Principles of Marketing, 14e (Kotler)

Chapter 19 The Global Marketplace

1) ________ industries are safe from foreign competition.

A) Most
B) Major
C) Few
D) NAFTA
E) European Union
Answer: C
Diff: 2 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

2) As global trade is growing, global competition is ________.

A) leveling off
B) declining
C) erratic
D) intensifying
E) stabilizing
Answer: D
Diff: 2 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

3) Firms that play it safe and do not enter the global market are likely to lose their chances to
enter other markets ________.
A) but protect themselves from competition at home
B) but gain a competitive edge against imports in their home markets
C) but successfully shield themselves from foreign competition
D) and risk losing their home markets
E) A and B
Answer: D
Diff: 2 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

1
Copyright © 2012 Pearson Education, Inc.
4) A ________ 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.
A) global firm
B) domestic firm
C) whole-channel view
D) direct investment
E) free trade zone
Answer: A
Diff: 1 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

5) All of the following are major decisions a company faces in international marketing EXCEPT
which one?
A) deciding which markets to enter
B) deciding how to enter the market
C) deciding how to set standardized prices
D) deciding on the global marketing program
E) deciding on the global marketing organization
Answer: C
Diff: 2 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

6) Of the following, a company should make which major decision about international marketing
first?
A) deciding which markets to enter
B) deciding how to enter the market
C) deciding on the global marketing organization
D) deciding on the global marketing program
E) deciding on the global communication program
Answer: A
Diff: 2 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

2
Copyright © 2012 Pearson Education, Inc.
7) A(n) ________ is a tax levied by a foreign government against certain imported products.
A) embargo
B) tariff
C) export
D) exchange control
E) quota
Answer: B
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

8) A(n) ________ is a limit on the amount of goods that an importing country will accept in
certain product categories.
A) embargo
B) tariff
C) benchmark
D) quota
E) exchange control
Answer: D
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

9) A(n) ________ serves to limit the amount of foreign exchange and the exchange rate against
other currencies.
A) trade system
B) tariff
C) quota
D) exchange control
E) tariff trade barrier
Answer: D
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

3
Copyright © 2012 Pearson Education, Inc.
10) Bias against bids made by American companies is an example of a(n) ________.
A) quota
B) tariff
C) boycott
D) nontariff trade barrier
E) exchange control
Answer: D
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

11) Which of the following is designed to help foster trade between nations?
A) tariffs
B) GATT
C) exchange controls
D) quotas
E) nontariff trade barriers
Answer: B
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

12) The ________ is a 62-year-old treaty designed to promote world trade by reducing tariffs
and other international trade barriers.
A) WTO
B) GATT
C) EU
D) CAN
E) NAFTA
Answer: B
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

4
Copyright © 2012 Pearson Education, Inc.
13) Concluding in 1994, the Uruguay Round reduced trade barriers, set international standards
for trade, and established the ________ to enforce GATT rules.
A) WTO
B) EU
C) NAFTA
D) CAFTA
E) CAN
Answer: A
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

14) Which of the following reduced the world's merchandise tariffs by 30 percent, toughened
international protection of copyrights and trademarks, and has been extended to cover trade in
agriculture and a wide range of services?
A) GATT
B) EU
C) NAFTA
D) CAFTA
E) FTAA
Answer: A
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

15) Economic communities are also known as ________.

A) global firms
B) free trade zones
C) management communities
D) production communities
E) open channels
Answer: B
Diff: 1 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

5
Copyright © 2012 Pearson Education, Inc.
16) ________ is a group of nations organized to work toward common goals in the regulation of
international trade.
A) A joint venture
B) A strategic marketing group
C) An economic community
D) A global firm
E) A multinational enterprise
Answer: C
Diff: 1 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

17) Formed in 1957, the ________ set out to create a single European market by reducing
barriers to the free flow of products, services, finances, and labor among member countries and
developing policies on trade with nonmember nations.
A) Uruguay Round
B) European Union
C) European Organization
D) NAFTA
E) CAFTA
Answer: B
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

18) The European Union and NAFTA (North American Free Trade Agreement) are examples of
________.
A) non-barrier zones
B) open economic areas
C) economic communities
D) barter organizations
E) world trade organizations
Answer: C
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

6
Copyright © 2012 Pearson Education, Inc.
19) There is concern that through the ________ lower barriers inside Europe will create only
thicker outside walls.
A) European Union
B) Euro-Scandinavian Pact
C) Euro-American Union
D) Atlantic Free-Trade Area
E) General Agreement on Tariffs and Trade
Answer: A
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

20) Which of the following economic communities is responsible for the adoption of the euro?
A) NAFTA
B) European Union
C) Euro-American Union
D) CAFTA
E) WTO
Answer: B
Diff: 1 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

21) Which of the following is an advantage created by the adoption of the euro?
A) Countries outside of Europe no longer face trade obstacles within Europe.
B) European countries with previously weak currencies are more attractive markets.
C) It has decreased the annual combined GDP.
D) A homogeneous European market has been created.
E) It is the last step necessary for the countries of Europe to act like a single entity.
Answer: B
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

7
Copyright © 2012 Pearson Education, Inc.
22) In 1994, ________ established a free trade zone among the United States, Canada, and
Mexico.
A) GATT
B) WTO
C) NAFTA
D) EU
E) CAFTA
Answer: C
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

23) In 2005, the ________ established a free trade zone between the United States and Costa
Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua.
A) CAFTA-DR
B) FTAA
C) CAN
D) NAFTA
E) EU
Answer: A
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

24) What is the name of the single agreement that created a market of 452 million people and has
eliminated trade barriers and investment restrictions among the United States, Mexico, and
Canada?
A) GATT
B) WTO
C) NAFTA
D) CAFTA-DR
E) EU
Answer: C
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

8
Copyright © 2012 Pearson Education, Inc.
25) Formed in 2004 and formalized in 2008, ________ makes up the largest trading block after
NAFTA and the European Union.
A) CAFTA-DR
B) FTAA
C) UNASUR
D) MCAN
E) GATT
Answer: C
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

26) All of the following are types of industrial structures EXCEPT?

A) subsistence economies
B) raw material exporting economies
C) marketing economies
D) industrializing economies
E) industrial economies
Answer: C
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

27) The two key economic factors reflecting a country's attractiveness as a market are its
industrial structure and its ________.
A) communication adaptation
B) nontariff trade barriers
C) exchange controls
D) income distribution
E) transportation systems
Answer: D
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

9
Copyright © 2012 Pearson Education, Inc.
28) In a(n) ________, the vast majority of people engage in simple agriculture and consume
most of their output.
A) raw material economy
B) subsistence economy
C) industrializing economy
D) emerging economy
E) industrial economy
Answer: B
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

29) Of the following industrial structures, which presents the fewest market opportunities?
A) subsistence
B) raw material exporting
C) industrializing
D) emerging
E) industrial
Answer: A
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

30) A(n) ________ economy is poor in some ways but rich in one or more natural resources
responsible for creating most of its exporting revenue.
A) industrial
B) industrializing
C) raw-material exporting
D) subsistence
E) agrarian
Answer: C
Diff: 1 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

10
Copyright © 2012 Pearson Education, Inc.
31) ________ are major exporters of manufactured goods, services, and investment funds. They
trade goods among themselves and export them to other types of economies for raw materials
and semifinished goods.
A) Material economies
B) Subsistent economies
C) Industrializing economies
D) Industrial economies
E) Developing economy
Answer: D
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

32) In a(n) ________ economy, fast growth in manufacturing results in rapid overall economic
growth. This type of economy typically has a new rich class and a small but growing middle
class, both demanding new types of imported goods.
A) industrial
B) industrializing
C) materials exporting
D) subsistence
E) agrarian
Answer: B
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

33) Industrializing economies do NOT include ________.

A) China
B) India
C) Brazil
D) Sweden
E) any of the above
Answer: D
Diff: 3 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

11
Copyright © 2012 Pearson Education, Inc.
34) All of the following are political-legal factors that should be considered when deciding
whether to do business in a given country EXCEPT which one?
A) attitudes toward international buying
B) government bureaucracy
C) business norms
D) monetary regulations
E) political stability
Answer: C
Diff: 2 Page Ref: 557
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

35) Countries with ________ economies consist mostly of households with very low family
incomes.
A) industrial
B) industrializing
C) service
D) technological
E) subsistence
Answer: E
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

36) In international trade, it is ideal if the buyer can pay in ________.

A) countertrade
B) the seller's currency
C) barter
D) buyback
E) counterpurchases
Answer: B
Diff: 2 Page Ref: 557
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

12
Copyright © 2012 Pearson Education, Inc.
37) Sellers might accept a ________, one whose removal from the country is restricted by the
buyer's government, if they can buy other goods in that country that they need themselves or can
sell elsewhere for a need currency.
A) blocked currency
B) counterpurchase
C) barter
D) buyback
E) tariff
Answer: A
Diff: 3 Page Ref: 557
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

38) Which of the following involves the direct exchange of goods and services?
A) cash transaction
B) compensation
C) buyback
D) blocked currency
E) barter
Answer: E
Diff: 2 Page Ref: 557
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

39) It is important to understand how business norms vary from county to country. For example,
________ like to sit or stand very close to each other when they talk businessin fact, almost
nose-to-nose.
A) Americans
B) Japanese
C) South Americans
D) Africans
E) Europeans
Answer: C
Diff: 2 Page Ref: 558
AACSB: Multicultural and Diversity Understanding
Skill: Concept
Objective: 19-1

13
Copyright © 2012 Pearson Education, Inc.
40) Why might Asian businesspeople be offended by the typical bargaining tactics of American
executives?
A) Asian businesspeople typically reject offers in face-to-face conversations.
B) Asian executives prefer to start business meetings with polite conversations.
C) American executives prefer to start business meetings with polite, personal conversations.
D) American executives tend to move closer to each other as they negotiate.
E) American executives tend to conduct tough bargaining through nonpersonal forms of
communication.
Answer: B
Diff: 2 Page Ref: 558
AACSB: Multicultural and Diversity Understanding
Skill: Concept
Objective: 19-1

41) Which of the following is an example of how American culture is being exported to the
world's countries?
A) the popularity of the Harry Potter series
B) the expansion of Walmart Supercenters
C) the success of "American Idol"
D) the increasing popularity of American soccer
E) the popularity of the Power Rangers
Answer: B
Diff: 3 Page Ref: 559
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

42) Which type of business is LEAST likely to find it necessary to enter international markets in
order to survive?
A) clothing manufacturers
B) food distributors
C) chain retailers
D) small, local businesses
E) automobile producers
Answer: D
Diff: 2 Page Ref: 560
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

14
Copyright © 2012 Pearson Education, Inc.
43) Which of the following is a factor that is likely to push a company to decide NOT to enter
international markets?
A) The company's home market is stagnant.
B) The company would have to redesign its products.
C) The company needs to counterattack international competitors in their home markets.
D) Foreign markets present higher profit opportunities.
E) Global competitors have offered similar products at lower prices.
Answer: B
Diff: 2 Page Ref: 560-564
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

44) Of the following, which is the LEAST critical decision a company should make before going
abroad?
A) what its international marketing objectives and policies are
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) what types of countries it wants to market in
Answer: D
Diff: 2 Page Ref: 561
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

45) Demographic characteristics, geographic characteristics, economic factors, sociocultural

factors, and political and legal factors all help a company ________.
A) determine a market's potential
B) determine a country's degree of globalization
C) evaluate its marketing objectives
D) evaluate its value delivery network
E) identify potential joint ventures
Answer: A
Diff: 2 Page Ref: 561
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

15
Copyright © 2012 Pearson Education, Inc.
46) Which of the following is a sociocultural factor that a company should consider before
deciding to enter an international market?
A) political stability
B) population density
C) education
D) income distribution
E) consumer lifestyles, beliefs, and values
Answer: E
Diff: 2 Page Ref: 562
AACSB: Multicultural and Diversity Understanding
Skill: Concept
Objective: 19-1

47) Which of the following is a political and legal factor that a company should consider before
deciding to enter an international market?
A) monetary and trade regulations
B) transportation structure
C) population size and growth
D) industrial infrastructure
E) business norms and approaches
Answer: A
Diff: 2 Page Ref: 562
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

48) Which of the following is an economic factor that a company should consider before
deciding to enter an international market?
A) population size and growth
B) natural resources
C) cultural and social norms
D) political stability
E) climate
Answer: B
Diff: 2 Page Ref: 562
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

16
Copyright © 2012 Pearson Education, Inc.
49) All of the following are modes of entry that companies can use when they have decided to
sell in a foreign country EXCEPT ________.
A) exporting
B) embargo
C) joint venturing
D) direct investment
E) licensing
Answer: B
Diff: 2 Page Ref: 562
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

50) The simplest way to enter a foreign market is through ________.

A) joint venturing
B) direct investment
C) exporting
D) joint ownership
E) contract manufacturing
Answer: C
Diff: 2 Page Ref: 562
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

51) When entering a foreign market, companies typically start with ________, working through
independent intermediaries to sell products produced in the home country.
A) direct exporting
B) embargo
C) product adaptation
D) indirect exporting
E) licensing
Answer: D
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

17
Copyright © 2012 Pearson Education, Inc.
52) ________ involves less investment because the firm does not require an overseas marketing
organization or network. It also involves less risk.
A) Indirect exporting
B) Direct exporting
C) Joint venturing
D) Licensing
E) Contract manufacturing
Answer: A
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

53) Sellers may eventually move into ________, whereby they handle their own exports. The
investment and risk are somewhat greater in this strategy.
A) direct exporting
B) embargo
C) product adaptation
D) indirect exporting
E) licensing
Answer: A
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

54) All of the following are types of joint ventures EXCEPT ________.
A) licensing
B) contract manufacturing
C) joint ownership
D) direct investment
E) management contracting
Answer: D
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

18
Copyright © 2012 Pearson Education, Inc.
55) Through ________, an organization in the foreign market buys the right to use a company's
manufacturing process, trademark, patent, trade secret, or other item of value.
A) indirect exporting
B) licensing
C) contract manufacturing
D) management contracting
E) joint ownership
Answer: B
Diff: 1 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

56) Coca-Cola markets internationally by ________ bottlers around the world for a fee or royalty
and then supplying them with the syrups needed to produce Coke products.
A) contract manufacturing with
B) management contracting with
C) licensing
D) creating joint ownerships with
E) directly investing in
Answer: C
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

57) Sears opened up department stores in Mexico and Spain, where it found qualified local
manufacturers to produce many of the product it sells. This type of joint venture is known as
________.
A) joint ownership
B) licensing
C) management contracting
D) indirect exporting
E) contract manufacturing
Answer: E
Diff: 3 Page Ref: 564
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

19
Copyright © 2012 Pearson Education, Inc.
58) Hilton helps others run their hotels by exporting know-how services rather than products.
This type of joint venture is known as ________.
A) contract manufacturing
B) licensing
C) management contracting
D) joint ownership
E) direct investment
Answer: C
Diff: 2 Page Ref: 564
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

59) ________ ventures consist of one company joining forces with foreign investors to create a
local business in which they share ownership and control.
A) Joint ownership
B) Licensing
C) Contract manufacturing
D) Management contracting
E) Indirect exporting
Answer: A
Diff: 1 Page Ref: 564
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

60) ________ involves entering a foreign market by developing foreign-based assembly or

manufacturing facilities.
A) Exporting
B) Direct investment
C) Joint venturing
D) Contract manufacturing
E) Direct exporting
Answer: B
Diff: 1 Page Ref: 565
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

20
Copyright © 2012 Pearson Education, Inc.
61) Lower costs in the form of cheaper labor or raw materials, foreign government investment
incentives, freight savings, and the opportunity to improve the company image are all factors that
would likely lead a company to ________ in a foreign market.
A) use direct exporting
B) begin licensing
C) conduct management contracting
D) initiate joint ownerships
E) make a direct investment
Answer: E
Diff: 2 Page Ref: 565
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

62) ________ means selling largely the same products and using the same marketing approaches
worldwide.
A) Adapted global marketing
B) Global marketing mixing
C) Standardized global marketing
D) Export marketing
E) Multinational strategizing
Answer: C
Diff: 1 Page Ref: 565
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

63) ________ means adjusting the marketing strategy and mix elements to each international
target market.
A) Standardized global marketing
B) Global marketing mixing
C) Adapted global marketing
D) Communication adaptation
E) Whole channel viewing
Answer: C
Diff: 1 Page Ref: 565
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

21
Copyright © 2012 Pearson Education, Inc.
64) All of the following are strategies for adapting product and marketing communications to a
global market EXCEPT which one?
A) external extension
B) straight extension
C) communication adaptation
D) product adaptation
E) product invention
Answer: A
Diff: 2 Page Ref: 566
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

65) "Take the product as is and find customers for it" is the slogan for ________.
A) product strategy
B) product invention
C) adapted marketing
D) straight product extension
E) product adaptation
Answer: D
Diff: 2 Page Ref: 566
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

66) Nokia created dustproof keypads, crucial in dry, hot countries with many unpaved roads,
such as India. This is an example of ________.
A) product invention
B) straight product extension
C) standard global marketing
D) communication adaptation
E) product adaptation
Answer: E
Diff: 2 Page Ref: 566
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

22
Copyright © 2012 Pearson Education, Inc.
67) Changing promotions for each local market is known as ________.
A) a straight extension
B) advertising depth
C) communication adaptation
D) product adaptation
E) standardized global marketing
Answer: C
Diff: 2 Page Ref: 569
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

68) Kellogg ads in the United States promote the taste and nutrition of Kellogg's cereals versus
competitors' brands. In France, where consumers drink little milk and eat little for breakfast,
Kellogg's ads must convince consumers that cereals are a tasty and healthful breakfast. Kellogg
is following what type of marketing strategy?
A) straight product extension
B) product adaptation
C) product invention
D) communication adaptation
E) straight communication extension
Answer: D
Diff: 2 Page Ref: 569
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

69) Regardless of how companies go about pricing their products, their foreign prices will
probably be ________ their domestic prices.
A) the same as
B) lower than
C) higher than
D) competitive with
E) not comparable with
Answer: C
Diff: 2 Page Ref: 571
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

23
Copyright © 2012 Pearson Education, Inc.
70) ________ occurs when a company either charges less than its costs or less than it charges in
its home market.
A) Price escalation
B) Dumping
C) Licensing
D) Straight product extension
E) Countertrade
Answer: B
Diff: 2 Page Ref: 571
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

71) The two major links between the seller and the final buyerchannels between nations and
channels within nationsmake up a ________.
A) whole-channel view
B) direct-distribution channel
C) large-scale channel
D) transportation network
E) global value delivery
Answer: A
Diff: 1 Page Ref: 572
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

72) The first link between the seller and the final buyer, ________ move company products from
points of production to the borders of countries within which they are sold.
A) channels between nations
B) channels within nations
C) whole-channel views
D) large-scale channels
E) global value deliveries
Answer: A
Diff: 2 Page Ref: 572
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

24
Copyright © 2012 Pearson Education, Inc.
73) A firm normally gets into international marketing by simply shipping out its goods. If its
international sales expand, the company organizes a(n) ________.
A) indirect exporting venture
B) joint ownership
C) export department
D) international division
E) standardized global marketing strategy
Answer: C
Diff: 2 Page Ref: 3
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

74) World product groups, geographical organizations, and international subsidiaries are all
options for organizing a(n)________.
A) export department
B) indirect exporting venture
C) joint ownership
D) international division
E) standardized global marketing strategy
Answer: D
Diff: 2 Page Ref: 573
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

75) In a(n) ________, executives are trained in worldwide operations, not just domestic or
international operations.
A) direct exporting company
B) joint venture
C) international division
D) international subsidiary
E) global organization
Answer: E
Diff: 2 Page Ref: 574
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

25
Copyright © 2012 Pearson Education, Inc.
76) Growing Green is a company that markets organic and environmentally friendly gardening
and landscaping supplies and equipment. Members of management at Growing Green are
examining the policies of GATT, actions undertaken by the WTO, and the agreements made by
NAFTA and the EU. In which stage of the international marketing process is Growing Green?
A) deciding whether to go global
B) deciding which markets to enter
C) deciding how to enter the market
D) deciding on the global marketing program
E) looking at the global marketing environment
Answer: E
Diff: 2 Page Ref: 554
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

77) U.S. foreign policy makers have criticized China for protectionist regulations and other
actions that restrict access to several Chinese markets, including banking services. This is an
example of a(an) ________.
A) nontariff trade barrier
B) tariff
C) boycott
D) exchange control
E) quota
Answer: A
Diff: 2 Page Ref: 554
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

78) Coffee, tea, cotton, and tobacco are the main exports of Uganda. It is most likely that Uganda
has a(n) ________ economy.
A) subsistence
B) marketing
C) merchandise exporting
D) raw material exporting
E) industrializing
Answer: D
Diff: 2 Page Ref: 556
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

26
Copyright © 2012 Pearson Education, Inc.
79) Azerbaijan imported wheat from Romania in exchange for crude oil and Vietnam exchanged
rice for Philippine fertilizer and coconuts. Both scenarios are examples of which of the
following?
A) cash transaction
B) compensation
C) buyback
D) blocked currency
E) barter
Answer: E
Diff: 3 Page Ref: 557
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

80) India needs more imports of raw materials such as textiles, steel, and heavy machinery and
fewer imports of finished textiles, paper products, and automobiles. India is most likely a(n)
________ economy.
A) subsistence
B) emerging
C) raw material exporting
D) agrarian
E) industrializing
Answer: E
Diff: 2 Page Ref: 556
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

81) Nike faced a situation in a Muslim country with the stylized "Air" logo on its shoes. Muslims
were offended because Nike's "Air" resembled "Allah" in Arabic script. This is an example of
________.
A) the impact of culture on marketing strategy
B) communication adaptation
C) product adaptation
D) adapted global marketing
E) product invention
Answer: A
Diff: 2 Page Ref: 558
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

27
Copyright © 2012 Pearson Education, Inc.
82) Members of management at Growing Green, a company that markets organic and
environmentally friendly gardening and landscaping supplies and equipment, are evaluating the
benefits and disadvantages of indirect exporting, direct exporting, and licensing. In which stage
of the international marketing process is Growing Green?
A) deciding whether to go global
B) deciding which markets to enter
C) deciding how to enter the market
D) deciding on the global marketing program
E) deciding on the global marketing organization
Answer: C
Diff: 2 Page Ref: 562
AACSB: Analytic Skills
Skill: Application
Objective: 19-2

83) Think Ink is a growing company that sells a variety of inks for home and business printers.
Management at Think Ink has decided to open a sales branch overseas to handle sales and
distribution abroad. Think Ink is engaging in ________.
A) indirect exporting
B) direct exporting
C) licensing
D) joint ownership
E) management contracting
Answer: B
Diff: 2 Page Ref: 563
AACSB: Analytic Skills
Skill: Application
Objective: 19-2

84) Hershey recently linked with Indian-based Godrej Beverages and Foods to make and
distribute its chocolates in that country. When it comes to selling chocolate in India, Hershey
will need all the help it can from its new local partner. This is an example of which joint venture?
A) licensing
B) contract manufacturing
C) management contracting
D) joint ownership
E) indirect exporting
Answer: D
Diff: 2 Page Ref: 564
AACSB: Analytic Skills
Skill: Application
Objective: 19-2

28
Copyright © 2012 Pearson Education, Inc.
85) Heineken beer is sold successfully in about the same form around the world. This is an
example of which product strategy?
A) product adaptation
B) straight product extension
C) product invention
D) dual adaptation
E) communication adaptation
Answer: B
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

86) To make Oreo cookies sell well in China, Kraft completely altered the popular all-American
classic to a long, thin, four-layered, chocolate-covered wafer. This is an example of ________.
A) product invention
B) straight product extension
C) product adaptation
D) dual adaptation
E) communication adaptation
Answer: C
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

87) Vidal Sassoon shampoos contain different amounts of scent according to what country they
are sold in. This is an example of ________.
A) straight product extension
B) product invention
C) product adaptation
D) communication adaptation
E) standardized global marketing
Answer: C
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

29
Copyright © 2012 Pearson Education, Inc.
88) Sony found that Japanese commuters had difficulty using standard laptops on crowded rush-
hour trains since standing commuters have no laps. So Sony created the U as a "standing
computer." The U includes a touch screen and small keyboard that can be used while standing or
on the move. This is an example of ________.
A) straight product extension
B) product invention
C) product adaptation
D) dual adaptation
E) communication adaptation
Answer: B
Diff: 3 Page Ref: 568
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

89) 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) communication adaptation
B) joint venturing
C) product invention
D) straight product extension
E) product adaptation
Answer: A
Diff: 2 Page Ref: 569
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

90) A Gucci handbag may sell for $60 in Italy and $240 in the United States. It must add the cost
of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory
price. Gucci faces a ________ problem.
A) dumping
B) tariff
C) licensing
D) product adaptation
E) price escalation
Answer: E
Diff: 2 Page Ref: 571
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

30
Copyright © 2012 Pearson Education, Inc.
91) At Comfort Homes, a manufacturer of furniture and home accessories, the global operating
units report directly to the chief executive instead of a head of an international division. The
company recruits management from many countries and buys components and supplies where
they cost the least. Comfort Homes is most accurately classified as a(n) ________.
A) direct exporter
B) geographical organization
C) international subsidiary
D) global organization
E) world product group
Answer: D
Diff: 2 Page Ref: 574
AACSB: Analytic Skills
Skill: Application
Objective: 19-4

92) Which of the following is 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 than between
countries not in the community.
C) CAFTA-DR represents the world's single largest market.
D) Converting numerous currencies into the euro has been a failure.
E) NAFTA was modeled after CAFTA-DR.
Answer: B
Diff: 2 Page Ref: 555
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

93) Trusted Wholesalers is a company that purchases products produced in Mexico and sells
them to companies based in the United States and Canada. Management at Trusted Wholesalers
would most likely be interested in becoming experts in the agreements made by ________.
A) the EU
B) NAFTA
C) CAFTA-DR
D) FTAA
E) UNASUR
Answer: B
Diff: 2 Page Ref: 558
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

31
Copyright © 2012 Pearson Education, Inc.
94) Trusted Wholesalers is a company that currently purchases products produced in Mexico and
sells them to companies based in the United States and Canada. Trusted Wholesalers is
considering whether to also purchase products produced in Costa Rica and the Dominican
Republic. To make their decision, members of management at Trusted Wholesalers will most
likely closely evaluate the agreements made by ________.
A) the EU
B) NAFTA
C) CAFTA-DR
D) MCAN
E) UNASUR
Answer: C
Diff: 2 Page Ref: 556
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

95) Which of the following would a defender of globalization most likely use as an example to
argue that concerns of Americanization are overblown and that globalization is indeed a two-way
street?
A) the view of McDonald's as a domestic brand in China
B) the growing popularity of coffee in China since the introduction of Starbucks
C) the growing number of IKEA furniture stores in the United States
D) the initial failure of Disneyland Paris
E) the antiglobalization protests aimed at KFC
Answer: C
Diff: 3 Page Ref: 560
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 15-1

96) A company could conduct direct exporting in all of the following ways EXCEPT which one?
A) It can set up a domestic export department.
B) It can set up an overseas sales branch.
C) It can send home-based sales people abroad to find more business.
D) It can work through independent international marketing intermediaries.
E) It can hire foreign-based agents who sell goods on its behalf.
Answer: D
Diff: 3 Page Ref: 566
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-2

32
Copyright © 2012 Pearson Education, Inc.
97) To maximize the toothpaste market in China, Crest needs to convince more of the Chinese
population to brush their teeth. Which of the following would Crest be most likely to use to
accomplish this?
A) product adaptation
B) straight product extension
C) communication adaptation
D) standardized global marketing
E) product invention
Answer: C
Diff: 3 Page Ref: 569
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-3

98) The global name for Microsoft's operating system, Vista, turns out to be a disparaging term
for a frumpy old woman in Lativa. Microsoft must adjust the name. This is an example of the
need for ________.
A) communication adaptation
B) standardized global marketing
C) straight product extension
D) product adaptation
E) communication extension
Answer: A
Diff: 3 Page Ref: 570
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-3

33
Copyright © 2012 Pearson Education, Inc.
Refer to the scenario below to answer the following questions.

Selman & Saks, 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. Though
seeing first-hand the benefits Wellman found with the licensing agreement, managers 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 the local
market better 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."

99) Based on the passage, Selman & Saks entered the French market to gain which of the
following benefits of global trade?
A) access to new consumer markets
B) access to less expensive labor
C) access to less expensive materials
D) access to foreign investment incentives
E) the ability to offset domestic economic cycles
Answer: A
Diff: 2 Page Ref: 553
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

100) If Selman & Saks allowed a French company to produce and market razors and trimmers
carrying the company's brand in exchange for a royalty, Selman & Saks would be using which
market entry strategy?
A) exporting
B) franchising
C) licensing
D) contract manufacturing
E) joint ownership
Answer: C
Diff: 2 Page Ref: 563
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

34
Copyright © 2012 Pearson Education, Inc.
101) A global firm gains marketing, production, and financial advantages that are not available
to purely domestic competitors.
Answer: TRUE
Diff: 1 Page Ref: 553
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

102) Nontariff trade barriers include restrictive product standards that work against American
product features.
Answer: TRUE
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

103) GATT is a 62-year-old treaty designed to promote world trade by reducing tariffs and other
international trade barriers.
Answer: FALSE
Diff: 2 Page Ref: 554
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

104) The EU acts as an umbrella organization that oversees GATT and mediates global disputes.
Answer: FALSE
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

105) Free trade zones are also known as economic communities.

Answer: TRUE
Diff: 1 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

106) The European Union represents one of the world's single largest markets.
Answer: TRUE
Diff: 1 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

35
Copyright © 2012 Pearson Education, Inc.
107) CAFTA-DR has eliminated all trade barriers and investment restrictions among the United
States, Canada, and Mexico.
Answer: FALSE
Diff: 2 Page Ref: 555
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

108) UNASUR is the economic community of South American nations.

Answer: TRUE
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

109) Barter is often used in subsistence economies.

Answer: TRUE
Diff: 2 Page Ref: 556
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

110) Barter is a form of cash transaction.

Answer: FALSE
Diff: 2 Page Ref: 557
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

111) Coca-Cola, McDonald's, Nike, and KFC have been singled out by antiglobalization
protestors all over the world.
Answer: TRUE
Diff: 2 Page Ref: 559
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-1

112) The simplest way to enter a foreign market is through exporting.

Answer: TRUE
Diff: 1 Page Ref: 562
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

36
Copyright © 2012 Pearson Education, Inc.
113) Joint venturing is when two or more U.S. companies jointly invest in distributing products
to a foreign country.
Answer: FALSE
Diff: 2 Page Ref: 563
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

114) The biggest involvement in a foreign market comes through direct investmentthe
development of foreign-based assembly or manufacturing facilities.
Answer: TRUE
Diff: 1 Page Ref: 565
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-2

115) The whole-channel view recognizes that to compete internationally a company must
effectively design and manage a standardized global marketing plan.
Answer: FALSE
Diff: 2 Page Ref: 5772
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

116) To overcome price escalation when selling to less-affluent consumers in developing

countries, companies make simpler or smaller versions of their products that can be sold at lower
prices.
Answer: TRUE
Diff: 2 Page Ref: 571
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

117) The Internet is making global price differences more obvious, forcing companies toward
more standardized international pricing.
Answer: TRUE
Diff: 2 Page Ref: 571
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-3

37
Copyright © 2012 Pearson Education, Inc.
118) If a firm moves into joint ventures and direct investments, it will eventually need to create
international divisions or subsidiaries.
Answer: TRUE
Diff: 3 Page Ref: 573
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

119) International divisions can be organized as geographical organizations, world product

groups, or national groups.
Answer: FALSE
Diff: 3 Page Ref: 573
AACSB: Dynamics of the Global Economy
Skill: Concept
Objective: 19-4

120) The exchange of U.S. wheat for Russian vodka would be an example of barter.
Answer: TRUE
Diff: 2 Page Ref: 557
AACSB: Analytic Skills
Skill: Application
Objective: 19-1

121) When Tool Trade, an American company, uses qualified Brazilian manufacturers to
produce many of the products it sells to retailers in South America, Tool Trade is using contract
manufacturing.
Answer: TRUE
Diff: 2 Page Ref: 564
AACSB: Analytic Skills
Skill: Application
Objective: 19-2

122) Kellogg cereals are sold successfully in essentially the same form around the globe. This is
an example of straight product extension.
Answer: TRUE
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

123) Coca-Cola is less sweet or less carbonated in certain countries. This is known as
standardized global marketing.
Answer: FALSE
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

38
Copyright © 2012 Pearson Education, Inc.
124) Finnish cell phone maker Nokia customized its cell phones for the Asian market by raising
the ring volume so phones could be heard on crowded streets. This is an example of product
invention.
Answer: FALSE
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

125) As an example of straight product extension, Coca-Cola calls its American low-calorie
beverage Diet Coke by the name of Light in many foreign markets.
Answer: FALSE
Diff: 2 Page Ref: 566
AACSB: Analytic Skills
Skill: Application
Objective: 19-3

126) Describe the purpose, roles, and achievements of GATT and the World Trade Organization.
Answer: The General Agreement on Tariffs and Trade (GATT) is a 62-year-old treaty designed
to promote world trade by reducing tariffs and other international trade barriers. Member nations,
currently numbering 153, have met repeatedly to reassess trade barriers and set new rules for
international trade. The most recently completed GATT negotiations promote long-term global
trade growth, reducing the world's remaining merchandise tariffs, extending GATT to cover
trade in agriculture and a wide range of services, and toughening international protection of
copyrights, patents, trademarks, and other intellectual property. The most recent round of GATT
negotiations resulted in the creation of the World Trade Organization (WTO) to enforce GATT
rules. In general, the WTO acts as an umbrella organization, overseeing GATT, mediating global
disputes, and imposing trade sanctions.
Diff: 2 Page Ref: 554-555
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

127) Describe the political-legal factors that a company should consider before deciding to do
business in a foreign country.
Answer: A company should consider the country's attitudes toward international buying, as well
as the country's bureaucracy, political stability, and monetary regulations. Some countries are
receptive to foreign firms, offering incentives and favorable operating conditions, while other
countries set restrictions and limitations designed to discourage foreign business. A country that
is politically unstable, with frequent and sometimes violent changes in leadership, offers a less
certain environment for business and financial matters. A country may also have monetary
regulations, such as a blocked currency whose removal from the country is restricted, that a
company should evaluate.
Diff: 3 Page Ref: 557
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-1

39
Copyright © 2012 Pearson Education, Inc.
128) Compare the four different types of industrial structures.
Answer: The four different types of industrial structures are subsistence economies, raw material
exporting economies, emerging economies, and industrial economies. In a subsistence economy,
most people work in simple agriculture and consume most of their output. Most people barter for
simple goods and services. Unlike subsistence economies, raw material exporting economies are
rich in one or more natural resources such as copper, oil, or coffee. However, these countries are
poor in other ways, lacking a strong middle class. An emerging economy is industrializing, with
fast growth coming from manufacturing. These countries typically have a new upper class and a
small but growing middle class. Industrial economies are the major exporters of manufactured
goods and services. They have varied economic activities and large middle classes.
Diff: 2 Page Ref: 556
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

129) Why is it important for companies to understand cultural differences and nuances before
entering a foreign country's market? Give two examples of cultural differences that would be
important for a company to know.
Answer: Before planning a marketing program in a new country, a seller should understand the
ways that consumers in that country think about and use the product. To succeed abroad, a
company must adapt to local cultural values and traditions rather than trying to force its own.
Students' examples will vary, but could include the following: French men use twice as many
grooming aids as women, many Chinese eat on the way to work, and religious imagery (such as
Hindu gods) used in a promotion could easily be considered offensive.
Diff: 2 Page Ref: 558
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

130) Describe the factors that might draw a company into the international arena.
Answer: Any of several factors might draw a company into the international arena. Global
competitors might attack the company's home market by offering better products or lower prices.
The company might want to counterattack these competitors in their home markets to tie up their
resources. The company's customers might be expanding abroad and require international
servicing. Or the company's home market might be stagnant or shrinking, and foreign markets
may present additional sales and profit opportunities.
Diff: 2 Page Ref: 560-561
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-1

40
Copyright © 2012 Pearson Education, Inc.
131) Discuss the international marketing objectives and policies a company should try to define
before going abroad.
Answer: Before going abroad, the company should try to define its international marketing
objectives and policies. It should decide what volume of foreign sales it wants. Most companies
start small when they go abroad. The company also needs to choose in how many countries it
wants to market. Companies must be careful not to spread themselves too thin or to expand
beyond their capabilities by operating in too many countries too soon. Next, the company needs
to decide on the types of countries to enter. A country's attractiveness depends on the product,
geographical factors, income and population, political climate, and other factors. The seller may
prefer certain country groups or parts of the world.
Diff: 3 Page Ref: 561
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

132) Discuss direct and indirect exporting. What are two advantages of exporting?
Answer: 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 network. It also involves less risk.
International marketing intermediaries bring know-how and services to the relationship,
so the seller normally makes fewer mistakes. Sellers may eventually move into direct exporting,
whereby they handle their own exports. The investment and risk are somewhat greater in this
strategy, but so is the potential return. One advantage of exporting is that the company produces
all of its goods in its home country, so it does not need to invest in manufacturing facilities
abroad. Also, exporting involves the least change in the company's product lines, organization,
investments, and mission. With exporting, a company can make a minimal commitment to a
foreign market and take minimal risks.
Diff: 2 Page Ref: 562-563
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-2

41
Copyright © 2012 Pearson Education, Inc.
133) Compare and contrast the advantages and disadvantages of standardized global marketing
and adapted global marketing.
Answer: Companies that use standardized global marketing use largely the same marketing
strategy approaches and marketing mix worldwide. On the other hand, with adapted global
marketing, the producer adjusts the marketing strategy and mix elements to each target market,
bearing more costs but hoping for a larger market share and return. Some global marketers
believe that technology is making the world a smaller place and that consumer needs around the
world are becoming more similar. This paves the way for "global brands" and standardized
global marketing. Global branding and standardization, in turn, result in greater brand power and
reduced costs from economies of scale. On the other hand, the marketing concept holds that
marketing programs will be more effective if tailored to the unique needs of each targeted
customer group. Despite global convergence, consumers in different countries still have widely
varied cultural backgrounds and still differ significantly in their needs and wants, spending
power, product preferences, and shopping patterns. Standardized global marketing does not take
these differences into account and may therefore be less effective, albeit less expensive.
Diff: 2 Page Ref: 565
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-3

134) Identify and describe the three product strategies a company entering a foreign market can
use.
Answer: A company can choose straight product extension, product adaptation, or product
invention. Straight product extension means marketing a product in a foreign market without any
change. This involves no additional product development costs, manufacturing changes, or new
promotion. But it can be costly in the long run if products fail to satisfy foreign consumers.
Product adaptation involves changing the product to meet local conditions or wants. Product
invention consists of creating something new for a specific country market.
Diff: 2 Page Ref: 566-568
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-3

42
Copyright © 2012 Pearson Education, Inc.
135) What might drive a company to create international divisions or subsidiaries? Discuss the
three ways these divisions can be organized.
Answer: Many companies get involved in several international markets and ventures, such as
exporting to one country, licensing to another, having a joint ownership venture in a third, and
owning a subsidiary in a fourth. With increased international activity, the company will need to
move from simply having an export department to having more specialized international
divisions or subsidiaries. International divisions are organized in a variety of ways. An
international division's corporate staff consists of marketing, manufacturing, research, finance,
planning, and personnel specialists. It plans for and provides services to various operating units,
which can be organized in one of three ways. They can be geographical organizations, with
country managers who are responsible for salespeople, sales branches, distributors, and licensees
in their respective countries. Or the operating units can be world product groups, each
responsible for worldwide sales of different product groups. Finally, operating units can be
international subsidiaries, each responsible for its own sales and profits.
Diff: 3 Page Ref: 573
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-4

136) Companies that go global confront several major risks. Describe three of these risks.
Answer: Companies that go global may face unstable governments and currencies abroad, as
well as restrictive government policies and regulations designed to protect domestic companies
or to protect the culture. High trade barriers are another issue. Also, some companies have to
deal with corruption abroad, as some officials award business contracts to the highest briber.
Diff: 2 Page Ref: 553
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

137) Compare and contrast a tariff and a quota.

Answer: 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. Both tariffs and quotas can be used to protect domestic firms from foreign
competition.
Diff: 2 Page Ref: 554
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

138) Briefly explain why economic communities are formed.

Answer: Economic communities are groups of nations organized to work toward common goals
in the regulation of international trade; economic communities benefit member nations by
reducing barriers to the free flow of products, services, finances, and labor across borders.
Diff: 2 Page Ref: 555
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

43
Copyright © 2012 Pearson Education, Inc.
139) Briefly explain why the European Union could be considered a threat to U.S. marketers that
want to do business in Europe.
Answer: As a result of increased unification, European companies will grow bigger and more
competitive. A concern is that lower barriers within Europe will lead to higher barriers between
Europe and non-EU countries. Some observers envision a "Fortress Europe" that heaps favors on
firms from European Union countries but hinders outsiders.
Diff: 3 Page Ref: 555
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-1

140) Explain why some critics worry that American multinationals are causing countries around
the globe to lose their individual identities. Give an example of the "Americanizing" of the
world's cultures.
Answer: Some critics are concerned because people in diverse countries and cultures throughout
the world now regularly use American products and services that have changed their daily habits.
For example, most people in China did not drink coffee until Starbucks entered the market, and
teens in India watch MTV and ask their parents for clothing and other symbols of American
culture.
Diff: 2 Page Ref: 559
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-1

141) Many studies reveal that instead of "Americanizing" the world's cultures, the cultural
exchange between America and other countries goes two ways. Give two examples of how
America has been influenced culturally by foreign products or services.
Answer: Examples will vary but could include the following: "American Idol" comes from
British TV; the popularity of soccer has international roots; and the Power Rangers, Tamagotchi
and Pokemon, Sega and Nintendo come from abroad.
Diff: 3 Page Ref: 560
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-1

142) Name two of the five indicators of market potential and provide an example of each.
Answer: The five indicators of market potential include demographic characteristics, geographic
characteristics, economic factors, sociocultural factors, and political and legal factors. Students'
examples will vary according to Table 19.1.
Diff: 2 Page Ref: 562
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-1

44
Copyright © 2012 Pearson Education, Inc.
143) How is joint venturing more risky and complex than merely exporting?
Answer: 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.
Diff: 3 Page Ref: 563
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-2

144) What are two possible risks involved with licensing?

Answer: 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.
Diff: 2 Page Ref: 564
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-2

145) What are two possible reasons that management contracting is prevalent in the hotel
industry?
Answer: A hotel, such as Hilton, that has an international reputation and is highly regarded
would bring brand value as well as experience to a foreign firm. For the company supplying the
contracting, the investment is minimized because the foreign company supplies the capital.
Diff: 3 Page Ref: 564
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-2

146) What types of products would be successful with standardized global marketing?
Answer: Products that require no change to the product itself or to the product's promotion
would follow a standardized marketing mix.
Diff: 2 Page Ref: 565
AACSB: Reflective Thinking Skills
Skill: Application
Objective: 19-3

45
Copyright © 2012 Pearson Education, Inc.
147) Explain why a global company would need to make adjustments to a highly standardized
promotion campaign for different markets.
Answer: Some language and cultural differences make adjustments necessary, as a slogan might
not translate well or a certain image or color may hold a vastly different meaning in a different
culture.
Diff: 2 Page Ref: 569
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-3

148) Why is a company unlikely to set a uniform price all around the world?
Answer: A uniform price would be too low in rich countries and too high in poor ones; the price
would not reflect the costs of transportation, tariffs, wholesale margins, and retailer margins that
will differ from country to country.
Diff: 2 Page Ref: 571
AACSB: Reflective Thinking Skills
Skill: Synthesis
Objective: 19-3

149) How has the Internet affected how companies set prices on global products?
Answer: With the aid of the Internet, customers can see how much products sell for in different
countries or even order a product directly from the location offering the lowest price; this is
forcing companies toward more standardized international pricing.
Diff: 2 Page Ref: 571
AACSB: Reflective Thinking Skills
Skill: Critical Thinking
Objective: 19-3

150) Identify the three major ways a company can manage its international marketing.
Answer: 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.
Diff: 2 Page Ref: 573
AACSB: Analytic Skills
Skill: Application
Objective: 19-4

46
Copyright © 2012 Pearson Education, Inc.