Deck 21: Tapping Into Global Markets

Question 1

Which of the following is the first stage of the internationalization process that can induce firms to enter the international arena?

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) adoption of a flexible exchange rate regime

Answer 1

A

Question 2

Regional economic integration is defined as the creation of trading agreements between ________.

A) a firm and its suppliers and distributors
B) firms targeting the same market
C) individual firms in an industry
D) related industries
E) blocs of countries

Answer 2

E

Question 3

What is a global firm?

A) A firm that operates in one country and exports its goods and services to foreign countries.
B) A firm that operates in more than one country and has a sales and marketing staff in those countries.
C) A firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages not available to purely domestic competitors.
D) A firm that sells its products and services across the world but restricts manufacturing to the home country.
E) A firm that operates in more than one country but restricts the sale of its products to the home country.

Answer 3

C

Question 4

Which of the following is a risk that firms must consider prior to expanding abroad?

A) The domestic consumers prefer low-priced products.
B) The market in the foreign country may be too similar to the domestic market.
C) Consumers in the foreign country are very particular about the quality of the goods they consume.
D) The foreign country has very low pollution control standards.
E) The foreign country's business culture may be too different from the domestic country.

Question 5

In a sprinkler approach to international expansion, ________.

A) countries are entered when competition is limited
B) countries are gradually entered sequentially
C) countries in which the supply of raw material is greatest are entered first
D) countries in which the demand for the product is greatest are entered first
E) many countries are entered simultaneously

Question 6

WayToGrow Inc. is one of the most popular brand of toys in its home market. The company decides to expand its business abroad and its board of directors feel that instead of trying to establish its presence all at once in multiple markets, it is better to expand one country at a time. This would limit their risk and allow them to analyze customer response, after which they could expand to other similar countries. WayToGrow is following a ________.

A) shotgun approach
B) continuous approach
C) born global approach
D) sprinkler approach
E) waterfall approach

Question 7

In a waterfall approach to international expansion, ________.

A) firms enter countries gradually in a sequence
B) firms enter those countries first where the demand for the product is greatest
C) countries are entered based upon the availability of government subsidies
D) firms enter those countries first where the supply of raw material is greatest
E) countries are entered based upon ease of entry

Question 8

Zodiac Inc. is one of the leading producers of designer bags in its country. The company is considering shifting some of its production to India. Which of the following could have prompted this move?

A) People in India prefer imported designer bags.
B) Zodiac can target a niche market of high-profile consumers who have a high income.
C) Zodiac needs a larger customer base to achieve economies of scale.
D) People in the home country have an ethnocentric approach.
E) Market research indicates that Indian consumers have a low per-capita income.

Question 9

When first-mover advantage is crucial and a high degree of competitive intensity prevails, the ________ approach is better.

A) waterfall
B) born global
C) rifle
D) sprinkler
E) franchisee

Question 10

A2Z Inc. is a producer of a huge variety of consumer goods, from soaps to shower gels, and shampoos to detergents. It is a market leader in Malaysia and is planning to tap the immense potential in the emerging markets. Market research, however, indicates that the Indian culture and society are substantially different from their Malaysian counterparts. If the company wants to target the masses, which of the following options is most likely to succeed?

A) A2Z can use a price skimming strategy to increase market share.
B) The company's existing strategies in Malaysia will work just as well in India.
C) A2Z can introduce smaller "sachets" of shampoos and detergents that are priced lower.
D) The company can introduce large family packs of shampoos and soaps even if they are priced higher than competitors.
E) A2Z can use a predatory pricing strategy to capture the market.

Question 11

When innovation at Siemens enables the company to offer solutions that can make the generation of hydroelectricity more environment-friendly, the company will want to reap the benefits of being the first to introduce such a product across countries. In this case, which of the following approaches is likely to be the best approach to entering foreign markets?

A) the rifle approach
B) the continuous approach
C) the born global approach
D) the sprinkler approach
E) the waterfall approach

Question 12

Which of the following can induce a firm to expand into the international arena?

A) Consumer preferences in the domestic market vary widely.
B) Average income level of domestic consumers is high.
C) The firm operates in an industry that caters to the mass market.
D) The company wants to reduce its dependence on any one market.
E) The firm is yet to achieve economies of scale even though the domestic market has potential.

Question 13

Once a firm decides to enter the international market, what is the next step in the decision-making process?

A) deciding on the marketing organization
B) deciding on the marketing program
C) deciding how to enter the market
D) deciding how to adapt the product to the new market
E) deciding which markets to enter

Question 14

Commonwealth countries such as Hong Kong, Malaysia, and Singapore often choose the U.K. as their springboard into the European market: they feel more comfortable with its language, laws, and culture, which reflect the ________ between these countries and the U.K.

A) self-serving bias
B) coincident development
C) psychic proximity
D) cognitive dissonance
E) backward invention

Question 15

Which of the following causes a difference between marketing in the developed countries and marketing in the developing countries?

A) The cost of production varies substantially between the developed and the developing world.
B) The disparity between the rich and the poor in the developing world is reducing.
C) There are substantial cultural differences between the developed and the developing world.
D) Marketing in developing countries is far more expensive than in the developed world.
E) The developing countries have more trade barriers in place than the developed countries.

Question 16

Which of the following countries is a member of ASEAN?

A) Indonesia
B) Japan
C) United States
D) India
E) Brazil

Question 17

NAFTA is a free trade zone comprising of which of the following 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, Japan, and the United States

Question 18

"BRIC" is an acronym for ________.

A) Brazil, Russia, India, and China
B) Bolivia, Russia, Indonesia, and China
C) Brazil, Russia, Indonesia, and China
D) Bolivia, Russia, India, and Canada
E) Bolivia, Russia, Indonesia, and Canada

Question 19

________ is one of the world's largest single markets, with 25 member countries, a common currency, and more than 454 million consumers.

A) NAFTA
B) MERCOSUR
C) The European Union
D) APEC
E) ASEAN

Question 20

A2Z Inc. is a producer of a wide variety of consumer goods in Malaysia. It has successfully captured a huge share of the domestic market and has been able to create a very strong brand. It is now considering a foray into foreign markets. Its board of directors decide to first try out some of its products in the neighboring country of Indonesia. A2Z plans to eventually expand its presence in other countries, after they analyze the impact of their entry into the Indonesian market. A2Z Inc. is following a ________.

A) born global approach
B) waterfall approach
C) sprinkler approach
D) franchisee approach
E) shotgun approach

Question 21

Domestic-based export merchants ________.

A) buy manufacturers' products and then sell them abroad
B) manage a company's export activities for a fee
C) buy foreign products and sell them in the domestic country
D) seek and negotiate foreign purchases
E) carry on exporting activities on behalf of several producers

Question 22

Hotel chains such as Hyatt sell a variation of the licensing agreement called ________ to the owners of foreign hotels to manage these businesses for a fee.

A) greenfield venturing
B) management contracts
C) strategic alliance
D) indirect exporting
E) direct exporting

Question 23

After successfully exporting its products through export merchants, Boyes Inc. decides to take control of its exports. It sets up its own unit in the home country that takes care of all export-related activities. Boyes Inc. is most likely using ________.

A) foreign-based distributors or agents
B) domestic-based export department
C) export merchants in foreign countries
D) export-management companies
E) traveling export sales representatives

Question 24

MERCOSUR is a free trade zone linking which of the following countries?

A) Mexico, Japan, Brazil, Paraguay, and Venezuela
B) Mexico, Canada, and the United States
C) Brazil, Argentina, Paraguay, and Venezuela
D) Canada, Brazil, and the United States
E) Brazil, Argentina, Paraguay, Uruguay, and Venezuela

Question 25

While choosing countries to invest in, companies sometimes choose psychic proximity to their own country. Psychic proximity can best be defined as ________.

A) countries in which the company feels comfortable with the language, laws, and culture
B) countries that are located close
C) countries that the home country's management team have visited
D) countries that have no trade barriers
E) countries with good infrastructure and stable political environment

Question 26

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.

A) contract manufacturing
B) cooperative agreement
C) management contract
D) joint venture
E) franchising

Question 27

________ agree to manage a company's export activities for a fee.

A) Cooperative organizations
B) Domestic-based export agents
C) Export-management companies
D) Domestic-based export merchants
E) Contract manufacturing organizations

Question 28

Which of the following modes of entry into a foreign market involves the maximum commitment and risk?

A) franchising
B) direct investment
C) joint ventures
D) licensing
E) direct exporting

Question 29

James Foo lives in Malaysia. He buys local products from manufacturers in Malaysia and sells them abroad, mainly to Caribbean nations. Mr. Foo is a(n) ________.

A) domestic-based export merchant
B) domestic-based export agent
C) cooperative agent
D) export-management agent
E) direct exporting agent

Question 30

Which of the following statements is true about licensing?

A) It is one of the most complex ways to engage in international marketing.
B) The licensor gains entry into the new market at low risk.
C) The licensee has no access to proprietary information.
D) The licensee receives a fee or royalty.
E) The only benefit for a licensee is the production expertise it gains.

Question 31

BestFoods Inc., a well-known producer of breakfast cereals, has decided to hire producers in different countries so that the cereals marketed under their brand are locally produced in the respective countries. This would not only appeal more to consumers who preferred domestically produced goods, but would also create jobs in the host-country enhancing the brand's image further. This is an example of ________.

A) management contracting
B) franchising
C) greenfield venturing
D) contract manufacturing
E) straight extension

Question 32

In which of the following modes of licensing does the firm hire local producers to produce the product, giving the company less control over the manufacturing process?

A) contract manufacturing
B) management contracts
C) direct investment
D) joint venture production
E) greenfield venturing

Question 33

Companies typically start their international foray with ________, which involves working through independent intermediaries who sell their products abroad.

A) indirect exporting
B) licensing
C) franchising
D) direct exporting
E) joint ventures

Question 34

Domestic-based export agents perform a valuable service for 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 foreign products and sell them in the domestic country
D) seek and negotiate foreign purchases for a commission
E) produce and export products to foreign countries

Question 35

Indirect exports have two advantages for a firm: they involve less investment and ________.

A) less paperwork
B) less intrusion by the government
C) less risk
D) less competition
E) less customer suits

Question 36

Which of the following can cause a firm to choose joint ventures as a mode of expansion into foreign markets?

A) excellent managerial resources
B) lack of sufficient finances
C) lack of redtapism in the host country
D) preferences of target consumers in the host country
E) psychic proximity of the host country

Question 37

Identify a benefit of using joint ventures to enter a foreign market.

A) It entails minimum risk.
B) It provides access to an established distribution network in the host country.
C) It yields the highest returns.
D) It retains full control of its investment in the host country.
E) It is the best strategy for countries with psychic proximity.

Question 38

Nash & Associates is a firm that takes care of all export procedures on behalf of its clients. In exchange for a fee, the firm acts as the liaison between domestic manufacturers and prospective foreign buyers. It has access to established distribution networks in other countries that domestic small-scale producers are unlikely to have, and facilitates communication between foreign importers and domestic producers. Nash & Associates is most likely a(n) ________.

A) domestic-based export merchant
B) domestic-based export agent
C) cooperative organization
D) export-management company
E) direct exporter

Question 39

A Canadian software company decides to buy majority stakes in a Chinese firm producing software. The company even adds to its Chinese production capacity. Which of the following could be a potential disadvantage of this direct investment?

A) The Canadian firm will find it difficult to achieve economies of scale.
B) This is the least financially rewarding mode of international expansion.
C) The Canadian firm will have very limited control on its Chinese investment.
D) The Canadian firm will be subject to the piracy problems in China.
E) The Canadian firm will be subject to a higher cost of production in China.

Question 40

Which of the following is true about direct investment as a mode of international expansion?

A) It allows a firm to retain full control over its investment.
B) It yields the lower returns than joint ventures.
C) It involves the least amount of risk.
D) It involves the least cost.
E) It does not allow the firm to diversify.

Question 41

Which of the following is most likely to be successful when introduced in foreign markets as a straight extension?

A) laundry detergent
B) khaki pants
C) dessert mixes
D) digital camera
E) condensed soup

Question 42

A risk averse attitude is associated with ________.

A) high uncertainty avoidance
B) high femininity
C) high power distance
D) high individualism
E) high collectivism

Question 43

In an adapted marketing program, the company ________.

A) ensures that uniform practices are adopted across countries
B) focuses more on brand image than consumer preferences
C) ignores differences in the legal environment
D) ensures the lowest cost marketing program is adopted
E) tailors the marketing programs to each target market

Question 44

For the launch of "Trema," your company's new pocket organizer that can also be used as a cell phone, the CMO has decided that the product can be launched in international markets without any changes in its features or the marketing strategy. This introduction can described as a ________.

A) dual adaptation
B) straight extension
C) product adaptation
D) forward invention
E) backward invention

Question 45

Finnish cellular phone giant, Nokia, customized its 6100 series mobile phone for every major market in which it is present. In Asia, for example, the series came with higher ring volume so that it could be heard on the crowded Asian streets. This is an example of ________.

A) straight extension
B) forward invention
C) regional version
D) city version
E) country version

Question 46

Which of the following is one of Hofstede's four cultural dimensions that differentiate countries?

A) customer relationship management versus power distance
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

Question 47

According to Hofstede, cultures with weak uncertainty avoidance are best described as ________.

A) collectivist
B) hierarchical
C) egalitarian
D) risk-averse
E) risk-tolerant

Question 48

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 home country
C) inventing products that are superior to competing offerings
D) taking an existing product into a new market
E) inventing something that as yet has no "market"

Question 49

Your firm has decided to enter the international market with your product called "Trema," a new pocket organizer that can also be used as a cell phone. While discussing the marketing plans, your CMO decides that no changes will be necessary in either the marketing mix or the product for export. What form of marketing strategy is the CMO advocating?

A) distributive marketing program
B) leveraged marketing program
C) adapted marketing program
D) engineering-driven marketing program
E) standardized marketing program

Question 50

Your firm has decided to enter the international market with your product called "Trema," a combination of a pocket organizer and cell phone. Even though the product has been a huge success in the home country, market research suggests some changes may be required before it can be introduced in Europe. Your CMO is of the opinion that the product requires certain extra features and the product will also have to be marketed differently. Your CMO is advocating ________.

A) product invention
B) dual adaptation
C) straight extension
D) forward adaptation
E) product standardization

Question 51

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 with minor changes to the product
C) introducing the product to the foreign market with major changes to the product
D) introducing a customized product to the foreign market with a new marketing strategy
E) introducing a customized product to the foreign market with existing marketing strategy

Question 52

According to Hofstede, cultures with low power distance are ________.

A) collectivist
B) assertive
C) egalitarian
D) risk-averse
E) risk-tolerant

Question 53

A standardized marketing program involves ________.

A) adopting the strategy that best fits a given target market
B) consistently using the communication and distribution channels that entail the lowest costs
C) adjusting the product to suit market preferences
D) changing the features of the product to accommodate the host country
E) changing only the communication message to suit the different target markets

Question 54

In collectivist societies, ________.

A) all property is owned by the government
B) the self-worth of the individual is rooted more in the social system than in individual achievement
C) the culture is dominated by the need to maintain low power distance and reduce income inequality
D) the culture is dominated by a nurturing attitude as opposed to an assertive attitude
E) people are highly risk-averse

Question 55

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) market development
C) dual adaptation
D) diversification
E) communication adaptation

Question 56

In an attempt to tailor its products to suit the requirements of consumers in India, LG introduced the aero-comfort system. A remote control is programed to regulate both the air-conditioning and the ceiling fan. Consumers can switch off the AC and increase the ceiling fan's flow once the desired temperature is achieved. This not only increases convenience, but also cuts down electricity charges. LG's aero comfort system is an example of which of the following?

A) backward invention
B) dual invention
C) country version product
D) straight extension
E) communication adaptation

Question 57

Backward invention occurs when a firm ________.

A) creates a new product to meet a need in another country
B) reintroduces earlier product forms adapted to suit another country's needs
C) invents products that are similar to competing offerings
D) takes an existing product into a new market
E) produces its own raw materials

Question 58

Product adaptation involves ________.

A) altering the product to meet local preferences with no change in communication strategy
B) altering the product to meet minimum acceptable standards
C) altering both the product and the communication strategy to meet local preferences
D) altering neither the product nor the communication strategy while entering a new market
E) developing a new product and adapting the communication strategy to enter a new market

Question 59

A market survey by LG revealed that Indians preferred not to mix vegetarian and non-vegetarian food items. Hence, LG refrigerators in India include a special convertible box with separate compartments to store and control the temperature of vegetarian and non-vegetarian food. This is an example of customizing ________ to local needs.

A) advertising media
B) product features
C) packaging
D) brand name
E) labeling

Question 60

Shanghai Baosteel Group has a $1.4-billion steel mill in Brazil with Companhia Vale do Rio Doce, the world's largest producer of iron ore. This is an example of a ________.

A) straight extension
B) joint venture
C) contract manufacturing agreement
D) licensing agreement
E) franchising agreement

Question 61

Which of the following is likely if the distribution channel for a product in the foreign country is long?

A) the foreign country buyers pay a high price
B) the consumer will pay arms-length price
C) the profit margin of the sellers increase
D) the intermediaries are motivated to reship the product to another country to earn higher profits
E) the seller can increase profit margins by charging a uniform price

Question 62

Existence of gray markets lead to which of the following outcomes?

A) They make the distribution channel stronger.
B) They create a free-rider problem making legitimate distributors' investments in supporting a manufacturer's product less productive.
C) Goods sold in grey markets are always counterfeit.
D) Goods sold in grey markets come with standard product warranties.
E) Taxes imposed on grey market products are very high.

Question 63

Forces promoting global integration include ________.

A) strong local preferences
B) heterogeneous demand
C) local standards and barriers
D) strong consumer resistance to foreign goods
E) capital-intensive production

Question 64

For its first global ad campaign for Infiniti luxury cars, Nissan chose to tap into its Japanese roots and association with Japanese-driven art and engineering. This is an example of ________.

A) anchoring effect
B) target market impact
C) regiocentrism
D) country-of-origin effect
E) cognitive dissonance

Question 65

When forces for global integration are high and forces for national responsiveness are weak, which of the following strategies makes most sense?

A) segment consumers on a regional basis
B) tailor the product on a city-by-city basis
C) treat the world as a heterogeneous market
D) treat the world as a single market
E) treat the world as a portfolio of national opportunities

Question 66

Ajax Corp. is a multinational group that manufactures medical equipment and a variety of household electrical appliances. Kevin Oi is the head of the SBU that produces and markets medical equipment globally. The company's operating units appear to be a(n) ________.

A) internal subsidiary
B) geographical organization
C) world product group
D) export department
E) regional headquarters

Question 67

A company that has the regional vice presidents for North America, Latin America, Europe, and Africa reporting to the international division president is said to be a(n) ________.

A) international subsidiary
B) geographical organization
C) world product group
D) export department
E) hierarchical organization

Question 68

When one unit charges another unit in the same company for goods it ships to its foreign subsidiaries, the charge is called a(n) ________.

A) original price
B) transfer price
C) margin price
D) break-even price
E) customer value price

Question 69

Dumping occurs when ________.

A) a company entering a foreign market charges either less than its costs or less than it charges at home
B) a company entering a foreign market charges more than the price in its home market
C) a company entering a foreign market charges prices that are lower than those charged by its competitors in this market
D) a company sets its price equal to its average cost of production
E) a company exports its products to a foreign country to increase its revenue in spite of excess demand in the home country

Question 70

The New Zealand Way program was an initiative by the government of New Zealand to raise awareness and attract tourists by showing the dramatic landscapes featured in "The Lord of the Rings" film trilogy. This is an example of a government trying to strengthen its ________.

A) country-of-origin perceptions
B) international subsidiaries
C) internationalization
D) contract manufacturing
E) distributor relationships

Question 71

Various governments force companies to charge the ________ price, which is charged by other competitors for the same or a similar product.

A) gray market
B) implicit
C) arm's-length
D) authorized
E) contingent

Question 72

When forces for global integration are low and forces for national responsiveness are high, a strategy that ________ makes sense.

A) treats the world as a single market
B) views the marketplace as completely homogeneous
C) treats the world as a portfolio of national opportunities
D) standardizes all elements of the marketing mix
E) facilitates a straight extension

Question 73

If a company adapts or changes both the product and the communications, the company engages in a process called ________.

A) straight extension
B) product reinvention
C) product adaptation
D) dual adaptation
E) full adaptation

Question 74

A Gucci bag sells for $120 in Italy and $240 in the United States due to the differences in the costs of distributing the product in the two countries. This phenomenon is called a(n) ________.

A) opportunity cost problem
B) market pricing problem
C) tactical pricing problem
D) price escalation problem
E) transfer pricing problem

Question 75

The problem with setting a uniform global price for a product is that ________.

A) it allows intermediaries in low-price countries to reship their products to high-price countries
B) the company would earn the same profits everywhere, regardless of the cost structure
C) this strategy can price the product out of the market in countries where costs are high
D) this strategy makes the price too high in poor countries and not high enough in rich countries
E) it is ineffective for products that are homogeneous

Question 76

Trends Inc. produces and markets casual wear for men and women. The company wants to be a global brand and is planning to enter a few chosen markets across Europe and Asia. To accommodate the differences in purchasing power and costs of shipping goods to the retailers, the company has decided to use cost-based pricing in each country. In order to ensure that this strategy is successful, Trends must first make sure that ________.

A) all the countries it is planning to enter have similar laws and regulations
B) competing offerings in the different markets are not priced lower
C) all competitors follow cost-based pricing
D) its marketing communication targets rival firms in the respective markets to prove its superiority
E) its transfer prices are high

Question 77

Companies can manage their international marketing activities in three ways: export departments, international divisions, or ________.

A) global organization
B) fixed corporate headquarters
C) strong marketing department in the "host" country
D) local marketing efforts
E) strategic business units

Question 78

As people in developing countries often prefer to buy in smaller quantities, ________ is one of the most important functions of intermediaries in developing countries and helps perpetuate the long channels of distribution, which are a major obstacle to the expansion of retailing.

A) product adaptation
B) breaking bulk
C) diversification
D) transfer pricing
E) dual adaptation

Question 79

When companies are setting prices in different countries, the problem with setting a market-based price in each country is that ________.

A) it allows intermediaries in low-price countries to reship their products to high-price countries
B) the company would earn the same profits everywhere, regardless of the cost structure
C) this strategy might price the product out of the market in countries where costs are high
D) this strategy would make the price too high in poor countries and not high enough in rich countries
E) it prevents the company from differentiating its products

Question 80

Forces promoting national responsiveness include ________.

A) strong local preferences
B) homogeneous demand
C) strong global preferences
D) strong consumer liking towards foreign goods
E) capital-intensive production