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Chapter 8 - Reaching Global Markets 1. Describe the cultural and social forces that affect international marketing strategy. Answer: Cultural and social differences among nations can have significant effects on marketing activities. Because marketing activities are primarily social in purpose, they are influenced by beliefs and values regarding family, religion, education, health, and recreation. Local preferences, tastes, and idioms can all prove complicated for international marketers. It can be difficult to transfer marketing symbols, trademarks, logos, and even products to international markets, especially if these are associated with objects that have profound religious or cultural significance in a particular culture. Cultural differences may also affect marketing negotiations and decision-making behavior. Buyers’ perceptions of other countries can influence product adoption and use. Multiple research studies have found that consumer preferences for products depend on both the country of origin and the product category of competing products. When people are unfamiliar with products from another country, their perceptions of the country as a whole may affect their attitude toward the product and influence whether they will buy it. If a country has a reputation for producing quality products and therefore has a positive image in consumers’ minds, marketers of products from that country will want to make the country of origin well known. The extent to which a product’s brand image and country of origin influence purchases is subject to considerable variation based on national culture characteristics. 2. In what ways can a nation restrict the flow of imported goods? Answer: A government’s policies toward public and private enterprise, consumers, and foreign firms influence marketing across national boundaries. Some countries have established import barriers, such as tariffs. An import tariff is any duty levied by a nation on goods bought outside its borders and brought into the country. Nontariff trade restrictions include quotas and embargoes. A quota is a limit on the amount of goods an importing country will accept for certain product categories in a specific period of time. An embargo is a government’s suspension of trade in a particular product or with a given country. Embargoes are generally directed at specific goods or countries and are established for political, health, or religious reasons. Exchange controls, government restrictions on the amount of a particular currency that can be bought or sold, may also limit international trade. They can force businesspeople to buy and sell foreign products through a central agency, such as a central bank. Countries may limit imports to maintain a favorable balance of trade. The balance of trade is the difference in value between a nation’s exports and its imports. When a nation exports more products than it imports, a favorable balance of trade exists because money is flowing into the country. 3. Describe how economic forces affect marketing strategies. Answer: Global marketers need to understand the international trade system, particularly the economic stability of individual nations, as well as trade barriers that may stifle marketing efforts. Economic differences among nations—differences in standards of living, credit, buying power, income distribution, national resources, exchange rates, and the like—dictate many of the adjustments firms must make in marketing internationally. Instability is one of the guaranteed constants in the global business environment. The value of the dollar, euro, and yen has a major impact on the prices of products in many countries. An important economic factor in the global business environment is currency valuation Opportunities for international trade are not limited to countries with the highest incomes. The countries of Brazil, Russia, India, China, and South Africa (BRICS) have attracted attention as their economies appear to be rapidly advancing. Other nations are progressing at a much faster rate than they were a few years ago, and these countries—especially in Latin America, Africa, eastern Europe, and the Middle East—have great market potential. Many of these countries are now being classified into two new categories. This has a major impact on international trade. 4. What marketing and ethical problems can bribes create in international marketing transactions? Answer: The use of payoffs and bribes is deeply entrenched in many governments. Because U.S. trade and corporate policy, as well as U.S. law, prohibits direct involvement in payoffs and bribes, U.S. companies may have a hard time competing with foreign firms that engage in these practices. Under the Foreign Corrupt Practices Act of 1977, it is illegal for U.S. firms to attempt to make large payments or bribes to influence policy decisions of foreign governments. Nevertheless, facilitating payments, or small payments to support the performance of standard tasks, are often acceptable. The Foreign Corrupt Practices Act also subjects all publicly held U.S. corporations to rigorous internal controls and record-keeping requirements for their overseas operations. Differences in ethical standards affect marketing efforts. When marketers do business abroad, they often perceive that other business cultures have different modes of operation. This uneasiness is especially pronounced for marketers who have not traveled extensively or interacted much with foreigners in business or social settings. However, many businesspeople adopt the principle of “When in Rome, do as the Romans do.” These businesspeople adapt to the cultural practices of the country they are in and use the host country’s cultural practices as the rationalization for sometimes straying from their own ethical values when doing business internationally. For instance, by defending the payment of bribes or “greasing the wheels of business” and other questionable practices in this fashion, some businesspeople are resorting to cultural relativism—the concept that morality varies from one culture to another and that business practices are therefore differentially defined as right or wrong by particular cultures. Because of differences in cultural and ethical standards, many companies work both individually and collectively to establish ethics programs and standards for international business conduct. 5. What are the effects of technological forces on international marketing? What opportunities exist in the global marketplace that marketers can exploit with regard to technology? Answer: Advances in technology have made international marketing much easier. Interactive Web systems, instant messaging, and podcast downloads; along with the traditional vehicles of voice mail, e-mail, and cell phones; make international marketing activities more affordable and convenient. Internet use and social networking activities have accelerated dramatically within the United States and abroad. In many developing countries that lack the level of technological infrastructure found in the United States and Japan, marketers are beginning to capitalize on opportunities to leap-frog existing technology. For example, cellular and wireless phone technology is reaching many countries at a more affordable rate than traditional hard-wired telephone systems. Consequently, opportunities for growth in the cell phone market remain strong in Southeast Asia, Africa, and the Middle East. One opportunity created by the rapid growth in mobile devices in Kenya is mobile payment services. Approximately 8.5 million Kenyans use their mobile phones to transfer money. London-based Vodafone has taken advantage of this market opportunity with its M-PESA money transfer service, the most popular money transfer service in Kenya. Because banks tend to avoid catering to lower income populations, such services are likely to grow. 6. What is the effect of NAFTA on the international trade of United States and Canada? Answer: The North American Free Trade Agreement (NAFTA), implemented in 1994, effectively merged Canada, Mexico, and the United States into one market of nearly 460 million consumers. NAFTA virtually eliminated all tariffs on goods produced and traded among Canada, Mexico, and the United States to create a free trade area. The estimated annual output for this trade alliance is more than $17 trillion. NAFTA makes it easier for U.S. businesses to invest in Mexico and Canada; provides protection for intellectual property (of special interest to hightechnology and entertainment industries); expands trade by requiring equal treatment of U.S. firms in both countries; and simplifies country-of-origin rules, hindering China and Japan’s use of Mexico as a staging ground for further penetration into U.S. markets. Canada’s more than 34 million consumers are relatively affluent, with a per capita GDP of $40,500. Canada is the single largest trading partner of the United States, which in turn supports millions of U.S. jobs. NAFTA has also enabled additional trade between Canada and Mexico. Mexico is Canada’s fifth largest export market and third largest import market. With a per capita GDP of $14,700, Mexico’s more than 114 million consumers are less affluent than Canadian consumers. 7. In what ways can businesses become involved in international marketing activities? Answer: Businesses become involved in international marketing activities in the following ways: a) Importing and exporting: Importing and exporting require the least amount of effort and commitment of resources. Importing is the purchase of products from a foreign source. Exporting, the sale of products to foreign markets, enables firms of all sizes to participate in global business. b) Licensing and franchising: When potential markets are found across national boundaries, and when production, technical assistance, or marketing know-how is required, licensing is an alternative to direct investment. Franchising is a form of licensing in which a company (the franchiser) grants a franchisee the right to market its product, using its name, logo, methods of operation, advertising, products, and other elements associated with the franchiser’s business, in return for a financial commitment and an agreement to conduct business in accordance with the franchiser’s standard of operations. c) Contract manufacturing: Contract manufacturing occurs when a company hires a foreign firm to produce a designated volume of the firm’s product (or a component of a product) to specification and the final product carries the domestic firm’s name. Marketing may be handled by the contract manufacturer or by the contracting company. Three specific forms of contract manufacturing have become popular in the last decade: outsourcing, offshoring, and offshore outsourcing. d) Joint ventures: In international marketing, a joint venture is a partnership between a domestic firm and a foreign firm or government. Joint ventures are especially popular in industries that require large investments, such as natural resources extraction or automobile manufacturing. e) Direct ownership: Once a company makes a long-term commitment to marketing in a foreign country that has a promising market as well as a suitable political and economic environment, direct ownership of a foreign subsidiary or division is a possibility. 8. How do globalized marketing strategies differ from customized marketing strategies? Answer: Like domestic marketers, international marketers develop marketing strategies to serve specific target markets. Traditionally, international marketing strategies have customized marketing mixes according to cultural, regional, and national differences. There are many international issues related to product, distribution, promotion, and price. For example, many developing countries lack the infrastructure needed for expansive distribution networks, which can make it harder to get the product to consumers. Realizing that both similarities and differences exist across countries is a critical first step to developing the appropriate marketing strategy effort targeted to particular international markets. Today, many firms strive to build their marketing strategies around similarities that exist instead of customizing around differences. 9. Describe the difficulties encountered in standardizing the marketing mix globally. Answer: For many firms, globalization of marketing is the goal; it involves developing marketing strategies as though the entire world (or its major regions) were a single entity: a globalized firm markets standardized products in the same way everywhere. Nike and Adidas shoes, for example, are standardized worldwide. For many years, organizations have attempted to globalize their marketing mixes as much as possible by employing standardized products, promotion campaigns, prices, and distribution channels for all markets. The economic and competitive payoffs for globalized marketing strategies are certainly great. Brand name, product characteristics, packaging, and labeling are among the easiest marketing mix variables to standardize; media allocation, retail outlets, and price may be more difficult. In the end, the degree of similarity among the various environmental and market conditions determines the feasibility and degree of globalization. A successful globalization strategy often depends on the extent to which a firm is able to implement the idea of “think globally, act locally.” International marketing demands some strategic planning if a firm is to incorporate foreign sales into its overall marketing strategy. International marketing activities often require customized marketing mixes to achieve the firm’s goals. Globalization requires a total commitment to the world, regions, or multinational areas as an integral part of the firm’s markets; world or regional markets become as important as domestic ones. Regardless of the extent to which a firm chooses to globalize its marketing strategy, extensive environmental analysis and marketing research are necessary to understand the needs and desires of the target market(s) and successfully implement the chosen marketing strategy. 10. Before the 1990s, most firms entered international markets: A. globally and quickly. B. incrementally and slowly. C. incrementally and quickly. D. domestically and slowly. E. regionally and quickly. Answer: B 11. According to the text, ________ are small technology-based firms operating in international markets within two years of their establishment and realizing as much as 70 percent of their sales outside the domestic home market. A. "natural globals" B. "multinational corporations" C. "born globals" D. "born multinationals" E. "multinational enterprises" Answer: C 12. Approximately two-thirds of the world's ________ is outside of the United States. A. selling power B. marketing strategy C. purchasing power D. technical expertise E. fast food consumption Answer: C 13. The forces that affect foreign markets may differ dramatically from those affecting domestic markets. This makes a careful ________ a critical part of a successful international marketing strategy. A. political analysis B. regulatory analysis C. social audit D. environmental analysis E. marketing analysis Answer: D 14. When Starbucks decided to expand into the international markets of India, Japan, and Argentina, its management realized that there would be significant differences in the standards of living, credit, buying power, and income distribution in those countries. Starbucks is currently examining the ________ forces in its environmental analysis. A. economic B. cultural C. ethical D. technological E. legal Answer: A 15. In China, the price of imported Scotch is $30 per glass as opposed to Scotch from China which is $3. Which of the following do you think accounts for the difference in price? A. Exchange control B. Balance of trade C. Import tariff D. Embargo E. Export tariff Answer: C 16. Which of the following is often used to raise revenue for a country and/or to protect domestic products? A. Quota B. Warning label C. Embargo D. Import tariff E. Exchange control Answer: D 17. If Tasmania levied a duty on all goods purchased from the United States and other countries outside its borders that were brought into Tasmania, its businesses and citizens would be paying a(n) ________. A. embargo B. import tariff C. travelers' tax D. export tax E. excise tax Answer: B 18. If Germany, in an attempt to bolster the sales of its own auto manufacturers, decided to limit the number of automobiles that could be brought in from other countries, Germany would be using a(n) ________. A. embargo B. boycott C. exchange control D. import tariff E. quota Answer: E 19. If Italy limits the number of coach bags that can be imported during a period of one-year, since coach bags are made in New York, USA. This would be an example of a(n) ________. A. exchange control limit B. embargo C. quota D. import tariff E. supply limit Answer: C 20. When a glove manufacturer in China is allowed to sell only a certain number of plastic gloves into Japan, that firm is facing a(n) ________. A. export tariff B. embargo C. restrictive product standard D. quota E. balance of trade restriction Answer: D 21. The United States' prohibition against importing cigars from Cuba is an example of a(n) ________. A. health control B. quota C. embargo D. exchange control E. import control Answer: C 22. Government restrictions on the amount of a particular country's currency that can be bought or sold are known as ________. A. embargoes B. quotas C. exchange controls D. import controls E. balance of trade controls Answer: C 23. ________ can force businesspeople to buy and sell foreign products through a central agency, such as a central bank. A. Embargoes B. Export tariffs C. Quotas D. Import tariffs E. Exchange controls Answer: E 24. Which of the following is used to help maintain a more favorable balance of trade by a country? A. Limiting imports B. Limiting exports C. Establishing exchange controls D. Increasing gross domestic product E. Changing political systems Answer: A 25. The ________ is the difference in value between a nation's exports and its imports. A. net trade value B. export/import ratio C. gross domestic product D. balance of payments E. balance of trade Answer: E 26. The gross domestic product is: A. a measure of the profit made by all firms in a nation. B. the average annual expenditure per organization in a nation. C. a measure of the types of products produced by a nation. D. an overall measure of a nation's economic standing. E. a ratio of domestic products to products produced in foreign countries. Answer: D 27. The country with the highest GDP is: A. Japan. B. the United Kingdom. C. Brazil. D. the United States. E. China. Answer: D 28. In considering the viability of potential international markets for Pepsi products, PepsiCo is advised to take into account ________, which provides insight into market potential. A. gross domestic product per capita B. gross domestic product C. the quantity of exports D. the quantity of imports E. total consumer income Answer: A 29. The Mont Blanc Company plans to export expensive consumer gift items to Germany. The best overall economic measure of market potential would be Germany's ________. A. gross domestic product B. gross domestic product per capita C. gross national product D. balance of trade E. unemployment rate Answer: B 30. Caterpillar, maker of large construction equipment in the U.S., would like to better understand factors that would affect its ability to export its products to various countries. Which of the following forces determine how trade barriers affect Caterpillar's marketing efforts? A. Political and legal B. Sociocultural C. Industrial and Technological D. Competitive E. Ethical and social responsibility Answer: A 31. Special-interest groups and regulatory bodies are ________ forces that must be taken into account in international marketing. A. socioeconomic B. technological C. economic D. social and ethical E. political and legal Answer: E 32. Which of the following is true about reaching global markets? A. Under the Foreign Corrupt Practices Act of 1977, it is legal for U.S. firms to attempt to make bribes to influence policy decisions of foreign governments. B. A government's attitude toward cooperation with importers has little impact on marketing to that country. C. Differences in ethical standards can affect marketing efforts. D. Bribes and payoffs are considered unethical in all countries and cultures. E. Bribes and payoffs are supported by U.S. trade policies under certain conditions. Answer: C 33. The Foreign Corrupt Practices Act of 1977 makes it illegal for U.S. firms to: A. attempt to make large payments or bribes to influence policy decisions of foreign governments. B. offer foreign businesses any type of incentive for purchasing their company's products and services. C. change their ethical standards when dealing with foreign firms. D. give even small tips or gifts in countries where such gifts are customary business practices. E. introduce any type of corruption into foreign businesses that have higher ethical standards than those of the U.S. firm. Answer: A 34. If a certain country considered handshakes in business transactions to be taboo and preferred to use nodding, this would be an example of differences in ________ forces. A. cultural B. political C. sales D. sociological E. regulatory Answer: A 35. When products are introduced into one nation from another, acceptance is far more likely: A. if prices are set very low. B. when bribes are paid to local officials to aid distribution. C. if there are many differences between the two cultures. D. if the country of origin has a positive image in consumers’ minds. E. when retailers are given incentives to push the products. Answer: D 36. Marketers of computer software, music CDs, and books are particularly affected by cultural differences in: A. socioeconomic status of citizens. B. advances in technology. C. differences in cross-cultural exchange behavior. D. ethical codes of conduct for businesses. E. standards regarding intellectual property. Answer: E 37. Many companies choose to standardize their ________ across national boundaries to maintain a consistent and well integrated corporate culture. A. technology B. ethical behavior C. language D. dress code E. products Answer: B 38. In many developing countries around the world, technology is enabling opportunities to "leapfrog" existing technology. Which of the following best describes this statement? A. These countries are able to forgo current technological advances in order to wait for even better technology to be developed. B. More advanced technology is reaching these countries even though they lack technological infrastructures. C. Technological advances are often offered at prices considerably lower than in well-developed countries. D. The technology in developing countries is rapidly surpassing the technology in well-developed countries. E. Advances in technology have made international marketing much easier in developing countries. Answer: B 39. The unconscious reference to one's own cultural values, experiences, and knowledge when encountering new and different cultures is known as: A. the "when-in-Rome" approach. B. the Fraedrich Principle. C. cultural relativism. D. the ethnocentric reference. E. the self-reference criterion. Answer: E 40. ________ refers to the idea that morality varies from one culture to another and that business practices are therefore differentially defined as right or wrong by particular cultures. A. The self-reference criterion B. Global ethics C. Economic relativism D. Cultural relativism E. Moral relativism Answer: D 41. Maquiladoras are: A. exchange controls from central banks in Latin American countries. B. production facilities set up in Mexico. C. import-export agents of the Mexican government. D. global marketing programs established in Latin American countries. E. freight forwarders from Mexico. Answer: B 42. The agreement between the United States, Canada, and Mexico that merges these three countries into one marketplace is called ________. A. EU B. MERCOSUR C. APEC D. NAFTA E. GATT Answer: D 43. If Walmart plans to expand its stores to Canada and Mexico. This expansion would be facilitated by the ________. A. European Union B. North American Free Trade Agreement C. Pacific Rim Unification Act D. International Retail Alliance Association E. Latin American Free Trade Association Answer: B 44. One of the effects of NAFTA is the simplification of country-of-origin rules. This will likely hinder the international trade activities of ________. A. Canada B. Japan C. Brazil D. Cuba E. Panama Answer: B 45. Which of the following is not true of NAFTA? A. The NAFTA effectively merged Canada, Mexico, and the United States into one market. B. The NAFTA restricts trade by requiring equal treatment of U.S. firms in Brazil and Canada. C. It will provide additional opportunities for the United States in long-term affiliations with other countries in the Western hemisphere. D. It is controversial. E. Many U.S. businesses who engage in outsourcing are looking toward Mexico as a less costly alternative than China. Answer: B 46. Which of the following is true about NAFTA? A. The NAFTA effectively merged Canada, Brazil, and the United States into one market. B. It will increase the total output of goods and services to foreign markets. C. It will decrease the total number of jobs in the United States. D. It eliminated virtually all tariffs on goods traded between the United States, Canada, and Mexico. E. It will reduce the number of illegal aliens in the United States. Answer: D 47. Another name for the European Union is ________. A. the Common Market B. the European Market C. the Euro D. NAFTA E. AECO Answer: A 48. The unification of Europe through the European Union (EU): A. produced the largest single market in the world. B. calls for greater customization of products and attention to regulations and restrictions of European countries. C. means that members of the EU have become more heterogeneous in their needs and wants. D. required the countries to be segmented into many different markets. E. was established to promote trade among its members. Answer: E 49. Which of the following is true about Europe? A. All European countries use a common currency, the euro, except for France, which uses its own currency. B. All European countries use a common currency, the euro, except for England, which uses its own currency. C. All European countries use a common currency, the dollar, except for Greece, which uses its own currency. D. All European countries use a common currency, the euro, except for Germany, which uses its own currency. E. All European countries use a common currency, the euro, except for Austria, which uses its own currency. Answer: B 50. Johnston Chemicals' president is very excited about the possibility of the firm's British subsidiary having access to customers in the entire EU. He realizes that it will be some time before this area truly becomes one market, primarily because of differences in: A. available advertising media. B. cultural factors. C. legal challenges. D. technological advances. E. economic environmental factors. Answer: B 51. The trade alliance that includes Brazil, Argentina, Uruguay, and other countries is known as ________. A. OPEC B. APEC C. MERCOSUR D. NAFTA E. the Common Market Answer: C 52. Which of the following alliances/agreements is the United States not a part of? A. NAFTA B. APEC C. GATT D. WTO E. MERCOSUR Answer: E 53. The Common Market of the Southern Cone (MERCOSUR) includes: A. countries from southern Africa. B. both India and Indonesia. C. Australia and New Zealand. D. countries in South America. E. southern China and India. Answer: D 54. Which of the following trade alliances differs from others in its commitment to facilitating business and its practice of allowing the private sector to participate in a wide range of activities? A. NAFTA B. EU C. MERCOSUR D. WTO E. APEC Answer: E 55. Which of the following agreements provides a forum for tariff negotiations, reducing trade restrictions, resolution of international trade problems, and ground rules for international trade? A. The World Trade Organization B. The North American Free Trade Agreement C. The Latin American Free Trade Agreement D. The European Union Free Trade Agreement E. The Association of Southeast Asian Nations Answer: A 56. If a newly formed country wanted to increase its international trade and reduce worldwide tariffs, it would most likely try to become a part of ________. A. NAFTA B. WTO C. MERCOSUR D. APEC E. EU Answer: B 57. The term dumping refers to the sale of: A. products in foreign markets that cannot be sold in the United States. B. products in foreign markets at prices above those charged in the United States. C. all discontinued U.S. products in foreign countries. D. products in foreign countries at unfairly low prices. E. products in foreign markets that cannot pass safety standards in the United States. Answer: D 58. If Hyundai, a Korean automobile manufacturing firm, started selling its cars at unfairly low prices to Germany, Hyundai would be engaging in ________. A. quota-enforcing B. embargoing C. shoveling D. dumping E. dipping Answer: D 59. The World Trade Organization accomplishes all of the following except: A. educating companies about international trade rules and regulations. B. lending money to firms interested in developing international markets. C. serving as a forum for trade negotiations. D. helping settle international trade disputes. E. providing legal ground rules for international commerce. Answer: B 60. At the heart of the ________ are agreements that provide legal ground rules for international commerce and trade policy. A. United Nations B. ASEAN C. MERCOSUR D. WTO E. APEC Answer: D 61. The purchase of products from a foreign source is called ________. A. exporting B. dumping C. importing D. licensing E. venturing Answer: C 62. When the American company Exxon purchases crude oil from Saudi Arabia, it is engaging in A. licensing. B. importing. C. free trade. D. exporting. E. dumping. Answer: B 63. Henderson Synthetics is a producer of chemical products aimed at increasing agricultural yield per acre. Henderson Synthetics’ management believes that several of the firm's products could have sizable markets in other countries; however, it is costly to obtain market research to confirm this. If Henderson Synthetics wanted to temporarily “try out” these international markets with a minimal level of commitment and cost, it should use ________. A. contract manufacturing B. export intermediaries C. joint ventures D. direct ownership E. subsidiaries Answer: B 64. The extent of Raytheon's participation in global business is selling the batteries it manufactures to companies in Spain. In this case, Raytheon is a(n) ________. A. trading company B. importer C. exporter D. franchiser E. contract manufacturer Answer: C 65. The Grummond Group buys air conditioner components in industrialized countries and sells them to business customers in developing countries where the air conditioners are assembled. Grummond is most likely classified as a(n) ________. A. trading company B. strategic alliance C. joint venture D. licensee E. exporter Answer: A 66. The role of export agents is to: A. bring buyers and sellers from different countries together and collect a commission for arranging sales. B. purchase products from different companies and sell them to foreign countries. C. help a firm to make direct investments in foreign countries. D. contact domestic firms about the opportunities available in exporting. E. arrange for licensing agreements between domestic and foreign firms. Answer: A 67. How does using an exporting intermediary limit the risk involved with global marketing? A. Most exporting intermediaries assume all financial risks on behalf of their clients. B. Exporting intermediaries are not subject to the same laws as companies, and therefore limit the legal risk involved. C. Using an exporting intermediary restricts a company to being involved with joint ventures and not direct ownership. D. Exporting intermediaries guarantee that the products a company is selling will be a good fit for the foreign markets they are entering. E. Using exporting intermediaries involves limited risk because the company has no direct investment in the foreign country. Answer: E 68. A company which is not involved in manufacturing but brings together buyers and sellers in different countries is usually referred to as a ________. A. franchise B. contract manufacturer C. strategic intermediary D. trading company E. licensee Answer: D 69. A large farming cooperative that focuses on the production of fruits and vegetables uses a business that sells the farmers' products in foreign countries and also provides consulting, insurance, legal assistance, and warehousing to the cooperative. This business would most likely be called a(n) ________. A. trading company B. export specialist C. contract wholesaler D. licensor E. strategic partner Answer: A 70. Questor Corporation owns the Spalding brand name but does not produce a single golf club or tennis ball. This arrangement is an example of ________. A. exporting B. trading C. joint venture D. strategic alliance E. licensing Answer: E 71. If Caterpillar wished to reach the market in Malaysia but was leery of a direct investment in the country, it might provide a Malaysian operation with the knowledge to produce and market its products in exchange for a commission. This type of arrangement is called ________. A. licensing B. exporting C. a strategic alliance D. a joint venture E. contract manufacturing Answer: A 72. What level of commitment in international marketing may be most attractive when the political and economic stability of a foreign country is questionable? A. Joint ventures B. Direct ownership C. Exporting D. Limited exporting E. Licensing Answer: E 73. A special form of licensing in which one company grants another company the right to market its product in accordance with its standards in exchange for a financial commitment is known as ________. A. a joint venture B. contract manufacturing C. direct licensing D. franchising E. a strategic alliance Answer: D 74. Tony & Guy is a global hairdressing and education business headquartered in England. It has recently opened salons in Mongolia, adding to its numerous salons worldwide. Tony & Guy allows foreign businesspeople to use its name, logo, methods of operation, advertising, and products. In exchange, Tony & Guy receives a financial commitment and an agreement to conduct business in accordance with its standard of operations. Tony & Guy is engaging in ________. A. contract manufacturing B. licensing C. franchising D. exporting E. direct investment Answer: C 75. Franchising offers all the following benefits for franchisers except: A. franchise agreements require a certain standard of behavior from franchisees, which helps protect the franchise name. B. franchisers can retain control of their name while increasing global penetration of their products. C. the franchisee's revenue stream is fairly consistent because franchisers pay fixed fees and royalties. D. the franchiser's revenue stream is fairly consistent because franchisees pay fixed fees and royalties. E. franchisers do not have to put up a large capital investment. Answer: C 76. Which of the following would be a benefit to a franchiser, such as Jiffy Lube, in expanding into international marketing? A. There are no risks involved with allowing a foreign franchisee. B. The franchiser does not have to put up a large capital investment. C. The franchiser does not have to share its name or operational procedures. D. The franchisee pays a set fee every month to the franchiser. E. An equal partnership is formed between the franchiser and franchisee. Answer: B 77. Which of the following describes a company hiring a foreign firm to produce a designated volume of its product to specification? A. Licensing B. Contract manufacturing C. Exporting D. Importing E. Direct investment Answer: B 78. If The Limited Company relies on hiring a foreign textile manufacturer to produce a designated amount of clothing for its Express, Limited, and other stores, it is using ________. A. exporting B. franchising C. contract manufacturing D. direct investment E. licensing Answer: C 79. Some hospitals in the United States find that their need for radiologists to read X-rays is volatile during the evening and early morning hours, especially between 2:00 a.m. and 6:00 a.m. This is because the number of emergency room visits needing X-rays is usually lower than those required during daytime operating hours. There is a recent trend where hospitals in the United States are contracting radiologists from countries such as Australia to read the electronically-transmitted X-rays during the evening and early morning hours. This is an example of ________. A. outsourcing B. licensing C. franchising D. contract manufacturing E. offshoring Answer: A 80. A business partnership between a domestic firm and a foreign firm is known as ________. A. a joint venture B. outsourcing C. a multinational enterprise D. licensing E. exporting Answer: A 81. The Cooper Tire & Rubber Company has been searching for less expensive raw materials for manufacturing its bicycle tires. Cooper has found that there are less expensive sources in the country of Indonesia, but it needs to form a partnership with the government of Indonesia in order to gain access to the country's rubber. What type of partnership will need to be formed? A. A multinational enterprise B. A contract manufacturing arrangement C. A strategic alliance D. A franchise E. A joint venture Answer: E 82. The Swatch Group is the parent company of the most successful wristwatch of all time, the Swatch. Headquartered in Switzerland, The Swatch Group recently entered into a partnership with a company in France to make the packaging materials for all of its Swatch lines. What type of partnership agreement does this situation most likely represent? A. Trading company B. Licensing arrangement C. Strategic alliance D. Joint venture E. Direct ownership arrangement Answer: D 83. Sometimes business partnerships are formed between traditional rivals competing for market share in the same product class. These partnerships are known as ________. A. franchises B. incorporations C. joint ventures D. strategic alliances E. corporations Answer: D 84. Nuhitzu believes it has the technological expertise to produce communication systems that will be leaders around the globe. Boston Electronics is widely regarded as having excellent management systems and superior marketing programs. To utilize these strengths, the two firms might form a(n) ________ to work together on a worldwide basis. A. licensing agreement B. export trading company C. joint agreement D. strategic alliance E. multinational enterprise Answer: D 85. Toshiba Electronics is interested in taking advantage of business opportunities in India but does not have access to India's market. Toshiba has the patent on a low-cost, quality computer system that could assist small businesses in India. Sony Computer, Toshiba's competitor, is experienced in India's small business market but does not have a computer comparable to Toshiba's. If Toshiba and Sony work together to utilize these strengths to seize this opportunity in India, they would likely use the ________ type of a business structure. A. trading company B. strategic alliance C. licensing D. direct ownership E. exporting Answer: B 86. Which of the following is the primary distinction between a joint venture and a strategic alliance in international marketing? A. Strategic alliances are only formed between companies from well-developed countries whereas joint ventures are between companies from economically-diverse countries. B. A joint venture involves only two companies whereas a strategic alliance is formed between three or more companies. C. A strategic alliance is formed by companies who have traditionally been rivals, which is not the case with a joint venture. D. A joint venture is a partnership formed to create a competitive advantage on a worldwide basis whereas a strategic alliance is a partnership between a domestic firm and a foreign firm or government. E. A joint venture is simply a financial investment in a foreign firm while a strategic alliance involves more than just financial support. Answer: C 87. The Ford Motor Company has entered into an alliance with Yves Saint Laurent, a maker of clothing and one of the most successful fashion houses in the world. Yves Saint Laurent is headquartered in France. Ford will use Yves Saint Laurent designs and color traditions in its production of luxury models of the company’s Expedition SUV and Lincoln vehicles. The Yves Saint Laurent elements will appear in the interior and body paint color. This alliance would most likely be classified as a ________. A. strategic alliance B. franchise agreement C. global direct ownership D. multinational enterprise E. trade contract Answer: A 88. Which of the following options emerges as a possibility if a company makes a long-term commitment to a foreign market that has a promising political and economic environment? A. Exporting B. Joint venture C. Limited exporting D. Direct ownership E. Licensing Answer: D 89. In relation to international marketing, which of the following best describes direct ownership? A. A company owns its own manufacturing facilities. B. A company forms an alliance with a similar company in a foreign country. C. Foreign companies contract with manufacturers in other countries. D. A company owns subsidiaries or facilities in foreign countries. E. Two companies from different nations have interests in each other's facilities. Answer: D 90. IKEA, a Swedish retailer of contemporary furniture, operates several stores in various Scandinavian countries, as well as in the United States and Canada. Which of the following describes IKEA's level of commitment to international marketing? A. Licensing B. Direct ownership C. Exporting D. A trading company E. A joint venture Answer: B 91. Firms that have operations or subsidiaries located in many countries are referred to as ________. A. multinational enterprises B. strategic alliances C. joint ventures D. international marketers E. export alliances Answer: A 92. Southern Tier Industries has operations in more than 30 foreign countries. The headquarters in Atlanta controls the entire organization while offering subsidiaries the freedom necessary to achieve success in local markets. Southern Tier Industries is an example of a(n) ________. A. strategic alliance B. joint venture C. export-driven corporation D. multinational enterprise E. trading company Answer: D 93. The Samsung Group sells several different product lines around the world through home appliance and electronics stores. Samsung appliances and electronics have been historically made in Korea, where the company is headquartered. Recently, Samsung has been investigating the possibility of buying land and building a production plant in Tennessee, in the United States. Which of the following is true about this scenario? A. Samsung is now operating as an exporter; however, if the plant is built in Tennessee, it will be operating as a strategic alliance. B. Samsung is now operating as a limited exporter; however, if the plant is built in Tennessee, it will be operating as a national marketer. C. Samsung is now operating as a limited exporter; however, if the plant is built in Tennessee, it will be operating as an international proprietor. D. Samsung is now operating as an exporter; however, if the plant is built in Tennessee, it will be operating as a multinational enterprise. E. Samsung is now operating as an exporter; however, if the plant is built in Tennessee, it will be operating as a global franchise. Answer: D 94. Japan's Sony Corporation is a prime example of a multinational enterprise. With this in mind, which of the following would most accurately characterize Sony's operations? A. It would be a wholly owned foreign subsidiary and would not be allowed to export products to the home country. B. It would have operations or subsidiaries in many different countries. C. It would place most of its emphasis on profits generated in foreign countries. D. Its foreign subsidiaries would not offer any tax, tariff, and other operating advantages. E. It would not concern itself with differences in markets around the world. Answer: B 95. Which of the following is the greatest advantage to an organization of having a subsidiary in a foreign nation? A. Avoidance of all U.S. laws B. Increase in cross-cultural approaches to management that allows subsidiaries to develop their own identity C. Increased trend toward nationalistic marketing approaches D. Greater amount of standardization of the marketing mix E. Greater amount of security from government nationalization and other anticompetitive measures Answer: B 96. A subsidiary in a foreign country generally operates under: A. the laws of the parent company's home country. B. a foreign management in order to develop a local identity. C. strict management control from the home country's executives. D. the regulations set forth by the International Trade Agreement. E. a team of managers from the distant parent company. Answer: B 97. Northeastern University and Penn State University both offer online MBA programs that are available to students around the world. This is an example of ________. A. globalization B. customization C. licensing D. nationalization E. regionalization Answer: A 98. When asked where Laser Tools Inc., markets its products, company president and founder Roger Helms says that "the world is just one big market." He feels anyone not taking this stance is systematically passing up profitable business. Helms's international marketing strategy is best described as: A. customization of marketing. B. globalization of marketing. C. limited exporting. D. full-scale international marketing. E. export agenting. Answer: B 99. Organizations that employ standardized products, promotion campaigns, and prices for all markets are practicing what is known as: A. customization. B. internationalization. C. globalization. D. regionalization. E. nationalization. Answer: C 100. Selling products that are not in demand in all world markets, such as hand-powered washing machines for use in countries where electricity is not universally available, represents an international marketing strategy focusing on ________. A. internationalization B. culturalization C. nationalization D. globalization E. customization Answer: E 101. Both Nike and Adidas standardize many of their shoe models and colors worldwide, which is an example of ________. A. globalization B. customization C. nationalization D. culturalization E. internationalization Answer: A 102. Levi Strauss markets its denim jeans in many countries and develops its marketing strategy as if the world were a single market. This approach to selling a standardized product in all countries represents: A. exporting. B. accidental exporting. C. limited exporting. D. licensing. E. globalization of markets. Answer: E 103. Globalization of markets requires developing marketing strategies as if the world were one market. Which of the following marketing mix variables is most difficult to standardize for globalization? A. Brand name B. Package C. Media allocation D. Labels E. Product characteristics Answer: C 104. Swiss­based Nestlé has taken a global approach to marketing its chocolate products. Which of the following is most easily standardized? A. Product B. Promotion C. Distribution D. Advertising E. Price Answer: A 105. When the makers of Red Bull, an energy drink, decided to go international with their marketing effort, a global approach was adopted. With which of the following factors did Red Bull most likely experience difficulty as the firm applied a global strategy for marketing? A. Branding B. Product characteristics C. Packaging D. Labeling E. Advertising Answer: E Scenario 8.1 Use the following to answer the questions. Harley-Davidson Motors manufactures all of its motorcycles in the U.S. at one of the four sites. With a large number of its bikes sold in markets all around the world, it still retains the manufacturing close to the headquarters for several reasons, one being that its management wants to keep close watch on the quality of its products. However, for all the accessories, apparel, and other riding gear, Harley-Davidson engages other manufacturers to produce the items with the Harley name and logo. Some of these items, particularly the apparel, are made in China. Lately, some members of the Harley Owners' Group (HOG) have been complaining to the company about this practice, citing that "everything Harley should be made in America." 106. Refer to Scenario 8.1. Harley-Davidson's practice of having establishments in China produce apparel items with the Harley logo is an example of ________. A. contract manufacturing B. globalization C. direct ownership D. joint venture E. exporting Answer: A 107. Refer to Scenario 8.1. One of Harley-Davidson's largest international markets is in Japan where American brands are highly sought after. This is an example of ________ impacting the market. A. international forces B. economic forces C. domestic forces D. cultural forces E. environmental forces Answer: D 108. Refer to Scenario 8.1. If Harley-Davidson were to suddenly find its inventory building up in Japan, it might reduce inventory by selling the bikes at below cost prices. This practice is known as ________. A. price skimming B. shoveling C. dumping D. differential pricing E. inventory compensation Answer: C 109. Refer to Scenario 8.1. At what level of involvement in international marketing is Harley-Davidson with regard to its bikes? A. Full-scale B. Globalization C. Joint venture D. Direct ownership E. Exporting Answer: E Scenario 8.2 Use the following to answer the questions. KFC opened its first franchised restaurant outside of North America in England in 1964. Now, over a billion KFC chicken dinners are sold annually at more than 80 countries and territories around the world. KFC has established its own processing plants in these countries to ensure the quality of its chicken and other food items. In the U.S., the menu at KFC is usually the same in all restaurants, with only a very few additional items available in different regions. However, when KFC first franchised into Asian countries, it added many unusual local delicacies to the menu, such as fried octopus and squid. Additionally, the franchised stores in Asian countries display cooked food in "plates" near windows at the front of the store. This is a tradition for many restaurants in these countries to offer the customer passing by a preliminary view of their product. 110. Refer to Scenario 8.2. KFC's establishment of international production/processing facilities is an example of ________. A. direct ownership B. franchising C. strategic alliance D. outsourcing E. contract manufacturing Answer: A 111. Refer to Scenario 8.2. The practice of offering fried octopus and squid at Asian KFC's is best described as: A. a strategy of standardization. B. a strategy of globalization. C. a strategy of customization. D. a strategy to gain competitive advantage. E. internationalizing the franchise. Answer: C 112. Refer to Scenario 8.2. Suppose that KFC's parent company experienced difficulty in opening its restaurants in China unless KFC was willing to pay the government a "bribe" and KFC were to resort to paying this bribe in China saying that "it's different doing business there" this would be an example of : A. a licensing arrangement. B. the self-reference criterion. C. cultural relativism. D. balance of trade. E. exchange controls. Answer: C 113. Refer to Scenario 8.2. Which of the following alliances will KFC most likely utilize to guide its business transactions in Japan and China? A. WTO B. MERCOSUR C. FTAA D. NAFTA E. APEC Answer: E 114. International marketing is defined as marketing activities performed across national boundaries. A. True B. False Answer: True 115. Two-thirds of the world's total purchasing power is outside the United States. A. True B. False Answer: True 116. Customers that travel the globe expect to be able to buy the same product in most of the world's more than 200 countries. A. True B. False Answer: True 117. An embargo occurs when a government suspends trade with a particular country. A. True B. False Answer: True 118. A quota is the suspension, by a government, of trade in a particular product. A. True B. False Answer: False 119. A positive balance of trade is considered good because it means that U.S. dollars are supporting foreign economies at the expense of U.S. companies and workers. A. True B. False Answer: False 120. Government restrictions on the amount of a particular currency that can be bought or sold are known as import controls. A. True B. False Answer: False 121. In determining the size of the market for consumer products, the international marketer will probably be very interested in per capita GDP figures. A. True B. False Answer: True 122. Opportunities for international marketers are limited to industrial nations with the highest incomes. A. True B. False Answer: False 123. U.S. marketers may engage in bribery to compete with foreign firms. A. True B. False Answer: False 124. The study of the cultural environment is unnecessary in the foreign market because foreign consumers will accept anything that American marketers have to sell. A. True B. False Answer: False 125. Customs and taboos are culture-bound and should be taken into consideration when products are marketed in a foreign environment. A. True B. False Answer: True 126. Cultural differences do not affect marketing negotiations and decision-making behavior. A. True B. False Answer: False 127. When products are introduced from one nation into another, acceptance is more likely if the two cultures are different. A. True B. False Answer: False 128. Cultural relativism is the unconscious reference to one's own cultural values, experiences, and knowledge when traveling in other countries. A. True B. False Answer: False 129. NAFTA eventually eliminates all tariffs on goods produced and traded between the United States, Mexico, and Brazil. A. True B. False Answer: False 130. NAFTA simplifies country-of-origin rules, hindering Japan's use of Mexico as a staging ground for further penetration into U.S. markets. A. True B. False Answer: True 131. The unification of Europe permits virtually free trade among the member nations of the European Union. A. True B. False Answer: True 132. The U.S. and Japanese economies are more integrated than are the U.S. and Canadian economies. A. True B. False Answer: False 133. GATT is based on negotiations between member countries to reduce worldwide tariffs and increase international trade. A. True B. False Answer: True 134. The World Trade Organization was an important outcome of the unification of Europe. A. True B. False Answer: False 135. Domestic marketing involves marketing strategies aimed at markets within the home country. A. True B. False Answer: True 136. Importing is the sale of products to foreign markets. A. True B. False Answer: False 137. The job of the export agent is to bring together buyers and sellers from different countries. A. True B. False Answer: True 138. A trading company provides a link between buyers and sellers in different countries. A. True B. False Answer: True 139. Under a licensing arrangement, the licensee pays commissions or royalties on sales or supplies used in manufacturing. A. True B. False Answer: True 140. Franchising is an arrangement whereby a franchisee grants a franchiser the right to market its product, using its name, logo, methods of operation, advertising, products, and other elements of the franchising company's business, in return for a financial commitment and an agreement to conduct business in accordance with the franchisee's standard of operations. A. True B. False Answer: False 141. Contract manufacturing occurs when a firm pays a commission or royalties on sales or supplies used in manufacturing. A. True B. False Answer: False 142. The joint venture approach has little appeal to industries involved in extraction of natural resources. A. True B. False Answer: False 143. A multinational enterprise is a firm that has operations or subsidiaries located in many countries. A. True B. False Answer: True 144. It is impossible for a foreign subsidiary to develop a local identity because it seldom employs personnel from the country within which it operates. A. True B. False Answer: False 145. The greatest danger in becoming involved in direct ownership in international marketing is political uncertainty. A. True B. False Answer: True 146. A subsidiary operating in a foreign country may have important tax, tariff, and other operating advantages over a licensing agreement or a joint venture. A. True B. False Answer: True 147. Globalization of marketing involves developing marketing strategies as though the entire world (or major regions of it) were a single entity. A. True B. False Answer: True 148. Media allocation, retail outlets, and price are among the easiest marketing mix variables to standardize. A. True B. False Answer: False 149. Brand name, product characteristics, packaging, and labeling are among the easiest marketing mix variables to standardize around the world. A. True B. False Answer: True 150. Regardless of the extent to which a firm chooses to globalize its marketing strategy, extensive environmental analysis and marketing research are necessary to understand the needs and desires of the target market(s) and successfully implement the chosen marketing strategy. A. True B. False Answer: True Test Bank for Foundations of Marketing William M. Pride, O. C. Ferrell 9781285429779, 9781439039441

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