Armstrong Mai08 Tif 15

Chapter 15The Global Marketplace

GENERAL CONTENT: Multiple-Choice Questions

1. _____ is arguably now the best known and most admired beverage brand in the world.a. Pepsib. Coca-Colac. A & W root beerd. Gatoradee. Dr. Pepper

(Answer: b; p. 465; Easy)

2. Coca-Cola spends lavishly on Coke advertising—some _____ a year.a. $100,000b. $900,000,000c. $5,000,000d. $300,000e. $1,200,000,000

(Answer: e; p. 465; Moderate)

3. The Coca-Cola Company makes nearly _____ different beverage brands. One is a pear-flavored drink in Turkey.a. 50b. 25c. 100d. 300e. 400


4. Coca-Cola dominates the global soft drink market. More than _____ percent of the company’s sales come from abroad.a. 20b. 70c. 95d. 50e. 30

(Answer: b; p. 466; Moderate)

439

5. What is one reason why global markets are hard to deal with?a. Managers need to learn other languages.b. Managers deal with strange currency.c. Managers face political uncertainties.d. A and Ce. All of the above.

(Answer: e; p. 466; Easy)

6. The world is _____ rapidly with the advent of faster communications, transportation, and financial flows.a. expandingb. explodingc. shrinkingd. A and Be. none of the above

(Answer: c; p. 467; Moderate)

7. The _____ of every manager is the _____.a. adaptation; quotab. product; quotac. export; embargod. scope; worlde. fear; global market

(Answer: d; p. 467; Easy)

8. Firms that stay at home to play it safe _____.a. lose their chances to enter other marketsb. risk losing their home marketsc. are far more stabled. A and Be. all of the above

(Answer: d; p. 468; Moderate)

9. Companies that go global confront several major problems. Which is not one of them?a. Trade barriers.b. Corruption.c. Highly unstable governments.d. Gains research and development.e. B and C

(Answer: d; p. 468; Challenging)

440

10. A _____ is one that, by operating in more than one country, contains marketing, production, research and development, and financial advantages that are not available to purely domestic competitors.a. global firmb. global industryc. whole-channel viewd. direct investmente. none of the above

(Answer: a; p. 468; Easy)

11. Before deciding whether to operate internationally, a company must thoroughly understand the _____.a. management contractb. economic communityc. international marketing environmentd. adapted marketing mixe. all of the above

(Answer: c; p. 468; Challenging)

12. A(n) _____ is a tax levied by a foreign government against certain imported products.a. embargob. tariffc. exportd. price packe. quota


13. A(n) _____ is a limit on the amount of goods that an importing country will accept in certain product categories.a. embargob. tariffc. benchmarkd. quotae. barter


14. Biases against U.S. company bids are examples of _____.a. quotasb. tariffsc. boycottsd. nontariff trade barrierse. barter exchanges


441

15. _____ is a nearly 60-year-old treaty designed to promote world trade by reducing tariffs and other international trade barriers.a. WTOb. GATTc. POPd. MTCe. NAFTA

(Answer: b; p. 469; Challenging)

16. Beyond reducing trade barriers and setting international standards for trade, the Uruguay Round established the _____ to enforce _____ rules.a. GATT; WTOb. POP; WTOc. WTO; GATTd. MTC; GATTe. EU; USA


17. One of _____’s first major tasks was to host negotiations on the General Agreement on Trade in Services, which deals with worldwide trade in banking, securities, and insurance services.a. GATTb. MTCc. WTOd. WTTLe. POP


18. Another name for economic communities is _____.a. global firmb. free trade zonesc. management communitiesd. production communitiese. none of the above


19. _____ is a group of nations organized to work toward common goals in the regulation of international trade.a. Joint venturingb. A standardized marketing mixc. An economic communityd. A global firme. A multinational enterprise

(Answer: c; p. 469; Easy)

442

20. An economic community that was formed in 1957 was then called the Common Market. Today it represents one of the world’s single largest markets and contains 25 member countries. What is the name of this market today?a. Fortress Europe.b. European Union.c. European Community.d. European Economic Community.e. Atlantic Free-Trade Area.

(Answer: b; pp. 469–470; Moderate)

21. _____ poses threats for the United States. Lower barriers inside Europe will create only thicker outside walls.a. European Unionb. Euro-Scandinavian Pactc. Euro-American Uniond. Atlantic Free-Trade Areae. None of the above


22. Some observers envision a _____ that heaps favors on firms from European Union countries but hinders outsiders by posing obstacles such as stiff import quotas.a. direct investmentb. adapted marketing mixc. product adaptationd. Fortress Europee. North and South American agreement


23. Adoption of the euro will do all of the following except _____.a. decrease much of the currency riskb. make countries with previously weak currencies more attractive marketsc. highlight differences in pricing and marketing from country to countryd. create a homogenous markete. none of the above


24. In January 1994, _____ established a free trade zone among the United States, Canada, and Mexico.a. GATTb. WTOc. NAFTAd. EUe. WTTL


443

25. What is the name of the single agreement that created a market of 434 million people and will eliminate all trade barriers and investment restrictions among the United States, Mexico, and Canada?a. GATT.b. WTO.c. NAFTA.d. WTTL.e. EU.


26. Each day the United States exchanges more than $500 billion in goods and services with _____, its largest trading partner.a. Canadab. Englandc. Brazild. Germanye. Japan

(Answer: a; p. 470; Moderate)

27. Given the apparent success of NAFTA, talks are now underway to establish a Free Trade Area called _____. This zone would include 34 countries stretching from the Bering Strait to Cape Horn.a. GATTb. WTOc. FTAAd. NAFTAe. AATF


28. _____ now links nine South and Latin American countries and these countries make up the largest trading block after NAFTA and the European Union.a. NAMb. WTOc. MERCOSURd. ABPUBCe. ECOWAS


29. Two economic factors reflect the countries’ attractiveness as a market: the countries’ industrial structure and their _____.a. communication adaptationb. economic communityc. global firmd. income distributione. transportation systems


444

30. One type of industrial structure is _____. This is where the vast majority of people engage in simple agriculture. They consume most of their output.a. raw material economyb. subsistence economyc. agricultural economyd. emerging economye. industrial economy


31. One type of industrial structure is _____. These are major exporters of manufactured goods and investment funds. They trade goods among themselves and export them to other types of economies for raw materials and semifinished goods.a. material economyb. subsistent economyc. industrializing economyd. industrial economye. emerging economy

(Answer: d; p.; 471; Challenging)

32. One type of industrial structure is _____. In this type of economy, manufacturing accounts for 10 to 20 percent of the country’s economy. As manufacturing increases, the country needs more imports of raw textile materials, steel, and heavy machinery, and fewer imports of finished textiles, paper products, and automobiles.a. industrial economyb. industrializing economyc. materials exporting economyd. subsistence economye. agrarian economy


445

33. One type of industrial structure is _____. These economies are rich in one or more natural resources but poor in other ways.a. industrial economyb. industrializing economyc. raw-material exporting economyd. subsistence economye. none of the above


34. At least four political-legal factors should be considered in deciding whether to do business in a given country. Which is not one of these factors?a. Attitudes toward international buying.b. Government bureaucracy.c. If a state religion is enforced.d. Monetary regulations.e. B and D


35. The political situation in India is _____. a. unstableb. stablec. similar to that of the United States d. B and Ce. none of the above


36. Ideally, the buyer can pay in the seller’s _____.a. demandb. currencyc. quotad. whole-channel-viewe. goods


37. All of the following describe countertrade except what?a. It makes up an estimated 20 percent of all world trade.b. It involves barter.c. It involves counterpurchased. It involves cash.e. None of the above.


446

38. _____ like to sit or stand very close to each other when they talk business—in fact, almost nose-to-nose.a. Americansb. Japanesec. South Americansd. Africanse. Europeans


39. Understanding cultural traditions can help companies to _____. a. survive longer in Asia than in Europeb. avoid embarrassing mistakesc. take advantage of cross-cultural opportunitiesd. B and Ce. none of the above


40. Some critics say that globalization really means Americanization and that exposure to American values and products _____ other cultures.a. erodesb. modernizesc. competes withd. heightense. A and C


41. _____ has been singled out by globalization protestors all over the world, especially when anti-American sentiment peaks. a. Nikeb. KFCc. McDonald’sd. Coca-Colae. All of the above


42. Disneyland Paris _____ at first because _____.a. became popular right away; Paris had a strong need for children’s entertainmentb. flopped; values and behaviors were not consideredc. went slow; the French disliked amusement parksd. B and Ce. none of the above


447

43. Operating _____ is easier and safer.a. globallyb. domesticallyc. outsided. insidee. a forklift


44. Several factors might draw a company into the international arena. What is not one of these factors?a. Global competitors might offer better products at lower prices domestically.b. Domestic markets might be stagnant or shrinking.c. Managers have little international experience.d. The company’s customers may be expanding abroad.e. B and D


45. Before going abroad, there are several things that the company needs to act upon right away. Which is not one of these things?a. Define its international marketing objectives and policies.b. What volume of foreign sales it wants.c. How many countries it wants to market in.d. How many people it wants to employ.e. None of the above.


46. Which of the following help(s) to determine the market attractiveness of a country? a. Geographic factors.b. Income levels of citizens.c. Population size.d. Political climate.e. All of the above.

(Answer: e; p. 476; Challenging)

47. Possible global markets should be ranked on _____. a. market sizeb. market growth c. cost of doing businessd. risk level e. any of the above


448

48. Which is not a mode of entry that companies use when they have decided to sell in a foreign country?a. Exporting.b. Embargo.c. Joint venturing.d. Direct investment.e. strategic alliance.


49. The simplest way to enter a foreign market is through _____.a. joint venturingb. direct investmentc. exportingd. joint ownershipe. contract manufacturing


50. What strategy is not appropriate when a company exports?a. The company produces all its goods in its home country.b. Exporting involves the least change in the company’s product lines.c. The company does not modify product for the export market.d. Exporting involves little change in the company’s investments.e. B and D


51. Companies typically start with _____, working through independent international marketing intermediaries. It involves less investment because the firm does not require an overseas sales force or set of contacts.a. direct exportingb. embargoc. product adaptationd. indirect exportinge. licensing


52. Sellers may eventually move into _____, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy.a. direct exportingb. embargoc. product adaptationd. indirect exportinge. licensing


449

53. A company can conduct direct exporting in several ways. Which is not one of these ways?a. It can set up a domestic export department.b. It can set up an overseas sales branch.c. The company can send home-based sales people abroad to find more business.d. It can work through independent international marketing intermediaries.e. None of the above.

(Answer: d; pp. 478–479; Challenging)

54. The _____ gives the seller more presence and program control in the foreign market and often serves as a display center and customer service center.a. straight product extensionb. sales branchc. market-centered companyd. market nichee. foreign licensing agreement


55. The company can send _____ salespeople abroad at certain times in order to find business.a. energeticb. competitivec. joint venturingd. home-basede. homesick


56. _____ is when a company comes together with a foreign company to produce or market products or services.a. Direct exporting b. Preapproachc. Joint venturingd. Licensing e. Indirect Exporting


57. ______ differs from _____ in that the company joins with a host country partner to sell or market abroad.a. Preapproach; joint venturingb. Exporting; joint venturingc. Joint venturing; exportingd. B and Ce. A and C


450

58. _____ differs from _____ in that an association is formed with someone in the foreign country.a. Direct investment; joint venturingb. Exporting; direct investmentc. Joint venturing; direct investmentd. B and Ce. A and C


59. There are four types of joint ventures. Which is not one of these types?a. Licensing.b. Contract manufacturing.c. Joint ownership.d. Outside management.e. None of the above.


60. _____ is a simple way for manufacturers to enter international marketing. This is an agreement purchased for a fee. The company buys the right to use the company’s manufacturing process, trademark, patent, trade secret, or other item of value.a. Joint venturingb. Licensingc. Contract manufacturingd. A strategic alliancee. None of the above


61. Licensing has potential disadvantages. Which is not a disadvantage?a. The firm has less control over the licensee than it would over its own production

facilities.b. The firm has given up some of its profits.c. It may find it has created a competitor.d. All of the above.e. None of the above.


62. _____ ventures consist of one company joining forces with foreign investors to create a local business in which they share ownership and control.a. Joint ownershipb. Licensingc. Contract manufacturingd. Management contractinge. Limited liability


451

63. _____ means entering a foreign market by developing foreign-based assembly or manufacturing facilities.a. Exportingb. Direct investmentc. Joint venturingd. Foreign venturinge. None of the above


64. A(n) _____ means selling largely the same products and using the same marketing approaches worldwide.a. adapting marketing mixb. global marketing mixc. standardized marketing mixd. exporting marketing mixe. multinational strategy


65. “Take the product as is and find customers for it” is the slogan for _____.a. product strategyb. direct productc. global productd. straight product extensione. product adaptation


66. Regardless of how companies go about pricing their products, their foreign prices will probably be _____ their domestic prices.a. the same asb. lower thanc. higher thand. competitive withe. not comparable with


67. There are three major links between the seller and the final buyer. They are seller’s headquarters organization, channels between nations, and channels within nations. These make up a _______.a. whole-channel viewb. direct-distribution channelc. large-scale channeld. transportation networke. none of the above


452

68. A tax on an import is known as a(n) _____.a. tariffb. boycottc. quotad. embargoe. B and D


69. Very few market opportunities are available in a(n) _____ economy.a. subsistenceb. raw material exportingc. industrializingd. emerginge. industrial


70. Manufacturing accounts for 10 to 20 percent of the economy in a (n) _____ economy.a. subsistenceb. raw material exportingc. industrializingd. industriale. C and D


71. With an adapted marketing mix, _____.a. the product might change while promotion stays the sameb. promotion might change while the product stays the samec. both the product and the promotion might changed. A and Be. all of the above


72. Truly “global brands” tend to have _____.a. standardized marketing mixesb. adapted marketing mixesc. more success in subsistence economiesd. straight product extensionse. A and D


453

73. Which of the following statement is/re true regarding economic communities?a. Trade barriers have increased between the United States and Mexico since

NAFTA was created.b. Tariffs are typically lower or nonexistent between countries in the community.c. The European Union represents the world’s single largest market.d. Converting numerous currencies into the euro has been a failure.e. B and C


74. Industrializing economies do not include _____.a. Egyptb. Indiac. Brazild. Swedene. any of the above


True/|False

75. Coca-Cola brand makes nearly 400 different beverage brands.(True; p. 466; Easy)

76. Sprite’s advertising uniformly targets the world’s young people with “Image is nothing. Thirst is everything. Obey your thirst.”

(True; p. 466; Easy)

77. A global firm is one that gains marketing, production, and financial advantages that are not available to purely domestic competitors.

(True; p. 468; Challenging)

78. A tariff is a tax levied by a foreign government against certain imported products.(True; p. 469; Easy)

79. A quota sets limits on the amount of goods the importing country will accept in certain product categories.


80. Nontariff trade barriers include restrictive product standards that go against American product features.


81. The Japanese plead “uniqueness.” They say that their skin is different and that foreign cosmetic companies must test their products in Japan before selling them there. This is an example of exchange controls.

(False; p. 469; Challenging)

454

82. GATT was established in Uruguay to reduce trade barriers and set international standards for trade.

(False; p. 469; Easy)

83. WTO is an umbrella organization that currently includes 144 nations.(False; p. 469; Easy)

84. Another name for free trade zones is economic communities.(True; pp. 469–470; Moderate)

85. The European Union represents one of the world’s single largest markets.(True; p. 470; Easy)

86. If “Fortress Europe” came about, it would really strengthen the American economy.(False; p. 470; Moderate)

87. NAFTA will eliminate all trade barriers and investment restrictions among the three countries—United States, Canada, and Mexico.


88. MERCOSUR now includes free trade areas for nine South American countries.(True; p. 470; Moderate)

89. Industrializing economies is one of a country’s four industrial structures.(True; p. 471; Easy)

90. Barter is common in subsistence economies. (True; p. 471; Easy)

91. Barter is a form of countertrade.(True; p. 472; Moderate)

92. Japanese like to sit or stand very close to each other when they talk business—in fact, almost nose-to-nose.

(False; p. 473; Moderate)

93. McDonald’s has been singled out by antiglobalization protestors all over the world.(True; p. 475; Moderate)

94. Disneyland Paris flopped at first because the French did not like amusement parks.(False; p. 476; Moderate)

95. The simplest way to enter a foreign market is through exporting.(True; p.; 478; Easy)

455

96. Joint venturing is when two or more U.S. companies jointly invest in distributing products to a foreign country.


97. Licensing is a simple way for manufacturers to enter international marketing with only a little risk.


98. Sears used contract manufacturing in opening up department stores in Mexico, where it found qualified, local manufacturers to produce many of the products it sells.

(True; p. 479; Challenging)

99. The biggest involvement in a foreign market comes through direct investment—the development of foreign-based assembly or manufacturing facilities.


100. Coca-Cola is less sweet or less carbonated in certain countries. This is known as standardized marketing mix.

(False; p. 481; Easy)

101. Kellogg cereals have been very successful with a straight product extension and Jell-O pudding has been successful in the British market.


102. Vidal Sassoon changes the strength of the fragrance in its shampoo for different countries. This is an example of product adaptation.


103. The exchange of U.S. wheat for Russian vodka would be an example of barter. (True; p. 472; Easy)

104. Industrializing and industrial economies both have a middle class.(True; p. 471; Challenging)

Essay

105. Companies that go global confront several major problems. Name five of these problems.

Five major problems that confront companies that try to go global are: high debt, inflation, unstable governments, corruption, and increased government regulations on foreign firms.

(p. 472; Moderate)

456

107. Explain the difference between a tariff and a quota.

A tariff is a tax levied by a foreign government against certain imported products. A quota is a set of limits on the amount of goods the importing country will accept in certain product categories.

(p. 469; Moderate)

108. Explain why the European Union could be considered a threat to the U.S. marketers that want to do business in Europe.

As a result of increased unification, European companies will grow bigger and more competitive. Some observers envision a “Fortress Europe” that heaps favors on firms from European Union countries but hinders outsiders.

(p. 470; Challenging)

109. Explain the raw material exporting economy.

Raw material exporting economies deal with economies that are rich in one or more natural resources but poor in other ways.

(p. 471; Moderate)

110. At least four political-legal factors should be considered in deciding whether to do business in a given country. One of these is political stability. Explain political stability.

Political stability occurs when government changes hands, sometimes violently. The foreign company’s property may be taken, its currency holding may be blocked, or import quotas or new duties may be set.

(p. 472; Moderate)

111. Explain why Disneyland Paris flopped at first and how it was remedied.

Disneyland Paris flopped at first because it failed to take local cultural values and behaviors into account. The new park blends Disney entertainment and attractions with the history and culture of European films. Now at the park, they speak six different languages and rides are narrated by foreign-born stars.


112. Colgate is waging a pitched battle in China, seeking control of the world’s largest toothpaste market. What problems has Colgate come up against?

Only 20 percent of China’s rural dwellers brush daily, so Colgate aggressively pursues promotional and education programs. They visit local schools and sponsor oral care research. Another is facing their competitors. Unilever and Procter & Gamble’s Crest are their biggest competitors.

(p. 477; Moderate)

457

113. What are two advantages of exporting?

Two advantages of exporting are: the company produces all of its goods in its home country and it involves the least change in the company’s product lines, organization, investments, and mission.

(p. 479; Easy)

114. Discuss how the international trade system, economic, political-legal, and cultural environments affect a company’s international marketing decisions.

A company must understand the global marketing environment, especially the international trade system. It must assess each foreign market’s economic, political-legal, and cultural characteristics. The company must then decide whether it wants to go abroad and consider the potential risks and benefits. It must decide on the volume of international sales it wants, how many countries it wants to market in, and which specific markets it wants to enter. This decision calls for weighing the probable rate of return on investment against the level of risk.


115. Identify the three major forms of global marketing organization.

The company must develop an effective organization for international marketing. Most firms start with an export department and graduate to an international division. A few become global organizations, with worldwide marketing planned and managed by the top officers of the company. Global organizations view the entire world as a single, borderless market.

(p. 489; Moderate)

APPLICATION CONTENT: Multiple-Choice Questions

116. A Chinese New Year television ad features a dragon in a holiday parade, adorned with red Coke cans. The spot concludes, “For many centuries, the color red has been the color for good luck and prosperity. Who are we to argue with ancient wisdom?” This is an example of _____.a. localized positioningb. joint venturingc. product inventiond. straight product extensione. product adaptation


458

117. _____’s advertising campaign taps into the rebellious side of teenagers and into their need to form individual identities. This advertising, teens tell them, is incredibly relevant in nearly every market we go into. They do not change it much for different countries. The advertising states “Image is nothing. Thirst is everything. Obey your thirst.”a. Coca-Colab. Nikec. Sprited. Gatoradee. Dr. Pepper


118. When Japanese plead “uniqueness” and claim that Japanese skin is different so foreign cosmetics companies must test their products in Japan before selling there, they are practicing _____.a. exchange controlsb. nontariff tradec. boycottd. embargoe. standardization


119. Daimler Chrysler agreed to sell 30 trucks to Romania in exchange for 150 Romanian jeeps, which it then sold to Ecuador for bananas, which were in turn sold to a German supermarket chain for German currency. What is this an example of?a. joint venturingb. product transportationc. countertradingd. adapted paye. global strategy


120. When Nike faced a situation in a Muslim country with the stylized “Air” logo on its shoes, the Muslims were offended because its “Air” resembled “Allah” in Arabic script. This is an example of _____.a. the impact of culture on marketing strategyb. marketing embarrassmentc. an expensive mistaked. all of the abovee. none of the above


459

121. Whirlpool became very popular among Indian homemakers because _____.a. their washing machines are easy to useb. they designed washing machines that are especially good with white fabricc. they lowered the cost of washing machines for the average householdd. they colored their machines rede. none of the above


122. _____ offers an opportunity to entrepreneurs to run a local business with local people supplied by a local infrastructure.a. Nikeb. McDonald’sc. Penteld. Krogere. Wal-Mart


123. What must Colgate do to reach the toothpaste market in China?a. Colgate must compete against the mouthwash market.b. Colgate must supply toothpaste in China.c. Colgate must persuade the Chinese to brush their teeth.d. Colgate must enter via a strategic alliance.e. None of the above.


124. Coca-Cola markets internationally by _____ bottlers around the world and supplying them with the syrup needed to produce the product.a. contract manufacturingb. management contractingc. licensingd. joint ownership withe. instilling


125. Sears used _____ in opening up department stores in Mexico and Spain. It found qualified local manufacturers to produce many of the products it sells.a. licensingb. contract manufacturingc. management contractingd. joint ownershipe. none of the above


460

126. Hilton uses this arrangement in its hotels around the world. This helps others learn how to run their hotels. The domestic firm exports services rather than products. This type of joint venture is known as _____.a. contract manufacturingb. licensingc. management contractingd. joint ownershipe. a strategic alliance


127. Vidal Sassoon shampoos contain different amounts of scent according to what country they are sold in. This is an example of _____.a. straight product extensionb. directly changed productc. product adaptationd. global producte. a global strategy


128. Gerber baby foods serves mugwort casserole to the babies in Japan. This is an example of _____.a. straight product extensionb. directly changed productc. product adaptationd. nutritional product adaptatione. a global strategy


129. The National Cash Register Company reintroduced its crank-operated cash register at half the price of a modern cash register and sold large numbers in Asia, Latin America, and Spain, This is an example of _____.a. product inventionb. product innovationc. promotiond. direct investmente. product reinvention

(Answer: a; p. 483; Challenging)

461

130. Changing promotion for each local market is known as _____. a. a straight extension b. advertising depthc. communication adaptationd. a tabooe. none of the above


131. Symbols of American capitalism around the world may include _____.a. McDonald’sb. Fordc. Coca-Colad. General Electric e. all of the above


132. In France, where consumers drink little milk and eat little for breakfast, _____ is used by Kellogg. Ads must convince consumers that cereals are a tasty and healthful breakfast.a. communication marketingb. strategy marketingc. personal marketingd. communication adaptatione. none of the above


133. You are a small exporter. What likely worries you the least?a. A change to the company’s product lines.b. Exchange-rate fluctuations.c. Language barriers.d. Foreign consumer perceptions.e. B and C


134. Though foreign consumers differ in their needs, spending power, and product preferences, you realize as a marketer that _____.a. exporting is always preferred over licensingb. global branding seldom results in reduced costsc. a balance between a standardized and adapted strategy may be necessaryd. all of the abovee. none of the above


462

135. Kraft cream cheese did not market well in Scandinavia. After researching the market, Kraft learned that a shrimp-flavored cream cheese was more preferred. This illustrates _____.a. straight product extensionb. product adaptationc. product inventiond. communication adaptatione. A and B


Short Answer

136. Define global firm.

A global firm is one that, by operating in more than one country, gains marketing, production, research and development, and financial advantages that are not available to purely domestic competitors.

(p. 468; Easy)

137. Why might a government impose tariffs?

A tariff is a tax levied by a foreign government against certain imported products; these products usually, somehow, economically threaten the foreign economy in such a way that the foreign government aims to make its own domestic products appear more attractive.

(p. 469; Moderate)

138. Why might a government set a quota on the number of cars, for example, that are imported?

A quota sets a limit on the number of products allowed into a country; these products are somehow economically threatening to the foreign economy.

(p. 469; Moderate)

139. What are exchange controls?

Exchange controls limit the amount of foreign exchange and the exchange rate against other currencies.

(p. 469; Moderate)

140. Briefly explain why economic communities are formed.

These are groups of nations organized to work toward common goals in the regulation of international trade.


463

141. List two signs that indicate that NAFTA is a success.

Trade among the United States, Canada, and Mexico is flourishing. Over a 15-year period, NAFTA is expected to eliminate all trade barriers and investment restrictions among the three countries.


142. What country characteristics define subsistence economies?

In a subsistence economy, the majority of the people engage in agriculture. They consume most of their output and barter the rest for simple goods and services.

(p. 471; Easy)

143. What country characteristics define raw-material exporting economies?

These economies are rich in one or more natural resources. Much of their revenue comes from exporting these resources. Oil from Saudi Arabia is an example.

(p. 471; Easy)

144. What country characteristics define an industrializing economy?

Manufacturing counts for 10 to 20 percent of the country’s economy. Industrialization usually creates a new rich class and a small but growing middle class, both demanding new types of imported goods.

(p. 471; Easy)

145. What country characteristics define an industrial economy?

Industrial economies are major exporters of manufactured goods, services, and investment funds. They trade goods among themselves and also export them to other types of economies for raw materials and semi-finished goods. The varied manufacturing activities of these industrial nations and their large middle class make them rich marketers for all sorts of goods.

(p. 471; Easy)

146. Explain countertrade.

Countertrade is the practice of paying with other items instead of cash. Trading bottles of Russian vodka for bushels of American wheat might be an example.

(p. 472; Moderate)

464

147. What are three cultural factors that may impede global business?

Language, religion, customs, habits, and perceptions of body language are a few examples of cultural factors.

(p. 473; Easy)

148. How is joint venturing more risky and complex than merely exporting?

With a joint venture, a company joins forces with another foreign company to produce or market products or services. With a joint venture, the company is not merely producing domestically and then shipping abroad, the company is working hand-in-hand with a foreign company toward a common purpose.


149. What are two possible risks involved with licensing?

The firm has less control over the licensee than it would over its own production facilities. Furthermore, if the licensee is very successful, the firm has given up these profits, and if and when the contract ends, it may find it has created a competitor.


150. Why is management contracting prevalent in the hotel industry?

Under management contracting, the domestic firm supplies management know-how to a foreign company that supplies the capital. The domestic firm exports management services, on which the hotel industry is highly dependent. Hilton is one hotel example that uses this arrangement.


151. What types of products would follow a standardized marketing mix?

Products that require no change to the product itself or to the product’s promotion would follow a standardized marketing mix.

(p. 481; Easy)

152. What types of products would follow an adapted marketing mix?

Products (and their promotions) that need to be altered to meet the local needs of specific cultures or regions of the world would require adapted mixes.

(p. 481; Easy)

465

153. Is a straight product extension the same as a standardized marketing mix?

A straight product extension occurs when a product is marketed to a foreign market without any change. A straight product extension is a part of a standardized marketing mix.


154. Give two hypothetical examples of product adaptation.

Students’ answers will vary greatly. Varying flavors of Gerber baby food, depending on where in the world the food is being marketed, and varying scents of shampoo are examples.

(p. 483; Easy)

155. Give two hypothetical examples of product invention.

Students’ answers will vary. National Cash Register’s re-entrance of the crank cash register at half the cost of the modern one is one example; in addition, introducing the old-style ringer washers in developing countries might be another.

(p. 483; Easy)

Scenario

Selman & Saks, as a maker of men’s and women’s razors and electric hair trimmers, had little reason to become involved in the global arena. But after acquiring Wellman Enterprises, whose largest division engages in a licensing agreement with a German firm to produce women’s hosiery, managers at Selman & Saks wondered just whether a company-wide global focus would be more profitable after all.

Managers at Selman & Saks studied Wellman’s licensing agreement in great detail. Still, after seeing first-hand the benefits Wellman found with the licensing agreement, it was decided that Selman & Saks would target the French market merely via exporting.

With the assistance of a domestic export department, the Selman & Saks razors and hair trimmers entered France. For six months, sales were mediocre. But after that, sales suffered. Opinions varied among numerous managers as to the cause of the failure. “Who knows better the local market than people who live there?” was a comment heard throughout Selman & Saks. “Maybe we needed an alliance with a French firm, or a licensing agreement, before racing to get there.”

466

156. Give two cultural factors that may impede Selman & Saks’ global business efforts.

Managers at Selman & Saks presumed that the French market would be comparable to that of the United States. Culturally, the French may prefer a different type of razor or trimmer. In addition, Selman & Saks managers likely did not study whether the use of product colors or ad slogans would be offensive.

(p. 473; Easy)

157. What factor(s) pulled this business into the global arena?

The simplicity with which Wellman’s licensing agreement appeared to operate seems to have pushed Selman & Saks into the global arena without the managers giving much consideration to the complexities of the numerous global market situations that could arise from such agreements.

(p. 479; Moderate)

158. Based on the nature of this business and its industry, what types of countries should the business enter?

Given the demand for razors and hair trimmers among people around the globe, managers at Selman & Saks are likely assuming that almost any culture similar to the United States could serve as a viable market.


159. Why might this business want to begin its global efforts by merely exporting?

After careful study of the foreign market, exporting is the simplest, least risky, least involved way to enter a foreign market. Once the market is located, the exporter can benefit from global exposure—keeping the brand name and symbol intact on the product—without much involvement after shipping.

(p. 478; Moderate)

160. How might this business benefit from indirect exporting?

Companies typically start with indirect exporting, working through independent international marketing intermediaries. Indirect exporting involves less investment because the firm does not require an overseas marketing organization or set of contacts. It also involves less risk. International marketing intermediaries bring know-how and services to the relationship, so the seller normally makes fewer mistakes.


467

161. How might this business eventually benefit from engaging in licensing?

Licensing would have allowed Selman & Saks to benefit by allowing a French firm to produce the razors and trimmers in exchange for a royalty; the French company might have identified necessary product or package changes necessary to remain attractive to the French market.

(p. 479; Moderate)

162. What risks, if any, might be associated with this business engaging in joint ownership?

Selman & Saks may have experienced disagreements over investment, marketing, or production with the new partner.

(p. 480; Moderate)

163. What elements of this firm’s marketing mix are likely to remain standardized?

All elements of the marketing mix will likely require modification.(p. 481; Moderate)

164. How might product adaptation be necessary?

Product color or size may require alteration. Electric currency differences in France will require product modification.

(p. 483; Moderate)

165. In what way(s) might this business engage in communication adaptation?

Communication adaptation may be necessary if Selman & Saks learns that French people shave more or less frequently or demand different results from a razor or trimmers than do Americans.


468

Armstrong Mai08 Tif 15

Documents

Transcript of Armstrong Mai08 Tif 15