This Document Contains Chapters 7 to 9 Chapter 7: Strategic Planning TRUE/FALSE 1. Global marketing can be seen as a culmination of a process of international market entry and expansion. Answer: True 2. Avoiding cost inefficiencies is a powerful globalization driver. Answer: True 3. A single-country approach is large enough for the local business to achieve all possible economies of scale. Answer: False 4. Mini-nationals are consortiums of companies that act as a lobbying force for global issues. Answer: False 5. The new-generation global players solve customers’ problems by pushing standardized solutions on them. Answer: False 6. In practice, strategic business units represent groupings organized around market similarities based on the product or service used to meet the needs of specific customers. Answer: True 7. A focus strategy is defined by its emphasis on several industrial segments. Answer: False 8. In pursuing cost leadership, the global marketer offers an identical or better product at a higher cost than the competition. Answer: False 9. Total quality management measures are allowing marketers to customize an increasing amount of their production while saving on costs. Answer: True 10. A global strategy implies that a company should serve the entire globe. Answer: False 11. When the cost of market share points in any one market becomes too high, marketers tend to begin looking for diversification opportunities. Answer: True 12. Segmentation considers the political boundaries that define markets. Answer: False 13. Globalization is the same as standardization except in the case of the technology used to produce the product. Answer: False 14. Globalization strives to reduce costs by exploiting factor costs or capabilities within a system. Answer: True 15. The quest for cost savings has allowed some marketers to have customer service activities present in all country markets. Answer: False 16. Cross-subsidization is the use of resources accumulated in one part of the world to fight a competitive battle in another. Answer: True 17. Globalization requires transfer of information typically between headquarters and country organizations, not the country organizations themselves. Answer: False 18. Executing global account management programs allows for the development of internal systems and interaction. Answer: True 19. The pressure to be global and local at the same time has to be addressed through developing talent. Answer: True 20. A dodger upgrades capabilities to match globals in niches. Answer: False MULTIPLE CHOICE 1. ____________ refers to balancing global, regional, and local interests. a. Global leverage b. Global account management c. Concentration d. Cross-subsidization Answer: A 2. Which of the following are two of the most powerful globalization drivers? a. Concentrating investments in national markets and focusing on economies of scale b. Restricting entry to geographically close markets and pushing standardized solutions on customers c. Centralizing all operations of R&D and providing additional funds for research d. Avoiding cost inefficiencies and duplication of effort Answer: D 3. Which of the following is true about government barriers to international marketing? a. Global companies support governmental decisions to implement barriers on domestic marketing. b. Government barriers have been implemented to discourage international marketing and concentrate only on domestic marketing. c. Physical, fiscal, and technical barriers are the same globally and apply to all companies. d. Barriers have fallen dramatically in the last years to further facilitate the globalization of markets. Answer: D 4. Which of the following is true about technology and international marketing? a. Newly emerging markets cannot leverage advanced communications as they are unable to leapfrog stages of economic development. b. Technological evolution is contributing on a rapid scale to the changes taking place in international marketing. c. E-business has not taken hold in international marketing. d. Global companies prefer conducting business the traditional way, without the use of teleconferencing or videoconferencing. Answer: B 5. Which of the following is true about “born globals”? a. They build their presence in every country. b. They discourage customer involvement in solving customer problems. c. They solve customers’ problems by pushing standardized solutions on them. d. They take ideas from wherever they can be found and solutions to wherever they are needed. Answer: D 6. ____________ refers to the capability of attracting and influencing all stakeholders, whether through energetic brands, heroic missions, distinctive talent development, or an inspirational corporate culture. a. Cross-subsidization b. Brand awareness c. Soft power d. Segmentation Answer: C 7. The use of scale, financial might, or the use of a low-cost position to win market access and share refers to ____________. a. cross-subsidization b. cost inefficiencies c. standardization d. hard power Answer: D 8. During the ____________ analysis stage of strategic planning, the company takes a look at its own organizational resources to determine if it can establish and sustain competitive advantage within global markets. a. competitive b. market c. internal d. external Answer: C 9. Which of the following is NOT one of the three choices of competitive strategies that the marketing manager has at his/her disposal? a. Target positioning b. Cost leadership c. Differentiation d. Focus Answer: A 10. Which of the following is true of a focus strategy? a. It is oriented toward either low cost or differentiation. b. It is either industry-wide or focused on a single segment. c. It offers an identical product at a lower cost than the competition. d. It has a broad target scope. Answer: A 11. What is the first step in the formulation of a global strategy? a. The location and extent of value-adding activities b. The choice of competitive strategy to be employed c. The resource allocation strategy to be adopted for various markets d. The choice of country markets to be entered Answer: B 12. ____________ takes advantage of the marketer's real or perceived uniqueness in elements such as design or after-sales services. a. Standardization b. Cross-subsidization c. Diversification d. Differentiation Answer: D 13. Which of the following statements is true about the choice of competitive strategy? a. In pursuing cost leadership, the global marketer offers an identical or better product at a higher cost than the competition. b. Most global marketers combine high differentiation with high costs to expand their market shares. c. Marketers who opt for high differentiation can ignore the monitoring of costs. d. Global activities will in themselves permit the exploitation of scale economies not only in production but also in marketing activities. Answer: D 14. Markets in the ____________ position will require continued commitment by management in research and development, investment in facilities, and the training of personnel at the country level. a. harvest/divest b. divest/reject c. invest/grow d. dominate/divest Answer: C 15. ____________ refers to a marketer’s decision to focus its resources on a smaller number of markets as opposed to a broad number of markets. a. Concentration b. Differentiation c. Diversification d. Cross-subsidization Answer: A 16. ____________ refers to a company’s decision to expand its portfolio by developing a strategy characterized by growth in a relatively large number of markets. a. Concentration b. Differentiation c. Cross-subsidization d. Diversification Answer: D 17. The recognition that groups within markets differ sufficiently enough to warrant individual marketing mixes is known as ____________. a. targeting b. positioning c. diversification d. segmentation Answer: D 18. The ____________ approach seeks uniformity, especially in elements that are strategic in nature, and also takes care to localize necessary tactical elements. a. globalization b. segmentation c. glocalization d. positioning Answer: C 19. One of the goals of globalization is to reduce costs by ____________. a. charging a lot more for product sold b. using price skimming techniques of increasing prices for brand name merchandise c. dumping surplus in receptive markets d. pooling production or exploiting factor costs or capabilities within a system Answer: D 20. One of the benefits for international marketers that have been able to globalize is that, customer service is ____________. a. concentrated and not dispersed in all country markets b. not required because customers do not need service c. standardized by the government under customer service requirements d. subsidized by customer service activities in the U.S. Answer: A 21. ____________ refers to a company’s use of resources accumulated in one part of the world to fight a competitive battle in another. a. Hard power b. Diversification c. Soft power d. Cross-subsidization Answer: D 22. Which of the following is a pitfall that handicaps global marketing programs and contributes to their suboptimal performance? a. Excessive cross-subsidization b. Vertical integration c. Overstandardization d. Adaptation Answer: C 23. The NIH syndrome refers to ____________. a. leveraging of local assets in segments where globals are weak b. the upgradation of local branches to match globals in niches c. resistance by local branches if adoption of the planning process is forced on them by headquarters d. the sale of the local branch to a global player or forming an alliance Answer: C 24. Giving midlevel managers more experience in working with others of different nationalities to expose them to other markets and surroundings is known as ____________. a. repatriation b. existential migration c. immigration d. personnel interchange Answer: D 25. ____________ calls for the centralization of decision-making authority far beyond that of the multidomestic approach. a. Cross-subsidization b. The NIH syndrome c. Globalization d. Localization Answer: C 26. Which of the following is an approach that can be used against the emergence of the NIH syndrome? a. Maintaining a product portfolio that exclusively supports specific local brands b. Allowing global managers control over local marketing budgets c. Ensuring that global managers participate in the development of marketing strategies and programs for local brands d. Encouraging local managers to generate ideas for possible regional or global use Answer: D 27. Which of the following statements about the emergence of organizational structures to support globalization effort is true? a. The matrix organization structure of global companies is focused on customers. b. Global product managers develop short-term strategies for product categories. c. Due to the intricate nature of global marketing, all marketers use the country-by-country approach. d. Global product managers develop strategies for product categories using the country-by-country approach. Answer: A 28. Why are marketers extending national account management programs across countries typically for the most important customers? a. To deal with the globalization of customers b. To maintain a product portfolio that includes only local/regional brands c. To serve and give importance to customers of a particular region than to the others d. To allow local managers control over their marketing budgets so that they can respond exclusively to local customer needs Answer: A 29. Executing ____________ programs not only builds relationships with important customers but also allows for the development of internal systems and interaction. a. cross-subsidization b. locally centralized marketing c. NIH d. global account management Answer: D 30. A local company that has assets that give it a competitive advantage only in its home market is known as a(n) ____________. a. defender b. dodger c. contender d. extender Answer: A 31. Which of the following is true of a dodger? a. It upgrades capabilities to match globals in niches. b. It sells out to a global player or becomes part of an alliance. c. It expands into markets similar to home base. d. It leverages local assets in segments where globals are weak. Answer: B 32. Nature-Care Inc., a Canadian-based cosmetics company, was under fierce competition from other cosmetics companies in Canada. The company came up with several strategies to increase profits, but they were still under severe losses. Finally, the company was sold to Trendy-Beauty Inc., a leading cosmetics company with branches all over the world. Which of the following competitive strategies did Nature-Care adopt? a. Contender b. Dodger c. Extender d. Defender Answer: B 33. ____________ are able to exploit their success at home as a platform for expansion elsewhere. a. Dodgers b. Extenders c. Defenders d. Contenders Answer: B 34. When Terminal Inc., a global heavy-duty vehicle manufacturer, could not cope up with the increasing demand, Next-Engines Inc. seized the opportunity and supplied their heavy-duty vehicles at prices lower than Terminal’s. Next-Engines’ lower labor costs and extensive R&D facilities allow it to keep its prices lower than Terminal’s. Which of the following competitive strategies did Next-Engines adopt? a. Dodger b. Extender c. Defender d. Contender Answer: D 35. Yummy Snacks Inc., a leading snack manufacturer in Mexico, has all its snacks catering to local taste buds. It has recently expanded their presence in the U.S. and other countries, especially at places with sizable Mexican communities. What is the competitive strategy adopted by Yummy Snacks? a. Contenders b. Defenders c. Dodgers d. Extenders Answer: D ESSAY 1. Why is standardization not the answer for companies wishing to go global? Answer: Globalization is not the same as standardization except in the case of the core product or the technology used to produce the product. The need to localize varies by product. Marketers may indeed occasionally be able to take identical technical and marketing concepts around the world, but most often, concepts must be customized to local tastes. Globalization reflects a business orientation based on the belief that the world is becoming more homogeneous and that distinctions between national markets are not only fading but, for some products, will eventually disappear. However, glocalization of the market is very important. 2. Discuss the environmental factors that favor the development of strategy and resource allocation on a global basis with an example. Answer: Government barriers have fallen dramatically in the last years to further facilitate the globalization of markets and the activities of marketers within them. For example, the forces pushing toward a pan-European market are very powerful: the increasing wealth and mobility of European consumers, the accelerating flow of information across borders, the introduction of new products where local preferences are not well established, and the common currency. The resulting removal of physical, fiscal, and technical barriers indicates the changes that are taking place around the world on a greater scale. At the same time, rapid technological evolution is contributing to the process. With operations spread across different continents, companies regularly use teleconferencing, videoconferencing, and knowledge networks, as well as travel, and are always on the lookout for innovative methods to share information and knowledge. Newly emerging markets will benefit from advanced communications by being able to leapfrog stages of economic development. Places that until recently were incommunicado are rapidly acquiring state-of-the-art telecommunications, especially in mobile telephony, that will let them foster both internal and external development. A new group of global players is taking advantage of today’s more open trading regions and newer technologies. Mini-nationals or “born globals” are able to serve the world from a handful of bases, compared with having to build a presence in every country as the established multinational corporations once had to do. Their smaller bureaucracies have also allowed these mini-nationals to move swiftly to seize new markets and develop new products—a key to global success. The lessons from these new-generation global players are to (1) keep focused and concentrate on being number one or two in a niche; (2) stay lean by having a small headquarters to save on costs and to accelerate decision making; (3) take ideas from wherever they can be found and solutions to wherever they are needed; (4) take advantage, regardless of nationality, of employees’ ideas and experience to globalize thinking; and (5) solve customers’ problems by involving them rather than pushing standardized solutions on them. 3. Explain the not-invented-here (NIH) syndrome and the approaches used to counter its emergence. Answer: Globalization by design requires a balance between sensitivity to local needs and deployment of technologies and concepts globally. This means that neither headquarters nor independent country managers alone can call the shots. If country organizations are not part of the planning process, or if adoption is forced on them by headquarters, local resistance in the form of the not-invented-here (NIH) syndrome may lead to the demise of the global program or to an overall decline in morale. Subsidiary resistance may stem from resistance to any idea originating from the outside or from valid concerns about the applicability of a concept to that particular market. Overall, the best approach against the emergence of the NIH syndrome is utilizing various motivational policies, such as (1) ensuring that local managers participate in the development of marketing strategies and programs for global brands, (2) encouraging local managers to generate ideas for possible regional or global use, (3) maintaining a product portfolio that includes local as well as regional and global brands, and (4) allowing local managers control over their marketing budgets so that they can respond to local customer needs and counter global competition. Chapter 8: Analyzing People and Markets TRUE/FALSE 1. The single most important cause for failure in the international marketplace is the inability to communicate in the host country language. Answer: False 2. The American Marketing Association (AMA) defines marketing research as the function that links the consumer, customer, and public to the marketer through information. Answer: True 3. The research done for international marketing activities is most often more rigorous, formal, and quantitative than for domestic marketing activities. Answer: False 4. A marketing plan is usually developed prior to doing any international research. Answer: False 5. The value of the international marketing decision with the benefit of research should be greater than the value of the decision without research. Answer: True 6. Clustering countries into similar groups for screening and evaluation is the first step of foreign-market opportunity analysis. Answer: False 7. When importing, firms shift their major focus from supplying to sourcing. Answer: True 8. Firms appear to be less open about their international marketing activities than about their domestic ones. Answer: False 9. It is not necessary to consider the compatibility and comparability of the data while using secondary data. Answer: False 10. The researcher should use creative inferences to arrive at knowledge useful to the firm. Answer: True 11. The EU law permits companies to collect personal data only if the individuals consent to the collection, know how the data will be used, and have access to databases to correct or erase their information. Answer: True 12. The two major approaches to international research organization are the top-down approach and the bottom-up approach. Answer: False 13. The less the corporation’s research needs overlap with an agency’s past research accomplishment, the more likely it is that the research task will be carried out satisfactorily. Answer: False 14. Centralizing all research activities with one service provider is more efficient than having experts working on a problem. Answer: False 15. Standardized research techniques are more useful in the collection of subjective data than of objective data. Answer: False 16. Focus groups can be most useful when specific answers are sought to very narrow questions. Answer: False 17. When qualitative data are desired, surveys are appropriate research instruments. Answer: False 18. Unstructured questions increase the potential for interviewer bias. Answer: True 19. Delphi studies are one means of obtaining factual data through quantitative methods. Answer: False 20. Scenario analysis is used to look at different configurations of key variables in the international market. Answer: True MULTIPLE CHOICE 1. What are the two basic forms of research gathering methods? a. Generic and specific b. Presentation and demonstration c. Primary and secondary d. Limited and scope-oriented Answer: C 2. Which of the following is true of marketing research? a. Marketing research can take place in a void. b. Marketing research is the link between marketer and market without which marketing cannot function. c. Marketing research highlights the roles of bias, emotions, and subjective judgment. d. Marketing research can take place even without a business purpose. Answer: B 3. A major reason that firms are reluctant to engage in international marketing activities is the: a. lack of investors in international markets. b. lack of sensitivity to differences in consumer tastes and preferences. c. absence of profitable opportunities. d. lack of distributors in international markets. Answer: B 4. The value of research in making a particular decision can be determined by applying the following equation: V(dr) - V(d) > C(r). In this equation, V(dr) represents the: a. cost of research. b. value of the decision with the benefit of research. c. value of the decision without the benefit of research. d. difference between the cost of research and the benefit of research. Answer: B 5. Which of the following is the aim of foreign-market opportunity analysis? a. To utilize a broad-brush approach which is accomplished quickly at low cost b. To conduct a detailed analysis of the world on a market-by-market basis c. To obtain consistency in the firm’s marketing efforts d. To evaluate the natural resources present in the different markets Answer: A 6. Which of the following is the first step in foreign-market opportunity analysis? a. Identifying the potential demand for a specific product b. Indexing and ranking countries by their market appeal c. Clustering countries into similar groups for screening and evaluation d. Developing and planning of strategies of the country chosen Answer: B 7. Macro level secondary data usually involves: a. data on local laws and regulations. b. tariff and nontariff information. c. information about individual companies. d. data on local distribution systems and competitive activities. Answer: B 8. Collecting secondary data at the micro level involves gathering: a. tariff and nontariff information. b. government trade policy information. c. information obtained from the WTO. d. data on local laws, regulations, standards, and specifications. Answer: D 9. ____________ information includes population trends, general trade flows between countries, and world agricultural production. a. Behavioral b. Macro c. Systemic d. Structural Answer: B 10. Which of the following entities has the greatest variety of secondary data? a. International organizations b. Governments c. Trade associations d. Service organizations Answer: B 11. Which of the following is true about trade associations? a. Trade associations provide valuable information about local markets. b. The information provided by trade associations is often quite specific in nature. c. Trade associations do not maintain files on international trade issues and trends affecting international marketers. d. Trade associations provide general background information such as the name of the chief executive officer, the address and telephone number, and some information about a firm’s products. Answer: A 12. Why is information provided by trade associations often quite general in nature? a. Because the frequency of updates is very low b. Because the basic intent of such information is to serve as an “appetizer” c. Because summary information is what most international organizations look out for d. Because of the wide variety of clients served Answer: D 13. Which of the following is a drawback associated with electronic information services? a. The information provided is not cost-effective. b. They are heavily biased toward the English language. c. They do not provide information on technical standards and trade regulations on specific products. d. The information provided is often quite general in nature. Answer: B 14. The level of computerization of a society can estimate the future need for software. In this statement, the level of computerization of a society is a: a. random variable. b. proxy variable. c. constant. d. qualitative variable. Answer: B 15. Which of the following is true about primary research? a. It is always conducted by the firm with a specific need. b. It is very limited in scope as it typically does not go beyond the activities of secondary data collection. c. It is conducted to fill specific information needs. d. It is easier to conduct internationally. Answer: C 16. Firms are increasingly recognizing that ____________ variables, such as lifestyles, attitudes, or personality, can play a major role in identifying similar consumer groups in different countries. a. discrete b. segmentation c. purchase-related d. economic Answer: B 17. Which of the following questions will require the use of primary research? a. What are the latest accords and negotiations in the WTO? b. What is the ratio of Columbia's debt to gross domestic product? c. What is the market potential for furniture in Indonesia? d. What percentage of global steel production is accounted by the Chinese steel industry? Answer: C 18. Which of the following approaches uses an intermediary such as an outside research agency to bring headquarters and country operations together? a. Coordinated research approach b. Top-down approach c. Decentralized approach d. Centralized approach Answer: A 19. In the ____________ approach, the headquarters establishes the broad thrust of research activities and delegates further design and implementation to the specific countries. The research is then carried out locally, and only a final report is provided to headquarters. a. top-down b. decentralized c. coordinated d. centralized Answer: B 20. Outside research is appropriate: a. for small-scale international marketing research. b. for small-scale domestic marketing research. c. when generalized research skills are required. d. when specialized research skills are required. Answer: D 21. ____________ can be helpful in providing information about perceptions, emotions, and other nonovert factors. a. Focus groups b. Scanner data c. Structured questionnaires d. Surveys Answer: A 22. Which of the following research techniques is most valuable for the researcher who is totally unfamiliar with a market or market situation, and can be quickly achieved through participation in a trade mission? a. Surveys b. Interviews c. Focus groups d. Observation Answer: D 23. Which of the following research instruments is used for gathering qualitative data in marketing research? a. Data mining b. Survey c. Scanner data d. Interviews Answer: D 24. The intent of gathering qualitative data is to: a. amass data. b. search for statistical significance. c. generalize. d. obtain a better understanding of given situations and behavioral patterns. Answer: D 25. When quantitative data are desired, ____________ are appropriate research instruments. a. interviews b. focus groups c. surveys d. observations Answer: C 26. Surveys are usually conducted ____________. a. via questionnaires b. through observations c. via experiments d. through focus groups Answer: A 27. Which of the following is true about structured questions? a. Structured questions increase the potential for interviewer bias. b. Structured questions typically permit the capture of more in-depth information than unstructured questions. c. Structured questions are quite useful in cross-cultural surveys because they make allowance for the frame of reference of the respondents. d. Structured questions typically allow the respondents only limited choice options. Answer: D 28. Which of the following is true about unstructured questions? a. Unstructured questions typically allow the respondents only limited choice options. b. Unstructured questions decrease the potential for interviewer bias. c. Unstructured questions permit the capture of in-depth information. d. Unstructured questions prevent the respondents from setting their own frame of reference. Answer: C 29. In some cultures, certain questions are asked directly to respondents while in others, the same questions are thought to be rude and insulting. This is because of: a. data equivalence. b. social desirability. c. interviewer bias. d. sampling error. Answer: B 30. In a developed country, a white-collar worker may be part of the middle class, whereas in a less-developed country, the same person would be part of the upper class. This example underscores the importance of ____________ while deciding on survey question formats. a. data equivalence b. social desirability c. question validity d. overt questioning Answer: A 31. ____________ requires categories used in questionnaires to be comparatively structured. a. Translation-retranslation approach b. Social desirability c. Data equivalence d. Content analysis Answer: C 32. In the ____________, a researcher formulates the questions, has them translated into the language of the country under investigation, and subsequently has a second translator return the foreign text to the researcher’s native language. a. transliteration methodology b. translation-retranslation approach c. multilingual evaluation d. reverse translation methodology Answer: B 33. Translation-retranslation approach is ____________. a. designed to reduce interviewer bias. b. employed to ensure that categories used in questionnaires are comparatively structured. c. necessary to ensure the capture of more in-depth information. d. used to reduce problems in question wording. Answer: D 34. To enrich information obtained from factual data, corporations resort to the use of creative and highly qualitative data-gathering methods. Which of the following methods would allow this? a. Surveys b. Questionnaires c. Scanner data d. Delphi studies Answer: D 35. Delphi studies: a. seek to obtain the responses of many people with only specific and limited knowledge. b. aim at qualitative rather than quantitative measures by aggregating the information of a group of experts. c. encourage interaction among the participants. d. require only two steps for completion and hence information is obtained very quickly. Answer: B ESSAY 1. Why are firms reluctant to engage in international marketing activities? Answer: A major reason that firms are reluctant to engage in international marketing activities is the lack of sensitivity to differences in consumer tastes and preferences. A second reason is a limited appreciation for the different marketing environments abroad. A third reason is the lack of familiarity with national and international data sources and the inability to use them if obtained. Finally, firms often build up their international marketing activities gradually, frequently on the basis of unsolicited orders. Over time, actual business experience in a country or with specific firms may be used as a substitute for organized research. 2. What are the sources of secondary data in international marketing? Answer: Secondary data is available from governments, international organizations, directories, trade associations, or online databases. 3. Write a note on analyzing and interpreting primary data. Answer: Interpretation and analysis of accumulated information are required to answer the research questions that were posed initially. The researcher should, of course, use the best tools available and appropriate for analysis. The fact that a market may be in a less-developed country does not preclude the collection of good data and the use of good analytical methods. On the other hand, international researchers should be cautioned against using overly sophisticated tools for unsophisticated data. Even the best of tools will not improve data quality. The quality of data must be matched with the quality of the research tools to achieve appropriately sophisticated analysis and yet not overstate the value of the data. Chapter 9: Market Entry and Expansion TRUE/FALSE 1. Proactive motivations influence firms that respond to environmental shifts by changing their activities over time. Answer: False 2. Profits provide the strongest proactive incentive to become involved in international marketing. Answer: True 3. Geographic closeness to foreign markets may not translate into real or perceived closeness to the foreign customers. Answer: True 4. The primary outside influence on a firm’s decision to go international is foreign demand. Answer: True 5. Bank participation in export trading companies was intended to allow better access to capital. Answer: True 6. The small transaction volumes of the sogoshosha provides them with cost advantages. Answer: False 7. Licensing increases the exposure to both government intervention and terrorism. Answer: False 8. Licensing has been criticized as it lets multinational corporations capitalize on older technology. Answer: True 9. From a recipient-country view, franchising requires considerable outflow of foreign exchange. Answer: False 10. The advantage of franchising is that there is no need for standardization. Answer: False 11. One key concern of franchising is the protection of the total business system that a franchise offers. Answer: True 12. Corporate desire for growth is a major cause for the increase in foreign direct investment. Answer: True 13. Efficiency seekers attempt to obtain the most economic sources of production. Answer: True 14. A major cause for the increase in foreign direct investment is derived demand. Answer: True 15. Nonfinancial incentives offer special funding for the investor by providing land or buildings. Answer: False 16. By raising money locally, multinationals provide the much needed boost to smaller capital markets. Answer: False 17. Full ownership by multinational firms is a prerequisite for international success. Answer: False 18. Strategic alliances are arrangements between two or more companies with different types of business objectives. Answer: False 19. Strategic alliances are more rigid than joint ventures. Answer: False 20. The risk of participating in an international venture is substantially increased for the supplier involved in a management contract. Answer: False MULTIPLE CHOICE 1. Which of the following is a proactive motivation to go international? a. Competitive pressures b. Unique products c. Overproduction d. Excess capacity Answer: B 2. The strongest proactive incentive to become involved in international marketing is ____________. a. to avoid taxation b. to control overproduction c. the profit advantage d. creation of excess capacity Answer: C 3. Historically, a firm with a competitive edge could count on being the sole supplier to international markets for years to come. However, this advantage has shrunk dramatically because ____________. a. of competing technologies and imitation due to insufficient protection of intellectual property rights b. it is becoming increasingly difficult to gain knowledge about foreign customers, marketplaces, or market situations c. globalization and the Internet do not allow the existence of a “first firm” d. most countries do not allow established big firms to enter their market Answer: A 4. During downturns in the domestic business cycle, markets abroad provided an ideal outlet for high inventories. This kind of market expansion represents ____________. a. guerilla marketing b. innate exporting c. portfolio investment d. safety-valve activity Answer: D 5. A firm with excess capacity assigns all fixed costs to domestic production. For the international markets, the firm uses a pricing scheme that focuses mainly on variable costs. This strategy allows the firm to offer its products abroad at a cost lower than at home. The firm in question could be accused of ____________. a. guerilla marketing b. dumping c. price skimming d. limit pricing Answer: B 6. Which of the following refers to the lack of symmetry between growing international markets with respect to cultural variables, legal factors, and other societal norms? a. The NIH syndrome b. Disequilibrium c. Psychological distance d. Environmental imbalance Answer: C 7. The intervening individual or variable within the firm that initiates change and shepherds it through to implementation is referred to as a ____________. a. dodger b. change agent c. resource seeker d. contender Answer: B 8. Which of the following is an internal change agent associated with the internationalization process? a. Demand b. Competition c. Governmental activities d. New management Answer: D 9. In small and medium-sized firms, the initial decision to go international is usually made by the president, with substantial input provided by the ____________. a. HR department b. R&D team c. manufacturing department d. marketing department Answer: D 10. The primary external influence on a firm's decision to go international is ____________. a. increasing competition at the international level b. management's gamble on a new market segment c. government mandate requiring the firm to do so d. foreign demand for a particular product or service Answer: D 11. A company that starts exporting its products or services within two years of its establishment is called a(n) ____________. a. innate exporter b. accidental exporter c. export management company d. trading company Answer: A 12. ____________ are domestic firms that perform international marketing services as commissioned representatives or as distributors for several other firms. a. Sogoshoshas b. Innate exporters c. Export management companies d. Shell corporations Answer: C 13. Which of the following is true about export management companies (EMCs)? a. Generally, most EMCs are large. b. The mode of operations of EMCs is constant for every client. c. The use of EMCs is a major channel commitment for the manufacturer. d. EMCs are multinationals involved in foreign investments. Answer: C 14. Under a ____________ agreement, one firm permits another to use its intellectual property in exchange for royalty. a. personal contract purchase b. franchising c. hire purchase d. licensing Answer: D 15. Which of the following costs is covered under the licensing agreement? a. Switching costs b. Sunk costs c. Fixed costs d. Transfer costs Answer: D 16. While negotiating licensing agreements, which of the following refers to the costs incurred in the foreclosure of other sources of profit, such as exports or direct investment? a. Opportunity costs b. Transfer costs c. R&D costs d. Sunk costs Answer: A 17. ____________ permits use of the names or logos of designers, literary characters, sports teams, and movie stars on merchandise such as clothing. a. Copyright licensing b. Trademark licensing c. Patent licensing d. Utility licensing Answer: B 18. In ____________, a parent company grants an independent entity the right to do business in a specified manner that includes the right to sell the parent company's products and use its name, along with its production, preparation, and marketing techniques. a. leasing b. a joint venture c. hire purchasing d. franchising Answer: D 19. Which of the following is a key impediment to international franchising? a. The protection of the total business system that a franchise offers b. The franchisee’s concern about increased risks upon implementing a proven concept c. Increased outflow of foreign exchange from recipient nations d. The government’s concern regarding replacement of export jobs Answer: A 20. Which of the following is true about franchising? a. From a government perspective, franchising replaces exports and export jobs. b. From a recipient-country view, franchising requires substantial outflow of foreign exchange. c. Typically, there is no need for standardization in franchising. d. A key concern of franchising is the issue of selection and training of franchisees. Answer: D 21. Which of the following best describes portfolio investment? a. It refers to direct investment in foreign entities. b. It is the purchase of a manufacturing plant in a foreign market. c. It is the outright purchase of a competing company. d. It focuses on the purchase of stocks and bonds internationally. Answer: D 22. The United Nations defines ____________ as “enterprises which own or control production or service facilities outside the country in which they are based.” a. trading companies b. multinational corporations c. shell corporations d. export management companies Answer: B 23. Which of the following is the negative effect of foreign direct investments by multinational companies? a. Lower wage rates compared to the average domestically oriented firms b. Economic instability in the host countries c. Decrease in the number of jobs in the host countries d. Entry of imports on an ongoing basis Answer: D 24. ____________ demand is said to occur when large multinational firms who would like to maintain their established business relationships, encourage their suppliers to follow them abroad. a. Derived b. Overfull c. Latent d. Irregular Answer: A 25. Which of the following types of incentives consist of special depreciation allowances, tax credits or rebates, special deductions for capital expenditures, tax holidays, and other reductions of the tax burden on the investor? a. Financial incentives b. Fiscal incentives c. Nonfiscal incentives d. Nonfinancial incentives Answer: B 26. ____________ incentives are specific tax measures designed to attract the foreign investor. a. Financial b. Fiscal c. Nonfiscal d. Nonfinancial Answer: B 27. ____________ incentives offer special funding for the investor by providing land or buildings, loans, loan guarantees, or wage subsidies. a. Financial b. Fiscal c. Nonfiscal d. Nonfinancial Answer: A 28. ____________ incentives consist of guaranteed government purchases; special protection from competition through tariffs, import quotas, and local content requirements; and investments in infrastructure facilities. a. Financial b. Fiscal c. Nonfiscal d. Nonfinancial Answer: D 29. Multinational firms are accused of causing ____________, when they deprive domestic firms of talent by employing the brightest locals and moving them to another country. a. a brain drain b. cross-subsidization c. NIH syndrome d. profit repatriation Answer: A 30. A major concern for governments about full ownership by multinational firms is profit ____________, which is the transfer of profits from the new foreign market back to the domestic country. a. repatriation b. sharing c. abolition d. disbursement Answer: A 31. Which of the following is a major deterrent to full ownership of FDI? a. Profitability b. Product differentiation c. Market instability d. Competition Answer: C 32. The collaboration of two or more organizations for more than a transitory period to share assets, risks, and profits is referred to as a(n) ____________. a. sole proprietorship b. acquisition c. portfolio investment d. joint venture Answer: D 33. One special form of joint ventures consists of ____________, which are arrangements between two or more companies with a common business objective. a. wholly owned subsidiaries b. strategic alliances c. franchises d. reverse mergers Answer: B 34. In a ____________, the supplier brings together a package of skills that will provide an integrated service to the client without incurring the risk and benefit of ownership. a. joint venture b. full ownership mechanism c. management contract d. portfolio investment Answer: C 35. Which of the following observations is true of a management contract? a. For the supplier, the risk of participating in an international venture is substantially increased. b. The supplier will be unable to exercise any amount of operational control. c. For the client, expertise that is built up is provided. d. For the client, organizational skills that are not available locally can be provided. Answer: D ESSAY 1. What is the difference between proactive and reactive motivators that spur a company to go international? Answer: Proactive motivations represent stimuli to attempt strategic change. Reactive motivations influence firms that respond to environmental shifts by changing their activities over time. In other words, proactive firms go international because they want to, while reactive ones go international because they have to. Profit advantage, unique products, technological advantage, economies of scale, and so on are proactive stimuli. Competitive pressures, overproduction, declining domestic sales, and so on are reactive stimuli. 2. List and describe the key corporate export stages. Answer: The key corporate export stages are: Awareness: A firm may gradually become aware of international market opportunities. Interest: While awareness of international market opportunities is unlikely to trigger much business activity, it can lead management to gradually become interested in international activities. Trial: In this stage, management is willing to consider the feasibility of exporting. In this exploratory stage, the firm begins to export systematically, usually to psychologically close countries. However, management is still far from being committed to international marketing activities. Evaluation: After some export activity, typically within two years of initial export, management is likely to conduct an evaluation of its export efforts. Adaptation: Success can lead to the process of export adaptation. Here a firm is an experienced exporter to a particular country and adjusts its activities to changing exchange rates, tariffs, and other variables. Management is ready to explore the feasibility of exporting to additional countries that are psychologically farther away. 3. Describe three types of ownership in foreign direct investment. Answer: A corporation's ownership choices can range from 100 percent ownership to a minority interest. Full ownership is to have 100 percent ownership. However, a major concern is the fairness of profit repatriation. Another type of ownership is joint venture, which is a collaboration of two or more organizations for more than a transitory period. The partners share assets, risks, and profits, though equality of partners is not necessary. Lastly, a strategic alliance is an arrangement between two or more companies with a common business objective. The great advantage of strategic alliances is their ongoing flexibility, since they can be formed, adjusted, and dissolved rapidly in response to changing conditions. Test Bank for International Marketing Michael R. Czinkota, Ilkka A. Ronkainen 9781133627517, 9788131533642
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