Test Bank for Global Marketing, 11th edition Mark C. Green Warren J. Keegan

TEST BANK FOR Global Marketing, 11th edition Mark C. Green Warren J. Keegan Chapter 1-17 Answers are at the end of each Chapter

1)

Chapter 1 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The worldview of a company's personnel can be described by all of the following types of orientation except: A) ethnocentric.

B) technocentric.

C) regiocentric.

D) polycentric.

E) geocentric.

2)

2) Nike recently adopted the slogan "Here I am" for its pan-European clothing advertising targeting women. The decision to drop the famous "Just do it" tag line was based on the research indicating that: A) the famous slogan did not have accurate translation in European languages.

B) European women want to differentiate themselves from men.

C) Europeans do not like tag lines that portray American thinking.

D) the old slogan conveys superiority of men over women.

E) college-age women in Europe are not as competitive about sports as men are.

3) The region that leads in the World Pharmaceutical Market is: A) North America.

B) Europe.

C) Asia.

D) Japan.

E) Latin America.

3)

4) The essence of marketing worldwide is to surpass the competition in creating perceived value, which can be represented as: A) Value = Benefits/Price.

B) Value = Benefits - Price.

C) Value = Price/Benefits.

D) Value = Benefits × Price.

E) Value = Benefits + Price.

4)

5) Coke's worldwide success is based on: A) using local sales force and vending machines.

B) using existing local infrastructure.

C) selected elements of the marketing mix.

D) standardization of the marketing mix.

E) adaptation of the marketing mix.

5)

6) Unilever, the Anglo-Dutch consumer products company, at one time had 30 different package designs and 48 different formulations for its Rexona deodorant brand. This is an example of: A) ethnocentric orientation.

B) polycentric orientation.

C) transnational orientation.

D) regiocentric orientation.

E) geocentric orientation.

1

6)

7) Which of the following descriptions does not portray an entrepreneur?

A) is a pioneer in introducing new products and services B) creates opportunities through their own daring and imagination C) someone who introduces innovations D) has myopic vision to focus on innovation that brings new capacity to create worth E) people with exceptional abilities who seize opportunities that others are oblivious to

7)

8) The success of Uniqlo's retail stores can be attributed to its decision to: A) locate in high population density areas.

B) locate in low population density areas.

C) manufacture most of their products in Japan.

D) remain in Japan.

E) become the world's number one apparel retailer.

8)

9) Companies that fail to formulate adequate responses to the challenges and opportunities of globalization will face all of the following consequences except: A) getting absorbed by visionary enterprises.

B) simply disappearing from the business horizon.

C) becoming locally profitable enterprises.

D) undergoing wrenching transformations.

E) getting absorbed by dynamic enterprises.

9)

10) At Procter & Gamble, one of the problems they were facing was that 80-plus country teams were all acting independently. Pampers Europe was not collaborating with Pampers North America. This example illustrates differences due to their: A) regiocentric orientation.

B) geocentric orientation.

C) polycentric orientation.

D) poor globalization orientation.

E) ethnocentric orientation.

10)

11) A type of advantage that a company enjoys by virtue of the fact that it has experience in more than one country is referred to as: A) leverage.

B) driving force.

C) globaphobia.

D) restraint.

E) management myopia.

11)

12) Ethnocentric orientation is sometimes associated with all of the following attitudes except: A) indifference to marketing opportunities.

B) selecting an adaptation approach.

C) national arrogance.

D) selecting a standardized approach.

E) assumption of national superiority.

12)

13) McDonald's Switzerland operates themed dining cars on the Swiss National Rail System. This is globalization of which marketing mix element?

A) product B) price C) process D) place E) promotion

13)

2

14) A key factor that distinguishes transnational companies from international companies is their for the marketing program.

A) use of localized elements B) mind-set C) needs assessment D) domestic research E) use of extension elements

14)

15) The former chairman of Nestlé recently told an interviewer: "We are food and beverages. We are not running bicycle shops. Even in food, we are not in all fields. There are certain areas we do not touch. Also, we have no soft drinks because I have said we either buy Coca-Cola or we leave it alone." What strategic marketing principle does the chairman's comment emphasize most specifically?

A) customer value B) policy of dealing only with Swiss businesses C) myopia D) competitive advantage E) focus

15)

16)

refers to some type of advantage that a company enjoys by virtue of the fact that it has experience in more than one country.

A) Flexibility B) Accountability C) Capability D) Leverage E) Transferability

16)

17) Burberry's global marketing strategy of offering "affordable luxury" to customers in the United States, with a value proposition of being more expensive than Coach and less expensive than Prada represents a focus on: A) position.

B) product.

C) price.

D) place.

E) promotion.

17)

18) In global markets, Starbucks is a good example of simultaneously executing all of the growth strategies except: A) product development.

B) market orientation.

C) diversification.

D) market penetration.

E) market development.

18)

19) Transnational companies, such as Toyota and Honda, have characteristic features that include: A) using both localized and standardized elements in marketing programs.

B) a mind-set of being "stateless."

C) decisions made on the basis of ongoing research.

D) being in both global markets and utilizing global supply chains.

E) all of the above.

19)

3

20) An important managerial task in global marketing is learning to recognize the extent to which it is possible to extend marketing plans as well as the extent to which adaptation is desired. The way a company addresses this task is a reflection of the company's: A) market penetration.

B) market diversification.

C) product standardization.

D) global marketing strategy.

E) product development.

20)

21) A type of advantage that a global company possesses by virtue of the fact that it has experience in more than one country is referred to as: A) capability.

B) flexibility.

C) accountability.

D) transferability.

E) leverage.

21)

22) When a country like China is experiencing rapid economic growth, policymakers are likely to: A) experience more resistance toward outsiders.

B) look more favorably on outsiders.

C) look less favorably on outsiders.

D) feel threatened by outsiders.

E) none of the above

22)

23) McDonald's has been in many country markets long enough that a new generation of consumers has grown up with McDonald's and are not aware of the company's U.S. origins. On the basis of this summary, what is the highest stage of corporate development that McDonald's arguably has achieved?

A) transnational B) international C) global D) multinational E) myopic

23)

24) In the United States, some people believe that globalization has depressed the wages of American workers resulting in the loss of both blue-collar and white-collar jobs. This is an example of: A) globaphobia.

B) domination.

C) management myopia.

D) discrimination.

E) economic crisis.

24)

25) Some globalization strategies do not yield the expected results as evidenced by the: A) leverage resulting from manufacturing.

B) larger scale improvement of quality.

C) acquiring of majority stake in Nissan Motor by Peugeot Citroen.

D) unravelling of the DaimlerChrysler merger.

E) leverage resulting from scale economies.

25)

4

26) McDonald's serves McRice Burger in Malaysia, McOZ Burger in Australia, Kiwi Burger in New Zealand, McHuevo Burger in Uruguay and McSamurai Burger in Thailand. These menu variations are examples of a: A) replacement of standard menu names with fancy names.

B) selection of menu items that can be sold eventually in U.S. markets.

C) reflection of failure of U.S. menu items in those countries.

D) combination of global and local marketing mix elements.

E) deviation from successful marketing practices.

26)

27) McDonald's developed a vegetarian burger in India. This is an example of: A) product development.

B) market diversification.

C) market penetration.

D) market development.

E) product diversification

27)

28) A fundamental difference between regular marketing and global marketing is the: A) focus on resources.

B) lack of marketing mix.

C) scope of activities.

D) lack of communication.

E) lack of strategic planning.

28)

29) Launching of Burberry Acoustic to enhance advocacy and sharing via social media and online channels is an example of which marketing mix element?

A) promotion B) price C) people D) product E) place

29)

30) Starbucks is entering Italy in 2018, starting with a 25,000-square-foot flagship Reserve Roastery in Milan. This is an example of: A) diversification.

B) product development.

C) service diversification.

D) market penetration.

E) market development.

30)

31) Starbucks dropped the word "Coffee" from its logo. This is an example of: A) automation.

B) adaptation.

C) diversification.

D) modernization.

E) standardization.

31)

32) The global market development strategy involves: A) creating new products for a new country.

B) creating new service offerings targeting a new region.

C) seeking new customers targeting a new segment.

D) creating new product offerings to a new country.

E) seeking new customers in a geographical market.

32)

5

33) All of the following correctly states McDonald's approach to standardization and adaptation of the marketing mix except: A) McDonald's standardizes all product elements.

B) McDonald's standardizes some place elements and adapts others.

C) McDonald's standardizes some promotion elements and adapts others.

D) McDonald's standardizes some product elements and adapts others.

E) McDonald's standardizes some price elements and adapts others.

33)

34) Global economic growth has been a driving force for companies to expand globally due to all of the following reasons except: A) rising per capita incomes in developing countries.

B) policymakers are likely to look more favorably on outsiders.

C) rapid growth in industrialized countries has provided new opportunities.

D) economic growth has reduced resistance in response to entry into new markets.

E) growing ranks of middle-class consumers have more money to spend.

34)

35) The dimensions of global marketing strategy include all of the following except: A) development of cultural activities.

B) integration of marketing mix.

C) concentration of marketing activities.

D) integration of competitive moves.

E) coordination of marketing activities.

35)

36) Examples of effective global marketing by McDonald's include both standardized and localized marketing mix elements. Which of the following does not represent a localized element?

A) It has slang nicknames such as MakDo in the Philippines and McDo in France.

B) It operates themed dining cars on the Swiss national rail system.

C) It has home delivery service in India.

D) It serves McAloo Tikki potato burger in India.

E) It uses the advertising slogan "I'm lovin' it."

36)

37) Facebook acquired Instagram for $1 billion in 2012. Which one of the following statements does not portray Instagram?

A) Social-media savvy companies were hesitant to embrace Instagram.

B) Using photo images and videos can show the "behind the scenes" processes.

C) Food categories are helping drive Instagram's popularity.

D) Instagram has 600 million users who upload about 100 million photos each day.

E) About two-thirds of Instagram users use the app to learn about brands.

37)

38) Pfizer, Merck, Novartis, and other pharmaceutical companies have little choice but to engage in global marketing since: A) there is more demand overseas for their products.

B) their research centers are located overseas.

C) no single market is large enough to recover costs incurred in research.

D) there is little demand for their products in home countries.

E) technology is not available in home countries.

38)

6

39) A company that succeeds in global marketing: A) customizes special products for each world country or region.

B) uses localized products only.

C) nurtures an ethnocentric management orientation.

D) pursues a "one size fits all" strategy by creating identical products for homogeneous markets.

E) creates both standardized and localized elements.

39)

40) The cell phone division of Toshiba prospered by doing business in the domestic market. When handset sales slowed, Atsutoshi Nishida, president of Toshiba noted, "We were thinking only about Japan. We really missed our chance." This statement is indicative of a(n) orientation.

A) polycentric B) regiocentric C) ethnocentric D) technocentric E) geocentric

40)

41) The way a company addresses the global marketing strategy (GMS) includes all of the following except: A) coordination of marketing activities.

B) concentration of marketing activities.

C) global market participation.

D) integration of competitive moves.

E) integration of inflationary moves.

41)

42) Which of the following statements cannot be ascribed to globalization?

A) A disproportionate amount of wealth has flowed from "have" and have "nots."

B) Gains from globalization have been evenly distributed.

C) Hundreds of millions of people have been lifted from poverty.

D) Millions of people have joined the middle class.

E) Wages and living standards of people have improved.

42)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

43) The value equation is represented as Value = Price/Benefits.

43)

44) Nonmonetary costs do not factor into the equation of value, which is represented by the equation Value = Benefits/Price.

44)

45) Companies doing business in China must take extra care to protect knockoffs.

45)

46) A global company possesses the unique opportunity to develop leverage.

46)

47) Multinational companies pursuing strategies of product adaptation run the risk of failing to be successful against global competitors that have recognized opportunities to serve global customers.

47)

48) A critical reason why companies need to take global marketing seriously is survival.

48)

49) Leverage from scale economies is limited to manufacturing industries.

49)

50) McAloo Tikka potato burger offered in India is an example of standardization.

50)

7

51) Starbucks offers a loyalty card and rewards program in the United States with an app that displays a bar code that can be scanned by the customer. This is an example of market development.

51)

52) When a company succeeds in creating more value for customers than its competitors do, that company is said to enjoy competitive advantage.

52)

53) Transnational companies serve global markets and use global supply chains, which often results in a blurring of national identity. A true transnational company would be characterized as "stateless."

53)

54) McDonald's global marketing strategy is based primarily on local marketing mix elements.

54)

55) A fundamental difference between regular marketing and global marketing is the scope of activities.

55)

56) Nike dropped its well-known tag line "Just do it" in advertising women's clothing in Europe and replaced it with slogan "Here I am" since college-age women in Europe are not as competitive about sports as men are.

56)

57) The European Union prohibits the use of generic terms such as "Parmesan" for dairy imports to protect cheese producers in Italy. This is an example of a nontariff barrier (NTB).

57)

58) Globaphobia is a term used to describe a hostile attitude toward global brands or company policies that appear to result in hardship for some individuals or countries while benefiting others.

58)

59) The essence of marketing is to surpass the competition at the task of creating perceived value.

59)

60) A disproportionate amount of wealth has flowed to the "have nots" and "have yachts," with much going to the "have nots."

60)

61) Marco Gobetti, who took over as Burberry's CEO in 2017, faces a number of new challenges including the declining of department store shopping in the United States.

61)

62) According to Nielson, Instagram users spend more time listening to music but are likely to refrain paying for streaming music services than nonusers.

62)

63) The pressure for globalization is so intense that even leading pharmaceutical companies such as Pfizer, Merck, Novartis, and Squibb have little choice but to engage in global marketing.

63)

64) Starbucks entered India via an alliance with the Tata Group. This is an example of "market penetration."

64)

65) Toyota and Honda are two examples of companies that exhibit key characteristics of transnationality.

65)

66) The geocentric orientation represents a synthesis of ethnocentrism and regiocentrism.

66)

67) If Nestlé decides not to market biscuits (cookies) in the United States due to competitive reasons, it is considered to have a lack of strategic focus and missed opportunity.

67)

8

68) A company with a geocentric orientation views the world as a potential market and strives to develop integrated global strategies.

68)

69) The term "polycentric" describes management's belief or assumption that each country in which a company does business is the same as the home country business.

69)

70) U.S. President Donald Trump's "America First" agenda is just one example of the way some nations are retreating into protectionism and isolation.

70)

71) The transformation of formerly local or national industries into global ones is part of a broader economic process of globalization.

71)

72) The National Football League (NFL) promotes American football in the United Kingdom by draping banners every fall over London's Regent Street to create awareness of the games.

72)

73) Tang drink powder became a $1 billion brand as regional managers in the Middle East added popular flavors like mango and pineapple.

73)

74) Four decades ago, the phrase global marketing did not exist.

74)

75) An industry is considered to be global to the extent that its industry position in one country is dependent upon the industry position in other countries.

75)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

76) When a global company establishes a benchmark in quality, competitors must quickly make their own improvements and come up to par. Justify the statement giving examples.

77) What are the dimensions of global marketing strategy (GMS) that pertain to marketing management?

78) Why is it important for a firm to have global marketing strategy?

79) List and describe the forces affecting local integration and global marketing.

80) List and describe the restraining forces for globalization. Provide examples in your answer.

81) Global marketing does not necessarily mean operating everywhere since there are forces affecting global integration and global marketing. Justify this statement using examples based on the world economic trends.

82) Why do some of the world's biggest, most successful companies stumble while pursuing global opportunities?

Give examples in support of your answer.

83) What is "global marketing" and how does it differ from "regular marketing"? Give examples of at least one major corporation that explains these differences.

84) The Coca-Cola Company has convincingly demonstrated that the ability to think globally and act locally can be a source of competitive advantage. Justify this statement using examples.

85) Give examples to show the differences between ethnocentric and polycentric orientation.

9

86) Using McDonald's as an example, show how effective global marketing can be successfully achieved.

87) Explain, with examples, the benefits of competitive advantage and show how globalization presents companies with unprecedented opportunities.

88) How can food categories lead to Instagram's popularity? Explain with examples.

89) Discuss the impact of management myopia and organizational culture on the globalization of a corporation?

10

Answer Key Testname: C1

1) B 2) E 3) A 4) A 5) E 6) B 7) D 8) A 9) C 10) A 11) A 12) C 13) D 14) B 15) E 16) D 17) C 18) B 19) E 20) D 21) E 22) B 23) A 24) A 25) D 26) D 27) A 28) C 29) A 30) E 31) C 32) E 33) A 34) C 35) A 36) E 37) A 38) C 39) E 40) C 41) E 42) B 43) FALSE 44) FALSE 45) TRUE 46) TRUE 47) TRUE 48) TRUE 49) FALSE 50) FALSE 11

Answer Key Testname: C1

51) FALSE 52) TRUE 53) TRUE 54) FALSE 55) TRUE 56) TRUE 57) TRUE 58) TRUE 59) TRUE 60) FALSE 61) TRUE 62) FALSE 63) TRUE 64) FALSE 65) TRUE 66) FALSE 67) FALSE 68) TRUE 69) FALSE 70) TRUE 71) TRUE 72) TRUE 73) TRUE 74) TRUE 75) FALSE 76) Starting in the 1960s, U.S. auto manufacturers saw their market erode as Japanese carmakers built strong reputations based on their products' quality and durability. In turn the U.S. companies are making great strides in quality. A new threat is being faced due to the introduction of Tesla's all-electric cars which have frequently been at or near the top of the quality and safety rankings for several years. Thus the global companies can establish a benchmark when other companies try to compete.

77) GMS has three dimensions that pertain to marketing management. First, "concentration of marketing activities" such as promotional campaigns or pricing decisions is performed in one or a few country locations. The second, "coordination of marketing activities," refers to the extent to which marketing activities related to the marketing mix are planned and executed interdependently around the globe. Finally, "integration of competitive moves" is the extent to which a firm's competitive marketing tactics in different parts of the world are interdependent. In essence, GMS should enhance the firm's performance on a worldwide basis.

78) A firm's global marketing strategy (GMS) can enhance its worldwide performance. The GMS addresses several issues.

First is the nature of the marketing program in terms of the balance between a standardized (extension) approach to the marketing mix elements and a localized (adaptation) approach that is responsive to country or regional differences.

Second is the concentration of marketing activities in a few countries or the dispersal of such activities across many countries. Companies that engage in global marketing can also engage in coordination of marketing activities. Finally, a firm's GMS addresses the issue of global market participation.

79) The forces affecting local integration and global marketing are (a) Multilateral Trade Agreements such as NAFTA which has expanded trade among the United States, Canada, and Mexico; (b) converging market needs and wants and the information revolution: the development of technology has a considerable impact on the market needs and wants; (c) transportation and communication improvements: the technology for transportation and communication is changing rapidly; (d) product development costs: new products require major investments and considerable time; (e) world economic trends: growing economies worldwide have an impact on global marketing; and (f) leverage: it is an advantage that a company enjoys by virtue of having experience in more than one country.

12

Answer Key Testname: C1

80) Two recent examples of the restraining forces relate to the election of Donald Trump in the United States and the Brexit vote in the United Kingdom. Shortly after election President Trump pulled the United States out of the Transatlantic Trade and Investment Partnership (TTIP) as well as the Trans-Pacific Partnership (TPP). He also campaigned on a pledge to revise or withdraw from NAFTA. Meanwhile, U.K. Prime Minister Theresa May was working to finalize "divorce" arrangements for the United Kingdom's withdrawal from the European Union.

81) Economic growth in key developing countries creates market opportunities that provide a major incentive for companies to expand globally. Due to the rising per capita incomes in India, China, and elsewhere, the growing ranks of middle-class consumers have more money to spend than in the past. At the same time, slow growth in industrialized countries has compelled management to look ahead for opportunities in nations or regions with high rates of growth.

Also, the economic growth has reduced resistance that might otherwise have developed in response to the entry of foreign firms into domestic economies. The worldwide movement toward free markets, deregulation, and privatization is also a driving force. The trend toward privatization is opening up formerly closed markets creating tremendous opportunities.

82) Store locations, pricing, customer preferences, convenience, and unfamiliarity can cause successful companies to fail or not perform well in global markets. Walmart's exit from the German market was due to the fact that German shoppers could find lower prices at "hard discounters" such as Aldi and Lidl. UK-based Tesco's attempts to enter the US market with its Fresh & Easy stores failed, in part, because US consumers were unfamiliar with the private-label goods that made up much of the merchandise stock. American "cheap chic" retailer Target terminated in Canada due to missteps in store location and pricing.

83) Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers. An organization that engages in global marketing focuses its resources and competencies on global market opportunities and threats. A fundamental difference between "regular marketing" and "global marketing" is the scope of activities. A company that engages in global marketing conducts important business activities outside the home-country market. For example, as Walmart expands into Guatemala and other Central America countries, it is implementing a market development strategy.

84) Coke achieved success in Japan by spending a great deal of time and money to become an insider. The company built a complete local infrastructure with its sales force and vending machine operations. Coke's success in Japan is a function of its ability to achieve "global localization," being as much of an insider as a local company but still reaping the benefits of worldwide operations. The company is adept at adapting sales promotion, distribution, and customer service efforts to local needs. Coke has become one of the brands that have spent time and money getting this experience in unknown territories.

85) A manager who assumes that his or her home country is superior to the rest of the world is said to have an ethnocentric orientation. Polycentric orientation is the opposite of ethnocentric orientation, where a manager assumes that each country in which a company does business is unique. In ethnocentric orientation, foreign operations or markets are typically viewed as being secondary or subordinate to domestic ones. For example, Nissan's ethnocentric orientation caused managers to believe that consumers all over the world should and would behave as do the Japanese. In Northern Japan, people would put blankets over the hoods of their cars during cold winters and managers assumed that people in the United States should be able to do the same. Citicorp's financial company executives have polycentric orientation, where the assumption was that each country is different, and there is a need for a localized or adaptation approach.

86) The particular approach to global marketing that a company adopts will depend on industry conditions and its source or sources of competitive advantage. McDonald's standardized product is Big Mac which is localized in various countries, such as McAloo Tikka Burger in India. Similar products with local slang names were used adapting to tastes in different countries. For promotion the standardized slogan "I'm lovin' it" is used whereas individual promotion is used in different countries. Freestanding restaurants are a standardized version, which is localized in several countries by having kiosks or home delivery. Similarly, the average price of Big Mac is used as a standard which is localized on the basis of currency fluctuation and affordability.

13

Answer Key Testname: C1

87) When a company succeeds in creating more value for customers than its competitors, that company is said to enjoy "competitive advantage." It is measured relative to rivals in a given industry. For example, Coca-Cola and Pepsi are trying to maintain a competitive advantage in global markets. Globalization presents companies with unprecedented opportunities as well as challenges. Achieving competitive advantage in a global industry requires executives and managers to maintain a well-defined strategic focus. Globalization provides companies with opportunities to develop new products, get new ideas, develop markets, expand brand recognition, and eventually profits.

88) Instagrams' "IG-ed" (Instagrammed) has more than 200 million posts with the hashtag #food. In response to this trend, social-media-conscious hospitality managers in London, New York, and other food-centric cities are taking steps to ensure that a restaurant's interior design, menus, and dishes lend themselves to Instagram posts. Recent trending food items include "freakshakes" and "unicorn lattes."

89) There are several examples where management simply ignores opportunities to pursue global marketing. A company that is "nearsighted" and ethnocentric will not expand geographically. For example, Anheuser-Busch, the brewer of Budweiser beer, lost its independence after years of focusing primarily on the domestic U.S. market. Myopia is also a recipe for market disaster if headquarters attempts to dictate when it should listen. Global marketing does not work without a strong local team that can provide information about local market conditions.

14

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The top global merchandise exporter is: A) Korea.

B) the United States.

C) Japan.

D) China.

E) Germany.

1)

2) Which country was upgraded from "emerging" to "developed" status by the Financial Times Stock Exchange (FTSE) in 2009?

A) United States B) Italy C) Malaysia D) South Korea E) Britain

2)

3) Pursuing alternative sources of energy, such as wind and solar power, is important due to the fact that: A) it is easy to develop solar power in many parts of the world.

B) people worldwide can afford to buy power generated from wind and solar.

C) global marketers are more interested in publicizing environmental issues.

D) people in developing countries are more conscious about the environment.

E) heavy reliance on fossil fuels contributes to global warming.

3)

4) Nike produces only a small portion of its output in China, but when the firm refers to China as a "2-billion-foot market," it is referring to the fact that: A) it will take a long time for China to develop a future market.

B) the Chinese shoe market is very competitive.

C) China is a potential future market.

D) China can develop its own shoe market.

E) the Chinese children had no shoes.

4)

5) To achieve success, executives and marketers must take into account all of the following new realities except: A) individual country economies play a major role in the world economy.

B) the 100-year struggle between capitalism and socialism is largely over.

C) capital movements have replaced trade as the driving force of the world economy.

D) the growth of e-commerce diminishes the importance of national barriers.

E) production has become "uncoupled" from employment.

5)

6) For decades, the economies of China, the former Soviet Union, and India functioned according to the tenets of: A) centrally planned socialism.

B) market socialism.

C) market capitalism and socialistic capitalism.

D) market capitalism.

E) centrally planned capitalism.

6)

1

7) All of the following facts pertain to China except: A) for years China's economic growth has been built on exports and low-wage manufacturing.

B) Beijing has launched a new industrial strategy dubbed "Made in China 2025."

C) China has received the "market economy" status by the World Trade Organization (WTO).

D) China is in the upper-middle-income category.

E) Beijing is shifting from an external focus to an internal one in order to deal with infrastructure, bribery, and corruption.

7)

8) The Swedish government has significant holdings in key business sectors and has a hybrid economic system that incorporates: A) market socialism and market capitalism.

B) centrally planned socialism and capitalism.

C) centrally planned socialism and market socialism.

D) market capitalism and centrally planned socialism.

E) market capitalism and socialistic capitalism.

8)

9) According to the authors of the Harvard Business Review article, "Serving the World's Poor, Profitably," which of the following is a mistaken assumption that global companies might have about the BOP (bottom of the pyramid)?

A) People in BOP markets cannot use advanced technology.

B) People in BOP markets will be criticized for exploiting the poor.

C) The poor have no money.

D) The poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods.

E) All of the above are mistaken assumptions discussed by the authors.

9)

10) The United Nations designates 50 countries in the bottom ranks of the low-income category named as: A) developing countries.

B) LDCs (least-developed countries).

C) low-income countries.

D) BRIC countries.

E) lower-middle-income countries.

10)

11) The fastest-growing sector of world trade includes: A) accounting and legal services.

B) travel and entertainment.

C) royalties and license fees.

D) engineering services.

E) all of the above

11)

12) Which one of the following nations falls in the lower-middle-income category?

A) Bangladesh B) Burundi C) India D) Venezuela E) none of the above

12)

2

13) Market capitalism is an economic system in which: A) the state has broad powers to serve the public interest as it sees fit.

B) individuals and firms allocate resources that are privately owned.

C) market-oriented economies function in an identical manner.

D) there is no correlation between economic freedom and a nation's economy.

E) market resource allocation is commanded by both private and state ownership.

13)

14) The only two countries where Coca-Cola is not available through authorized channels are: A) India and China.

B) Cuba and North Korea.

C) North Korea and South Korea.

D) Cuba and Venezuela.

E) Singapore and Indonesia.

14)

15) Product and market opportunities in a postindustrial society are more heavily dependent upon new products and innovations than in industrial societies. An example of this would be: A) Coca-Cola Company developing a beverage Vintago in low-income countries.

B) new e-commerce markets for interactive forms of electronic communication.

C) India's Suzlon Energy using wind-driven turbines.

D) Nestlé marketing Bono brand cookies in Brazil.

E) Hermes creating handbags called Amazonia.

15)

16) Most of the world's income is located in all of the following countries except: A) United States.

B) Japan.

C) Canada.

D) Western Europe.

E) Greater China.

16)

17) The United States' growing trade deficit reflects a number of factors, which exclude: A) a seemingly insatiable consumer demand for imported goods.

B) the enormous cost of military operations in the Middle East.

C) increased imports from China.

D) the services trade surplus.

E) record goods sales to developing countries.

17)

18) The big emerging markets (BEMs), include: A) Brazil.

B) Pakistan.

C) Sweden.

D) Japan.

E) Vietnam.

19) The "balance of payments" is a record of all economic transactions between the residents of a country and the rest of the world. It is divided into the current and capital accounts. Current accounts include all of the following except: A) balance on services.

B) balance on goods.

C) goods exports.

D) portfolio investments.

E) goods imports.

3

18)

19)

20) All of the following facts pertain to Brazil except: A) its top trading partner is China, which has an insatiable appetite for iron ore.

B) it is the largest country in Latin America.

C) it lacks logistics software; horse-drawn carts are still a common sight on many roads.

D) it boasts the richest reserves of natural resources in the hemisphere.

E) its GNI grew steadily between 2003 and 2013.

20)

21) Which two companies are sourcing product components from small-scale enterprises, which in turn are helping preserve old-growth forests as well as economic opportunities in Brazil?

A) Volkswagen and Coach B) General Motors and Hugo Boss C) Ford Motor Company and Armani D) Coca-Cola and Nestlé E) Daimler AG and Hermes

21)

22) French Champagne producers have been compelled to seek growth elsewhere. Which of the following statements is not accurate? In 2016, Champagne producers shipped: A) two bottles per person in France.

B) 0.07 bottle per person in the United States.

C) one bottle per person in Switzerland.

D) one bottle per person in India.

E) one-half bottle per person in Great Britain.

22)

23) With per capita income of less than $700, Ethiopians enjoyed more than a decade of double-digit economic expansion due to all of the following reasons, except: A) foreign investment from China helped in building several industrial parks.

B) the country is sufficiently near a seaport for exports.

C) garment workers were trained in Hong Kong by J Crew and Burberry.

D) Ethiopia provides duty-free access to the key U.S. markets.

E) the country has a sufficient available workforce with low wage levels.

23)

24) To the extent that a country sells more goods and services abroad than it buys, there will be: A) a surplus production of goods and services.

B) a need for revaluation of its currency.

C) a greater demand for its currency.

D) time for fluctuating its currency.

E) a scarcity of goods and services within the country.

24)

25) Upper-middle-income countries are also known as: A) agricultural countries.

B) industrializing countries.

C) manufacturing countries.

D) stabilized countries.

E) BRIC countries.

25)

26) The general characteristics shared by low-income countries do not include: A) heavy reliance on foreign aid.

B) high birth rates.

C) low literacy rates.

D) lack of genuine market opportunities.

E) concentration in Africa south of the Sahara.

26)

4

27) Low-income countries have a GNI per capita of $1,005 or less. The general characteristics shared by countries at this income level include all of the following except: A) less engaged in farming.

B) high agricultural population.

C) heavy reliance on foreign aid.

D) political unrest.

E) high birth rates.

27)

28) Singapore banned the import, manufacture, and sales of chewing gum in the country since wads of gum were making a mess on sidewalks, buses, and subway trains. Violators are subject to severe penalties, and before buying a pack consumers must register their names and addresses. This, according to author William Greider, demonstrates that Singapore's government: A) deprives a free press and free assembly.

B) deprives the nation's citizens of free speech.

C) requires consumers to register their addresses before buying gum.

D) is harshly autocratic.

E) all of the above

28)

29) Measuring elevator populations in countries measured as units installed per thousand people gives an estimate of the market for elevators. That China has about one-half an elevator per thousand people is indicative of: A) high technological level.

B) low technological level.

C) low product saturation level.

D) high population level.

E) high product saturation level.

29)

30) Traditionally economists identified main types of economic systems, which include all of the following except: A) market socialism.

B) centrally planned socialism.

C) centrally planned capitalism.

D) centrally planned nationalism.

E) market capitalism.

30)

31) Key characteristics of the Anglo-Saxon model market system consists of private ownership and: A) inflexible employment policies.

B) a mix of state ownership.

C) "social partners" orientation.

D) a generous social safety net.

E) a free enterprise economy.

31)

32) The Organization for Economic Cooperation and Development (OECD) has become more focused on global issues, social policy, and labor market regulations as seen by: A) requiring members to cooperate when pursuing bribery allegations.

B) helping members candidly assess their own economic policies.

C) addressing the vexing problem of bribery.

D) member nations working together in committees to review social policies.

E) all of the above

32)

5

33) Prahalad and Hammond have identified several assumptions and misconceptions about the "bottom of the pyramid" (BOP) that need to be corrected. All of the following mistaken assumptions are correct except: A) the poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods.

B) global companies that target BOP markets will be criticized for exploiting the poor.

C) the goods sold in developing markets are so expensive that there is no room for a new market entrant to make a profit.

D) the poor have no money.

E) people in BOP markets cannot use advanced technology.

33)

34) The world economy has changed profoundly since the end of the World War II. Perhaps the most fundamental changes that took place include all of the following except: A) global competitors have steadily displaced local competitors.

B) economic integration is particularly striking in the European Union.

C) the integration of the world economy has increased significantly.

D) integration of the world economy is visible in NAFTA (North American Free Trade Agreement).

E) protectionism and nationalism have rapidly increased economic integration.

34)

35) Upper-middle-income countries that achieve the highest rates of economic growth are sometimes referred to collectively as: A) NIEs. B) BEMs. C) BOPs. D) BRICs. E) LDCs.

35)

36) The Washington, D.C.-based Heritage Foundation survey consists of over 180 countries ranked by degree of economic freedom. The key economic variables considered for this ranking include all of the following except: A) government consumption of economic output.

B) percent foreign ownership.

C) taxation policy.

D) banking policy.

E) wage and price control.

36)

37) One of the major issues in trade relations between the high- and lower-income countries is trade in: A) services.

B) automobiles.

C) shoes.

D) computers.

E) textiles.

37)

38) Upper-middle-income countries, also known as industrializing or developing countries are those with GNI per capita ranging from: A) $3,956 to $12,235.

B) $12,236 or higher.

C) $1,006 to $3,955.

D) less than $1,005.

E) none of the above

38)

6

39) With a 2016 GNI per capital of $1,680, India has transitioned out from the former category and now is classified as a(n): A) low-income country.

B) lower-middle-income country.

C) upper-income country.

D) upper-middle-income country.

E) lower-upper-income country.

39)

40) The Organization for Economic Cooperation and Development (OECD) is described as the: A) organization of 35 nations.

B) economic think tank.

C) rich-man's club.

D) pluralistic democracies.

E) All of the above statements are applicable.

40)

41) The Gross Domestic Product (GDP), a measure of a nation's economic activity, is calculated by all of the following factors except: A) investment spending.

B) consumer spending.

C) government purchases.

D) net exports.

E) industry purchases.

41)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

42) Economic integration was at 10 percent at the beginning of the twentieth century; today, it is approximately 50 percent.

42)

43) When a company conducts business across boundaries in countries with different currencies, it is thrust into the turbulent world of exchange risk.

43)

44) Today, market capitalism is widely practiced around the world, most notably in North America and the European Union.

44)

45) The world's largest automakers have, for the most part, evolved into local companies.

45)

46) China is the first BRICS nation in the upper-middle-income category with a GNI per capita income of $8,260 in 2016.

46)

47) The struggle between capitalism and socialism that began in 1917 is over.

47)

48) In centrally planned socialism economic systems, the state allocates resources, whereas production resources are privately owned.

48)

49) With a 2016 GNI per capita of $1,680, India has transitioned out of the low-income category and is now classified as an upper-middle-income country.

49)

50) The world economy has changed profoundly as evident by the fact that the global competitors have steadily displaced or absorbed local competitors.

50)

7

51) In Sweden, where the government controls two-thirds of all expenditures, resource allocation is more "market" oriented than "command" oriented.

51)

52) The "balance of payments" is a record of all economic transactions between the residents of a country and the developed countries of the world.

52)

53) Approximately 25 percent of the world population is included in the low-income countries category as per the World Bank classification system.

53)

54) Myanmar, a low-income country in Southeast Asia with a population of 52 million people, can be considered an emerging market.

54)

55) In Singapore, gum is available at pharmacies; before buying a pack, however, consumers must register their names and addresses.

55)

56) Myanmar people are very similar to Japanese in some ways.

56)

57) According to the 2017 Index of Economic Freedom compiled by the Heritage Foundation, Singapore is ranked as having the highest degree of economic freedom.

57)

58) Two of the smaller countries from the former Soviet Union, Tajikistan and Uzbekistan, fall into the lower-middle-income categories.

58)

59) In reality, market capitalism and centrally planned socialism do not exist in "pure" form.

59)

60) The World Bank has developed a four-category classification system for stages of marketing development, which uses a country's population as a base.

60)

61) The foreign exchange market consists literally of a buyer's and a seller's market where currencies are traded for both spot and future delivery on a continuous basis. The forward market is for immediate delivery and the spot market is for future delivery.

61)

62) The important fact to recognize about the overall balance of payments is that it is always in balance, although imbalances do occur in subsets of the overall balance.

62)

63) The 35 nations that belong to the OECD, who believe in market-allocation economic systems and pluralistic democracy, are also addressed as an "economic think tank" or the "rich man's club."

63)

64) A low correlation exists between the degree of economic freedom and the extent to which a nation's mixed economy is market oriented.

64)

65) Brazil, China, and India are classified as upper-middle income countries, also known as industrialized or developing countries.

65)

66) A country with a positive current account balance has a trade deficit; that is, the outflow of money to pay for imports exceeds the inflow of money for sales of exports.

66)

67) The CEO of Otis Elevators says they measure elevator populations in countries as units installed per thousand people. According to this, China is about one-half an elevator per thousand people.

67)

8

68) Grocery distribution companies in Brazil use logistics software to route their trucks; meanwhile, horse-drawn carts are still a common sight on many roads.

68)

69) Amazon cannot sell its own goods in India.

69)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

70) Traditionally economists identified four main types of economic systems. However, due to globalization it is harder to categorize the systems this narrowly. What will be more robust descriptive criteria that can be used for classification?

71) Smaller countries like Tajikistan and Uzbekistan are lumped into a regional group known as "the Stans." Incomes in these countries are low, there is considerable economic hardship, and the potential for disruption is high. Are these countries problem cases or opportunities for potential economic growth?

72) What are the distinguishing features between centrally planned socialism and centrally planned capitalism? Give examples of two or more countries which follow these systems.

73) Authors Prahalad and Hammond have identified several assumptions and misconceptions about the "bottom of the pyramid" (BOP). Explain these assumptions, giving examples.

74) The newly independent countries of the former Soviet Union present an interesting situation: income is declining, and there is considerable economic hardship. The potential for disruption is certainly high. Are these disruptions problem cases, or are they attractive opportunities with good potential for moving out of the low-income category?

75) The world economic environment is changing very rapidly and has become increasingly competitive. In order to achieve success, based on author William Greider's analysis, what are the realities that executives and marketers should take into account in such a dynamic environment?

76) What are some of the challenges faced by marketers in relation to the newly formed smaller countries? Explain giving examples.

77) Some people believe that marketing is relevant only in affluent, industrialized countries, whereas others believe that the role of marketing is to identify people's needs and wants worldwide, irrespective of the economy. Giving examples of companies involved in energy conservation and technology, support the latter argument.

78) What are some challenges facing the BRIC framework? Explain with examples from a corporation.

9

Answer Key Testname: C2

1) D 2) D 3) E 4) C 5) A 6) A 7) C 8) B 9) E 10) B 11) E 12) C 13) B 14) B 15) B 16) C 17) D 18) A 19) D 20) C 21) E 22) D 23) C 24) C 25) B 26) D 27) A 28) E 29) C 30) D 31) E 32) E 33) C 34) E 35) A 36) B 37) A 38) A 39) B 40) E 41) E 42) TRUE 43) TRUE 44) TRUE 45) FALSE 46) FALSE 47) TRUE 48) FALSE 49) FALSE 50) TRUE 10

Answer Key Testname: C2

51) FALSE 52) FALSE 53) FALSE 54) TRUE 55) TRUE 56) TRUE 57) FALSE 58) TRUE 59) TRUE 60) FALSE 61) FALSE 62) TRUE 63) TRUE 64) FALSE 65) FALSE 66) FALSE 67) TRUE 68) TRUE 69) TRUE 70) (a) Type of economy; (b) Type of government; (c) Trade and capital flows; (d) The commanding heights; (e) Services provided by the state and funded through taxes; (f) Institutions; and (g) Markets.

71) These countries represent an obvious risk-reward trade-off. Some companies have taken the plunge, but many others are still assessing whether they ought to join the pioneers. For example, Uzbekistan is one indication of a risky business environment in a lower-middle-income country. Perhaps that explains why there are no Western fast-food chains in Uzbekistan — no Starbucks, no McDonalds's. However, the good news is that in the last few years, Uzbekistan has transitioned from "repressed" in the index to "mostly unfree." Also, as a nation whose cities once were important trade hubs on the Silk Road, there are market opportunities. As an example, GM is the top car company in Uzbekistan, and is one of GM's 10 largest markets worldwide. Thus countries in this category are risky but have good potential for economic growth and global marketing.

72) In Centrally Planned Socialism, the state has broad powers to serve the public interest as it sees fit. Ownership of entire industries as well as individual enterprises belongs to the government. The elements of the marketing mix are not used as strategic variables. In Centrally Planned Capitalism, economic system command resource allocation is utilized extensively in an overall environment of private resource ownership. In Sweden, the government controls two-thirds of all expenditures, and the resource allocation is more "command" oriented than "market" oriented. This would be an example of centrally planned socialism although it can have elements of capitalism. China is an example of centrally planned socialism.

73) (1) The poor have no money. In Bangladesh villagers spend considerable sums to use village phones operated by local entrepreneurs; (2) the poor are too concerned with fulfilling basic needs to "waste" money on nonessential goods.

Consumers who are too poor to purchase a house do buy luxury goods such as televisions and cell phones; (3) the goods sold in developing markets are so inexpensive that there is no room for a new market entrant to make a profit.

Since the poor often pay higher prices for many goods, there is an opportunity for efficient competitors to realize attractive margins by offering quality and low prices; (4) people in BOP markets cannot use advanced technology.

Residents of rural areas can and do quickly learn to use cell phones and PCs; and (5) global companies that target BOP markets will be criticized for exploiting the poor. A global company offering basic goods and services that improve a country's standard of living can earn a reasonable return while benefiting society.

11

Answer Key Testname: C2

74) These countries are good example of risk-reward trade-off. Many companies have taken the plunge, but many others are still assessing whether to take risk. Belarus and Turkmenistan are rated quite low in the rankings in terms of economic freedom. Russia itself has slipped within the upper-middle-income category. However, there are still some former Soviet-dominated countries which have opportunities for economic growth. It much depends on the actions taken by the Soviet republic. For example, the launching of a military action in Georgia creates a ripple effect and causes economic and political instability.

75) (a) Capital movements have replaced trade as the driving force of the world economy; (b) Production has become "uncoupled" from employment; (c) The world economy dominates the scene; individual country economies play a subordinate role; (d) The struggle between capitalism and socialism is largely over; and (e) The growth of e-commerce diminishes the importance of national barriers and forces companies to reevaluate their business models.

76) There are several challenges faced by marketers in newly formed countries. For example, some of the smaller countries from the former Soviet Union, including Tajikistan and Uzbekistan, fall into the low- and lower-middle income categories. Sometimes referred to collectively as "the Stans," they present marketers with an interesting challenge.

Incomes are low, there is considerable economic hardship, and the potential for disruption is certainly high. Are they problem cases, or are they attractive opportunities with good potential for economic growth? These countries present an interesting risk–reward trade-off; some companies have taken the plunge, but many others are still assessing whether to take the risk.

77) People everywhere need affordable and safe drinking water. Recognizing this fact, Nestlé launched Pure Life bottled water in Pakistan. The Coca-Cola Company recently began to address dietary and health needs of low-income countries by developing a beverage, Vitango, which has several nutritional and health benefits. Technology is another area which can benefit countries all over the world. Intel's World Ahead is developing a $550 computer that is powered by a car battery. Hewlett-Packard engineers are working to develop solar-powered communication devices that can link remote areas to the Internet.

78) Goldman Sachs, the firm that developed the original BRIC framework more than a decade ago, has identified a new country grouping called Next-11 (N11). Five of the N11 countries are considered NIEs: three lower-middle-income countries (Egypt, Indonesia, and the Philippines) and two upper-middle-income countries (Mexico and Turkey).

Among these five countries, Egypt, Indonesia, and the Philippines have posted positive GDP growth over the past several years.

12

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) According to EU regulations, Kraft parmesan cheese cannot be sold in Europe because: A) terms such as "Parmesan" are used on the package labels.

B) it is expensive when compared to local products.

C) it does not contain salt and an enzyme.

D) it contains synthetic cellulose powder.

E) it is considered genetically modified agricultural product.

1)

2) Select the best answer that represents the lowest to the highest level of economic integration.

A) economic union customs union common market free trade area B) customs union economic union free trade area common market C) common market economic union customs union free trade area D) free trade area customs union common market economic union E) common market free trade area economic union customs union

2)

3) Which of the following ASEAN countries alone accounts for more than one-third of 2014 two-way trade exports with the United States?

A) Singapore B) Brunei C) Vietnam D) Thailand E) Malaysia

3)

4) ________ is gaining a reputation as a manufacturing center as well as the world's number one producer of flat-screen TV sets.

A) Argentina B) Mexico C) Panama D) Brazil E) Canada

4)

5) Which one of the ASEAN members has the World's second-largest container port?

A) India B) Singapore C) Brunei D) Thailand E) Philippines

5)

6) The country that withdrew from the original members of the Andean Community is: A) Ecuador.

B) Columbia C) Bolivia.

D) Peru.

E) Chile.

6)

7) Blackberry (formerly known as Research in Motion), the smartphone marketer, is based in: A) Canada.

B) the Netherlands.

C) Mexico.

D) Brazil.

E) Argentina.

7)

8) The World Trade Organization, which came into existence on January 1, 1995, is the successor of another organization known as: A) ASEAN. B) FTAA. C) GATT. D) DSB. E) NAFTA.

8)

1

9) Bhutan has relied on a measure besides economic growth, namely, gross national happiness (GNH). The GNH Index includes all of the following indicators except: A) living standards.

B) psychological well-being.

C) economic vitality.

D) environmental diversity.

E) community vitality.

9)

10) In 2014, the EU filed a complaint that the government of Washington state violated international trade rules by: A) charging that cotton subsidies depressed prices and disadvantaged producers in emerging markets.

B) prohibiting Internet gambling, the United States was violating global trade agreements.

C) extending tax incentives to Boeing for in-state manufacture of the 777x jetliner.

D) imposing tariffs on a range of products imported from Brazil.

E) imposing 30 percent tariffs on a range of steel imports for a period of three years.

10)

11) Because they are in transition, the markets of Central and Eastern Europe present interesting opportunities and challenges, which include: A) lower wage rate.

B) exporting as an entry mode.

C) first mover advantage.

D) new sources of growth.

E) all of the above

11)

12) The five original members of the Central American Integration System did not include: A) Nicaragua.

B) Honduras.

C) Guatemala.

D) El Salvador.

E) Venezuela.

12)

13) The markets of Central and Eastern Europe present interesting opportunities and challenges for low-cost manufacturing due to: A) prohibitive tariffs and export restrictions.

B) strict laws and regulations.

C) their location being close to the sea.

D) the cultural similarities.

E) wage rates being lower than in Spain, Portugal and Greece.

13)

14) Management strategic options pertaining to products that are facilitated by a single European market include: A) consolidated production.

B) shift from brand to benefit segmentation.

C) seeking marketing economies.

D) standardized packaging and labeling.

E) all of the above

14)

2

15) ________ is a key word(s) in conducting business in the Middle East.

A) Discrimination B) Connection C) Haggling D) Arab Spring E) Male dominance

15)

16) ________ builds upon the elimination of internal tariff barriers, the establishment of common external barriers, and the free flow of factors.

A) Free trade area B) Economic union C) Common market D) European Union E) Customs union

16)

17) The Middle East and North Africa are sometimes viewed as a regional entity referred to as: A) ECOWAS. B) MENA. C) AMU. D) GCC. E) ACC.

17)

18) The form of economic cooperation that calls for countries to eliminate all internal barriers to trade among themselves even while maintaining independent trade policies with third countries is known as a(n): A) common market.

B) economic union.

C) customs union.

D) free trade area.

E) none of the above

18)

19) For more than 40 years, Bhutan, a kingdom of 754,000 people in the Himalaya mountains, has relied on the following measure: A) GTE. B) GDP. C) GNH. D) GNP. E) GNI.

19)

20) The introduction of the euro by the EU resulted in multifaceted advantages, which include: A) fixed exchange rate worldwide.

B) elimination of costs associated with currency conversion.

C) withdrawal of French Francs from circulation.

D) elimination of paper currency and coins.

E) a choice for using local or European currency.

20)

21) There are several preferred trade arrangements in Latin America which include all of the following except: A) the Andean Community.

B) CARICOM. C) Mercosur.

D) BRIC. E) SICA.

21)

3

22) European countries would benefit by having an FTA with the United States. However, there are some sticky points, which need resolution. All of the following points need consideration except: A) further reduction of tariffs, which now average between 2 and 3 percent.

B) the U.S. government would like easing of restrictions for purchasing European goods.

C) a variety of regulations that hamper cross-border investment and purchasing.

D) the name "Parmesan" applied to the "cows-milk" cheese.

E) that the EU restricts the import of most genetically modified crops, which are common in the United States.

22)

23) The "Common Market of the South" in Latin America is used to describe: A) Andean Community.

B) FTAA. C) SICA. D) CARICOM. E) Mercosur.

23)

24) Political and social instability in the Middle Eastern region can primarily be attributed to: A) lack of water purification facilities.

B) a wide gap between rich and poor nations due to oil revenues.

C) cultural differences among nations.

D) the "Arab Spring."

E) desert conditions and lack of agricultural land.

24)

25) Which of the following statements related to Brexit is not accurate?

A) U.K. business community was firmly against the "Remain" camp.

B) As a member of the EU, U.K. has access to a free, open market of nearly 500 million people.

C) Disillusionment was evident among members of the Tory party who had opposed Britain's initial inclusion in the European Union (EU).

D) In 2013, Prime Minister Cameron was convinced that, after sufficient public debate, most U.K. citizens would opt for the status quo.

E) When the final votes were tallied, the "Exit" camp prevailed.

25)

26) The form of economic cooperation that calls for establishing common external tariffs is known as a(n): A) customs union.

B) economic union.

C) European Union.

D) common market.

E) free trade area.

26)

27) The Gulf Cooperation Council (GCC) includes all of the following countries except: A) Kuwait.

B) Saudi Arabia.

C) Iraq.

D) Oman.

E) Bahrain.

27)

4

28) Other than tariffs, there are certain problems that restrict free trade between the European Union and the United States which includes all of the following except: A) Hollywood movie domination.

B) Internet usage.

C) use of genetically modified agricultural products.

D) product labeling.

E) cultural diversity.

28)

29) In order to form a free trade area, South Africa has signed a Trade, Development, and Cooperation Agreement (TDCA) with: A) Swaziland.

B) Angola.

C) Japan.

D) Namibia.

E) the EU.

29)

30) The business environment in Europe has undergone considerable transformation since 1992 with significant implications for all elements of the marketing mix except: A) promotion.

B) distribution.

C) process.

D) product.

E) price.

30)

31) The enlargement of the EU has affected marketing strategies in the Euro zone countries by: A) increasing the cost of production since the euro replaced local currency.

B) having less flexibility in the placement of factories.

C) shifting products from one market to another in the event of shortages.

D) reduced tariffs and quotas for products imported from non-EU members.

E) making it difficult to export food products from one country to another.

31)

32) A customs union does not create a free trade area as compared to NAFTA due to: A) ease of exporting commodities.

B) decreased production costs.

C) reduced competition.

D) creation of a continental demand.

E) no common external tariffs.

32)

33) Implementation of the Central American Free Trade Agreement with the United States created a free trade area known as DR-CAFTA that includes all SICA members except: A) Panama.

B) Nicaragua.

C) Guatemala.

D) Costa Rica.

E) Honduras.

33)

5

34) One of the most exciting projects in the Central American region in 2014 was: A) the five original members' decision to reestablish the CACM. B) the Free Trade Agreement with the United States.

C) the establishment of Guatemala as the region's headquarters.

D) the enlargement of the Panama Canal.

E) Central America's effort to revive its common market.

34)

35) The Secretariat for Central American Integration is headquartered in: A) Guatemala City.

B) Nicaragua.

C) Costa Rica.

D) El Salvador.

E) Honduras.

35)

36) There are barriers in Japan for global marketers in terms of attitudes as well as laws. Barriers include all of the following except: A) repeat visits and extended socialization with distributors.

B) trust has to be built before conducting successful business.

C) marketers must master the keiretsu system of tightly knit corporate alliances.

D) any organization wishing to compete in Japan must be committed to providing top-quality products and services.

E) goods marketed should have a semblance of western products and services.

36)

37) Which of the following statement is not true related to the African Growth and Opportunities Act (AGOA)?

A) African companies will find it easier to gain access to financing from the U.S. Export-Import Bank.

B) The law is designed to support African nations that make significant progress toward economic liberalization.

C) It is designed to help African nations that help neighboring countries in need.

D) AGOA represents a formal step TOWARD a U.S.-Africa free trade area.

E) The theme of the AGOA is "Trade, not Aid."

37)

38) Argentina was allowed to break from the CET and raise duties on consumer goods. This crisis had a silver lining, which is evident from all of the following points except: A) low prices for land, inexpensive labor, and ideal growing conditions for the Malbec grape have combined to make Argentina's wine industry a major player in world markets.

B) Argentina can make better wine locally for less money than anywhere in the world.

C) Argentina's wine exports to the United States were worth four times more when dollar revenues were converted into pesos.

D) the currency devaluation made Argentine vineyard property cheaper for foreign buyers.

E) Argentina became known for the world's most expensive wines.

38)

39) Markets of Central and Eastern Europe present interesting opportunities and challenges.

Companies such as 3M International, Philips Electronics, and Henkel are moving into the region for all of the following reasons except: A) wage rates are much lower than those in Spain, Portugal, and Greece.

B) that region offers attractive locations for low-cost manufacturing.

C) that region is an important new source of growth.

D) that the first company to penetrate a country market often emerges as leader.

E) core products and Western brand names need changes that are appropriate for business.

39)

6

40) The new country, which joined the EU at the beginning of 2015, is: A) Latvia.

B) Slovakia.

C) Slovenia.

D) Lithuania.

E) Cyprus.

40)

41) Which form of regional cooperation agreement, when fully implemented, entails creation of a unified central bank, the use of a single currency, and common policies on agriculture, social services, and welfare?

A) free trade area B) common market C) dispute settlement body D) economic union E) customs union

41)

42) NAFTA creates a free trade area, as opposed to a customs union or a common market, due to the fact that: A) they promote economic growth through tariff elimination.

B) the agreement does not leave the door open for discretionary protectionism.

C) restrictions are imposed on labor movements among members.

D) the issue of illegal immigration from Mexico to the United States is resolved.

E) restrictions are imposed on the use of goods, services, and investments.

42)

43) The original six members of the ASEAN (Association of Southeast Asian Nations) included all of the following countries except: A) Brunei.

B) Philippines.

C) Singapore.

D) Thailand.

E) Sri Lanka.

43)

44) The world's newest common market includes all of the following countries except: A) Nigeria.

B) Rwanda.

C) Kenya.

D) Burundi.

44)

E) Tanzania.

45) The English-speaking CARICOM members in the eastern Caribbean are concerned with defending their privileged trading position with: A) China.

B) Australia.

C) Russia.

D) the United Kingdom.

E) the United States.

45)

46) Which member of the Central American Integration System has both the largest economy and the largest population?

A) Costa Rica B) Guatemala C) Nicaragua D) El Salvador E) Honduras

46)

7

47) Argentina provides a good example of how a country can emerge from an economic crisis as a stronger global competitor as per the following statement: A) Argentina added tariffs on imported wines.

B) Argentina adopted the U.S. dollar as official currency.

C) Argentina reduced the duties on consumer goods.

D) Argentina added tariffs on wine produced within the country.

E) Argentina devalued its currency for exports and capital transactions.

47)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

48) One of the reasons why Bhutan is called the "forbidden kingdom" is that the country's leaders limit tourism.

48)

49) Some companies choose not to manufacture in Mexico since a lack of checkpoints means that cargo sits on trucks at bottleneck points such as Tijuana, a key hub for manufacturing.

49)

50) Despite trade agreements, attempts to achieve integration in Central America have been described as uncoordinated, inefficient, and costly. Tariffs still exist on imports of sugar, coffee, and alcoholic beverages.

50)

51) Due to the drop of the price of oil resulting in lower revenues, Saudi Arabia plans to invest in robotics.

51)

52) In October 2011, the U.S. Congress finally ratified the long-delayed free trade areas with South Korea, Panama, and Colombia.

52)

53) The GATT had no enforcement power since the losing party in a dispute was entitled to ignore the ruling.

53)

54) In addition to eliminating internal barriers to trade, members of a customs union agree to the establishment of common external tariffs.

54)

55) It is mandatory for countries to notify the WTO when they enter into preferential trade agreements.

55)

56) A preferential trade agreement is a mechanism that confirms special treatment on select trading partners, thereby at times discriminating against other trading partners.

56)

57) In an economic union, a doctor or lawyer qualified in one country can practice in another member country.

57)

58) Brazil has ramped up efforts to prevent maca seeds from being smuggled out of the country for cultivation elsewhere.

58)

59) The five original members of the Central American Common Market (CACM) are El Salvador, Honduras, Guatemala, Panama, and Costa Rica.

59)

60) Implementation of the Central American Free Trade Agreement with the United States created a free trade area known as DR-CAFTA.

60)

8

61) When the ASEAN countries expanded to include Australia, New Zealand, and India, it was dubbed as "ASEAN + 6."

61)

62) Chile became only an associate member of Mercosur and participates in the free trade area aspect of Mercosur.

62)

63) In a common market there are no internal barriers to trade, and it allows free movement of factors of production such as labor and capital.

63)

64) The Middle East does not have a single societal type with a typical belief, behavior, and tradition.

Each capital and major city in the Middle East has a variety of social groups that can be differentiated on the basis of religion, social class, education, and degree of wealth.

64)

65) President Trump's administration has blocked the process for filling vacancies on the WTO's Appellate Body.

65)

66) "Euro-skeptics" and other members of the Leave movement were convinced that their country could thrive economically outside of the EU framework.

66)

67) Mercosur, the Common Market of the South, resulted from a treaty signed by four countries: Argentina, Brazil, Paraguay, and Venezuela.

67)

68) A free trade area represents the most fully developed form of preferential trade agreement among nations.

68)

69) Competing ideologies in South America help explain why intraregional trade is not yielding more benefits.

69)

70) The six countries in the Gulf Cooperation Council (GCC) hold about 45 percent of the world's known oil reserves, but their production amounts to only 18 percent of world oil output.

70)

71) When the roster of ASEAN members expanded to include Japan, Korea, and India, it was dubbed "ASEAN + 3."

71)

72) In 2016, the United States filed a complaint with the WTO stating that Indian export duties on a range of extractive commodities gave its manufacturers access to key materials at market-distorting prices.

72)

73) CARICOM's main objective has been to achieve a deepening of economic integration by means of a Caribbean common market.

73)

74) The Asia-Pacific Economic Cooperation (APEC) launched an economic bloc called the ASEAN Economic Community (AEC).

74)

75) Although the ASEAN member countries are geographically close, they have historically been divided in many respects.

75)

76) Coca-Cola had to delay launching its Powerade sports drink in Europe due to the lack of uniform food safety laws in the European Union.

76)

9

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

77) Why do some critics refer to GATT as the "General Agreement to Talk and Talk" and how does its successor, the WTO, provide a better forum for trade agreements?

78) Why does NAFTA create a free trade area as opposed to a customs union or a common market? Explain the difference by giving examples.

79) "Although the ASEAN countries are geographically close, they have historically been divided in many respects."

Elaborate on this statement and highlight the important economic development of member countries within ASEAN. How does Singapore represent a special case within the ASEAN nations?

80) The formation and enlargement of the European Union has a wide everlasting impact on marketing strategies and marketing mix. Discuss this giving example from member nations.

81) What are the possible benefits or drawbacks if a customs union is formed between Great Britain and the EU? 82) There are several issues related to labeling of products exported to the EU. Explain giving an example of one such issue.

83) What are some of the concerns if the European Union decides to sign a free trade agreement with the United States?

84) According to experts, mastering the Japanese market is considered a very difficult task. However, with the lucrative market in Japan, it is imperative to understand the intricacies in order to be successful in business. What are some of the factors that need to be considered by corporations that would like to conduct business in Japan?

85) Historically, most of the Latin American nations have witnessed decades of slow or no growth, crippling inflation, increasing foreign debt, protectionism, the bloated government payrolls, money laundering problems, and currency fluctuations. What measures are now being taken by countries in that region that will begin the process of economic transformations?

86) In spite of forming an economic bloc, the 10 ASEAN nations have many problems that need to be resolved.

Describe any two problems?

87) What are the two key issues that became the reason for the Trump administration to focus on NAFTA? 88) What are some of the marketing problems in the Middle East and how are these problems different than faced by other regions of the world?

89) A laptop manufactured in Canada and imported by Chile would not be subjected to duty. If the same laptop was manufactured in the United States and exported to Chile, it will have to pay duty. In order to avoid duty, can the manufacturer in the United States send the computer via Canada?

10

Answer Key Testname: C3

1) A 2) D 3) A 4) B 5) B 6) E 7) A 8) C 9) C 10) C 11) E 12) E 13) E 14) E 15) B 16) E 17) B 18) D 19) C 20) B 21) D 22) B 23) E 24) B 25) A 26) A 27) C 28) B 29) E 30) C 31) C 32) E 33) A 34) D 35) A 36) E 37) C 38) E 39) E 40) D 41) D 42) A 43) E 44) A 45) E 46) B 47) E 48) TRUE 49) TRUE 50) TRUE 11

Answer Key Testname: C3

51) TRUE 52) TRUE 53) TRUE 54) TRUE 55) FALSE 56) FALSE 57) TRUE 58) FALSE 59) FALSE 60) FALSE 61) TRUE 62) FALSE 63) TRUE 64) TRUE 65) TRUE 66) TRUE 67) FALSE 68) FALSE 69) TRUE 70) TRUE 71) FALSE 72) FALSE 73) TRUE 74) FALSE 75) TRUE 76) TRUE 77) GATT was an organization that was handling 300 trade disputes during its half century of existence. It itself had no enforcement power, and the process of dealing with disputes stretched for years. The losing party had the right to ignore the ruling. Therefore, it was referred to as more of a talking rather than enforcing body. The WTO provides a forum for trade-related negotiations among its 150 members. The WTO has a Dispute Settlement Body (DSB) that mediates complaints concerning unfair trade barriers and other issues between the WTO's member countries. During a 60-day consultation period, parties to a complaint are expected to engage in good-faith negotiations and reach an amicable resolution. If that fails, the complainant can ask the DSB to appoint a three-member panel of trade experts to hear the case. The panel has nine months within which to issue its ruling. The losing party has the option of turning to a seven-member appellate body. If, after due process, a country's trade policies are found to violate the WTO rules, it is expected to change those policies. If changes are not forthcoming, the WTO can authorize trade sanctions against the loser. Thus, the formation of the WTO took care of many of the problems that existed during GATT. 78) Under a customs union, in addition to eliminating internal barriers to trade, members agree to the establishment of common external tariffs. For example, the EU and Turkey initiated a customs union in an effort to boost two-way trade. In a common market, in addition to the removal of internal barriers to trade and the establishment of common external tariffs, free movement of factors of production such as labor and capital is allowed. NAFTA helps in promoting economic growth through tariff elimination, expanded trade and investment, as well as no restrictions on labor and other factor movements within the three nations. The benefits of continental free trade will enable all three countries to meet the economic challenges of the decades to come. The gradual elimination of barriers to the flow of goods, services, and investment, coupled with strong protection of intellectual property rights will further benefit businessmen, workers, farmers, and consumers. The agreement also leaves the door open for discretionary protectionism.

12

Answer Key Testname: C3

79) The Association of Southeast Asian Nations (ASEAN) was established as an organization for economic, political, social, and cultural cooperation among its member countries. Brunei, Indonesia, Malaysia, the Philippines, Singapore, and Thailand were the original six members. Vietnam, Cambodia, Laos, and Myanmar joined later on. Individually and collectively, ASEAN countries are active in regional and global trade. However, all the above-mentioned countries were under different political orders, and the population is very different from the religious and cultural point of view.

Some of these countries are advancing rapidly whereas others still have a long way to go. There are different natural resources in each of the member countries. Some have undergone political unrest and wars recently. For example, Singapore transformed itself from a British colony to a vibrant industrial power. One of the reasons for its success is its extremely efficient infrastructure. The Port of Singapore is the world's second-largest container port. It has a high standard of living, second only to Japan. There is 93-percent literacy rate and is very much advanced in business. Many foreign companies are attracted to Singapore. Singapore alone accounts for more than one-third of U.S. trading activities with ASEAN countries.

80) The European Union has concluded over 20 different trade pacts with other nations. The business environment in Europe has undergone considerable transformation with significant implications for all elements of the marketing mix.

For example, there is harmonization of product standards, thereby reducing the number of adaptations needed in each country. Similarly, from a pricing point of view the environment has become more competitive. Common guidelines are also set for promotion and distribution. Thus, all components of the marketing mix are getting standardized and harmonized. Corporations are beginning to treat the entire region as one entity with very little adaptation. For example, France will be able to shop around for distributions of products or services and select the best one in any member country. This selection can be based on cost, quality, or local preferences. Food safety laws can also be made uniform with some modifications that can be adapted. The members in the European Union will find it easier to do business at any of the member countries including setting up of manufacturing plants or headquarters. It will also help in balancing the inventory and moving products from one country to another in case of shortages.

81) Such a deal would allow Britain to negotiate its own trade terms in the services and agriculture sectors; the EU would set any external tariffs on goods. This arrangement would be modeled on the existing customs union between Turkey and the EU. The downside for Great Britain would be the inability to independently negotiate tariff reductions with the United States and China, two important trading partners.

82) Product labeling can become important for products to be sold in the EU. For example, food companies that market dairy products in the United States use terms such as "Parmesan" on their labeling. According to EU law, the name "Parmesan" should apply only to a cow's-milk cheese known as "Parmigiano-Reggiano" that is produced using traditional methods in the Parma/Reggio region of Italy. The Italian cheese bears symbols for protected geographical indication (PGI) and protected designation of origin (PDO). The only ingredients besides milk in true Parmigiano-Reggiano are salt and an enzyme. By contrast, Kraft 100% Grated Parmesan Cheese contains cellulose powder (for a smooth texture), potassium sorbate (a preservative), and other ingredients. Because of EU regulations, Kraft cannot sell its cheese in Europe.

83) One of the issues related to this agreement would be the tariffs on goods imports and exports, which will amount to be a significantly large amount. Tariffs are only one part of the picture. Nontariff restrictions create major bureaucratic obstacles. The use of genetically modified agricultural products such as corn and soy, which are restricted in Europe, will be one of the issues. Another issue concerns the product labeling which is profoundly different in Europe compared to that in the United States. Other issue of concern is related to the cultural diversity. In parts of Europe, some hold the view that American cultural exports such as Hollywood movies overwhelm the works of the local film producers. This has prompted European policymakers to demand "carve-outs" that exempt certain industries from the trade pact. All these aspects have to be addressed before any agreement can be signed and implemented.

84) Conducting business in the Japanese market demands understanding, flexibility, ambitions, and long-term commitment. Although the Japanese market has changed from a closed market to just being a tough market, there are still several barriers that need to be overcome. These barriers include differences in business attitude as well as laws.

Companies interested in doing business with Japan should be willing and able to provide top-quality products and services. In addition, the products and services should be tailored to local tastes. All this requires countless visits and socializing to build trust as well as mutual understanding. Marketers must also master the "keiretsu" system of tightly knit corporate alliances.

13

Answer Key Testname: C3

85) The allure of the Latin American market has been its considerable size, its strategic location, and huge resource base.

Many countries are implementing economic reforms such as priority to have a balanced budget and privatization of certain industries. Free markets, open economies, and deregulation are becoming governmental priorities. Tariffs are being lowered, and free trades are being encouraged. Global corporations are encouraged by import liberalization, lower tariffs, and the potential for establishing more efficient regional production. Many observers envision a free trade area within the entire region. The four most important preferential trading arrangements in Latin America are the SICA, the Andean Community, the Common Market of the South (Mercosur), and the Caribbean Community and Common Market (CARICOM).

86) The ten ASEAN nations are slated to launch an economic bloc called the ASEAN Economic Community (AEC).

Although tariffs have been cut in the region, nontariff barriers, including cumbersome labor laws, lack of harmonization in product standards, and bureaucracy, are some of the issues that have yet to be resolved. Also, ASEAN is not a customs union, so import/export activities are conducted with different procedures. As a result, goods can languish in ports for weeks while documents are reviewed and approved. Much work remains to be done before the AEC evolves into a customs union or common market.

87) Two key issues, illegal immigration and trade, came to the fore during Donald Trump's U.S. presidential campaign.

Candidate Trump promised to "build a wall" along the U.S.-Mexico border and repeal NAFTA, which he famously denounced as "the worst trade deal ever." Following his election, President Trump threatened to make good on his NAFTA pledge while pro-trade legislators tried to persuade him to negotiate a new, improved agreement. The president was targeting America's $70 billion trade deficit with Mexico, much of it attributable to the auto industry.

88) Connection is a key word in conducting business in the Middle East. Those who take the time to develop relationships with key business and government figures are more likely to cut through red tape than those who do not. A predilection for bargaining is culturally ingrained, and the visiting businessperson must be prepared for some old-fashioned haggling. Establishing personal rapport, mutual trust, and mutual respect are essentially the most important factors leading to a successful business relationship. Decisions are usually not made by correspondence or telephone. The Arab businessperson does business with the individual, not with the company. In addition, most social customs are based on the Arab male-dominated society. Women are usually not part of the business or entertainment scene for traditional Muslim Arabs.

89) There is a Free Trade Area (FTA) which is formed when two or more countries agree to eliminate tariffs and other barriers that restrict trade. However, there are rules of origin that discourage the importation of goods into the member country with the lowest external tariff for transshipment to one or more FTA members with higher external tariffs.

Thus, even though the laptop can be shipped via Canada, it will have the label as "made in USA" and therefore subject to duty.

14

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) A vice-president of an American software company introduced himself to a group of Korean partners and added "you may just call me John." Although this verbal cue shows the underlying reality that Americans have a high value on informality and equality, it needs adaptation due to the reason that: A) it is difficult to translate John in Korean language.

B) John is not a very popular name in Korea.

C) it is not appropriate to disclose nicknames in business meetings.

D) customs, hierarchies, and class structure of Korean culture have to be respected.

E) Korean culture requires that first and last name be used in addressing guests.

1)

2) An intern from the United Kingdom was working in an American software company during the summer. Her boss gave her a memo asking her to post it, with the intention of having it put on the bulletin board. To her boss's surprise the letter was mailed by the intern since the word "post" means "mail" in British English. In communication terms this error can be attributed due to: A) semiotics.

B) semantics.

C) morphology.

D) phonology.

E) syntax.

2)

3) A new digital cassette recorder from Philips was a market failure, in part because advertisements did not clearly mention the fact that the product could make CD-quality recordings using new cassette technology while still playing older, analog tapes. This is an example of: A) divisibility.

B) complexity.

C) communicability.

D) compatibility.

E) relative advantage.

3)

4) The ________ the level of environmental sensitivity for a given product, the ________ the need for managers to address country-specific economic, regulatory, technological, social, and cultural environmental conditions.

A) lower; lower B) stronger; greater C) greater; lower D) greater; greater E) lower; greater

4)

5) The lesson that SRC (Self-Reference Criterion) teaches can be summarized as: A) the prior success and ethnocentrism can override the SRC. B) a person's perception of market needs is framed by others cultural experience.

C) the perceptual blockage and distortion about cultures are hard to reduce.

D) an unconscious reference to one's cultural values is critical in global marketing.

E) an unbiased perception is a vital and critical skill in global marketing.

5)

1

6) In high-context cultures, time is: A) linear.

B) short.

C) common.

D) polychronic.

E) monochronic.

6)

7) Two countries that score low in uncertainty avoidance are: A) United States and Canada B) Japan and Hong Kong.

C) Austria and Belgium.

D) Ireland and Italy.

E) Denmark and Finland.

7)

8) According to Geert Hofstede, which of the following is a key cultural dimension that helps account for rapid economic growth in Asia?

A) individualist/collectivist B) long-term orientation C) feminine/masculine D) uncertainty avoidance E) power distance

8)

9) Together, innovators and early adopters make up about ________ of the potential market for a new product.

A) 12 percent B) 26 percent C) 46 percent D) 16 percent E) 34 percent

9)

10) When members of the British royal family make diplomatic tours, ________ is a frequent wardrobe choice.

A) blue B) brown C) green D) orange E) red

10)

11) Linguists have divided the study of languages into four main areas. The system of word formation is referred to as: A) morphology.

B) semiotics.

C) phonology.

D) syntax.

E) semantics.

11)

12) Which of the following best sums up the experience of Walt Disney Company executives when creating Disney's theme park in Paris?

A) They were guided by the "think global, act local" principle.

B) They miscalculated the rate of diffusion of innovations in Europe.

C) They fell victim to the self-reference criterion.

D) They exhibited a geocentric management orientation.

E) They had an unbiased perception of existing culture in Europe.

12)

2

13) Coca-Cola billboards were recently put up near the Piazza San Marco in Venice, which has numerous historical landmarks. The major reason for allowing the billboards at a prominent historical site is: A) aesthetic reasons.

B) Coke is a very popular drink in Italy.

C) to introduce an American product in an emerging market.

D) a severe lack of funds for historic renovation.

E) the prominence of global marketing.

13)

14) Which of the following can negatively influence the rate of diffusion of an innovation?

A) high compatibility B) high complexity C) substantial relative advantage D) divisibility E) high level of communicability

14)

15) Insisting on competitive bidding can cause complications in: A) the Japanese culture.

B) the Korean culture.

C) low and high context cultures.

D) high-context cultures.

E) low-context cultures.

15)

16) Suppose you have a friend from India who is a lifelong vegetarian and who does not like McDonald's because the company sells hamburgers in many countries. Which of the following describes your friend?

A) "vegetarianism" represents an attitude; "dislike McDonald's" represents a value B) "vegetarianism" represents a value; "dislike McDonald's" represents a belief C) "vegetarianism" and "dislike McDonald's; "both represent an attitude D) "vegetarianism" represents a value; "dislike McDonald's" represents an attitude E) "vegetarianism" and "dislike McDonald's;" both represent values

16)

17) Which of the following is true about the innovation diffusion process in Asia?

A) After a new product has achieved success in one Asian market, it is likely to be adopted in other Asian markets at an even faster rate.

B) Once innovators in Asia have tried a product, early adopters and the early majority quickly follow suit.

C) Japan has a high-context culture with a relatively homogeneous population.

D) Because risk avoidance is a cultural value, there are fewer innovators in Asia than in the United States.

E) All of the above are true.

17)

18) Comparing and contrasting the diffusion of innovations in Western countries and in Asia, one can say that: A) in Western countries, the adoption process begins more slowly but ramps up more rapidly than it does in Asia.

B) the diffusion of innovation framework is applicable in Asia but not in the West.

C) in Asia, the adoption process begins more slowly but ramps up more rapidly than it does in Western countries.

D) the process occurs in an identical manner in both regions.

E) the diffusion of innovation framework is applicable in the West but not in Asia.

18)

3

19) There is nothing inherently "good" or "bad" about any color of the spectrum and all associations and perceptions regarding color arise from culture. Which of the following statements is not true?

A) Red color is associated with "active," "vibrant," and "emotional."

B) Red color is highly preferred in Korea.

C) Red color is preferred in many countries since it is the color of blood.

D) Red color is tied to the traditions of viticulture and winemaking.

E) Red color is a popular color in most parts of the world.

19)

20) Considering Hofstede's notion of culture as "the collective programming of the mind," then attitudes can be defined as: A) a learned tendency to respond in a consistent way to a given object or entity.

B) an enduring belief or feeling of a specific mode of conduct.

C) an organized pattern of knowledge that an individual holds to be true about the world.

D) the deepest level of a culture present in the majority of the members of a particular culture.

E) a personally or socially preferable mode of conduct.

20)

21) Which of the following shows the correct order from the highest to the lowest environmental sensitivity level?

A) integrated circuits computers food B) food computers integrated circuits C) integrated circuits food computers D) computers food integrated circuits E) none of the above

21)

22) Cultural influences are also quite apparent in food preparation and consumption patterns and habits. Domino's Pizza, the world's largest pizza-delivery company, pulled out of Italy because: A) people did not like to eat at home.

B) Italians wanted more toppings on thick crust.

C) Italians perceived its products to be "too American."

D) its tomato sauce was too bold and competed with Italian products.

E) Italians did not like anyone else to use the name "pizza."

22)

23) European consumers have faced a number of food-related issues, including an outbreak of hoof-and-mouth disease and continuing concerns over mad cow disease. As a result, many are skeptical about GMOs (genetically modified organisms) and the benefits of eating food products that incorporate genetically engineered ingredients. As one French citizen noted recently, "We have a very risk-averse society that has been completely traumatized by food scares." Thinking about this situation in terms of Hofstede's cultural values framework, one might reasonably interpret this remark to indicate that France ranks relatively high in: A) Masculinity.

B) Short-term Orientation.

C) Uncertainty Avoidance.

D) Individualism.

E) Power Distance.

23)

4

24) If a marketing manager plans to enter newly industrializing-countries (NICs) or other Asian markets with a product that has proved to be successful in the home market, the product's diffusion processes are likely to be: A) much faster than in the home market.

B) negligible since consumers will take time to assess the relative advantage.

C) less compatible in the Asian market.

D) much slower than in the home market.

E) similar to that in the home market.

24)

25) That social and cultural environments influence marketing opportunities and dynamics around the globe is illustrated by all of the following facts except: A) consumers want to drink more coffee made from premium coffee beans.

B) coffee brew is becoming popular in countries such as India and China.

C) coffee became the hot beverage of choice in India.

D) coffee culture continues to spread around the globe.

E) conflict is brewing between government budget and consumer aspirations.

25)

26) Which of the following shows the correct order of the product adoption process?

A) trial interest evaluation awareness adoption B) awareness interest evaluation trial adoption C) evaluation trial awareness interest adoption D) adoption evaluation trial interest awareness E) interest awareness adoption trial evaluation

26)

27) Anheuser-Busch and Miller Brewing both experienced market failures in the United Kingdom when they used the phrase "light beer" which was misinterpreted as: A) being low in calories.

B) having less quality.

C) having reduced alcohol levels.

D) having light color.

E) having less quantity.

27)

28) As cultural differences become less relevant and disposable incomes become high, a trend towards greater consumption of the following type of foods is predicted.

A) Chinese retail foods B) Indian spicy foods C) Mexican spicy foods D) French artistic foods E) American fast foods

28)

29) Colgate discovered that in Spanish colgate is a verb form that means "go hang yourself." Whirlpool found that consumers in Italy, France, and Germany had trouble pronouncing the name. These are examples, which show the importance of ________ in global marketing.

A) phonology and morphology B) syntax and morphology C) semantics and morphology D) semantics and phonology E) syntax and semantics

29)

5

30) Adopter categories are classifications of individuals within a market, based on their innovativeness.

When Apple introduced the Apple watch people waited in long lines before the doors opened.

According to experts, those people can be categorized as: A) late majority.

B) laggards.

C) early adopters.

D) early majority.

E) innovators.

30)

31) When Walt Disney Company's executives were planning to build a theme park in France, they firmly believed that the success of McDonald's and Coke as well as their own success in Tokyo ensured the runaway success of their plans. Disney policies prohibit sale or consumption of alcohol inside their theme parks, which they also implemented in France. This proved to be a failure since consuming wine with the midday meal is a long-established custom in France. This is most likely a classical example of: A) the "think global, act local" principle.

B) miscalculation of the rate of diffusion of innovations in Europe.

C) a geocentric management orientation.

D) being victim to the self-reference criterion.

E) an unbiased perception of existing culture in Europe.

31)

32) Which is not considered as a long-term value?

A) thrift B) persistence C) ordering relationships D) search for truth E) sense of shame

32)

33) To speed adoption of a new product, a marketing team should: A) ensure that features and benefits can be communicated or demonstrated.

B) rely heavily on word-of-mouth marketing.

C) design the maximum amount of complexity into the product.

D) attempt to make a clean break with existing customer values.

E) discourage limited use on a "trial" basis.

33)

34) Lawyers are more important in: A) the Japanese culture.

B) Indian cultures.

C) low-context cultures.

D) the Korean culture.

E) high-context cultures.

34)

35) Giving business cards with the left hand in Malaysia, showing soles of shoes to a host in Saudi Arabia, and winking one eye in India are all considered impolite interpersonal communication due to the fact that: A) it is difficult to notice when one winks eyes since there are many people in India.

B) people pick up nonverbal cues and understand intuitively without being told.

C) people are not aware of Western ways of doing business.

D) in Middle Eastern countries it is customary to take off shoes at the door.

E) these actions distract people from hearing at meetings.

35)

6

36) While some food preferences remain deeply embedded in culture, there is plenty of evidence that global dietary preferences are converging. Examples of such a change can be predicted from the: A) preference for local hamburgers from a local chain, Jollibee's, in the Philippines.

B) increased sales of soups and noodles in Thailand.

C) popularity of Chinese foods in Taiwan.

D) popularity of Domino's Pizza in Italy.

E) growing number of McDonald's restaurants globally.

36)

37) A massive effort dubbed as "MOSE Project" is underway in Venice in order to: A) reduce the number of billboards on historic sites.

B) provide biblical information to tourists.

C) promote passive tourism.

D) prevent flooding.

E) modernize accommodations.

37)

38) Danes generally are not afraid of taking chances; they are comfortable doing things that are not carefully thought out or planned. Denmark's "flexicurity" policy combines free labor markets with adjustable welfare benefits. This is an example of the application of Hofstede's typology under the values which highlight: A) Future Orientation.

B) Power Distance.

C) Uncertainty Avoidance.

D) Individualism/Collectivism.

E) Gender Differentiation.

38)

39) According to Hofstede, a cultural dimension which describes a society in which the social roles of men and women overlap, with neither gender exhibiting overly ambitious or competitive behavior is known as: A) achievement.

B) power distance.

C) collectivistic.

D) individualistic.

E) nurturing.

39)

40) One of the basic elements of sociologist Everett Rogers study on the diffusion theory is the concept of an "adoption process." The first step in this adoption process is: A) evaluation.

B) adoption.

C) trial.

D) awareness.

E) interest.

40)

41) An innovation can mean all of the following except: A) a product introduced for the first time.

B) something new.

C) a product already introduced in a target market.

D) when a product is newly introduced.

E) any product newly introduced in the world.

41)

7

42) The Walt Disney Company's decision to build a theme park in France provides an excellent vehicle to understanding SRC (Self-Reference Criterion). All of the statements listed below portray this meaning except: A) The SRC can be a powerful negative force in global business.

B) Disney executives believed there is virtually unlimited demand for American cultural exports.

C) Disney executives were blinded by their prior success and ethnocentrism.

D) French are sensitive about American cultural imperialism.

E) Consuming wine with the midday meal is a long-established custom which was not realized

by Disney executives.

42)

43) Airbnb has become a source of social glue and a new pattern of trust due to all of the following factors, except: A) a heart shape design in the logo.

B) a symbol for "pinning" a location.

C) the letter "A." D) the company's logo represents universal belonging.

E) perception that "strangers equal friends."

43)

44) Which of the following is true about "coffee culture" in England?

A) Starbucks-style coffee shops have been a flop because tea culture is too deeply engrained.

B) Starbucks succeeded in England only after changing the company's name to Seattle Coffee Company.

C) Starbucks has been unsuccessful in its attempt to change the Brits' preference for tea.

D) American entrepreneurs found success in England with the Seattle Coffee Company which Starbucks later acquired.

E) Starbucks has been successful in England since it started selling beer.

44)

45) The power distance dimension reflects the degree of trust among members of society. Thus, the higher the power distance (PDI), the: A) lower is the harmony.

B) greater is uncertainty avoidance.

C) higher is tolerance for ambiguity.

D) greater is male dominance.

E) lower is the level of trust.

45)

46) When the Coca-Cola Company was developing its new Dasani bottled water brand, linguists helped guide the naming process. For example, the recurring "a" was chosen because it has a soothing sound. In linguistics, issues pertaining to letters and sounds are a matter of: A) semiotics.

B) syntax.

C) synonym.

D) semantics.

E) phonology.

46)

8

47) Procter & Gamble's introduction of All-Temperature Cheer laundry detergent in Japan was a flop at first. The problem was that Japanese women wash clothes in cold water—either tap water or leftover bath water—so they don't care about all-temperature washing (which is a big selling point in the United States). Also, Cheer was first introduced in Japan at a time when the market for fabric softeners in Japan was rapidly expanding. However, when Japanese housewives added lots of fabric softener to the water, Cheer didn't produce many suds (Americans don't use as much fabric softener). P&G reformulated the product so it wouldn't be affected by fabric softeners, and ads for Cheer in Japan pledged superior cleaning in cold water, not all temperatures. Which of the following might have helped P&G avoid the initial problems with Cheer?

A) diffusion of innovation B) self-reference criterion C) polycentric orientation D) high vs. low context culture E) Maslow's hierarchy

47)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

48) Relative advantage refers to how a new product compares with existing products or methods in the eyes of the competitors.

48)

49) High-context messages are explicit and specific; words carry most of the communication power.

49)

50) Background music can be used effectively in broadcast commercials, since it can be accepted universally.

50)

51) According to Roger's diffusion theory, most customers will not purchase expensive products without the "hands-on" experience marketers call "trial."

51)

52) "McDonaldization of culture," a term coined by Geert Hofstede, refers to the wide spread of McDonald's restaurants in the world and its adverse impact on global culture.

52)

53) Music provides an interesting example of the "think globally, act locally" concept.

53)

54) Although some food preferences remain deeply embedded in culture, plenty of evidence suggests that global dietary preferences are converging.

54)

55) The president of an American company was interested in dealing with a company in Saudi Arabia.

The Saudi CEO made it clear at the outset that the credentials in the documents have less credibility than personal trust and confidence. This shows that the Saudi Arabian culture is a high-context culture.

55)

56) The English language requirement by Matsushita is a potent symbol that this Japanese company is focusing on globalizing its operations.

56)

57) Music is an aesthetic component of all cultures and is accepted as a form of artistic expression and a source of entertainment.

57)

58) New York's attorney general declared that most of Airbnb's listings in the Big Apple are illegal.

58)

9

59) According to Hofstede's research on cultural values, masculinity dimension describes a society in which social roles of men and women overlap.

59)

60) Aesthetic elements that are attractive, appealing, and in good taste are perceived as such universally.

60)

61) In Korea, it is taboo to write a person's name in blue ink, since traditionally, red was used to record the names of the deceased.

61)

62) In Korea 4 5683 968 can be interpreted as "I love you."

62)

63) Japanese strive to achieve cooperation, consensus, self-denial, and harmony. Because these all represent feelings about modes of conduct, they are beliefs.

63)

64) In Indonesia, home of the world's largest Muslim population, KFC uses Ramadan-themed outdoor advertising to encourage Indonesians to come to the restaurants at buka puasa, the end of each day's fast.

64)

65) Historically, the lagoon in Venice provided Venetians with a safe haven from Germanic and Hun invaders.

65)

66) According to Hofstede's definition of culture a particular "category of people" may constitute a nation, an ethnic group, a gender group, an organization, a family, or some other unit.

66)

67) Long-term values include persistence (perseverance), defined as a general tenacity in the pursuit of a goal.

67)

68) In China, Dell had to find a meaningful interpretation of "direct sales," the phrase that describes the company's powerful business model.

68)

69) Domino's Pizza pulled out of Italy because Italians perceived its products to be "too American."

69)

70) If a potential Latin American customer insists on giving you a tour of the architectural highlights of his city prior to discussing business, it's a clue that you are doing business in a high-context culture.

70)

71) Westerners doing business in the Middle East must be careful not to reveal the soles of their shoes to hosts or pass documents with the left hand.

71)

72) Colgate discovered that in Spanish colgate is a verb form that means "go hang yourself."

72)

73) Culture includes conscious and unconscious values, ideas, attitudes, and symbols that shape human behavior that are confined to a generation.

73)

74) White connotes purity and cleanliness in the West, but is often associated with death, mourning, and funerals in China and other parts of Asia.

74)

75) Cadbury has trademarked the color brown for its chocolate confectionary packaging.

75)

10

76) Former Disney chairperson Michael Eisner and other company executives were blinded by ethnocentrism and the self-reference criterion (SRC).

76)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

77) There are considerable differences and similarities among world cultures. This makes the task of the global marketer much more difficult. Giving examples, show what factors have to be taken into account when planning marketing strategy for different parts of the world.

78) Why does a pound of "aged" Sumatra beans cost $29.95, while "regular" Sumatra beans cost only $12.95? Why is Starbucks using "regular" beans?

79) London's Sunday Times reported that Mecca-Cola has become the drink which has come to be seen as "politically preferable" to Pepsi or Coke in many Muslim countries. Also, Danish products were boycotted in many Islamic countries in protest of an offensive cartoon that was printed in Danish newspapers. Considering these two examples, show how religion can have an impact on marketing.

80) Applying Hofstede's typology, show how Power Distance and Gender Differentiation can influence the marketing of products and services in different countries.

81) Giving examples show how technology is providing interesting new opportunities for exploiting linguistics in the name of marketing.

82) The diversity of cultures around the world is reflected in languages and communication. When KFC translated its slogan "Finger Licking Good" it became "Eat your fingers" in Chinese; similarly "Pepsi is for Generations" became "your grandparents will come out of the grave to drink Pepsi." Using studies showing how linguists have divided the study of spoken or verbal language, demonstrate how verbal and non-verbal communication can have an impact on marketing around the world.

83) One of the basic elements of Rogers diffusion theory is the concept of adoption process which deals with the mental stages through which an individual passes from the time of his or her first knowledge of an innovation to the time of product adoption or purchase. Briefly describe these stages giving examples of Apples' iPhone.

84) What are some of the characteristics and differences between high- and low-context cultures?

85) There are specific characteristics of innovations that affect which innovations are adopted. Define those characteristics giving examples of products or services.

86) Hofstede considers culture as "the collective programming of the mind," which makes it necessary to look at the attitudes, beliefs, and values. Giving an example of a country, explain how these attributes are so important.

87) Reference to one's own cultural values or self-reference criterion (SRC) can create a cultural myopia. It can consciously or unconsciously create considerable problems for marketing professionals. Using Walt Disney's decision to build a theme park in France, address the problem, following a systematic framework.

11

Answer Key Testname: C4

1) D 2) B 3) C 4) D 5) E 6) D 7) A 8) B 9) D 10) A 11) A 12) C 13) D 14) B 15) E 16) D 17) E 18) C 19) B 20) A 21) B 22) C 23) C 24) A 25) C 26) B 27) C 28) E 29) A 30) E 31) D 32) D 33) A 34) C 35) B 36) E 37) D 38) C 39) E 40) D 41) E 42) C 43) E 44) D 45) E 46) E 47) B 48) FALSE 49) FALSE 50) FALSE 12

Answer Key Testname: C4

51) TRUE 52) FALSE 53) TRUE 54) TRUE 55) FALSE 56) TRUE 57) TRUE 58) TRUE 59) FALSE 60) FALSE 61) FALSE 62) TRUE 63) FALSE 64) TRUE 65) TRUE 66) TRUE 67) TRUE 68) TRUE 69) TRUE 70) TRUE 71) TRUE 72) TRUE 73) FALSE 74) TRUE 75) FALSE 76) FALSE 77) The task of the global marketer is twofold based on the differences and similarities prevalent worldwide. First, marketers must study and understand the country cultures in which conduction of business is planned. Secondly, marketers must incorporate this understanding into the marketing planning process. Several adaptations will be needed in developing strategies. Deep cultural understanding can actually be a source of competitive advantage for global companies. It is not only the language but also deep understanding of culture and developing a relationship that is of paramount importance. In a new geographic market, it requires a combination of tough-mindedness and generosity. While marketers should be secure in their own convictions and traditions, generosity is required to appreciate the integrity and value of other ways of life as well as points of view. People should overcome the prejudices that are a natural result of the human tendency toward ethnocentricity.

78) Starbucks is preparing to ride coffee's third wave with a new venture called Starbucks Reserve and Starbucks Reserve Roastery and Tasting Room. Growth in mass-market coffee consumption in the United States has been slowing, a sign that it is entering the mature phase of the product life cycle. For several years, Starbucks had been selling limited quantities of seasonal Reserve beans that were much more expensive than the company's regular offerings. A pound of Aged Sumatra beans cost $29.95 while "regular" Sumatra costs $12.95. Known as "single-origin coffees," the Reserve beans typically are sourced from small farms with limited production capacity. Some produce as few as 60 bags of green coffee beans each year. To ensure a reliable source of Reserve beans, Starbucks is cultivating relationships with small-scale farmers. The company even bought Hacienda Alsacia, a coffee producer in Costa Rica.

13

Answer Key Testname: C4

79) Religion is one of the most important sources of a culture's beliefs, attitudes, and values. Hindus do not eat beef, which means that McDonald's does not serve hamburgers in India. There was a big uproar when it was found that McDonald's french fries had beef as one of the ingredients. Similarly, Jews do not combine fish and dairy products, which makes McDonald's fish fillet a problem for them. Jews and Muslims do not eat pork, which rules out the use of bacon in many products sold by fast food operations. Restaurants in Malaysia have to declare that all meats are Halal or sacrificed in a specified religious way. In addition to religious requirements, religious sentiments also play an important role. After the incidents of September 2001, there was a distinct feeling of anti-Americanism in many parts of the world, particularly the Middle Eastern region. Mecca-Cola was an attempt to make indigenous products to compete with American ones. One of the concerns in allowing Turkey to join the European Union is that it is predominantly Islamic, whereas other members are comprised of Christians. All these cases show that religion plays a very important role in how people live as well as buy products and services.

80) Power Distance is the degree to which members of a particular society expect power to be unequally shared. Hong Kong and France are both high power-distance cultures; low power distance characterizes Germany, Australia, the Netherlands, and Scandinavia. The power distance dimension reflects the degree of trust among members of society.

The higher the power distance, the lower the level of trust. Companies in high power-distance cultures prefer sole ownership of subsidiaries because it provides them with more control. On the other hand, companies in low power-distance cultures are more apt to use joint ventures.

Masculinity describes a society in which men are expected to be assertive, competitive, and concerned with material success, and women fulfill the role of nurturer and are concerned with issues such as the welfare of children.

Femininity, by contrast, describes a society in which the social roles of men and women overlap, with neither gender exhibiting overly ambitious or competitive behavior. Japan and Austria ranked highest in masculinity; whereas Spain, Taiwan, the Netherlands, and the Scandinavian countries were among the lowest. The masculinity-femininity dimension is likely to manifest itself in the relative importance of achievement and possessions (masculine values) compared with a spirit of helpfulness and social support (feminine values). An aggressive, achievement-oriented salesperson can be more successful in Austria, Japan, or Mexico than in Denmark. The Japanese managers may react negatively to a woman, especially if she is younger than they are.

81) With the increased use of information technology and computers, there has been a noticeable positive and negative impact on linguistics. Text messaging and chat rooms have made it much easier to abbreviate common words, primarily due to limited space on keyboards of cell phones such as BlackBerry and to reduce time involved. Thus, a combination of numerical and alphabetical abbreviations is being used. For example, GR8 (great); CU (see you); AFK (away from keyboard); b4 (before); BBL (be back later); BRB (be right back); GMTA (great minds think alike); l8r (later) and ^5 (high five). In Korean, the phonetic pronunciation of the numerical sequence 8282 (Pal Yi PalYi) means hurry up and 7179 (Chil Han Chil Gu) sounds like "close friend." In some languages numerology has different meanings which when decoded can convey messages. In addition to being exciting, such use of terminology can make slogans stick in the minds of consumers and therefore can be used effectively in marketing. Some of these are getting to be universally accepted terms due to common use of computers and technological gadgets.

14

Answer Key Testname: C4

82) Linguists have divided the study of spoken language into four main areas: syntax (rules of sentence formation); semantics (system of meaning); phonology (system of sound patterns); and morphology (word formation). Unspoken or nonverbal communication includes gestures, touching, and other forms of body language. Both the spoken and unspoken aspects of language are included in the broader field of semiotics, which is the study of signs and their meanings. Language is a crucial tool for communicating with customers and channel intermediaries. Words have different meanings in different cultures. For example, post in America may refer to putting something on a bulletin board, whereas in British English it may mean mailing through the post office. Similarly, Miller Lite was considered to have less alcohol in Europe, whereas Diet Coke was considered as a dietary supplement in the Middle East. Changes were made to market Miller Lite as Miller Pilsner in Europe and Diet Coke as light coke in the Middle East. In addition to syntax and semantics, phonology can have an impact. For example, there is no letter that sounds like P in Arabic so Pepsi sounds like Bebsi and Popeye's sounds like Bobeye's. Similarly, sounds of r and l are intermixed in Chinese. In the United States recently, Sioux Gateway City airport decided to keep the symbol "SUX" although there were a lot of comments about its phonology. On the other hand, the airport decided to use it in marketing by using the slogan "Fly SUX" thereby making it easy for people to remember it. Semantics can also have an impact, such as the word Esso has negative connotation in some languages; Nova (as in Chevy Nova) meant it does not move and Colgate means "go hang yourself" in Spanish. Also, nonverbal cues can have different meanings. In some cultures shaking the head from right to left is considered as yes whereas it means no in some other cultures. Shaking hands is considered as finalizing the deal in some cultures and in others it is just an introduction. There are different ways of bowing in Far Eastern cultures to indicate different aspects. Thus, verbal and nonverbal communications have a distinct impact on marketing practices.

83) 1. Awareness. In the first stage the customer becomes aware for the first time of the product or innovation. Mass media advertising was critical in informing customers about the new iPhone. 2. Interest. Enough interest was generated by advertisement which did not fully disclose the exciting features of iPhone but did provide some clues. 3. Evaluation.

Customers became curious and started mental assessment of the product's benefits in relation to present and anticipated future needs. Also, comparative assessment was made to see how it is more versatile than the existing technology. 4. Trial. Most customers did not purchase iPhone since it was expensive and waited to get some "hands-on" experience. Such trials are common for many products and services. 5. Adoption. This is the final stage where the individual will make a decision to buy; purchases it; or adopts it. Personal sources of information are more important in the entire process than impersonal sources. Word-of-mouth becomes a very important persuasive force affecting the decision to buy.

84) In a low-context culture, messages are explicit and specific; words carry most of the communication power whereas in high-context culture, less information is contained in the verbal part of a message. Much more resides in the context of communication, including the background, associations, and basic values of the communicators. Japan and Saudi Arabia are examples of high-context culture, where a great deal of emphasis is placed on a person's values and position or place in society. In a low-context culture, such as the United States, Switzerland, or Germany, deals are made with much less information about the character, background, and values of the participants. In a high-context culture, a person's word is his or her bond. As a result, lawyers are much less important in high-context cultures. This also makes negotiations lengthy in high-context culture since several meetings or prodding is needed.

15

Answer Key Testname: C4

85) There are five different characteristics that are important in the adoption of innovations. They are: 1. Relative advantage. This involves a comparative assessment of the existing products or methods. If a product has a substantial relative advantage, it is likely to gain quick acceptance. The popularity of jump drives is an example for their preference over floppy disk. 2. Compatibility. This concerns the extent to which a product is consistent with existing values and past experiences of adopters. For example, the first consumer VCR, the Sony Betamax, failed because it could only record for one hour. Most customers wanted to record for longer periods of time and thus selected VHS-format, although the recording quality of Sony-Betamax was superior to VHS. 3. Complexity. The degree to which an innovation or new product is difficult to understand, operate, and use. The more complex a product is, the slower will be its adoption. The new digital cameras are an example of their slow adoption since their operations are very complex. 4. Divisibility. This is the ability of a product to be tried and used on a limited basis without great expense. There are wide discrepancies in income levels around the world as well as the storage conditions. Smaller cans of Coke and Pepsi are popular in many countries, with affordable prices and less storage space requirement. 5.

Communicability. It is the degree to which benefits of an innovation or the value of a product may be communicated to a potential market. Many of the software programs go unsold since their benefits are not fully communicated to customers. These characteristics give a clear outline of what is needed for an innovation to be successful.

86) An attitude is a learned tendency to respond in a consistent way to a given object or entity. Actually, they are clusters of interrelated beliefs. Many Japanese believe that the West is the source of important fashion trends, and therefore they share a favorable attitude toward American brands. A belief is an organized pattern of knowledge that an individual holds to be true about the world. Japan's monocultural society reflects the belief among the Japanese that they are unique in the world. Attitudes and beliefs are closely related to values. A value can be defined as an enduring belief or feeling that a specific mode of conduct is personally or socially preferable to another mode of conduct. Values represent the deepest level of a culture and are present in the majority of the members of a particular culture. The Japanese, for example, strive to achieve cooperation, consensus, self-denial, and harmony. Since these all represent feelings about modes of conduct, they are values. Attitudes, beliefs, and values are all interrelated and extremely important from a marketing point of view.

87) To address the problem and to eliminate or reduce cultural myopia, a systematic four-step framework is proposed as described below: Step 1. Define the problem or goal in terms of home-country cultural traits, habits and norms. Disney executives believe there is virtually unlimited demand for American cultural exports all over the world. Disney has a track record in exporting its American management system as seen by the success of Tokyo Disneyland. However, Disney policies prohibit sale or consumption of alcohol inside its theme parks.

Step 2. Define the problem or goal in terms of host-country cultural traits, habits, and norms. Make no value judgments. Europeans in general and the French in particular are sensitive about American cultural imperialism.

Consuming wine with the midday meal is a long-established custom in France. Many Disney characters are based on European folklore.

Step 3. Isolate the SRC influence and examine it carefully to see how it complicates the problem. The differences noted in earlier steps suggest strongly that the needs upon which the American and Japanese Disney theme parks were based did not exist in France.

Step 4. Redefine the problem without the SRC influence and solve for the host-country market situation. A modification in design of the theme park that is in keeping with French and European cultural norms will solve the problem. Focus on French identity on the park.

16

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Any Western country doing business in Malaysia or the Middle East should have an understanding of: A) Anglo-Saxon common law.

B) Roman law and the Napoleonic Code.

C) the Uniform Commercial Code.

D) the French Civil Code.

E) Islamic law.

1)

2) Companies such as Caterpillar have been unable to protect critical innovations in Japan because: A) the Japanese government enforces strict control over infringement rights for security reasons.

B) patents in Japan are broader than those in the United States.

C) U.S. patent laws now harmonize with those in the EU as well as Japan.

D) products very similar to those made by U.S. companies can be patented without fear of infringement.

E) inventions that are based on software can be easily downloaded.

2)

3) As part of their alliance relationship, Northwest Airlines and KLM Royal Dutch set air fare prices jointly and coordinate flight schedules. Normally, such behavior would be considered harmful to competition, but the U.S. government has granted the two airlines special exemptions from laws concerning: A) antitrust.

B) arbitration.

C) jurisdiction.

D) intellectual property.

E) licensing.

3)

4) Which of the following best describes the legal basis for protection of trade secrets, patents, and copyrights in the United States?

A) Trade secrets are protected by state law, while patents and copyrights are protected by federal statutes.

B) Trade secrets, patents, and copyrights are protected by state law.

C) Trade secrets, patents, and copyrights are protected by federal statutes.

D) Trade secrets, patents, and copyrights are not protected by any laws.

E) Trade secrets are protected by federal statutes, while patents and copyrights are protected by state law.

4)

5) Categories of political risk listed by EIU (Economist Intelligence Unit) include all of the following except: A) war.

B) international disputes.

C) corruption.

D) politically motivated violence.

E) social injustice.

5)

1

6) OPEC is a cartel, a group of separate companies that collectively: A) dictates how other countries should use their products.

B) sets prices, controls output, or takes other actions to maximize profits.

C) produces more products in order to beat the competition.

D) conducts activities that are considered illegal in the United States.

E) works on forming a union against management of other companies.

6)

7) A formal legal document that gives an inventor the exclusive right to make, use, and sell an invention for a specified period of time is known as a: A) copyright.

B) patent.

C) trade secret.

D) trade dress.

E) trademark.

7)

8) Which of the following actions were approved by the Antitrust Ruling in the United States?

A) merger of WorldCom (U.S.) and MCI (U.S.) B) merger of British Airways (U.K.) and American Airlines (U.S.) C) joint venture between music businesses of EMI group (Great Britain) and Washington Post (U.S.) D) merger of Sony Music (Japan) and BMG (Germany) E) acquisition of Honeywell (U.S.) by GE (U.S.)

8)

9) Bureaucracy is listed as a political risk category by: A) PRS. B) BERI. C) WTO.

9)

D) EIU.

E) OPIC.

10) According to Transparency International's Corruption Perceptions Index scores for 2016, the country which was listed as most corrupt was: A) Uzbekistan.

B) Afghanistan.

C) Chad.

D) Somalia.

E) Iraq.

10)

11) Which of the following is true about revised U.S. patent laws?

A) Patents are valid for 17 years after the patent is granted.

B) Patents are valid for 17 years after the patent is filed.

C) Patents are valid for 20 years after the patent is granted.

D) Patents are valid as long as the product is manufactured.

E) Patents are valid for 20 years after the filing date of the application.

11)

12) Which of the following statements does not reflect performance and service provided by Uber nationally and internationally?

A) Uber's rapid growth was another example that the "sharing economy," also known as "collaborative consumption," was gaining traction.

B) The European Commission conducted an inquiry and found Uber to be different than taxi services.

C) In Brussels, a court fines drivers who use Uber service.

D) Uber has encountered resistance as its popularity has grown.

E) Industry observers hailed the company as a prime example of digital technology disrupting an established industry.

12)

2

13) When companies operate abroad in the absence of home-country legal constraints, the best choice for ethical conduct would be: A) to abandon any attempt to maintain company ethics.

B) to adapt in varying degrees to local customs and practices.

C) to ignore bribery and act as if it does not exist.

D) to maintain home-country ethics worldwide with no adaptations.

E) to have a product that is clearly superior to that of the competition.

13)

14) In West Africa, Burkina Faso, the Ivory Coast and Senegal are former French colonies, while Nigeria, Sierra Leone, and Ghana are former British colonies. Based on this information, which of the following would be correct?

A) Burkina Faso, the Ivory Coast and Senegal are civil-code countries, while Nigeria, Sierra Leone, and Ghana are common-law countries.

B) All the West African nations mentioned are likely to be common-law countries.

C) West Africa, the Ivory Coast and Senegal are the only common-law countries.

D) Burkina Faso, the Ivory Coast and Senegal are common-law countries, while Nigeria, Sierra Leone, and Ghana are civil-code countries.

E) All the West African nations mentioned are likely to be civil-code countries.

14)

15) The European Commission has jurisdiction over European-based companies as well as non-European ones that generate significant revenues in Europe. If Microsoft applies in Europe, the Commission has a right to all of the following except: A) it can demand substantial concessions before granting approval.

B) it can refer serious matters to the UN Security Council.

C) it can approve with minor modifications.

D) it can block a proposed joint venture.

E) it can block a proposed merger.

15)

16) Which of the following statements is correct?

A) Neither the Berne Convention nor the Paris Convention is concerned with intellectual property.

B) The Paris Convention protects patents; the Berne Convention protects copyrights.

C) The International Union for the Protection of Literary and Artistic Property is different from the Berne Convention.

D) The Paris Convention protects copyrights; the Berne Convention protects patents.

E) The Berne Convention and Paris Convention are different names for the same thing.

16)

17) Which of the following is true about protection of computer software?

A) Patent laws protect both the actual code and the idea embodied in the code.

B) Copyright laws protect the actual code, while patent laws protect the idea.

C) Patent laws protect the actual code, while copyright laws protect the idea.

D) License protects both the actual code and the idea embodied in the code.

E) Copyright laws protect both the actual code and the idea embodied in the code.

17)

18) In Great Britain, the Wine and Spirit Association estimates that, on average, cars returning from France are loaded with 80 bottles of wine. This is most likely due to: A) antitrust scrutiny.

B) cross-border smuggling.

C) trademarks and copyrights violation.

D) high excise and VAT taxes.

E) bribes accepted by officers.

18)

3

19) What type of international disputes would be taken before the International Court of Justice?

A) disputes between a citizen of one country and a company from a different country B) disputes between profit and non-profit organizations C) disputes between a company and a nation D) disputes between two companies E) disputes between two nations

19)

20) The unauthorized publication or reproduction of copyrighted work is referred to as: A) mistake.

B) piracy.

C) trade secrets.

D) associative counterfeit.

E) imitation.

20)

21) The Uniform Commercial Code (UCC) is fully adopted by all U.S. states except: A) Montana.

B) North Dakota.

C) Louisiana.

D) Wisconsin.

E) Virginia.

21)

22) In 2005, representatives from several wine regions in the United States and the EU signed a Joint Declaration to Protect Wine Place & Origin. In addition, a Wine Accord signed by the United States and EU bans the: A) purchase of wine from country of origin.

B) misuse of labels which do not include the origin of ingredients.

C) use of the word "champagne" on wine made in the United States.

D) use of alcohol in public places.

E) misuse of place names by marketers of wine products that do not originate in those places.

22)

23) Which of the following would constitute a copyright violation?

A) printing and selling illegal copies of Harry Potter books B) manufacturing and selling illegal copies of Levi jeans C) manufacturing and selling illegal videocassette copies of "Spiderman" D) A, B, and C are copyright violations.

E) A and B are copyright violations.

23)

24) What happens if a nation has allowed a case against it to be brought before the ICJ (International Court of Justice) and then refuses to accept a judgment against it?

A) American Arbitration Association can be sought for justice.

B) European Court of Justice can be approached if the country is in the European Union.

C) International Chamber of Commerce will be another source for seeking justice.

D) The plaintiff nation can seek recourse through the United Nations Security Council.

E) UN Conference on International Trade Law can be approached.

24)

25) The high level of political risk currently evident in Russia can be attributed in part to: A) environment of uncertainty for foreign companies.

B) changing the national flag.

C) participation in the WTO (World Trade Organization).

D) excessive loans from the International Monetary Fund (IMF).

E) changing of name of the country.

25)

4

26) Counterfeiting is: A) the use of a distinctive mark of a brand that is no longer producing the original brand.

B) the use of a formal legal document for illegal purposes.

C) the ownership of a written, recorded, performed or filmed creative work.

D) the use of a product name that has different meaning than the original brand.

E) the unauthorized copying or production of a product.

26)

27) The U.S. Justice Department objected to a recent patent license agreement between S.C. Johnson & Sons and Bayer AG. The antitrust unit at the Justice department objected to: A) the hostile arrangement between Bayer and Johnson.

B) the duration of the license.

C) the exclusive nature of the license agreement.

D) the amount of royalties Johnson agreed to pay.

E) Bayer's attempts to circumvent FDA policies.

27)

28) Which of the following is true of the arbitration framework created by the New York Convention?

A) The grounds that are recognized are different than the typical appeals that are permitted in a court of law.

B) Signatory countries recognize and can enforce arbitration judgments.

C) There are limited grounds for appealing arbitration decisions.

D) Signatory countries can require parties to an arbitration agreement to actually use arbitration.

E) all of the above

28)

29) The governmental action to dispossess a foreign company or investor is known as: A) nationalization.

B) internationalization.

C) compensation.

D) confiscation.

E) expropriation.

29)

30) ________ refers to governmental action to dispossess a foreign company or investor. Compensation is generally provided, often not in the "prompt, effective, and adequate" manner provided for by international standards.

A) Deportation B) Expropriation C) Internationalization D) Nationalization E) Confiscation

30)

31) Consten, a French company, had exclusive rights to import and distribute German Grundig's electronic products into France. One of the competitors started bringing "parallel imports" into France illegally, importing Grundig products bought from a foreign supplier. Which of the following does not represent an action taken by different legal bodies?

A) The European Commission ruled that Grundig was in violation of the laws of the Common Market.

B) Consten's complaint was upheld by two French courts.

C) The Paris Court of Appeal's judgment was based on a ruling by the European Commission.

D) The European Commission ruled against Consten on the grounds that territorial protection proved to be damaging to the Common Market.

E) The Paris Court of Appeals suspended the judgment of the French courts.

31)

5

32) Uber's rapid growth is an example that ________ is gaining traction.

A) collaborative consumption B) transport convenience C) ride sharing D) digital technology E) tourism

32)

33) The International Court of Justice (ICJ) is located in: A) Hague.

B) Tokyo.

C) London.

D) New York.

E) Geneva.

33)

34) The German civil-law tradition prevails in all of the following countries except: A) Germany.

B) Poland.

C) Hungary.

D) Scandinavia.

E) Czech Republic.

34)

35) A proposed merger between two Swiss-based global pharmaceutical companies, Ciba-Geigy AG and Sandoz AG, would be subject to review by regulators from which of the following?

A) International Chamber of Commerce B) UN Conference on International Trade Law C) International Court of Justice D) European Commission E) none of the above

35)

36) What do value added taxes (VAT) encourage in countries such as China?

A) They make it harder to bribe officials.

B) They protect companies from antitrust scrutiny.

C) They result in cross-border shopping.

D) Global companies refrain from offering bribes.

E) They make trademarks and copyrights more valuable.

36)

37) The following criminal penalties may be imposed for violations of the FCPA'S (Foreign Corrupt Practices Act) antibribery provisions except: A) corporations are subject to a fine of up to $2,000,000.

B) in addition to fines, there may be imprisonment for up to five years.

C) fines imposed on individuals can be paid by their employer or principal.

D) officers, directors, stockholders, employees, and agents are subject to a fine of up to $100,000.

E) the fines may be much higher, up to twice the benefit sought by the defendant.

37)

38) In accordance with GATT, new U.S. patents are granted for a period of ________ years from the filing date.

A) 30 B) 10 C) 20 D) 27 E) 17

38)

6

39) Engineers at a company in a developing country study an American computer chip design, copy it, and produce identical chips that are then sold to local computer makers. What form of intellectual property has been wrongly appropriated?

A) trade secrets B) trademark C) copyright D) technological E) patent

39)

40) Any company doing business outside the home country should first carefully study the ________ in the target country.

A) social activities B) sovereignty C) political culture D) cultural activities E) intellectual activities

40)

41) A company stands a better chance of having an international arbitration decision upheld if its home-country government has signed: A) the Paris Convention.

B) the Geneva Convention.

C) the Vienna Convention.

D) the New York Convention.

E) the Prague Convention.

41)

42) Various types of political risk insurance to U.S. companies is provided by: A) WTO (World Trade Organization).

B) PRS Group.

C) BERI (Business Environment Risk Intelligence).

D) OPIC (Overseas Private Investment Corporation).

E) EIU (Economist Intelligence Unit).

42)

43) Italy recently introduced the Reguzzoni-Versace Law, which is intended to regulate trade in textiles, leather, and footwear. All of the following statements pertaining to the law are correct except: A) the law is more stringent than the existing laws where only one production stage has to occur in the country of origin.

B) at least four stages of production should occur in Italy for the product to be labeled as "Made in Italy."

C) Brussels objected on grounds that the law conflicts with restrictions provided by the European Union.

D) the countries in which the remaining production stages took place must be identified.

E) EU regulators view the law as "protectionist."

43)

44) The United States has more lawyers than any other country in the world and is arguably the most litigious nation on earth. This is a reflection of: A) the low-context nature of the American culture.

B) the lack of spirit of confrontational competitiveness.

C) the fact that conflicts arise more in the United States.

D) the fact that lawyers cannot undertake cases on contingency fee basis.

E) the lack of class action lawsuits.

44)

7

45) Harley-Davidson has applied for federal protection of an unusual form of intellectual property; the "soul-pleasing rumble" produced by its motorcycles. What type of protection is Harley-Davidson seeking?

A) patent B) copyright C) trademark D) license E) trade dress

45)

46) Islamic law is a comprehensive code based in part on: A) Roman law and the Napoleonic Code.

B) Anglo-Saxon common law.

C) the French Civil Code.

D) the Koran.

E) the Uniform Commercial Code.

46)

47) All of the following statements are true regarding services provided by Uber except: A) in London and other major cities, drivers have staged demonstrations claiming unfair competition.

B) regulators in Germany succeeded in obtaining a temporary injunction banning the service.

C) Uber is considered as an "information-society service" in 250 cities where it operates.

D) Uber was banned in the Delhi region after a driver was accused of sexually assaulting a female passenger.

E) in Brussels, a court fines drivers who use the service.

47)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

48) The University of Florence in Italy was sued by a lecturer from Belgium on grounds of discrimination. The case would go on to the European Court of Justice (ECJ), which would make a ruling based on Italian laws.

48)

49) Trade secrets are confidential information or knowledge that has commercial value, is in the public domain and for which steps have been taken to keep it secret.

49)

50) In Europe, individual EU countries gave up the right to have their own currencies, ceded the right to set their own product standards, and have made other sacrifices in exchange for improved market access.

50)

51) As the ruble's value fell through most of 2014, European firms began to feel the effects.

51)

52) The Brexit issue can be viewed as a mandate by Britons to regain some of what their nation lost to the "collective sovereignty" of the EU28.

52)

53) To establish ownership of a written, recorded, performed, or filmed creative work, it is necessary to apply for and be granted a patent.

53)

54) The guidelines of Hadith in Islamic law spells out the products and practices that are haram (forbidden).

54)

8

55) Under the Alternative Fines Act, fines imposed on individuals can be paid by their employer or principal.

55)

56) British Petroleum, British Airways, and Rolls-Royce were privatized under Margaret Thatcher's administration.

56)

57) Formation of a cartel like OPEC, consisting of oil-producing companies, would most likely be illegal in the United States.

57)

58) Antitrust laws in the United States and other countries are designed to combat restrictive business practices and to discourage competition.

58)

59) A recent rash of antitrust actions brought in the United States against foreign companies has raised concerns that the United States is violating international law as well as the sovereignty of other nations.

59)

60) According to U.S. laws, there is no restriction on remittances of royalties received abroad based on the commercial negotiation between licensor and licensee.

60)

61) India, Pakistan, Malaysia, Korea, and Japan have common-law jurisdictions.

61)

62) If an American businessperson pays a Russian customs agent a $20 cash "processing fee" to avoid delay in leaving Russia, the businessperson has violated the Foreign Corrupt Practices Act (FCPA).

62)

63) "Sharia" and "haram" are important concepts in civil-code laws, which are commonly practiced in Middle Eastern countries.

63)

64) Patents and trademarks that are protected in one country are protected in another, so global marketers must ensure that patents and trademarks are registered.

64)

65) Terms like crony capitalism and kleptocracy refer to rampant corruption and bribery within capitalism.

65)

66) In France, laws forbid the use of foreign words such as le weekend or le marketing in official documents.

66)

67) Italy recently introduced the Reguzzoni-Versace Law which states that if at least two stages of production—there are four stages altogether—occur in Italy, a garment can be labeled "Made in Italy."

67)

68) If a foreign company is taken over by the host country government, and some form of compensation is paid, "expropriation" has occurred.

68)

69) Denmark ranks highest in bribery as listed by the Corruption Perceptions Index (CPI) by Transparency International in 2016.

69)

70) A current global phenomenon in both nonmarket and market structures is the trend toward capitalism.

70)

9

71) If a foreign company is taken over by a host country government, and some form of compensation is paid, "confiscation" has occurred.

71)

72) The roots of modern international law can be traced to the twentieth-century Peace of Westphalia.

72)

73) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese companies to raise fax paper prices in the United States.

73)

74) Some legal experts believe that the pressures of global competition have resulted in an increased incidence of price-fixing and collusion among companies.

74)

75) Germany has accused the United States of promoting a legal system so complex that it requires legions of lawyers to interpret it. The U.S. response: German system is outdated.

75)

76) The TRIPs agreement requires signatory countries to protect against acquisition, disclosure, or use of trade secrets "in a manner contrary to honest commercial practices."

76)

77) Russian consumers have little choice but to "buy local" since farmed salmon has expanded to keep up with booming demand.

77)

78) A key issue is global patent protection for software. Although copyright law protects the computer code, it does not apply to the idea embodied in the software.

78)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

79) In most of the European Union countries, the influence of regulatory agencies is pervasive. What steps will be necessary of a corporation to protect business interest and advance new programs?

80) What are the differences between a patent, trademark, and a copyright? What is meant by counterfeiting?

81) In the United States, the Foreign Corrupt Practices Act (FCPA) is a legacy of the Watergate scandal during Richard Nixon's presidency. Administered by the Department of Justice and the Securities and Exchange Commission, the act is concerned with disclosure and prohibition. What is this law concerned with, and why is it a subject of criticism by many?

82) What are some of the criticisms of the Foreign Corrupt Practices Act (FCPA)? Give examples in support of your answer.

83) When a company invents a product or service, it should have a right to defend its creativity with intellectual patents. However, there are some countries like Italy and China where piracy and copyright violations are common. How can a corporation prevent this by having some built-in measures in products and services?

84) Explain, giving examples, as to why "jurisdiction" plays an important role in global marketing?

85) In Middle Eastern countries, it is common to see that courts handle marriages, divorces, distribution of family assets, and business practices by the "Sharia" law. What are these tenets and how do they have an impact on international business?

10

86) In December 2012, U.S. President Barack Obama signed the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law Accountability Act. What does this law entail and how does it affect Russia-U.S. relations?

87) What is the reason behind the formation of the American Innovation Act? What does this Act address?

88) What will happen if a European Union's competition commission ruled against a company? Give examples to illustrate your point.

89) What should a U.S. company do if competitors are willing to offer a bribe for business in a foreign country?

90) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese companies to raise fax paper prices in the United States under the antitrust laws. What are the implications of such a law, and how does it affect international business?

91) What are some of the challenges facing Amazon related to being dominant in online retailing?

11

Answer Key Testname: C5

1) E 2) D 3) A 4) A 5) E 6) B 7) B 8) E 9) D 10) D 11) E 12) B 13) E 14) A 15) B 16) B 17) B 18) D 19) E 20) B 21) C 22) E 23) D 24) D 25) A 26) E 27) C 28) E 29) E 30) B 31) A 32) A 33) A 34) D 35) D 36) C 37) C 38) C 39) E 40) C 41) D 42) D 43) B 44) A 45) C 46) D 47) C 48) FALSE 49) TRUE 50) TRUE 12

Answer Key Testname: C5

51) TRUE 52) TRUE 53) FALSE 54) TRUE 55) TRUE 56) TRUE 57) TRUE 58) FALSE 59) TRUE 60) TRUE 61) FALSE 62) FALSE 63) FALSE 64) FALSE 65) FALSE 66) TRUE 67) TRUE 68) TRUE 69) FALSE 70) FALSE 71) FALSE 72) FALSE 73) TRUE 74) TRUE 75) TRUE 76) FALSE 77) FALSE 78) TRUE 79) Executives of companies who would like to go global should realize that the influence of regulatory agencies worldwide is getting very pervasive. One way to understand the operation and legal aspects related to business environment is to have permanent representation of the company in the country. International companies such as McDonald's, Nike, and Toyota have several people representing their interests to the European Commission.

Companies hire several lobbyists to represent their interests as well as to influence the direction of the regulatory process. U.S. law firms and consulting firms also have sharply increased in number and can be seen having offices in Brussels. This way they can gain insight into EU politics and have access to its policymakers. It may also be possible to hire local people as official representatives of the companies. It is estimated that currently there are 15,000 lobbyists in Brussels representing about 1,400 companies and nonprofit organizations from around the world.

80) A patent is a formal legal document that gives an inventor the exclusive right to make, use, and sell an invention for a specified period of time. Typically, this invention should be a new, novel, and/or non-obvious creation. On the other hand, a trademark is defined as a distinctive mark, motto, device, or emblem that a manufacturer affixes to a particular product or package to distinguish it from goods produced by other manufacturers. A copyright establishes ownership of a written, recorded, performed, or filmed creative work.

Counterfeiting is the unauthorized copying and production of a product. An associative counterfeit, or imitation, uses a product name that differs slightly from a well-known brand but is close enough that consumers will associate it with the genuine product. The worst form of counterfeiting is known as piracy, which is the unauthorized publication or reproduction of copyrighted work. Counterfeiting and piracy are particularly important in industries such as motion pictures, recorded music, computer software, and textbook publishing. The United States in particular has a vested interest in intellectual property protection worldwide since it is home to many companies which have patents, trademarks, and copyrighted materials.

13

Answer Key Testname: C5

81) The act concerns disclosure and prohibition. The disclosure part of the act required publicly held companies to institute internal accounting controls that would record all transactions. The prohibition part makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business. Payments to third parties were also prohibited when they can be channeled to some related official as a bribe. Some critics of the FCPA feel strongly that this act is a sort of regrettable display of moral imperialism. The problem is the extra-territorial extension and sovereignty of U.S. law. To impose U.S. laws, standards, values, and mores on American companies and citizens worldwide is considered wrong. A second criticism of the FCPA is that it puts U.S. companies in a difficult position vis-à-vis foreign competitors. It is perceived that the act adversely affects U.S. businesses overseas. Bribes offered by non-U.S. companies are considerable and can provide a competitive advantage to other companies.

82) One of the criticisms of FCPA is that this law does not let a person do indirectly (e.g., through an agent, joint venture partner, or other third party) what it prohibits directly. For example, Rolls-Royce (the aircraft engine manufacturer, not the luxury car brand) is one well-known company that has run afoul of the anti-bribery laws in the United States and elsewhere. The UK-based firm has businesses in a variety of sectors, including civil aviation. Its energy business was sold to Germany's Siemens in 2014 but prior to the sale there was evidence of multiple offenses that occurred in Brazil, Kazakhstan, Nigeria, and Russia. Rolls-Royce agreed to pay a $919 million fine to the United Kingdom, the United States, and Brazil. In exchange, the company was not prosecuted on criminal charges. However, several former Rolls-Royce employees, charged by the U.S. Department of Justice with conspiring to violate the FCPA, pleaded guilty.

83) Individuals or companies sometimes find ways to exploit loopholes or other unique opportunities in patent, trademark, and copyrights. A company should take measures to protect itself from such piracy situations. For many of the technological products, certain codes can be built into the software program such that it is self-destructive or becomes inaccessible for those who would like to use piracy. One of the sure safe methods is to make the product or service of such a quality that it becomes very difficult or expensive for anyone to copy. One such example can be seen in the formulas of Coke and Pepsi beverages. The product has special features and it is distributed so cheaply such that there is no money left for the counterfeiters. Similarly, packages and containers can be made in such a way that it will become expensive or otherwise technologically impossible to copy. For example, in China, Budweiser cans have fluted edges that are difficult to manufacture. Thus, there can be some inherent qualities or manufactured processes which can make it difficult, if not impossible, to duplicate.

84) Jurisdiction plays an important role in trade-related disputes. Two examples illustrate the importance jurisdiction plays in addressing trade-related disputes. One pitted Volkswagen AG against General Motors. After GM's worldwide head of purchasing, José Ignacio López de Arriortúa, was hired by Volkswagen in 1992, his former employer accused him of taking trade secrets. Volkswagen accepted U.S. court jurisdiction in the dispute, although the company's lawyers requested that the U.S. District Court in Detroit transfer the case to Germany. Jurisdiction was also an issue in a trade dispute that pitted Eastman Kodak against Fuji Photo Film. Kodak alleged that the Japanese government had helped Fuji in Japan by blocking the distribution of Kodak film. The U.S. government turned the case over to the WTO despite the opinion expressed by many experts that the WTO lacks jurisdiction in complaints over trade and competition policy.

85) The legal system in many Middle Eastern and some Far Eastern countries is identified with the laws of Islam. These laws are associated with "the one and only one God, the Almighty." In Islamic law, the Sharia refers to a comprehensive code governing Muslim conduct in all areas of life, including business. The code is primarily derived from two sources.

The first and foremost source is the Koran or the Holy Book that is a record of the revelations made to the Prophet Mohammed by Allah (God). The second source is the Hadith which is an interpretation of Koran based on the sayings and practices of Prophet Muhammad. In particular, the Hadith spells out the products and practices that are Haram (forbidden) compared to Halal (allowed). Any non-Muslim doing business in Islamic countries should be aware of the Islamic laws which have wide implications for commercial activities including advertisement and promotion.

14

Answer Key Testname: C5

86) The first part of the law normalizes trade relations with Russia and Moldova by repealing Jackson-Vanik, a law dating back to mid-1970s. At that time, the Soviet Union was a non-market economy and restricted the right of its citizens to emigrate abroad. Jackson-Vanik denied most-favored-nation trading status to any country that blocked emigration rights. However, the Soviet Union broke apart in 1991, Russia has transitioned to a market economy, and today its citizens are free to travel abroad and emigrate. Moreover, Russia joined the World Trade Organization in 2012. For these reasons, Jackson-Vanik is no longer relevant.

The second part of the law is concerned with civil rights issues in Russia at the present time. Sergei Magnitsky was a Russian lawyer who uncovered evidence that Russian government officials had stolen $230 million in tax payments made by the Heritage Capital Management investment firm. When Magnitsky went public with his allegations in 2008, he was arrested. The law calls for the U.S. government to identify by name Russian officials believed to be complicit in Magnitsky's death; those persons will not be allowed to enter the United States and any assets held in the United States have been frozen.

87) In 2011, the U.S. government overhauled the patent system once again with the passage of the American Innovation Act. This Act addressed the problem of so-called patent trolls who file multiple patent applications with the intent of getting large tech companies such as Facebook, Apple, and Google to pay large sums to settle patent claims. A new entity, the Patent Trial and Appeal Board, was created to expedite the process of resolving patent infringement cases.

Some observers have noted that the push-back on patent protection has led to a decline of U.S. investment in life sciences and software.

88) In fall 2017, the EU's competition commissioner, announced that Amazon would have to pay €250 million in back taxes after the European Commission ruled that the online giant's Luxembourg operations had benefited from illegal state aid over a ten-year period. In 2004, Amazon had shifted certain intellectual property (IP) into a non-taxable holding company in Luxembourg that collected IP royalties from operations in Europe and then paid the parent company. The Brussels-based Commission alleged that the arrangement allowed Amazon to shift as much as three-fourths of its European profits into the holding company, thereby reducing its tax bill. Under EU law, individual EU states cannot selectively grant tax benefits to some global companies but not others. Not surprisingly, Amazon denied any wrongdoing. The previous year, in 2016, the Commission ruled that Ireland had granted Apple illegal tax advantages, and ordered the country to recover €13 billion in back taxes. Both Apple and Ireland disagreed with the Commission's findings; Apple CEO Tim Cook called the investigation and the resulting ruling "total political crap." After Apple refused to pay, the Commission referred the case to the European Court of Justice.

89) Managers have to realize the fact that bribery is a fact of life in world markets. It is not going to change overnight or based on how ethical the U.S. companies feel about their business. In fact, bribery payments are considered a deductible business expense in many European countries. Two alternative courses of action are possible. One is to ignore bribery and act as if it does not exist. This may be a very hard option. The other is to recognize the existence of bribery and evaluate its effect on the customer's purchase decision, in other words, treating it as just another element of the marketing mix. The overall value of a company's offer must be as good as, or better than, the competitor's overall offering, including bribe. If possible, a lower price, a better product, a better distribution system, or better advertisement/promotion can be undertaken to beat the competition. The best line of defense is to have a product or service that is superior to that of the competition, whether a bribe is included or not. Thus, a bribe should not be a factor that will sway the purchase decision.

15

Answer Key Testname: C5

90) Antitrust laws in the United States and other countries are designed to combat restrictive business practices and to encourage competition. Agencies such as the U.S. Federal Trade Commission, Japan's Fair Trade Commission, and the European Commission enforce antitrust laws. According to some legal experts, the pressures of global competition have resulted in an increased incidence of price-fixing and collusion among companies. The Sherman Act of 1890 prohibits certain restrictive business practices, including fixing prices, limiting production, allocating markets, or any other scheme designed to limit or avoid competition. The law applies to the activities of U.S. companies outside U.S. boundaries, as well as to foreign companies conducting business in the United States. Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese companies to raise fax paper prices in the United States.

The Japanese government denounced the U.S. indictment as a violation of international law and Japan's sovereignty. A U.S. federal judge struck down the indictment, ruling that the Sherman Act does not apply to foreign conduct.

However, a federal appeals court reversed the decision.

91) There have also been calls on both sides of the Atlantic for regulators to challenge the dominance of online retailing giant Amazon. For example, during the 2016 U.S. presidential campaign, candidate Donald Trump singled out the company for criticism, complaining, "Amazon is controlling so much." Amazon's admirers point out that, despite or perhaps because of its size, Amazon is a "consumer first" company that offers low prices on some 400 million different products. The broader question is whether existing antitrust laws and regulations need to be revised to reflect the Internet age. Some observers want companies such as Facebook and Google to be regulated as public utilities!

16

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which of the following can be defined as a business philosophy that values two-way communication between a company and individual customers?

A) CRM B) ECR C) EDI D) BOLD E) EPOS

1)

2) CRM tools allow companies such as Credit Suisse, AT&T, Hewlett-Packard and others to determine: A) which customers are most valuable.

B) warranty of products sold to consumers.

C) the use of credit cards for payment.

D) the use of laptop computers by customers.

E) amount paid by consumers in different countries.

2)

3) One of the key features of an EDI (Electronic Data Interchange) system is: A) it allows easy access to all company data to vendors.

B) it saves both time and money by using different languages.

C) it allows third-party transmission connections to company data.

D) its transaction formats are universal.

E) vendors receive orders by voice mail.

3)

4) Tools that can be used for collecting primary data include: A) focus groups and survey research.

B) interviews and observation.

C) consumer panels and observation.

D) survey research and interviews.

E) all of the above

4)

5) The music industry's use of big data shows how information about buyer behavior and the overall business environment is vital to effective managerial decision making. All of the factors listed below facilitate decision making for music industry except: A) big data helps in increasing revenues from paid downloads.

B) big data allows executives to see what factors "move the needle" across a variety of metrics.

C) musicians can interact with fans via social networks.

D) big data allows record executives and band managers to find patterns and discern market trends.

E) data analytics permit record company executives to overlay information about an artist's appearance on a TV show.

5)

6) Which of the following is an inaccurate description of secondary data use in global markets?

A) It can be accessed quickly.

B) It cannot be retrieved online.

C) A great deal is available from government agencies.

D) It is often so expensive that small companies cannot afford to access it.

E) It was not gathered specifically for the research project at hand.

6)

1

7) An ________ is a company's private data network, accessible only by authorized persons inside the organization.

A) EDI B) Internet C) ECR D) EPOS E) intranet

7)

8) The U.S. government's most comprehensive source of world trade data is: A) National Trade Data Base (NTDB).

B) Gross Domestic Product (GDP).

C) Census Bureau.

D) Eurostat.

E) Bureau of Economic Analysis.

8)

9) Which of the following environmental factors may require marketers to adjust their approach to conducting international as opposed to domestic marketing research?

A) Company personnel must come to grips with a new set of culture-based assumptions about conducting business.

B) Research may help reduce psychological overload.

C) Researchers may have to broaden the definition of competitors to include competitive pressures not present in the domestic market.

D) Researchers must be prepared for new parameters of doing business.

E) All of the above

9)

10) Suppose Apple has collected extensive survey data about its new iPhone, and respondents have rated it on 20 different features and benefits. Now researchers want to reduce the amount of data to a few underlying dimensions. Which data analysis technique should the researchers use?

A) conjoint analysis B) multidimensional scaling C) factor analysis D) cluster analysis E) analogy

10)

11) Potential markets can be subdivided into: A) existing and latent markets.

B) latent and parallel markets.

C) incipient and existing markets.

D) existing and incipient markets.

E) latent and incipient markets.

11)

12) A market research study of soft drink consumption and distribution in Hungary commissioned by an American company indicated that soft drinks were available in drugstores. However, Western-style drugstores do not exist in Hungary. This illustrates an important issue in global marketing research, namely: A) market estimation by analogy.

B) using multidimensional scaling.

C) comparability of data.

D) inflated data.

E) using convenience samples.

12)

2

13) Whirlpool conducts usability studies that provide insight into the ways consumers interact with its products. In one study in an emerging market, engineers and designers stood behind a two-way mirror and watched as a volunteer put groceries away in a Kenmore Elite refrigerator. The Whirlpool team recorded a variety of data, such as the amount of time required for the volunteer to finish the task and the number of features used. The basis of this research study was based on the fact that: A) listening to customers is only possible in America.

B) in India, refrigerators are seldom used by customers.

C) consumers in different countries prefer different types of features.

D) data collected in the United States should be applicable in other countries.

E) in China, it will be difficult to find enough space in homes to put a refrigerator.

13)

14) Anyone undertaking a market research project should understand that the first step is: A) determining information requirements.

B) setting the budget.

C) defining the problem.

D) determining the methodology to use.

E) deciding who will see the final report.

14)

15) For consumer products, qualitative research is especially well suited to: A) identify core brand equity.

B) get close to the consumer.

C) identify what people really feel.

D) describe the cultural context of consumer behavior.

E) all of the above

15)

16) In Singapore, Coca-Cola wanted to develop an advertisement program. They selected a group of teenagers and a trained moderator facilitated discussion asking questions related to brand's image, advertisement, social trends, TV watching habits, and snack usage. This type of research is called: A) observational studies.

B) focus group research.

C) survey research.

D) comparison studies.

E) experimental research.

16)

17) Direct sensory perception provides a vital background for the information that comes from human and documentary sources since: A) it involves reading and reviewing documents.

B) top executives are involved in getting firsthand information.

C) it provides secondhand information.

D) it means firsthand seeing, feeling, hearing, smelling, and tasting.

E) it is easy and the most economical way of collecting data.

17)

18) Problems faced by small markets around the world in collecting research data can be overcome by all of the following ways except: A) get information from selected individuals who may be familiar with demographics.

B) estimate demand by using the economic and demographic relationships.

C) use methods sacrificing elegance in order to minimize expenses.

D) use inexpensive survey research sacrificing statistical rigor.

E) devise inexpensive research techniques and methods.

18)

3

19) Marketers must be aware of the impact of SRC and other cultural assumptions since: A) it can help ensure that the research effort is designed with minimal home-country bias.

B) it enhances management's willingness to pursue market research.

C) it can help ensure that the research effort is designed with minimal second-country bias.

D) it can have several positive effects on market planning.

E) All of the above are correct.

19)

20) A market researcher who uses multidimensional scaling (MDS) will: A) conduct a focus group.

B) attempt to determine the combination of product features that create the greatest utility for consumers.

C) ask respondents to rate a particular product or brand in terms of multiple characteristics or attributes.

D) ask respondents to evaluate product or brand pairs in terms of similarity.

E) attempt to estimate market size by analogy.

20)

21) Which of the following is not recommended by expert David Arnold for companies engaged in global market research?

A) assess a particular market in isolation B) use multiple indicators C) observation should be weighted more heavily than statements of purchase intention D) develop customized measures specific to an industry or product E) conduct comparative assessments in neighboring countries

21)

22) According to David Arnold, there are four possible approaches to forecasting by analogy, which does not include which of the following?

A) Data is available about a comparable company in the same country.

B) Data is available on a comparable product in the same country.

C) Data is available on the same product in every country.

D) Data is available on the same product in a comparable country.

E) Data is available on the same product from a dependent distributor in a neighboring country.

22)

23) When a survey questionnaire in English is translated into Korean for use in South Korea and then translated into English, it is described as: A) comparative translation.

B) parallel translation.

C) incipient translation.

D) back-translation.

E) native translation.

23)

24) Which of the following is an IT tool designed specifically to help retailers work more closely with vendors on stock replenishment?

A) data warehouse B) projection C) ECR D) BOLD E) EDI

24)

25) The decision by Toyota executives to introduce the Sienna minivan in the U.S. market was based on their study of a(n) ________ market.

A) latent B) incipient C) parallel D) global E) existing

25)

4

26) The first step in formulating and conducting research is to: A) design research.

B) select unit of analysis.

C) define the problem.

D) examine data availability.

E) collect information.

26)

27) The reasons why a majority of recording artists are struggling to adapt to the new music economy include all of the following except: A) musicians can interact with fans via social networks.

B) the majority of recording artists do not come close to achieving the same level of global success as Swift, Adele, Cardi B, Ed Sheeran, or Jay-Z. C) artists do not see significant financial returns even after a song is streamed millions of times.

D) the music industry has embraced information science and big data.

E) to supplement their incomes, many artists have opted to tour constantly, hoping to generate income from ticket and merchandise sales.

27)

28) In India, only 10% of men who shave use Gillette razors. Worldwide, 50% of male shavers use Gillette products. To achieve greater penetration in India, Gillette rolled out a no-frills brand that costs 15 rupee —about 34 cents. The Gillette Guard® has a lighter handle that is cheaper to produce. It also lacks the lubrication strip found in Gillette's more expensive razors, and replacement blades cost only 5 rupees (11 cents). This use of data is described as: A) income elastic analysis.

B) multidimensional scaling.

C) factor analysis.

D) market estimation by analogy.

E) demand pattern analysis.

28)

29) Which of the following is true about etic and emic approaches to country analysis?

A) An emic approach studies a culture "from the outside"; etic analysis studies a culture from within.

B) An emic approach studies a culture from within; etic analysis is "from the outside."

C) The etic and emic approaches are identical.

D) The emic/etic approaches cannot be applied to Asian countries.

E) The emic/etic distinction is not useful in cultural studies.

29)

30) To gain insights for product and package design improvements, Procter & Gamble sent video crews into 80 households in the United Kingdom, Italy, Germany, and China. P&G's ultimate goal was to amass an in-house video library database. This type of technique is known as: A) scaling technique.

B) qualitative technique.

C) MDS technique.

D) reactivity technique.

E) projective technique.

30)

31) An ________ system allows a company's business units to submit orders, issue invoices, and conduct business electronically with other company units as well as outside companies.

A) intranet B) Internet C) EPOS D) ECR E) EDI

31)

5

32) Campbell is the world's largest soup company, commanding about 80% of the U.S. canned soup market. However, the company has a presence in only 6% of the world's soup markets. Russians eat 32 billion servings of soup each year, and the Chinese consume 300 billion! By contrast, Americans eat 15 billion servings each year. Sensing a huge opportunity, Campbell has dispatched teams to observe Russian and Chinese habits. This type of interpretation and decision is based on: A) time series displacement.

B) comparative analysis.

C) demand pattern analysis.

D) polycentrism.

E) income elastic analysis.

32)

33) All of the following represent keys to success of Tesco's Clubcard except: A) for every 100 points accumulated, shoppers receive a £1 voucher that can be redeemed for future grocery purchases or used with airline frequent-flyer programs.

B) traditional shoppers who buy ingredients to prepare home-cooked meals gravitated toward "Tesco's Finest" label.

C) by combining household information with weekly purchase behavior data, obtained by the Clubcard, Tesco is able to tailor promotions to specific customer segments.

D) Tesco's Clubcard is a loyalty program that the U.K.-based grocery store chain uses to reward customers; shoppers receive points based on purchase amounts.

E) Clubcard gives Tesco a tactical advantage over Walmart's Asda stores.

33)

34) Predicting economic and income growth rates is particularly important when researching which type of market?

A) incipient markets B) existing markets C) parallel markets D) latent markets E) local markets

34)

35) For research, the unit of analysis can be a single country or region; however, for all market-entry decisions, ________ data are not required.

A) countrywide B) districtwide C) specific city D) statewide E) provincial

35)

36) Emerging markets present a number of challenges to anyone conducting market research, which includes all of the following except: A) geographic issues.

B) underdeveloped technology infrastructure.

C) privacy issues.

D) data-gathering methodologies.

E) lack of field teams.

36)

6

37) When Mattel first introduced Barbie in Japan, managers assumed that Japanese girls would find the doll's design just as appealing as American girls did. This may be due to: A) Barbie being a symbol of American lifestyle.

B) Barbie's physical features such as long legs and blonde hair.

C) the limited competition for dolls in Japan.

D) the SRC tendency on the part of American managers.

E) the SRC tendency on the part of Japanese consumers.

37)

38) Marketer's should be aware of the impact of self-reference criterion (SRC) and other cross-cultural assumptions. The advantages of such awareness include all of the following except: A) it can ensure that the research effort is not affected by home-country findings.

B) it can help marketer's contradict "tried-and-true" marketing experience in other markets.

C) it can enhance management's willingness to conduct market research.

D) it can ensure that the research effort is designed without any bias.

E) it can enhance management's receptiveness to research findings.

38)

39) CRM tools do not help companies in determining: A) the use of laptop computers by customers.

B) amount paid by consumers in different countries.

C) the use of credit cards for payment.

D) which customers are very demanding.

E) warranty of products sold to consumers.

39)

40) For consumer products, qualitative research is especially well suited to accomplish all of the following tasks except: A) describe the social and cultural context of consumer behavior.

B) identify core brand equity and brands.

C) assess consumer spending trends.

D) provide consumer understanding.

E) determine what consumers really feel.

40)

41) Which of the following correctly reflects marketing expert David Arnold's recommendations for companies engaged in global market research?

A) conduct comparative assessments in neighboring countries B) use multiple indicators C) develop customized measures specific to an industry or product D) observation should be weighted more heavily than statements of purchase intention E) all of the above

41)

42) One study of adult involvement in household tasks revealed greater similarities between the United Kingdom and the United States compared with France, Belgium, and French Canada. Thus, the United States and United Kingdom were "twins" based on common language. This study is an example of: A) factor analysis.

B) cluster analysis.

C) conjoint analysis.

D) multidimensional scaling.

E) market latency.

42)

7

43) Although environmental scanning is a vital source of information, research has shown that headquarters executives of global companies obtain as much as two-thirds of the information they need from: A) professional publications.

B) personal sources.

C) trade publications.

D) census data.

E) government publications.

43)

44) A marketer of breakfast cereals might send researchers to preselected households at 6 A.M. to watch families go about their morning routines. The client could also assign a researcher to accompany family members to the grocery store to record their behavior under actual shopping conditions. This type of research method is considered as: A) focus group.

B) consumer panel study.

C) invasion of privacy.

D) observation.

E) factor analysis.

44)

45) When a trained person is recording items selected in a grocery cart or basket, the research method is known as: A) observation.

B) secondary data collection.

C) focus study.

D) survey research.

E) personal interviews.

45)

46) When the Coca-Cola Company used the "micro-dosing technology" that allows for 170 possible drink combinations, the user data generated by the units helped in developing a new flavor: Cherry Sprite. This is an example of collecting ________ data.

A) MIS B) incipient C) primary D) quantitative E) secondary

46)

47) One study compared consumer-shopping attitudes in the United States, Jordan, Singapore, and Turkey. Data for the latter three countries were gathered from convenience samples recruited by an acquaintance of the researcher. Although data gathered in this way are not subject to statistical inference, they may be adequate to address the problem. In this study, for example, the researchers were able to identify a clear trend toward cultural convergence in shopping attitudes and customs that cut across modern industrial countries, emerging industrial countries, and developing countries. The sample obtained in this case is referred to as a: A) convenience sample.

B) quota sample.

C) secondary sample.

D) probability sample.

E) focus group sample.

47)

8

48) When consumers have difficulty in verbalizing their perceptions, and there are different alternative brands of toothpaste, what is the best method of judging them in terms of similarity?

A) multidimensional scaling B) factor loading C) focus group D) cluster analysis E) dependence techniques

48)

49) One challenge of using CRM is: A) assessing the use of credit cards for payment.

B) knowing the use of laptop computers by customers.

C) understanding which customers are most valuable.

D) knowing amount paid by consumers in different countries.

E) integrating data into customer relationships.

49)

50) In 1998, U.K.-based retailer Marks & Spencer closed its office in Shanghai and tabled plans to commence operations there. After 3 years of research, they concluded that the timing is not right.

The majority of their customers are from middle-income groups. Within a decade, however, China's emerging middle class represented an attractive opportunity. Marks & Spencer opened its first store in Shanghai in 2008; by 2017, there were 10 stores. However, when its sales stalled, the company pulled out of China for the second time. Part of the problem: low brand awareness, plus the fact that many Chinese shoppers preferred "fast-fashion" brands such as Zara and H&M. China was considered as a(n)________ market in both instances.

A) cluster B) primary C) latent D) incipient E) existing

50)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

51) Market research is the project-specific, systematic gathering of data and is the activity that links the consumer, customer, and public to the marketer through information.

51)

52) Volkswagen, Peugeot, Chrysler, and other global automakers have established manufacturing operations in China since they consider it to be an incipient market.

52)

53) An "incipient market" is a market that will emerge if a particular economic, demographic, political, or sociocultural trend continues in a country.

53)

54) A Safe Harbor agreement establishes principles for privacy protection.

54)

55) Gathering data is an end in itself.

55)

56) "Back-translation" is a technique whereby a survey or other document that has been translated is returned (i.e. "sent back") to the translator for corrections.

56)

57) It is difficult to obtain a representative sample in Brazil since the technological infrastructure for gathering market data is minimal.

57)

58) Market research should focus on finding out how a potential customer can be changed into an actual customer.

58)

9

59) If a market researcher would like to know how much the typical Nigerian consumer spends on soft drinks, the information can be obtained from GNP or GDP.

59)

60) To prevent the most value-conscious shoppers from defecting to Walmart, Tesco mined its database to identify Clubcard users who buy the lowest-priced grocery items.

60)

61) EDI links with vendors to enable retailers to improve inventory management and restock hot-selling products in a timely, cost-effective manner.

61)

62) Mattel Toys thought that Barbie would be as popular in Japan as it is in the United States. This assumption was due to the self-reference criterion (SRC).

62)

63) During earlier days, Japanese women almost never used mascara because, by nature, they have very straight, short and thin lashes. This was observed during a focus group study.

63)

64) "Back-translation" is a technique used to ensure that currency conversion is performed correctly when financial statements of foreign subsidiaries are consolidated with financial statements at headquarters.

64)

65) It will be convenient to do a telephone survey in rural areas in China since, according to the Ministry of Information Industry reports, 40 percent of households have at least one fixed-line telephone.

65)

66) Red Bull energy drink manufacturer, Dietrich Mateschitz, hired a market research firm to assess the market potential for the drink. In the tests, consumers reacted negatively to the taste, the logo, and the brand name. The company ignored the research completely.

66)

67) If Avon would like to sell cosmetics in India, a good estimate of sales can be predicted by researching the average wage of an office secretary.

67)

68) Companies wishing to minimize the cost and effort associated with market research should start by collecting and analyzing primary data.

68)

69) If interaction between two variables is desired, factor analysis can be used to transform large amounts of data into manageable units.

69)

70) Africa represents a huge untapped market for shoes since most people walk barefoot. Thus, it will be easy to alter entrenched consumer behavior patterns if shoes are available.

70)

71) By combining household information with weekly purchase behavior data, Tesco is able to tailor promotions to specific customer segments.

71)

72) Direct sensory perception provides a vital background for the information that comes from human and documentary sources.

72)

73) A latent market is, in essence, an undiscovered market segment.

73)

74) When using a "projective technique," the researcher presents close-ended or ambiguous stimuli to a subject in a focus group.

74)

10

75) Retailers are increasingly using a technique known as efficient consumer response (ECR) in an effort to work more closely with vendors on stock replenishment.

75)

76) Culture shapes attitudes and values in a way that directly affects people's willingness to respond to interviewer questions.

76)

77) In global marketing research, the results of a nonprobability sample can be projected with statistical reliability.

77)

78) A marketer of breakfast cereals might send researchers to preselected households at 6 a.m. to watch families go about their morning routines.

78)

79) Traditional market research is the most effective means for identifying latent markets.

79)

80) Direct perception can be important when a global player dominates a company's domestic market.

80)

81) According to Peter Drucker, Japanese companies are the leading sellers of fax machines because their understanding of the market was based on survey research.

81)

82) In global marketing research, it is important to establish scalar equivalence when obtaining information from different countries.

82)

83) CRM tools allow companies like American Express, Dell, Sharp, and Sony to determine which customers are most valuable and to react in a timely manner with customized products and service offerings that closely match customer needs.

83)

84) A "touchpoint" provides important data about consumers.

84)

85) Using big data analytics, Netflix knows that twenty-something males have viewing habits that many people would associate with 70-year-old females, and vice versa.

85)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

86) If Coach, a luxury goods marketer, would like to study the consumer perceptions of global luxury brands, what would be the best approach since there are several competitors?

87) Many of the fast food operations are entering markets in Middle Eastern countries. In the United States, breakfast items are very popular and are responsible for a majority of the profit from sales, primarily from drive-in customers. However, to their dismay, managers found that there was practically no demand for breakfast items.

Firstly, due to hot weather conditions, people sleep late and wake up late. Secondly, they do not eat burgers, and sausage or bacon is prohibited. Also, drive-in business is not popular since people go to work at different periods of time. Explain the reasons why these facts were not discovered by marketing research.

88) What are the secondary sources of data and how do these sources differ from primary sources? Give examples of sources from which secondary data can be obtained.

89) What are "interdependence techniques" in the analysis of data? What type of measurement is possible with this technique, and what are different methods that are used in marketing research?

11

90) What is meant by Comparative Analysis and Market Estimation by Analogy? How can these be helpful in marketing research?

91) Global competition intensifies the need for effective MIS and business intelligence that are accessible throughout the company. How can IT provide valuable tools in fulfilling this need as well as conducting global marketing research?

92) What is the difference between emic and etic analysis? Explain with examples as to how these analyses can be used in marketing research.

93) Grey China Advertising agency gathers a wealth of information about attitudes and buying patterns of the Chinese in its Grey China Base Annual Consumer Study. Recent findings point to growing concerns about the future, Westernization of grocery purchases, growing market saturation, increasingly discerning customers and a rise in consumer willingness to try new products. These data can be very inconsistent since conflicting findings were reported by different agencies. For example, data gathered by Euromonitor International estimates soft-drink consumption at 23 billion liters in China, while Coca-Cola's in-house marketing research team places the figure at 39 billion liters. Similar differences were noted in other data published by different agencies. What is the best approach in such situations so that finite decisions can be made? What are the differences between latent and incipient markets?

94) How can observational studies and focus groups be used in marketing research? What are the different methods by which these studies are conducted?

95) Big data can be used in collecting information about buyer behavior and the overall business environment, which is vital in making effective managerial decisions. Giving reasons illustrate how this can be accomplished.

96) Authors Michael Czinkota and Ilka Ronkainen identified four specific environmental factors that may require international research efforts to be conducted differently than domestic research. Describe those factors to outline the differences.

97) Describe guidelines that are recommended by David Arnold for data gathering and explain their importance in marketing research.

12

Answer Key Testname: C6

1) A 2) A 3) D 4) E 5) A 6) D 7) E 8) A 9) E 10) C 11) E 12) C 13) C 14) A 15) E 16) B 17) D 18) A 19) E 20) D 21) A 22) C 23) D 24) C 25) E 26) E 27) D 28) D 29) B 30) E 31) E 32) B 33) B 34) A 35) A 36) E 37) D 38) C 39) D 40) C 41) E 42) B 43) B 44) D 45) A 46) C 47) D 48) A 49) E 50) D 13

Answer Key Testname: C6

51) TRUE 52) TRUE 53) TRUE 54) TRUE 55) FALSE 56) FALSE 57) TRUE 58) TRUE 59) FALSE 60) TRUE 61) TRUE 62) TRUE 63) FALSE 64) FALSE 65) FALSE 66) TRUE 67) TRUE 68) FALSE 69) FALSE 70) FALSE 71) TRUE 72) TRUE 73) TRUE 74) FALSE 75) TRUE 76) TRUE 77) FALSE 78) TRUE 79) FALSE 80) TRUE 81) FALSE 82) TRUE 83) TRUE 84) TRUE 85) TRUE 86) Consumers may differentiate one designer brand from another in various ways, such as how easy it is to purchase each brand, how visible each brand is, whether or not the brand offers diffusion lines, etc. A study can be conducted to study the perceptual dimension of "ubiquitous verses rare." A five-point similarity judgment scale of selected designer brands can be developed. The responses achieved help marketers understand which brands in a particular category are in direct competition with each other and which are not. The responses can be analyzed using an MDS program—the perceptual mapping. The perceptual map will show the differences such as between ubiquity and rarity or exclusivity and accessibility. The position of Coach, thus can be studied from the map. This type of study could help Coach to respond to new industry realities, which include a shift in the perception of what constitutes luxury and the increasing fragmentation of consumer tastes. Such a map will be helpful in knowing up-and-coming fashion designers hoping to launch a new line.

14

Answer Key Testname: C6

87) When conducting research in a foreign country one has to be free from any kind of bias or prejudice as possible. A person's home-country values and beliefs may consciously or unconsciously influence the assessment of a foreign culture or country. This is referred to as SRC (self-reference criterion). The SRC tendency underscores the importance of understanding the cultural environments of global markets. As in the above case, assumptions based on home-country marketing success turned out to be wrong when applied in a Middle Eastern country. A marketing program that is successful in one country does not guarantee success in another country. Thus, marketers must be aware of the SRC and its impact. Such awareness can have several positive effects. It can enhance management's willingness to conduct market research in the first place. Also, an awareness of SRC can help in ensuring the validity of research with minimal home-country or second-country bias. In other words, the research will have potentially useful results which managers will be able to accept and implement.

88) A low-cost approach to market research and data collection begins with desk research. There are a lot of secondary sources which are a good place to start. Data from census bureaus; government and private agencies; trade associations; chamber of commerce; published reports; academic institutions; and public libraries are not only extensive but can provide valuable information in a very cost-effective manner. All of these are considered as secondary sources since the data already exist and is not based on the research conducted by the company. Data obtained by conducting research by the company is considered as a primary source. This may also include the company's unpublished reports and other financial data. Other secondary sources include the U.S. Government's National Trade Data Base (NTDB), an online resource from the Department of Commerce. Similarly, there are other data which are published by almost all of the federal government agencies. Most countries compile data related to the gross national product (GNP), gross domestic product (GDP), consumption, investment, government expenditures, price levels, and import/export expenditures. Demographic data are available from the United Nations' agencies as well as other international agencies. The Statistical Yearbook of the United Nations contains global data on agriculture, mining, manufacturing, construction, energy production consumption, internal and external trade, health, housing, education and lots of other services. Similar data are collected by the U.S. Central intelligence Agency which publishes the World Fact book. Other sources are the World Bank and the International Monetary Fund. The Economist and Financial Times regularly compile comprehensive surveys of regional and country markets and include them in their publications. Data from many of these sources are generally available in both print and electronic forms. There are also different country Web sites which also provide some useful information. Syndicated studies published by private research companies are another source of secondary data and information.

89) Interdependence techniques show the interaction between variables and are comprised of factor analysis, cluster analysis, and multidimensional scaling (MDS). Factor analysis can be used to transform large amounts of data into manageable units. Specialized statistical programs can reduce or group the data by distilling out certain meaningful factors. These factors are selected by the program on the basis of attitudes and perceptions that can be closely aligned from a multitude of survey responses.

Factor analysis is useful in psychographic segmentation studies. It can also be used to create perceptual maps.

Cluster analysis allows the researcher to group variables into clusters that maximize within-group similarities and between-group differences. Cluster analysis shares some characteristics of factor analysis in that it does not classify variables as dependent or independent. It can also be used in psychographic segmentation. It is well suited to global marketing research because similarities and differences can be established between local, national, and regional markets of the world. Cluster analysis can also be used to perform benefit segmentation and identify new product opportunities.

MDS is another technique for creating perceptual maps. When the researcher is using MDS, the respondent is given the task of comparing products or brands, one pair at a time, and judging them in terms of similarity. The researcher then infers the dimensions that underlie the judgments. MDS is particularly useful when there are many alternatives from which to choose and when consumers may have difficulty verbalizing their perceptions. To create a well-defined spatial map, a minimum of eight products or brands should be used.

15

Answer Key Testname: C6

90) In global marketing research, it may be necessary to conduct comparisons of market potential and marketing performance in different countries or regional markets at the same point in time. This analysis can be intra-company or cross-national comparison. There may be differences even under similar conditions from one country to another. For example, catalog sales in the United States represent about 3% of overall retail sales. By comparison, catalog sales in Germany account for 5.8% of overall sales. This suggests that there is a catalog marketing opportunity in Germany.

Sometimes data may not be available for a particular country or regional market. In such cases it is sometimes possible to draw an analogy. In other words the comparison is based on partial resemblance since data are not available.

Time-series displacement is an analogy technique based on the assumption that an analogy between markets exists in different time periods. The time displacement method requires a marketer to estimate when two markets are at similar stages of development.

91) There are different IT programs that can provide valuable tools for marketing. EDI (Electronic data interchange) links with vendors to enable retailers to improve inventory management and restock popular products in a timely, cost-effective manner. Also, effective consumer response (ECR) is another program which allows management to work more closely with vendors on stock replenishment. ECR systems utilize electronic point of sale (EPOS) data gathered by checkout scanners that help retailers identify product sales patterns as well as record consumer preferences separated by geographical areas. All these tools are also helpful in improving the ability of businesses to target consumers and increase loyalty. Customer relationship management (CRM) is another method by which a relationship is developed with the customer. It helps in determining which customers are most valuable and to react in a timely manner with customized product and service offerings that closely match customer needs. It also makes employees more productive and enhances corporate profitability. It also benefits customers by providing value-added products and services. Data warehouses store a company's CRM system as well as other IT systems. These data warehouses can provide multiple uses such as helping retailers with multiple store locations fine-tune their product assortments. In addition to the Internet, an intranet can be a valuable tool, which can connect individuals within a company on a private basis.

92) Emic analysis is similar to ethnography in that it attempts to study a culture from within, using its own system of meanings and values. Etic analysis is "from the outside"; in other words, it is a more detached perspective that is often used in comparative or multi-country studies. In a particular research study, an etic scale would entail using the same set of items across all countries. This approach enhances comparability, but some precision is lost. By contrast, an emic study would be tailored to fit a particular country; inferences about cross-cultural similarities based on emic research have to be made subjectively. A good compromise is to use a survey instrument that incorporates elements of both types of analysis. It is likely that the marketing director will end up with a number of marketing programs tailored to clusters of countries that exhibit within-group similarities.

93) These types of discrepancies are expected due to the research methodology, design, analyses, and scores of other factors. In such situations, and in countries where such data are not available, researchers must first estimate the market size, the level of demand, or the rate of product purchase or consumption. A second research objective in existing markets may be assessment of the company's overall competitiveness in terms of product appeal, price, distribution, and promotional coverage and effectiveness. Researchers may be able to find out special aspects or weaknesses in competitors' way of doing business. Unserved market segments may also be discovered. In some instances, there is no existing market to research. Such potential markets can be further subdivided into latent and incipient markets. A latent market is, in essence, an undiscovered market segment. It is a market in which demand would materialize if an appropriate product or service were made available. In a latent market, demand is zero before the product is offered. An incipient market is a market that will emerge if a particular economic, demographic, political, or sociocultural trend continues. A company is not likely to achieve satisfactory results if it offers a product in an incipient market before the trends have taken root. After the trends have had a chance to unfold, the incipient market will become latent and, later, an existing market.

16

Answer Key Testname: C6

94) In the observation method, one or more trained observers or a mechanical device watch and record the behavior of actual or prospective buyers. The research results are used to guide marketing managers in their decision making. For example, observations are done as to how male or female customers open the door of cars and sit. This simple act can be of tremendous help in designing the doors of cars and the adjustment of seats. Similarly, observing how consumers are picking items in a grocery store or observing the items in shopping carts can give better understanding of the actual purchase behavior of consumers. It should be noted that since consumers are unaware of being watched, actual behavior can be recorded and interpreted. Marketers can also observe the eating behavior by observation or the plate wastages after dinner to assess food preferences of consumers. Companies using observation as a research methodology must be sensitive to public concerns about privacy issues, particularly if the subjects know that they are being watched. In focus group research, a trained moderator facilitates discussion of a product concept, a brand's image and personality, advertisement, social trends, or other related topic with a group comprised of 6 to 10 people.

Selection of focus group participants has to be done very carefully since the number of participants is very limited.

They should also meet the criteria which closely fit the overall population under study. Usually focus group meetings are conducted in a special equipment room in an undisturbed environment. The questions are carefully framed and answers are solicited from all participants in an organized manner. Recordings are made of the entire process and analyzed after the conclusion of the session. A one-way mirror or a video screening is simultaneously conducted where focus group participants are being watched. Also the trained moderator is connected by earphones with others including business managers, so that appropriate instant questions may be prompted to be used in discussion. Focus group research yields qualitative data that does not lend itself to statistical projection. Such data are extremely valuable in the exploratory phase of a project and are typically used in conjunction with data gathered via observation and other methods.

95) When researching a market, seeking a solution to any problem, or trying to answer key questions, marketers must know where to go to obtain information. They must also know what subject areas to investigate and what information to look for, the different ways to acquire information, and the various types of analyses that will yield important insights and understanding. With the availability of big data, marketers have a well of market information available via information technology, such as the Internet. A few keystrokes can yield literally hundreds of articles, research findings, and Web sites that offer a wealth of information about marketing-related issues. Even so, marketers must do their homework if they are to make the most of modern information technology. First, they need to understand the importance of information technology and marketing information systems as strategic assets. Second, they should have a general understanding of the formal market research process. Finally, they should know how to manage the marketing information collection system and the marketing research effort.

96) The four specific environmental factors that may require international research efforts to be conducted differently than domestic research are: (1) Researchers must be prepared for new parameters for doing business. The requirements and ways in which rules are applied may differ from country to country. (2) A "cultural mega-shock" may occur as company personnel come to grips with a new set of culture-based assumptions about conducting business. (3) A company entering more than one new geographic market faces a burgeoning network of interacting factors. Research may help prevent psychological overload in that case. (4) Company researchers may have to broaden the definition of competitors in international markets to include competitive pressures that would not be present in the domestic market.

97) The guidelines for data gathering can be explained by the following steps: (1) Use multiple indicators rather than a single measure. This approach will decrease the level of uncertainty for decision makers. This technique, known as triangulation, is equally useful in global market research. (2) Individual companies should develop customized indicators specific to the industry, product market, or business model. Such indicators should leverage a company's previous experience in global markets. (3) Always conduct comparative assessments in multiple markets. Do not assess a particular market in isolation. Comparative assessment enables management to develop a "portfolio" approach in which alternative priorities and scenarios can be developed. (4) Observations of purchasing patterns and other behavior should be weighted more heavily than reports or opinions regarding purchase intention or price sensitivity.

Particularly in developing markets, it is difficult to accurately survey consumer perceptions.

17

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) In 2016, the 10 most populous countries in the world accounted for ________ percent of the total world income.

A) 70 B) 40 C) 50 D) 60 E) none of the above

1)

2) Basic criteria that marketers should keep in mind while assessing opportunities in global markets include all of the following except: A) current size of the market segment.

B) anticipated growth potential of the market.

C) competition in the market.

D) compatibility with company's overall objectives.

E) securing first-mover advantage.

2)

3) In response to increasing worldwide concerns about obesity, diabetes, and other food-related health issues, some of the world's largest food companies are developing new products. Nestlé and Groupe Danone SA have developed several health foods, which include all of the following, except: A) Nutraceuticals.

B) Medical Foods.

C) Activia.

D) Souvenaid.

E) NutriChoice.

3)

4) Facebook's consumer insights team divided the 1.6 million online shoppers into several categories that include all of the following except: A) Informed Mobilizers.

B) Golden Elite.

C) Shopping Mavens.

D) Opportunistic Shoppers.

E) Online Reluctants.

4)

5) The law of disproportionality suggests that ________ percent of the company's menu or profits are accounted for by 20 percent of a firm's products or customers.

A) 70 B) 90 C) 60 D) 80 E) 50

5)

6) "Usage rates" and "user status" are important criteria for which segmentation variable?

A) behavioral B) demographic C) psychographic D) occupational E) benefit

6)

1

7) The Swatch Group markets watches in all price ranges, from the Swatch brand at the low end to luxury brands such as Longines, Blancpain, and Breguet. Which target market strategy does this illustrate?

A) concentrated global marketing B) standardized global marketing C) psychographic global marketing D) differentiated global marketing E) none of the above

7)

8) The feasibility of targeting a particular market segment can be negatively impacted by various factors. Which of the following is not one of those factors?

A) regulatory hurdles B) cultural barriers C) surplus demand D) time required to establish business E) lack of distribution system

8)

9) India's population is hard to segment since every region defines like 25 different countries. Based on this assessment, which one of the following statements is not accurate?

A) In Indian cities, everyone who can afford a television has one.

B) India can be segmented into a "bike segment" of 25 million households.

C) Vast majority of India's population comprises a "bullock cart" segment.

D) For a global company, it is easy to "act local" in India.

E) In order to maintain high growth, marketers have to penetrate into rural regions.

9)

10) In the music business, 5 percent of recording artists account for ________ percent of all artist-related Facebook engagement.

A) 95 B) 75 C) 65 D) 55 E) 85

10)

11) The process of global market segmentation begins with the choice of one or more variables to use as a basis for grouping customers. All of the following are variables that are commonly used except: A) demographics.

B) polycentrics.

C) behavioral characteristics.

D) psychographics.

E) benefits sought.

11)

12) Consumers shopping for high-touch products, such as fine perfume, are generally energized by ________ motives.

A) emotional B) neither emotional nor rational C) both emotional and rational D) high-tech E) rational

12)

2

13) Demographic segmentation is based on measurable characteristics of populations that includes all of the following examples except: A) Disney hopes to capitalize on the huge number of young people and their incomes as a means to extend its brand.

B) the United States is home to 28.4 million foreign-born residents with combined income of $233 billion.

C) in the EU, the number of consumers aged 16 and younger is rapidly approaching the number of consumers aged 60 and older.

D) Southeast Asia's population numbers 600 million, 70 percent of whom are younger than the age of 40.

E) India has the youngest demographic profile among the world's large nations, and two-thirds of its population is younger than age 35.

13)

14) Positioning refers to the act of: A) differentiating a brand in customer's mind.

B) ensuring a choice retail shelf location.

C) formulating a companion product.

D) determining what areas of the globe to target.

E) formulating a private label strategy.

14)

15) After segmenting potential markets in terms of a single demographic variable, "income," a company can reach the most affluent market by targeting fewer than ________ nations.

A) 25 B) 30 C) 15 D) 10 E) 20

15)

16) According to Euromonitor International, the global market for foods that offer health benefits is currently worth about ________ billion in annual sales.

A) $600 B) $300 C) $500 D) $400 E) $700

16)

17) The efforts of global companies to reach low-income consumers in emerging markets highlight the importance of skillful global market segmentation and targeting. Market segmentation represents: A) targeting prospective customers.

B) promoting products and services internationally.

C) identifying customers based on similar needs and desires.

D) identifying customers who can help in promoting products.

E) finding customers who can respond to advertisement.

17)

18) Companies like Coca-Cola had the first-mover advantage since they were the first company to enter a global market. The first-mover advantages include all of the following except: A) best chance of becoming world leader.

B) substantial investments in marketing.

C) advantage in adapting to the local culture.

D) lead in advertising and promotion exposure.

E) gain business experience.

18)

19) The basis for global marketing expert David Arnold's framework for screening intercountry comparisons includes: A) "top-down" segmentation analysis.

B) "bottom-up" segmentation analysis.

C) population data.

D) income level.

E) demographic data.

19)

3

20) Ericsson, IKEA, and other companies based in Sweden have looked beyond their borders for significant growth market because: A) Sweden has low total annual income.

B) Sweden has high total annual income.

C) Sweden is landlocked geographically.

D) Sweden has relaxed export policies.

E) Sweden has a fairly small population.

20)

21) SRI International developed Values and Lifestyles (VALS). Such a consumer profile would be helpful for which type of segmentation?

A) occupational B) psychographic C) behavioral D) gender E) demographic

21)

22) Campbell Soup is making significant inroads into Japan's $500 million soup market as time-pressed homemakers place a premium on convenience. This type of consumer segmentation by Campbell Soup is referred to as ________ segmentation.

A) demographic B) behavioral C) psychographic D) benefit E) occupational

22)

23) Porsche AG uses the label "Top Guns" to describe one segment of its customers, namely those who care about power and control and who expect to be noticed. Such a profile would be based on which type of segmentation?

A) occupational B) psychographic C) gender D) behavioral E) demographic

23)

24) Global marketing authority, Theodore Levitt, has noted that many ethnic and regional foods —sushi, for example—are enjoying popularity in many countries of the world. This observation is known as the: A) pluralization of consumption.

B) domestication of consumption.

C) democratization of consumption.

D) ethnicitization of consumption.

E) sophistication of consumption.

24)

25) Global automakers are targeting the U.S. market with SUVs. All of the following SUVs are assembled or manufactured in the listed country except: A) Mercedes-Benz in the United States.

B) Kia in Malaysia.

C) Volkswagen in Slovakia.

D) Honda in Japan.

E) Porsche in Germany.

25)

4

26) The strategy that identifies a brand as a symbol of a particular global segment is known as: A) foreign consumer culture positioning.

B) global consumer culture positioning.

C) demographic market positioning.

D) global market positioning.

E) local consumer culture positioning.

26)

27) Which of the following is generally true about the marketing of high-touch products such as fine china and crystal?

A) It relies equally on specialized information and image.

B) It relies partially on specialized information and partially on image.

C) It relies less on image and more on specialized information.

D) It relies less on specialized information and more on image.

E) Neither image nor specialized information is relevant to the marketing of high-touch products.

27)

28) Procter & Gamble has identified a group of consumers in Europe who are willing to pay premium prices for pet food that will improve the health of their pets. This is an example of ________ segmentation.

A) ethnic B) demographic C) benefit D) behavioral E) psychographic

28)

29) Which of the following criteria should marketers use when assessing opportunity in global target markets?

A) compatibility with company's overall objectives B) current size of the segment C) competition D) anticipated growth potential E) all of the above

29)

30) The trend showing popularity of ethnic or regional foods such as sushi, falafel, or pizza worldwide is referred to as the ________, which provides an opportunity for marketers to pursue one or more segments on a global scale.

A) promotion of products and services B) popularity of segmentation C) identification of consumers D) segmentation of markets E) pluralization of consumption

30)

31) According to Sony's U.S. segmentation, 55 years old or older consumers are referred to as: A) DINKS B) Affluent C) SoHo D) CE Alphas E) Zoomers

31)

5

32) Marketing that involves creating the same marketing mix for a broad mass market of potential buyers is referred to as: A) concentrated global marketing.

B) differentiated target marketing.

C) target benefit marketing.

D) competitive global marketing.

E) standardized global marketing.

32)

33) Marketers know that Russians consume a great deal of vodka. This type of market segmentation can be classified as: A) benefit.

B) occupational.

C) demographic.

D) behavioral.

E) psychographic.

33)

34) Managers must decide how well a company's product fits the country market by asking all of the following questions except: A) Is it advisable to source locally?

B) Will strong home currency have an adverse impact on product price?

C) Will it be possible to neglect home-country regulations?

D) Will import restriction drive up the product price?

E) Will adaptation be required?

34)

35) The Tourism Authority of Thailand has developed a series of promotional campaigns and practices aiming at repositioning Thailand and changing public perceptions, which include all of the following except: A) many restaurants have halal-certified kitchens.

B) increase country's transportation infrastructure and redeveloping crowded city areas in order to promote the sex trade.

C) "Go Thai. Be Free" is the theme of a government-sponsored campaign targeting gay and lesbian travelers.

D) prayer rooms are available for Muslims at shopping malls, resorts, and beaches.

E) "Amazing Thailand" and "Unseen Thailand" are among the campaign themes.

35)

36) The world's best-known cosmetics companies are setting their sights on a lucrative new market segment: the emerging middle classes in countries such as Brazil, Russia, India, and China.

However, these companies have to understand: A) that women's preferences for cosmetics are the same in all countries.

B) what beauty means to Chinese women.

C) that Chinese consumers are not willing to invest in beauty products.

D) that working Indian women currently prefer only local brands.

E) cosmetics are preferred mostly by the top end of the market in China.

36)

37) An example of a trap that marketers can set for themselves while targeting a foreign market is to: A) restrain from being persistent to enter a country market.

B) realize that short-term profit and revenue growth objectives may be hard to achieve.

C) ignore shareholders' or competitors' pressure not to "miss out" on a strategic opportunity.

D) overstate the size and short-term attractiveness of individual country markets.

E) enter a market based on time-consuming rigorous market analysis.

37)

6

38) When a marketer understands that a product satisfies a buyer's rational criteria while also evoking an emotional response, the marketer should: A) utilize a multi-tiered targeting strategy rather than a concentrated strategy.

B) follow normal targeting strategy.

C) only target consumers in high-income countries.

D) create advertising that reflects a bipolar, high-tech and high-touch approach.

E) commission psychographic segmentation studies to augment demographic data.

38)

39) For years, ads for Volvo automobiles stressed safety features and protection in the event of a crash.

Thus, Volvo automobiles developed a reputation based on which positioning strategy?

A) attribute/benefit B) competition C) quality/price D) use/user E) high touch

39)

40) When identifying global market segments, a fundamental guiding principle should be the need to determine: A) similar needs and buying behavior.

B) similar languages.

C) shared demographic characteristics.

D) similar geographic regions.

E) similar ethnic backgrounds.

40)

41) McDonald's operates in over 118 countries; however, 80 percent of its restaurants are located in nine countries, which generate nearly ________ percent of the company's total revenues.

A) 65 B) 55 C) 85 D) 45 E) 75

41)

42) BMW advertises its cars as the "ultimate driving machine" which is described as positioning based on: A) competition.

B) use/user.

C) high touch.

D) attribute/benefit.

E) quality/price.

42)

43) Psychographic segmentation involves grouping people in terms of their: A) attitudes, values, and lifestyle.

B) age and income.

C) gender.

D) psychological well being.

E) combined household income.

43)

44) Both Nestlé and Cadbury determined that a liquid chocolate confection would be one way to address the issue of India's hot weather. This is an example of: A) target benefit marketing.

B) differentiated target marketing.

C) competitive global marketing.

D) standardized global marketing.

E) product-market decision

44)

7

45) A. Coskun Samli had developed a useful approach to global market segmentation that compares and contrasts "conventional" versus "unconventional" wisdom. An example of unconventional wisdom can be identified with which of the following assumptions?

A) Since per capita annual income in India is about $1,670, all Indians are low income.

B) The potential customer base for McDonald's in India is greater than in any developed country.

C) Consumers in Europe and Latin America are interested in World Cup soccer whereas Americans are not.

D) There is no running water and electricity in India.

E) There is a presence of a higher-income, middle-class segment in India.

45)

46) Nutraceuticals are health food products, which are manufactured by: A) Kraft Foods.

B) General Mills.

C) Gerber foods.

D) Nestlé foods.

E) Campbell's soups.

46)

47) The top 10 countries based on per capita income for the year 2016 does not include: A) Qatar.

B) Switzerland.

C) China D) Australia.

E) Norway.

47)

48) One global segment based on demographics is referred to as "global teens." It includes: A) young global travelers.

B) people between the ages of 12 and 19.

C) technology professionals.

D) affluent, well-traveled persons.

E) teens having power.

48)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

49) For some consumer products such as cigarettes, soft drinks, and candy that have a low per-unit cost, income is often a more valuable segmentation variable than is population.

49)

50) Unilever and other consumer goods companies often engage in differentiated target marketing, offering a full range of brands within a given product category.

50)

51) Benetton uses the slogan "United Colors of Benetton" to position itself as a brand concerned with the unity of humankind. This type of strategy is referred to as GCCP (global consumer culture positioning).

51)

52) Sweden's smaller population explains why IKEA, and Ericsson have looked beyond their borders for significant growth opportunities.

52)

53) Sometimes it is preferable to market to a particular age group rather than a mind-set; in such an instance, psychographic studies can help marketers arrive at a deeper understanding of consumer behavior than is possible with traditional segmentation variables.

53)

8

54) India has the youngest demographic profile among the world's large nations.

54)

55) When making a decision about market entry timing, a company's management team should understand that the first-mover always becomes the market leader.

55)

56) There is considerable income disparity between western and eastern provinces in China.

56)

57) By 2030, 30 percent of the U.S. population will be 65 years or older versus 13 percent today.

57)

58) Pareto's Law suggests that 80% of a company's revenues or profits are accounted for by 20% of a firm's products or customers.

58)

59) Russia is included in the top 10 nations ranked by the GDP (2016).

59)

60) France has a fragmented shop system that consists of small, specialized stores such as the boulangerie and charcuterie; which became a part of France's national heritage.

60)

61) In the cosmetics industry, Unilever pursues differentiated global marketing strategies by targeting both ends of the perfume market.

61)

62) One of the advantages of targeting a market segment globally is that although the segment in a single-country market might be small, even a narrow segment can be served profitably if the segment exists in several countries.

62)

63) Global marketers must determine whether a standardized or an adapted marketing mix is required to best serve the wants and needs of the consumers.

63)

64) Standardized global marketing is analogous to mass marketing in a single country and is also known as differentiated target marketing.

64)

65) Global market segmentation is based on the premise that companies should attempt to identify consumers in different countries who share similar needs and desires.

65)

66) Mobile payment technology exploded in popularity, as consumers embraced Alibaba's Alipay and Tencent's.

66)

67) Alipay and WeChat pay are the preferred mobile payments platforms in Middle Eastern countries.

67)

68) The market for computers and related products can be divided into home users, corporate ("enterprise") users, and educational users.

68)

69) A market segment or country market characterized by weak competition may be a segment to avoid.

69)

70) BMW's slogan "the ultimate driving machine," is an example of an attribute or benefit that has proven successful in their positioning strategy.

70)

9

71) Sushi, falafel, tandoori chicken or pizza is in demand in many parts of the world. This phenomenon can be due to the pluralization of consumption and segment simultaneity.

71)

72) Eighty percent of McDonald's restaurants are located globally in more than 20 countries.

72)

73) For products whose price is low enough, population is a more important variable than income in determining market potential.

73)

74) After convening worldwide employee conferences to study women's shaving preferences, Schick-Wilkinson Sword introduced a shaving system for women that features a replaceable blade cartridge.

74)

75) There is a tendency to overstate the size and short-term attractiveness of individual country markets, especially when estimates are based primarily on demographic data such as income and population.

75)

76) When assessing potential country target markets, management should rely heavily on its network of contacts as a primary criterion for targeting.

76)

77) Lexus developed new diesel models as well as a gas-hybrid engine because Germans want the option of buying vehicles with diesel engines.

77)

78) For behavior segmentation, marketers use the 80/20 rule when assessing the consumers' usage rate, which means that 20% of the company's revenues or profits are accounted for by 80% of the firm's products or customers.

78)

79) Approximately 70 percent of India's population is younger than the age of 35. This segment is increasingly affluent, and today's young, brand-conscious consumers are buying $100 Tommy Hilfiger jeans and $690 Louis Vuitton handbags.

79)

80) One of the first-mover disadvantages is that a late-mover competitor may reap benefit from the investments made in marketing and establishing in a particular country.

80)

81) Ideally, GDP and other measures of national income converted to U.S. dollars should be calculated on the basis of purchasing power parities or through direct comparisons of actual prices for a given product.

81)

82) According to the World Bank reports, Tanzania has the most mobile money accounts per 1,000 adults for any African country.

82)

83) As Emirates and other Middle Eastern carriers penetrate more deeply into the world's largest aviation market, they are becoming known for very high-quality in-flight service.

83)

84) IKEA home furnishings are decorated in the national colors of blue and yellow. This is an example of local consumer culture positioning.

84)

85) Differentiated global marketing represents a more ambitious approach than concentrated target marketing.

85)

10

86) All three Gulf carriers have experienced barriers to growth. For example, Qatar's bookings dropped dramatically after four of its Middle Eastern neighbors initiated an air and sea blockade in June 2017.

86)

87) Implicit or explicit reference to competitors can provide the basis for an effective positioning strategy.

87)

88) Despite having comparable per capita incomes, other industrialized countries are nevertheless quite small in terms of total annual income.

88)

89) Dove, a division of Unilever, traditionally targeted men and women with its Dove-branded skin care products.

89)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

90) Colgate Total toothpaste is positioned as the brand that addresses all aspects of oral health. Such positioning is very important from a business point of view. How does positioning help in deciding on a marketing strategy?

What are the differences between using "attribute or benefit" and "quality and price" as positioning strategy?

91) What factors should be considered by cosmetic companies to be successful in markets in Brazil, Russia, India, and China?

92) What is psychographic segmentation, and how do marketers use it in targeting different world markets?

93) Discuss the basics of a framework for selecting target markets highlighting the salient features of David Arnold's framework.

94) Demographic changes can create opportunities for marketing innovation. Justify this statement using examples.

95) After evaluating identified segments, decisions have to be made whether to pursue a particular opportunity or not.

Assuming the decision is made to proceed, an appropriate targeting strategy must be developed. Explain the basic categories of target marketing strategies and how they can be implemented.

96) Due to globalization, "it is a small world after all." Also, vast scale migration of populations due to various reasons, including opportunities, has created large segments of ethnic population. Considering these facts, highlight the ethnic segmentation and its importance.

97) Assume that the market segment is judged to be large enough, and the strong competitors are either absent or deemed to be vulnerable, then is it safe to enter the country?

98) What are the major differences between global, foreign, and local consumer culture positioning? Why are these differences significant? Give examples of how companies are trying to lure customers using these positioning strategies.

99) What important lessons did Virgin chief executive Richard Branson learn in the mid-1990s when he launched Virgin Cola, directly targeting Coca-Cola's core market?

100) From a marketing point of view, the Hispanic American segments represent a great opportunity. Realizing the importance, give an example of a company which is planning to target this group?

11

101) What are some of the pitfalls in assessing market potential and choosing target markets or segments?

12

Answer Key Testname: C7

1) D 2) E 3) C 4) B 5) D 6) A 7) D 8) C 9) E 10) A 11) B 12) A 13) A 14) A 15) E 16) A 17) C 18) B 19) B 20) E 21) B 22) D 23) B 24) A 25) B 26) B 27) D 28) C 29) E 30) E 31) E 32) E 33) D 34) C 35) B 36) B 37) D 38) E 39) A 40) A 41) E 42) D 43) A 44) E 45) E 46) D 47) C 48) B 49) FALSE 50) TRUE 13

Answer Key Testname: C7

51) TRUE 52) TRUE 53) FALSE 54) TRUE 55) FALSE 56) TRUE 57) FALSE 58) TRUE 59) FALSE 60) FALSE 61) TRUE 62) TRUE 63) TRUE 64) FALSE 65) TRUE 66) TRUE 67) FALSE 68) TRUE 69) FALSE 70) TRUE 71) TRUE 72) FALSE 73) TRUE 74) TRUE 75) TRUE 76) FALSE 77) TRUE 78) FALSE 79) TRUE 80) TRUE 81) TRUE 82) TRUE 83) TRUE 84) FALSE 85) TRUE 86) TRUE 87) TRUE 88) TRUE 89) FALSE 90) Positioning refers to the act of differentiating a brand in customers' minds in relation to competitors in terms of attributes and benefits that the brand does and does not offer. It is the process of developing strategies for marketing purposes. It is frequently used in conjunction with the segmentation variables and targeting strategies. "Attribute or benefit" strategies are used to expose a particular product attribute, benefit, or other special feature. Aspects such as economy, reliability, multiple uses, durability, and simplicity are very commonly used to describe the attributes of a product or service. For example, Visa's advertising theme "It's Everywhere You Want to Be" exposes its benefit of being useful at any place in the world. Thus, these types of slogans, themes, or jingles very cleverly outline the benefits or attributes of a product. A similar strategy that is used is related to "Quality and Price." This strategy can be considered in light of a continuum from high fashion/quality and high price to good value. Swatch watches advertise their quality, Swiss origin, as well as affordable price. This way price is always tied to the quality and durability of the product or service.

14

Answer Key Testname: C7

91) Noting that there is no "one-size-fits-all" ideal of beauty, cosmetic marketers should consider the sensitivity to local cultural preferences. Each customer is free to have her own aspirations. They have to offer the best quality and the best product to satisfy local customers. Many Asian women use whitening creams to lighten and brighten their complexion.

In China, white skin is associated with wealth. Companies have to understand what beauty means to Chinese women and what they look for. Product offerings and communications therefore have to be adjusted accordingly. Market research is critical to understanding women's preferences in different parts of the world. Japanese women prefer to use a compact foundation rather than a liquid. Humid conditions in tropical countries, like India, should be taken into account. How many times women clean their faces should be taken into account. In China, mass-market and premium brands should be considered in order to fulfill requirements of the top and general market. In India, the number of working women is increasing dramatically, and consumer attitudes are shifting. Due to advances in technology and access to television, women are getting more beauty conscious. Coloring gray hair is also an important consideration for women in India. Thus, for each country different factors have to be considered since preferences for beauty products vary from country to country.

92) Psychographic segmentation involves grouping people in terms of their attitudes, values, and lifestyles. Respondents are carefully selected by asking questions to assess their attitudes, values, and lifestyles. There are different companies that provide services and help in assessing these psychographic variables. Different groups are given names based on the attributes which describe their attitudes, values, and lifestyles. Automakers rely on this segmentation since the purchase behavior of a considerable size of consumers is dependent on psychographic values. A psychographic study showed that Porsche buyers could be divided into several distinct categories. One of the categories, "Top Gun," was found to buy Porsches and expect to be noticed. Proud Patrons and Fantasists, on the other hand, found such conspicuous consumption as irrelevant. Thus, automakers can design autos based on the preferences of populations grouped under each category. It is preferable to market to a mind-set rather than a particular age group. For finding such a group, psychographic studies are important. These analyses are expensive and require careful interpretations.

SRI International, one of the market research organizations, has developed VALS/VALS 2 analyses of consumers based on psychographic values. A research team in Europe identified four lifestyle groups: Successful Idealists, Affluent Materialists, Comfortable Belongers and Disaffected Survivors. The first two groups represent the elite, while the latter two represent the mainstream European consumers. It should be noted that the segmentation and targeting approach used by a company can vary from country to country. Methods that can truly assess a population segment of a country should be employed for psychographic segmentation.

93) A framework for selecting target markets should take into account the market size of the targeted market. The market size should then be multiplied by the competitive advantage in that country. Multiplying the market size and competitive advantage index yields a market potential. The next step in the analysis requires an assessment of the various market access considerations. Finally, multiplying the market potential by the terms of access index gives the final market potential. This framework takes into account the competitive advantage, market potential and the terms of access. This framework should prove useful as a preliminary screening tool for inter-country comparisons. However, it does not go far enough in terms of assessing actual market potential. Global marketing expert David Arnold has developed a framework that goes beyond demographic data and considers other marketing-oriented assessments of market size and growth potential. Thus, instead of a "top-down" segmentation analysis beginning with, for example, income or population data from a particular country, Arnold's framework is based on a "bottom-up" analysis that begins at the product-market level. The product-market refers to a market defined by a product category. For example, in the automotive industry that would refer to luxury car market. Arnold's framework incorporates two core concepts: marketing model drivers and enabling conditions. Marketing model drivers are key elements or factors required for a business to take root and grow in a particular country market environment. The drivers may differ depending on whether a company serves consumer or industrial markets. Enabling conditions are structural market characteristics whose presence or absence can determine where the marketing model can succeed. For example, in India, refrigeration is not widely available in shops and market food stalls. This creates challenges for storing dairy products and confections. So the enabling conditions are very important. After marketing-model drivers and enabling conditions have been identified, the management should weigh the estimated costs associated with entering and serving the market with potential short- and long-term revenue streams. One way to determine the marketing model drivers and enabling conditions is to create a product-market profile.

15

Answer Key Testname: C7

94) Demographic changes can create opportunities, which are unexpected or unforeseen. For example, demographic change has been a driving force behind a renaissance of shopping malls in the United States. The first enclosed mall opened in 1956. After over 50 years retail experts were using terms like "dying culture" to describe American shopping malls. Although America boasts approximately 1,500 malls, many have closed as the Internet has brought the world's stores into American homes. Similarly in France, two entrepreneurs began rewriting the rules of retailing years before Sam Walton founded the Walmart chain. Marcel Fournier and Louis Defforey opened the first Carrefour ("crossroads") hypermarket in 1963. At the time, France had a fragmented shop system that consisted of small, specialized stores with only about 5,000 square feet of floor space, such as the boulangerie and charcuterie. The shop system was part of France's national heritage, and shoppers developed personal relationships with a shop's proprietor. However, time-pressed, dual-parent-working families had less time to stop at several stores for daily shopping. The same trend occurred in other countries.

95) The three basic categories of target marketing strategies are: standardized marketing, concentrated marketing, and differentiated marketing. Standardized global marketing is analogous to mass marketing in a single country. It involves creating the same marketing mix for a broad mass market of potential buyers. It is also known as undifferentiated target marketing since it is based on the premise that a mass market exists around the world. Product adaptation is minimized, and a strategy of intensive distribution ensures that the product is available in the maximum number of retail outlets. The appeal of standardized global marketing is due to the lower production costs. The concentrated target marketing involves devising a marketing mix to reach a niche. A niche is a single segment of the global market. For example, in cosmetics, Chanel has targeted the upscale, prestige segment of the market.

Concentrated targeting is also the strategy employed by the hidden champions of global marketing—companies unknown to most people that have succeeded by serving a niche market that exists in many countries. These companies define their markets narrowly and strive for global depth rather than national breadth. The narrowing of market definition is the key principle in this strategy. The third category, differentiated global marketing, represents a more ambitious approach than concentrated target marketing. It is also known as multi-segment targeting. It entails targeting two or more distinct market segments with multiple marketing mix offerings. This strategy allows a company to achieve wider market coverage. For example, in the sport utility vehicle segment, Rover has a Range Rover at the high end of the market. A scaled down version, the Land Rover Discovery, is offered which competes directly with the Jeep Grand Cherokee. The Freelander, its newest vehicle, has been on sale in Europe for several years.

Thus, there is a multi-pronged approach to marketing.

96) Due to several reasons, in many countries the population consists of ethnic groups. For example, in the United States there are three major ethnic segments—African/Black Americans; Asian Americans; and Hispanic Americans. In other countries there are different combinations of ethnic population. Each segment shows great diversity and can be further subdivided. Even those coming from one country may have differences in language, culture, religion, and other attitudinal aspects. Their purchasing behavior is different within groups and subgroups. From a marketing standpoint these groups offer great opportunity. Companies in a variety of industry sectors, primarily food and beverages, household goods, and financing services can benefit by targeting these groups. For example, Japanese automakers have been successful in targeting ethnic populations in different parts of the world.

97) If the market segment is judged to be large enough, and there are no strong existing or potential competitors, one should not assume that it is safe to enter the country. There are several other factors that can negatively impact a business. For example, significant regulatory hurdles may be present that limit market access. The company may also encounter cultural barriers or religious restrictions. Other marketing-specific issues can arise. For example, in India, three to five years are required to build an effective distribution system for many consumer products. Also, the approvals may take a considerably long period of time. Thus, apparent potential does not guarantee success. Managers have a difficult decision in such conditions. If there are certain prevailing conditions that require adaptation of products, then that should be taken into account. Also, it is important to consider the question of whether targeting a particular segment is compatible with the company's overall goals, its brand image, or established sources of competitive advantage.

16

Answer Key Testname: C7

98) Global consumer culture positioning (GCCP) is defined as a strategy that identifies the brand as a symbol of a particular global culture or segment. It has proven to be an effective strategy for communicating with global teens, cosmopolitan elites, and globe-trotting laptop warriors who consider themselves members of a transnational commerce culture. For example, Sony's slogan "My First Sony" is positioned as the electronics brand for youngsters around the globe with discerning parents. Benetton uses the slogan "United Colors of Benetton" to position itself as a brand concerned with the unity of humankind. Categories of products that lend themselves to this positioning are both associated with high levels of customer involvement and by a shared "language" among users. High tech products such as iPod, iPhone, MP3 players, video cameras, and all such technology-prone items fall into these categories. Foreign consumer culture positioning (FCCP) associates the brand's users, use occasions, or production origins with a foreign country or culture. Foster's Brewing Group's U.S. advertising proudly uses the brand's nation of origin in all of its print ads and other promotions as being Australian. Local consumer culture positioning (LCCP) strategy associates the brand with local cultural meanings, reflects the local culture's norms, portrays the brand as consumed by local people in the national culture, or depicts the product as locally produced for local consumers. Budweiser's U.S. advertising particularly focuses on local aspects.

99) Starting a soft-drinks war with Coca-Cola was crazy. It was one of their highest profile business mistakes, though it was also one of the things that raised the profile of the Virgin name in America. By launching Virgin Cola they were having fun and reveling in bravado. However, taking on Coke taught them two lessons: how to make a great cola with a different taste; and how to antagonize a global business that brought in $28 billion in 2007, with profits of $5 billion.

They underestimated the power and the influence of a global brand that epitomizes the strength and reach of American capitalism.

100) Modelo Especial is a Mexican beer brand that has successfully capitalized on its heritage to target Hispanic Americans while also appealing to the "Mercado General." The brand was first introduced in the United States in 1982; today, Latinos account for 50 percent of its sales volume. Gradually, over the course of several decades, various aspects of Latino culture have been widely embraced in the United States, as evidenced by the mainstream popularity of artists such as Jennifer Lopez and Pitbull. In addition, the marketing team at Constellation Brands, which distributes Modelo Especial, attributes the brand's mainstream appeal today in part to the fact that urban millennial consumers are generally open to different cultures and lifestyles. Moreover, Modelo benefits from the fact that its brand-loyal consumers are "hyper-social" users of new media. Tumblr is the social media site of choice for the beer's parent company, where posts include "beer recipes" for Latino-style cocktails.

101) After segmenting a market, the next important step is to assess the attractiveness of the identified segments. This is an important part when assessing emerging country markets as potential targets. Several potential pitfalls in assessment should be taken into account. In general, there is a tendency to overstate the size and short-term attractiveness of individual country markets. This can happen if estimates are based primarily on demographic data such as income and population. For example, the population figures in India and China can create a bloated image. Short-term profitability may be hard due to prevailing conditions in these emerging markets. Persistence and long-term outlook often pays off in new markets. A second pitfall may originate from pressures placed on marketers by shareholders or competitors.

The possibility of missing out on entering a condition is in itself a stress-causing factor. Marketers may find themselves overwhelmed at times by such pressures and the urge to react quickly. Another factor may be the decisions made based on convenience or opinion of persons/advisors not residing in the home country. The right representatives or distributors should be selected in order to be successful.

17

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The four tigers—Singapore, South Korea, Taiwan, and Hong Kong—learned from the ________ experience and built strong export-based economies of their own.

A) Chinese B) Japanese C) American D) Indian E) German

1)

2) Which of the following completely eliminates the risk of nonpayment by an importer or a bank in an international transaction?

A) draft B) sales on open account C) cash in advance D) documentary collection E) documentary credit (letter of credit)

2)

3) The sale of merchandise in export markets at unfair prices is known as: A) tariff.

B) transaction.

C) dumping.

D) countervailing.

E) ad valorem.

3)

4) In the post-September 11 business environment in the United States, imports have come under increased security. One of the initiatives taken in the interest of national security is: A) WTO. B) NAFTA. C) FSC. D) NTB. E) C-TPAT.

4)

5) Which of the following establishes classification numbers that must be used by importers and exporters?

A) HTS B) CVD C) NTR D) NTB E) FSC

5)

6) Research has shown that exporting is essentially a developmental process that proceeds in different stages. Before a firm reaches stage 4, it must do which one of the following activities?

A) commit resources for exporting B) receive unsolicited export orders C) believe in attractiveness of exporting D) build confidence in firm's ability for exporting E) explore the feasibility of exporting

6)

7) ________ is an independent marketing intermediary that acts as the export department for two or more manufacturers whose product lines do not compete with each other.

A) Manufacturer's export agent B) Cooperative exporter C) Export commission representative D) Export merchant E) Export management company

7)

1

8) Which of the following incorrectly states the role of banks in import/export transactions involving a letter of credit (L/C)?

A) The importer's bank is the advising and/or confirming bank.

B) The importer's bank is neither advising nor confirming bank.

C) The exporter's bank is the advising and/or confirming bank.

D) The importer's bank is the advising, confirming, and issuing bank.

E) The exporter's bank is the advising, confirming, and issuing bank.

8)

9) A licensed forwarder receives brokerage fees or rebates from a(n) ________ for booked space.

A) export merchant B) export management company C) shipping company D) export broker E) foreign purchasing agent

9)

10) ________ are variously referred to as buyer for export, export commission house, or export confirming house.

A) Export managers B) Export brokers C) Export merchants D) Foreign purchasing agents E) Manufacturer's agents

10)

11) Officially, the EU tariffs on Chinese and Vietnamese shoe imports are known as: A) temporary surcharges.

B) specific duties.

C) countervailing duties.

D) antidumping duties.

E) ad valorem duties.

11)

12) Which of the following is described as the three Rs of global business: rules, rate schedules, and regulations?

A) NTBs B) NTR C) duties D) tariffs E) quotas

12)

13) The United States has given normal trade relations (NTR) status to some 180 countries. In actuality only four countries are excluded from this status which includes all of the following countries except: A) North Korea.

B) Cuba.

C) Iraq.

D) Iran.

E) Libya.

13)

14) Agricultural subsidies are particularly controversial because, although they protect the interests of farmers in some countries, they work to the detriment of farmers in countries such as: A) India.

B) Switzerland.

C) Singapore.

D) the United States.

E) Japan.

14)

2

15) Restrictive administrative and technical regulations can create barriers to trade which may take all of the following forms except: A) safety and pollution regulations.

B) safety and health regulations.

C) product size regulations.

D) antidumping regulations.

E) common agricultural policies.

15)

16) Which of the following correctly states the role of banks in import/export transactions involving a letter of credit (L/C)?

A) The importer's bank is the advising, confirming, and issuing bank.

B) The importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing bank.

C) The exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing bank.

D) The exporter's bank is the advising, confirming, and issuing bank.

E) none of the above

16)

17) Representatives of the apparel, footwear, furniture, and textile industries in many countries are deeply concerned about the impact that increased trade with ________ will have on these sectors.

A) Bangladesh B) India C) Italy D) Hong Kong E) China

17)

18) Export marketing requires all of the following except: A) reaching retail customers.

B) identification of market potential.

C) decisions concerning product design.

D) the use of marketing research.

E) an understanding of the target market environment.

18)

19) The advantages of a market visit include all of the following except: A) build confidence in firm's ability for exporting.

B) gain confidence in firm's ability for exporting.

C) gather additional data to reach final decision.

D) contradict market potential.

E) confirm market potential.

19)

20) Sweden applies a system to certain categories of imported agricultural products referred to as: A) ad valorem duty.

B) temporary surcharges.

C) specific duty.

D) countervailing duty.

E) variable import levies.

20)

3

21) The furniture industry has become one of the fastest-growing sectors of China's economy. Furniture imports are flooding into the United States from China. This can be attributed to: A) China's low labor rates translate into reasonable prices for consumers.

B) American tastes in décor have changed.

C) the quality of furniture is better than that made in Europe.

D) China can survive tough competition.

E) replacement parts are readily available from China.

21)

22) After the research effort has zeroed in on potential markets, marketers should: A) plan a personal visit.

B) make decisions concerning product design.

C) work on understanding the target market environment.

D) identify products that can be marketed.

E) modify methods used for marketing research.

22)

23) Governmental actions that discourage imports and block markets include all of the following except: A) duties.

B) free trade zones.

C) subsidies.

D) tariffs.

E) tax incentives.

23)

24) Which of the following receives a fee for bringing together an exporter and a buyer in another country?

A) foreign purchasing agent B) export merchant C) export broker D) export management company E) freight forwarder

24)

25) A nontariff barrier (NTB) includes all of the following except: A) restrictive administrative policies.

B) restrictive technical regulations.

C) discriminatory procurement policies.

D) quotas.

E) ad valorem duty.

25)

26) Which of the following was a major U.S. tax incentive for exporters that the WTO recently ruled was an illegal subsidy?

A) FSC B) NTB C) HTS D) CVD E) NTR

26)

27) The so-called "China triangle" includes: A) Taiwan, Hong Kong, and Republic of China B) Singapore, China, and Republic of China C) Republic of China, Taiwan, and Hong Kong D) Hong Kong, Republic of China, and Singapore E) Republic of China, Taiwan, and South Korea

27)

4

28) In an effort to attract assembly operations, Brazil allows certain product components to be imported at reduced tariff rates. This is an example of: A) the effect of the Customs Valuation Code.

B) preferential tariffs.

C) discriminatory procurement.

D) offsets.

E) an EMC.

28)

29) The possible arrangements for handling exports include all of the following except: A) as a part-time activity performed by domestic employees.

B) through an export partner affiliated with the domestic marketing structure that takes possession of the goods before they leave the country.

C) through an export department within an international division.

D) as a low-cost arrangement requiring no additional personnel.

E) for multidivisional companies, each of the preceding options is available.

29)

30) After recovering from the destruction of its economy during World War II, ________ became an economic superpower as a direct result of export strategies.

A) Japan B) China C) Italy D) Germany E) Hong Kong

30)

31) Which of the following types of duties would be imposed on a company whose home-country government provides export subsidies?

A) specific duty B) ad valorem duty C) antidumping duty D) countervailing duty E) customs duty

31)

32) Which of the following documents represents title to goods in an export transaction?

A) bills of lading B) packing list C) certificate of origin D) invoice E) insurance certificates

32)

33) In which of the following forms of export financing does a bank assume a financial obligation?

A) neither an L/C nor a documentary collection requires a bank to assume financial obligation B) with both an L/C and a documentary collection C) with either an L/C or a collection letter D) with an L/C but not a documentary collection E) with a documentary collection but not an L/C

33)

5

34) ________ is an independent marketing intermediary that acts as the export department for two or more manufacturers whose product lines do not compete with each other.

A) Manufacturer's export agent B) Export commission C) Cooperative exporter D) Freight forwarders E) Export management company

34)

35) ________ is the most important aspect of a company's international orientation.

A) Cooperation B) Dynamism C) Confidence D) Experience E) Commitment

35)

36) The Ministry of International Trade and Industry (MITI) has helped devise export strategies for companies in: A) Taiwan.

B) Hong Kong.

C) South Korea.

D) Japan.

E) Singapore.

36)

37) Which set of documents generally represents the minimum documentation required to clear a shipment through customs?

A) letter of credit, commercial invoice B) packing list, insurance certificate C) packing list, commercial invoice D) bill of exchange, commercial invoice E) certificate of origin, bill of exchange

37)

38) If the dollar, the yen, or the euro becomes seriously overvalued, a company with a production capacity in other locations can achieve competitive advantage by: A) buying different currencies before major fluctuations take place.

B) shifting production among different sites.

C) cutting down production and waiting until the currency rate is reasonable.

D) conducting transactions in different currencies of the world.

E) reducing production and labor force simultaneously.

38)

39) Which of the following refers to a system of farm subsidies in Europe?

A) FSC B) HTS C) CAP D) CVD

39)

E) NTR

40) An irrevocable letter of credit transfers the payment obligation for an export deal from the buyer to the buyer's: A) bank.

B) freight forwarder.

C) checking account.

D) credit union.

E) in-house export organization.

6

40)

41) Direct representation, as opposed to representation by independent intermediaries, for exporting by the market country has several advantages which do not include: A) helps sell products directly to the consumer in the market country.

B) benefits when a product is not yet established in a market.

C) facilitates control and communications.

D) allows decisions concerning program development and resource allocation.

E) ensures marketer's interest and special efforts.

41)

42) The only marketing mix element that is applicable in export selling is: A) place.

B) promotion.

C) product.

D) price.

E) process.

42)

43) ________ is sometimes called a mother hen, a piggyback exporter, or an export vendor.

A) Manufacturer's agent B) Cooperative exporter C) Export manager D) Export broker E) Export merchant

43)

44) The top ranked country among those exporting apparels to the United States is: A) China.

B) India.

C) Taiwan.

D) Honduras.

44)

E) Mexico.

45) A duty that represents a certain percentage of the value of a particular product is a(n): A) ad valorem duty.

B) antidumping duty.

C) "schedule B" duty.

D) specific duty.

E) BTN duty.

45)

46) Which of the following financing methods would be used by an exporter that enjoys good relations with a buyer in a well-established market?

A) arrival draft B) letter of credit C) open account D) barter E) cash in advance

46)

47) Which of the following methods of financing would be used if the exporting and importing parties had a strong, long-standing relationship?

A) bank draft B) documentary credit (letter of credit) C) documentary collection D) open account E) cash in advance

47)

7

48) Which of the following offers a company the best assurance of being paid for exported goods?

A) a certified check B) a letter of credit C) a "piggyback" arrangement D) a swap E) an in-house export organization

48)

49) Governments commonly use activities to support and encourage firms that engage in exporting.

Such activities include all of the following except: A) voting rights.

B) tax incentives.

C) subsidies.

D) export assistance.

E) free trade zones.

49)

50) The organizational decision to purchase production inputs, components, or finished goods from domestic or foreign producers is known as the ________ decision.

A) security B) import/export C) NTB D) sourcing E) preferential

50)

51) A number of explanations have been offered for the low level of U.S. exports relative to other countries. All of the following can be considered as reasons for low level of exports except: A) perceived lack of necessary resources.

B) marketing to home-country users is easier than exporting.

C) lack of knowledge of market opportunities abroad.

D) a strong U.S. dollar translates into less affordable prices in export markets.

E) limited ambition by many American business owners.

51)

52) The possible arrangements of the responsibilities for handling exports include all of the following except: A) as a part-time activity performed by domestic employees.

B) through an export department of an embassy in a foreign country.

C) through an export partner affiliated with the domestic marketing structure.

D) through an export department that is independent of the domestic marketing structure.

E) through an export department within an international division.

52)

53) Which of the following can be referred to as a "buyer for export" or an "export commission house" and operates on behalf of a buyer from a foreign country?

A) export merchant B) export broker C) foreign purchasing agent D) freight forwarder E) export management company

53)

8

54) Developed under the auspices of the Custom Cooperation Council (now the World Customs Organization) the system which took effect is referred to as: A) specialized tariff.

B) antidumping duty.

C) BTN duty.

D) harmonized tariff.

E) preferential tariffs.

54)

55) The chief executives of Swiss Swatch Group and Japanese Canon would like to: A) outsource a full line of new products only.

B) outsource a majority of the manufacturing functions overseas.

C) outsource all of the manufacturing units overseas in order to save money.

D) establish "call centers" in developing countries in order to save labor costs.

E) retain a majority, if not all, of the manufacturing in their home country.

55)

56) The export and import process can entail red tape and bureaucratic delays. In an effort to facilitate exports, countries are designating certain areas as: A) special tariff zones.

B) duty free zones.

C) free trade zones.

D) import control zones.

E) global business zones.

56)

57) Which of the following is not true about a personal visit to size up the market firsthand and begin the development of an actual export-marketing program?

A) contradict assumptions regarding market potential B) develop a marketing plan in cooperation with local agents C) arrange a face-to-face meeting and avoid going to trade shows D) confirm assumptions regarding market potential E) gather additional data to help make decisions

57)

58) ________ are licensed specialists in traffic operations, customs clearance, and shipping tariffs and schedules. They can be considered as the travel agents for handling export goods.

A) Foreign purchasing agents B) Export brokers C) Cooperative exporters D) Export merchants E) Freight forwarders

58)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

59) After research has zeroed in on potential markets, there is no substitute for a personal visit to size up the market firsthand and begin the development of an actual export-marketing program.

59)

60) Overall, Italy's retail sector has pursued very little international expansion; by contrast, other European supermarket chains such as Tesco (UK), Metro (Germany), and Carrefour (France) took local products and brands with them as they expanded around the globe.

60)

61) The Common Agricultural Policy (CAP) determines the level of subsidies granted to farmers in Latin America.

61)

9

62) In the last stage of the developmental process for exporting, a firm evaluates global market potential before screening for the "best" target markets to include in its marketing strategy and plan.

62)

63) According to the recent import regulations in the United States, action figures that represent non-human creatures such as monsters or robots are categorized as toys and qualify for lower duties than human figures that are classified as dolls.

63)

64) Exports from China have grown significantly in the years since China joined the World Trade Organization (WTO).

64)

65) Representatives of the apparel, footwear, and textile industries in many countries are deeply concerned about the impact that increased trade with China will have on these sectors.

65)

66) Tax incentives, subsidies, export assistance, and free trade zones are common support provided by governments to firms that engage in exporting.

66)

67) Duty drawback refers to refunds of duties paid on imports that are processed or incorporated into other goods and then re-exported.

67)

68) The Harmonized Tariff System (HTS) has eliminated virtually all problems associated with assigning tariff classifications to new products.

68)

69) An ad valorem duty is expressed as a percentage of the value of goods.

69)

70) According to research, exporting is essentially a developmental process starting with the first stage when the firm exports to one or more markets on a trial basis.

70)

71) Research discovered that even the most experienced exporters express lack of confidence in their knowledge about shipping arrangements, payment procedures, and regulations.

71)

72) When Honda's U.S. manufacturing subsidiaries purchase parts from Japan, customs authorities in the United States have the right to scrutinize the transfer price to make sure it is a fair reflection of market value.

72)

73) The terms "export selling" and "export marketing" are interchangeable.

73)

74) The Customs Trade Partnership Against Terrorism (C-TPAT) recognizes that U.S. Customs and Border Protection (CBP) is responsible for screening import cargo transactions.

74)

75) If the dollar, the yen, or the mark becomes seriously overvalued, a company with production capacity in other locations can achieve competitive advantage by shifting its production among several different sites.

75)

76) A company that assigns a sufficiently high priority to its export business will establish an in-house organization. It then faces the question of how to organize it effectively.

76)

77) Volkswagen's business environment includes a significant wage differential between Mexico and Germany.

77)

10

78) CVDs are additional duties levied by exporting countries on imported videodiscs.

78)

79) In general, the greater the distance between the product source and the target market, the greater the time delay for delivery and the lower the transportation cost.

79)

80) In an export/import transaction requiring a letter of credit (L/C), the exporter's (seller's) bank can be known as the "advising" bank, the "confirming" bank, or both.

80)

81) Export management company (EMC) is an independent marketing intermediary that acts as the export department for two or more manufacturers (principals) whose product lines compete with each other.

81)

82) Outsourcing means shifting undesirable jobs or work assignments to another company to cut costs.

When the outsourced work moves to another country, the terms "global outsourcing" or "offshoring" are used.

82)

83) Tariffs can be thought of as the "three Rs" of global business: rules, rigor, and regulations of individual countries.

83)

84) Potential export problems include packaging, government red tape, warehousing, advertising, and trade restrictions.

84)

85) "Export selling" involves tailoring various elements of the marketing mix to global market requirements.

85)

86) Even today, the managerial mind-set in many companies still favors export selling rather than export marketing.

86)

87) The export marketer takes the domestic product "as is" and sells it to international customers.

87)

88) The Harmonized Tariff System (HTS) is currently the dominant system for determining the correct classification number.

88)

89) The four tigers—Singapore, South Korea, Taiwan, and Hong Kong—learned from the Japanese experience and built strong export-based economies of their own.

89)

90) Any government concerned with trade deficits or economic development should focus on educating firms about the potential gains from exporting.

90)

91) A nontariff barrier (NTB) is a hidden trade barrier that is a deterrent or obstacle to the sale of products in a foreign market.

91)

92) The Fly American Act is an example of a nontariff barrier.

92)

93) "Piggyback exporter," "cooperative exporter," and "export vendor" are all terms used to describe an export broker.

93)

94) Foreign purchasing agents are also referred to as jobbers.

94)

11

95) The MEA can act as an export distributor or as an export commission representative. However, the MEA does not perform the functions of an export department, and the scope of market activities is usually limited to a few countries.

95)

96) Paris is widely regarded as the design capitol of the world, where the world's largest furniture and home furnishings trade fair took place in 2016.

96)

97) In an effort to facilitate exports, countries are designating certain areas as "free trade zones" (FTZ) or "special economic zones" (SEZ).

97)

98) "Tariff" is an ancient trading term derived from the Arabic word "ta'rif", which means "information" or "notification."

98)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

99) What are some of the entities that an exporter should be familiar with? Describe and explain the role played by each of these entities, separating those that have responsibilities from exporters from those that have no responsibilities from the exporters.

100) Recently "call centers" have mushroomed in countries like India, China, and Philippines due to the outsourcing by many Western countries. What are some of the benefits and disadvantages to this method to the company that is outsourcing? What factors should be taken into account when deciding to outsource?

101) What is the impact of tariffs imposed by U.S. Donald Trump's "America First" policy on imports of steel and aluminum?

102) An executive is undecided whether to rely on in-house or external export specialists/intermediaries in the home country. He is leaning towards direct representation in a market. What are the benefits of going forth with direct representation?

103) Some Italian food brands are well known throughout the world; however, these foods are not globally exported.

Describe the reasons giving examples.

104) What are customs duties? How do they work in controlling imported goods?

105) How can restrictive administrative and technical regulations create barriers to trade?

106) Exporting is considered as essentially a developmental process. What are the stages in which this process can be divided?

107) Export marketing is the integrated marketing of goods and services that are destined for customers in international markets. What does the marketing require?

108) Why does the tariff system vary from country to country? Explain, giving examples of tariffs imposed by the United States with particular emphasis on preferential tariffs. What are the conditions under which GATT allows the use of preferential tariffs?

109) What are some of the advantages of exporting and what is needed to be successful in export marketing?

12

110) Governmental actions at times are designed to discourage imports and block market access. Why do governments want to curtail imports? Explain some of the barriers that are placed to discourage imports.

111) Governments in Japan, Singapore, South Korea, and China have supported exports for years, which have tremendously helped their economies. Since exporting is a very important component of a country's business strategy, many government programs are offered that support exports. Describe ways by which governments can support exports.

112) What are the differences between antidumping and countervailing duties? Under what conditions are these duties imposed?

13

Answer Key Testname: C8

1) B 2) C 3) C 4) E 5) A 6) B 7) E 8) A 9) E 10) D 11) D 12) D 13) C 14) A 15) E 16) C 17) E 18) A 19) B 20) E 21) A 22) A 23) B 24) C 25) E 26) A 27) C 28) B 29) D 30) D 31) D 32) A 33) E 34) E 35) E 36) D 37) D 38) B 39) C 40) A 41) A 42) A 43) B 44) A 45) A 46) C 47) D 48) B 49) A 50) D 14

Answer Key Testname: C8

51) D 52) B 53) C 54) D 55) E 56) C 57) C 58) E 59) TRUE 60) TRUE 61) FALSE 62) TRUE 63) TRUE 64) TRUE 65) TRUE 66) TRUE 67) TRUE 68) FALSE 69) TRUE 70) FALSE 71) TRUE 72) TRUE 73) FALSE 74) TRUE 75) TRUE 76) TRUE 77) TRUE 78) FALSE 79) FALSE 80) TRUE 81) FALSE 82) FALSE 83) FALSE 84) TRUE 85) FALSE 86) TRUE 87) FALSE 88) TRUE 89) TRUE 90) TRUE 91) TRUE 92) TRUE 93) FALSE 94) FALSE 95) TRUE 96) FALSE 97) TRUE 98) TRUE

15

Answer Key Testname: C8

99) Key export entities include purchasing agents, export brokers, and export merchants. They have no responsibility from the client. Others are export management companies, manufacturer's export representatives, export distributors, and freight forwarders. They are assigned responsibilities by the exporter. Foreign purchasing agents operate on behalf of, and are compensated by, an overseas customer known as a "principal." They generally seek out the manufacturer whose price and quality match the specifications of their principal. They often represent governments, utilities, railroads, and other large users of materials. Purchases may be completed as domestic transactions with the purchasing agent handling all export packing and shipping details, or the agent may rely on the manufacturers to handle the shipping arrangements. The export broker receives a fee for bringing together the seller and the overseas buyer. This fee is usually paid by the seller. The broker takes no title to the goods and assumes no financial responsibility. A broker usually specializes in a specific commodity, such as grain or cotton, and is less frequently involved in the export of manufactured goods. Export merchants are sometimes referred to as "jobbers" and they identify market opportunities in one country or region and make purchases in other countries to fill these needs. They typically buy unbranded products directly from the producer or manufacturer. The export merchant then brands the goods and performs all other marketing activities, including distribution. "Export management company" is the term used to designate an independent marketing intermediary that acts as the export department for two or more manufacturers whose product lines do not compete with each other. It may act as an independent distributor, purchasing and reselling goods at an established price or profit margin. It may also act as a commission representative taking no title or financial risk. Manufacturer's export agent acts as an export distributor or as an export commission representative. On the other hand, an export distributor assumes financial risk, whereas the export commission representative assumes no financial risk. The cooperative exporter is an export organization of a manufacturing company retained by other independent manufacturers to sell their products to foreign markets. Freight forwarders are licensed specialists in traffic operations, customs clearance, and shipping tariffs and schedules. A licensed forwarder receives brokerage fees or rebates from shipping companies for booked space.

100) Outsourcing refers to shifting production jobs or work assignments to another company in order to cut costs. When the outsourced work moves to another country it becomes "global outsourcing" or "offshoring." Due to intense competition in the marketplace, more and more companies are under pressure to lower costs. One way to do this is to locate manufacturing or consumer relation activities in China, India, Philippines, or other low-wage countries. In theory, this situation bestows great flexibility on companies and in reality, the consumer is unaware of the country where a product is manufactured or service is delivered. However, in the case of call centers, consumers get in direct contact with the service provider or its representative. Call centers also perform outbound services such as telemarketing. A variety of tasks such as airline reservation, completing tax returns, reading medical charts, and drawing up manufacturing blueprints are done by persons who do the job at a fraction of the cost compared to what it will cost in the home country. The decision to use outsourcing requires careful analysis since saving cost may not be the only factor for success of many products or services. This requires careful consideration of management's vision, costs and conditions, customer needs, logistics, country infrastructure, political factors, and foreign exchange rates. In formulating a sourcing strategy, company managers and executives should also recognize the declining importance of direct manufacturing labor as a percentage of total product cost. For example, Compaq found that the human labor portion in manufacturing a PC is only about 15 minutes. Thus, the cost involved in saving human labor is not as high as one would imagine and outsourcing may not be the best choice for all products or services. Also, the company image and customer loyalty can be adversely affected if outsourced services are not quality conscious.

101) One of the most controversial aspects of U.S. Donald Trump's "America First" policy was his decision to impose tariffs on imports of steel and aluminum. Opponents of this policy, including trade partners and some U.S. industry leaders, argue that the tariffs will negatively impact the U.S. economy and invite retaliation from abroad. President Donald Trump's decision to impose tariffs on steel and aluminum imports was hailed by some as an important step toward reversing unemployment in America's Rust Belt.

16

Answer Key Testname: C8

102) It is a common problem faced by many executives planning on exporting goods and services to foreign countries.

There are two specific advantages to direct representation in a market. It allows decisions concerning program development, resource allocation, or price changes to be implemented unilaterally. Thus, control and communication aspects are major benefits. This is very significant when a product is not yet established in a market. It will require special marketing efforts for which direct efforts will be necessary rather than relying on intermediaries. Also, the marketer's investment ensures special efforts are undertaken to achieve sales. With indirect or independent representation, such efforts and investment may not be that effective due to lack of incentives. It is also advantageous to get feedback and firsthand information related to the market. This information can greatly improve export marketing decisions concerning product, price, communications, and distribution. In essence, all operational parameters are under control. However, it should be noted that direct representation will depend on the size of the market. It may not be possible to have it when market size is small.

103) Some Italian food brands, such as Ferrero (Nutella) and Barilla (pasta), are well known throughout the world.

However, many of Italy's food companies, which represent about 15 percent of the country's overall economy, lack the money or the managerial expertise to export. Italy boasts myriad product categories that carry designations such as Denominazione Origine Controllata e Garantita (DOCG) and Denominazione Origine Protetta (DOP). Such a designation means, for example, that cheese marketed as Parmigiano-Reggiano can only be made from cow's milk from a certain part of Italy. Eataly's success has helped small-scale, artisanal wine, cheese, and prosciutto producers to reach new customers who are willing to pay premium prices for Italian quality and authenticity. Such limited designations also restrict the products from being exported. Many observers note that the "Made in Italy" movement got an additional boost from the 2015 World Expo in Milan. The theme of the Expo was "Feeding the Planet. Energy for Life." Perhaps not surprisingly, the Italian Pavilion showcased Italy's national food culture. Eataly was present at the 2015 Expo.

104) There are two main categories of customs duties. Their calculation method is the differentiating factor. They may be calculated either as a percentage of the value of the goods (ad valorem duty), as a specific amount per unit (specific duty), or as a combination of both of these methods. An ad valorem duty is expressed as a percentage of the value of goods. The definition of customs value varies from country to country. An exporter has to determine the duty applicable and the method used for calculations. For countries under GATT conventions the customs value is landed cost, insurance, and freight amount at the port of importation. On the other hand, a specific duty is expressed as a specific amount of currency per unit of weight, volume, length, or other unit of measurement. Specific duties are usually expressed in the currency of the importing country, but there are exceptions, particularly in countries that have experienced sustained inflation. Both ad valorem and specific duties are occasionally set out in the custom tariff for a given product. Compound or mixed duties provide for specific, plus ad valorem, rates to be levied on the same articles.

105) Restrictive administrative and technical regulations can create barriers to trade, which may take the form of antidumping regulations, product size regulations, and safety and health regulations. Some of these regulations are intended to keep out foreign goods; others are directed toward legitimate domestic objectives. For example, the safety and pollution regulations being developed in the United States for automobiles are motivated almost entirely by legitimate concerns about highway safety and pollution. However, an effect of these regulations has been to make it so expensive to comply with U.S. safety requirements that some automakers have withdrawn certain models from the market. Volkswagen, for example, was forced to stop selling diesel automobiles in the United States for several years.

17

Answer Key Testname: C8

106) The stages can be divided as shown in the following points: 1. If the firm is unwilling to export; it will not even fill an unsolicited export order. This may be due to perceived lack of time or to apathy or ignorance.

2. The firm fills unsolicited export orders but does not pursue unsolicited orders. Such a firm is an export seller.

3. The firm explores the feasibility of exporting.

4. The firm exports to one or more markets on a trial basis.

5. The firm is an experienced exporter to one or more markets.

6. After this success, the firm pursues country- or region-focused marketing based on selected criteria.

7. The firm evaluates global market potential before screening for the "best" target markets to include in its marketing strategy and plan.

The probability that a firm will advance from one stage to the next depends on different factors. Moving from stage 2 to stage 3 depends on management's attitude toward the attractiveness of exporting and confidence in the firm's ability to compete internationally. However, commitment is the most important aspect of a company's international orientation. Before a firm can reach stage 4, it must receive and respond to unsolicited export orders. The quality and dynamism of management are important factors that can lead to such orders. Success in stage 4 can lead a firm to stages 5 and 6. A company that reaches stage 7 is a mature, geocentric enterprise that is relating global resources to global opportunity. To reach this stage requires management with vision and commitment.

107) Export marketing targets the customer in the context of the total market environment. The export marketer does not simply take the domestic product "as is" and sell it to international customers. To the export marketer, the product offered in the home market represents a starting point. It is then modified as needed to meet the preferences of international target markets. In order to formulate a good exporting strategy the following points should be considered: 1. An understanding of the target market environment 2. The use of marketing research and identification of market potential 3. Decisions concerning product design, pricing, distribution channels, advertising, and communications—the marketing mix.

The export marketer should also set prices to fit the marketing strategy and does not merely extend home-country pricing to the target market. Charges incurred in export preparation, transportation, and financing must be taken into account in determining prices. Finally, the export marketer also adjusts strategies and plans for communication and distribution to fit the market. In other words, effective communication about product features or uses to buyers in different export markets may require creating brochures with different copy, photographs, or artwork.

108) Tariff systems provide either a single rate of duty for each item applicable to all countries or two or more rates, applicable to different countries or groups of countries. The single-column tariff is the simplest type of tariff. It includes a schedule of duties in which the rate applies to imports from all countries on the same basis. Under the two-column tariff the first column includes "general" duties plus "special" duties indicating reduced rates determined by tariff negotiations with other countries. Rates agreed upon by "convention" are extended to all countries that qualify for normal trade relations (NTR). The United States have given NTR status to some 180 countries around the world. A preferential tariff is a reduced tariff rate applied to imports from certain countries. GATT prohibits the use of preferential tariffs, with three major exceptions. First are historical preference arrangements such as the British Commonwealth preferences and similar arrangements that existed before GATT. Second, preference schemes that are part of a formal economic integration treaty, such as free trade areas or common markets, are excluded. Third, industrial countries are permitted to grant preferential market access to companies based in less-developed countries.

18

Answer Key Testname: C8

109) Studies show that export procedural expertise and sufficient corporate resources are required for successful exporting.

An interesting finding was that even the most experienced exporters express lack of confidence in their knowledge about shipping arrangements, payment procedures, and regulations. The study also showed that, although profitability is an important expected benefit of exporting, other advantages include increased flexibility and resiliency and improved ability to deal with sales fluctuations in the home market. Although research generally supports the proposition that the probability of being an exporter increases with firm size, it is less clear whether export intensity —that is, the ratio of export sales to total sales—is positively correlated with firm size.

110) In order to promote domestic industries and agriculture and restrict the inflow of materials from unfavored nations, some governments impose certain barriers. The tariffs, which can be regarded as the three Rs of global business—rules, rate schedules, and regulations—are imposed by countries. Duties can be imposed on goods and services, thereby making it difficult for importers to import as well as for consumers to buy. A Harmonized Tariff System (HTS) has been adopted by the majority of trading nations, under which importers and exporters have to determine the correct classification number for a given product or service that will cross borders. This classification helps in the identifying of the product and applicable tariff. A nontariff (NTB) can also be imposed which is any measure other than a tariff that is a deterrent or obstacle to the sale of products in a foreign market. This includes quotas, discriminatory procurement policies, restrictive customs procedures, arbitrary monetary policies, and restrictive regulations. A quota is a government-imposed limit or restriction on the number of units or the total value of a particular product or product category that can be imported. In addition, discriminatory procurement policies can take the form of government rules and administrative regulations specifying that local vendors or suppliers receive priority consideration. Customs procedures are also considered restrictive if they are administered in a way that makes compliance difficult and expensive. Discriminatory exchange rate policies are imposed to distort trade in much the same way as selective import duties and export subsidies. Finally, restrictive administrative and technical regulations can create barriers to trade. These may take the form of antidumping regulations, product size regulations, and safety and health regulations. Some of these regulations are intended to keep out foreign goods; others are directed toward legitimate domestic objectives.

111) Countries benefit a lot based on their facilitating of export and import business. For example, China has attracted increased foreign investment from DaimlerChrysler, Hewlett-Packard, GM, and other similar corporations by accommodating them to set up production facilities that will support local sales as well as exports to world markets.

Governments commonly use four activities to support and encourage firms that engage in exporting. These are tax incentives, subsidies, export assistance, and free trade zones. Tax incentives treat earnings from export activities preferentially either by applying a lower rate to earnings or by refunding taxes already paid on income associated with exporting. Also, tax benefits are offered by governments which may include tax exemption or tax deferral on export income, accelerated depreciation of export-related assets, and generous tax treatment of overseas market development activities. Governments also support export performance by providing outright subsidies. Subsidies are direct or indirect financial contributions or incentives that benefit producers. Governments also provide assistance to exporters.

Companies can avail themselves of a great deal of governmental information concerning the location of markets and credit risks. Assistance may also be oriented toward export promotion. Various agencies at different levels hold trade fairs and trade missions designed to promote sales to foreign customers. In an effort to facilitate exports, countries are designating certain areas as "free trade zones" and particular "special economic zones." These zones are geographic entities that offer manufacturers simplified customs procedures, operational flexibility, and a general environment of relaxed regulations. Thus, these ways are very helpful and have helped several companies.

19

Answer Key Testname: C8

112) Dumping essentially refers to the sale of merchandise in export markets at unfair prices. In order to offset the impact of dumping and to penalize guilty companies, most countries have introduced legislation providing for the imposition of antidumping duties. These duties are levied if injury is caused to domestic producers. Such duties are normally imposed as special additional import charges equal to the dumping margin. They are almost invariably applied to products that are also manufactured or grown in the importing country. In the United States, antidumping duties are assessed after the commerce department finds a foreign company guilty of dumping and the International Trade Commission rules if the dumped products injured American companies. Countervailing duties, on the other hand, are additional duties levied to offset subsidies granted in the exporting country. In the United States, countervailing duty legislation and procedures are very similar to those pertaining to dumping. The U.S. Commerce Department and the International Trade Commission jointly administer both the countervailing duty and antidumping laws.

20

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Which of the following related to South African Breweries (SAB) PLC is not accurate?

A) The company's brands were popular among the "echo boom" generation in the United States.

B) None of its brands had the same status as Heineken or Guinness.

C) The company owned more than 100 breweries in 24 countries.

D) SAB had a commanding 98 percent share of the beer market.

E) Most of its brands, which include Castle Lager, were sold on regional basis.

1)

2) Caterpillar merchandise is gaining popularity as consumers make a fashion statement by donning boots, jeans, and handbags. All of the following statements related to their merchandise are correct except: A) Cat-branded apparel's are licensed to UK-based Overland Ltd. B) Caterpillar's merchandise bears distinctive black-and-yellow Cat label.

C) People do not know the brand but recognize it from their tractors.

D) Caterpillar's merchandise sales are close to $2.1 billion.

E) Caterpillar sells their apparel under a franchise agreement in UK.

2)

3) According to a 1991 report by McKinsey & Co., problems of alliances between Western and Japanese firms were related to all of the following factors except: A) balance between partners.

B) a feeling of mutual disillusionment.

C) difference in expectations.

D) objective levels of performance.

E) frictional loss.

3)

4) The strategy to use joint ventures has several advantages which do not include: A) achieve synergy.

B) the only way to enter a country or region.

C) reduced financial risk.

D) reward sharing.

E) risk sharing.

4)

5) A number of factors combine to make Russia an excellent location for an alliance which do not include: A) abundance of supplies.

B) potential for economic growth.

C) a well-educated workforce.

D) potential for growth in service sector.

E) quality is important to Russian consumers.

5)

6) The particular market-entry strategy that company executives choose depends on all of the following except: A) the availability of investment capital.

B) their vision.

C) their attitude toward risk.

D) the possibility of significant adaptation.

E) the amount of control sought.

6)

1

7) Which of the following currently owns a 70 percent stake in Skoda, the Czech automaker?

A) GM B) Ford C) DaimlerChrysler D) Volkswagen E) Renault

7)

8) Ford and Mazda have market entry and expansion in a relationship known as: A) franchising.

B) contract manufacturing.

C) a joint venture.

D) licensorship.

E) none of the above

8)

9) A competitive business environment is now characterized by all of the following characteristics except: A) unprecedented degrees of turbulence.

B) unpredictability.

C) dynamism.

D) inadaptability.

E) environmental responsiveness.

9)

10) The agreements that allows McDonald's franchisees around the globe to use McDonald's trademarked name and menu items represents, in essence, which form of market entry?

A) joint ventures B) acquisition C) franchising D) 100 percent ownership E) exporting

10)

11) The specialty retailing industry, as well as the fast-food industry, favors ________ for global growth.

A) joint ventures B) investment C) licensing D) strategic alliances E) franchising

11)

12) Disadvantages of joint venturing can include all of the following except: A) joint venture partners must share rewards as well as risks.

B) a company incurs very significant costs by joint venturing.

C) joint ventures allow partners to achieve synergy.

D) a dynamic joint venture partner can evolve into a strong competitor.

E) joint ventures can have the potential for conflict between partners.

12)

2

13) "Successful GSPs create win-win situations, where participants pursue objectives on the basis of mutual advantage." When applied to global strategic partnerships, this statement indicates the importance of which factor?

A) culture B) mission C) governance D) strategy E) organization

13)

14) An attribute which does not represent true global partnership is: A) achieving world leadership by differentiation.

B) retaining national identities.

C) continual transfer of resources.

D) relationship is organized vertical lines.

E) achieving a reciprocal relationship.

14)

15) "Corporate amnesia" in global partnership is a term which refers to: A) a relationship which is short lived.

B) discontinuation of a partnership due to personal chemistry.

C) losing national identity and ideology.

D) short-term goals with no memory on how to compete.

E) achieving world leadership by differentiation.

15)

16) Tata Motors (India) acquired the following auto company: A) Toyota (Japan).

B) Volkswagen AG (Germany).

C) Volvo (Sweden).

D) Hyundai (South Korea).

E) Jaguar (UK).

16)

17) A factor which is unrelated to licensing is: A) licensees can develop similar products.

B) licensees have considerable autonomy.

C) license agreements have short life.

D) licensees have considerable leverage.

E) licensees have limited control.

17)

18) Toyota learned many things from its partnership with GM, however American managers involved in the venture complained that: A) Toyota learned about managing American workers.

B) Toyota learned about the U.S. transport system.

C) Toyota learned many things about the U.S. supply system.

D) Toyota did not apply manufacturing expertise at GM plant.

E) Toyota applied its expertise at its Camry plant.

18)

19) Which of the following is not true of Japanese keiretsu?

A) blocks foreign suppliers from the Japanese market B) ensures low prices for Japanese consumers C) relationships are cemented by bank ownership D) promotes risk sharing E) promotes long-term employment

19)

3

20) Strictly speaking, a(n) ________ is an entry strategy for a single target country in which the partners share ownership of a newly created business entity.

A) joint venture B) exporting C) acquisition D) licensing E) franchising

20)

21) ________ represents a market entry strategy whereby one company permits a foreign company to make use of its patents, know-how, technology, company name, or other intangible assets in return for a royalty payment.

A) Licensing B) A global strategic alliance C) Exporting D) A joint venture E) One-hundred-percent ownership

21)

22) Avon Products uses ________ to enter developing markets.

A) acquisition and joint ventures B) licensing and franchising C) franchising and licensing D) joint venture and licensing E) acquisition and franchising

22)

23) Honda has invested $550 million in building an assembly plant in Greensburg, Indiana; IKEA spent nearly $2 billion to open stores in Russia; and South Korea's LG Electronics purchased a 58% stake in Zenith Electronics. All of these are examples of: A) FDI. B) acquisition.

C) franchising.

D) exporting.

E) licensing.

23)

24) The Russian market for imported premium vehicles is exploding as the number of households that can afford luxury products exhibit rapid growth. The luxury cars include all of the following except: A) Infiniti.

B) Rolls-Royce.

C) Lexus.

D) Porsche.

E) BMW.

24)

25) Which automaker owns an equity stake in Japan's Nissan Motor?

A) Volkswagen B) Ford C) Renault D) DaimlerChrysler E) GM

25)

4

26) As a general rule, the Chinese government allows foreign companies to participate in its market only if those companies agree to establish operations with local Chinese enterprises. Which market entry mode would be the appropriate choice under these circumstances?

A) franchising B) licensing C) acquisition D) joint venture E) exporting

26)

27) The president of a Mexican company recently remarked, "Business in Mexico is done on a consensus basis, very genteel and sometimes slow by U.S. standards." A few months later, the Mexican company and its U.S. joint venture partner parted company. Judging by the president's remark, one important reason for the "divorce" was: A) the cancellation of NAFTA. B) cultural differences.

C) the U.S. government's insistence on quick negotiations.

D) failure of one partner to live up to the terms of the contract.

E) the language barrier.

27)

28) The success of CFM International (the strategic partnership between GE and Snecma) can be attributed to which of the following?

A) commitment of the partners B) personal chemistry between executives C) compatibility of the partners D) capability of the partners E) all of the above

28)

29) Critics warn that employees of a company that become reliant on an outside supplier for critical components will: A) lose expertise and engineering skills B) encourage outsourcing C) become used to value-added components D) use time for developing other skills E) look for employment with competitors

29)

30) Would-be franchisors ask all of the following questions except one before expanding overseas: A) Can products be easily counterfeited?

B) How tough is the local competition?

C) Is commercial space available?

D) Does the government respect trademark and copyrights?

E) Can profits be easily repatriated?

30)

31) Boeing developed the wide-bodied aircraft, the 777, with about ________ of the work subcontracted out to Mitsubishi, Fuji, and Kawasaki.

A) 60% B) 50% C) 75% D) 25% E) 20%

31)

5

32) In 2016, one of the largest merger and acquisition deals was the proposed acquisition of American agricultural giant Monsanto by Germany-based Bayer for $66 billion. This type of transfer is known as: A) full ownership.

B) greenfield investment.

C) equity stake.

D) joint venture.

E) none of the above

32)

33) ________ provides technical specifications to a subcontractor or local manufacturer, who then oversees production.

A) A joint venture B) Contract manufacturing C) Exporting D) A global strategic alliance E) Licensing

33)

34) "Discussion and consensus must be the norms. Partners must be viewed as equals." When applied to global strategic partnerships, this statement indicates the importance of which factor?

A) strategy B) organization C) governance D) mission E) culture

34)

35) Which of the following is true about Japanese keiretsu?

A) Toyota is a horizontal keiretsu, Mitsubishi is a vertical keiretsu.

B) Toyota and Mitsubishi are both horizontal keiretsu.

C) Toyota and Mitsubishi are both vertical keiretsu.

D) Toyota is a vertical keiretsu, Mitsubishi is a horizontal keiretsu.

E) none of the above

35)

36) Having partners from another country can have advantages which include all of the following except: A) access to capital.

B) reducing product development costs.

C) securing technology.

D) increased competition.

E) shared risks.

36)

37) Russia is an excellent location for a strategic business alliance due to all of the following factors, except: A) sound legal system B) good regulatory system C) well-educated workforce D) importance on quality E) growth in service sector

37)

6

38) GM executives are looking for a joint venture with AvtoVAZ, the largest carmaker in: A) Russia.

B) Kazakhstan.

C) Germany.

D) Lithuania.

E) Turkey.

38)

39) The advantages of contract manufacturing include all of the following except: A) limited commitment of financial resources.

B) access to technical specifications by local manufacturers.

C) considerable commitment of management resources.

D) access to technical specifications by subcontractors.

E) a licensing firm can specialize in product marketing.

39)

40) Which of the following does not fit in with the factors that should be considered by companies forming GSPs? A) Learning from partners is critically important.

B) All employees and managers must understand where cooperation ends and competitive compromise begins.

C) Harmony is the most important measure of success.

D) Partners are competitors to each other.

E) none of the above

40)

41) Which automaker currently has a joint venture with Hindustan Motors (India)?

A) Volkswagen B) Renault C) Ford D) GM E) Mazda

41)

42) Which of the following is not a characteristic of global strategic partnership?

A) Participants make ongoing contributions in technology, products, and other areas.

B) Participants share benefits of the alliance.

C) Participants share control over the performance of the assigned tasks.

D) Participants agree not to compete in areas unrelated to the alliance.

E) Participants maintain independence outside the framework of alliance.

42)

43) Another perspective on the future of cooperative strategies envisions the emergence of: A) franchising.

B) mergers and acquisition.

C) keiretsu.

D) joint ventures.

E) virtual corporations.

43)

44) Pollo Campero, a chicken restaurant chain based in Central America, is using the following method for expanding operations in the United States: A) licensing.

B) franchising.

C) acquisition.

D) joint ventures.

E) exporting.

44)

7

45) Licensing as a market entry mode has several disadvantages and opportunity costs, which do not include: A) agreement may have short life.

B) leveraging and exploiting by licensee.

C) limited market control.

D) adaptations by licensee to fit local tastes.

E) similar product or technology development by licensee.

45)

46) The terminology used to describe the new forms of cooperation strategies varies widely and the phrases used include all of the following except: A) greenfield investments.

B) strategic international alliances.

C) global strategic partnerships.

D) strategic alliances.

E) collaborative agreements.

46)

47) Saab markets two luxury car models, both prized by drivers for their "quirkiness." About 30 percent of Saab's sales come from the United States, with most of the rest from Western Europe.

Which strategy does Saab appear to be using?

A) country concentration/market segment concentration B) country diversification/market segment concentration C) country diversification/market segment diversification D) country concentration/market segment diversification E) none of the above

47)

48) GSPs (Global Strategic Partnerships) are attractive for several reasons which do not include: A) focus on a single national market or a specific problem.

B) continuous transfer of technology between partners.

C) sharing technological developments.

D) sharing high product development costs.

E) securing access to national and regional markets.

48)

49) Which of the following does not fit into the sequence of experiences Anheuser-Busch had in Japan?

A) Anheuser-Busch dissolved the joint venture with Kirin Brewery.

B) Anheuser-Busch entered into a joint venture with Kirin Brewery.

C) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader.

D) Anheuser-Busch first entered Japan by means of a licensing agreement with Suntory, the smallest brewery in Japan.

E) Anheuser-Busch reverted to a licensing agreement with Kirin Brewery.

49)

50) In a joint venture with Russian manufacturer AvtoVAZ, GM executives were planning to have a stripped-down reengineered car based on its Opel model. However, the market research revealed that a "Made-in-Russia" car would only be acceptable if: A) it has a Russian name.

B) it has a very high sticker price.

C) it has an American name.

D) it has a German name.

E) it sported a very low sticker price.

50)

8

51) The Ford Motor Company (United States) has a 50-50 joint venture to build Ford Fiestas with: A) Mahindra & Mahindra (India).

B) BMW (Germany).

C) Toyota (Japan).

D) Mazda (Japan).

E) Shanghai Automotive Industry (China).

51)

52) McDonald's success in franchising in global markets can be attributed to several factors which do not include: A) local market knowledge.

B) granting franchisees leeway to tailor menu offerings to suit local tastes.

C) cross licensing.

D) a well known global brand name.

E) a business system that can be easily replicated.

52)

53) In order to prevent a licensor-competitor from gaining unilateral benefit, licensing agreements should provide for: A) adaptation for local tastes.

B) cross licensing.

C) strategic decision making.

D) contract manufacturing.

E) franchising.

53)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

54) In a country and market concentration strategy, a company serves many markets in a few countries.

54)

55) The joint venture between Corning Glass and Mexican manufacturer Vitro failed primarily due to conflicts arising from cultural differences.

55)

56) Franchising is a variation of licensing strategy in which there is a contract between the parent company franchiser and a franchisee that allows the franchisee to operate a business developed by the franchiser in return for all rights for operations.

56)

57) Starbucks' management team have used only licensing at the marketing entry approach.

57)

58) A lesson that can be learned from Anheuser-Busch's experience in Japan is that it is better to give control to a local partner via a licensing agreement rather than making a major investment.

58)

59) A joint venture with a local partner represents a more extensive form of strategy that is similar to exporting and licensing.

59)

60) By pursuing a joint venture entry strategy, a company can limit its financial risk as well as its exposure to political uncertainty.

60)

61) A joint venture with a local partner represents a more extensive form of strategy that is similar to exporting and licensing.

61)

9

62) Recently, questions about corporate governance have arisen after some chaebol leaders were accused of various offenses including colluding with politicians and corruption.

62)

63) Despite commanding a 37 percent share of the global cellular handset market, Nokia announced that it would make the source code for handsets manufactured by Siemens AG.

63)

64) U.S. President Donald Trump has made intellectual property protection as key elements in trade negotiations with Beijing.

64)

65) Licensing is a contractual agreement whereby one company (the licensor) makes a legally protected asset available to another company (the licensee) in exchange for royalties, license fees, or some other form of compensation.

65)

66) Licensing agreements offer limited market control since the licensee typically does not become involved in the licensor's marketing program.

66)

67) Japan's Fuji Photo Film Company invested hundreds of millions of dollars in the United States after the U.S. government ruled that Fuji was guilty of dumping.

67)

68) In China, regulations require foreign franchisers to directly own two or more stores for a minimum of one year before franchising.

68)

69) One of the advantages of a license arrangement is that it can create export market opportunities and open the door to a competitive relationship.

69)

70) GM and South Korea's Daewoo Group formed a joint venture which helped Daewoo improve its competitiveness. The venture was terminated since Daewoo prevented the import of GM cars to Korea.

70)

71) Despite the sometimes problematic nature of the keiretsu, change comes slowly in Japan.

71)

72) A dynamic joint venture partner can evolve into a strong competitor.

72)

73) To succeed in global markets, firms can no longer rely exclusively on the technological superiority or core competence that brought them past success.

73)

74) Japanese keiretsu executives can legally sit on each other's boards, share information, and coordinate prices in closed-door meetings of "presidents' councils."

74)

75) Organizations as diverse as Disney, Caterpillar, and the National Basketball Association make extensive use of licensing in overseas markets.

75)

76) Licensing, joint ventures, minority or majority equity stake, and ownership are points along a continuum of alternative strategies for global market entry and expansion.

76)

77) Eaton, the then Chrysler chairman believed that in international market the economies of scale suggests that you can go without a partner.

77)

10

78) Generally speaking, franchising is a market-entry strategy that is typically executed with more localization than is licensing.

78)

79) The alliance between GE and Snecma got off to a feeble start due to the personal chemistry between the top two executives of the respective companies.

79)

80) To succeed in global markets, firms can now rely exclusively on the technological superiority or core competence that brought them past success.

80)

81) The failure of partnership between Great Britain's General Electric Company was blamed in part due to the fact that it was run by engineers.

81)

82) The virtual corporation will seem to be a single entity with vast capabilities but will really be the result of numerous collaborations assembled only when needed.

82)

83) A licensed asset may be a brand name, company name, patent, trade secret, or product formulation.

83)

84) Although Jaguar's identity is closely tied to its British heritage, the first-generation I-Pace is being assembled in a factory in Austria owned by Canadian carmaker Magna.

84)

85) Foreign investments may take the form of minority or majority shares in joint ventures, minority or majority equity stake in another company, or outright acquisition.

85)

86) Hungary has the most liberal financial and commercial systems in the Central European market.

86)

87) The South Korean government has recently abandoned the "chaebol" industry structure in favor of the "keiretsu" structure.

87)

88) Sony entered into a strategic partnership with Samsung in order to produce flat-panel TV screens due to the high product development costs.

88)

89) The driving force behind many business acquisitions is globalization.

89)

90) According to the international Licensing Industry Merchandisers Association (LIMA), the United States and Canada account for about 90 percent of licensed goods sales.

90)

91) Prior to the economic crisis of 1997-1998, South Korea's "chaebol" had become bloated and heavily in debt.

91)

92) Franchising has great appeal to local entrepreneurs who are anxious to learn and apply Western-style marketing techniques.

92)

93) If government restrictions prevent 100 percent ownership by foreign companies, the investing company will have to settle for a majority or minority equity stake.

93)

94) Eventually, an affiliate-based strategy gives way to an export-driven strategy.

94)

11

95) McDonald's headquarters has learned the wisdom of leveraging local market knowledge by granting franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. However, franchising is a market-entry strategy that is typically executed with more localization than is licensing.

95)

96) Avon Products uses both acquisition and joint ventures to enter developing markets.

96)

97) One of the biggest joint ventures between an American company and a Russian company linked Cummins with the KamAZ truck company in Tatarstan.

97)

98) Foreign direct investment figures reflect investment flows out of the home country as companies invest in or acquire plants, equipment, or other assets.

98)

99) Overall, a licensing strategy must be designed to ensure ongoing competitive advantage for the licensee.

99)

100) Companies may move from licensing or joint venture strategies to ownership in order to achieve faster expansion in a market, greater control, and/or higher profits.

100)

101) Anheuser-Busch created a joint venture with Kirin Brewery, the market leader. Anheuser-Busch's 90 percent stake in the venture entitled it to market and distribute beer produced in Los Angeles.

101)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

102) Companies like Anheuser-Busch, Corning Glass, and GM have learned a lot by using joint venture as a mode of entry into a foreign market. Some of their experiences are not very positive. What are the disadvantages of joint venturing?

103) Companies are faced with the decision whether to expand by seeking new markets in existing countries or seeking new country markets for already identified and served market segments. Faced with these situations, what are the strategies that can be followed?

104) Why are alliances between Western companies and Asian competitors different as well as difficult? What are some of the concerns, and how can those concerns be addressed?

105) Giving an example, show what are the possible reasons to assume that joint ventures in the transition economies of Central and Eastern Europe could evolve at a more accelerated pace than past ventures?

106) Joint ventures are becoming very popular as an entry mode into foreign markets. Why is this strategy so attractive to companies interested in entering other markets in the world?

107) What are some of the questions that a would-be franchisor should ask before using franchising as a mode of entry?

108) Nike provides technical specifications to a subcontractor or local manufacturer for its products. What is this arrangement called and what are its major benefits and drawbacks?

109) Why would any firm, whether global or otherwise, seek to collaborate with another firm, be it local or foreign?

12

110) Japanese keiretsu is considered to be a strong cooperative strategy that will have an impact in global marketing.

Describe what it is and how it can affect U.S. businesses.

111) McDonald's and other fast food restaurants have benefitted by using franchising as a mode of entry into different countries. What are the benefits of franchising and how does it differ from other modes of entry?

112) What factors are necessary for a proposed global strategic partnership to be successful?

113) A true global strategic partnership is unique and different. Using the example of Sony's strategic alliance with Samsung, discuss attributes that are needed for a productive working partnership.

114) What are the two key advantages that are associated with licensing as a market-entry mode?

115) What are important considerations that will result in a successful global strategic alliance between two countries?

13

Answer Key Testname: C9

1) A 2) E 3) D 4) D 5) A 6) D 7) D 8) C 9) D 10) C 11) E 12) C 13) B 14) D 15) D 16) E 17) B 18) D 19) B 20) A 21) A 22) A 23) A 24) C 25) C 26) D 27) B 28) E 29) A 30) A 31) E 32) A 33) B 34) C 35) D 36) D 37) A 38) A 39) C 40) E 41) D 42) D 43) E 44) B 45) D 46) A 47) A 48) A 49) B 50) E 14

Answer Key Testname: C9

51) A 52) C 53) B 54) FALSE 55) TRUE 56) FALSE 57) FALSE 58) TRUE 59) FALSE 60) FALSE 61) FALSE 62) TRUE 63) TRUE 64) TRUE 65) TRUE 66) FALSE 67) TRUE 68) TRUE 69) FALSE 70) FALSE 71) TRUE 72) TRUE 73) TRUE 74) TRUE 75) TRUE 76) TRUE 77) FALSE 78) FALSE 79) FALSE 80) FALSE 81) FALSE 82) TRUE 83) TRUE 84) TRUE 85) TRUE 86) TRUE 87) FALSE 88) TRUE 89) TRUE 90) FALSE 91) TRUE 92) TRUE 93) TRUE 94) FALSE 95) FALSE 96) TRUE 97) TRUE 98) TRUE 99) FALSE 100) TRUE 15

Answer Key Testname: C9

101) FALSE 102) Many companies have experienced difficulties, some serious, when working with partners under joint venture agreement. Anheuser-Busch first entered the Japanese market in order to cross the difficult barrier by entering into a licensing agreement with Suntory, the smallest of the brewers in Japan. Although Budweiser became popular, it had a minuscule share of the market. Anheuser-Busch then created a joint venture with Kirin Brewery, the market leader with a 90 percent stake in the venture. Kirin's distribution channel was very helpful, and Anheuser-Busch was able to use some of Kirin's facilities. On the other hand, Kirin gained a lot of knowledge about the beer market globally. The beer market did not increase substantially for Anheuser-Busch, and the joint venture was losing money. Finally, Anheuser-Busch decided to dissolve the joint venture and reverted to a licensing agreement with Kirin. Thus, joint venture does not work in all circumstances and at times licensing works as well. In order for the joint venture relationship to work well, both partners must share rewards as well as risks. The main disadvantage associated with joint venture is that a company may incur very significant costs associated with control and coordination issues that arise when working with partners in another country. Another disadvantage is that of potential for conflict between partners. These often arise out of cultural differences. Corning Glass and Vitro, Mexico's largest industrial manufacturer had a joint venture. Mexican managers viewed the Americans as too direct and aggressive, whereas the American managers believed Mexicans took too much time to make important decisions. Another disadvantage is that a dynamic joint venture partner can evolve as a stronger competitor. GM and South Korea's Daewoo had a joint venture to produce cars for the Korean market. GM developed Daewoo's competitiveness, and finally Daewoo terminated the venture since their cars were not allowed for exportation. Thus, all the disadvantages have to be taken into account when entering into a joint venture agreement.

103) There are four different dimensions that emerge in combination to produce four different sets of strategies that are described as follows. (1) Country and market concentration, which involves targeting a limited number of customer segments in a few countries. This is typically a starting point for most companies and it matches with limited company resources and market investment needs. (2) Country concentration and market diversification, in which a company serves many markets in a few countries. Many European companies have followed this strategy. American companies that decide to diversify in the U.S. market as opposed to going international have also followed this strategy. (3) Country diversification and market concentration is the classic global strategy whereby a company seeks out the world market for a product. This strategy is desirable since it serves the world customer, and a company can achieve a greater accumulated volume at a lower cost. It also has a competitive advantage due to cost. This is the strategy followed by well-managed businesses that serve a distinct need and customer category. (4) Country and market diversification is the corporate strategy of a global, multi-business company such as Matsushita. Thus, based on the level of involvement desired and available resources, one of the above-mentioned strategies should be selected.

104) Western companies may find themselves to be at a disadvantage in GSPs with an Asian competitor. To limit transparency, some companies involved in GSPs establish a "collaboration section." This department is designed to serve as a gatekeeper through which requests for access to people and information must be channeled. Unintended transfers are therefore guarded and controlled. A study by McKinsey & Co. identified four common problem areas that have gone wrong in alliances between Japanese and Western firms. The Japanese partner saw itself emerging from the alliance as a leader in its business or building a new basis for the future, whereas the Western partner sought relatively quick and risk-free financial returns. The second area of concern related to the balance between partners. Each must contribute to the alliance and each must depend on the other to a degree that justifies participation in the alliance.

Another common cause of problems was found to be due to friction. This mainly stemmed from differences in management philosophy, expectations, and approaches. Lastly, the study found that short-term goals can result in the foreign partner limiting the number of people allocated to the joint venture. The original goals of the venture are lost as each new manager takes their turn. There is little original corporate memory or reminder of the initial intent of the venture. These concerns, if addressed adequately and before any formal agreement is signed, will be helpful in taking care of later concerns, frictions and unnecessary problems.

16

Answer Key Testname: C9

105) Assuming that risks can be minimized and problems overcome joint ventures in the transition economies of Central and Eastern Europe could evolve at a more accelerated pace than past joint ventures with Asian partners. On the one hand, a number of factors combine to make Russia an excellent location for an alliance: It has a well-educated workforce, and quality is very important to Russian consumers. On the other hand, several problems are frequently cited in connection with joint ventures in Russia—namely, organized crime, supply shortages, and outdated regulatory and legal systems in a constant state of flux. Despite the risks, the number of joint ventures in Russia is growing, particularly in the service and manufacturing sectors. In the early post-Soviet era, most of the manufacturing ventures were limited to assembly work, but higher value-added activities such as component manufacture are now being performed.

106) A joint venture with a local partner represents a more extensive form of participation in foreign markets than either exporting or licensing. A joint venture is an entry strategy for a single target country in which the partners share ownership of a newly created business entity. This strategy is attractive for several reasons such as the sharing of risk.

Sharing of risk is a very important advantage when a company is entering a new and unfamiliar region. Also, by pursuing joint venture entry strategies, a company can limit its financial risks as well as exposure to political uncertainty. A company can also use the joint venture experience to learn about a new market environment. Joint ventures also allow partners to achieve synergy by combining different value chain strengths. One company may be helpful in providing knowledge about local markets and availability of resources, and the other company may have a brand name and well-established reputation in the market. Thus, there can be a complimentary effect by linking the attributes of both the companies. Joint venture is recommended for companies which lack enough resources or technical know-how. Also, in cases where the governmental policies restrict the full ownership of the companies by foreign businesses, joint venture is the only option to enter.

107) Some of the questions that a would-be franchiser should ask include the following: (1) Will local consumers buy your product?

(2) How tough is the local competition?

(3) Does the government respect trademark and franchiser rights?

(4) Can your profits be easily repatriated?

(5) Can you buy all the supplies you need locally?

(6) Is commercial space available and are rents affordable?

(7) Are your local partners financially sound and do they understand the basics of franchising?

By addressing these issues, franchisers can gain a more realistic understanding of global opportunities.

108) This type of arrangement is referred to as "contract manufacturing." Nike, for example, provides technical specifications of products to be manufactured to the subcontractor, who then oversees production. The licensing firm can specialize in product design and marketing, while transferring responsibility for ownership of manufacturing facilities to contractors and subcontractors. Other advantages include limited commitment of financial and managerial resources and quick entry into target countries. This is especially helpful when the target market is too small to justify full- scale investment. Also, there is the possible advantage of securing labor and resources at less cost than in the licensor's home country or manufacturing plant. One disadvantage would be that the licensed companies may become subject to public scrutiny and criticism for several reasons. Nike has to face this problem if workers in the contracted companies are underpaid. Inhumane working conditions and hiring underage workers have also been points of criticism by many governmental and private organizations. Violations of sustainable business practices have also come under scrutiny.

17

Answer Key Testname: C9

109) Recent changes in the political, economic, sociocultural, and technological environments of global firms have prompted the need for strategies that are more current rather than the traditional strategies. Trade barriers are less, global markets are more accessible, consumer needs and wants have changed, product life cycles have shortened, and new communication technologies and trends have emerged. These factors may provide unprecedented opportunities.

However, there are strong strategic implications for the global organizations and new challenges for the global marketer. All these converging environmental forces or changes require different unprecedented global strategies that take into account collaborations which were not thought of at any period of time. Today's competitive environment is described as turbulent, dynamic, and unpredictable. Global firms are under intense pressure to respond and adapt quickly. They have to pursue "entrepreneurial globalization" by developing unique and flexible organizational capabilities, innovation, and updating global strategies that take care of the demands.

110) Japan's keiretsu represents a special category of cooperative strategy which is an interbusiness alliance or enterprise group. It exists in a broad spectrum of markets, including the capital market, primary goods markets, and component parts markets. Keiretsu relationships are often cemented by bank ownership of large blocks of stock and by cross-ownership of stock between a company and its buyers and nonfinancial suppliers. Also, keiretsu executives can legally sit on each other's boards, share information, and coordinate prices. Thus, keiretsu serves as a cartel that has the government's blessing. Although it is not a market entry strategy per se, it played an integral part in the international success of the Japanese companies as they sought new markets. Clyde Prestowitz provided the following example to show how keiretsu relationships have a potential impact on U.S. businesses. In the 1980s, Nissan was in the market for a supercomputer to use in car design. Two vendors under consideration were Cray and Hitachi. Cray was the worldwide leader in supercomputers, and Hitachi had no functional product to offer. When it appeared that the purchase of a Cray computer was pending, Hitachi executives called for solidarity since both Nissan and Hitachi were members of the same big six keiretsu. Hitachi was pushing Nissan to show preference for Hitachi, and the United States had to put pressure on both Nissan and the Japanese government to have the sale proceed with Cray. Because keiretsu relationships are crossing the Pacific and directly affecting the American market, the U.S. companies have a reason for concern. In California alone, keiretsu owns more than half of the Japanese businesses. Other keiretsu businesses are moving into different parts of the United States.

111) Franchising involves a contract between a parent company (franchiser) and a franchisee that allows a franchisee to operate a business developed by the franchiser in return for a fee and adherence to franchise-wide policies and practices. This definition is very similar to that of licensing since franchising itself is another variation of licensing strategy. McDonald's is a good example of the success that can be achieved through franchising. It has great appeal to local entrepreneurs who are very anxious to learn and apply franchising, which has been found to be very successful in the United States. The specialty retailing industry favors franchising as a market entry mode. Many of the famous American restaurant chains have used franchising to enter and to develop in other countries. McDonald's has a well-known global brand name and a business system that can be easily replicated in multiple country markets. It also provides its franchisees considerable leeway to tailor restaurant interior designs and menu offerings to suit country-specific preferences and tastes. Franchising is a market entry strategy that is typically executed with less localization than licensing.

112) Assuming that a proposed alliance has required attributes, it is necessary to consider six basic factors deemed to have significant impact on the success of GSPs: mission, strategy, governance, culture, organization, and management: 1. Mission. Successful GSPs create win-win situations, in which participants pursue objectives on the basis of mutual need or advantage.

2. Strategy. A company may establish separate GSPs with different partners; strategy must be thought out upfront to avoid conflicts.

3. Governance. Discussion and consensus must be the norms. Partners must be viewed as equals.

4. Culture. Personal chemistry is important, as is the successful development of a shared set of values.

5. Organization. Innovative structures and designs may be needed to offset the complexity of multicountry management.

6. Management. GSPs invariably involve a different type of decision making. Potentially divisive issues must be identified in advance and clear, unitary lines of authority established that will result in commitment by all partners.

18

Answer Key Testname: C9

113) A true global strategic partnership requires a mutual collaboration between partners. There are five attributes that are described as important for this type of collaboration. (1) Two or more companies should develop a joint long-term strategy aimed at achieving world leadership by pursuing cost-leadership, differentiation, or a combination of the two.

Samsung and Sony are two major companies jockeying for leadership in the global television market. The flat-panel TV market is the newest market that has a great potential. (2) The relationship should be reciprocal with each partner bringing in specific strengths that can prove to be mutually beneficial. Also, both sides should be able to learn from each other. Samsung is the leader in the manufacturing technology into world-class products. They can learn from Sony how the present technology can be advanced. (3) The partners' vision and effort are truly global, extending beyond home countries and the home regions to the rest of the world. Sony and Samsung are both global companies that market global brands throughout the world. (4) The relationship should be organized along horizontal not vertical lines. Also, continual transfer of resources laterally between partners is required, with resource pooling representing norms. Both Sony and Samsung are in direct contact with each other and there is good sharing of resources. (5) When competing in markets excluded from the partnership, the participants retain their national and ideological identities.

Both Sony and Samsung are well established and have sufficient key products in the world market that they will be able to retain their national and ideological identities as well as competitive edge.

114) Two key advantages are associated with licensing as a market-entry mode. First, because the licensee is typically a local business that will produce and market the goods on a local or regional basis, licensing enables companies to circumvent tariffs, quotas, or similar export barriers. Second, when appropriate, licensees are granted considerable autonomy and are free to adapt the licensed goods to local tastes.

115) There are five attributes that are important while considering global strategic alliances as illustrated by the example of Sony and Samsung. These can be listed as follows: 1. Two or more companies develop a joint long-term strategy aimed at achieving world leadership by pursuing cost leadership, differentiation, or a combination of the two.

2. The relationship is reciprocal. Each partner possesses specific strengths that it shares with the other; learning must take place on both sides.

3. The partners' vision and efforts are truly global, extending beyond home countries and the home regions to the rest of the world.

4. When competing in markets excluded from the partnership, the participants retain their national and ideological identities.

5. The relationship is organized along horizontal, not vertical, lines. Continual transfer of resources laterally between partners is required, with technology sharing and resource pooling representing norms.

19

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) The formulation, imagery, and consumer appeal of Colgate's Total brand toothpaste were designed to translate across national boundaries. This new global brand represents which type of product innovation?

A) dynamically continuous innovation B) dynamically discontinuous innovation C) comparative innovation D) discontinuous innovation E) continuous innovation

1)

2) Targeting the 300 million farmers in India who still use plows harnessed to oxen, John Deere engineers created a line of relatively inexpensive, no-frills tractors. The Deere team then realized that the same equipment could be marketed to hobby farmers and acreage owners in the United States, a segment that they had previously overlooked. This is an example of ________ strategy.

A) product invention B) product extension-communications adaptation C) product-communications extension D) product adaptation-communications extension E) dual adaptation

2)

3) Marketers in Gillette's Parker Pen subsidiary focused on upscale shoppers in Malaysia and Singapore. This is an example which coincides with Maslow's hierarchy related to: A) self-esteem.

B) social needs.

C) physiological needs.

D) security.

E) self actualization.

3)

4) Packaging is an important consideration for products that are shipped to markets worldwide.

Which of the following statements related to packaging is not true?

A) The Aquafresh Ultimate tube was designed to stand vertically.

B) The Japanese prefer plain soft colors on their packages.

C) Coca-Cola had contour bottles in both glass and plastic versions in many countries.

D) Nestlé's worldwide network of packaging teams provide improvement suggestions on a quarterly basis.

E) Nestlé asked suppliers to find a glue to make the clicking sound louder when a tube of Smarties brand chocolate candies are unwrapped.

4)

5) To promote its Centrino wireless chip, Intel launched a global ad campaign that features different combinations of celebrities. These celebrities were chosen because they are widely recognized in the key world markets. This type of strategy is referred to as: A) product adaptation-communications extension.

B) product invention.

C) product extension-communications adaptation.

D) product-communication adaptation.

E) product-communications extension.

5)

1

6) Campbell's has been marketing soup in Japan for more than 40 years. Early on, Japanese consumers were not receptive to ads featuring the Campbell Kids and the "M'm M'm Good" slogan. This compelled Campbell's to develop ads featuring a talking soup can known as "Mr. Campbell."

Campbell's also developed soup varieties for Japan with fish as the main protein source and spices that reflect local preferences. As described here, which of the following strategies has Campbell's used in Japan?

A) product-communication adaptation B) product invention C) product extension-communications adaptation D) product adaptation-communications extension E) product-communications extension

6)

7) Which one of the following statements is not accurate regarding Alphabet Inc.?

A) Samsung and several other handset manufacturers use its Android smartphone operating system.

B) The company also owns Advanced Technology and Projects (ATAP), which focuses on mobile applications.

C) Alphabet has also made a number of strategic acquisitions, including video-sharing site YouTube and the Internet of Things thermostat brand Nest.

D) The company's semi-secret research division is known as the Moonshot Laboratory.

E) The company's core search and ad-driven businesses are still called Google.

7)

8) Which of the following is not one of the levels in the Asian version of Maslow's hierarchy?

A) admiration B) affiliation C) safety D) physiological E) self-respect

8)

9) The marketers of Corona beer achieved great success in the U.S. market by: A) changing the brewing recipe to conform to American palates.

B) retaining the bottle design originally used in Mexico.

C) distributing Corona in returnable bottles.

D) having the label in Spanish.

E) hiring Hispanic movie stars as endorsers.

9)

10) The benefits of strong brands include all of the following except: A) more elastic consumer response to price decreases.

B) less inelastic consumer response to price increases.

C) larger margins.

D) greater loyalty.

E) less vulnerability to marketing actions.

10)

11) Generally speaking, which of the following statements is true concerning product attributes?

A) A product has more attributes than tangible and intangible ones.

B) Neither tangible nor intangible product attributes are important.

C) Intangible product attributes are more important than tangible ones.

D) Both tangible and intangible product attributes are important.

E) Tangible product attributes are more important than intangible ones.

11)

2

12) Comparing the traditional formulation of Maslow's hierarchy with the results of current research on the consumer needs and motivation in Asia, which of the following is correct?

A) The lowest three levels of the hierarchy are the same in the traditional and Asian versions.

B) The highest levels of the hierarchy are the same in the traditional and Asian versions.

C) The five levels in the traditional formulation apply equally in the West and in Asia.

D) The lowest four levels of the hierarchy are the same in the traditional and Asian versions.

E) The lowest two levels of the hierarchy are the same in the traditional and Asian versions.

12)

13) Which of the following is not in the top five of the world's most valuable brands according to 2017 rankings?

A) Microsoft B) Apple C) Samsung D) Amazon E) Coca-Cola

13)

14) Guidelines which can assist managers in their effort to establish global brand leadership include all of the following except: A) before taking a brand overseas, select name, marks and symbols.

B) assign specific responsibility for managing branding issues.

C) create a compelling value proposition for customers.

D) make a process template available to all managers.

E) make a process template for international consumers.

14)

15) Most new products fall into the category described as: A) platform-based innovation.

B) continuous innovation.

C) dynamically continuous innovation.

D) added-value innovation.

E) discontinuous innovation.

15)

16) Ben & Jerry's ice cream package design was changed in the United Kingdom since British consumers perceived the colors differently than U.S. consumers. This is an example of: A) product-communications extension.

B) product invention.

C) dual adaptation.

D) product extension-communications adaptation.

E) product adaptation-communications extension.

16)

17) Which of the following could hinder the success of products labeled "Made in Bangladesh" or "Made in Thailand" in export markets?

A) no possible quality/price positioning B) low acceptance of private brands C) high product saturation levels in global markets D) negative country-of-origin bias E) lack of promotion in global markets

17)

18) As outlined by branding expert Kevin Lane Keller, the benefits of strong brand equity include all of the following except: A) greater loyalty.

B) more inelastic consumer response to price increases.

C) more elastic consumer response to price decreases.

D) less vulnerability to marketing crises.

E) more vulnerability to marketing actions.

18)

3

19) All of the following statements related to packaging of Coca-Cola products are true except: A) in Latin America, Coca-Cola offers Coke in different-sized bottles.

B) Coke sells 2-liter bottles in the United States, which can be stocked in chilled and unchilled forms in stores.

C) Coca-Cola's distinctive contour bottle comes in both glass and plastic versions.

D) Coke's packaging strategies are based on profitability in using different-sized bottles.

E) in North America, Coke offers Fridge Pack, which holds 12 cans, since there are large refrigerators in use.

19)

20) ________ can also be thought of as an asset representing the value created by the relationship between the brand and its customers over time.

A) Brand equity B) Co-branding C) Brand extensions D) Brand image E) Brand loyalty

20)

21) Which of the following consumer products companies experienced a major product failure in Europe due to inadequate test marketing?

A) Procter & Gamble B) Unilever C) Seagram D) Kao E) Colgate

21)

22) Generally speaking, which of the following product categories represents the best potential for extension into international markets without adaptation?

A) intangible products B) non-alcoholic drinks C) food products D) companion products E) industrial products

22)

23) An express warranty is a written guarantee that assures the buyer that he or she: A) has limited time for filling out information required by the manufacturer.

B) will be able to contact the manufacturer whenever needed.

C) is getting what he or she desired.

D) is getting what he or she has paid for.

E) will be able to get express response if any defects are found.

23)

24) Maslow's hierarchy is applicable to global marketing because it can help explain how: A) status needs in different countries can only be fulfilled with localized products.

B) basic human needs can drive the development of global products.

C) "luxury badging" is irrelevant to companies marketing in Asia.

D) the top of the Asian hierarchy is self-respect.

E) Asians differ from Westerners in their basic physiological needs.

24)

4

25) Which of the following statements is not an example of local products or brands?

A) Coca-Cola developed several branded drink products for Japan.

B) BMW uses "the ultimate driving machine" slogan in India.

C) Coca-Cola markets Kinely brand bottled water in India.

D) Diageo PLC markets Gordon's Edge, a gin-based ready-to-drink beverage in the United Kingdom.

E) Coca-Cola developed a noncarbonated, ginseng-flavored beverage for Japan.

25)

26) When a corporate name such as Sony is combined with a product brand name such as Walkman, the brand category is referred to as: A) brand loyalty.

B) co-brand.

C) brand symbol.

D) tiered brand.

E) brand equity.

26)

27) Global marketers must understand the importance of visual aesthetics embodied in the color or shape of a product, label, or package. Which of the following statements is not true regarding the use of color in selected countries?

A) The red Marlboro color had to be changed in some Asian countries.

B) The color white is associated with death and bad luck in some Asian countries.

C) Packaging aesthetics are particularly important to the Japanese.

D) The Chinese consider the color red to be lucky.

E) The yellow color on Caterpillar's earthmoving equipment is acceptable worldwide.

27)

28) Coca-Cola's distinctive contour bottle, which is sold in many countries, illustrates the point that packaging: A) helps in storing large sizes in refrigerators.

B) appeals only to Asian consumers.

C) helps in brand identification.

D) strategies can vary by country and region.

E) strategies do not change by country and region.

28)

29) Many American car buyers perceive Korean cars as: A) a good investment.

B) reliable.

C) cheap.

D) durable.

E) of high quality.

29)

30) Before Ben & Jerry's launched their ice cream in the United Kingdom, the company conducted extensive research to determine whether the package design was appropriate. The research indicated that British consumers perceived the colors differently than U.S. consumers. The package design was changed accordingly. This type of strategy can be defined as: A) product-communication adaptation.

B) product adaptation-communications extension.

C) product extension-communications adaptation.

D) product invention.

E) product-communications extension.

30)

5

31) By definition, a ________ requires a large amount of learning on the part of users and typically creates new markets and consumption patterns.

A) dynamically continuous innovation B) discontinuous innovation C) platform-based innovation D) continuous innovation E) new and improved innovation

31)

32) ________ represents the cumulative added value of a company's investment in the marketing of a brand over time.

A) Brand image B) Brand loyalty C) Co-branding D) A brand extension E) Brand equity

32)

33) British entrepreneur Richard Branson has built a global business empire by: A) relying on brand extension.

B) avoiding consumer businesses with established leaders.

C) being the first to use smart cards in major markets.

D) developing local brands.

E) restricting the "Virgin" name only to airlines.

33)

34) In some developing countries, refrigerators have an important secondary purpose related to higher-order needs, which relates to: A) self-respect B) competition C) physiology D) prestige E) safety

34)

35) When introduced in the late 1970s, the VCR created new patterns of consumer behavior. For example, assuming the user could learn to set the timer, he or she could tape programs to watch at a later time. DVD, a playback only video system, was introduced in the late 1990s. DVD discs contain full-length movies with digital sound in a format that resembles conventional music compact discs. Which of the following most accurately describes the respective degree of newness of these two global products?

A) The VCR is a discontinuous innovation; the DVD is a dynamically continuous innovation.

B) The VCR and DVD are both dynamically continuous innovations.

C) The VCR and DVD are both continuous innovations.

D) The VCR and DVD are both discontinuous innovations.

E) The VCR is a dynamically continuous innovation; the DVD is a discontinuous innovation.

35)

36) Around the world, various brands of personal computers are sold with Pentium processors. This fact is often used as a selling point, with advertising that proclaims "Intel Inside." Which branding concept does such advertising reflect?

A) brand extension B) co-branding C) tiered branding D) brand image E) brand equity

36)

6

37) The corporate development team at Virgin evaluates more than a dozen proposals each day from outside and within the company. When assessing new-product ideas, they look for all of the following except: A) if the idea "uses or abuses" the Virgin brand.

B) synergy with existing Virgin products.

C) aesthetic attributes of competitors' products.

D) marketing opportunities.

E) pricing and return on investment.

37)

38) Examples of a "brand symbol" include all of the following except: A) date of manufacture on Coca-Cola cans.

B) the wave that appears on red Coke cans and bottle labels.

C) McDonald's golden arches.

D) non-word marks such as the Nike swoosh.

E) three-pronged Mercedes star.

38)

39) Packaging serves several important communication functions, which include all of the following except: A) packaging enhances a consumer's brand experience.

B) packaging enhances functional benefits of the product.

C) packaging engages the senses of a consumer.

D) packaging makes an emotional connection with the consumer.

E) packaging offer communication cues that can influence consumers when making a purchase decision.

39)

40) The introduction of consumer VCRs in the late 1970s initiated a revolutionized in-home electronic entertainment. For example, assuming the user could learn to set the timer, he or she could tape programs to watch at a later time. The VCR's popularity also gave rise to an entirely new retailing concept, the video rental store. What type of innovation did the consumer VCR represent?

A) a discontinuous innovation B) a dynamically continuous innovation C) a comparative innovation D) a continuous innovation E) none of the above

40)

41) A logo can be all of the following except: A) word mark.

B) nonword mark.

C) trademark.

D) brand equity.

E) brand symbol.

41)

7

42) Which one of the following statements describing brand equity is not accurate?

A) It represents the total value that accrues to a product as a result of a company's cumulative investments in the marketing of the brand.

B) It can be thought of as an asset representing the value created by the relationship between the brand and its customers over time.

C) It is an asset representing the value created by the relationship between the brand and its customers over time.

D) The stronger the relationship with the consumer, the greater is the brand equity.

E) It is a perception about a brand as reflected by brand associations that consumers hold in their memories.

42)

43) Alfred Zeien, former chairman of Gillette, once noted that his company's Parker Pen unit does not have to develop a special model for Malaysia and Singapore because shoppers worldwide seek the same things when buying a gift that will serve the recipient as a status symbol. This insight relates to which level of Maslow's hierarchy of needs?

A) esteem B) physiological C) safety D) self-respect E) social

43)

44) Colgate's Total is a new toothpaste brand whose formulation, imagery, and consumer appeal were designed from the beginning to translate across national boundaries. Which strategy did Colgate use with Total?

A) product innovation B) dual adaptation C) product adaptation-communications extension D) product extension-communications adaptation E) product-communications extension

44)

45) Packaging aesthetics are particularly important to the ________ consumer.

A) German B) Indian C) French D) Japanese

45)

E) American

46) The Intel Inside campaign promoting both the Intel Corporation and its Pentium-brand processors in conjunction with advertising for various brands of personal computers is an example of: A) brand symbol.

B) brand extension.

C) co-branding.

D) brand loyalty.

E) brand equity.

46)

47) In Chinese markets, Nike had a problem using the "Just Do It" attitude which was found not to be appropriate. Finally, Nike decided to use Chinese athletes in their promotion. This type of adaptation was needed due to: A) the Chinese do not wear running shoes.

B) parents do not want their children to see such ads.

C) ingrained Chinese values which respect authority.

D) "Just do it" in Chinese has a negative connotation.

E) Chinese athletes use Nike shoes.

47)

8

48) Regulators in different countries have proposed various regulations for product labeling. All of the following statements pertaining to such regulations are true except: A) the American Automobile Labeling Act clarifies the country of origin as well as the final assembly point.

B) in 2008, the United States enacted a country-of-origin labeling (COOL) law.

C) the use of terms "light" and "natural" are allowed on labels only in the United States.

D) McDonald's is posting nutrition information on all food packaging and wrappers in selected markets.

E) mandatory health warnings on tobacco products are required in most countries.

48)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

49) When Kraft Foods launched Oreo brand cookies in China in 1996, they found that Oreo was too sweet for the Chinese palate, and the price was too low. Oreo reformulated a less-sweet chocolate-covered wafer and increased its price. This strategy is referred to as product extension approach.

49)

50) An express warranty is a written guarantee that assures the buyer that he or she is getting what he or she has paid for or that provides recourse in case a product's performance falls short of expectations.

50)

51) In India, Vietnam, and other emerging markets, many people cannot afford flush toilets but buy cell phones as status symbols.

51)

52) Marketers in Gillette's Parker Pen subsidiary are confident that consumers in Malaysia and Singapore shopping for an upscale gift will buy the same Parker Pen as Americans shopping at Neiman Marcus.

52)

53) A product is a good, service, or idea with both tangible and intangible attributes that collectively create value for a buyer or user.

53)

54) In countries like India and Vietnam, and other emerging markets, amenities such as refrigerators, flush toilets, and cell phones are considered status symbols.

54)

55) Because of the consumer safety regulations, McDonald's can only give away soft plastic toys with its Happy Meals in Europe.

55)

56) Coca-Cola's packaging innovation includes a Fridge Pack, which is a long, slender carton that holds the equivalent of 12 cans of soda. This pack is popular since it fits into the refrigerator's lower shelf and is convenient for use by global consumers.

56)

57) A company that has developed a successful local product or brand cannot implement an adaptation strategy.

57)

58) One of the benefits of strong brand equity is more elastic consumer response to price increases.

58)

59) The decision to transform a global product into a global brand is risky. For example, in the United Kingdom, Snickers may get confused with Knickers, the British slang for a woman's undergarment.

59)

9

60) Perceptions and attitudes about a product's origins can be positive or negative. On the positive side, "German" is synonymous with style.

60)

61) The Virgin brand is a global brand with several brand extensions.

61)

62) U.S. executives of an electronic device manufacturer understood that in Japan, "a book is judged by its content." As a result, they revamped packaging aesthetics.

62)

63) For brands, it's important to speak the language of the target audience.

63)

64) The European Commission sets product standards that force many non-EU companies to adapt their product or service offerings to satisfy domestic market regulations.

64)

65) In Hellmut Schutte's modified hierarchy to explain the needs and wants of Asian consumers, the last three levels are affiliation, admiration, and self-actualization.

65)

66) Microsoft's Windows 7 operating system was launched in 2009 with the user-centric global advertising campaign keyed to the theme "I'm a PC, and Windows 7 was my idea." This is an example of the dual-extension strategy.

66)

67) As quoted in the text, "People love the Uber product. They do not necessarily love the brand."

67)

68) Many consumers consider products with labels such as "Made in Bangladesh" and "Made in Brazil" to be of inferior quality and value.

68)

69) Before executives at Ben & Jerry's Homemade launched their ice cream in the United Kingdom, the company conducted extensive research to determine whether the package design effectively communicated the brand's "super premium" position. This is an example of dual-extension strategy.

69)

70) Apple's retail stores reinforce the brand's hip, cool image.

70)

71) Coca-Cola's distinctive contour bottle comes in both glass and plastic versions.

71)

72) In 2008, the United States enacted a country-of-origin labeling (COOL) law. The law requires supermarkets and other food retailers to display information that identifies the country that meat, poultry, and certain other food products come from.

72)

73) The Sony Walkman is an example of combination or tiered branding, whereby a corporate name is combined with the name of the product.

73)

74) According to the top brand rankings, 2017, Microsoft is the world's most valuable brand.

74)

75) The "wave" that appears on red Coke cans and bottle labels is an example of a brand symbol.

75)

76) Some consumers flaunt their wealth by buying expensive products and brands that others will notice—a behavior referred to as conspicuous consumption.

76)

10

77) When consumers flaunt their wealth by buying expensive products and brands so that others will notice is referred to as "luxury badging" behavior.

77)

78) The extension strategy where the product remains virtually unchanged but extending it in markets outside the home country is known as "adaptation strategy."

78)

79) X (formerly Google X), the company's semi-secret research facility, is known as the Moonshot Laboratory. That's because staff members are working on "moonshot" projects that represent leading-edge technology leaps.

79)

80) Alphabet's myriad product development initiatives illustrate the point that products and brands are arguably the least crucial element of a company's marketing program.

80)

81) People have local tastes based on their unique cultures and traditions—a good candy bar in Brazil is not the same as a good candy bar in China.

81)

82) German wines would be more appealing in export markets if the labels were simplified.

82)

83) Nestlé asked suppliers to find a type of glue to make the clicking sound louder when consumers snap open a tube of Smarties brand chocolate candies.

83)

84) Tangible product attributes include the status associated with product ownership and a brand's overall reputation.

84)

85) The world's 10 most valuable brands (2017) includes McDonald's restaurants.

85)

86) The appeal of the product extension-communication adaption strategy is its relatively low cost of implementation.

86)

87) Industrial products tend to be less deeply rooted in culture than are consumer goods.

87)

88) The term consumer packaged goods applies to a specific variety of products whose packaging is designed to protect or contain the product during shipping, at retail locations, and at the point of use or consumption.

88)

89) Scotland's top export category is information technology.

89)

90) The equity value of global megabrands such as Coca-Cola and Marlboro runs in the tens of billions of dollars.

90)

91) In the United States, the average Buick buyer is 61 years old, which stands in marked contrast to Volvo, whose average buyer is only 50.

91)

92) China and India take great pride in their manufacturing capabilities but, generally speaking, consumer perception lags behind the reality.

92)

11

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

93) What are brands, and what are their functions in global marketing? How do brands develop their image, identity, and equity? Are global products and global brands the same?

94) If a label on a product states "Made in Thailand," and a similar product has a label "Made in Germany," why do consumers consider the latter to be better than the former? What difference does a label make in consumer perceptions?

95) Explain the differences between "product adaptation-communication extension" and "product-communication adaptation" strategies.

96) Give an example of how innovation can be applied to meet the needs of low-income populations.

97) Laws and regulations in different countries frequently lead to obligatory design. Giving examples, show how this can have an impact in global marketing.

98) What is a brand image? How can it be used by competitors to differentiate themselves?

99) What are the differences between "product-communication extension" and "product extension-communication adaptation" as strategies?

100) Why are packaging aesthetics an important consideration in global product marketing?

101) Describe the factors that should be considered in developing new products for international markets with particular emphasis on the consequences for not adequately testing new products.

102) Coca-Cola has developed several branded drink products for sale only in Japan, including a noncarbonated ginseng-flavored beverage. Using this as an example, outline the differences between a local brand and a global brand.

103) Is it possible for the manufacturing reputation of a particular country to change over time? Justify using examples.

104) What is the significance of innovation in global marketing? Describe different categories of innovation with examples.

105) Maslow's hierarchy of needs provide a useful framework for understanding how and why local products and brands can be extended beyond home-country borders. How can Maslow's needs hierarchy be used in global marketing?

106) Describe the guidelines that can assist marketing managers in their efforts to establish global brand leadership.

12

Answer Key Testname: C10

1) E 2) B 3) D 4) B 5) C 6) A 7) B 8) E 9) B 10) B 11) D 12) E 13) C 14) E 15) B 16) D 17) D 18) E 19) D 20) A 21) B 22) E 23) D 24) B 25) B 26) D 27) A 28) D 29) C 30) C 31) B 32) E 33) A 34) D 35) A 36) B 37) C 38) A 39) B 40) A 41) D 42) E 43) A 44) A 45) D 46) C 47) C 48) C 49) FALSE 50) TRUE 13

Answer Key Testname: C10

51) TRUE 52) TRUE 53) TRUE 54) TRUE 55) FALSE 56) FALSE 57) FALSE 58) FALSE 59) TRUE 60) FALSE 61) TRUE 62) FALSE 63) TRUE 64) TRUE 65) FALSE 66) TRUE 67) TRUE 68) TRUE 69) FALSE 70) TRUE 71) TRUE 72) TRUE 73) TRUE 74) FALSE 75) TRUE 76) TRUE 77) TRUE 78) FALSE 79) TRUE 80) FALSE 81) TRUE 82) TRUE 83) TRUE 84) FALSE 85) FALSE 86) TRUE 87) TRUE 88) FALSE 89) TRUE 90) TRUE 91) TRUE 92) TRUE

14

Answer Key Testname: C10

93) A brand is a complex bundle of images and experiences in the consumer's mind. Brands perform two important functions. First, they represent a promise by a particular company about a particular product and secondly, brands enable customers to better organize their shopping experiences by helping them seek out and find a particular product.

Customers integrate all their experiences of observing, using, or consuming a product with other aspects that they obtain from a variety of published and verbal information. Perceptions can be based on price, after-sale service, distribution, and a variety of other experiences. The sum of these impressions becomes a brand image which is actually a mental image of both the product as well as the company. Brand equity represents the total value that accrues to a product as a result of a company's cumulative investments in the marketing of the brand. Companies develop logos, distinctive packaging, and other communication devices to provide visual representations of their brands. A local product or local brand is one that has achieved success in a single national market. A global product meets the wants and needs of a global market. A true global product is offered in all world regions. A global brand has the same name and, in some instances, a similar image and positioning throughout the world. Thus, global products and global brands are different.

94) In global marketing, consumer perceptions play a very important role. Such perceptions contribute to what is referred to as the "country-of-origin" effect. They become part of a brand's image and contribute to its brand equity. This is particularly true for product categories that are most commonly consumed such as automobiles, electronics, fashion, recorded music, food, and other products. The country of origin effect can be positive or negative. Of course, positive ones add to the brand's image and contribute to its brand equity. For example, Swiss watches, French wines, or Japanese cars are well known. Perceptions are hard to change, and it takes time for perceptions to set. The manufacturing reputation of a particular country can change over time. Korea's image has improved greatly in recent years. It is expected that some national brands developing from Asian countries will have an impact. Sometimes one brand can lead in forming a country of origin affect. Nokia phones, for example, have made Finland popular, and products coming from there will have the quality impression that has been formed by Nokia. Also, recently the "Made in Mexico" image has become popular. For some product categories, foreign products have a substantial advantage for just being foreign. Global marketers should utilize the opportunity to bank on the special qualities of the products which are well known for their country of origin. If a country's manufacturers produce high-quality products that are nonetheless perceived to be of low quality then one has to disguise the foreign origin of the products. In any case, marketers should consider the impact that country of origin has and act accordingly.

95) In the product adaptation-communication extension strategy, the global product planning is to extend, without change, the basic home-market communication strategy or brand name while adapting the product to local use or preference conditions. The products perform the same function around the globe under different market conditions. For example, a new Cadillac model is built six inches shorter for Sweden and is available with an optional diesel engine. Thus, the function is the same but there are minor adaptations to suit the preference of the local consumers. On the other hand, product-communication adaptation strategy is a combination of the adaptations needed for changes in the environmental conditions and consumer preferences. For example, marketers of home appliances found that Italian women are not interested in labor saving conveniences since most of their time at home goes to housekeeping chores.

They would rather prefer a product which will make the house shinier than one which will save a few hours. Thus, these two different strategies vary based on the difference in conditions when compared to the home country.

96) As an example of how innovation can be applied to meet the needs of low-income populations, consider two entrepreneurs, working independently, who recognized that millions of people around the globe need low-cost eyeglasses. Robert J. Morrison, an American optometrist, created Instant Eyeglasses. These glasses utilize conventional lenses, can be assembled in minutes, and sell for approximately $20 per pair. Joshua Silva, a physics professor at Oxford University, took a more high-tech approach and came up with glasses with transparent membrane lenses filled with clear silicone fluid. Using two manual adjusters, users can increase or decrease the power of the lenses by regulating the amount of fluid in them. Professor Silva is currently CEO of the Centre for Vision in the Developing World, whose mission is to sell low-cost, self-adjusting glasses in developing countries.

15

Answer Key Testname: C10

97) It is true that laws and regulations in different countries frequently lead to obligatory product design adaptations.

Corporations have to develop or modify products to meet the requirement. This may be seen most clearly in Europe, where one impetus for the creation of the single market was the desire to dismantle regulatory and legal barriers that prevented pan-European sales of standardized products. These were particularly prevalent in the areas of technical standards and health and safety standards. In the food industry, for example, there were 200 legal and regulatory barriers to cross-border trade within the EU in 10 food categories. Among these were prohibitions or taxes on products with certain ingredients and different packaging and labeling laws. As these barriers are dismantled, there will be less need to adapt product designs, and many companies will be able to create standardized "Euro-products."

98) Brand image can be defined as perceptions about a brand as reflected by brand associations that consumers hold in their memories. Customers integrate all their experiences of observing, using, or consuming a product with everything they hear and read about it. Information about products and brands comes from a variety of sources and cues, including advertising, publicity, word of mouth, sales personnel, and packaging. Perceptions of service after the sale, price, and distribution are also taken into account. Brand image is one way that competitors in the same industry sector differentiate themselves. Take Apple and Samsung, for example. Both companies market smartphones. The late Steve Jobs, Apple's legendary cofounder and CEO, was a constant media presence and a master at generating buzz; the iPhone, iPad, and other Apple products generally receive stellar reviews for their sleek designs, powerful functionality, and user-friendly features. Apple's retail stores reinforce the brand's hip, cool image. By contrast, Samsung's brand image is more heavily skewed toward technology; few Samsung users are likely to know the name of the company's chief executive.

99) Many companies employ product-communication extension as a strategy for pursuing opportunities in the global market. It can be the easiest and most profitable strategy if all the given conditions are favorable. Companies pursuing this strategy sell the same product with virtually no adaptation, using the same advertising and promotions used domestically. For this strategy to be successful, the message must be understandable across selected cultures. This issue can be especially important in developing country markets. This is a favored strategy for many companies since it saves a lot of money, time and investment. On the other hand, there are some products which introduced outside the home market do not do very well. This may be due to the fact that consumers' perception about quality and value may be very different than domestically. It may be that certain adaptations will result in fulfilling a different need and meeting the demand of a different segment of populations. In such cases, extending the product while adapting the marketing communications program may result in market success. This strategy is referred to as the product extension-communication adaptation strategy. This is preferred because of the low cost involved in its implementation.

Ben & Jerry's changed the packaging design to meet the preferences of consumers in the United Kingdom.

100) Global marketers must understand the importance of visual aesthetics embodied in the color or shape of a product, label, or package. Also, aesthetic styles, such as the degree of complexity found on a label, are perceived differently in different parts of the world. For example, it is mentioned that German wines would be more appealing in the export market if the labels were simplified. Aesthetic elements that are deemed appropriate, attractive, and appealing in one's home country may not be liked or may be perceived differently in other countries. Moreover, there are certain colors and shapes which are culturally liked or disliked in different countries. In some cases, colors that are accepted worldwide are preferable. For example, the yellow color of Caterpillar's corporation or the red color of Marlboro is widely accepted. In China, red color is preferred, and white is considered an unlucky color. Packaging aesthetics are particularly important to the Japanese. The way a package is wrapped and presented is very important for Japanese consumers.

16

Answer Key Testname: C10

101) Since conditions vary in different countries, it is very important to test new products that are designed for international markets.

There are three primary activities that managers should undertake and carry out on a routine basis. First, they should ensure that all relevant information sources are continuously tapped for new-product ideas. This can come from external or internal sources. Secondly, they should carefully screen all ideas to identify potential candidates for further investigation. Finally, they should ensure that the organization commits adequate resources for the development of potential ideas. Once there is enough evidence that the idea has good potential, it should be examined for the following aspects: (a) the size of the market for the product at various prices; (b) the expected competition; (c) market possibilities through existing structures; (d) changes to be made in order to market the product; (e) estimates of potential demand; and (f) the compatibility of the idea with the corporation's goals and objectives. Once the answers to the above questions are promising, new products should be tested.

One should realize that new-product introduction outside the home market is subjected to interaction with human, mechanical, or chemical elements. Incompatibility can be expected from unimaginable sources. Therefore, it is important to test a product under actual market conditions before proceeding with full scale introduction. Failure to assess actual use conditions can lead to big surprises.

102) A local product or local brand is one that has achieved success in a single national market. A global company creates local products and brands in an effort to cater to the needs and preferences of a particular country market. The Sony Walkman is an example of combination or tiered branding whereby a corporate name (Sony) is combined with a product name (Walkman). By using combination branding marketers can leverage a company's reputation while developing a distinctive brand identity for the line of products. Co-branding is a variation of combination branding in which two or more different company or product brands are featured prominently on product packaging or advertising. A good example would be the "Intel Inside" campaign promoting both the Intel Corporation and its Pentium-brand processors in conjunction with advertising for various brands of personal computers. Global companies can also leverage strong brands by creating brand extensions. Brand names are used as an umbrella when entering new businesses or developing new product lines that represent new categories to the company. For example, the Virgin brand has been attached to a wide range of businesses and products such as airline, retail stores, movie theaters, financial services, and soft drinks.

103) The manufacturing reputation of a particular country can change over time. Studies conducted during the 1970s and 1980s indicated that the "Made in the USA" image had lost ground to the "Made in Japan" image. Today, however, U.S. brands are finding renewed acceptance globally. Examples include the Jeep Cherokee, clothing from Lands' End and American Apparel, and Budweiser beer, all of which are being successfully marketed with strong "USA" themes. Even so, companies must be able to back up their "Made in the USA" claims. For example, Shinola, a manufacturer based in Detroit, used the slogan "Where America is made" and "Made in Detroit" in its watch advertising. As it turns out, however, the watches are assembled in the United States from imported components. The United States Federal Trade Commission ruled that the company would have to amend its slogan to read "Built in Detroit using Swiss and imported parts."

17

Answer Key Testname: C10

104) Innovations for new products are important for any corporation to maintain a competitive edge. A product's newness can be assessed in the context of those who buy and use it. An existing product can be new to a market which was not exposed to it. The product may also be an entirely new invention or innovation. When such products are successful, they create new markets, new consumption patterns, and new ideas for further innovations. Innovations that result in creating new markets and new consumption patterns that literally break with the past are categorized as "discontinuous innovations." For example, the VCR's introduction was revolutionary and changed the way people watched and recorded movies. Likewise, computers have also brought a revolution in many ways. Another category of innovation that may be less disruptive or change producing is categorized as dynamically continuous innovations.

Products in this category share certain features with earlier generations while incorporating new features that often add value to produce substantial changes. For example, Mach3 shaving systems by Gillette are an innovative development of existing products. Finally, the third category consists of products that can be truly defined as "new and improved." This category of innovations is referred to as continuous innovation. Continuous innovations cause minimal disruption of existing consumption patterns and require the least amount of learning by consumers. Examples of this category will include newer models of computers for those who are familiar with laptops and personal computers. These often take the form of line extensions such as new sizes, flavors, and low-fat versions.

105) The essence of marketing is finding consumer needs and fulfilling them. As an individual fulfills needs at each level of the hierarchy, he or she progresses to the higher level. At the most basic level of human existence, physiological and safety needs must be met. Basic needs include that of food, clothing, shelter and other basic survival needs. However, one has to understand that the basic human need to consume food and drink is not the same as wanting or preferring a Big Mac or a Coke. After Coca-Cola and McDonald's were established at home, they entered the international arena since they are fulfilling the basic needs. These needs are deeply ingrained in the culture, and so they are different in different countries. Responding to these differences has meant creating local products and brands that suit the tastes and preferences of different countries. Although the first two levels in Maslow's hierarchy are similar all over the world, the mid-level needs which include self-respect and self-esteem are different for different consumers in other countries. Products can therefore fulfill different needs in different countries. For example, refrigeration is not very common in India since fresh produce is purchased on a daily basis, and most of the products are not frozen. Also, due to the intermittent supply of electric current, it is not a very popular appliance. However, it is a status symbol.

Similarly, a flush toilet is considered as a status symbol. Thus, the upper level of hierarchy does not fit in a similar fashion between Western cultures and other cultures.

106) The following six guidelines are mentioned as helpful for marketing managers in their efforts to establish global brand leadership: (1) creating a compelling value proposition for consumers in every market entered, beginning with the home-country market; (2) before going international, thinking about all elements related to brand such as brand identity, names, marks, symbols and labels which have potential for globalization; (3) developing a companywide communication system to share and leverage knowledge and information about marketing programs and customers in different countries; (4) developing a consistent planning process across markets and products; (5) assigning specific responsibility for managing branding issues to ensure that local brand managers accept global best practices; and (6) executing brand-building strategies that leverage global strengths and respond to relevant local differences.

18

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Suppose a company selling in various country markets makes statements such as "we know what the customer wants, and he or she will have to pay for it." This is an indication of a(n) ________ approach to setting prices.

A) geocentric B) adaptation C) regiocentric D) polycentric E) ethnocentric

1)

2) Gray markets impose several costs or consequences on global marketers, which does not include: A) increased product demand.

B) free riding.

C) reputation and legal liability.

D) damage to channel relationships.

E) dilution of exclusivity.

2)

3) According to a recent study of European industrial exporters, companies that utilized independent distributors would be most likely to utilize: A) geocentric pricing.

B) regiocentric pricing.

C) extension pricing.

D) polycentric pricing.

E) ethnocentric pricing.

3)

4) When a seller has agreed to deliver goods to a buyer at a place the buyer names in the country of import, with all costs, including duties paid, it is referred to as: A) FOB. B) FAS. C) CIF. D) DDP. E) FCA.

4)

5) Mexican customers generally carry small coins. To keep prices of shampoo and detergent below 11 or 12 pesos, Procter & Gamble is using which method of pricing?

A) cost-based pricing B) cost-plus approach C) price bundling D) export price costing E) target costing

5)

6) Which type of countertrade arrangement is required by governments seeking to reduce the budgetary impact of expenditures for defense or telecommunications?

A) compensation trading B) barter C) offset D) switch trading E) none of the above

6)

1

7) The unauthorized distribution of trademarked goods to exploit price differentials in world markets is known as: A) market skimming.

B) licensing.

C) dumping.

D) gray marketing.

E) black marketing.

7)

8) All of the following basic consideration questions are important for those whose responsibility includes setting prices on goods that cross borders except: A) Should prices differ with market segment?

B) Is the price competitive given local market conditions?

C) Does the price reflect the product's quality?

D) Does the local market use target costing?

E) Do the foreign country's dumping laws pose a problem?

8)

9) If a company's home currency strengthens, it is: A) a favorable turn of events since the revenues increase in home currency.

B) a favorable turn of events for the typical exporter.

C) an unfavorable turn of events for exporter's home country.

D) neither favorable nor unfavorable turn of events for the typical exporter.

E) an unfavorable turn of events for the typical exporter.

9)

10) "Cost-based," "market-based," and "negotiated" are three approaches to: A) dumping.

B) price skimming.

C) transfer pricing.

D) gray marketing.

E) counter trade.

10)

11) If a distributor's margins are based on the "landed" price of an import shipment, they will be based on: A) insurance costs.

B) transportation costs.

C) ex-works price.

D) VAT. E) all of the above

11)

12) All of the following activities must be performed when goods cross international boundaries except: A) obtaining marine insurance and certificate of the policy.

B) packaging goods for export.

C) arranging for ocean freight and preparation.

D) using the cost-based pricing method.

E) obtaining currency permit, if required.

12)

13) Generally speaking, international trade results in: A) low inflation rate.

B) high inflation rate.

C) higher prices for goods.

D) stabilizing prices.

E) lower prices for goods.

13)

2

14) All import charges are assessed against the: A) flexible cost-plus price.

B) landed price.

C) ex-works price.

D) estimated future cost price.

E) rigid cost-plus price.

14)

15) A manufacturer attempting to set prices for its products in export markets must realize that CIF, VAT, and distributor markup all lead to: A) market penetration.

B) dumping charges.

C) price escalation.

D) currency devaluations.

E) market skimming.

15)

16) Which of the following forms of countertrade does not require use of money or credit between parties?

A) switch trading B) offset C) barter D) compensation trading E) none of the above

16)

17) When Tag Heuer, a marketer of luxury watches, takes out newspaper ads urging consumers to purchase Tag Heuer products from authorized dealers only, the company is most likely attempting to combat the ________ problem.

A) countertrade B) gray market C) market holding D) price escalation E) market skimming

17)

18) Pricing objectives in export market may vary depending all of the following factors except: A) the added cost associated with shipping goods.

B) the country-specific competitive situation.

C) the product design process.

D) the stability of prices globally E) a product's life-cycle stage.

18)

19) When Sony introduced the first consumer VCRs in the 1970s, the retail price exceeded $1,000.

Within a few years, the price dropped well below $500. This is an example of: A) cost-based strategy.

B) skimming strategy.

C) price ceiling strategy.

D) penetration strategy.

E) transfer pricing strategy.

19)

3

20) One of the highest profile companies, PepsiCo, which has done business in the Soviet and post-Soviet market for decades, has used this form of countertrade: A) offset.

B) counterpurchase.

C) barter.

D) switch trading.

E) compensation trading.

20)

21) The basic considerations for setting prices on goods that are traded across borders does not include: A) Do the foreign country's dumping laws pose a problem?

B) Is the price competitive given the local market conditions?

C) Does the price reflect the product's quality?

D) Is it feasible to use home country pricing?

E) Which type of discount does the firm offer its international customers?

21)

22) ________ is derived from the price required to be competitive in the global marketplace.

A) Negotiated transfer price B) Vertical price C) Cost-based transfer price D) Market-based transfer price E) Horizontal price

22)

23) Which of the following is true about proper use of the term "countertrade"?

A) The term "countertrade" is interchangeable with "offsets."

B) The term "countertrade" is interchangeable with "barter."

C) The term "countertrade" is interchangeable with "dumping."

D) "Countertrade" is a term that refers to several different types of business transactions.

E) The term "countertrade" is interchangeable with "counterpurchase."

23)

24) ________ occurs when a manufacturer conspires with wholesalers or retailers to ensure certain retail prices are maintained.

A) Black marketing B) Gray marketing C) Horizontal price fixing D) Vertical price fixing E) Dumping

24)

25) Luxury good marketers found a new way to combat gray market imports into the United States. In March 1995, the U.S. Supreme Court let stand an appeals court ruling prohibiting a discount drugstore chain from selling Givenchy perfume without permission. The distinctive packaging of the perfume is also protected by the U.S. copyright law. The ruling implies that: A) Costco and Walmart will be able to sell Givenchy with authorization.

B) Givenchy can only be sold in copyrighted packages.

C) discount drugstores cannot market a product resembling Givenchy's perfumes.

D) Costco and Walmart will no longer be able to sell Givenchy.

E) gray marketers will be able to market with authorization.

25)

4

26) Two automakers that have joined the race to bring low-cost cars to the emerging Indian market are: A) Mercedes and Lexus.

B) Nissan and Toyota.

C) Tata and Nissan.

D) Toyota and Ford.

E) Tata and Toyota.

26)

27) The following activities must be performed when goods cross international boundaries except: A) obtaining currency permit.

B) preparing a land bill of lading.

C) transporting the goods.

D) packing goods for export.

E) receiving payments.

27)

28) In India, consumers do not like to be locked in to long-term contracts, and Apple distributes its iPhone exclusively through stores operated by Airtel, an Indian carrier, and Vodaphone. This pricing is an example of: A) price bundling.

B) gray market.

C) market skimming.

D) cost-based.

E) razors and blades.

28)

29) A market ________ pricing strategy calls for setting price levels that are low enough to quickly build market share.

A) penetration B) holding C) skimming D) cost-based E) gray

29)

30) The country which has the highest rates of value added tax (VAT) in the European Union is: A) Denmark.

B) Switzerland.

C) Germany.

D) Italy.

E) France.

30)

31) If a company sells products in export markets at prices that are below fair market value and that can harm producers in the export market, that company may be accused of: A) gray marketing.

B) pursuing artificially high margins.

C) using offsets.

D) market skimming.

E) dumping.

31)

5

32) When one of the parties to a barter transaction is not willing to accept the goods included in the transaction, that party is likely to utilize the services of a: A) Foreign Trade Organization.

B) Mittelstand owner.

C) broker.

D) switch trader.

E) Foreign Sales Corporation.

32)

33) As a starting point, firms that comply with Western cost-accounting principles typically use the pricing method known as: A) cost-plus pricing.

B) full absorption cost.

C) target costing.

D) price bundling.

E) export price costing.

33)

34) Which of the following would not be used by an exporter with a weak home-country currency?

A) buy advertising, insurance, and other services in home-country market B) shift sourcing outside home-country market C) exploit marketing opportunities in all markets D) speed repatriation of foreign-earned income E) expand product line and add more costly feature

34)

35) The direct exchange of goods or services between parties in lieu of monetary payment is known as: A) barter.

B) switch trading.

C) compensation trading.

D) offset.

E) counterpurchase.

35)

36) Givenchy and Christian Dior's Dune fragrance are two of the luxury perfume brands that are sometimes diverted from authorized channels for sale at mass-retail outlets. This practice is referred to as: A) offset.

B) dumping.

C) barter.

D) gray market.

E) switch trading.

36)

37) If the manufacturer of a sophisticated new consumer electronics product determines that many target consumers qualify as "innovators" and "early adopters" with relatively inelastic demand curves, the company should use the ________ pricing strategy.

A) market holding B) gray market C) penetration D) cost-based E) skimming

37)

6

38) Parallel importing occurs when companies employ a(n) ________ multinational pricing policy that calls for setting different prices in different country markets.

A) ethnocentric B) regiocentric C) geocentric D) extension E) polycentric

38)

39) To provide positive proof that dumping has occurred in the United States, both ________ and injury must be demonstrated.

A) price fixing B) gray marketing C) black marketing D) price discrimination E) market skimming

39)

40) If company managers decide to set the export price for a particular product at an amount equivalent to the home-country price, they would be using which approach to pricing?

A) geocentric B) polycentric C) extension pricing D) regiocentric E) ethnocentric

40)

41) Despite the high expenses associated with operating elegant stores and purchasing advertising space in upscale magazines, the premium retail prices that luxury goods like Louis Vuitton command translate into handsome profits. The Louis Vuitton brand alone accounts for 60% of LVMH's operating profit. On the other hand, Louis Vuitton SA spends $10 million annually battling: A) EU regulations.

B) suppliers of needed materials.

C) counterfeiters in countries such as Turkey, South Korea, & Italy.

D) export freight and taxes.

E) competitors in European countries.

41)

42) Apple learned an important lesson about the potential drawbacks of ethnocentric pricing in China.

All of the following statements relate to this lesson except: A) in China, many smartphone apps give users the ability to "tip" each other by sending yuan as an acknowledgment of user-created content.

B) in China, "tipping" is considered to be an in-app purchase.

C) Apple's policy is to take 30 percent of fees generated by apps, and it initially applied this policy in China.

D) Tencent Holding's popular WeChat app in China charges for tipping.

E) in response to complaints about the pricing, Apple changed its policy.

42)

7

43) Which of the following would not be taken into account by a company using an ethnocentric approach to pricing decisions?

A) the possibility of implementing a penetration strategy B) factors unique to individual country markets C) integration of price with other marketing mix elements D) profitable price points that could be tied to local sourcing as opposed to home-country sourcing E) None of the above would be taken into account by a company using ethnocentric pricing.

43)

44) All of the listed advantages are for "extension or ethnocentric" pricing strategy except: A) it is extremely simple since it does not require information on market condition.

B) it does not respond to the competitive and market conditions of each national market.

C) it does not require competitive conditions for implementation.

D) it calls for the per-unit price of an item to be the same all over the world.

E) the importer must absorb freight and import duties.

44)

45) Which of the following does not contribute to price escalation in global marketing?

A) fluctuating exchange rates B) different Incoterms as incentives C) value added taxes (VAT) D) shipping and insurance charges E) duties and tariffs

45)

46) Nintendo was fined nearly $150 million after it was determined that the video game company had colluded with European distributors. The distributors in countries with lower retail prices had agreed not to sell to retailers in countries with high prices. This is a classic example of: A) transfer pricing.

B) price bundling.

C) market penetration.

D) price fixing.

E) price skimming.

46)

47) In July 2001, the euro's value relative to the dollar was about €1.00 = $0.85. By November 2009, the euro had strengthened to €1.00 = $1.48. In February 2012, one euro was equal to $1.33, in August 2015 €1.00 = $0.99 and in September 09, 2018 €1.00 = $0.87. All other things being equal, if a European-based global company wants to preserve margins for goods exported to the U.S. market, the company should: A) reduce prices in dollars.

B) raise prices in dollars.

C) switch to cost-based pricing.

D) use skimming pricing.

E) adopt a policy of market penetration pricing.

47)

48) The most general term for the global phenomenon involving reciprocal business interactions between parties in various countries is known as: A) countertrade.

B) compensation trading.

C) barter.

D) switch trading.

E) offset.

48)

8

49) The price of a six-pack of Heineken varies in price by as much as 50 percent depending on where it is sold due to all of the factors except: A) promotion.

B) competition.

C) purchasing power parity.

D) transaction costs.

E) transportation costs.

49)

50) Which pricing strategy has the advantage of being simple to calculate but has the disadvantage of ignoring demand and competitive conditions?

A) market holding B) skimming C) penetration D) gray marketing E) cost-based

50)

51) A firm without much export experience uses the rigid cost-based pricing method. Which of the following considerations is the exporter ignoring?

A) Does the price take antidumping laws into consideration?

B) Does the price reflect the product's quality?

C) Is the price competitive in view of local market conditions?

D) Will authorities in export markets view the price as reasonable or exploitative?

E) all of the above

51)

52) Historically, many companies that used the ________ for pricing were located in the Pacific Rim. A) price ceiling strategy B) skimming strategy C) penetration strategy D) cost-based strategy E) transfer pricing strategy

52)

53) Joseph Quinlan, chief marketing strategist at Bank of America, estimated that about 25 percent of U.S. merchandise exports represent shipments by American companies to their foreign affiliates and subsidiaries. This situation underscores the importance of ________ in global marketing.

A) transfer pricing B) gray marketing C) price fixing D) dumping E) price skimming

53)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

54) IKEA takes a polycentric approach to pricing: While it is company policy to have the lowest price on comparable products in every market, managers in each country set their own prices.

54)

55) When a manufacturer conspires with wholesalers or retailers to ensure certain retail prices are maintained it is known as horizontal price fixing.

55)

56) Canada's Imax Corporation is the world's premier provider of large-format motion picture projection technology. The company has identified 900 potential markets for new Imax theaters; two-thirds of those are global.

56)

9

57) Many countries took issue with the U.S. system of antidumping laws, in part because historically, the U.S. Commerce Department almost always ruled in favor of the U.S. company that filed the complaint.

57)

58) India's Tata Motors launched the Nano, a radical new design with a rock-bottom sticker price of $2,500.

58)

59) Free alongside ship (FAS) named port is the Incoterm for a transaction in which the seller places the shipment alongside the vessel upon which the goods will be transported out of the country.

59)

60) Nano's instrument panel is clustered in the middle of the dashboard so that Tata can offer both right- and left-hand drive versions.

60)

61) Toyota, Sony, Olympus, and Komatsu are some of the well-known Japanese companies that use target costing, a process which is also known as "design to cost."

61)

62) Companies using "rigid cost-plus pricing" set prices with adjustments to reflect market conditions outside the home country.

62)

63) The skimming pricing strategy is appropriate in the mature phase of the product life cycle.

63)

64) If the terms of a sale are CFR (cost and freight), the seller is responsible for risk or loss at any point outside the factory.

64)

65) All other things being equal, a Boeing 787 costs the same worldwide. By contrast, beer, compact discs, and many other products that are available around the world are actually offered in markets that are national rather than global in nature.

65)

66) Marketers of domestically manufactured finished products may be forced to switch to offshore sourcing of certain components to keep costs and prices competitive.

66)

67) A market penetration pricing strategy calls for setting price levels that are high enough to quickly build market share.

67)

68) Gray market goods are trademarked products that are exported from one country to another and sold by authorized persons or organizations.

68)

69) Ethnocentric pricing responds to the competitive and market conditions of the national market.

69)

70) Since hand carried wine bottles crossing the border from Hong Kong to China are taxed, entrepreneurial individuals hire "mules" to transport wine into the mainland.

70)

71) "Market skimming" is a strategy that uses low prices as a competitive weapon to gain market position.

71)

72) Denmark and Sweden have a VAT of 25 percent, the highest rate in the European Union. Moreover, Sweden taxes luxury goods heavily.

72)

10

73) A first-time exporter is likely to use skimming pricing, so that the product may be sold at a profit for a certain length of time.

73)

74) In some instances, deregulation represents a quid pro quo that will allow French companies wider access to other country markets.

74)

75) To win sales in important markets such as China, global companies can face demands for offsets even when transactions involve military procurement.

75)

76) If a company manufactures a product in the home-country market as well as in foreign markets it is considered black marketing.

76)

77) Transfer pricing is a term that applies to transactions between different divisions or units of the same company.

77)

78) Levi's non-U.S. sales represent about one-third of revenues but more than 50 percent of profits.

78)

79) It is illegal for representatives of two or more companies to secretly set similar prices for their products. This practice is known as transfer pricing.

79)

80) A global company that uses market skimming as a pricing strategy is likely to invite charges of dumping by competitors in host-country markets.

80)

81) In the United States, Levi Strauss & Company has to face competitive behavior since Wrangler and Lee brands are being marketed by VF Corporation.

81)

82) A company using geocentric pricing neither fixes a single price worldwide, nor allows subsidiaries or local distributors to make independent pricing decisions.

82)

83) A strengthening of a home-country currency swings exchange rates in a favorable direction.

83)

84) Many companies that are active in the 19 nations of the euro zone are adjusting to the new cross-border transparency of prices.

84)

85) Penetration prices often mean that the product may be sold at a loss for a certain period of time.

85)

86) "Export price escalation" is the increase in the initial selling price of goods traded across borders.

86)

87) Every commercial transaction is based on a contract of sale, and the trade terms in that contract specify the exact point at which the ownership of merchandise is transferred from the seller to the buyer and which party in the transactions pays which cost.

87)

88) The U.S. Labor Department filed a complaint against Swatch Group alleging that the Swiss watchmaker improperly used transfer pricing to evade millions of dollars in customs duties and taxes.

88)

11

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

89) In recent years, in light of the technological developments, many exporters have been forced to finance international transactions by taking full or partial payment in some form other than money. A number of alternative forms of payments known as countertrade are widely used. How does a countertrade transaction work?

How do barter transactions differ from offset?

90) What is the impact of increased tariffs on exports and imports? Give an example in support of your answer.

91) When disparities in prices between different country markets exceed the transportation and duty costs separating the markets, enterprising individuals can purchase goods in the lower-price country market and then transport them for sale in markets where higher prices prevail. Give examples in support of this statement.

92) What is offset and why is it important in global marketing? How can it be distinguished from counterpurchase?

93) GATT and the U.S. Congress have both defined "dumping." What is the difference in their definitions? Why is dumping a major issue in global marketing?

94) Why is compensation trading also called a "buyback?" How does it differ from switch trading?

95) If a Lexus car is priced in U.S. dollars and sold at the dollar converted price in Indian rupees, what problems can be expected? What is the difference between ethnocentric, polycentric and geocentric pricing?

96) How does "Switch Trading" work in global marketing? What is the advantage of the "switching mechanism"?

Comment on the logistics and fees involved in this type of arrangement.

97) A working knowledge of Incoterms can be a source of competitive advantage to anyone seeking an entry-level job in global marketing. What are "Incoterms," and how are they classified? How are Incoterms applied in global marketing?

98) What is the difference between "F-Terms" and "C-Terms" category of Incoterms?

99) Give an example as to how razors and blades type of pricing will be profitable in global markets.

100) How can price be used as a strategic variable to achieve specific financial goals? Under what conditions should skimming or penetration pricing be adapted as strategy?

101) What kind of price pressures are faced by Levi Strauss & Company in the United States? How does this pressure compare with sales outside of the United States?

102) The European Commission recently fined Nintendo nearly $150 million after it was determined that the video game company had colluded with European distributors to fix prices. Why is price fixing not considered a good practice? What are different kinds of price fixings?

103) The currency fluctuations in global markets have a big impact on international transactions. What actions can be adapted if the domestic currency is strong?

12

104) Suppose that a book publisher sells a textbook for $150 each to its domestic distributor. The same publisher sells the same edition of the textbook to a distributor in Thailand for $85 since the affordable prices by Thai students may be much less than in the domestic market. The textbook finds its way back into the domestic market since the Thai distributor sold it back to another marketer who sells in the domestic market for $85. What is this type of pricing known as, and what are the consequences of such transactions to global marketers, if any?

105) What are some companies doing to bypass antidumping legislation?

13

Answer Key Testname: C11

1) E 2) A 3) D 4) D 5) E 6) C 7) D 8) D 9) E 10) C 11) E 12) D 13) E 14) B 15) C 16) C 17) B 18) D 19) B 20) C 21) D 22) D 23) D 24) D 25) A 26) C 27) E 28) E 29) A 30) A 31) E 32) D 33) B 34) B 35) A 36) D 37) E 38) E 39) D 40) E 41) C 42) D 43) E 44) B 45) B 46) D 47) B 48) E 49) A 50) E 14

Answer Key Testname: C11

51) E 52) C 53) A 54) TRUE 55) FALSE 56) TRUE 57) TRUE 58) TRUE 59) TRUE 60) TRUE 61) TRUE 62) FALSE 63) FALSE 64) FALSE 65) TRUE 66) TRUE 67) FALSE 68) FALSE 69) FALSE 70) FALSE 71) FALSE 72) FALSE 73) FALSE 74) FALSE 75) FALSE 76) FALSE 77) TRUE 78) TRUE 79) FALSE 80) FALSE 81) TRUE 82) TRUE 83) FALSE 84) TRUE 85) TRUE 86) FALSE 87) TRUE 88) TRUE

15

Answer Key Testname: C11

89) In a countertrade transaction, a sale results in product flowing in one direction to a buyer with a separate stream of products and services often flowing in the opposite direction. For example, the countries in the former Soviet bloc have historically relied heavily on countertrade. Countertrade flourishes when hard currency is scarce. Since exchange controls may prevent a company from expatriating earnings, the company may be forced to spend money in-country following products that are then exported and sold in third-country markets. The reasons importing nations may demand countertrade include the priority attached to the Western import. The second condition may be the value of the transactions; the higher the value, the greater the likelihood that countertrade will be involved. Also, the availability of products from other suppliers can be a factor. Barter falls in one of the categories of countertrade. The mixed forms of countertrade, including counterpurchase, offset, compensation trading, and switch trading belong in a separate category. They incorporate a real distinction from barter because the transaction involves money or credit.

The term "barter" describes the least complex and oldest form of bilateral, non-monetized countertrade. It is a direct exchange of goods or services between two parties. Although no money is involved, both partners construct an approximate shadow price for products flowing in each direction. Offset, on the other hand, is a reciprocal arrangement whereby the government in the importing country seeks to recover large sums of hard currency spent on expensive purchases such as military aircraft or telecommunication systems.

90) Sometimes inflationary forces arise out of changes in the political environment. For example, in early 2018, U.S. President Donald Trump announced tariffs of 10 percent on aluminum imports from China and several other nations.

That was bad news for the beer industry; the U.S. beer market represents about $100 billion in annual sales of aluminum, much of it in the form of aluminum cans. A trade group called the Beer Institute estimated that the tariffs amount to a $347 million tax on the beverage industry by raising its variable costs. An aluminum beer can costs about 10 cents to manufacture, so a 10 percent tariff on aluminum would boost the cost of each can by about a penny, or roughly 6 cents per six-pack. Marketing managers at AB InBev, the company that brews Bud Light, face a decision about whether they can pass on the increased cost to consumers without any decrease in demand for Bud Light and other brands. The question is, if tariffs lead to price increases, will Americans drink less beer? Will Bud Light fans exhibit elastic demand curves or inelastic demand curves?

91) This is precisely what has happened in both the pharmaceutical and textbook publishing industries. Discounted drugs intended for patients with acquired immunodeficiency syndrome (AIDS) in Africa have been smuggled into the European Union and sold at a huge profit. Similarly, Pearson (which publishes this text), McGraw-Hill, Thomson, and other publishers typically set lower prices in Europe and Asia than in the United States. The reason is that the publishers use polycentric pricing: They establish prices on a regional or country-by-country basis using per capita income and economic conditions as a guide. By the way, authors have no control over the prices that university bookstores and other retailers charge for textbooks.

92) Offset is a reciprocal arrangement whereby the government in the importing country seeks to recover large sums of hard currency spent on expensive purchases such as military aircraft or telecommunications systems. Offset arrangements may also involve cooperation in manufacturing, some form of technology transfer, placing subcontracts locally, or arranging local assembly or manufacturing equal to a certain percentage of the contract value. Offset may be distinguished from counterpurchase since the latter is characterized by smaller deals over shorter periods of time.

Another major distinction between offset and other forms of countertrade is that the agreement is not contractual but reflects it to memorandum of understanding that sets out the dollar value of products to be offset and the time period for completing the transaction. In addition, there is no penalty on the supplier for nonperformance. Some highly competitive sales have required offsets exceeding 100 percent of the valuation of the original sale.

16

Answer Key Testname: C11

93) GATT defined dumping as the sale of an imported product at a price lower than that normally charged in a domestic market or country of origin. The U.S. Congress has defined dumping as an unfair trade practice that results in "injury, destruction, or prevention of the establishment of American industry." This definition is very broad and can be interpreted in different ways. Dumping is an important global pricing strategy issue. Dumping occurs when imports sold in the U.S. market are priced either at levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing country. The U.S. Commerce Department is responsible for determining whether products are being dumped in the United States. The International Trade Commission (ITC) then determines whether the dumping has resulted in injury to U.S. firms. Many of the dumping cases in the United States involve manufactured goods from Asia and frequently target a single or very narrowly defined group of products. U.S. companies that claim to be materially damaged by the low-priced imports often initiate such cases. The Byrd Amendment calls for antidumping revenues to be paid to U.S. companies harmed by imported goods sold at below-market prices. For positive proof that dumping has occurred in the United States, both price discrimination and injury must be demonstrated.

94) Compensation trading is a form of countertrade that involves two separate and parallel contracts. In one contract, the supplier agrees to build a plant or provide plant equipment, patents or licenses, or technical, managerial, or distribution expertise. A hard currency down payment is paid at the time of delivery. In the other contract, the supplier company agrees to take payment in the form of the plant's output equal to its investment for a period of as many as 20 years. Interest is subtracted from the investment. The success of compensation trading rests on the willingness of each firm to be both a buyer and a seller. Hence, this method is referred to as "buyback." On the other hand, switch trading is a mechanism that can be applied to barter or countertrade. In this arrangement, a third party steps into a simple barter or other countertrade arrangement. When one of the two parties in barter system is not willing to accept all the goods received in a transaction, the third party may be a professional switch trader, switch trading house, or a bank.

The switching mechanism provides a "secondary market" for countertraded or bartered goods and reduces the inflexibility inherent in barter and countertrade. Fees charged by switch traders range from 5% of market value for commodities to 30% for high-technology items. Switch traders develop their own network of firms and personal contacts.

95) It will not be possible to sell many cars in India if the price in U.S. dollars is directly converted into local currency. This is the reason why there is price differential, and different methods of pricing are used. Ethnocentric pricing calls for the per-unit price of an item to be the same no matter where in the world the buyer is located. In such instances, the importer must absorb freight and import duties. The advantage of this pricing is that it is extremely simple and does not require information on competitive or market conditions for implementation. The disadvantage is that it does not respond to the competitive and market conditions of each national market. Polycentric pricing permits subsidiary or affiliate managers or independent distributors to establish whatever price they feel is most appropriate in their market environment. There is no requirement that prices be coordinated from one country to another. IKEA takes a polycentric approach to pricing. In geocentric pricing, the company neither fixes a single price worldwide nor allows subsidiaries or local distributors to make independent pricing decisions. Instead, the geocentric approach represents an intermediate course of action. It is based on the realization that unique local market factors should be recognized in arriving at pricing decisions. These factors include local costs, income level, competition, and the local marketing strategies. The important point to note in all pricing systems is that in global marketing there is no such thing as a normal margin.

17

Answer Key Testname: C11

96) Switch trading is also called triangular trade and swap, since as the name indicates there is a switching arrangement. It is a mechanism that can be applied to barter or countertrade. In this arrangement, a third party steps into a simple barter or other countertrade arrangement when one of the parties is not willing to accept all the goods received in a transaction. The third party may be a professional switch trader, a switch trading house, or a bank. The switching mechanism provides a "secondary market" for countertraded or bartered goods and reduces the inflexibility inherent in barter and countertrade. Fees charged by switch traders range from 5 percent of market value for commodities to 30 percent for high-technology items. Switch traders develop their own networks of firms and personal contacts and are generally headquartered in Vienna, Amsterdam, Hamburg, or London. If a party to the original transaction anticipates that the products received in a barter or countertrade deal will be sold eventually at a discount by the switch trader, the common practice is to price the original products higher, build in "special charges" for port storage or consulting, or require shipment by the national carrier.

97) The internationally accepted terms of trade are known as "Incoterms." They are classified into four different categories.

Ex-works (EXW) refers to a transaction in which the buyer takes delivery at the premises of the seller; the buyer bears all risks and expenses from that point on. Another category of Incoterms is known as F-Terms in which there are different sets of terminologies. Free carrier (FCA) is a widely used term in global sales since it is suited for all modes of transport. Under FCA, transfer from seller to buyer is affected when the goods are delivered to a specified carrier at a specified destination. FAS (free alongside ship) is the Incoterm for a transaction in which the seller places the shipment alongside, or available to, the vessel upon which the goods will be transported out of the country. The seller pays all charges up to that point. With free on board (FOB), the responsibility and liability of the seller do not end until the goods have cleared the ship's rail. Several other Incoterms are known as "C-Terms" such as when goods are shipped (CIF). Cost, insurance, and freight represents the risk of loss or damage to goods that is transferred to the buyer once the goods have passed the ship's rail. In this sense, CIF is similar to FOB. If the terms of the sale are cost and freight (CFR), the seller is not responsible for risk or loss at any point outside the factory. A currency adjustment factor (CAF) is assessed to protect the seller from possible losses from disadvantageous shift in the currency exchange rates. All import charges are assessed against the landed price of the shipment (CIF value). Thus, these terminologies help in identifying who is responsible for what prices and at what point of exchange. In fact, different Incoterms for larger orders are used as incentives.

98) The category of Incoterms known as "F-Terms" or "pre-main-carriage terms" because it is suited for all modes of transport with free carrier (FCA) delivery is widely used in global sales. Under FCA, transfer from seller to buyer occurs when the goods are delivered to a specified carrier at a specified destination. Two additional F-terms apply to sea and inland waterway transportation only. Free alongside ship (FAS) named port is the Incoterm for a transaction in which the seller places the shipment alongside, or available to, the vessel upon which the goods will be transported out of the country. The seller pays all charges up to that point. The seller's legal responsibility ends once the goods have been cleared for export; the buyer pays the cost of actually loading the shipment. With free on board (FOB) named port, the responsibility and liability of the seller do not end until the goods—typically housed in containers—have cleared the ship's rail. Several Incoterms are known as "C-Terms" or "main-carriage" terms. When goods are shipped cost, insurance, freight (CIF) named port, the risk of loss or damage to goods is transferred to the buyer once the goods have passed the ship's rail. In this sense, CIF is similar to FOB. However, with CIF, the seller has to pay the expense of transportation for the goods up to the port of destination, including the expense of insurance. If the terms of the sale are cost and freight (CFR), the seller is not responsible for risk or loss at any point outside the factory.

99) Here is an example that illustrate the concept of companion products: A video game console has no value without video game software, and a DVD player has no value without movies available on DVD. Likewise, a razor handle has no value without blades. Thus, Gillette can sell a single Mach3 razor for less than $5—or even give the razor away for free —because it knows that over a period of years, the company will make significant profits from selling packages of replacement blades. As the saying goes, "If you make money on the blades, you can give away the razors."

18

Answer Key Testname: C11

100) Price can be used as a strategic variable based on the financial goals such as return on investment, profit, and rapid recovery of research and product development costs. When financial criteria such as profit and maintenance of margins are the goals, the product quality and price become important aspects of the strategy. The market skimming pricing strategy is part of a deliberate attempt to reach a market segment that is willing to pay a premium price for a particular brand or for a specialized or unique product. The skimming price strategy is also appropriate in the introductory phase of the product life cycle when both production capacity and competition are limited. By deliberately setting a high price, demand is limited to innovators and early adopters, who are willing and able to pay the price. When Apple introduced iPhone, the price used was a skimming price. When the product enters the growth stage of the life cycle and competition increases, manufacturers start to cut prices. This strategy has been used widely in the consumer electronics industry. On the other hand, some companies are pursuing non-financial objectives with their pricing strategy. Price can, therefore, be used as a competitive weapon to gain or maintain market position. A market penetration pricing strategy calls for setting price levels that are low enough to quickly build market share. The first-time exporter seldom uses penetration pricing since it often means that the products may be sold at a loss for a certain length of time. Many companies, when they are not qualified for patent protection, use penetration pricing as a means of achieving market saturation before competitors copy their product.

101) In the United States, Levi Strauss & Company is under price pressure from several directions. First, Levi's face stiff competition from the Wrangler and Lee brands marketed by VF Corporation. A pair of Wrangler jeans retails for about $20 at JCPenney and other department stores, compared with about $30 for a pair of Levi's 501 jeans. Second, the two primary retail customers for Levi's, JCPenney and Sears, are aggressively marketing their own private-label brands.

Finally, designer jeans from Calvin Klein, Polo, and Diesel are enjoying renewed popularity. Exclusive fashion brands such as 7 for All Mankind and Lucky, retail for more than $100 per pair.

Outside the United States, thanks to the heritage of the Levi's brand and less competition, Levi's jeans command premium prices—$80 or more for one pair of 501 jeans. To support their prestige image, Levi's are sold in boutiques.

Levi's non-U.S. sales represent about one-third of revenues but more than 50 percent of profits. In an attempt to apply its global experience and enhance the brand in the United States, Levi has opened a number of Original Levi's Stores in selected American cities. Despite such efforts, Levi rang up only $4.5 billion in sales in 2016, compared with $7.1 billion in 1996. More than a decade ago, the company closed six plants and moved most of its North American production offshore in an effort to cut costs.

102) The reason why Nintendo had to pay a fine was due to price fixing which, in most instances, is considered illegal. It is illegal for representatives of two or more companies to secretly set similar prices for their products. This practice is known as "price fixing." It is considered an undesirable practice since it is an anticompetitive act. Companies that collude in this manner are generally trying to ensure higher prices for their products than would generally be available if markets were functioning freely. There are two major types of price fixings. One of them is described as horizontal price fixing in which competitors within an industry that make and market the same product conspire to keep prices high. For example, if airlines collude and decide to have higher prices that would be referred to as horizontal price fixing. The next type is called the vertical price fixing, which occurs when a manufacturer conspires with wholesalers or retailers to ensure certain higher retail prices are maintained. In the case of Nintendo, it was vertical price fixing since the video game company had colluded with European distributors to fix prices.

103) Currency fluctuations complicate the task of setting prices. A weakening of the home-country currency swings exchange rates in a favorable direction if the currency in the country of business is strong. An equally opposite effect can happen when the currency is strong. In responding to currency fluctuations, global marketers can utilize other elements of the marketing mix besides price. Other actions that can be taken if the domestic currency is strong are: (1) engaging in non-price competition by improving the quality of the products, delivery methods, or after-sale services; (2) improving productivity by taking actions that may result in cost reduction; (3) if possible, sourcing can be shifted outside the home country; (4) giving priority to exports to countries, either temporarily or permanently, with stronger currencies; (5) trimming profit margins and using marginal-cost pricing; (6) keeping the foreign-earned income in host country as well as slowing down collections; (7) maximizing expenditures in the local currency of the host-country; (8) buying needed services aboard and paying them in local currencies; and (9) billing foreign customers in the domestic currency.

19

Answer Key Testname: C11

104) This practice is known as parallel importing, and the goods are referred to as gray market goods. Gray market goods are trademarked products that are exported from one country to another where they are sold by unauthorized persons or organizations. This practice occurs when companies employ a polycentric, multinational pricing policy that calls for setting different prices in different country markets. Gray markets can flourish when a product is in short supply, when producers employ skimming strategies in certain markets, or when the goods are subject to substantial markups.

Gray markets impose several costs of consequences on global marketers. These include (1) dilution of exclusivity, where authorized dealers are no longer their sole distributors; (2) free riding, where channel members can take actions to offset downward pressure; (3) damage to channel relationship resulting in conflicts and other relationship problems; (4) undermining segmented pricing schemes because of price differentials; (5) reputation can be compromised; and (6) legal liability. Thus, gray markets can cause a variety of problems for the manufacturers as well as distributors.

Although it can benefit some customers, it can have an adverse effect on customer loyalty.

105) Companies concerned with running afoul of antidumping legislation have developed a number of approaches for avoiding these laws. One approach is to differentiate the product sold from that in the home market so it does not represent "like quality." An example is an auto accessory that one company packaged with a wrench and an instruction book, thereby changing the "accessory" to a "tool." The duty rate in the export market happened to be lower on tools, and the company also acquired immunity from antidumping laws because the package was not comparable to competing goods in the target market. Another approach is to make non-price competitive adjustments in arrangements with affiliates and distributors. For example, credit can be extended, which essentially has the same effect as a price reduction.

20

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) When companies adopt an indirect involvement channel they have all of the following activities except: A) utilize independent agents.

B) establish their own sales force.

C) utilize retailers.

D) use distributors.

E) utilize those who have a network of stores.

1)

2) Some wine importers insist on shipping their wines in refrigerated containers to protect the wines from being damaged by high temperatures. Such importers are creating which kind of utility?

A) place utility B) information utility C) worker utility D) time utility E) form utility

2)

3) The scandal about finding horse DNA in frozen beef burgers sold in supermarkets in Ireland became a big issue. However, the fact remains that 60,000 tons of horse meat were sold in Europe in 2012. Other facts about horse meat include all of the following except: A) horses are shipped from the United States to Mexico and Canada for slaughter.

B) it is legal to produce horse meat in the United States.

C) in Europe, horse meat is available from a variety of suppliers.

D) horse meat is lean and high in iron and other nutrients.

E) Italy imports 50 million pounds of horse meat annually from Ireland.

3)

4) To motivate shopkeepers to stock more of P&G's products, the company launched a: A) hypermarket program.

B) retail store program.

C) door-to-door program.

D) golden store program.

E) sole distributor program.

4)

5) When British entrepreneur Richard Branson established the first Virgin Megastore in France, he invested a great deal of money to develop a retail space on the famous Champs-Elysées. Judging by the approach Branson used, he and his management team must have viewed France as: A) culturally close and difficult to enter.

B) culturally difficult and easy to enter.

C) culturally close and easy to enter.

D) culturally distant and difficult to enter.

E) culturally distant and easy to enter.

5)

1

6) Which of the following does not qualify as a "category killer?"

A) Home Depot B) Toys "R" Us C) Circuit City D) Victoria's Secret E) IKEA

6)

7) When Walmart stores first expanded into Mexico, management established a joint venture with the country's largest retailer. Judging by the approach Walmart used, management must have viewed Mexico as: A) culturally close and easy to enter.

B) culturally difficult and easy to enter.

C) culturally close and difficult to enter.

D) culturally distant and easy to enter.

E) culturally distant and difficult to enter.

7)

8) In less-developed countries the most important channel of distribution is: A) door to door.

B) retail stores.

C) public marketplaces.

D) wholesale marketplaces.

E) pyramid schemes.

8)

9) The quadrant that offers a good example of a global retailer with a niche focus as well as an own-label focus is: A) quadrant A. B) quadrant B. C) quadrant C. D) quadrant D. E) quadrant E.

9)

10) Physical distribution and logistics are concerned with all but one of the following: A) warehousing.

B) transportation.

C) order processing.

D) designing in-store displays.

E) inventory management.

10)

11) A French winery packs its wine in a 40-foot container that is trucked to a port and then loaded onto an ocean-going vessel. This is an example of: A) "cherry picking" a product.

B) inventory control.

C) intermodal transportation.

D) containerization.

E) hypermarketing.

11)

2

12) A distributor with good contacts may appear to be the obvious choice in terms of generating quick sales and revenues but may not be the best one. Which of the guidelines for companies selecting independent distributors is this statement referring to?

A) Give local distributors control over marketing strategy.

B) Select distributors; don't let them select you.

C) Treat local distributors as long-term partners.

D) Look for distributors capable of developing markets.

E) From the start maintain control.

12)

13) In the matrix-based scheme for classifying global retailers, in which quadrant does IKEA fall between retailers?

A) quadrant A B) quadrant B C) quadrant C D) quadrant D E) quadrant E

13)

14) eBay was a pioneer in a form of online marketing known as: A) b-to-b.

B) c-to-b.

C) b-to-c.

14)

D) d-to-d.

E) p-to-p.

15) Inventory management is: A) managing physical distribution of products.

B) ensuring cost control.

C) purchasing products.

D) determining what type of warehouse to manage.

E) establishing an inventory channel.

16) Which of the following transportation modes ranks lowest in capability?

A) water B) truck C) railroad D) air

15)

E) Internet

16)

17) A freighter loaded with 40-foot shipping containers leaves a port in Europe and sails to New York, where the containers are transferred to railroad cars and transported to the west coast. At the port of San Francisco, the containers are loaded onto another freighter bound for Japan. The term that best describes this situation is: A) intermodal transportation.

B) hypermarketing.

C) inventory management.

D) greenfield investment.

E) containerization.

17)

18) Which of the following is not an appropriate guideline for companies selecting independent distributors in international markets?

A) Give local distributors control over marketing strategy.

B) Look for distributors capable of developing markets.

C) Select distributors; don't let them select you.

D) Treat local distributors as long-term partners.

E) All of the above are appropriate guidelines.

18)

3

19) In exchange for a pledge to carry at least 40 different Procter & Gamble products, participating stores receive regular visits from P&G representatives who tidy and arrange display areas. This motivational program is referred to as: A) "buy-in-bulk" store program.

B) "golden store" program.

C) "high-frequency" store program.

D) "mom-and-pop" store program.

E) "shop operators" program.

19)

20) Which of the following categories best describes the approach of Britain's Marks & Spencer to global retailing?

A) few product categories, own-label focus B) few product categories, manufacturer brand focus C) many product categories, manufacturer brand focus D) many product categories, own-label focus E) none of the above

20)

21) A variety of environmental factors have combined to push retailers out of their home markets in search of opportunities around the globe. All of the following reasons are responsible for such a move except: A) saturation of the home-country market.

B) high population growth.

C) strict regulation on store development.

D) high operating costs.

E) a recession in the home-country.

21)

22) "Organized retail" is a term used to describe: A) hypermarkets.

B) supermarkets.

C) modern chain stores.

D) local retail chains.

E) grocery stores.

22)

23) Breaking all the conventional norms, Selfridge opened his department store just off Oxford Street.

The changes incorporated include all of the following except: A) perfume and fragrance were moved to the front in order to avoid any horse dung odors.

B) goods were put within reach of the customers.

C) goods were kept behind counters and were available by asking store clerks.

D) early bird specials were offered.

E) customers always came first.

23)

24) A commodity raw material that comes from Africa, is refined in Asia, is shipped to South America for finishing, and finally is transported to the Middle East and then sold around the world mimics products marketed by: A) McDonald's.

B) Caterpillar.

C) IKEA. D) Sears.

E) Exxon.

24)

4

25) Which personal computer company began life as a b-to-b marketer and then began marketing direct to the home PC market?

A) Sony B) Compaq C) Hewlett-Packard D) Acer E) Dell

25)

26) The American Marketing Association defines a channel of distribution as "an organized network of agencies and institutions that, in combination, perform all the activities required to link ________ with users to accomplish the marketing task."

A) stores B) competitors C) marketers D) producers E) retailers

26)

27) Prior to 2017, H&M was growing at a torrid pace, however, several changes took place which are represented by all of the following statements except: A) H&M had a successful business model, which did not change with market conditions.

B) profits have been stagnant since discount retailers have lower prices.

C) revenue growth was driven by store openings and the company did not open new stores.

D) customers are lured away by Britain's Asos and Germany's Zalando free shipping offers.

E) online competitors are putting a lot of pressure on H&M sales.

27)

28) Which of the following is the largest retailer in the world in terms of annual sales according to the top five global retailers, 2017?

A) Metro AG B) Aldi C) Tesco PLC D) Carrefour E) no correct answer

28)

29) Which country has the biggest market for Tupperware?

A) Indonesia B) Russia C) Romania

29)

D) India

E) China

30) Which of the following most accurately describes the relative length of consumer and industrial distribution channels?

A) Consumer channels tend to be shorter (consist of few intermediaries) than the industrial channels.

B) Consumer channels tend to be longer (consist of more intermediaries) than industrial channels.

C) Industrial channels tend to be longer (consist of more intermediaries) than consumer channels.

D) Both consumer and industrial channels tend to be short (consist of few intermediaries).

E) Both consumer and industrial channels tend to be long (consist of several intermediaries).

30)

31) "Nakumatt" is a supermarket chain in: A) Kenya.

B) Japan.

31)

C) India.

5

D) Korea.

E) Indonesia.

32) When Walmart entered the German market, ________ were already entrenched.

A) supermarkets B) hard discounters C) discount retailers D) specialty retailers E) hypermarkets

32)

33) Sales representatives in which Japanese industry cultivate close long-term relations with customers by selling door-to-door?

A) pharmaceuticals B) groceries C) consumer electronics D) soft drinks E) automobiles

33)

34) An important new tool for inventory management is: A) EPOS. B) ODW. C) VUCA.

34)

D) LEGO.

E) RFID.

35) What solution did Andersen Consulting provide to the Moscow Bread Company to solve the problem of stale bread?

A) Deliver the bread sliced rather than in whole loaf form.

B) Convert to a paperless office to cut red tape.

C) Deliver the bread frozen.

D) Package the bread in plastic bags.

E) Use paper packaging for bread.

35)

36) The entry global retailing market expansion strategies include all of the following except: A) organic.

B) franchise.

C) chain acquisition.

D) departmental stores.

E) joint ventures.

36)

37) Which of the following correctly characterizes the retailing strategy shared by Virgin Megastores?

A) few product categories, manufacturer brand focus B) many product categories, own-label focus C) few product categories, own-label focus D) many product categories, manufacturer brand focus E) none of the above

37)

38) By definition, ________ feature a narrow but deep merchandise mix and high levels of service.

A) specialty retailers B) department stores C) convenience stores D) discount stores E) supermarkets

38)

6

39) Which of the following statements is not correct?

A) Walmart pulled out of Germany and South Korea.

B) Mattel closed its flagship Barbie store in Shanghai.

C) Tesco shut down Fresh & Easy stores in the United States.

D) Home Depot pulled out of China.

E) Best Buy closed several stores in China.

39)

40) Saks Fifth Avenue has ________ stores in the Middle East.

A) own-label focus B) franchise C) joint venture D) organic E) licensed

40)

41) Which of the following correctly characterizes the retailing strategy of Benetton, IKEA, and Gap? A) many product categories, own-label focus B) many product categories, manufacturer brand focus C) few product categories, manufacturer brand focus D) few product categories, own-label focus E) none of the above

41)

42) Peer-to-peer (p-to-p) marketing uses distribution channels through: A) manufacturer-to-wholesalers.

B) door-to-door.

C) business-to-business.

D) business-to-consumers.

E) electronic commerce.

42)

43) Channel decisions are important because: A) relationships change with time.

B) commitments are flexible.

C) it is expensive to terminate.

D) issues can be solved by arbitration.

E) local laws do not protect agreements.

43)

44) Which of the following is an appropriate guideline for companies selecting independent distributors in international markets?

A) Maintain control over marketing strategy from day one.

B) Look for distributors capable of developing markets.

C) Treat local distributors as long-term partners.

D) Select distributors; don't let them select you.

E) All of the above are appropriate guidelines.

44)

45) The availability of the product processed, prepared, in proper condition, and/or ready to use is referred to as: A) information utility.

B) place utility.

C) price utility.

D) product utility.

E) form utility.

45)

7

46) "Containerization" refers to a company's: A) use of refrigerated warehouses for perishable products.

B) designing attractive product packaging that will help a product "sell itself."

C) method of shipment by using oversized steel containers to fit different commodities.

D) use of computer technology to keep a lid on ("contain") distribution costs.

E) use of standard-sized shipping boxes that can be transported in various ways.

46)

47) Dollar stores are classified under: A) specialty retailers.

B) hard discounters.

C) category killers.

D) convenience stores.

E) discount retailers.

47)

48) Which approach to retail expansion is most appropriate when targeting a country that management considers both culturally close and easy to enter?

A) joint venture B) organic growth C) franchise D) chain acquisition E) own-label focus

48)

49) Order processing, warehousing, and inventory management are all functions pertaining to: A) physical distribution and logistics.

B) personal selling.

C) a polycentric orientation.

D) chain acquisition.

E) sales promotion.

49)

50) Departmentalized, single-story retail establishments that offer food and nonfood items, mostly on a self-service basis are called: A) discount retailers.

B) specialty retailers.

C) convenience stores.

D) hyper markets.

E) supermarkets.

50)

51) In ________, the Tupperware brand is associated with hip young women rather than traditional homemakers: A) Indonesia B) Romania C) France D) China E) Russia

51)

52) The retail environment in developing countries presents challenges for marketing nonperishable items. In Mexico, Proctor & Gamble, Unilever, Colgate-Palmolive, and other global consumer product companies use ________ for their products.

A) door-to-door selling B) franchised stores C) buy-in-bulk selling D) manufacturer-owned stores E) mom-and-pop stores

52)

8

53) When a company uses intermodal or multimodal transportation, it is: A) using the services of both UPS and FedEx. B) using land and water shipping.

C) shipping via more than one railroad line.

D) using multiple channels.

E) using different size containers for shipment.

53)

54) Coca-Cola Company's global marketing leadership position is based in part on its ability to put Coke "within an arm's reach of desire"; in other words, it is the ability to create: A) form utility.

B) time utility.

C) information utility.

D) place utility.

E) all of the above

54)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

55) When British entrepreneur Richard Branson opened the first Virgin Megastore in Japan, he did so by establishing a joint venture with the Marui retailing chain. This represents an inappropriate market-entry approach for a global retailer.

55)

56) Channel obstacles are often encountered when a company enters a competitive market where brands and supply relationships are less established.

56)

57) The world's five largest malls are in Asia.

57)

58) Today, "conbinis" are ubiquitous in Japan, with tens of thousands of store locations.

58)

59) Due to political upheaval in the Middle East, in spring 2011, Procter & Gamble was forced to briefly close plants in Egypt that supply products for South Africa.

59)

60) Retail stores vary in size from giant hypermarkets to small stores in Latin America called pulperías.

60)

61) The close long-term relationships between auto salespersons and the Japanese people can be considered as a consumer version of the keiretsu system.

61)

62) Hypermarkets are a hybrid retailing format combining the discounter, supermarket, and warehouse club approaches under a single roof.

62)

63) Germany's Aldi and Lidl ("Where quality is cheaper!") and France's Leader Price ("Le Prix La Qualité en Plus!") are among the most popular discount retailers.

63)

64) Specialty retailers such as Zara, H&M, and Uniqlo are just three of the many elements that make up distribution channels around the globe.

64)

65) After successfully penetrating China's first-tier cities, Mary Kay expanded into second- and third-tier locations.

65)

66) Distribution channels for automobiles in Japan and the United States are similar in that most car buyers in both countries visit dealerships before making a purchase.

66)

9

67) Retailers may have a difficult time crossing borders if they fail to appreciate similarities in retailing environments, and consumer behavior and preferences.

67)

68) Tesco made vigorous effort to penetrate the U.S. market.

68)

69) Trains are more reliable than trucks for transportation of goods.

69)

70) When Carrefour, Tesco, or Walmart set up shop in developing countries, they provide customers with access to more products but at higher prices than were available previously. This is an example of global retailing.

70)

71) Channel strategy involves an analysis of each shipping mode to determine which mode, or combination of modes, will be both effective and efficient in a given situation.

71)

72) eBay pioneered a form of online commerce known as p-to-p or peer-to-peer marketing whereby individual consumers market products to other individuals.

72)

73) When utilizing the services of a local independent distributor, management is well advised to treat the distributor as a temporary market-entry vehicle.

73)

74) The reason why Saks Fifth Avenue has licensed stores in the Middle East is to limit their risk when targeting unfamiliar, difficult-to-enter markets.

74)

75) The term logistics management describes the integration of activities necessary to ensure the efficient flow of raw materials, in-process inventory, and finished goods from producers to customers.

75)

76) Today's global retailing scene is characterized by great diversity.

76)

77) Walmart's international expansion in the mid-1990s coincided with disappointing financial results in its home market.

77)

78) In Japan, the biggest barrier facing U.S. auto manufacturers is that half the cars that are sold each year are sold door-to-door.

78)

79) The cherry picker is most interested in developing a market for a new product, which helps an expanding international company.

79)

80) Nakumatt, is a supermarket chain in Kenya, where people go to show that they are educated and prosperous and cognizant of larger affairs.

80)

81) The French Connection Group PLC closed all of its U.S. and Japanese stores, as well as underperforming stores in Europe.

81)

82) A company or activity that is somewhat removed from the final customer is said to be downstream in the value chain.

82)

83) The first step in the guidelines to help newcomers in choosing a channel intermediary is to let the distributors select the business.

83)

10

84) It is advisable to treat local distributors as temporary market-entry vehicles.

84)

85) Water transportation is rated "low" in reliability since approximately 200 freighters sink due to bad weather or other factors.

85)

86) A distributor with good contacts is the best one to select in terms of generating quick sales and revenues.

86)

87) Laura Ashley, The Body Shop, Victoria's Secret, Starbucks, the Disney Store and Gap are examples of global retail operators that can be classified as specialty retailers since they offer less variety than department stores.

87)

88) Swedish furniture retailer IKEA pulled meatballs from its cafeterias and grocery sections in several countries after food inspectors found some samples that contained horse meat.

88)

89) Japanese retailers traditionally offered few extra services to clientele; their stock was chosen not according to consumer demand but, rather, according to purchasing preferences of the stores.

89)

90) By definition, a retailer that caters to the general public would be upstream in an industry's supply chain.

90)

91) Apple, Levi Strauss, Nike, Sony, well-known fashion design houses, and other companies with strong brands sometimes establish flagship retail stores as a means of obtaining marketing intelligence.

91)

92) Dell's rise to a leading position in the global PC industry was based on Michael Dell's decision to bypass conventional channels by selling direct and by building computers to customers' specifications.

92)

93) An exporter that is new to a particular market would do well to choose a middleman with a reputation for "cherry picking" products.

93)

94) Walmart pulled out of Germany; Best Buy closed several stores in China. These examples illustrate that it is not possible to export a retail business model that has proven successful in the domestic market.

94)

95) Selfridge fell victim to various demons and vices and was ousted from the company he had founded.

95)

96) Western luxury goods marketers such as Jean Paul Gaultier (France) and Harmont & Blaine (Italy) have long relied on direct involvement for distribution.

96)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

97) When devising a channel strategy, it is necessary to be realistic about the intermediary's motives. What is "cherry picking" and how does it affect careful selection of a channel strategy?

11

98) Distribution channels around the world are highly differentiated. However, these differences cannot be explained just by culture and income level of the existing market. What is the difference between organic growth and franchising?

99) An export administrator, Beth Dorrell, notes, "A commodity raw material from Africa can be refined in Asia, then shipped to South America to be incorporated into a component of a final product that is produced in the Middle East and then sold around the world." In light of this statement, describe supply chain, value chain, and logistics.

List and briefly describe the most important distribution activities.

100) How do specialty retailers differ from "hypermarkets," "supercenters," and "convenience stores"? Why are some businesses called "category killers"?

101) As Walmart extends its reach around the globe, some observers are very skeptical and consider it as an "assault" or "invasion." Using Walmart in India as an example discuss all impacting factors.

102) Dell's rise to a leading position in the global PC industry was based on Michael Dell's decision to bypass conventional channels by selling direct and by customizing computers. Discuss the importance of channel innovation, giving examples of piggyback marketing in emerging markets.

103) What does the term "logistic management" describe? What are some changes taking place in this type of management?

104) How can political turmoil and other adverse environmental conditions affect global marketing?

105) Nestlé in Brazil is using door-to-door selling to reach low-income neighborhoods; Dell computers provides home delivery for its products; Avon is using sales representatives and other companies are using other methods to reach consumers. Describe different channels that can be used for reaching the customers.

106) What are global retail categories? Describe these categories giving examples.

107) Give examples to show the use of technology and how it impacts order processing and explain the dilemma associated with its use.

108) What are the market entry expansion strategies which are available to retailers that wish to cross borders? Describe these strategies in detail.

109) What factors should be considered by management in order to achieve success in global retailing?

110) Companies entering emerging markets for the first time must exercise particular care in choosing a channel intermediary. Generally, a local distributor is required. What are some of the guidelines that should be considered in selecting a distributor in order to avoid any problems?

12

Answer Key Testname: C12

1) B 2) E 3) B 4) D 5) C 6) D 7) E 8) C 9) A 10) D 11) C 12) D 13) A 14) E 15) B 16) D 17) A 18) A 19) B 20) D 21) A 22) C 23) C 24) C 25) E 26) D 27) C 28) E 29) A 30) B 31) A 32) B 33) E 34) E 35) D 36) D 37) A 38) A 39) D 40) E 41) D 42) E 43) C 44) E 45) E 46) B 47) E 48) C 49) A 50) E 13

Answer Key Testname: C12

51) C 52) E 53) B 54) D 55) FALSE 56) FALSE 57) TRUE 58) TRUE 59) TRUE 60) TRUE 61) TRUE 62) TRUE 63) TRUE 64) TRUE 65) TRUE 66) FALSE 67) FALSE 68) FALSE 69) FALSE 70) FALSE 71) TRUE 72) TRUE 73) FALSE 74) TRUE 75) TRUE 76) TRUE 77) TRUE 78) TRUE 79) FALSE 80) TRUE 81) TRUE 82) FALSE 83) FALSE 84) FALSE 85) TRUE 86) FALSE 87) TRUE 88) TRUE 89) TRUE 90) FALSE 91) TRUE 92) TRUE 93) FALSE 94) TRUE 95) TRUE 96) FALSE

14

Answer Key Testname: C12

97) Selection of agents is very important in the success of a channel strategy. These agents sometimes engage in what is called cherry picking, the practice of accepting orders only from manufacturers with established demand for certain products and brands. Cherry picking can also take the form of selecting only a few choice items from a vendor's product lines. The cherry picker is not interested in developing a market for a new product, which is a problem for an expanding international company. Manufacturers should provide leadership and invest resources to build the relationship with a desired distributor. A manufacturer with a new product or a product with a limited market share may find it more desirable to set up some arrangement for bypassing the cherry-picking channel member. In some cases, a manufacturer must incur the costs of direct involvement by setting up its own distribution organization to obtain a share of the market. When the company's sales finally reach critical mass, management may decide to shift from direct involvement to a more cost-effective, independent intermediary.

An alternative method of dealing with the cherry-picking problem does not require setting up an expensive direct sales force. Rather, a company may decide to rely on a distributor's own sales force by subsidizing the cost of the sales representatives the distributor has assigned to the company's products. This approach has the advantage of holding down costs by tying in with the distributor's existing sales management team and physical distribution system.

98) Organic growth occurs when a company uses its resources to open a store on a greenfield site or to acquire one or more existing retail facilities from another company. For example, Marks & Spencer's announced in 1997 plans to expand from one store to four in Germany via the purchase of three stores operated by Cramer and Meerman. Franchising is the appropriate entry strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures. It is a contractual relationship between two companies. The parent company-franchisor authorizes a franchise to operate a business development by the franchisor in return for a fee and adherence to franchise-wide policies and practices. The key to a successful franchise operation is the ability to transfer company know-how to new markets. Benetton, IKEA, and other focused, private-label retailers often use franchising as a market entry strategy.

99) As the statement describes, it has become very easy to have raw product in one country which can be transported to several countries for processing or finishing, and then sold all over the world. IKEA, the global furniture manufacturer, purchases wood and other raw material inputs from a network of suppliers located in several countries. The wood is then transported to the factories, which add value to the inputs by transforming them into furniture kits that are then shipped on to IKEA's store. The stores are downstream in IKEA's value chain. Thus, there is a continuous global involvement from raw materials, to factories, retail distribution and finally to consumers. The most important distribution activities are order processing, warehousing, inventory management, and transportation. Order processing includes order entry, handling, and delivery. Proper inventory management ensures that a company neither runs out of manufacturing components or finished goods nor incurs the expense and risk of carrying excessive stocks at any time. Warehouses are used to store goods until they are sold. Finally, transportation plays a big role in the movement of products. The transportation can be by rail, trucks, air, or ships.

100) "Specialty retailers" offer less variety than department stores. They are very narrowly focused and offer a relatively narrow merchandise mix aimed at a particular target market. Specialty stores offer a great deal of merchandise depth such as styles, colors and sizes. Whereas "hypermarkets" are a hybrid retailing format combining the discounter, supermarket, and warehouse club approaches under a single roof. On the other hand, "supercenters" offer a wide range of aggressively priced grocery items plus general merchandise in a space that occupies about half the size of a hypermarket. Supercenters are an important aspect of Walmart's growth strategy, both at home and abroad.

Convenience stores offer some of the same products as supermarkets, but the merchandise mix is limited to high-turnover convenience and impulse products. Prices are generally higher compared to supermarket prices.

"Category killers" is the label many in the industry use when talking about stores such as Toys "R" Us, Home Depot, and IKEA. It refers to the fact that such stores specialize in a particular product category such as toys or furniture and offer a vast selection at low prices. These stores represent a very influential business which can demolish smaller, more traditional competitors and prompt department stores to scale down merchandise sections that are not competitive.

15

Answer Key Testname: C12

101) Global retailers who would like to go to India will face a variety of challenges. The term organized retailing is used to describe the activity by large multi-store chains such as Woolworths, Tesco, and Walmart. Walmart utilizes a variety of retail formats, including discount stores and supercenters that feature a full line of groceries and general merchandise.

As one of the chief executives of one supplier noted, "Walmart is going to change the retailing landscape internationally exactly the same way it's done domestically." In India, strict government regulations once meant that the retail market was essentially closed to foreigners, but that situation is now changing. Walmart began by operating a liaison office in India from which it conducted market research and lobbied Indian policymakers. India's annual retail market is worth $500 billion, and analysts expect the retail sector to grow at a rate of 7 percent over the next few years.

Today, more than 90 percent of retail activity is generated by small shops, newspaper kiosks, and tea stalls.

Regulatory reforms passed in fall 2012 will finally allow Walmart and other foreign big-box retailers to sell directly to consumers. Yet, despite Walmart's potential to transform India's retail sector for the better, some observers have concerns about the company's presence there. Western style retailing is anathema to many Indian activists and policymakers, who fear that Walmart will drive some of India's millions of shopkeepers out of business. Legislators are also suspicious of the company's motives, an attitude that can be traced back to the colonial era and the operations of the British East India Company. Perhaps, they fear, the foreigners will raise prices after they have driven small operators out of business.

102) Channel innovation can be an essential element of a successful marketing strategy as noted in the case of Dell computers, which began as a b-to-b marketer. The business model proved to be so successful that the company began marketing direct to the home PC market. This strategy may not work for other products, particularly where a complicated system or mechanism is involved. Before deciding which system to use, marketers must study each country individually. In general, if the market is large, it is more feasible to use a manufacturer's own sales force.

Piggyback marketing is a good example of another channel innovation that has grown in popularity. In this type of marketing, one manufacturer obtains product distribution by utilizing another company's distribution. Both parties can benefit by increasing the total revenue generated by the channel members. Successful piggyback marketing requires that the combined product lines be complementary. They must appeal to the same customer and must not compete with each other. Several companies have taken advantage of the opportunity to piggyback with Avon, which has a network of direct sales representatives in over 100 countries. Several of Mattel's toy lines are being marketed in China by local Avon representatives. In Australia, New Zealand, Brazil, Canada, and France, Avon representatives offer Reader's Digest subscriptions along with Avon's health and beauty products. In emerging markets, Avon offers a second catalog featuring products from Timex, Duracell, Time-Life, and others. Thus, piggyback products already account for 15% of sales in some emerging markets.

103) The term "logistics management" describes the integration of activities necessary to ensure the efficient flow of raw materials, in-process inventory, and finished goods from producers to customers. JCPenney provides a case study in the changing face of logistics, physical distribution, and retail supply chains in the twenty-first century. Several years ago, Penney's management team made a key decision to outsource most elements of its private-label shirt supply chain to TAL Apparel Ltd. of Hong Kong. Penney's North American stores carry almost no extra inventory of house-brand shirts; when an individual shirt is sold, EPOS scanner data are transmitted directly to Hong Kong. TAL's proprietary computer model then determines whether to replenish the store with the same size, color, and style. Replacement shirts are sent directly to stores without passing through Penney's warehouse system; sometimes the shirts are sent via air, sometimes by ship.

104) The ongoing political upheaval in the Middle East has highlighted the importance of flexibility in global supply-chain design. For example, in spring 2011, P&G was forced to briefly close plants in Egypt that supply products for South Africa. During the closure, production from plants in Hungary and Turkey was redirected to supply the South African market. Such incidents explain why supply-chain managers use a term borrowed from the military, VUCA, to describe places that are "volatile, uncertain, complex, and ambiguous." Walmart's mastery of logistics and supply-chain management is an important source of competitive advantage. The retailing giant's basic value proposition is simple: getting goods to people as efficiently as possible. To do this, Walmart exploits a core competency: leveraging its vast customer database to know and anticipate what customers want and getting it to them quickly and efficiently. In short, alternatives and alternative routes should always be taken into consideration when undertaking marketing globally.

16

Answer Key Testname: C12

105) Marketing channels exist in order to create utility for customers. These utilities can be place utility, time utility, form utility, or information utility. Thus, the selection of a marketing channel depends on the target market which a manufacturer is planning to reach. Various companies have used innovative channel distribution methods.

Distribution channels are systems that link manufacturers to customers. Although channels for consumer products and industrial products are similar, there are also some distinct differences. In business-to-consumer marketing (B2C) consumer channels are designed to put products in the hands of consumers. In the case of business-to-business (B2B), industrial channels deliver products to manufacturers or other types of organizations that use them as inputs in the production process or in other types of operations. Agents and distributors are commonly used as intermediaries. With the increased use of technology, peer-to-peer (p-to-p) marketing is becoming popular, whereby individual consumers market products to other individuals. eBay pioneered a form of online commerce which has gained popularity, and many companies are using it as a channel for distribution. Door-to-door selling has been a traditional channel which is also currently in use. For example, in Japan, auto manufacturers use door-to-door selling. Another direct selling alternative is the manufacturer-owned store or independent franchise store. In many countries where manufacturers cannot own stores, franchising is a very popular method. Other channel structure alternatives for consumer products include various combinations of a manufacturer's sales force and wholesalers calling on independent retail outlets.

Piggyback marketing is another channel innovation whereby one manufacturer obtains product distribution by utilizing another company's distribution channels.

106) The categories for global retailing can be visualized in the form of a matrix. One axis of the matrix represents private or own-label focus versus a manufacturer brands focus. The other axis differentiates between retailers specializing in relatively few product categories and retailers that offer a wide product assortment. IKEA, Benetton, and Gap fall under quadrant A, which contains global retailers with a niche focus as well as an own-label focus. In quadrant B, the private-label focus is retained, but many more product categories are offered. This is the strategy of Marks & Spencer whose strategy, Michael private label, is found on a broad range of clothing, food, home furnishings, jewelry, and other items. Retailers in the upper right quadrant offer many well-known brands in a relatively tightly defined merchandise range. Such businesses include Toys "R" Us, Virgin, and others. These types of stores tend to quickly dominate smaller established retailers by out-merchandising local competition and offering customers superior value. Carrefour, Walmart, and Promodes and similar businesses fall in the fourth quadrant. They offer the same type of merchandise available from established local retailers. Thus, there are different strategies that can be followed based on different criteria.

107) In addition to using radio frequency identification (RFID) tags, retailers—especially those with e-commerce operations —are exploring the potential of industrial robots to pick out items in warehouses and distribution centers and put them in boxes for shipping. The drive to automate fulfillment holds the promise of significantly reducing the time and labor cost involved in preparing an order for shipment. The development process includes creating massive data sets and 3D renderings of individual inventory items. Meanwhile, just in the United States alone, Amazon.com and other companies are hiring hundreds of thousands of distribution center employees in an effort to keep up with the torrid pace of online sales growth.

17

Answer Key Testname: C12

108) There are four market entry expansion strategies available to retailers that wish to cross borders. These strategies can be visualized by a matrix that differentiates between (a) markets that are easy to enter versus those that are difficult to enter; and (b) culturally close markets versus culturally distant ones. The upper half of the matrix encompasses quadrants A and D and represents markets in which shopping patterns and retail structures are similar to those in the home country. In the lower half of the matrix, quadrants C and B represent markets that are significantly different from the home country market in terms of one or more cultural characteristics. The right side of the matrix, quadrants A and B, represents markets that are difficult to enter because of the presence of strong competitors, location restrictions, excessively high rent or real estate costs, or other factors. In quadrants C and D, any barriers that exist are relatively easy to overcome. The four entry strategies indicated by the matrix are organic, franchise, chain acquisition, and joint venture. Organic growth occurs when a company uses its own resources to open a store on a greenfield site or to acquire one or more existing retail facilities from another company. Franchising is the appropriate entry strategy when barriers to entry are low yet the market is culturally distant in terms of consumer behavior or retailing structures. In global retailing, acquisition is a market-entry strategy that entails purchasing a company with multiple retail locations in a foreign country. This strategy can provide the buyer with quick growth as well as access to existing brand suppliers, distributors, and customers. Joint ventures, the final entry strategy, are advisable when culturally distant, difficult-to-enter markets are targeted. The strategy is to collaborate with some local company as a joint venture.

109) Achieving retailing success outside the home-country market is not simply a matter of consulting a matrix and choosing the recommended entry strategy. Management must also be alert to the possibility that the merchandise mix, sourcing strategy, distribution, or other format elements will have to be adapted. Management at Crate & Barrel, for example, is hesitant to open stores in Japan. Part of the reason is research indicating that at least half the company's product line would have to be modified to accommodate local preferences. Another issue is whether the company will have the ability to transfer its expertise to new country markets.

110) Care should be taken in selecting distributors, particularly when entering a new market in a foreign country. Prof.

Arnold provided seven specific guidelines to help prevent problems. These guidelines are: (1) select distributors, and do not let the distributors select you; (2) look for distributors capable of developing markets, rather than those with a few good customer contacts; (3) treat local distributors as long-term partners, not temporary market-entry vehicles; (4) support market entry by committing money, managers, and proven marketing ideas; (5) from the start, maintain control over marketing strategy; (6) make sure distributors provide you with detailed market and financial performance data; and (7) build links among national distributors at the earliest opportunity. When devising a channel strategy, it is necessary to be realistic about the motives of the typical channel intermediary. If distributors are not properly selected, it can prove to be a nightmare.

18

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Advertising, public relations, and other forms of communication are critical tools in the marketing program and reflect the ________ (P) of the marketing mix.

A) Process B) Price C) Promotion D) Place E) Product

1)

2) What do Unilever and Procter & Gamble have in common?

A) Both companies rank high in terms of non-U.S. ad spending.

B) Both companies use the same advertising agency.

C) Both companies utilize extension approaches to advertising.

D) Both companies use a great deal of corporate advertising.

E) Revenues at both companies have been hurt by regulations concerning tobacco advertising and promotion.

2)

3) Some of the world's most memorable advertising campaigns have achieved success because they originate from an idea that is so big that the campaign offers opportunities for a seemingly unlimited number of new executions. Such a campaign is said to have: A) "fun."

B) "legs."

C) "love."

D) "life."

E) "toes."

3)

4) Standardized print campaigns can be used for all of the following except: A) high-tech consumer products.

B) stereotype advertising.

C) voiceovers TV commercials.

D) industrial products.

E) visual appeal.

4)

5) What do Ford Motor Company, Coca-Cola, Nike, and McDonald's all have in common?

A) They spend more in advertising in foreign markets than home markets.

B) They have all received a great deal of negative publicity in recent years.

C) They all have foreign CEOs. D) They all rely exclusively on TV advertising.

E) They are all consumer packaged-goods companies.

5)

6) ________ is the technique global marketers use to describe ads with common design elements into which localized elements are inserted for individual country markets.

A) "Cookie-cutter advertising" B) "Pattern advertising" C) "Model advertising" D) "Stereotype advertising" E) "Template advertising"

6)

1

7) Because advertising is often designed to add ________ value to a product or brand, it plays a more important communications role in marketing consumer products than it does for marketing industrial products.

A) social B) psychological C) emotional D) monetary E) cultural

7)

8) Ads based on a(n)________ appeal depend on logic and speak to the audience's intellect.

A) emotional B) localized C) melodramatic D) advertising E) rational

8)

9) In selecting an advertising agency, all of the following issues should be taken into consideration except: A) national responsiveness.

B) buyer perception.

C) company organization.

D) franchise or company owned status.

E) area coverage.

9)

10) In southern China, McDonald's is careful not to advertise prices with multiple occurrences of the number 4 because: A) there is no number four in the Chinese language.

B) the "word" four is pronounced similar to the word "death" in Cantonese.

C) prices ending in odd numbers are preferred in China.

D) prices are not included on menus in China.

E) multiple occurrences are considered as unlucky in China.

10)

11) Which of the following most accurately describes the state of global public relations (PR) today?

A) Expenditures on PR are increasing.

B) PR is not important in emerging markets like India.

C) Expenditures on PR are dropping.

D) PR practices are standardized worldwide.

E) Foreign investments are increasing.

11)

12) In advertising, a(n) ________ is an agent who chooses graphics, pictures, type styles, and other visual elements and has general responsibility for the overall look of an advertisement.

A) IMC manager B) art director C) PR practitioner D) copywriter E) stylist

12)

2

13) Which of the following is true about advertising expenditures in Germany and Brazil?

A) Magazines are the leading medium in Brazil and Germany.

B) Television is the leading medium in Brazil; newspapers are the leading medium in Germany.

C) Television is the leading medium in both Germany and Brazil.

D) Television is the leading medium in Germany; newspapers are the leading medium in Brazil.

E) Newspapers are the leading medium in both Germany and Brazil.

13)

14) A company that is ________ in its approach to public relations (PR) will extend home-country activities into host countries.

A) ethnocentric B) hostile C) regiocentric D) domestic E) polycentric

14)

15) A recent global campaign for IKEA, the Swedish home furnishings retailer, positioned houses as homes as a place for love, memories, and laughter. This is a classic example of: A) emotional appeal.

B) creative appeal.

C) advertising appeal.

D) rational appeal.

E) selling proposition.

15)

16) ________ is the top advertiser in China with 25 percent of the company's measured media spending budgeted for the Asia-Pacific region.

A) L'Oreal B) Unilever C) Proctor & Gamble D) Nestle E) Samsung

16)

17) According to data published by Advertising Age (2017), which of the following is the largest global advertising agency network based on worldwide revenues?

A) Dentsu Inc. B) PwC Digital C) Accenture D) Young & Rubicam Group (WPP) E) Deloitte Digital

17)

18) Ads that tickle the funny bone of the intended audience and evoke responses that will direct purchase behavior are based on: A) emotional appeals.

B) SRC appeals.

C) rational appeals.

D) localized appeal.

E) melodramatic appeals.

18)

3

19) The advertising promise that captures the reason that people buy products is known as: A) the big idea.

B) the advertising appeal.

C) the selling proposition.

D) creative strategy.

E) the creative execution.

19)

20) In many parts of the world, McDonald's utilizes TV advertising that shows parents interacting with their happy children. Such advertising utilizes: A) localized appeal.

B) rational appeals.

C) emotional appeals.

D) SRC appeals.

E) melodramatic appeals.

20)

21) The advantages of using in-house marketing and advertising staff include all of the following except: A) greater control.

B) global accounts.

C) brand knowledge.

D) superior product.

E) lower cost.

21)

22) Which of the following product category/company pairings best illustrates the concept of "product cultures"?

A) coffee bars/Starbucks B) automobiles/Ford C) batteries/Duracell D) personal hygiene/Procter & Gamble E) earth-moving equipment/Caterpillar

22)

23) In the language of global marketing, ________ is the phrase used to describe advertising that represents a middle ground between 100% standardization and 100% localization.

A) "pattern advertising" B) "compromise advertising" C) "stereotype advertising" D) "template advertising" E) "cookie-cutter advertising"

23)

24) The words that are the spoken or written communication elements in advertisements are known as: A) idea.

B) script.

C) copy.

D) writings.

E) manuscript.

24)

25) McDonald's global marketing chief staged a competition that included agencies from all over the world. The "I'm lovin' it" tagline was devised by a(n) ________ agency.

A) American B) Turkish C) Chinese D) German E) Egyptian

25)

4

26) China's ongoing trade-related friction with the United States highlights the need for: A) a better PR effort.

B) pattern advertising.

C) sales promotion.

D) a better distribution system.

E) a better transportation system.

26)

27) A technique, which is analogous to the concept of global product platforms is: A) "cookie-cutter advertising."

B) "pattern advertising."

C) "model advertising."

D) "stereotype advertising."

E) "template advertising."

27)

28) As companies recognize and embrace new concepts such as the globalization of "the coffee culture," the potential for effective global advertising: A) decreases.

B) remains the same.

C) is ignored.

D) becomes evident.

E) increases.

28)

29) U.S. advertisements contain more ________ information, and are more likely to include comparative appeals than Arabic ads.

A) process B) people C) price D) sex E) context

29)

30) According to data published by Advertising Age (2016), which of the following is the largest global advertising organization based on worldwide revenues?

A) Interpublic Group B) Dentsu Inc. C) Omnicom Group D) Havas E) WPP Group

30)

31) Japan's Fuji Photo Film asked its advertising agency to develop an advocacy campaign for the United States targeted to appeal both to Walmart and to its customers. This is an example of: A) local advertising.

B) pattern advertising.

C) global advertising.

D) image advertising.

E) advocacy advertising.

31)

32) Generally speaking, a company has little control over media. To compensate for this lack of control, many companies utilize: A) radio advertising.

B) image advertising.

C) corporate advertising.

D) TV advertising.

E) advocacy advertising.

32)

5

33) Which company ranks number one in terms of worldwide ad spending for 2016?

A) Procter & Gamble B) Unilever C) Coca-Cola D) General Motors E) Philip Morris

33)

34) Landor Associates, a company specializing in brand identity and design, recently determined that ________ has the number one brand-awareness and esteem position in the United States, number two in Japan, and number six in Europe.

A) Sony B) Pepsi C) Coke D) McDonald's E) Toyota

34)

35) A company's efforts to effectively communicate with customers is very important. All of the following are major difficulties which can compromise an organization's attempt to communicate with customers except: A) the message does not reach the intended recipient.

B) the message reaches the intended recipient but is misunderstood.

C) the message reaches the intended recipient and is understood, but the recipient may fail to take action.

D) the message is only in one language.

E) the message is distorted by noise.

35)

36) The kind of brand awareness a company wants to project is identified by: A) buyer perception.

B) in-house marketing.

C) area coverage.

D) national responsiveness.

E) company organization.

36)

37) The choice between demonstration, slice of life, straight sell, and other advertising forms is a matter of the: A) big idea.

B) creative strategy.

C) selling proposition.

D) creative execution.

E) advertising appeal.

37)

38) Which company ranked number one in terms of ad spending in Europe in 2016?

A) General Motors B) Philip Morris C) Procter & Gamble D) Nestlé E) Coca-Cola

38)

39) The country which has a massive potential for cigarette manufacturers is: A) Vietnam.

B) Egypt.

C) China.

D) Turkey.

6

E) Spain.

39)

40) One task of the ________ department is to generate nonpaid forms of communication to foster goodwill among customers and others.

A) public relations B) sales promotion C) advertising D) global marketing E) headquarters

40)

41) Volkswagen's portfolio of brands does not include: A) Lamborghini.

B) Bentley.

C) Audi.

D) Porsche.

E) no correct answer

41)

42) When the subheads and body copy of an advertisement are localized, not simply translated, it is an example of: A) advocacy advertising.

B) pattern advertising.

C) local advertising.

D) stereotype advertising.

E) global advertising.

42)

43) A ________ company possesses a critical marketing advantage with respect to marketing communications.

A) global B) multinational C) domestic D) local E) glocal

43)

44) A company adopting a(n) ________ approach to worldwide PR activities gives the host-country practitioner maximum leeway to incorporate local customs and practices into the PR effort.

A) regiocentric B) local C) publicity D) ethnocentric E) polycentric

44)

45) Competitive advertising may impair the effectiveness of the message due to the fact that it may: A) reach the intended recipient but is misunderstood.

B) not reach the intended recipient.

C) only be in one language.

D) reach the intended recipient and is understood, but the recipient may fail to take action.

E) get distorted by noise.

45)

7

46) Even in the face of such tough and growing competition, Adidas still enjoys high brand loyalty among older Europeans. The company recruits young people and pays them to wear Adidas shoes in public. This is an example of: A) image advertising.

B) global advertising.

C) pattern advertising.

D) advocacy advertising.

E) local advertising.

46)

47) Which promotional mix element is most closely associated with activities designed to foster goodwill and understanding with various constituents both inside and outside the company?

A) sales promotion B) personal selling C) advertising D) public relations E) publicity

47)

48) Officials at Brazil's state-owned oil company and top politicians were accused of collaborating with contractors to receive billions in kickbacks. This resulted in ________ problems for Petrobras.

A) public relations B) distribution C) advertising D) sales promotion E) pricing

48)

49) In developing countries, such as Ghana, the best way to communicate with market segments may be through: A) written word.

B) mass media.

C) dance, songs, and storytelling.

D) TV ads.

E) magazine ads.

49)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

50) Benetton's striking print and outdoor advantage campaigns keyed to the "United Colors of Benetton" generated both controversy and widespread media attention.

50)

51) In China, McDonald's is careful not to advertise prices with multiple occurrences of the number 4 since, in Cantonese, the pronunciation of the word "four" sounds similar to that of the word "death."

51)

52) In Greece, ads show ketchup pouring over pasta, eggs, and cuts of meat. This is an example which shows that ketchup is the product category most likely to elicit cultural sensitivity.

52)

53) Arabic ads contain more price information, and are more likely to include comparative appeals than U.S. ads.

53)

54) In a massive security breach, North Korean hackers leaked data, memos, and films stolen from Sony in retaliation for Sony Pictures Entertainment's The Interview.

54)

8

55) Publicity is similar to advertising in that companies pay the media for placement of stories and news items.

55)

56) Companies that are centralized typically allow managers at the local subsidiary to make ad agency selection decisions.

56)

57) When photographing a couple entering a restaurant or theater, women should be shown preceding the man in Germany and France.

57)

58) In December 2012, Australia implemented some of the world's most stringent antismoking regulations which included a ban on brand logos and prominent placement of graphic photographic images of smoking-related illnesses and disfigurement on cigarette packs.

58)

59) The "extension versus adaptation" debate is essentially a debate over "standardized versus localized" advertising.

59)

60) Lynch agency developed for Subaru. "Love—it's what makes a Subaru, a Subaru," omits any reference to the auto brand's most salient functional attribute—namely, its dependable Symmetrical AWD (all-wheel drive) system.

60)

61) According to data published by Advertising Age in 2016, Proctor & Gamble ranks #2 in worldwide advertisement spending.

61)

62) Standardized print campaigns can be used for industrial products or for technology-oriented consumer products such as the Apple iPhone and the iPad.

62)

63) Ads in a European print campaign for Boeing shared basic design elements, but the copy and the visual elements were localized on a country-by-country basis. This is an example of pattern advertising.

63)

64) In an effort to push back against social media platforms where fake news has proliferated, more than 100 magazines participated in an advertising campaign designed to raise awareness for the credible and trustworthy editorial environment that print media provide.

64)

65) Despite an unmistakable trend toward using global advertising agencies to support global marketing efforts, companies with geocentric orientations tend to adapt to the global market requirements and select the best agency or agencies accordingly.

65)

66) To counteract the negative perception and publicity about Coke, the company launched its own print ad campaign that featured smaller-format cans and bottles.

66)

67) Some of the world's most memorable advertising campaigns originate from big ideas with an unlimited number of new executions. Such a campaign is said to have legs.

67)

68) Western advertising agencies still find markets such as China and Japan to be very complex, as Asian agencies find it just as difficult to establish local agency presence in western markets.

68)

69) Recently, global companies have embraced a technique known as "pattern advertising" which is analogous to the concept of global product platforms.

69)

9

70) The challenge of encoding and decoding slogans and taglines in different national and cultural contexts can lead to unintentional errors.

70)

71) High-end U.S. grocery chain Whole Foods Market does not stock Coke in its stores since its mission is to bring healthy food to the world.

71)

72) The way a product's appeal or proposition is presented is called the "selling proposition."

72)

73) Google and Facebook now account for more than three-fourths of new online ad spending, and Snapchat is gaining traction as an advertising forum.

73)

74) Image advertising is used by global companies to present themselves as famous corporate citizens in foreign countries.

74)

75) In 2018, Heinz was still experimenting with the global/local taste trade-off: Managers had to decide whether to introduce a blend of mayonnaise and ketchup, to Middle Eastern consumers.

75)

76) The ultimate test of an organization's understanding of the power and importance of PR occurs during a time of environmental turbulence, especially a potential or actual crisis.

76)

77) A company that is ethnocentric in its approach to PR will not extend home-country PR activities into host countries.

77)

78) In Japan, intimate scenes between men and women are in bad taste, and in Saudi Arabia, such ads are outlawed.

78)

79) The elements of the promotion mix are advertising, public relations, personal selling, process, and sales promotion.

79)

80) When creating global advertising, it is important to remember that the "advertising appeal" should be based on the agency's understanding of the target audience's buying motives.

80)

81) Advocacy advertising enhances the public's perception of a company, creates goodwill, or announces a major change.

81)

82) Partial nudity and same-sex couples are seldom seen in ads in Latin America and Europe.

82)

83) According to the worldwide revenue figures for 2016, Omnicom Group is the world's largest advertising organization.

83)

84) Most of the agency brands identified among the network agencies are full-service agencies involved in creating advertising as well as other services, such as market research, media buying, and direct marketing.

84)

85) Pinterest began selling ads in 2015. In 2017, as part of an effort to differentiate the company from Facebook, Google, Instagram, Snapchat, and Twitter, Silbermann's team launched its first print brand campaign.

85)

10

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

86) Considering the fact that the "message" is at the heart of advertising, discuss how creative strategy and different types of appeals can be created in global advertising.

87) There is an ongoing debate between "standardization" versus "adaptation" pertaining to global advertising.

Explain how different sides of the arguments fit into the global context.

88) A global company that has the ability to successfully transform a domestic campaign into a worldwide one or to create a new global campaign from the ground up possesses a critical marketing advantage. Explain this statement in light of the global advertising.

89) Food is a product category most likely to exhibit cultural sensitivity. Using Heinz ketchup as an example, discuss how the company has used its advertising taking into account cultural sensitivities in different parts of the world.

90) Because of its size and presence in more than 200 countries, the Coca-Cola Company is often the target of anti-globalization protests. Giving examples, show how negative publicity affects global marketers.

91) Much academic research has been devoted to the impact of culture on advertising. Researcher Tamotsu Kishii identified seven characteristics that distinguish between Japanese and American creative strategy. Briefly describe those characteristics.

92) Why is the "big idea" easier to illustrate than define? Explain the importance of big ideas in advertising strategy.

93) What issues must be considered in selecting an advertising agency for global advertising?

94) What was the reason for McDonald's to pull out advertising business from Leo Burnett?

95) How do the public relations differ around the world? Explain giving examples to show the importance of public relations for a global company.

96) Companies use corporate advertising, image advertising, and advocacy advertising from time to time. How are these advertising methods different? What are the circumstances under which they are used?

97) One of the issues facing advertisers is which medium or media to use when communicating with global target markets. Discuss how these media differ from country to country, giving examples.

11

Answer Key Testname: C13

1) C 2) A 3) B 4) B 5) B 6) B 7) B 8) E 9) D 10) B 11) A 12) B 13) B 14) A 15) A 16) C 17) C 18) A 19) C 20) C 21) B 22) A 23) A 24) C 25) D 26) A 27) B 28) E 29) C 30) E 31) E 32) C 33) A 34) C 35) D 36) A 37) D 38) D 39) C 40) A 41) B 42) B 43) A 44) E 45) E 46) A 47) D 48) A 49) C 50) TRUE 12

Answer Key Testname: C13

51) TRUE 52) FALSE 53) FALSE 54) TRUE 55) FALSE 56) FALSE 57) FALSE 58) TRUE 59) TRUE 60) TRUE 61) FALSE 62) TRUE 63) TRUE 64) TRUE 65) TRUE 66) TRUE 67) TRUE 68) TRUE 69) TRUE 70) TRUE 71) TRUE 72) FALSE 73) TRUE 74) FALSE 75) FALSE 76) TRUE 77) FALSE 78) TRUE 79) FALSE 80) TRUE 81) FALSE 82) FALSE 83) FALSE 84) TRUE 85) TRUE

13

Answer Key Testname: C13

86) The particular message and the way it is presented will depend primarily on the advertiser's objectives; whether the ad is meant for informing, entertaining, reminding, or persuading. Moreover, in a world characterized by information technology, ads must break through the clutter, grab the audience's attention, and linger in their minds for a desired period of time. All this requires developing an original and effective creative strategy. Advertising agencies can be thought of as "idea factories" since they have to create ideas from scratch, sometimes referred to as the "big idea." Some of the world's most memorable advertising campaigns have achieved success because they originate from an idea that is big enough to offer opportunities that will last for a long period of time. Companies seek such big ideas since they bring a lot of profitability and exposure to the products and their companies. The advertising appeal is the communications approach that relates to the motives of the target audience. For example, ads based on a rational appeal depend on logic and speak to the audience's intellect. Rational appeals are based on consumers' needs for information. Ads using an emotional appeal may be directed to evoke a feeling response that will direct purchase behavior. The message elements in a particular ad will depend, in part, on which appeal is being employed. The selling proposition is the promise or claim that captures the reason for buying the product or the benefit that ownership confers. Because products are frequently at different stages in their life cycle in various markets, and because of cultural, social, and economic differences that exist in those markets, the most effective appeal or selling proposition for a product may vary from market to market.

87) Communication experts generally agree that the overall requirements of effective communication and persuasion are fixed and do not vary from country to country. The same is true for the components of communication process whereby the marketer is the source of the message; the message must be encoded, conveyed via the appropriate media, and decoded by a member of the target audience. A message is fully communicated when it results in a desired feedback. Four major difficulties can compromise an organization's attempt to communicate with customers in any location: (a) the message may not get through to the intended audience. This may be due to advertiser's lack of knowledge or experience about appropriate media to reach certain types of audiences; (b) the message may reach the target audience but may not be understood or may even be misunderstood. This may be due to inadequate understanding of the target audiences; (c) the message may reach the target audience and may be understood but still may not compel the recipient to take action. This could be due to the lack of cultural knowledge about a target audience, and the effectiveness of the message can be impaired by noises, which in this case are external influences such as competitive advertising, other prejudices and related factors. All these factors compel a marketer to think and decide whether to use adaptations in advertising from country to country and region to region. Proponents of the "one world, one voice" approach to global advertising believe that the era of the global village has arrived and that tastes and preferences are converging worldwide. According to the standardization arguments, people everywhere want the same products for the same reasons. Advertisers who prefer the localized approach are skeptical of the global village argument. They assert that consumers still differ from country to country and must be reached by advertising tailored to their respective countries. Proponents of localization point out those very costly blunders have occurred since advertisers have failed to understand or adapt to different cultures. Currently, the argument remains unresolved and companies are using both standardized advertising as well as adapting where necessary.

14

Answer Key Testname: C13

88) Advertising can be any sponsored, paid message that is communicated in a non-personal way. Global advertising can be defined as messages whose art, copy, headlines, photographs, tag lines, and other elements have been developed expressly for their worldwide suitability. Many companies have used local, international, and global themes from time to time for domestic or worldwide use. A global company may use single-country advertising in addition to campaigns that are regional and global in scope. The search for a global advertising campaign should bring together everyone involved with the product to share information. Regional market areas such as Europe are experiencing an influx of standardized global brands as companies align themselves. This phenomenon is accelerating the growth of global advertising. The potential for effective global advertising also increases as companies recognize and embrace new concepts such as "product cultures." An example of such cultures can be coffee culture which has created market opportunities for Starbucks Company. Companies also realize that some market segments can be defined on the basis of global demography such as youth culture. MTV, for example, is just one of the media vehicles that enable people virtually anywhere to see how the rest of the world lives and to learn about products that are popular in other cultures.

Global advertising also offers companies economies of scale in advertising as well as improved access to distribution channels. A global brand supported by global advertising may be very attractive from the retailer's standpoint; a global brand is less likely to languish on the shelves. Although standardization is recommended for some products it is not always required or necessary. For example, Nestlé's Nescafe coffee is marketed as a global brand, even though advertising messages and product formulation vary to suit cultural differences.

89) Marketers of food and food products have to consider cultural sensitivities in different parts of the world since food preferences vary from country to country. Localization of the advertising is highly preferable in the case of food and food product advertising. A good example is the effort by H.J. Heinz Company to advertise its ketchup products in different markets. Heinz's strategy involved adapting both the product and advertising to target country tastes. For example, in Greece, ads show ketchup pouring over pasta, eggs, and cuts of meat. In Japan, they instruct Japanese homemakers on using ketchup as an ingredient in Western-style food such as omelets, sausages, and pasta. Americans like a sweet ketchup, whereas Europeans prefer a spicier, more piquant variety. Apparently, Heinz's foreign marketing efforts are most successful when the company quickly adapts to local cultural preferences. In Sweden, the made-in-America theme is so muted in Heinz's ads that Swedes do not realize that Heinz is American and consider it to be German because of its name. In contrast, American themes still work well in Germany.

90) A large group of Indian protestors protested against the use of water by Coke in India, where getting water for drinking was a problem. With negative publicity due to vast coverage in news media, the company has to take some reactionary measures. A rapid reaction is necessary to do any damage control. Hyundai and Samsung in South Korea had to face negative publicity when their executives were portrayed for embezzlement or bribery. Coca-Cola and Pepsi had to face negative publicity in India when both companies were alleged to have pesticide residues in their soft drinks. Sales dropped as soon as the news hit the media. Halliburton in the United States also suffered when it was revealed that the company overcharged the U.S. government for supplies and services rendered in Iraq. Ford Motor Company and Bridgestone/Firestone had a tough time defending their relationship when a rash of tire failures occurred in Ford manufactured autos. Ultimately, Ford severed its decades-old relationship with Firestone. Firestone is still recovering from the loss of public confidence. Nike has been continuously responding to the criticism that its subcontractors operate factories in which sweatshop conditions prevail. McDonald's is faced with public concerns due to mad cow disease in Europe; legal battles originating from beef contamination in french fries; links of food to obesity; and some problems with subcontractors. Thus, there are several large companies that have faced problems due to negative publicity. The best thing is to take all precautions and try to prevent any situations which might lead to negative publicity. In case it happens, then they should have a plan to react in a swift and effective manner.

15

Answer Key Testname: C13

91) The seven characteristics outlined by researcher Tamotsu Kishii show how Japanese ads differ from the American ads which can be summarized as follows: (1) indirect forms of expression are used in Japan where many television ads do not mention what is desirable and let the audience judge for themselves; (2) there is often little relationship between advantages content and the advertised product; (3) in the Japanese culture, the more one talks, the less others will perceive him or her as trustworthy, so only a brief dialogue or narration is preferred; (4) humor is used to create a bond of mutual feelings and not to dramatize others in a humorous way; (5) famous celebrities appear as close acquaintances or everyday people; (6) priority is placed on company trust rather than product quality. Japanese tend to believe that if a company is large and has a good image, the quality of its products should also be outstanding; and (7) the product name is impressed on the viewer with short and brief commercials.

92) The Big Idea is easier to illustrate than define, and easier to illustrate by what it is not than by what it is. It is not a "position." It is not an "execution" or a slogan. The Big Idea is the bridge between an advertising strategy, temporal and worldly, and an image, powerful and lasting. The theory of the Big Idea assumes that average consumers are at best bored and more likely irrational when it comes to deciding what to buy. Some of the world's most memorable advertising campaigns have achieved success because they originated from an idea that was so big that the campaign offered opportunities for a seemingly unlimited number of new executions. Such a campaign is said to have legs because it can be used for long periods of time. The print campaign for Absolut Vodka is a perfect example: Over the course of two decades, Absolut's agency created hundreds of two-word puns on the brand name linked with various pictorial renderings of the distinctive bottle shape. Other campaigns based on big ideas include Nike ("Just do it") and MasterCard ("There are some things in life money can't buy"). In 2003, McDonald's executives launched a search for an idea big enough to be used in multiple country markets even as the company faced disapproval in some countries from consumers who linked it to unpopular U.S. government policies.

93) Care should be taken in selecting advertising agencies, particularly when entering a new market in a foreign country.

The following issues should be considered: (a) company organization—companies that are decentralized may want to leave the choice to the local subsidiary; (b) national responsiveness—the global agency should be familiar with the local culture and buying habits in a particular country. If not, a local agency might be more suitable; (c) area coverage —does the agency cover the areas, regions, or countries targeted; and (d) buyer perception—what kind of brand awareness does the company want to project? For example, if a product needs a strong local identification, it would be best to select a national agency. Despite the trend toward using global agencies to support global marketing efforts, companies with geocentric orientations will adapt to the global market requirements and select the best agency or agencies accordingly.

94) In 2016, McDonald's pulled much of its advertising business from Leo Burnett (which is a unit of Publicis Groupe) and transferred it to Omnicom. The reason? Omnicom had partnered with both Facebook and Google to form an integrated team of creative experts and data scientists. The new unit, known as We Are Unlimited, is based in Chicago. Despite losing the account, Leo Burnett did get a consolation prize: Its London office will handle global marketing communications for McDonald's new McDelivery service.

95) Cultural traditions, social and political contexts, and economic environments in specific countries can affect PR practices. The mass media and the written word are important vehicles for information dissemination in many of the industrial countries. In developing countries these may not be as effective or the only source of communication. In Ghana, dance, songs, and storytelling are important communication channels. In India, where half of the population cannot read, written communication is of no importance, mostly in the extensive rural areas. Even in industrialized nations PR practices vary to a great extent. In the United States, the hometown news release comprises much of the news in a small, local newspaper. In Europe, PR professionals are viewed as part of the marketing function rather than as distinct and separate specialists in a company. A company that is ethnocentric in its approach to PR will extend home-country PR activities into host countries. The rationale behind this approach is that people everywhere are motivated and persuaded in much the same manner; a company adopting a polycentric approach to PR gives the host-country practitioner more leeway to incorporate local customs and practices into the PR effort.

16

Answer Key Testname: C13

96) Companies do not have free access to the media and cannot control what they write. In order to have control, many companies utilize "corporate advertising" which is generally considered part of the PR function. A company or organization pays for the corporate advertising. In the context of IMC, corporate advertising is often used to call attention to the company's other communications efforts, rather than enticing the customers. On the other hand, "image advertising" enhances the public's perception of a company, creates goodwill, or announces a major change, such as a merger or acquisition. Global companies frequently use image advertising in an effort to present themselves as good corporate citizens in foreign countries. In "advocacy advertising," a company presents its point of view on a particular issue. Examples of such advertising methods include the following: Nokia purchased full-page newspaper ads to congratulate the University of Florida Gators for winning the 1997 Sugar Bowl. Also, Japan's Fuji Photo Film did an advertising campaign in the United States while they were competing with Kodak. They were able to secure a contract with Walmart, which gave them access to many customers of a large discount store. Thus, companies use advertising for enhancing their image, advocating a cause, or putting their point across to consumers, regulatory agencies, suppliers, competitors, or government at home or in a foreign country.

97) Media availability varies from country to country. Some companies like Coca-Cola utilize every media that is available in a country. The available alternatives can be broadly classified as print media, electronic media, and other. Print media includes newspapers to magazines and business publications with national, regional, or international audiences.

Electronic media includes broadcast television, cable television, radio, and the Internet. Other media may include outdoor, transit, and direct mail advertising. Globally, media decisions must take into account country-specific regulations such as in France retailers are banned from advertising on television. Worldwide, television is the number one advertising medium; however, there are some exceptions. In the United States and Japan, television is the number one medium, whereas in Germany newspapers are the leading medium. Therefore, more companies use newspaper as a medium for advertising. Television is also important in Latin American countries. In Mexico, an advertiser that can pay for full-page advertising may get the front page, while in India, paper shortages may require booking an ad six months in advance. In some countries, especially those where the electronic media are government owned, television and radio stations can broadcast only a restricted number of advertising messages. In Saudi Arabia, no commercial television advertising was allowed prior to 1986 and currently ad content and visual presentation are restricted. Also, radio can be an effective advertising media in many countries. The latest trend, however, is to use the electronic media, and, therefore, Internet advertising is gaining popularity at the expense of television and print advertising. Outdoor advertising may also be a major medium of choice in countries such as Russia and India. Cultural considerations are important when selecting the advertising message as well as the media.

17

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Celeste Atkinson is a lifestyle and entertainment manager for Audi, and her job is to create buzz by ensuring that vehicles such as the Audi A8L and the S8 sports sedan figure in paparazzi photos.

This is referred to as: A) product placement.

B) blockbuster placement.

C) promotion placement.

D) photo placement.

E) lifestyle placement.

1)

2) Chinese direct-response television has learned that there are many obstacles that still need to be overcome, which include all of the following except: A) delivery logistics in Shanghai.

B) consumers' savings rate is very low.

C) low penetration of credit cards.

D) delivery logistics in Beijing.

E) a limited number of private telephones.

2)

3) In a contest in 45 different languages covering 60 countries, marketers for Axe Apollo invited consumers to fill out an "astronaut profile." This is an example of: A) people in different countries prefer different topics.

B) astronaut profile varies from country to country.

C) promotion of different types for marketing.

D) sales promotion by global marketer.

E) promotion of interest in space exploration.

3)

4) Which promotional technique is best suited to a situation in which a company wants consumers to actually try its product or service at no cost?

A) personal selling B) free-standing inserts C) sampling D) couponing E) sweepstakes

4)

5) Peppers and Rogers described different steps that are involved in one-to-one marketing. These steps include all of the following except: A) customize.

B) identify.

C) interact.

D) differentiate.

E) evaluate.

5)

1

6) In Hong Kong and Singapore, Western catalogers are finding it easy to market because of all of the following reasons except: A) efficient postal services.

B) high per capita income.

C) wide use of credit cards.

D) few mail-order companies.

E) highly educated populations.

6)

7) The term magalog can be used to describe which communication medium?

A) coupons B) catalogs C) direct mail D) infomercials E) Groupons

7)

8) Unilever hired a promotional marketing firm to pass out Lever 2000 hand wipes in food courts and petting zoos. This is an example of: A) point-of-sale sampling.

B) point-of-dirt sampling.

C) point-of-work sampling.

D) point-of-event sampling.

E) point-of-use sampling.

8)

9) Building a prospect base is typically part of which step of the Strategic/Consultative Selling model?

A) development of a personal selling philosophy B) development of a presentation strategy C) development of a customer strategy D) development of a relationship strategy E) development of a product strategy

9)

10) A ban on billboards in Brazil meant they had to come down, including transit ads. Denied access to traditional outdoor advertising, companies devised a number of alternative ways to communicate with prospective customers. These ways included all of the following except: A) ads were placed indoors in elevators.

B) ads were placed in restrooms and other indoor traffic areas.

C) ads were placed on buses.

D) Citibank used the color blue in much of its advertising.

E) ads were placed using social media or online channels.

10)

11) Which of the following is not one of the steps in the Strategic/Consultative Selling model?

A) develop personal selling philosophy B) develop customer strategy C) develop relationship strategy D) develop ethnocentric policy E) develop product strategy

11)

2

12) It was found that Malaysians hesitate to use coupons due to the: A) fear of public embarrassment.

B) higher uncertainty avoidance.

C) impact of religion.

D) general dislike for coupons.

E) lower power distance.

12)

13) Which of the following is not a useful guideline for U.S.-based direct marketers wishing to reach global customers?

A) Customers should be able to return products to an address in their local country market.

B) Focus on all countries included in the European Union.

C) Do not automatically assume that a direct-mail campaign that works in one country will work in another country.

D) Do not assume that all Europeans are similar in their tastes and wants.

E) Do not treat prospects as though they are Americans.

13)

14) Interactive television (ITV) allows viewers to see an ad in its entirety by pressing a remote button; to order products from home-shopping channels; or choose different camera angles, such as for sporting events. Comments by James Pennefather, brand manager for Smirnoff, UK, based on comparison of traditional TV ads to ITV features included all of the following except: A) "it is a calculated risk."

B) "it allows viewers to interact with programming."

C) "it is a lot more unproven."

D) "it may or may not succeed."

E) "it needs further testing."

14)

15) A company in which an ethnocentric orientation prevails is likely to utilize primarily ________ in its sales force.

A) agents of any nationality B) expatriates C) agents of host country D) host-country nationals E) third-country nationals

15)

16) A company with a polycentric orientation is likely to employ host-country nationals in all but which of the following selling situations?

A) selling high-tech products in developed countries B) selling low-tech products in less-developed countries C) selling low-tech products in developed countries D) selling high-tech products in less-developed countries E) none of the above

16)

17) A marketer of fine French cognac offers fancy cigar ashtrays as prizes to consumers who correctly solve a crossword puzzle. Which of the following most accurately describes this offer?

A) trade sales promotion B) sampling C) sweepstakes promotion D) nonprice promotion E) price promotion

17)

3

18) Which of the following is not an advantage of using sales promotions?

A) develops relationship with customers B) builds long-term brand awareness C) provides a tangible incentive to buyers D) enables company to build its database E) provides accountability to marketing managers

18)

19) The effective integration of products and brands with entertainment can be seen on the TV hit American Idol. This type of trend is referred to as: A) branded entertainment.

B) advertising age.

C) image entertainment.

D) traditional advertising.

E) global advertising.

19)

20) Spoexa, a food-marketing company, was hired by the French Ministry of Agriculture to organize cocktail parties in 19 countries in order to: A) show that French cuisine is laid back.

B) show that French wines are superior.

C) promote French cheese.

D) promote French wines.

E) show how to use French cuisine.

20)

21) Chinese authorities ratified the WHO's Framework Convention on Tobacco Controls which means: A) Chinese TV can show tobacco ads only after midnight.

B) tobacco companies cannot show ads on TV but can sponsor sports events.

C) tobacco companies can use sponsorships of health and sporting events.

D) all forms of tobacco promotion and sponsorships will be phased out.

E) tobacco companies can sponsor China's national soccer tournament.

21)

22) The success of the Stratos project helps Red Bull by: A) personal selling.

B) having their logo on NASCAR cars.

C) using YouTube as an effective marketing tool.

D) standing out from a crowded field of competitors.

E) utilizing free-standing inserts.

22)

23) A box of Crest toothpaste contains a coupon entitling the buyer to save 50 cents when purchasing a Crest toothbrush. What type of sales promotion does this represent?

A) trade promotion coupon B) product placement coupon C) online coupon D) freestanding coupon E) cross coupon

23)

24) Coupons are not a favorite promotion tool for use in: A) the United Kingdom.

B) Italy.

C) Malaysia.

D) the United States.

E) Belgium.

24)

4

25) Which country or region offers direct marketers the advantage of a well-developed mailing list industry?

A) the United States B) Latin America C) South Korea D) Japan E) Western Europe

25)

26) In fall 2002, a new Broadway production of Puccini's La Boheme was set in Paris circa 1957. The stage set included billboards for luxury pen maker Montblanc and Piper-Heidsieck champagne.

This is an example of: A) global awareness.

B) consumer sales promotion.

C) sampling.

D) trade sales promotion.

E) product placement.

26)

27) In the six-step presentation plan, the first and last steps are respectively: A) presentation; demonstration.

B) approach; presentation.

C) approach; close.

D) approach; servicing the sale.

E) presentation; negotiation.

27)

28) Social couponing is one of the hottest sales promotion trends today. This refers to: A) Groupons.

B) freestanding inserts.

C) personal selling.

D) sweepstakes.

E) sampling.

28)

29) Benefits for using sales agents include all of the following except: A) agents are less expensive than full-time, in-country national sales representatives.

B) agents can eventually replace manufacturer's sales agents.

C) agents work under contract rather than as full-time employees.

D) agents possess the same market knowledge as in-country nationals.

E) agents possess the same cultural knowledge as in-country nationals.

29)

30) Promotions that are designed to increase product availability in distribution channels are known as: A) sweepstakes promotion.

B) price promotion.

C) nonprice promotion.

D) sampling.

E) trade sales promotion.

30)

5

31) Which of the following is not characteristic of direct marketing?

A) The customer perceives high risk.

B) A marketer relinquishes control of product when it is turned over to channel intermediaries.

C) Direct response advertising is used.

D) Repetition is used in individual advertisements.

E) Advertising serves to generate an immediate inquiry or purchase.

31)

32) ________ is a form of paid television programming in which a particular product is demonstrated, explained, and offered for sale to viewers who call a toll-free number shown on the screen.

A) Infomercials B) Interactive television C) Groupon D) Teleshopping E) Magalog

32)

33) Worldwide spending on outdoor advertising amounts to about ________ of total ad spending.

A) 1 percent B) 6 percent C) 2 percent D) 10 percent E) 4 percent

33)

34) Industry observers expect the popularity of home shopping to increase during the next few years due to the: A) introduction of TV shops.

B) introduction of interactive television.

C) formation of the European Union.

D) introduction of iPhone.

E) economic development in India.

34)

35) Which of the following environmental characteristics affects use of direct marketing in Europe?

A) high postal rates in several European countries B) linguistic, cultural, and regional diversity C) the European Commission's concern about privacy D) industries in Europe are still developing complete mailing lists E) all of the above

35)

36) Other international personal selling approaches that fall somewhere between sales agents and full-time employee teams include all of the following except: A) exclusive license arrangements.

B) management-only agreements.

C) franchising.

D) contract manufacturing or production.

E) joint ventures.

36)

37) Kashani and Quelch identify four factors that contribute to more involvement of company headquarters in the sales promotion effort, which include all of the following except: A) promotion.

B) transnational trade.

C) global branding.

D) cost.

E) complexity.

37)

6

38) Which of the following is not characteristic of mass marketing?

A) Repetition of ads is the key to awareness and remembering.

B) Advertising is used to generate an immediate inquiry or purchase.

C) The customer perceives relatively little risk.

D) Product benefits do not typically include home delivery.

E) Purchase action is deferred.

38)

39) After much trial and error in creating sales forces, most companies today attempt to establish a: A) sales force composed of third country nationals.

B) hybrid sales force composed of expatriates and third country nationals.

C) sales force composed of a majority of expatriates.

D) sales force consisting of all in-country nationals.

E) hybrid sales force composed of expatriates and in-country nationals.

39)

40) Thomas Burke, an executive at Saatchi & Saatchi, is quoted as saying ________ are "the most powerful form of advertising ever created."

A) direct mail campaigns B) infomercials C) corporate advocacy ads D) banner ads on the Internet E) catalog sales

40)

41) Which of the following is not a step in the Strategic/Consultative Selling model?

A) develop a marketing mix B) develop a personal selling philosophy C) develop a relationship strategy D) develop a presentation strategy E) develop a product strategy

41)

42) Which of the following is a disadvantage of using an expatriate sales force?

A) capability to institute the acceptable practices B) follow policies of the home office C) maintaining is very expensive D) enhanced promotion prospects E) inferior product and company knowledge

42)

43) Negotiation requires both customer and the salesperson: A) to be subjected to arm-twisting.

B) to agree to disagree.

C) to come away as losers.

D) to be persistent in their point of view.

E) to come away as winners.

43)

44) To fight counterfeiting, the "Disney Magical Journey" promotion was keyed to mail-in hologram stickers on genuine Disney products. Participants could win Disney DVDs, TV sets, and trips to Hong Kong Disneyland. This is an example of: A) promotion of different types for marketing.

B) sales promotion by global marketer.

C) promotion of Disney Magical Journey.

D) people in many countries prefer mail-in hologram.

E) "Disney Magical Journey" is popular worldwide.

44)

7

45) Dietrich Mateschitz, Red Bull's creator, stated "When we first started, we said that there is not an existing market for Red Bull." The reasons behind Red Bull's success include all of the following except: A) a market segment was found with unmet needs.

B) a market was created for Red Bull.

C) The Red Bulletin magazine helped in Red Bull's popularity.

D) the blue-and-silver color on cans helped in Red Bull's popularity.

E) orthodox advertising strategies were used with tactics.

45)

46) Traditional support media include: A) newspapers.

B) billboards.

C) catalogs.

D) indoor posters.

E) magazines.

46)

47) Product placement has reached the world of live theater and opera. The difference between product placement and other forms of promotion is: A) prominent personalities add a message about the product.

B) viewers are being marketed to subliminally without their consent.

C) sponsors are recognized for their contribution.

D) products are focused showing different angles.

E) ethical concerns are not taken into account.

47)

48) Which type of salesperson is best suited to selling technologically sophisticated products in developed countries?

A) expatriates B) third-country nationals C) agents of any nationality D) host-country nationals E) none of the above

48)

49) PepsiCo experienced great success in Latin America with its Numeromania contest, which lured consumers by promising big cash prizes. They used the same contest in Poland successfully. This shows that: A) economically squeezed consumers love Pepsi.

B) Numeromania can be used in different languages.

C) Numeromania can be used in cash starved countries.

D) Numeromania helped in developing a taste for Pepsi in both countries.

E) leverage experience gained in one country can be used in another country.

49)

50) When a company must decide on the composition of its foreign sales force, which alternative is generally the most expensive?

A) third-country nationals B) host-country nationals C) agents of host country D) agents of any nationality E) expatriates

50)

8

51) Environmental issues and challenges faced by a company which is in the initial stages of implementing a personal selling strategy include all of the following except: A) market unknowns.

B) currency fluctuations.

C) regulatory hurdles.

D) product innovation.

E) political risks.

51)

52) All of the following statements represent mass marketing except: A) the marketer typically loses control as the product is turned over to distribution channel intermediaries.

B) advertising is used for its cumulative effect over time to build image, awareness, loyalty, and benefit recall.

C) the customer perceives less risk due to direct contact with the product. Recourse is viewed as less distant.

D) repetition is used within the ad/offer.

E) purchase action by the customer is deferred.

52)

53) A critical marketing tool for global companies such as Red Bull is: A) sweepstakes.

B) sampling.

C) personal selling.

D) event marketing.

E) couponing.

53)

54) Promotions designed to increase product availability in distribution channels are known as: A) price promotions.

B) sales promotions.

C) nonprice promotions.

D) consumer sales promotions.

E) trade sales promotions.

54)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

55) Direct marketing does not work well as a global marketing tool because it is not well suited to the task of addressing cultural differences among consumers.

55)

56) Red Bull has been involved in Music Academy which is a series of concerts, workshops, art installations, and other cultural events that rotate from year to year among different international cities.

56)

57) A company with a regiocentric orientation is likely to utilize third-country nationals for its sales force in less developed countries.

57)

58) PepsiCo rolled out a "PepsiMoji" promotion in Canada, Russia, and Thailand. The rollout coincided with World Emoji Day; labels on the brand's soft-drink cans and bottles had special emoji's.

However, the promotion was not successful.

58)

59) By the end of 2012, Groupon had more than 40 million users in 48 countries. More than half of Groupon's Web site visitors live in the United States.

59)

9

60) Cross coupons offer its users deal-of-the-day coupons that are sponsored by local businesses.

60)

61) At concerts and other events, street teams pass out free samples while driving specially modified cars with giant Red Bull cans mounted on them. This is an example of regiocentric orientation.

61)

62) In a contest in 45 different languages covering 60 countries, marketers for Axe Apollo invited consumers to fill out an "astronaut profile."

62)

63) Sampling can be especially important if consumers are persuaded by claims made in advertising or other channels.

63)

64) The final step in the 6-step sales presentation plan is closing the sale.

64)

65) It is easy to identify the highest-ranking individual based on observable behavior during group meetings.

65)

66) In companies where a polycentric management orientation prevails, host-country nationals will be used in most selling situations with the exception of high-tech products sold in developed countries.

66)

67) To fight counterfeiting, the "Disney Magical Journey" promotion was keyed to mail-in hologram stickers on imitation Disney products.

67)

68) Following the economic crisis in Asia, many companies in that region have turned to direct mail in order to save costs.

68)

69) In Hong Kong and Singapore, efficient postal services, highly educated populations, wide use of credit cards, and high per capita income are attracting the attention of catalog marketers.

69)

70) Few environmental issues and challenges often surface as a company completes the initial stages of implementing a personal selling strategy.

70)

71) Some advertisers acknowledge that, in Brazil, traditional outdoor advertising may not be the best communication channel due to noise level.

71)

72) The U.S.-style "I'll do whatever it takes to get your business" has proven to be a successful selling approach throughout the world.

72)

73) Traditional support media include transit and billboard advertising; as a category, these media are known as out-of-home (OOH) advertising.

73)

74) Worldwide, the popularity of direct marketing has been steadily decreasing in recent years.

74)

75) France is leading in the rankings showing expenditures for outdoor advertising as percentage of total ad spending.

75)

76) A marketer of fine French cognac offers a fancy cigar ashtray to persons who correctly solve a crossword puzzle and mail it in. This is an example of a trade promotion.

76)

10

77) Unilever hired a promotional marketing firm to pass out Lever2000 hand wipes in food courts and petting zoos. This is referred to as "point-of-dirt" sampling.

77)

78) When MCI Communications first entered Latin America, it utilized expatriate Americans to work for them despite the high cost of doing so.

78)

79) P&G distributed millions of free samples of its shampoo products; after the no-risk trial, many consumers became adopters.

79)

80) Social couponing is one of the hottest online sales promotion trends. It offers its followers deal-of-the-day coupons that are sponsored by local businesses.

80)

81) The Strategic/Consultative Selling Model consists of five interdependent steps, each with three prescriptions that can serve as a checklist for sales personnel.

81)

82) Sales promotions are popular in Scandinavia because of restrictions on broadcast advertising, but promotions in the Nordic countries are subject to regulations.

82)

83) Fifty years ago, Kikkoman brand soy sauce was unknown in the United States. The company used sampling and even today continues to make extensive use of shopper marketing as a communication tool.

83)

84) From the point of view of the marketer, sales promotion provides accountability.

84)

85) Host-country nationals may possess work habits or selling styles that do not mesh with those of the parent company.

85)

86) In countries with high levels of economic development, low incomes limit the range of promotional tools available. In such countries, free samples and demonstrations are more likely to be used than coupons or on-pack premiums.

86)

87) In China, consumers are reluctant to buy full-sized packages of unfamiliar imported products. In such a marketing environment, sampling is an appropriate promotional strategy.

87)

88) Ethnocentric companies are likely to use an expatriate sales force in countries at all levels of economic development.

88)

89) Since market maturity can be different from country to country, consumer sampling and coupons are appropriate for mature markets.

89)

90) Acknowledging that some consumers are intimidated by France's culinary heritage, the Ministry sponsored a promotion to demonstrate that French cuisine can be relaxed and laid back.

90)

91) In absolute dollar terms, the United States ranks second in terms of OOH spending.

91)

92) During the 2004 Super Bowl broadcast, PepsiCo launched a joint promotion with Apple's iTunes Music Store. Anyone purchasing a bottle of Pepsi had a one-in-three chance of being a winner.

However, many people discovered that by tilting the bottles, they could tell whether the bottle was a winner.

92)

11

93) Overall, sales promotion tools, such as coupons, are used less frequently as consumer products companies increase budget allocations for media advertising.

93)

94) On a per capita basis, German consumers are world-leader mail-order shoppers.

94)

95) Although Asian consumers have a reputation for thriftiness, some are reluctant to use coupons, because doing so might bring shame upon them or their families.

95)

96) Industry observers expect the popularity of home shopping to decrease during the next few years as interactive television technology is introduced into more households.

96)

97) Relationship marketing, which stresses an approach on developing long-term relationships with customers, has been disliked by many U.S. companies.

97)

98) Starbucks dispatches "Chill Patrols" in the summertime to pass out samples of ice-cold Frappuccinos to overheated commuters during rush hour in busy metropolitan areas. This is an example of "point-of-dirt" sampling.

98)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

99) What is the reason for out-of-home (OOH) advertising? Give examples in support of your answer.

100) Coupons are a favorite promotion tool of consumer packaged goods companies such as Proctor & Gamble and Unilever. How does the couponing work, and what are the advantages for using different types of coupons?

101) Discuss how manufacturers are using the film industry for product placement?

102) Compared with other forms of marketing communication, sampling is more likely to result in actual trials of the product. Explain this by giving examples of possible types of sampling.

103) The authors of one study noted that Nestlé and other large companies that once had a polycentric approach to consumer and trade sales promotions have redesigned their efforts. Based on a study by Kashani and Quelch, identify factors that contribute to more headquarters involvement in the sales promotions effort.

104) What are the issues and problems related to sales promotion in different parts of the world?

105) Discuss what makes the use of sales promotion so effective and popular. Describe different types of sales promotions.

106) Direct marketing and mass marketing are becoming a very popular method for communicating with consumers.

Giving reasons for their worldwide popularity, show the differences between direct and mass marketing.

107) A number of factors must be taken into account when determining the extent to which promotion must be localized. List and describe those factors giving examples.

108) Describe how Red Bull's creator trusted his entrepreneurial instincts instead of relying on traditional marketing research to make it so globally successful.

12

109) Basic issues for companies that sell globally are the composition of the sales force in terms of nationality. List choices that are available to companies for selecting a sales force. Outline advantages and disadvantages of each choice.

110) Giving examples, show how sampling can be an effective sales promotion technique.

111) Who are the largest players in the OOH industry?

112) Why did the French Ministry of Agriculture launch a global promotion? Give examples in support of your answer.

113) The Strategic/Consultative Selling Model has gained wide acceptance in the United States. Briefly describe what the model consists of and how it can serve as a checklist for sales personnel.

13

Answer Key Testname: C14

1) A 2) B 3) D 4) C 5) E 6) D 7) B 8) B 9) A 10) C 11) D 12) A 13) B 14) B 15) B 16) A 17) D 18) D 19) A 20) A 21) D 22) D 23) E 24) C 25) A 26) E 27) D 28) A 29) B 30) C 31) B 32) A 33) B 34) B 35) E 36) D 37) A 38) B 39) E 40) B 41) A 42) C 43) B 44) B 45) D 46) B 47) B 48) A 49) E 50) E 14

Answer Key Testname: C14

51) D 52) D 53) D 54) E 55) FALSE 56) TRUE 57) TRUE 58) FALSE 59) FALSE 60) FALSE 61) FALSE 62) TRUE 63) FALSE 64) FALSE 65) FALSE 66) TRUE 67) FALSE 68) TRUE 69) TRUE 70) FALSE 71) TRUE 72) FALSE 73) TRUE 74) FALSE 75) TRUE 76) FALSE 77) TRUE 78) FALSE 79) TRUE 80) TRUE 81) TRUE 82) TRUE 83) TRUE 84) TRUE 85) TRUE 86) FALSE 87) TRUE 88) TRUE 89) FALSE 90) TRUE 91) FALSE 92) TRUE 93) FALSE 94) TRUE 95) TRUE 96) FALSE 97) FALSE 98) FALSE

15

Answer Key Testname: C14

99) Growth in OOH category in recent years has been fueled by the rollout of digital billboard platforms, known as digital out-of-home (DOOH) advertising. In fact, the signage in London's Piccadilly Circus, widely regarded as the most valuable DOOH property in the world, has recently been updated to incorporate digital recognition technology. The technology allows for targeted ads to be directed to some of the 100 million people who pass through the intersection every year. In absolute dollar terms, the United States ranks number 1 in terms of OOH spending. Globally, OOH represents a $28 billion market, accounting for approximately 6 percent of total ad expenditures.

100) A coupon is a printed certificate that entitles the bearer to a price reduction or some other special consideration for purchasing a particular product or service. In the United States, marketers rely heavily on newspapers to deliver coupons. Most of the coupons are distributed in a printed ride-along vehicle referred to as a "free-standing insert (FSI)."

"On-pack coupons" are those that are attached to, or part of, the product package; they can frequently be redeemed immediately at checkout. "In-pack coupons" are placed inside the package. Coupons have flexibility since they can also be handed out in stores, offered on a self-service basis from on-shelf dispensers, delivered to homes by mail, or distributed electronically at the checkout counter. Also, the number of coupons distributed via the Internet is growing.

"Cross coupons" are distributed with one product but redeemable for a different product. The United States leads the world in the number of coupons issued by a wide margin. The goal of couponing is to reward loyal users and stimulate product trial by nonusers. In the EU, couponing is widely used in the United Kingdom and Belgium. Couponing is not as prevalent in Asia where saving face is important. Although Asian consumers have a reputation for thriftiness, some are reluctant to use coupons because doing so might bring shame upon them or their families. Thus, couponing also depends on the culture of a particular country. There are also regulations in many countries pertaining to the use of coupons by manufacturers.

101) This tactic is especially popular with auto manufacturers and fashion designers and is often used in conjunction with movie premieres and popular annual television events such as the Academy Awards and the Grammys that garner significant media attention. For example, Celeste Atkinson has worked as a lifestyle and entertainment manager for Audi. Her job is to create buzz by ensuring that vehicles such as the Audi A8L, the 12-cylinder A8L, and the S8 sports sedan figure in paparazzi photos.

102) Sampling is a sales promotion technique that provides potential customers with the opportunity to try a product or service at no cost. To ensure a trial, consumer products companies are increasingly using a technique known as "point-of-use" sampling. For example, Starbucks dispatches "Chill Patrols" in the summertime to pass out samples of ice-cold Frappuccinos to overheated commuters during rush hour in busy metropolitan areas. In an example of "point-of-dirt" sampling, Unilever hired a promotional marketing firm to pass out Lever2000 hand wipes in food courts and petting zoos. As Michael Murphy, director of home and personal-care promotions at Unilever, noted, "We're getting smarter. You must be much more precise in what, where, and how you deliver samples."

103) As with other aspects of marketing communication, a key issue is whether headquarters should direct promotion efforts or leave it to local country managers. Kashani and Quelch identified four factors that contribute to more headquarters involvement in the sales promotion effort, namely, cost, complexity, global branding, and transnational trade as follows: (1) as sales promotions command ever-larger budget allocations, headquarters naturally takes a greater interest; (2) the formulation, implementation, and follow-up of a promotion program may require skills that local managers lack; (3) the increasing importance of global brands justifies headquarters involvement to maintain consistency from country to country and ensure that successful local promotions programs are leveraged in other markets; and (4) as mergers and acquisitions lead to increased concentration in the retail industry and as the industry globalizes, retailers will seek coordinated promotional programs from their suppliers.

16

Answer Key Testname: C14

104) Many companies are very selective in targeting their sampling programs. In the case of coupons, retailers must bundle the redeemed coupons together and ship them to a processing point. Many times, coupons are not validated at the point of purchase; fraudulent redemption costs marketers hundreds of millions of dollars each year. Sometimes the code on packaging can be read easily and used without purchasing the product. Thus, the formulation and execution of sales promotion requires planning in addition to creativity. In some emerging markets, sales promotion efforts can raise eyebrows if companies appear to be exploiting regulatory loopholes and lack of consumer resistance to intrusion.

Sales promotion in Europe is highly regulated, whereas it is very popular in Scandinavia. In the Nordic countries there are regulations pertaining to sales promotion. A recent study examined coupon usage and attitudes toward both coupons and sweepstakes in Taiwan, Thailand, and Malaysia. The study has particular relevance to global companies that are targeting these and other developing nations in Asia. All three countries in the studies were collectivist, and the researchers found that positive attitudes of family members and society as a whole influence an individual's positive attitude toward coupons and coupon usage. However, the three nations show some differences in value orientation. For example, Malaysia has a higher power distance and lower uncertainty avoidance than the others. For Malaysians, the fear of public embarrassment was a constraint on coupon usage. In all three countries, media consumption habits were also a factor; persons who were not regular readers of magazines or newspapers were less likely to be aware that coupons were available. Consumers in Taiwan and Thailand look more favorably upon coupons than sweepstakes. Thus, one implication for marketing in developing countries is that, despite cultural differences, increased availability of promotions will result in higher levels of consumer utilization.

105) Sales promotion refers to any paid consumer or trade communication program of limited duration that adds tangible value to a product or brand. In a price promotion, tangible value may take the form of a price reduction, coupon, or mail-in refund. Non-price promotions may take the form of free samples, premiums, "buy one get one free" offers, sweepstakes, and contests. Consumer sales promotions may be designed to make consumers aware of a new product, to stimulate nonusers to sample an existing product, or to increase overall consumer demand. Trade sales promotions are designed to increase product availability in distribution channels. The reason why worldwide there is an increase in the popularity of sales promotions as a marketing communication tool is due to several of its strengths and advantages. Besides providing a tangible incentive to buyers, sales promotions also reduce the perceived risk buyers may associate with purchasing the product. From the point of view of the sponsoring company, sales promotions provide accountability; the manager in charge of the promotions can immediately track the results of the promotions.

Overall promotional spending is increasing at many companies as they shift available allocations away from traditional print and broadcast advertising. Also, sweepstakes, rebates, and other forms of promotions require consumers to fill out a form and return it to the company, which can then build up information in its database for use when communicating with customers in the future. A global company can sometimes leverage experience gained in one country market and use it in another market.

106) Direct marketing is defined as any communication with a consumer or business recipient that is designed to generate a response in the form of an order, a request for further information, and/or a visit to a store or other place of business.

Mass marketing communications are typically aimed at broad segments of consumers with certain demographic, psychographic, or behavioral characteristics in common. More sophisticated techniques and tools are being used for direct marketing as well as for mass marketing. Also, one-to-one marketing is developed on the basis of CRM by treating different customers differently based on their previous purchase history or past interactions with the company. Worldwide, the popularity of direct marketing has been steadily increasing in recent years partly due to the availability of credit cards as a convenient payment mechanism for direct response purchase. Another reason is societal, since dual-income families have more money to spend but less time to shop outside the home. Technological advancements have also made it easier for companies to reach customers directly. Cable and satellite television allow advertisers to reach specific audiences on a global basis. The European Commission expects investment in direct marketing to surpass expenditures for traditional advertising in the near future. The primary differences between direct marketing and mass marketing include marketers add value in direct marketing by arranging for delivery of products to the customer's door and control the product all the way through to delivery. Another difference is that in direct marketing, direct response is used to generate an immediate enquiry or order. Also, in direct marketing, the customer perceives higher risk because the product is bought unseen and recourse may be viewed as distant or inconvenient.

17

Answer Key Testname: C14

107) The number of factors that must be taken into account when determining the extent to which promotion must be localized can be summarized as follows: (a) in countries with low levels of economic development, low incomes limit the range of promotional tools available. In such countries, free samples and demonstrations are more likely to be helpful than coupons or on-pack premiums; (b) market maturing can be different from country to country; consumer sampling and coupons are appropriate in growing markets, but mature markets might require trade allowances or loyalty programs; (c) local perceptions of a particular promotional tool or program can vary. Japanese consumers, for example, are reluctant to use coupons at the checkout counter. A particular premium can be seen as a waste of money; (d) local regulations may rule out use of a particular promotion in certain countries. There are countries which regulate coupon distribution; (e) trade structure in the retailing industry can affect the use of sales promotions. For example, in the United States and parts of Europe, the retail industry is highly concentrated. This situation requires significant promotional activity at both the trade and consumer level.

108) Dietrich Mateschitz, Red Bull's creator, trusted his entrepreneurial instincts instead of relying on traditional marketing research. As Mateschitz recalls, "When we first started, we said that there is not an existing market for Red Bull, but Red Bull will create it. And this is what finally became true." In other words, Mateschitz succeeded at accomplishing one of the most basic goals in marketing: He discovered a market segment with needs that weren't being met by any existing product. Today, Red Bull's blue-and-silver cans emblazoned with the iconic charging bulls logo are recognized around the globe. With typical entrepreneurial flair, Mateschitz pursues alternatives to orthodox advertising strategies and tactics. The Red Bulletin is a monthly magazine produced by Red Bull Media House. Red Bull distributes more than 3 million copies of each issue through newsstand sales, subscriptions, and as a free iPad app. The magazine is available in Austria, Germany, Great Britain, Kuwait, New Zealand, Poland, and South Africa. In 2011, The Red Bulletin was launched in the United States; 1.2 million free copies were distributed in major newspapers such as The Los Angeles Times, The Chicago Tribune, and The New York Daily News. The first U.S. issue featured San Francisco Giants pitcher Tim Lincecum, one of hundreds of athletes who are sponsored by Red Bull. Since 1998, Red Bull has been involved in another high-profile initiative. The Red Bull Music Academy is a series of concerts, workshops, art installations, and other cultural events that rotate from year to year among different international cities. Red Bull Music Academy also sponsors stages at international music festivals such as Montreaux Jazz; RBMA Radio is a Web resource where listeners can access new music, live concerts, interviews, and other content. Needless to say, the Red Bull logo is visible everywhere, and coolers filled with the drink are placed in strategic locations.

18

Answer Key Testname: C14

109) It is possible to utilize expatriate salespersons, hire host-country nationals, or utilize third-country sales personnel. The staffing decisions are based on several factors, including managements' orientation, the technological sophistication of the product and the stage of economic development exhibited by the target country. A company with an ethnocentric orientation is likely to prefer expatriates and adopt a standardized approach without regard to technology or the level of economic development in the target country. On the other hand, polycentric companies selling in developed countries may opt for expatriates to sell technologically sophisticated products; a host-country sales force can be used when technological sophistication is lower. In less-developed countries, host-country nationals may be used for products in which technology is a factor and host-country agents may be used for low-tech products. The widest diversity of sales force nationality is found in a company in which a regiocentric orientation prevails. Except in the case of high-tech products in developed countries, third-country nationals are likely to be used in all situations.

Management should weigh advantages and disadvantages of each nationality type. Expatriates, since they come from the home country, often possess a high level of product knowledge and are likely to be thoroughly versed in their company's commitment to after-sales service. They are also better able to institute policies and standards. It is also very easy to train them for promotion. The disadvantages include that there is high cost involved and with the high turnover the costs can go up further. Also, the cost for language and cross-cultural training has to be taken into account. Host-country hiring is economical, they have superior market knowledge, good language skills, superior cultural knowledge, and they can implement actions rapidly. The disadvantages include that they need product training and may be held in low esteem. Also, language skills may not be important, and it is difficult to ensure their loyalty. Using the third-country salesperson has advantages of cultural sensitivity, language skills, economy, and the possibility of regional sales coverage. The disadvantages include that they face identity problems, promotions may be limited, and there may be income gaps based on the country they are coming from. They will need product or company training; however, their loyalty is not assured. After much trial and error in creating sales forces, most companies today attempt to establish a hybrid sales force comprised of a balanced mix of expatriates and in-country nations.

110) Sampling is a sales promotional technique that provides potential customers with the opportunity to try a product or service at no cost. A typical sample is an individual portion of a consumer product, such as breakfast cereal, shampoo, cosmetics, or detergent, distributed through the mail, door-to-door or at a retail location. Kikkoman brand soy sauce was unknown in the United States until they initiated a sampling program in American supermarkets and gave free samples of food seasoned with Kikkoman. Today they have a considerable size market in the United States. Similarly, Unilever launched Axe deodorant body spray in the United States with print ads and in-store sampling as promotion strategy. They hired female models to offer samples to male shoppers at Walmart and Costco stores. This was also very successful. Cost is one of the major disadvantages associated with sampling. It may also be difficult to assess the contribution a sampling program makes to return on investment. Event marketing and sponsorships are used to distribute samples at concerts, sports events, or special events where food and beverages are served to large numbers of people. Sampling may also consist of non-food items such as free viewing of a cable TV channel at no cost for a certain period of time or no-cost trial subscriptions to a computer service or newspaper service. Web sites can also be used for requesting free samples. Compared to the other forms of marketing communication, sampling is more likely to result in actual trial of the product. In China, for example, shoppers are reluctant to buy full-sized packages of imported consumer products that they have not tried or if products have higher prices than local brands. Proctor & Gamble's dominance in China's shampoo market can be attributed to the company's skilled use of market segmentation coupled with an aggressive sampling program. They distributed millions of free samples of its shampoo products. After the no-risk trial, many consumers became adopters.

111) The two largest players in the OOH industry are Texas-based Clear Channel Outdoor Holdings, with nearly 600,000 outdoor and transit displays in 35 countries, and France's JCDecaux which is the market leader in Europe; overall, the company operates in about 75 different countries. Outdoor advertising is currently experiencing explosive growth in China, where JCDecaux competes with Tom Group, Clear Media, and thousands of other local companies, especially in large cities such as Beijing, Shanghai, and Guangzhou. The same trend is evident in Russia, especially in Moscow.

19

Answer Key Testname: C14

112) The French Ministry of Agriculture launched a global promotion aimed at boosting exports of French wine and cheese.

Acknowledging that some consumers are intimidated by France's culinary heritage, the Ministry sponsored the promotion to demonstrate that French cuisine can be relaxed and laid back. As part of this multi-pronged promotion, Spoexa, a food-marketing company, was hired to organize cocktail parties in 19 countries, including Canada, Spain, and the United States. House Party Inc., an American marketing firm, promoted the U.S. parties through its Web site.

Would-be hosts registered online (allowing their personal information to be collected); from that applicant pool, House Party chose 1,000 people. The winners received discount coupons good for purchases of French wine. In addition, they were entitled to free gifts when ordering French cheeses from select Web sites (more opportunities for data collection).

Each winner also received a basket of party supplies, including a corkscrew and an apron. In return, the hosts agreed to take photos and blog about their parties. After the parties, the hosts answered questionnaires to provide sponsors with feedback about the featured food and wine (yet more data collection). Finally, in-store promotions on party-related French goods were featured at various shops and supermarkets.

113) The Strategic/Consultative Selling Model consists of five interdependent steps, each with three prescriptions that can serve as a checklist for sales personnel. The first step requires a sales representative to develop a personal selling philosophy. A commitment to the marketing concept and a willingness to adopt the role of problem solver or partner in helping customers is required at this first step. The second step is to develop a relationship strategy, which is a game plan for establishing and maintaining high-quality relationships with prospects and customers. This step connects sales personnel directly to the concept of relationship marketing. The third step, developing a product strategy, results in a plan that can assist the sales representative in selecting and positioning products that will satisfy consumer needs. The next step deals with customer strategy, which is a plan that ensures that the sales professional will be maximally responsive to customer needs. For this, a general understanding of consumer behavior is needed. The final step, the actual face-to-face selling situation, requires a presentation strategy. This consists of setting objectives for each sales call and establishing a presentation plan to meet those objectives. The presentation strategy must be based on the sales representative's commitment to provide outstanding service to customers. A presentation plan that is the heart of the presentation strategy typically consists of six stages: approach, presentation, demonstration, negotiation, closing, and servicing the sale.

20

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) "Cloud computing" is different from currently available technologies in all of the following aspects except: A) applications are delivered through a Web browser.

B) it is performed "in the cloud."

C) archives are stored on massive remote servers.

D) computer files can be accessed remotely.

E) it is installed in the computer's hard drive.

1)

2) Internet penetration is less than 10 percent in: A) Bahrain.

B) Qatar.

C) Greenland.

D) the Netherlands.

E) Burundi.

2)

3) A key player in the cell phone business who could have been first to market a cell phone camera is: A) Motorola.

B) Ericsson.

C) Sprint.

D) Samsung.

E) AT&T.

3)

4) Streaming media represents a huge market opportunity for all of the following except: A) game publishers.

B) Internet portals.

C) video game industry.

D) online gaming.

E) telematics.

4)

5) The practice of registering a particular domain name for the express purpose of reselling it to the company that should rightfully use it is referred to as: A) cybersquatting.

B) gray market.

C) piracy.

D) patent violation.

E) copyright violation.

5)

6) An Internet site's address on the World Wide Web is a(n): A) HTTP. B) HTTPS. C) URL.

6)

D) WWW.

E) HTML.

7) The Web site's architecture should be flexible enough to allow all of the following except: A) privacy.

B) different dates.

C) money formatting.

D) currency.

E) local culture.

1

7)

8) Facebook, Google, Pinterest, Twitter, and Wikipedia represent which element of the marketing mix?

A) place B) price C) promotion D) product E) people

8)

9) Cloud-based music services are expected to have a major impact on the mobile music business. The reason for their popularity includes all of the following except: A) this new approach addresses some of the shortcomings of the existing methods.

B) they are a hybrid between subscription and online store business.

C) music services can be purchased from a variety of mobile devices.

D) they offer users a music locker "in the cloud."

E) the pricing schemes for various services are simple.

9)

10) Wi-Fi, or wireless fidelity, permits laptop and PDA users to establish high-speed wireless connections to the Internet via: A) laptop warriors.

B) infrared rays.

C) hot spots.

D) modem.

E) magnetic rays.

10)

11) Which of the following is not one of Clayton Christensen's principles of disruptive innovation?

A) Companies depend on customers for resources.

B) Technology supply may not equal market demand.

C) Small markets don't satisfy the growth needs of large companies.

D) E-commerce activities can be divided into three categories.

E) Markets that don't exist can't be analyzed.

11)

12) Which of the following digital revolution pioneers were instrumental in created the "network of networks" that is now known as the Internet?

A) Robert Noyce and Jack Kilby B) Steve Jobs and Steve Wozniak C) Vint Serf and Bob Kahn D) Vincent Atanasoff and Clifford Berry E) Tim Berners-Lee

12)

13) The term "m-commerce" is used to describe the use of: A) credit cards in commerce.

B) money in commerce.

C) web.com in commerce.

D) Internet in commerce.

E) cell phones in commerce.

13)

14) Amazon.com, the leading Internet bookseller, allows users to purchase books, CDs, and other products online. Amazon.com is primarily a(n) ________ site.

A) promotion B) content C) transaction D) cyber E) execution

14)

2

15) Some global marketers make the strategic decision to establish a presence on the Web without offering transaction opportunities even though the product could be sold that way. Such sites are known as: A) company sites.

B) content sites.

C) transaction sites.

D) promotion sites.

E) cyber sites.

15)

16) ________ is the term that refers to the merging of different industries such as computers, photography, and motion pictures.

A) Value networks B) Disruptive technology C) Agnostic marketing D) Convergence E) Telematics

16)

17) The top Digital Agency Network by 2016 Interactive Marketing Revenues is: A) Accenture Interactive.

B) IBM iX. C) Deloitte Digital.

D) PwC Digital Services.

E) Publicis Sapient

17)

18) ________ are online retail operations that allow customers to purchase goods and services.

A) Transaction sites B) Content sites C) Transfer sites D) Matrix sites E) Promotion sites

18)

19) Bluetooth mobile communication technology has all of the following advantages over Wi-Fi except one: A) Bluetooth works over shorter distances than Wi-Fi. B) Bluetooth can handle data as well as voice.

C) Bluetooth technology has been incorporated into automobiles.

D) Bluetooth is well suited for use with cell phones.

E) Bluetooth consumes less power than Wi-Fi.

19)

20) Each value network has a ________ associated with it that dictates the margins needed to achieve profitability.

A) technology B) cost structure C) dilemma D) transaction E) digital network

20)

3

21) Smartphones that are equipped with a global positioning system can determine the users' exact geographic position. This capability has created new opportunity for marketers by using all of the following innovative means except: A) promoting mobile campaigns which will reach smartphone users.

B) obtaining demographic information about the smartphone users.

C) locate smartphone users for delivering products or services.

D) text messages can be sent to smartphone users who are in the vicinity.

E) offering special deals to smartphone users who happen to be in the vicinity.

21)

22) Robert Noyce and Jack Kilby are pioneers in the digital revolution. What contribution did they make?

A) They invented the silicon chip.

B) They invented the first digital computer.

C) They invented the Internet.

D) They invented the spreadsheet.

E) They invented the transistor.

22)

23) Konbini is a convenience store in ________, where consumers can pay for online purchases.

A) Japan B) Bosnia C) Croatia D) Indonesia E) Russia

23)

24) The new user interface that has the potential to replace our phones, TVs, and desktop computers is described by all of the following terms except: A) virtual reality.

B) personal reality.

C) interface reality.

D) mixed reality.

E) preferred reality.

24)

25) It is advisable to start a double-ACSII platform when designing a Web site's architecture since: A) the English language can store only a maximum of 256 characters.

B) French and German languages use the Latin alphabet.

C) French and German languages cannot be used in a Web site's architecture.

D) German-language Web sites require double the English Web site's capacity.

E) Japanese and Chinese languages require a database which supports such a platform.

25)

26) Each network has its own "metrics of value." For laptop computers this value would include all of the following except: A) memory capacity.

B) low weight.

C) rugged design.

D) power consumption.

E) small size.

26)

27) In the 1950s, which company used transistor technology licensed from Bell Labs to develop the transistor radio?

A) Panasonic B) Sanyo C) Nokia D) RCA E) Sony

27)

4

28) According to Christensen's five principles of disruptive innovations, the following statement is not true: A) markets that don't exist can't be analyzed.

B) companies depend on customers and investors for resources.

C) small markets solve the growth needs of large companies.

D) an organization's capabilities define its disabilities.

E) technology supply may not equal market demand.

28)

29) Alcatel-Lucent, the French telecommunications equipment manufacturer, has launched a service that sends tailored text messages when smartphone users are near a specific location, such as a store, hotel, or restaurant. This capability can help in all of the following ways except: A) promoting mobile campaigns which will reach smartphone users.

B) text messages can be sent to smartphone users who are in the vicinity.

C) obtaining demographic information about the smartphone users.

D) offering special deals to smartphone users who happen to be in the vicinity.

E) locating smartphone users for delivering products or services.

29)

30) One factor driving mobile ads in ________ is the low rates that subscribers pay.

A) Japan B) India C) South Korea D) Indonesia E) Sudan

30)

31) Today Microsoft lags behind new industry entrants in high-growth, consumer-oriented areas such as search and social networking. Which of the principles of disruptive innovation does this fact pertain to?

A) Markets that don't exist can't be analyzed.

B) A company's capabilities define its disabilities.

C) Small markets don't satisfy the growth needs of large companies.

D) Technology supply may not equal market demand.

E) Companies depend on customers for resources.

31)

32) Web sites can be classified by purpose as represented by the term: A) regional sites.

B) geographic sites.

C) matrix sites.

D) international sites.

E) promotion sites.

32)

33) The country which boasts the world's fastest average Internet speed is: A) India.

B) Russia.

C) South Korea.

D) China.

E) Japan.

33)

5

34) According to the innovator's dilemma: A) the computing power of a microprocessor doubles every 18 months.

B) innovations are copied soon after they are discovered.

C) well-managed companies that listen and respond to needs of established customers may miss opportunities to innovate.

D) markets that don't exist can't be analyzed.

E) regulation of e-commerce activities will increase at a rate that is directly proportional to the growth of e-commerce revenues.

34)

35) While South Korea is considered as "ready for tomorrow" in terms of Internet speed, countries which are "below today's applications threshold" include all of the following except: A) Germany.

B) China.

C) Hong Kong.

D) the United States.

E) India.

35)

36) Web sites that provide news and entertainment and support a company's PR efforts are known as: A) cyber sites.

B) promotion sites.

C) content sites.

D) company sites.

E) transaction sites.

36)

37) Which of the following is not a critical issue for a company whose management intends to engage in e-commerce?

A) ensuring a company's computer system supports only a particular language B) the availability of hot spots for Wi-Fi C) credit card fraud in developing countries D) privacy E) ensuring that logos and other brand identity elements are consistent with local preferences

37)

38) Which of the following pioneers of the digital revolution developed the URL, HTTP, and HTML, thus paving the way for the World Wide Web? A) Vincent Atanasoff and Clifford Berry B) Steve Jobs and Steve Wozniak C) Vint Serf and Bob Kahn D) Robert Noyce and Jack Kilby E) Tim Berners-Lee

38)

39) Although it is certainly possible for European consumers to browse Amazon.com's U.S. site, they prefer a direct link to a site with a local domain name. All of the following are possible reasons for such behavior except: A) due to price fluctuations the preference will be for the Web site that quotes prices in U.S. dollars.

B) the Web site of choice will be that which offers a product selection tailored to local tastes.

C) the Web site of choice will be one that quotes prices in euros.

D) the preference will be for sites that are in their own language.

E) the preference will be for the Web site which ships from local distribution points.

39)

6

40) Ideally, each country-specific site should reflect all of the following except ________, which may not be familiar to shoppers in some countries.

A) the local language B) the shopping cart icon C) local customs D) local colors E) logos and symbols

40)

41) Claude Shannon's technical report led to his pioneer work for which he is regarded as the inventor of the: A) Internet.

B) spreadsheet.

C) information theory.

D) transistor.

E) silicon chip.

41)

42) The integrated circuit and the concept of binary code permitted the development of the: A) personal computer.

B) transistor.

C) smartphone.

D) radio.

E) SMS.

42)

43) The domain name for Amazon.com in Germany is: A) amazon.com.gm.

B) amazon.gm.

C) amazon.ge.

D) amazon.gr.

E) amazon.de.

43)

44) BMW and Porsche have developed Apple Watch apps that enable drivers to remotely check many items within their cars which includes all of the following except: A) help recharging the car's batteries.

B) help in restaurant reservation.

C) help in booking hotel rooms.

D) information about services.

E) information about pricing.

44)

45) Broadband offers companies the telecommunication capability to do all of the following except: A) compressed video.

B) streaming media.

C) streaming audio.

D) streaming sales.

E) streaming video.

45)

7

46) Which of the following principles of disruptive innovation pertains to the notion of agnostic marketing?

A) A company's capabilities define its weaknesses.

B) Markets that don't exist can't be analyzed.

C) Companies depend on customers for resources.

D) Technology supply may not equal market demand.

E) Small markets don't satisfy the growth needs of large companies.

46)

47) ________-commerce is one of the significant marketing opportunities made possible by the digital revolution.

A) Marginal-cost B) Multinational C) Mobile D) Multisegment E) Multilingual

47)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

48) When people attending the Metropolitan Museum of Art's Gala in 2016 tweeted, supermodel Karolina Kurkova's dress changed colors! This is an example of wearable technology.

48)

49) Although IBM tried to regain its position by creating its first PC, it was slow to recognize the growing demand for laptops.

49)

50) The value network for the personal computer industry is not different from the value network for mainframe computers.

50)

51) Google's Chrome operating system, which has been described as "a new computing paradigm," is designed to exploit the opportunities of cloud computing.

51)

52) The digital revolution is causing dramatic, desired changes in industry structures.

52)

53) "Convergence" is a term that describes a world in which the telecommunications, consumer electronics, computer, and entertainment industries are entering each other's markets.

53)

54) As Pandora CEO Joe Kennedy recently remarked, "The good news is that the Internet is global, and that the copyright law is country by country."

54)

55) Because the Internet is global, no single country controls it.

55)

56) Research suggests that visitors spend more time at sites that are in English than in their own language.

56)

57) Cloud computing means that archives—-including music and movie files, photos, and documents —are stored on massive remote servers and data centers rather than on individual users' computers.

57)

58) Cybersquatting is the practice of registering a particular domain name for the express purpose of reselling it to the company that should rightfully use it.

58)

8

59) According to innovation expert Clayton Christensen, the creation of the Internet represented a disruptive technology for Dell Computer.

59)

60) Despite the "go-slow "market entry strategy in the United States, by 2016 Alibaba was selling nearly 15 billion items per year—three times more than Amazon.

60)

61) Russia and China have new cyber-security laws requiring that all data about customers in their respective countries be stored on in-country servers.

61)

62) According to innovation expert Clayton Christensen, markets that don't exist can't be analyzed since companies embrace agnostic marketing.

62)

63) Bandwidth determines the range of frequencies that can pass over a given transmission channel.

63)

64) There is a misperception that the market opportunity in Africa is limited because people are too poor.

64)

65) According to innovation expert Clayton Christensen, an organization's capabilities define its disabilities.

65)

66) Originally, Sony entered new businesses by acquiring CBS Records and Columbia Motion Pictures.

These acquisitions represent convergence because they occurred in the early days of the digital revolution, when motion pictures, recorded music, and consumer electronics were still separate industries.

66)

67) In South Korea, the Netherlands, Greenland, the UAE, Bahrain, and Qatar, more than 90 percent of the population is online.

67)

68) Industry experts expect marketers to integrate SMS with communication via other digital channels, such as the Internet and e-mail.

68)

69) According to Steve Case, founder of AOL, the second wave of the Internet revolution lasting from 2000 to 2014, shifted the focus from building the Internet to building on top of it.

69)

70) Sustaining technologies enable something to be done that was previously deemed impossible.

70)

71) Localizing a Web site in native language can be done by translating a Web site from the home-country language.

71)

72) Apple's wildly successful iPhone comes equipped with a full-blown version of the company's iOS and Web browser.

72)

73) Ironically, Motorola, a key player in the cell phone business, could have been first to market with a cell phone camera.

73)

74) The digital revolution is a paradigm shift resulting from technological advances that allow for the digitization of analog sources of information, sounds, and images.

74)

9

75) China, India, Brazil, and the European Union (EU) have taken the position that, because the Internet is global, one single country should be in control of it.

75)

76) Kodak has easily made the transition from industry leadership in chemical-based photography to industry leadership in digital photography.

76)

77) In 1948, a Bell Labs researcher named Claude Shannon wrote a technical report in which he proposed that all information media could be encoded in binary digits, or bits.

77)

78) An innovation that is disrupting to one firm can be sustaining to another firm.

78)

79) Several automakers have developed Apple Watch apps that enable drivers to remotely check, say, whether the doors are locked and the windows are up.

79)

80) Some company executives become so committed to a current, profitable technology that they fail to provide adequate levels of investment in new, apparently riskier technologies.

80)

81) The marginal cost of storing and distributing digitized products—music files, for example—is practically nothing.

81)

82) Web "content sites" provide news and entertainment and support a company's PR efforts.

82)

83) The Chinese government, alarmed by the free flow of information across the Internet, closely monitors the content on Web sites that its citizens access. Facebook, Twitter, and numerous other social media sites are blocked in China.

83)

84) Today, almost 3 billion people–nearly half of the world's population—are using the Internet.

84)

85) E-mail within a computer network was made possible by the creation of a file-transfer program in 1972, which enabled an e-mail created by one network to be delivered to a computer on a different network.

85)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

86) What is meant by e-commerce? How can e-commerce activities be classified?

87) Why are policymakers in countries such as South Korea following the broadband race so closely?

88) "The worldwide success of Apple's iTunes Store has generated a backlash of sorts." Explain why this statement is true giving examples.

89) The Internet's powerful capabilities and increasing importance have resulted in a backlash that manifests itself in various ways. Giving examples, explain how this statement is true.

90) What is m-commerce, and what are some of the technological innovations that fall under this type of commerce?

91) Comment on the current status and future of "Wearable technology."

92) How can Web sites be classified? Show how different companies fall under different categories.

10

93) According to various statistics, South Korea leads the world in providing its citizens with access to information and communications technologies. Discuss how South Korea could lead the world in technology and why the United States has taken a relatively slow start, particularly in spreading the broadband technology.

94) What are some of the issues that need to be addressed when setting up for global e-commerce?

95) What is convergence? What kind of challenges does it present?

96) Describe the principles developed by Christensen in order to help managers recognize the innovator's dilemma and develop appropriate responses to environmental change.

11

Answer Key Testname: C15

1) E 2) E 3) A 4) E 5) A 6) A 7) E 8) D 9) E 10) C 11) D 12) C 13) E 14) C 15) D 16) D 17) A 18) A 19) A 20) B 21) B 22) A 23) A 24) C 25) E 26) A 27) E 28) C 29) C 30) B 31) B 32) E 33) C 34) C 35) E 36) C 37) B 38) E 39) A 40) B 41) C 42) A 43) E 44) A 45) D 46) B 47) C 48) TRUE 49) TRUE 50) FALSE 12

Answer Key Testname: C15

51) TRUE 52) FALSE 53) TRUE 54) FALSE 55) FALSE 56) FALSE 57) TRUE 58) TRUE 59) FALSE 60) TRUE 61) TRUE 62) TRUE 63) TRUE 64) TRUE 65) TRUE 66) FALSE 67) TRUE 68) TRUE 69) TRUE 70) FALSE 71) FALSE 72) TRUE 73) TRUE 74) TRUE 75) FALSE 76) FALSE 77) TRUE 78) TRUE 79) TRUE 80) TRUE 81) TRUE 82) FALSE 83) TRUE 84) TRUE 85) FALSE 86) The term "e-commerce" refers to the general exchange of goods and services using the Internet as a marketing channel.

E-commerce activities can be divided into three broad categories: business-to-consumer (B2C or b-to-c), business-to-business (B2B or b-to-b), and consumer to consumer (or peer-to-peer or P2P). Many people associate e-commerce with well-known commerce service providers (CSPs) such as Amazon.com and Yahoo! Overall, B2B commerce constitutes the biggest share of the Internet economy and will likely continue to do so for the foreseeable future. About three-fourths of the B-to-C revenue for the year 2001 was generated in North America. Problems can arise when a transaction site that is not designed to serve foreign customers nevertheless attracts them. Customer service can be a problem when customers are located in different time zones.

13

Answer Key Testname: C15

87) Broadband offers multiple marketing opportunities to companies in a variety of industries. It also allows Internet users to access streaming media such as streaming audio and streaming video. Personalized radio services such as Apple Music, Pandora, Spotify, and Tidal allow users to list their favorite artists and songs; Pandora then uses a proprietary technology called the Music Genome Project to make recommendations for new music that are similar to a listener's current favorites. Streaming media are also having a profound impact on the television industry, with Amazon.com, iTunes, Netflix, YouTube, and other services offering movie and TV show downloads and streaming as viewing options. Streaming media represent a major market opportunity for the video game industry, which includes electronics companies (e.g., Microsoft and Sony), game publishers (e.g., Electronic Arts), and Internet portals (e.g., Google). Gamers in different locations, even different countries, can compete against one another using PCs or Xbox or PlayStation consoles.

88) It is true that the worldwide success of Apple's iTunes Store has generated a backlash of sorts. In Japan, the music industry was unsuccessful in 2005 to persuade the government to charge a royalty fee on each iPod sold. The money generated would have been distributed to record companies, songwriters, and recording artists as partial compensation for financial losses due to illegal music file downloading. In France, the National Assembly approved a bill that would require Apple to share the iTunes software codes with other companies so that music downloads would play on all digital music players, not just iPods. In January 2007, Norway's consumer ombudsman ruled that iPod's lack of interoperability was illegal. Cloud computing is the next-generation computing that will be performed "in the cloud." Rather than installing software such as iTunes or Microsoft Office on a computer hard drive, such applications will be delivered through a Web Browser. Cloud computing means that archives—including music and movies files, photos, and documents are all stored on massive remote servers and data centers rather than on individual users' computers. Computer files can be accessed remotely, via the Internet, from any location and from any computer. Cloud computing can therefore be applied on numerous computer-based applications. By contrast, cloud-based music services offer users a music locker, the locker is "in the cloud," and music files that have been purchased or uploaded can be accessed from a variety of mobile devices. Currently, Amazon.com, Apple, and Google all have cloud-based music services.

89) The Internet has become a powerful tool whose capabilities are not yet fully explored. Since it has multifaceted applications, there is a considerable backlash based on what it can and cannot do. For example, the Chinese government, alarmed by the free flow of information across the Internet, closely monitors the content on Web sites that its citizens access. In addition, policymakers in some countries are concerned about U.S. control of the Internet. The nonprofit Internet Corporation for Assigned Names and Numbers (Icann) is based in Marina del Ray, California. Icann maintains a database of Web addresses, approves new suffixes for Web addresses and performs other behind-the-scenes procedures that are critical for keeping the Internet functioning properly. Icann's advisory body includes international members, but the U.S. Department of Commerce (USDC) retains veto power over all decisions.

For example, after Icann tentatively approved the domain name.xxx for pornography sites, USDC blocked the decision.

Recently, China, India, Brazil, and the EU have taken the position that since the Internet is global, no single country should be in control. Accordingly, these nations are seeking to have the United Nations assume a role in Internet governance. Privacy is another issue. As companies become more adept at using the Internet to gather, store, and access information about customers, privacy issues are becoming a focal point of concern among policymakers and the general public. In the EU, for example, a privacy protection directive was established.

14

Answer Key Testname: C15

90) "Mobile commerce" or "m-commerce" is the term for conducting commercial transactions using wireless handheld devices such as personal digital assistants (PDAs) and cell phones. Many companies are developing ways to provide Internet access without the need for a wired broadband connection. For example, wireless fidelity (Wi-Fi) permits laptop and PDA users to establish high-speed wireless connections to the Internet and corporate intranets via "hot spots" located in airports, cafes, or other public places. Wi-Fi networks have a limited range; an improved technology known as World Interoperability for MicroWave Access (WiMax) is being deployed in many parts of the world. A WiMax network can have a range of several miles making it superior to traditional Wi-Fi. In addition, mobile WiMax offers greater capacity and faster speeds than current mobile data networks; it is well suited for streaming music or video. Another mobile communication technology known as Bluetooth is gaining popularity in Europe; because it consumes less power than Wi-Fi, Bluetooth is well suited to use with cell phones. It, however, works over shorter distances than Wi-Fi. Bluetooth has been incorporated into automobiles and home appliances, such as microwaves and refrigerators. In the United States, T-Mobile also has deals with Borders bookstores, FedEx Kinko's business centers, Texaco service stations, and, of course, Starbucks and major airports. Current Wi-Fi technology commonly handles data, not voice. However, many industry observers expect that in the near future, hot spots will allow cell phones to switch to the Internet for telephone calls. Wireless technology is being used in other ways. In the automotive world, there is a trend toward "telematics," which is a car's ability to exchange information about the vehicle's location or mechanical performance. Cars are also being equipped with online access so passengers can send and receive e-mails.

A new generation of smartphones has already penetrated the market.

91) Wearable technology includes fitness bands, Google Glass, Apple Watch, and other products which are reaching a tipping point in terms of sales growth. These technologies have witnessed different stages of development and there are unlimited possibilities. For example, technology research firm IDC predicts that annual sales will reach 113 million units by 2018, up from 6 million units in 2013. Glass at Work, a new program from Google, is designed to encourage adoption of Google Glass in hospitals, construction, and other workplaces where employees work with their hands.

These technologies will change the way global marketing will be done in the near future.

92) Web sites can be classified by purpose: promotion sites provide marketing communications about a company's goods or services, content sites provide news and entertainment and support a company's PR efforts, and transaction sites are cyberspace retail operations that allow customers to purchase goods and services. In many instances, Web sites combine the three functions. Web sites can also be categorized in terms of content and audience focus. The Internet can be used as an advertising channel, as a PR tool, as a means of running a contest or sales promotion, and as support for the personal selling effort. A schematic diagram showing four quadrants can be visualized when categorizing Web sites. In quadrant one the focus is on providing information and service to domestic or local-country customers.

Quadrant 2 companies such as iTunes Music Store maintain transaction-oriented e-commerce sites with a domestic focus. Companies in both quadrants 1 and 2 do attract international traffic, but the focus is still local. Companies that initially fall into quadrants 1 and 2 can transition into quadrants 3 and 4; for example Apple's iTunes Music Store was rolled out in Germany, France, and the United Kingdom in 2004. In quadrant 3, the audience focus is global.

Companies such as Federal Express and Gucci are already global in scope, and the Internet constitutes a powerful, cost-effective communication tool. In quadrant 4, companies seek e-commerce transactions with customers on a worldwide basis. Amazon.com is perhaps the most successful example of the global audience-transaction business model. Some products are inherently not suitable candidates for sale via the Internet. McDonald's does not sell hamburgers from its Web site, and Proctor & Gamble does not sell shampoo via the Internet.

15

Answer Key Testname: C15

93) South Korea leads the world in broadband penetration with 68 connections per 100 households. According to one consultant, Koreans tend to be early adopters of technology and, more significantly, are fast followers. They are always conscious of the need not to get left behind by the Japanese, and the young have a great desire to conform to the gadget-carrying norm of their peers. Several factors help explain broadband's relatively slow start in the United States.

First of all, one-quarter of the U.S. population lives in rural areas; which means that broadband is more expensive to roll out than in densely populated nations, such as South Korea. Also, U.S. telecom companies were reluctant to invest in broadband lines because of concerns that the U.S. Federal Communications Commission would force them to lease the lines to rival service providers. South Korea's digital future includes much more than simply broadband connection. Policymakers are aggressively pursuing applications for radio frequency identification tags (RFID). The South Korean government is spending nearly $300 million to build an RFID research center which will be a part of an even more ambitious effort, i.e. the construction of a ubiquitous city on a 1,500-acre manmade island near the Incheon Free Economic Zone. Korea being a smaller country, such activities promoting technologies are possible rapidly.

94) To fully exploit the Internet's potential, company executives must be willing to integrate interactive media into their marketing mixes. Web sites can be developed in-house, or an outside firm can be contracted. During the past few years, several interactive advertising sources have become available in different parts of the world. No matter which agency or source is selected, there are several issues that must be addressed and taken into consideration when setting up for global e-commerce. This involves choosing the domain names, arranging payment, localizing sites, addressing privacy issues, and setting up a distribution system. A critical first step is registering a country-specific domain name.

The Web site of choice will be the one which uses the language of the country and lists prices in the currency of the country. While registering a domain name is a relatively straightforward procedure in the United States, requirements vary in different countries. Also cybersquatting, the practice of registering a particular domain name for the express purpose of reselling it to the company that should rightfully use it, is a problem. Payment can be another problem; in many countries credit card use is low or not very much prevalent. In such situations, e-commerce operators must arrange payment by bank check or other means. Another issue is credit card fraud which will also become a problem for e-commerce. Also, it is preferable to double check the translations used for the Web site. Direct translation from the home-country Web site may not work in many countries. Words also have different meanings, and that should be taken into account. Another critical global e-commerce issue is privacy. There are some countries where the rules are strict, and in some countries they are very much relaxed.

95) The digital revolution is causing dramatic changes in industry structures. Convergence is a term used to refer to the coming together of previously separate industries and product categories. New technologies affect the business sector(s) in which a company competes. For example, Sony was a consumer electronics company best known for innovative products such as transistor radios, Trinitron televisions, VCRs and other stereo components, and the Walkman line of personal music players. Then, Sony entered new businesses, acquiring a record company and a motion picture studio. These acquisitions did not represent convergence because they occurred in the early days of the digital revolution. Motion pictures, recorded music, and consumer electronics were still separate industries. Today, however, Sony is in the "bits" business: its core businesses incorporate digital technology and involve digitizing and distributing sound, images, and data. Companies are faced with challenges of changing, acquiring, and moving on with technologies. If not, companies like Kodak and Motorola did not converge, and they are finding it hard to come up with a competitive model.

16

Answer Key Testname: C15

96) To help managers recognize the innovator's dilemma and develop appropriate responses to environmental change, Christensen has developed the following five principles of disruptive innovations: 1. Companies depend on customers and investors for resources. The best innovations are user-driven. Paradoxically, however, if management listens to established customers, opportunities for disruptive innovation may be missed.

2. Small markets do not solve the growth needs of large companies. Small organizations cannot easily respond to the opportunities for growth in a small market. This fact may require large organizations to create independent units to pursue new technologies.

3. Markets that do not exist cannot be analyzed. Christensen recommends that companies embrace agnostic marketing.

This is the explicit assumption that no one company personnel, nor the company's customers, can know whether, how, or in what quantities a disruptive product can or will be used before they have experienced using it.

4. An organization's capabilities define its disabilities.

5. Technology supply may not equal market demand. Some products offer a greater degree of sophistication than the market requires. For example, developers of accounting software for small businesses overshot the functionality required by the market, thus, creating an opportunity for a disruptive software technology that provided adequate, not superior, functionality and was simple and more convenient to use.

17

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) Maytag has been called "the Rolls-Royce of washers and dryers." Maytag markets Neptune, a high-tech machine, at a substantially higher than regular washer price. This is an example of: A) cost leadership.

B) focused differentiation.

C) cost focus.

D) consumer focus.

E) differentiation.

1)

2) Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices. In the strategic intent model of competitive advantage, this is an example of: A) loose bricks.

B) changing the rules of engagement.

C) collaborating.

D) building layers of advantage.

E) none of the above

2)

3) Which of the following is not identified by Porter as one of the possible types of barriers to entry in an industry?

A) economies of scale B) access to distribution channels C) product differentiation D) switching costs E) loose bricks

3)

4) Porter's four generic strategies for achieving competitive advantage are: A) cost leadership, product differentiation, cost focus, focused differentiation.

B) price leadership, product differentiation, price challenger, cost differentiation.

C) price determination, cost leadership, product differentiation, distribution savings.

D) cost leadership, product differentiation, cost challenger, product challenger.

E) cost leadership, product differentiation, consumer differentiation, focused differentiation.

4)

5) The town of Impruneta in the Italian province of Florence, is a source of high-quality terracotta; the high iron content of the area's clay means that the finished pieces can withstand temperatures as low as -20 degrees Fahrenheit. Many artisan pieces are rolled by hand, including those imported in the United States by Seibert & Rice. This is an example of ________ resources available for competitive advantage of a business.

A) infrastructure B) human C) capital D) physical E) knowledge

5)

1

6) Chance events play a role in shaping the competitive environment. Chance events are occurrences which include all of the following except: A) major technological breakthroughs.

B) oil crisis.

C) currency fluctuations.

D) annual business meeting.

E) wars and their aftermath.

6)

7) A nation's banking system, health care system, transportation system, and communications system, as well as the availability and cost of using these systems are considered as ________ resources available for competitive advantage of a business.

A) human B) capital C) physical D) knowledge E) infrastructure

7)

8) Which of the following is not one of the four arenas in which dynamic strategic interactions are played out in hypercompetitive industries?

A) timing and know-how B) buyer and supplier power C) entry barriers D) cost/quality E) deep pockets

8)

9) Barnes & Noble entered the online book market as a response to the threat posed by Amazon.com.

This approach represents which aspect of the Porter's five forces model?

A) bargaining power of buyers B) rivalry among competitors C) bargaining power of suppliers D) threat of new entrants E) threat of substitute products

9)

10) The issue of sustainability is central to this strategy concept: A) cost leadership.

B) differentiation.

C) consumer differentiation.

D) cost focus.

E) focused differentiation.

10)

11) Rugman and D'Cruz have developed an alternative framework to Porter's five forces model. The framework, based on business networks, is called: A) the differentiation model.

B) the hypercompetition model.

C) the Rugman & D'Cruz model.

D) the flagship model.

E) strategic intent.

11)

2

12) Which of the following is not identified by Porter as one of the five forces that explains competition in an industry?

A) threat of substitute products or services B) threat of new entrants C) bargaining power of competitors D) bargaining power of suppliers E) the competitive rivalry among current members

12)

13) New entrants to an industry bring all of the following except: A) a desire to gain market position.

B) a desire to gain market share.

C) new approaches to serving customer needs.

D) a desire to compete.

E) new capacity.

13)

14) Several factors can create intense rivalry among firms. These factors include all of the following factors except: A) absence of switching costs for customers.

B) firms focus on market share at the expense of others.

C) firms feel pressure due to fixed costs and produce at full capacity.

D) lack of differentiation in products and services.

E) upward pressure on prices and profitability.

14)

15) The ________ framework was developed by Professor Richard D'Aveni to describe a business environment in which no form of competitive advantage can be sustained for long because of escalating and accelerating competitive forces.

A) hypercompetition B) generic strategies C) strategic intent D) factor conditions E) five forces model

15)

16) Many firms have gained competitive advantage by disadvantaging rivals through: A) competitive innovation.

B) consumer differentiation.

C) engagement.

D) collaboration.

E) focused differentiation.

16)

17) The automobile industry has become fiercely competitive on a global basis. The initial success of foreign automakers in the United States was due to all of the following reasons except: A) bigger cars meant bigger profits for U.S. manufacturers.

B) U.S. manufacturers did not realize drivers' preferences.

C) reluctance of U.S. manufacturers to make inexpensive small cars.

D) reluctance of U.S. manufacturers to design high-quality cars.

E) inability of U.S. manufacturers to manufacture high-quality cars.

17)

3

18) Taiwan's Acer prospered by following founder Stan Shih's strategy of approaching the world computer market from the periphery. By the time Acer was ready to target the United States in earnest, it was already the number one PC brand in key countries in Latin America, Southeast Asia, and the Middle East. This is an example of which component of competitive innovation?

A) loose bricks B) generic C) supplier power D) collaboration E) layers of advantage

18)

19) Germany's Mittelstand companies have been extremely successful pursuing: A) cost focus.

B) differentiation.

C) cost leadership.

D) cost differentiation.

E) focused differentiation.

19)

20) According to the hypercompetition model of competitive advantage, which of the following allows the firm to create an entirely new product or market?

A) timing advantage B) know-how advantage C) countermoves D) switching costs E) outflanking

20)

21) India's Tata Group participates in a variety of industries. Which one of the following statements is incorrect?

A) Tata Group's management team is hoping to maintain the image as an international brand.

B) Tata Group's advantage is based on highest quality raw materials irrespective of price.

C) Tata Group's competitive advantage was based on scouring the globe for the highest quality materials.

D) Tata Group's Taj Hotels acquired Ritz Carlton in Boston and sold it at a loss.

E) Tata Group industries include heavy vehicles, cars, department stores, and tea.

21)

22) The key to maintaining competitive advantage, according to W. Edwards Deming is: A) outsourcing key components.

B) stressing low-price advantage in all areas.

C) challenging all market leaders.

D) being committed to constant improvement.

E) being first to market with all products.

22)

23) Walmart refuses to stock CDs bearing parental advisory stickers for explicit lyrics or violent imagery. Recording artists who want their recordings available at Walmart have the option of altering lyrics and song titles or deleting offending tracks. Likewise, artists are sometimes asked to change album cover art if Walmart deems it offensive. Considering the elements of the five forces model this is an example of: A) threat of new entrants.

B) supplier power.

C) threat of substitute products.

D) buyer power.

E) access to distribution channels.

23)

4

24) When managers at Matsushita realized that cost advantages in TV production were often fleeting, they added quality and reliability advantages, thus establishing: A) a logo.

B) buyer power.

C) layers of advantage.

D) loose bricks.

E) attribute diversity.

24)

25) Mitsubishi Heavy Industries Ltd. and other Japanese companies manufacture airplanes under license to U.S. firms, and also work as subcontractors for aircraft parts and systems. This type of effort is known as: A) innovating.

B) building of layers of advantage.

C) searching for loose bricks.

D) collaborating.

E) changing the rules of engagement.

25)

26) Which of the following generic strategies best captures the way Harley-Davidson has achieved competitive advantage in the global motorcycle industry?

A) focused differentiation B) differentiation C) cost differentiation D) cost leadership E) cost focus

26)

27) The rivalry between Dell, Hewlett-Packard, Gateway, Compaq, and Apple forces all the players to undertake all of the following except: A) develop new technologies.

B) develop new products.

C) lower costs and prices.

D) change the rules of engagement.

E) improve existing products.

27)

28) In the tech world, about 90 percent of the world's nearly one billion PCs use Microsoft's operating systems and 80 percent use Intel's microprocessors. This represents which aspect of the Porter's five forces model?

A) rivalry among competitors B) bargaining power of suppliers C) threat of new entrants D) bargaining power of buyers E) threat of substitute products

28)

29) Caterpillar's attention was focused elsewhere when Komatsu made its first entry into Eastern Europe and gained ground. This is an example of: A) loose bricks.

B) changing the rules.

C) collaborating.

D) differentiation.

E) layers of advantage.

29)

5

30) Caterpillar's attention was focused elsewhere when Komatsu made its first international entry into the Eastern European Market. Based on the strategic intent framework, this is an example of: A) changing the rules.

B) layers of advantage.

C) loose bricks.

D) comparative advantage.

E) collaborating.

30)

31) According to strategy expert Richard D'Aveni, the actions taken by Swatch in the global watch industry illustrate hypercompetitive dynamic maneuvering in which arena?

A) Olympics B) entry barriers C) cost/quality D) timing and know-how E) deep pockets

31)

32) In the shipbuilding industry, Polish and Chinese shipyards offer simple, standard vessel types at low prices that reflect low production costs. This represents generic strategy related to: A) cost differentiation.

B) cost focus.

C) differentiation.

D) focused differentiation.

E) cost leadership.

32)

33) Building layers of advantage is one of the elements of Hamel and Prahalad's framework for: A) innovation leadership.

B) quality advantage.

C) positioning.

D) competitive innovation.

E) marketing management.

33)

34) Del Vecchio, the Italian entrepreneur's business principles include all but one of the following: A) hiring qualified personnel.

B) investing in automation.

C) cutting costs to keep production at home.

D) "Made in Italy" is important.

E) investing in robots, not workers.

34)

35) In the global watch industry, the success of the Swatch brand resulted in a manufacturing renaissance for Switzerland. In the strategic framework known as hypercompetition, Swatch's success is an example of interactions in which arena?

A) cost/quality B) entry barriers C) sporting events D) deep pockets E) timing and know how

35)

6

36) Which of the following is not an element of Rugman and D'Cruz's flagship model?

A) focused differentiation B) key suppliers C) selected competitors D) key customers E) key consumers

36)

37) According to Porter, the nature of the interaction between potential industry entrants, buyers, substitute products, suppliers, and rival firms determines: A) whether or not the government will launch an antitrust investigation.

B) whether a country can create a comparative advantage in the production of differentiated products.

C) whether a country can generate a balance of payments surplus.

D) whether a country can generate income by innovation.

E) the industry's profit potential in terms of long-run return on invested capital.

37)

38) According to Michael Porter's research on the competitive advantage of nations, Switzerland's large synthetic dye industry and the success of the Swiss pharmaceuticals can be explained in terms of: A) related and supporting industries.

B) demand conditions.

C) factor conditions.

D) strategy, structure, and rivalry.

E) formation of the European Union.

38)

39) According to Michael Porter's research on the competitive advantage of nations, human, physical, knowledge, capital, and infrastructure resources are all components of a country's: A) factor conditions.

B) strategy, structure, and rivalry.

C) demand conditions.

D) related and supporting industries.

E) global conditions.

39)

40) Hundreds of small companies such as Martin-Logan and Mark Levinson compete in the high-end audiophile segment of the consumer electronics industry. If analyzed in terms of Porter's generic strategies framework, such companies might be said to be pursuing competitive advantage via: A) cost focus.

B) focused differentiation.

C) differentiation.

D) consumer differentiation.

E) cost leadership.

40)

41) The Rugman and D'Cruz's flagship model is evident in the strategies of all but one of the following businesses: A) Benetton.

B) Ford.

C) Volkswagen.

D) Microsoft.

E) IKEA.

41)

7

42) The leading country among the "World's Most Competitive Countries" is: A) Japan.

B) the United Kingdom.

C) Germany.

D) the United States.

E) France.

42)

43) Intel achieved success by using the "Intel Inside" advertising campaign and logo that appears on many brands of PCs. This is an example of a barrier to entry classified as: A) distribution channels.

B) new capacity.

C) product differentiation.

D) new approaches to customer needs.

E) competitor response.

43)

44) Factors which determine suppliers' ability to gain leverage over industry firms include all of the following except: A) large numbers and relatively few in number.

B) suppliers' products or services are highly differentiated.

C) suppliers' products or services are important to user firms.

D) alternative products do not threaten suppliers' business.

E) buyers preferences are highly differentiated.

44)

45) Intel's loose brick was: A) unbeatable in the computer market.

B) getting into the smartphone market.

C) its narrow focus on complex microprocessors for PCs. D) demand for non-PC products.

E) developing new chips incorporating 3D technology.

45)

46) Suppose you are a sales representative for Advanced Micro Devices (AMD) in Japan. You are trying to convince Toshiba to buy your company's superfast Opteron microprocessor for its new laptop computer. Toshiba's representative seems interested, but eventually does not actually place an order. Confidentially, the representative tells you that he is afraid that Intel will withhold shipments of its Pentium 4 if he does business with AMD. Thinking about Intel's role in this scenario, which of the following elements of the five forces model is evident here?

A) bargaining power of buyers B) threat of substitute products C) threat of new entrants D) bargaining power of suppliers E) barriers to entry

46)

47) Building layers of advantage, searching for loose bricks, changing the rules of competitive engagement, and collaborating are elements of the competitive advantage framework developed by: A) W.E. Deming.

B) Drucker.

C) D'Aveni.

D) Porter.

E) Hamel and Prahalad.

47)

8

48) The characteristics of home demand for a firm's products or services include all of the following except: A) the size of the competitors' share of the home demand.

B) the size of the home demand.

C) the composition of home demand.

D) the pattern of growth of the home demand.

E) means by which the home demand pushes or pulls foreign markets.

48)

49) In the terminology of the strategic intent framework for competitive advantage, a firm that establishes advantages in a number of different areas has: A) marketing breadth.

B) a "double diamond."

C) layers of advantage.

D) comparative advantage.

E) attribute diversity.

49)

50) An approach to competitive advantage that exploits weaknesses in competitors' narrow-focus strategies is called a ________ strategy.

A) supplier power B) layers of advantage C) collaboration D) generic E) loose bricks

50)

51) Canon introduced the first full-color copiers and the first copiers with "connectivity"—the ability to print images from such sources as video camcorders and computers. This Canon example shows how an innovative marketing strategy—with fresh approaches to product, pricing, distribution, and selling—leads to overall competitive advantage in the marketplace. This strategy can be classified under: A) loose bricks.

B) layers of advantage.

C) differentiation.

D) collaborating.

E) changing the rules.

51)

52) Which of the following statements is incorrect regarding Benetton Group?

A) Benetton's business model is suited for emerging markets.

B) Benetton faces increased competition from Sweden's Hennes & Mauritz (H&M).

C) Benetton's business involves partnerships with regional sales agents.

D) Benetton faces increased competition from Spain's Zara.

E) Benetton's business model needs adjustment for emerging markets.

52)

53) When company management decides that it is unwilling to follow the "conventional wisdom" and instead finds a new way to gain competitive advantage, it might be said to be: A) collaborating.

B) changing the rules of engagement.

C) searching for loose bricks.

D) building layers of advantage.

E) innovating.

53)

9

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

54) A useful way of gaining insight into competitors is through industry analysis.

54)

55) According to D'Aveni, in today's business environment, short product life cycles, short product design cycles, new technologies, and globalization undermine market stability; thereby an acceleration of competitive forces takes place.

55)

56) IKEA's founder Ingvar Kamprad's frugal ways also applied to the company's finances. To minimize tax liabilities, he split the company into two parts: Inter Ikea owns the brand and the concept, while Ikea Group runs the retailing operations.

56)

57) Analyzed in terms of Porter's five forces model, Walmart's ability to dictate terms to the music industry is one indication of the retail giant's supplier power.

57)

58) Cost leadership is a sustainable source of competitive advantage only if no barriers exist that prevent competitors from achieving the same low costs.

58)

59) According to the model developed by Rugman and D'Cruz, the flagship firm is at the center of a collection of three partners.

59)

60) The "layers of advantage" approach to global competitive innovation is based on using know-how developed by other companies.

60)

61) Established firms do not enjoy cost advantages independent of scale economies that present a barrier to entry.

61)

62) Intel's "loose bricks" approach was its broad focus on complex microprocessors for PCs.

62)

63) Michael Porter's generic strategy framework is derived from the basic types of competitive advantage and the scope of the target market served.

63)

64) Intel's focus on designing complex, expensive microprocessors for PCs enabled competitors to develop cheaper chip sets for non-PC electronics devices. In the strategic intent model of competitive advantage, this is an example of "loose bricks."

64)

65) If rivalry among firms forces companies to rationalize costs, it is a negative force.

65)

66) Analyzed in terms of Porter's five forces model, online music file sharing services represent a threat to the music industry in the form of a substitute product.

66)

67) "Hypercompetition" refers to companies that are successful and find sustainable competitive advantages.

67)

68) Competition in an industry tends to drive rates of return on invested capital up towards what is described as "perfectly competitive."

68)

69) The development of the MP3 file format for music was accompanied by the increased popularity of peer-to-peer (p-to-p) file swapping among music fans.

69)

10

70) Apple's success with the iPhone prompted Samsung and others to enter the market. This is an example of the "perfectly competitive."

70)

71) Michael Porter's five forces model and Rugman and D'Cruz's flagship model are both based on the concept of corporate individualism.

71)

72) "Factor conditions" refers to a country's endowment with resources, which may have been created or inherited.

72)

73) "Hypercompetition" is a term that describes a business environment of escalating rivalry characterized by rapid product innovation and short product life cycles.

73)

74) A firm that has the skills to be a "first mover" and arrive first in the market has achieved a know-how advantage.

74)

75) In Michael Porter's model, "buyers" refers to manufacturers (e.g., GM) and retailers (e.g. Walmart), rather than consumers.

75)

76) It is the number of domestic rivals, intensity of the competition, as well as the quality of the competitors that make the difference.

76)

77) Michael Porter's four generic strategies for achieving competitive advantage are product differentiation, price leadership, promotion power, and distribution efficiency.

77)

78) Product differentiation and brand loyalty "raise the bar" for would-be industry entrants who would be required to make minimal investments in research or advertising.

78)

79) Microsoft's extensive base of Windows operating systems and applications presented a formidable entry barrier for many years.

79)

80) "Switching costs" is one of the barriers to entry in Porter's five forces model.

80)

81) In the case of Volkswagen, dealers are its key consumers while individual car buyers are the key consumers of the dealers.

81)

82) The Swatch Group is the world's second largest watchmaker. This shows that in the low-cost segment, brands compete on price and value.

82)

83) Microsoft and Intel are two companies that illustrate the concept of "bargaining power of suppliers" in Porter's five forces model of industry competition.

83)

84) Volkswagen Auto Group of America markets both the VW and Audi nameplates in the United States; in 2014, unit sales for the group totaled nearly 550,000 vehicles. However, the VW brand has been hampered by perceptions of hit-and-miss quality.

84)

85) Competitive advantage exists when there is a match between a firm's distinctive competencies and the factors critical for success within its industry.

85)

11

86) The strong rivalry in the U.S. market between Dell, Gateway, Hewlett-Packard, Apple, and other computer companies has helped make the United States a world leader in personal computers.

86)

87) Maytag has been called "the Rolls-Royce of washers and dryers," and it can be said that it has achieved a competitive advantage by means of differentiation.

87)

88) Rivalry among firms refers to all the actions taken by firms in the industry to improve their position and gain advantage over each other.

88)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

89) What are demand conditions? Why is the nature of home demand conditions for the firm's or industry's products and services important?

90) Describe how competitive advantage can be created via strategic intent, giving examples of successful approaches of competitors.

91) What does the phrase factor conditions refer to? How can these factors be inherited or created? Describe Porter's categories of factor conditions.

92) Describe how Japanese companies added layers of advantage realizing that the cost advantage may be temporary.

93) Michael E. Porter, a leading theorist of competitive strategy, developed a five forces model to explain competition in an industry. List these forces and describe the impact of the threat of new entrants.

94) The nature of firm strategy, structure, and rivalry is the final determinant of a nation's diamond. What does this statement refer to? How does domestic rivalry differ from foreign rivalry? Please explain in detail.

95) There have been considerable changes that have taken effect since Porter presented his theories. One such impact is due to the tremendous technological advancement. In light of these changes, examine what potential impact technology has on some of his theories.

96) What is hypercompetition? Briefly discuss conditions under which hypercompetition takes place.

97) Explain the reasons behind the failure of the visionary strategy of Volkswagen from becoming the number one automaker in the world.

98) The Komatsu/Caterpillar saga illustrates the fact that global competitive battles can be shaped by factors other than the pursuit of generic strategies. Explain this statement giving examples and impact on competitive strategies.

99) In addition to the five forces model of industry competition, Michael Porter has developed a framework of so-called generic business strategies. Explain these generic strategies, describing their aims and application.

100) "Few competitive advantages are long lasting." Justify this statement giving reasons.

101) Describe some of the factors that create intense rivalry among business competitors.

102) How do chance events play a role in shaping the competitive environment?

12

Answer Key Testname: C16

1) E 2) A 3) E 4) A 5) D 6) D 7) E 8) B 9) D 10) D 11) D 12) C 13) D 14) E 15) A 16) A 17) B 18) A 19) E 20) A 21) D 22) D 23) D 24) C 25) D 26) A 27) D 28) B 29) A 30) C 31) C 32) B 33) D 34) A 35) A 36) A 37) E 38) A 39) A 40) B 41) D 42) D 43) C 44) A 45) C 46) E 47) E 48) A 49) C 50) E 13

Answer Key Testname: C16

51) E 52) A 53) B 54) TRUE 55) TRUE 56) TRUE 57) FALSE 58) FALSE 59) FALSE 60) FALSE 61) FALSE 62) FALSE 63) TRUE 64) TRUE 65) FALSE 66) TRUE 67) FALSE 68) FALSE 69) TRUE 70) TRUE 71) FALSE 72) TRUE 73) TRUE 74) FALSE 75) TRUE 76) FALSE 77) FALSE 78) FALSE 79) TRUE 80) TRUE 81) FALSE 82) TRUE 83) FALSE 84) TRUE 85) TRUE 86) TRUE 87) TRUE 88) TRUE

14

Answer Key Testname: C16

89) Demand conditions are the factors that either train firms for world-class competition or that fail to adequately prepare them to compete in the global marketplace. The nature of home demand conditions for the firm's or industry's products and services is important because it determines the rate and nature of improvement and innovation by the firms in the nation. Characteristics of home demand are particularly important to the creation of competitive advantage, which include the composition of home demand, the size and pattern of growth of home demand, rapid home market growth, and the means by which a nation's home demand pulls the nation's products and services into foreign markets. The characteristics of home demand determines how firms perceive, interpret, and respond to buyer needs. Competitive advantage can be achieved when the home demand sets the quality standard and gives local firms a better picture of buyer needs, at an earlier time, than is available to foreign rivals. This advantage is enhanced when home buyers pressure the nation's firms to innovate quickly and frequently. The size and pattern of growth of home demand are important only if the composition of the home demand is sophisticated and anticipates foreign demand.

Large home markets offer opportunities to achieve economies of scale and learning while dealing with familiar, comfortable markets. Rapid home market growth is yet another incentive to invest in and adopt new technologies faster, and to build large, efficient facilities. Means by which a nation's products and services are pushed or pulled into foreign countries helps a nation's people and businesses go abroad and then demand the nation's products and services in those second countries. It is the interplay of demand conditions that produces competitive advantage. Of special importance are those conditions that lead to initial and continuing incentives to invest and innovate, and to continuing competition in increasingly sophisticated markets.

90) An alternative framework for understanding competitive advantage focuses on competitiveness as a function of the pace at which a company implants new advantages deep within its organization. This framework identifies strategic intent, growing out of ambition and obsession with winning, as the means for achieving competitive advantage. Major theories related to this were presented by Gary Hamel and C.K. Prahalad. The basic approach is founded in the principles of W.E. Deming, who stressed that a company must commit itself to continuing improvement in order to be a winner in a competitive struggle. Many firms have gained competitive advantage by disadvantaging rivals through competitive innovation. Hamel and Prahalad define competitive innovation as the art of containing competitive risks within manageable proportions. They identify four successful approaches used by Japanese competitors. These are building layers of advantage, searching for loose bricks, changing the rules of engagement, and collaborating. Building layers of advantage refers to having a wide portfolio of advantages thereby reducing risk in any competitive encounters. A second approach takes advantage of the "loose bricks" left in the defensive walls of competitors whose attention is narrowly focused on a market segment or a geographic area to the exclusion of others. A third approach involves changing the so-called "rules of engagement" and playing by the rules set by industry leaders. A final source of competitive advantage is using know-how developed by other companies. Such collaboration may take the form of licensing agreements, joint ventures, or partnerships.

15

Answer Key Testname: C16

91) The phrase "factor conditions" refers to a country's endowment with resources. Factor resources may have been created or inherited. Basic factors may be inherited or created without much difficulty since they can be replicated in other nations and they are not sustainable sources of national advantage. Porter describes five categories of factor conditions: human, physical, knowledge, capital, and infrastructure. The quantity of workers available, the skills possessed by these workers, the wage levels, and the overall work ethic of the workforce together constitute a nation's human resources factor. Countries with a plentiful supply of low-wage workers have an obvious advantage in the production of labor-intensive products. On the other hand, such countries may be at a disadvantage when it comes to the production of sophisticated products which require highly skilled workers capable of working without extensive supervision. The availability, quantity, quality, and cost of land, water, minerals, and other natural resources determine a country's physical resources. A country's size and location are also included in this category. The availability within a nation of significant population having scientific, technical, and market-related knowledge means that the nation is endowed with knowledge resources. The presence of this factor is usually a function of the number of research facilities and universities—both government and private—operating in the country. This factor is important to success in sophisticated products and services. The nation's savings rate, interest rates, tax laws, and government deficit all affect the availability of capital resources. The advantages enjoyed by industries in countries with low capital costs versus those located in nations with relatively high capital costs are sometimes decisive. Firms paying high capital costs are frequently unable to stay in a market where the competition comes from a nation with low capital costs. The firms with the low cost of capital can keep their prices low and force the firms paying high costs to accept low returns on investment or leave the industry. Finally, infrastructure is important, which includes a nation's banking, healthcare, transportation, communication systems as well as the availability and cost of using these systems.

More sophisticated industries are more dependent on advanced infrastructure for success. A mix of factors available to the industry determines a nation's competitive advantage.

92) Because Japanese companies realized that their cost advantage might be temporary, they added another layer of quality and reliability advantages by building plants large enough to serve world markets. Much of this output did not carry the manufacturer's brand name. For example, Matsushita Electric sold products to other companies such as RCA, which then marketed them under their own brand names. Matsushita was pursuing a simple idea: A product sold was a product sold, no matter whose label it carried. To build the next layer of advantage, Japanese firms spent the 1970s investing heavily in marketing channels and Japanese brand names to gain recognition. This strategy added yet another layer of competitive advantage: the global brand franchise—that is, a global customer base. By the late 1970s, channels and brand awareness were established well enough to support the introduction of new products that could benefit from global marketing—VCRs and photocopy machines, for example. Finally, many companies have invested in regional manufacturing so their products can be differentiated and better adapted to customer needs in individual markets. The process of building layers illustrates how a company can move along the value chain to strengthen its competitive advantage.

16

Answer Key Testname: C16

93) The five forces in the model by Porter are the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers, and the competitive rivalry among current members of the industry. New entrants to an industry bring new capacity, a desire to gain market share and position. They also bring new approaches to serving customer needs. New players mean prices will be pushed downward and margins squeezed, resulting in reduced industry profitability in the long run. According to Porter, there are eight major sources of barriers to entry, the presence or absence of which determines the extent of threat of new industry entrants. (1) Economies of scale, which refers to the decline in per-unit product costs as the absolute volume of production per period increases. Although the concept of scale economies is frequently associated with manufacturing, it is also applicable to R&D, general administration, marketing, and other business functions. (2) Product differentiation is the barrier that depends on the extent of a product's perceived uniqueness. Differentiation can be achieved as a result of unique product attributes or effective marketing communications, or both. (3) Capital requirement is another barrier.

This may include fixed as well as the working capital. Some industries require enormous capital for various activities.

(4) The one-time switching costs caused by the need to change suppliers and products are another barrier. These might include retraining, ancillary equipment costs, the cost of evaluating a new source, and other related aspects. (5) The access to distribution channels is another barrier. If channels are full or unavailable, the cost of entry is substantially increased because a new entrant must invest time and money to gain access to existing channels or to establish new channels. (6) Government policy is frequently a major entry barrier. (7) Established firms may also enjoy cost advantages independent of scale economies that present barriers to entry. Access to raw materials, a large pool of low-cost labor, favorable locations, and government subsidies are several examples. (8) Competitor response can be a major entry barrier. If new entrants expect existing competitors to respond strongly to entry, their expectations about the rewards of entry will certainly be affected.

94) Domestic rivalry in a single national market is a powerful influence on competitive advantage. A good example is the PC industry in the United States which created a strong domestic rivalry. It keeps the industry dynamic and creates continual pressure to improve and innovate. The rivalry between Dell, HP, Gateway, Compaq, Apple, and others forces all the players to develop new products, improve existing ones, lower costs and prices, develop new technologies, and continually improve quality and service to keep customers satisfied. Rivalry with foreign firms may lack this intensity. Domestic rivals have to fight each other not just for market share, but also for employee talent, R & D breakthroughs, and prestige in the home market. Eventually, strong domestic rivalry will push firms to seek international markets to support expansions in scale. The absence of significant domestic rivalry can lead to complacency in the home firms and eventually cause them to become noncompetitive in the world markets. The intensity of the competition is more important rather than the number of domestic rivals. Also, the quality of the competitors makes a difference. It is also important that there be a fairly high rate of new business formations to create new competitors and safeguard against the older companies becoming comfortable with their market positions and products or services. New industry entrants bring new perspectives and new methods. They also find pockets of markets that were not explored by the incumbent companies. Differences in management styles, organizational skills, and strategic perspectives also create advantages and disadvantages for firms competing in different types of industries. The intensity of domestic rivalry also depends on them.

95) With the digital revolution, there are several aspects that have impact on the entry barriers that were listed by Michael Porter. Technology has lowered the cost for new entrants significantly. For example, Barnes & Noble watched an entrepreneurial upstart, Amazon.com, storm the barriers protecting traditional booksellers. Amazon.com exploited a lagging inefficiency in book distribution by shipping unsold copies of books back to publishers to be shredded and turned into pulp. Its centralized operations and increasingly personalized online service enable customers to select from millions of different titles at discount prices and have them delivered to their homes within days. The company has expanded into new product lines such as CDs and DVDs. The company now serves tens of millions of customers in 160 countries. Barnes & Noble responded by entering the online book market itself even as it continues to be profitable in its traditional business method. Thus, Internet superstores selling different kinds of general merchandise will come into the horizon making the way business is done very different as well as a significant decrease in the cost of doing business.

17

Answer Key Testname: C16

96) The term "hypercompetition" is used to describe a dynamic competitive world in which no action or advantage can be sustained for long. Under such conditions, everything changes because of the dynamic maneuvering and strategic interactions by hypercompetitive firms. According to D'Aveni's model, competition unfolds in a series of dynamic strategy interactions in four arenas: cost/quality, timing and know-how, entry barriers, and deep pockets. Each of these arenas is continuously destroyed and recreated by the dynamic maneuvering of hypercompetitive firms. Competition in the first arena, cost/quality, occurs via seven dynamic strategic interactions: price wars, quality and price positioning, "the middle path," "cover all niches," outflanking and niching, the move toward an ultimate value marketplace, and escaping from the ultimate value marketplace by restarting the cycle. The second arena deals with timing and know-how. A firm that has the skills to be a "first mover" and arrives first in a market has achieved a timing advantage. A know-how advantage is the technological knowledge. It deals with six dynamic strategic interactions that drive competition in this arena: capturing first-mover advantages, imitation and improvement by followers, creating impediments to imitation, overcoming the impediments, transformation or leapfrogging, and downstream vertical integration. Next, one deals with the barriers to entry. These barriers include economies of scale, product differentiation, capital investments, switching costs, access to distribution channels, cost advantages other than scale, and government policies. The last one deals with deep pockets, which evidently leads to hypercompetition.

97) A deeper understanding of Volkswagen's place in the auto industry requires an overview of Chairman Carl Hahn's attempts to implement his vision of VW as Europe's first global automaker. By 1970, the Beetle was a mature product in Europe, sales were still moderately strong in the United States and were booming in Brazil. The chief executive officer of VW proposed switching the German plants entirely to the new model, the successor to the Beetle, which the German plants would also supply to the U.S. market. The continuing demand for Beetles in the United States would be satisfied out of Brazil. To assure the American customers of the "German quality" that was one of the Beetle's main attractions, the critical parts such as engines and transmissions for all cars sold in North America, would, however, still be made in Germany. Unfortunately, this visionary strategy failed. One problem was resistance on the part of the German unions. A second problem was confusion among American dealers about a car that was equally "made in Germany," "made in Brazil," and "made in the USA." Hahn's strategic plan for the 1990s and beyond called for a decentralized structure of four autonomous divisions. In pursuit of this vision, Hahn invested tens of billions of dollars in Czechoslovakia's Skoda Auto Works and SEAT in Spain. In Spain, VW hoped to take advantage of labor rates 50 percent lower than in West Germany. Spain was an attractive location for small-car production. Besides serving the domestic market, VW intended to use Spain as a production source that would allow it to cut prices and boost margins in Europe. Similar reasoning was behind VW's 1991 purchase of a 31 percent stake in Skoda. However, the product quality was low, and the plant was a major source of pollution. Hahn's successor, Ferdinand Piech took drastic actions and cost cutting measures. All these changes in the strategy affected the growth and competitive status in the world market.

18

Answer Key Testname: C16

98) Caterpillar has faced a very challenging set of environmental pressures over the last several decades. Many of Caterpillar's plants were closed by a lengthy strike in the early 1980s; a worldwide recession at the same time caused a downturn in the construction industry. This hurt companies that were Caterpillar customers. In addition, the strong dollar gave a cost advantage to foreign rivals. Compounding Caterpillar's problems was a new competitive threat from Japan. Komatsu was the world's number 2 construction equipment company and had been competing with Caterpillar in the Japanese market for years. Komatsu's products were generally acknowledged to offer a lower level of quality.

The rivalry took on a new dimension after Komatsu adopted the slogan "Maru-c," meaning "encircle Caterpillar."

Emphasizing quality and taking advantage of low labor costs and the strong dollar, Komatsu surpassed Caterpillar as number 1 in earthmoving equipment in Japan and made serious inroads in the United States and other markets.

However, the company continued to develop new sources of competitive advantage even after it achieved world-class quality. For example, new-product development cycles were shortened and manufacturing was rationalized.

Caterpillar struggled to sustain its competitive advantage because many customers found that Komatsu's combination of quality, durability, and lower price created compelling value. Yet even as the recession and a strong yen put new pressure on Komatsu, the company sought new opportunities by diversifying into machine tools and robots.

This is an example as to how many firms have gained competitive advantage by disadvantaging rivals through "competitive innovation." Hamel and Prahalad define competitive innovation as "the art of containing competitive risks within manageable proportions" and identify four successful approaches used by Japanese competitors. These are building layers of advantage, searching for loose bricks, changing the rules of engagement, and collaborating.

99) The generic business strategies are based on the two types or sources of competitive advantage: low-cost and differentiation. The relationship of these two sources with the scope of the target market served (narrow or broad) or product mix width (narrow or wide) yields four generic strategies: cost leadership, product differentiation, cost focus, and focused differentiation. Cost leadership is competitive advantage based on a firm's position as the industry's low producer in broadly defined markets or across a wide mix of products. By contrast, strategies to achieve a narrow focus advantage target a narrowly defined market or customer. This advantage is based on an ability to create more customer value for a narrowly targeted segment and results from a better understanding of customer needs and wants.

Focused differentiation strategies backed by a strong export effort have proven to be very successful. When a firm's lower cost position enables it to offer a narrow target market and lower prices than the competition, it is referred to as the strategy of cost focus. In the shipbuilding industry, for example, Polish and Chinese shipyards offer simple, standard vessel types at low prices that reflect low production costs.

100) Competitive advantages focus on the fact that competitiveness is a function of the pace at which a company implants new advantages within its organization. This framework identifies strategic intent, growing out of ambition and obsession with winning, as the means for achieving competitive advantage. It has been proven that few competitive advantages are long lasting. Keeping score of existing advantages is not the same as building new advantages. The essence of strategy lies in creating tomorrow's competitive advantages faster than competitors mimic the ones possessed today. An organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all. A company must commit itself to continuing improvement if it expects to be a winner in a competitive struggle, thus the competitive advantages are not long lasting.

101) Several factors can create intense rivalry. First, once an industry becomes mature, firms focus on market share and how it can be gained at the expense of other firms. Second, industries characterized by high fixed costs are always under pressure to keep production at full capacity to cover those costs. Once the industry accumulates excess capacity, the drive to fill capacity will push prices—and profitability—down. A third factor affecting rivalry is lack of differentiation or an absence of switching costs, which encourages buyers to treat the products or services as commodities and shop for the best prices. Again, this factor places downward pressure on prices and profitability. Fourth, firms with high strategic stakes in achieving success in an industry generally are destabilizing forces because they may be willing to accept below-average profit margins to establish themselves, hold their positions, or expand their operations.

19

Answer Key Testname: C16

102) Chance events are occurrences that are beyond the control of a firm, industry, or government. Unexpected events include war and its aftermath, technological breakthroughs, sudden dramatic shifts in factor or input cost, changes in oil prices or production crisis, dramatic swings in exchange rates, and similar incidences. Chance events are important because they create major discontinuities in operation as well as in technologies. Such disruptions allow nations and firms that were not competitive to leapfrog over old competitors and become competitive, even leaders, in the changed industry. For example, the development of microelectronics allowed many Japanese firms to overtake U.S. and German firms in industries that had been based on electromechanical technologies. These electromechanical technologies traditionally were dominated by the Americans and Germans. From a systemic perspective, the role of chance events lies in the fact that they alter conditions in the diamond. The nation with the most favorable "diamond," however, will be the one most likely to take advantage of these events and convert them into advantages. For example, Canadian researchers were the first to isolate insulin, but they could not convert this breakthrough into a globally competitive product. Firms in the United States and Denmark were able to do that because of their respective national "diamonds."

20

Exam Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

1) All of the following statements regarding Starbucks are true except: A) Shareholders consider Starbucks' stock to be risky investment.

B) Starbucks partners can take part in Starbucks' stock option plan.

C) Starbucks offers health benefits to company employees.

D) Starbucks has the opportunity to be a different global company.

E) Starbucks is a profitable company.

1)

2) Nike came under fire from critics who alleged poor working conditions in the factories that make the company's athletic shoes. This is an example of the demand for: A) equal opportunity employment.

B) labor unions.

C) higher wages.

D) corporate social responsibility.

E) standards for working conditions.

2)

3) Boeing has reorganized its commercial transport design and manufacturing engineers from functional lines into a matrix organization. This new design is expected to have all of the following benefits except: A) lower costs and quick updates.

B) unite engineering and manufacturing processes.

C) facilitate problem solving.

D) provide customer contacts.

E) enhance product consistency.

3)

4) Having established that the matrix organizational structure is appropriate, management can expect to integrate the following competency on a worldwide basis: A) geographic knowledge.

B) functional competence in finance, production and marketing.

C) product knowledge and know-how.

D) knowledge of customer or industry and its needs.

E) All of the above are competencies.

4)

5) When an organization assigns regional or worldwide product responsibility to its product divisions, there are several advantages except: A) can help in integrating operations.

B) can result in saving development costs.

C) products can be tailored to local market needs.

D) manufacturing standardization can occur.

E) can result in significant economies.

5)

1

6) The ability to speak foreign languages is one difference between managers born and raised in the United States and those born and raised elsewhere. Which of the following is true and reflects this statement?

A) There are 200 million Indian children studying Chinese.

B) Chinese managers study English as much as they study Chinese.

C) There are 200 million Chinese children studying English.

D) There are 24 million American children studying Chinese.

E) There are equal numbers of American and Chinese children studying English.

6)

7) Under the geographical and product division structures, for the company with French origins, France is: A) a special unit of the European market.

B) a product market in European Union.

C) the headquarter country market.

D) simply another geographic market.

E) a divisional market in Europe.

7)

8) Concepts such as "assembler value chains" and "downstream value chains" are associated with: A) traditional assembly designs.

B) lean production.

C) the matrix structure.

D) polycentric organizational designs.

E) the global marketing audit.

8)

9) In the fast changing, competitive environment, new global realities are emerging, which include all of the following needs except: A) to deliver best quality.

B) to be customer driven.

C) to be cost effective.

D) to deliver quickly.

E) to deliver success.

9)

10) An important leadership task involves articulating all of the following points except: A) beliefs.

B) activities.

C) policies.

D) values.

E) status.

10)

11) In developing countries, globalization's opponents accuse companies of: A) placing intellectual property rights ahead of human rights.

B) promoting unhealthy diets and unsafe food technologies.

C) undermining local cultures.

D) pursuing unsustainable consumption.

E) all of the above

11)

12) Rebecca Van Dyck is the chief marketing officer of: A) Facebook (United States).

B) Coca-Cola (United States).

C) L'Oreal (France).

D) Levi's (United States).

E) SAP AG (Germany).

12)

2

13) Satya Nadella is the chief executive officer of: A) PepsiCo (USA).

B) Ford Motor Company (USA).

C) Pharmacia Corporation (USA).

D) Nissan Motor (Japan).

E) Microsoft (USA).

13)

14) Organizations, in order to be globally successful, must be viewed as a portfolio of: A) policies.

B) competencies.

C) activities.

D) businesses.

E) products.

14)

15) In contrast to the lean producers, U.S. mass producers typically maintain operations that involve all of the following except: A) employee teamwork.

B) less mechanization.

C) limited quality control.

D) divide employees with no overlap.

E) greater labor direct content.

15)

16) In today's dynamic global competitive environment, organizations need to develop new forms of: A) self-reference criterion.

B) geographic structure.

C) ethnocentrism and myopia.

D) export department structure.

E) flexibility, efficiency, and responsiveness.

16)

17) When Brazilian Carlos Ghosn was installed as chief executive, he introduced two new words into Nissan's lexicon: A) speed and commitment.

B) activities and commitment.

C) beliefs and values.

D) policies and speed.

E) values and activities.

17)

18) Yong Nam, CEO of LG, recently stipulated that English would be required throughout the company. His reasons for this action included all of the following statements except: A) impede information sharing.

B) facilitate decision making.

C) not to depend on a small group of people.

D) the need to have seamless communication.

E) utilizing everybody's wisdom.

18)

3

19) The organization design in which an employee reports to both a country manager and a functional manager is a(n): A) worldwide product division structure.

B) geographic structure.

C) matrix structure.

D) regional management center.

E) international division structure.

19)

20) Which of the following does not describe the Toyota Production System (TPS)?

A) "just-in-time" B) jidoka C) built-in quality D) visualizing problems E) fixed setup time

20)

21) Which of the following assumptions does not belong in a list of characteristics of lean production?

A) maximize backwards integration B) labor is more costly than machines C) minimize inventory to cut costs and wastage D) inspection to prevent defective production E) set up time can be reduced

21)

22) Which of the following does not belong in a list of mass production in an automobile company such as Ford?

A) organized production machinery B) use of the moving assembly line C) changing value chains D) outsourcing from supplier specialists E) making each worker productive

22)

23) The differences between lean producers and U.S. mass producers is in the way they deal with all of the following groups except: A) customers.

B) suppliers.

C) dealers.

D) managers.

E) distributors.

23)

24) Which of the following is not the way U.S. auto mass producers operate?

A) greater labor content B) lack of employee teamwork C) less flexible mechanization D) less mechanization E) divide employees in discrete specialties

24)

25) Victor Luis is the chief executive officer of: A) 3M (USA).

B) Ford Motor Company (USA).

C) Coach (USA).

D) Pharmacia Corporation (USA).

E) Nissan Motor (Japan).

25)

4

26) As a company's initial international business involvement becomes too much for a single manager or export department to handle, the next step is typically to establish a(n): A) worldwide product division structure.

B) geographic structure.

C) matrix structure.

D) regional management center.

E) international division structure.

26)

27) One of the potential drawbacks of a regional management center is that: A) pan-regional coordination efforts can suffer.

B) the cost can be prohibitive.

C) there is a lack of coordinated decision making.

D) regional management may take a one-sided approach when implementing corporate objectives.

E) the company may lose its "insider" advantage.

27)

28) Primary stakeholders include all of the following except: A) top management.

B) suppliers.

C) employees.

D) media.

E) customers.

28)

29) Which one of the following statements is incorrect regarding matrix organizational structure?

A) The matrix structure is not always appropriate.

B) Managers in a matrix culture recognize the need to resolve issues.

C) In a matrix organization, managers rely on higher authorities for decisions.

D) A matrix organization requires fundamental changes in management behavior.

E) In a matrix organization, influence is based on technical competence and interpersonal sensitivity.

29)

30) Lessons that are learned from Starbucks' cooperation with NGOs include all of the following except: A) appreciate the value of the NGOs dependence.

B) recognize that collaboration involves some compromise.

C) think strategically about relationships with NGOs. D) don't wait for a crisis to collaborate.

E) understand that building relationships with NGOs takes time.

30)

31) In addition to "selling" their vision, top management at both Whirlpool and GE face the formidable task of building: A) access to distribution channels.

B) a cadre of globally oriented managers.

C) their company stature.

D) physical layout and design.

E) a cadre of loyal customers.

31)

5

32) Secondary stakeholders include all of the following except: A) general business community.

B) local community groups.

C) media.

D) employees.

E) nongovernmental organizations.

32)

33) According to David Whitwam, former CEO of Whirlpool, one must create an organization whose people are: A) working together to solve the biggest global problems.

B) constantly working together to identify best global opportunities.

C) adept at exchanging ideas, processes, and symptoms.

D) able to adapt to systems across borders.

E) absolutely free of the "not-invented here" syndrome.

33)

34) The advantages that a regional management center can offer include all of the following except: A) coordinated control.

B) pan-regional decision making.

C) coordinated regional planning.

D) coordinated decision making.

E) considerable cost saving.

34)

35) A company with headquarters in the United States and operational units in the Netherlands, France, Italy, and Spain would be well advised to consider establishing a(n): A) matrix structure.

B) international division structure.

C) geographic structure.

D) regional management center.

E) worldwide product division structure.

35)

36) Which of the following is the best organization structure for global marketing?

A) matrix B) geographic structure C) international division structure D) worldwide product division structure E) There is no single "best" structure.

36)

37) Management experts often use terms like ________ to describe an organization in which autonomous business units operate with their own agendas and a minimum of horizontal interdependence.

A) towers B) skyscrapers C) fountains D) chimneys E) sprinklers

37)

6

38) According to Prahalad and Hamel, a core competence has all of the following characteristics except: A) it is easy for competitors to imitate.

B) potential access to a wide variety of markets.

C) benefits to customers.

D) it is difficult for competitors to imitate.

E) a significant contribution to perceived customer benefits.

38)

39) Which form of organization design is capable of integrating geographic knowledge, product knowledge, functional competencies, and customer knowledge?

A) geographic structure B) international division structure C) worldwide product division structure D) matrix structure E) regional management center

39)

40) Sony's Blu-ray DVD format has gained widespread acceptance. Sony, Sharp, Panasonic, and other Japanese manufacturers are all experiencing ________ sales of traditional electronics products.

A) improving B) horizontal C) vertical D) declining E) increasing

40)

41) According to Carly Fiorina, former CEO of Hewlett-Packard, leadership is not about: A) connecting at multiple levels.

B) capturing hearts.

C) empowering others.

D) challenging minds.

E) bragging rights.

41)

42) Hershey rolled out a new line of condensed-milk candies, named Yo-man, specifically targeting the premium candy segment in: A) Japan.

B) India.

C) South Korea.

D) China.

E) Mexico.

42)

43) Which global company has dissolved its matrix structure in order to achieve "greater speed and efficiency by further focusing and flattening the organization"?

A) ABB B) Pearson PLC C) Levi Strauss D) Whirlpool E) Gillette

43)

44) Which global marketing expert recommends an organization design based on a "global superstructure" that views the world in terms of 30 regions?

A) Kazuo Inamori B) Michael Porter C) Paul Krugman D) Kenichi Ohmae E) Tom Peters

44)

7

45) Which of the following does not contribute to the establishment of an international division?

A) an organizational unit should be headed by a committed senior manager B) complexity of international operations to make its own decisions C) a lack of desire by management to scan the globe for opportunities and threats D) recognition of the need for internal specialists E) assembling a staff that will take the responsibility to coordinate

45)

46) Which one of the following companies has a woman as the global chief marketing officer in the United States?

A) Apple B) Procter & Gamble C) Starbucks D) Ford Motor Company E) Coca-Cola

46)

47) Organizations vary in terms of the size and potential of targeted global markets and local management competence in different country markets. Considering different factors and facts related to the constellation of pressures, which of the following statements is not accurate?

A) Some patterns are common among different organizations.

B) No two organizations pass through similar stages.

C) Conflicting pressures may arise from the need for product and technology.

D) Conflicting pressures may arise from the need for better organization.

E) No two organizations arrive at precisely the same organizational pattern.

47)

48) The key to successful matrix management is ensuring that managers are able to: A) maintain technical systems.

B) adhere to matrix structure.

C) resolve conflicts and achieve integration.

D) adopt a matrix design.

E) preserve existing organizational culture.

48)

49) Employee ability is emphasized in a lean production environment. Before being hired, people seeking jobs with Toyota participate in the Day of Work, an assessment test to determine who has the right mix of qualities. These qualities include all of the following except: A) problem solving.

B) team attitude.

C) decision making.

D) team work.

E) dexterity.

49)

50) A company with headquarters in Europe and operational units in Canada, the United States, and Mexico would be well advised to consider establishing a(n): A) international division structure.

B) regional management center.

C) geographic structure.

D) worldwide product division structure.

E) matrix structure.

50)

8

51) In a socially responsible firm, employees perform all of the following except: A) pursue goals and policies that are in society's best interest.

B) use moral principles as guidelines.

C) conduct business in an ethical manner.

D) develop their own core ideologies.

E) distinguish between right and wrong.

51)

52) The universal concerns for global companies established by the United Nations Global Compact consist of the following three dimensions: A) content domains, animal rights, and labor.

B) content domain, human conditions and animal rights.

C) human rights, labor, and the environment.

D) factor conditions, demand conditions, industry conditions.

E) human rights, animal rights, and the environment.

52)

TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.

53) The differences between lean producers and U.S. mass producers in the way they deal with their respective dealers, distributors, and customers are as dramatic as the differences in the way they deal with their suppliers.

53)

54) There is general agreement that the matrix design is the single best organization structure for global marketing.

54)

55) When Hershey created its international division in 2005, J.P. Bilbrey, the division's senior vice president, noted that Hershey would no longer utilize the extension strategy of exporting its chocolate products from the United States.

55)

56) Subaru's assembly plant in Indiana is the first "zero landfill" auto plant in the United States.

56)

57) A study by the Economic Policy Institute found that, in 2016, CEOs were paid 100 times more than the average worker.

57)

58) One of the characteristics of core competence is that it is difficult for competitors to imitate.

58)

59) Carly Fiorina, former CEO of Hewlett-Packard, said that leadership is not about hierarchy or title or status; it's about having influence and mastering change.

59)

60) Nokia's reversal of fortune at the hands of Apple and Google underscores the fact that today's executives must rethink the concept of the corporation if they wish to operationalize the concept of core competencies.

60)

61) The increasing importance of the European Union (EU) as a regional market has prompted a number of companies to change their organizational structures by setting up regional headquarters there.

61)

62) A CEO has to look at the entire global economy and then put the company's resources where they will capture the biggest market share of every region.

62)

9

63) By the early 2000s, Sony was faltering due to the rapid consumer acceptance of flat-panel wide-screen TV sets.

63)

64) Sony, Sharp, Panasonic, and other Japanese manufacturers are all experiencing declining sales of traditional electronics products, whereas Apple and Samsung have risen to prominence in the competitive landscape once dominated by the Chinese.

64)

65) Jack Welch encountered resistance at GE and said that, "The lower you are in the organization, the less clear it is that globalization is great."

65)

66) Des Moines, Iowa-based Meredith Corporation participates in international markets by means of foreign licensing agreements that are administered by a copyrights and contracts manager.

66)

67) A stakeholder is any group or individual that is affected by, or takes an interest in, the policies and practices adopted by an organization.

67)

68) As markets globalize, and as Japan opens its own market to more competition from overseas, more Japanese companies are likely to stick to the traditional organization patterns.

68)

69) A potential advantage of the organization on product basis is that the local input from individual country managers may not be ignored, with the result that products will be sufficiently tailored to local markets.

69)

70) Former Whirlpool CEO David Whitwam described his own staffs' resistance in the early 1990s after he had approved the acquisition of Royal Philips Electronics' European home appliance division.

70)

71) Before retiring at the end of 2008, Unilever Group Chief Executive Patrick Cescau wanted to reconnect the company with its heritage of sustainability and concern for the environment. This and other values reflect Unilever's philosophy of "doing well by doing good."

71)

72) One of the four basic competencies that a matrix design can achieve on a worldwide basis is that it helps in providing a knowledge of the customer and its needs.

72)

73) During his years as chief executive of GE, Jack Welch discovered that many employees resisted his ideas about the need to globalize the company.

73)

74) Nike came under fire from critics who alleged poor working conditions in the factories that make the company's athletic shoes.

74)

75) A key issue in global organization is when to achieve balance between autonomy and integration.

75)

76) The U.S. mass producers focus on long-term income and return on investment, whereas Japanese see the process in terms of the short-term perspective.

76)

77) No single correct organizational structure exists for global marketing.

77)

78) One of the Corporate Social Responsibility (CSR) initiatives by IKEA's primary carpet supplier in India is to provide good working conditions for children working in India's carpet industry.

78)

10

79) One of the forces restraining the growth of global business and global marketing is the functioning of globalization.

79)

80) The Subaru nameplate is synonymous with the company's Symmetrical All-Wheel Drive and Partial Zero Emissions Vehicle (PZEV) engineering.

80)

81) Sigismundus Lubsen, the former president and CEO of Quaker Chemical Corporation, is a good example of today's cosmopolitan executive. Born in the Netherlands and educated in Rotterdam as well as New York, Lubsen speaks Dutch, English, French, and German.

81)

82) The matrix organization requires fundamental changes in management behavior, organizational culture, and technical systems.

82)

83) The matrix organization is inappropriate when the market is demanding.

83)

84) Corporate social responsibility (CSR) refers to a company's obligation to pursue goals and policies that are in a company's best interest.

84)

85) Walmart has been the target of criticism by activists, urging management to pay higher wages to hourly employees.

85)

86) Despite the fact that Starbucks is widely admired for forward-thinking management policies, Global Exchange allowed the company to further demonstrate its commitment to social responsibility by selling Fair Trade coffee.

86)

87) The ability to speak at least one other foreign language is one difference between managers born and raised in the United States and those born and raised elsewhere.

87)

88) Being socially responsible is only the right thing to do; it can distinguish a company from its industry peers.

88)

89) In developing countries, globalization's opponents accuse companies of placing intellectual property rights ahead of human rights.

89)

90) Management writers often use terms like silos, stovepipes, or chimneys to describe an organization in which autonomous business units operate with their own agendas and a minimum of horizontal interdependence.

90)

ESSAY. Write your answer in the space provided or on a separate sheet of paper.

91) At Whirlpool, North American operations are organized in a matrix structure. What is the key to successful matrix management?

92) McDonald's organizational design integrates the international division and geographical structures. How does the geographical and product division structure work in a global context?

93) How does Johnson & Johnson use and communicate its ethics statement?

11

94) After establishing that the organizational matrix is appropriate for a business, what should management expect as to the integration of basic competencies on a worldwide basis?

95) What are regional management centers? What are the advantages of having such centers in global businesses?

96) What are some examples of global marketing where corporations have undertaken Corporate Social Responsibility (CSR)?

97) What should be a leader's role in practicing corporate social responsibility (CSR)? Give examples of some firms known for initiating successful socially responsible corporate programs.

98) What is stakeholder analysis? Give an example of the beneficial outcome of social responsibility to all stakeholders.

99) What are the assumptions about mass production compared to the Toyota Production System?

100) How important is the nationality of the top management position holder in global businesses?

101) What is a matrix organization? Describe giving examples.

102) As a company's international business grows, the need for having international divisions becomes evident. Explain how an international division structure works and what factors contribute to the establishment of an international division.

12

Answer Key Testname: C17

1) A 2) D 3) D 4) C 5) C 6) C 7) D 8) B 9) E 10) E 11) E 12) A 13) E 14) B 15) A 16) E 17) A 18) A 19) C 20) E 21) A 22) D 23) D 24) B 25) A 26) E 27) B 28) D 29) C 30) A 31) B 32) D 33) C 34) E 35) D 36) E 37) D 38) A 39) D 40) D 41) E 42) D 43) A 44) D 45) C 46) C 47) E 48) C 49) C 50) B 13

Answer Key Testname: C17

51) D 52) C 53) TRUE 54) FALSE 55) TRUE 56) TRUE 57) FALSE 58) TRUE 59) TRUE 60) TRUE 61) TRUE 62) FALSE 63) FALSE 64) FALSE 65) TRUE 66) TRUE 67) TRUE 68) FALSE 69) FALSE 70) TRUE 71) TRUE 72) TRUE 73) TRUE 74) TRUE 75) FALSE 76) FALSE 77) TRUE 78) FALSE 79) FALSE 80) TRUE 81) TRUE 82) FALSE 83) FALSE 84) FALSE 85) TRUE 86) FALSE 87) TRUE 88) FALSE 89) TRUE 90) TRUE 91) The key to successful matrix management is ensuring that managers are able to resolve conflicts and achieve integration of organization programs and plans. The mere adoption of a matrix design or structure does not create a matrix organization. The matrix organization requires a fundamental change in management behavior, organizational culture, and technical systems. In a matrix, influence is based on technical competence and interpersonal sensitivity, not on formal authority. In a matrix culture, managers recognize the absolute need to resolve issues and choices at the lowest possible level and do not rely on higher authority. An important task of the current day top management is to eliminate a one-dimensional approach to decisions and encourage the development of multiple management perspectives and an organization that will sense and respond to a complex and fast-changing world.

14

Answer Key Testname: C17

92) As a company becomes more global, management frequently faces the dilemma of whether to organize by geography or by product lines. The geographical structure involves the assignment of operational responsibility for geographic areas of the world to line managers. The corporate headquarters retains responsibility for worldwide planning and control, and each area of the world—including the "home" or base market—is organizationally equal. For the company with French origins, for example, France is simply another geographic market under the organizational arrangement.

This structure is most common in companies with closely related product lines that are sold in similar end-use markets around the world. For example, the major international oil companies utilize the geographical structure. McDonald's U.S. is organized into five geographical operating divisions, and McDonald's International has four. When an organization assigns regional or worldwide product responsibility to its product divisions, manufacturing standardization can result in significant economies. One potential disadvantage of the product approach is that local input from individual country managers may be ignored with the result that products will not be sufficiently tailored to local markets.

93) At Johnson & Johnson (J&J), the ethics statement is known as "Our Credo"; first introduced in 1943, the credo has been translated into dozens of languages for Johnson & Johnson employees around the world. As management guru Jim Collins notes in his book Built to Last, J&J's credo is a "codified ideology" that guides managerial actions. J&J operationalizes the credo in various ways, including through its organizational structure and its planning and decision-making processes. The credo also serves as a crisis management guide. For example, during the Tylenol crisis of the early 1980s, J&J's adherence to the credo enabled the company to mount a swift, decisive, and transparent response to what might have been a devastating blow to its business.

94) There are four basic competencies on a worldwide basis that a manager can expect the matrix to integrate once it is established that it is appropriate for the organization. These are: (1) geographic knowledge—an understanding of the basic economic, social, cultural, political, and governmental markets and competitive dimensions of a country is essential; (2) product knowledge and know-how—product managers with a worldwide responsibility can achieve this level of competence on a global basis. Another way of achieving global product competence is simply to duplicate product management organizations in domestic and international divisions, achieving high competence in both organizational units; (3) functional competence in such fields as finance, production, and especially, marketing —corporate functional staff with worldwide responsibility contributes toward the development of functional competence on a global basis; (4) a knowledge of the customer or industry and its needs—certain large and extremely sophisticated global companies have staff with a responsibility for serving industries on a global basis to assist the line managers in the country organizations in their efforts to penetrate specific customer markets. Under this arrangement, instead of designating national organizations or product divisions as profit centers, both are responsible for profitability.

95) When business is conducted in a single region that is characterized by similarities in economic, social, geographical, and political conditions, there is both justification and need for a management center. Thus, another stage of organizational evolution is the emergence of an area or regional headquarters as a management layer between the country organization and the international division headquarters. The increasing importance of the EU as a regional market has prompted a number of companies to change their organizational structures by setting up regional headquarters there. A regional center typically coordinates decisions on pricing, sourcing, and other matters.

Executives at the regional center also participate in the planning and control of each country's operations with an eye toward applying country knowledge on a regional basis and optimally utilizing corporate resources on a regional basis. Regional management can offer a company several advantages. First, many regional managers agree that an on-the-scene regional management unit makes sense where there is a real need for coordinated, pan-regional decision making. Coordinated regional planning and control are becoming necessary as the national subsidiary continues to lose its relevance as an independent operating unit. Regional management can probably achieve the best balance of geographical, product, and functional considerations required to implement corporate objectives effectively. By shifting operations and decision making to the region, the company is better able to maintain an insider advantage.

The major disadvantage of a regional center is its cost.

15

Answer Key Testname: C17

96) There are several corporations who have made special effort towards CSR. Some of the examples include: (a) Starbucks founder and CEO Howard Schultz's enlightened human resources policies have played a key part in the company's success. Partners, as the company's employees are known, who work 20 hours or more per week are offered health benefits; partners can also take advantage of an employee stock option plan known as Bean Stock; (b) IKEA's primary carpet supplier in India monitors subcontractors to ensure that they do not employ children. IKEA also helps lower-caste Indian women reduce their indebtedness to moneylenders. In an effort to create a more child-friendly environment in Indian villages, IKEA sponsors "bridge schools" to increase literacy so young people—including girls and untouchables—can enroll in regular schools; (c) The Avon company's Breast Cancer Awareness Crusade has raised hundreds of millions of dollars for cancer research. The money is used to fund research in 50 countries; and (d) Subaru's assembly plant in Indiana is the first "zero landfill" autoplant in the United States. More than 99 percent of the packaging taken in by the plant is recycled. Subaru also partners with key organizations such as the Leave No Trace Center for Outdoor Ethics and United By Blue, the ocean-friendly apparel brand. These are some of the examples of CSR, however, many other corporations are undertaking other helpful programs.

97) The leaders of global companies must practice corporate social responsibility (CSR) which can be defined as a company's obligation to pursue goals and policies that are in society's best interests. Organizations can demonstrate their commitment to CSR in a variety of ways, including cause-marketing efforts or a commitment to sustainability.

Starbucks' enlightened human resources policies have played a key part in the company's success. Company employees are treated as partners, who work 20 hours or more per week, are offered health benefits, stock options, and other benefits. In a socially responsible firm, employees conduct business in an ethical manner. In other words, they are guided by moral principles that enable them to distinguish between right and wrong. At many companies, a formal statement or code of ethics summarizes core ideologies, corporate values, and expectations. GE, Boeing, and United Technologies Corp. are some of the American companies offering training programs that specifically address ethics issues. At Johnson & Johnson, the ethics statement is known as "Our Credo." The issues of CSR become complicated for the global company with operations in multiple markets. The chief executive of a global firm in a developed country or government policymakers have the dilemma of selecting home country or developed countries' ethical standards. On the other hand, in developing countries, globalization's opponents accuse companies of undermining local cultures, placing intellectual property rights ahead of human rights, promoting unhealthy diets and unsafe food technologies, and pursuing unsustainable consumption. Environmental degradation and labor exploitation are also key issues. A company's reputation can very quickly get tarnished if activists target its policies and practices. In addition, companies that do business around the globe may be in different stages of evolution. Thus, a multinational firm may rely on individual country managers to address CSR issues on an ad hoc basis, while a global or transnational firm may create a policy adopted by the headquarters.

98) Stakeholder analysis is the process of formulating a "win-win" outcome for all stakeholders. One such example of the "win-win "outcome of social responsibility to all stakeholders is described below.

U2 singer Bono and Bobby Shriver are cofounders of Product (RED), a partnership with well-known global companies to raise money to fight disease in Africa. Apple, American Express, Emporio Armani, Converse, Gap, and Motorola all offer (RED)-themed merchandise and services to their customers. The partners are demonstrating their commitment to corporate social responsibility by pledging to donate a percentage of the profits generated to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. To launch its (RED) line, Gap's advertising campaign used celebrities and one-word headlines consisting of verbs that end in "-red." For example, one ad featured the word "INSPI(RED)" superimposed over a photo of director Steven Spielberg wearing a Product (RED) leather jacket.

16

Answer Key Testname: C17

99) Under the traditional assumptions related to mass production, there are five major differences: (1) maximize machine utilization; (2) fixed setup times; (3) build inventory to reduce unit cost; (4) inspect at end of process; and (5) maximize backwards integration. On the other hand, in the Toyota Production System these five assumptions are: (1) labor is more costly than machines; (2) can reduce setup time; (3) minimize inventory to cut costs and waste; (4) inspect to prevent defective production; and (5) outsource from supplier specialists. These differences are remarkable. To achieve these gains at Toyota, production experts Taiichi Ohno and Shigeo Shingo challenged above-listed traditional assumptions associated with automobile manufacturing. They made changes to operations within the auto company itself such as reducing setup times for machinery. Their innovations have been widely embraced in the industry as a result, individual producers' value chains have been modified, and interfaces between producers and suppliers have been optimized to create more effective and efficient value systems.

100) Many globally minded companies realize that the best person for a top management job or board position is not necessarily someone born in the home country. The ability to speak foreign languages is one difference between managers born and raised in the United States and those born and raised elsewhere. There are many examples of executives who were from countries other than the country where the business is located. Alexander Trotman was born in England and speaks English, French, and German. Howard Stringer is the chief executive at Sony. Generally speaking, however, Japanese companies have been reluctant to place non-Japanese nationals in top positions. For years, only Sony, Mazda, and Mitsubishi had foreigners on their boards. In March 1999, the French company Renault SA bought a stake in Nissan Motor and installed a Brazilian, Carlos Ghosn, as president. An outsider, Ghosn was required to move aggressively to cut costs and make drastic changes in Nissan's structure. He also introduced two new words into Nissan's lexicon: speed and commitment. His life story and exploits have been so important that he is celebrated in a big comic that is popular with Japanese.

101) In the fully developed large-scale global company, product or business, function, area, and customer know-how are simultaneously focused on the organization's worldwide marketing objectives. This type of total competence is a matrix organization. Management's task in the matrix organization is to achieve an organizational balance that brings together different perspectives and skills to accomplish the organization's objectives. In 1998, both Gillette and Ericsson announced plans to reorganize into matrix organizations. Ericsson's matrix is focused on three customer segments: network operators, private consumers, and commercial enterprises. Gillette's new structure separates product-line management from geographical sales and marketing responsibility. Likewise, Boeing has reorganized its commercial transport design and manufacturing engineers into a matrix organization. This is built around five platform or aircraft model-specific groups. The new design is expected to lower costs and quicken updates and problem solving. It will also unite essential design, engineering, and manufacturing processes between Boeing's commercial transport factories and component plants, enhancing product consistency. The matrix form of organization is well-suited to global companies because it can be used to establish a multiple-command structure that gives equal emphasis to functional and geographical departments. Four considerations are suggested regarding the matrix organizational design. First, the matrix is appropriate when the market is demanding and dynamic. Second, employees must accept higher levels of ambiguity and understand that policy manuals cannot cover every eventuality. Third, in country markets where the command-and-control model persists, it is best to overlay matrices on only small portions of the workforce. Finally, management must be able to clearly state what each axis of the matrix can and cannot do.

102) The complexity of coordination and directing activities grows with the growth of international business. Pressure is created to assemble a staff with the responsibility for coordination and direction of the growing international activities of the organization. This demands the creation of the international division as has happened in many of the organizations such as Walmart, Levi Strauss, Best Buy, and Walt Disney Company. Four factors contribute to the establishment of an international division. First, top management's commitment to global operations has increased enough to justify an organizational unit headed by a senior manager. Second, the complexity of international operations requires a single organizational unit whose management has sufficient authority to make its own determination on important issues such as which market entry strategy to employ. Third, an international division is frequently formed when the firm has recognized the need for internal specialists to deal with the special demands of global operations. A fourth contributing factor is management's recognition of the importance of strategically scanning the global horizon for opportunities and aligning them with company resources rather than simply responding on an ad hoc basis to situations as they arise.

17