOP: AACSB Communication

KEY: CB&E Model International Perspective | CB&E Model Pricing

MSC: BLOOMS Synthesis

Explain the following statement: “The Internet economy is being restrained by the old rules, regulations, and habits related to traditional commerce.”

ANS:

Before answering this question, students will need to understand that traditional commerce refers to traditional distribution systems where the seller has a physical presence that is visited by the buyer. There are several examples in the text, which show how trade regulations (Germany not allowing Lands’ End to mention its refund policy on its Web site), cultural habits (Japanese do not use credit cards), and tariffs, quotas, and other legal restrictions prevent the Internet from becoming borderless commerce.

PTS: 1 REF: 73 OBJ: 05-6

TOP: AACSB Technology | AACSB Communication

KEY: CB&E Model Online/Computer MSC: BLOOMS Synthesis

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MKTG 5 5th Edition by Charles W. Lamb - Test Bank

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