Chapter 16 – Marketing
1. Which of the following is usually the first demand estimate a company should make for a given foreign market?
a. an estimate of total market potential for all firms (moderate, page 474)
b. sales through push versus pull promotion
c. gap analysis
d. an estimate of price elasticity
2. Estimates of income elasticity are useful in predicting demand in a foreign country because:
a. they indicate how incomes will change during business cycles.
b. income levels differ across countries, so one may impute demand changes in one country on the basis of what has happened in other countries as incomes have changed. (difficult, page 476)
c. they indicate consumption at different time periods as technology changes.
d. they show which products will substitute for others as incomes change.
3. A means of making a rough estimate of demand for a product or service in a foreign country is to examine how demand has occurred in countries with different levels of per capita GNP. However, this analysis may break down for some products in some countries for all the following reasons EXCEPT:
a. obsolescence and leap frogging of products.
b. income elasticity.
c. income equality. (difficult, page 476)
EXPLAIN THE DIFFERENT GAPS IN A GAP ANALYSIS TOOL AND HOW A COMPANY MAY USE THIS TOOL IN INTERNATIONAL OPERATIONS
4. Assume that the per capita consumption of shoes is three pairs in Country A and two pairs in Country B. The difference probably means that there is a _______________ gap in Country B.
a. product line
d. usage (moderate, page 477)
5. One may use gap analysis:
a. to compare one’s sales potential in a country with one’s actual sales. (difficult, page 477)
b. to estimate market potential over a business cycle.
c. to determine the best market niches to enter.
d. to compare sales over time.
6. The _______________ represents sales lost to competitors because they have product variations the company does not have.
a. usage gap
b. product gap (moderate, page 477)
c. competitive gap
d. distribution gap
7. Which of the following gaps represents unexplained sales lost to competitors who may have a better image or lower prices?
b. product line
c. competitive (moderate, page 477)
8. When selling a commodity for which there is little possibility of product differentiation, a company would likely use a:
a. societal marketing orientation.
b. strategic marketing orientation.
c. customer orientation.
d. production orientation. (easy, page 478)
9. Which of the following product policies do companies use internationally for passive exports and to reduce surpluses within the domestic market?
a. production orientation (moderate, page 478)
b. sales orientation
c. customer orientation
d. strategic marketing orientation
10. The _______________ is used internationally for foreign-market segments or niches that may resemble the domestic market to which the company initially aims the product.
a. sales orientation
b. production orientation (moderate, page 478)
c. customer orientation
d. strategic marketing orientation
11. When a company sells to countries that have only a small market potential regardless of whether they make changes to meet unique consumer needs in those countries, the company is most apt to use a:
a. sales orientation
b. customer orientation
c. production orientation (moderate, page 478)
d. strategic marketing orientation
EXPLAIN WHAT IS MEANT BY SALES-, CUSTOMER-, STRATEGIC -, AND SOCIETAL MARKETING ORIENTATIONS FOR INTERNATIONAL MARKETING.
12. An orientation in which a company markets abroad what it has been able to market domestically on the assumption that consumers are sufficiently similar globally is a:
a. customer orientation.
b. societal marketing orientation.
c. strategic marketing orientation.
d. sales orientation. (moderate, page 479)
13. A firm that asks: "What can we sell in Country A?" has a:
a. customer orientation. (moderate, page 479)
b. sales orientation.
c. strategic marketing orientation.
d. production orientation.
14. A firm that wishes to operate in a given country because of the country's growth potential or market size, and then moves to completely unrelated products to sell in the country is following a:
a. sales orientation.
b. customer orientation. (moderate, page 479)
c. strategic marketing orientation.
d. production orientation.
15. A firm that designs a product with a global segment in mind is said to have a:
a. sales orientation.
b. production orientation.
c. strategic marketing orientation. (difficult, page 480)
d. customer orientation.
16. A societal marketing orientation is one in which a company:
a. is nonprofit.
b. is owned by the state.
c. promotes the means by which its products will help customers be more popular.
d. considers the environmental, political, and safety dimensions of its products. (easy, page 480)
WHAT FACTORS INFLUENCE COMPANIES TO ALTER VERSUS STANDARDIZE THEIR PRODUCTS INTERNATIONALLY?
17. Product alterations among countries that result in differences in product purity and safety are most likely to occur as a result of:
a. legal requirements. (moderate, page 481)
b. economic requirements.
c. cultural requirements.
d. competitive requirements.
18. Assume a country raises the tax on large cars, which causes consumers to buy smaller cars requiring smaller tires. The shift in demand for tires would be an example of:
a. a non-tariff barrier on tire trade.
b. an indirect legal effect. (moderate, page 481)
c. demand changes from income elasticity.
19. Selling a product in a foreign market that resembles an older model sold in the domestic market in an earlier period usually occurs as a result of:
a. cultural factors.
b. indirect legal factors.
c. economic factors. (moderate, page 481)
d. direct legal factors.
20. Cost savings through global standardization are usually potentially greatest in:
d. products. (difficult, page 481)
WHAT ARE THE ADVANTAGES FOR COMPANIES TO BROADEN VERSUS NARROW THEIR PRODUCT LINES INTERNATIONALLY?
21. If a foreign market is small relative to the domestic market, a manufacturer may (for the foreign market):
a. add more product lines to reduce the unit costs of selling. (difficult, page 482)
b. add more salespeople as compared to the domestic market in order to get better market penetration.
c. rationalize production by making products with shorter production runs in the foreign market and making products with longer production runs in the domestic market.
d. more likely handle the sales in the foreign market with its own staff.
22. Companies finding market opportunities in foreign countries for products that are obsolete in the domestic markets are exploiting:
a. the decline of authoritarian regimes.
b. cheap labor.
c. the product life cycle. (moderate, page 482)
d. less-stringent environmental protection laws abroad.
23. Which of the following statements is FALSE regarding what companies should consider when determining the extent and mix of their product line for foreign countries?
a. In reaching product line decisions, marketing managers should consider the possible effects on sales and costs by having one product as opposed to a family of products.
b. They should consider if there are advantages in producing and selling some less popular and lucrative products in order to sell more popular and lucrative ones.
c. They may need to raise prices in foreign markets that are large compared to the domestic market because of the higher fixed costs per unit associated with selling. (difficult, page 482)
d. A company may consider instituting a few short production runs in order to gain the mass market (and long production runs) on other products.
24. Pricing is more complex internationally than domestically because of all of the following factors EXCEPT:
a. greater diversity of markets.
b. price escalation for exports.
c. changing values of currencies.
d. the tremendous impact of e-commerce. (moderate, page 483)
25. A company may wish to export at a price lower than that in its domestic market in order to:
a. test-market before building a foreign production facility. (difficult, page 483)
b. use a cost-plus strategy globally.
c. use a skimming strategy abroad.
d. avoid criticism that it is dumping.
26. In which of the following pricing strategies does a company introduce a product at a low price to induce a maximum number of consumers to try it?
a. skimming strategy
b. penetration strategy (moderate, page 484)
c. cost-plus strategy
d. cost-minus strategy
27. A _______________ is a practice of pricing at a desired margin over cost.
a. skimming strategy
b. penetration strategy
c. cost-plus strategy (moderate, page 484)
d. cost-minus strategy
DEFINE PRICE ESCALATION IN EXPORTING AND EXPLAIN WHY IT OCCURS.
28. An example of price escalation on export sales is charging final consumers a higher price because:
a. there is a small competitive gap in the foreign market.
b. cultural factors permit more demand abroad.
c. the foreign market is at an early stage of its PLC.
d. longer channels of distribution increase costs that are passed on to consumers abroad. (difficult, page 484)
29. The longer a company waits to receive payment for sale of its merchandise, the more important it becomes for it to use a:
a. graduated pricing model. (moderate, page 484)
b. general pricing model.
c. cost-plus pricing model.
d. penetration pricing model.
30. Which of the following statements regarding the implications of export price escalation is FALSE?
a. Seemingly exportable products may turn out to be noncompetitive abroad if companies use cost-plus pricing.
b. The longer a company waits to receive payment for its exports, the less important it becomes for it to use a graduated pricing model. (difficult, page 484)
c. To become competitive in exporting, a company may have to sell its product to intermediaries at a lower price to lessen the amount of escalation.
d. Longer distribution channels may escalate prices to final consumers.
WHAT IS THE GRAY MARKET? WHY ARE COMPANIES CONCERNED ABOUT IT?
31. Internationally, the gray market refers to:
a. products aimed at people of mixed-race.
b. the bargaining of prices at the retail level.
c. the handling of products through unofficial distributors. (moderate, page 486)
d. the sale of products abroad at a lower price than in one's domestic market.
32. Companies are concerned about the gray market for their production because:
a. the price escalation it causes can undermine their ability to sell.
b. their ability to export may be curtailed if governments determine they are participating in it.
c. they need to alter products to maximize sales potential when serving that market.
d. the existence may upset their distributor system. (difficult, page 486)
33. The _______________ is illegal in many countries, but companies have to monitor compliance and can find enforcement difficult.
a. gray market (moderate, page 486)
b. use of a cost-plus strategy
c. use of exclusive distributors
d. societal marketing orientation
34. Internationally, the relative mix of push and pull promotional strategy is affected by all of the following factors EXCEPT:
a. consumer attitudes toward sources of information.
b. the stage of the product in its life cycle. (moderate, page 488)
c. the price of the product relative to incomes.
d. the type of distribution system in place.
35. Generally, the more tightly controlled the distribution system, the more likely a company is to emphasize a _______________ strategy because it requires a greater effort to get distributors to handle a product.
b. production orientation
c. push (moderate, page 488)
d. societal orientation
36. A push strategy is probably preferable to a pull strategy when:
a. there are few prohibitions on advertising.
b. literacy rates are high.
c. people depend a great deal on their friends' opinions about products.
d. the price of the product is high relative to incomes. (difficult, page 488)
37. In emerging economies, MNEs usually have to rely more on _______________ strategies, because prices for more consumer products are apt to be high compared to incomes.
a. push (moderate, page 488)
WHAT ARE THE MAJOR PROBLEMS OF STANDARDIZING ADVERTISING IN DIFFERENT COUNTRIES?
38. In advertisements aimed at different countries, companies sometimes use actors who do not speak, along with a voice and/or print overlay. The major reason for doing this is to:
a. alter messages among countries.
b. avoid dubbing that does not correspond to lip movements. (moderate, page 489)
c. reach a hearing-impaired audience.
d. appeal to different segments in different countries.
39. Which of the following statements regarding the language translation of global advertising is FALSE?
a. When a company is going to sell in a country with a different language, translation is usually necessary unless the advertiser is trying to communicate an aura of foreignness.
b. The most audible problem in commercial translation is dubbing.
c. Translating a message into a different language for an advertising campaign is simple and straightforward. (moderate, page 489)
d. Marketing managers can avoid dubbing problems by creating commercials in which actors do not speak, along with using a voice or print overlay in the appropriate language.
40. Which of the following statements regarding the legality of global advertising is FALSE?
a. What is legal advertising in one country may be illegal elsewhere.
b. Governments may restrict the advertising of some products because they feel they are in bad taste.
c. Only a few countries regulate sexism in advertising.
d. All countries allow direct advertising comparison with competitive brands. (difficult, page 489)
41. Which of the following gives a product or service instant recognition and may save promotional costs?
a. brand (easy, page 491)
c. a strategic marketing orientation
d. gap analysis
42. All of the following are major branding decisions that MNEs must make when operating internationally EXCEPT:
a. brand versus no brand
b. cultural brand versus noncultural brand (moderate, page 491)
c. manufacturer’s brand versus private brand
d. one brand versus multiple brands
43. Among the branding decisions that companies must make, which is substantially affected by the international environment?
a. Brand versus no brand
b. Trademarked brand versus copyrighted brand
c. Worldwide brand versus local brands (moderate, page 491)
d. Manufacturer's brand versus private brand
44. A generic product is one:
a. that has a different quality image depending on perceived national origin.
b. aimed at an elderly market niche.
c. that is standardized globally.
d. that was once a trademarked brand name, but is now considered the name of the product. (moderate, page 491)
45. _______________ is the course—physical path or legal title—that goods take between production and final consumer sales.
c. Vertical integration
d. Price escalation
46. Which of the following examples is NOT TRUE regarding the variance among countries’ distribution channels?
a. In the
47. Which of the following is NOT a reason that MNEs find distribution to be one of the most difficult functions to standardize internationally?
a. Each country has its own distribution system, which an MNE finds difficult to modify because it is entwined with the country’s cultural, economic, and legal environments.
b. Legislation differentially affecting chain stores and individually owned stores is a factor that influences how goods will be distributed in a given country.
c. The number of distribution levels within a country correlates to countries’ population size. (difficult, page 494)
d. Countries differ in terms of when distributors can legally sell to the public.
WHY MIGHT THE INTERNAL HANDLING OF FOREIGN DISTRIBUTION BE ADVANTAGEOUS FOR A COMPANY?
48. When sales volume is _______________, it is usually more economical for a company to handle distribution by _______________.
a. low; using a sales representative and selling direct
b. low; vertical integration
c. high; contracting with an external distributor
d. low; contracting with an external distributor (difficult, page 495)
49. A common criterion for selecting a foreign distributor is its:
a. good connections (has "friends" to sell to). (moderate, page 495)
b. few trained personnel (new personnel are more open-minded).
c. weak financial strength (needs the business).
d. ability to handle noncomplementary products (no attempt to tie sales to those of other companies).
50. In terms of contracting with foreign distributors, companies must usually:
a. "build a better mousetrap" and distributors will compete to get the account.
b. convince distributors that the product and company are viable. (difficult, page 495)
c. determine the distribution gap before making a contract.
d. establish some in-house distribution to demonstrate what is desired.
WHAT CHALLENGES DOES SELLING INTERNATIONALLY THROUGH THE INTERNET CREATE?
51. Which of the following is NOT a challenge of global internet sales?
a. A company needs to set up and promote its Internet sales, which can be very expensive.
b. A company cannot easily differentiate its marketing program for each country where it operates.
c. Many households, especially in industrialized economies, lack access to Internet connections. (moderate, page 498)
d. The company’s Internet ads and prices must comply with the laws of each country where the company makes sales.
52. Which of the following statements regarding international marketing through the Internet and e-commerce is FALSE?
a. Estimates vary widely on the current and future number of worldwide on-line households and the electronic commerce generated through on-line sales.
b. E-commerce offers companies an opportunity to promote their products globally.
c. Global Internet sales are not without problems.
d. As e-commerce increases, customers worldwide will have more difficulty in quickly comparing prices among competitors, thus driving prices up. (difficult, page 498)
53. Which of the following statements regarding the logistics of Internet sales is FALSE?
a. A company can easily differentiate its marketing program for each country where it operates. (moderate, page 498)
b. If the company makes international sales over the Internet, it must deliver what it sells expeditiously, which may necessitate placing warehouses and service facilities abroad.
c. The same world wide web advertisements and prices reach customers everywhere, even though different appeals and prices for different countries might yield more sales and profits.
d. A company may or may not own and manage its warehouses and services facilities abroad.
54. In a short essay, discuss the main reason that simply multiplying the country’s expected per capita consumption by its population doesn’t necessarily lead to a good estimate for potential demand.
a. Obsolescence and leap frogging of products—Consumers in emerging economies do not necessarily follow the same patterns as those in higher-income countries. In many emerging economies, consumers have leap frogged the use of traditional telephones by jumping from having no telephones to using cellular phones exclusively.
Costs—If costs of essential
products are high, consumers may spend more than what one would expect based on
per capita GNP. The expenditures on food in
c. Income elasticity—A common tool to predict total market potential is to divide the percentage of change in product demand by the percentage of change in income in a given country. The more that demand increases, the more elastic is the demand in response to income change. Income elasticity varies by product and by income level.
d. Substitution—Consumers in a given country may have products or services that substitute more conveniently in some countries than in others for the products that companies would like to sell. For example, there are fewer automobiles in Hong Kong than one would expect based on income and population because the crowded conditions make the efficient mass transit system a desirable alternative to automobiles.
e. Income inequality—Where income inequality is high, the per capita GNP figures are usually low because many people have little income. This masks the fact that there are middle- and upper-income people who have substantial income to spend.
f. Cultural factors and taste—Countries with similar per capita GNPs may have different preferences for products and services because of values or tastes.
(difficult, page 476)
55. In a short essay, discuss gap analysis.
Gap analysis is a method for estimating a company’s potential sales by identifying market segments it is not serving adequately. When sales are lower than the estimated market potential for a given type of product, the company has potential for increased sales. The distribution gap represents sales lost to competitors who distribute where the company does not. The product line gap represents sales lost to competitors who have product variations the company does not have. And the competitive gap is the remaining unexplained sales lost to competitors who may have a better image or lower prices.
(moderate, page 477)
56. In a short essay, discuss the international application of five common product policies.
a. Production orientation—With production orientation, companies focus primarily on production—either efficiency or high quality—with little emphasis on marketing. There is little analysis of consumer needs; rather, companies assume customers want lower prices or higher quality.
b. Sales orientation—Internationally, sales orientation means a company tries to sell abroad what it can sell domestically on the assumption that consumers are sufficiently similar globally. A company may make this assumption because the distance between it and its foreign markets makes information about the foreign markets difficult to obtain. This orientation differs from the production orientation because of its active rather than passive approach to promoting sales.
c. Customer orientation—In a company that operates according to sales orientation, management usually is guided by answers to questions such as: Should the company send some exports abroad? Where can the company sell more of product X? In contrast, a customer orientation asks: What can the company sell in country A?
d. Strategic marketing orientation—Most companies committed to continual, rather than sporadic, foreign sales adopt a strategy that combines production, sales, and consumer orientations. Instead of merely trying to sell a domestic product abroad, the company designs a product to fit some global market segment.
e. Societal marketing orientation—Companies with societal marketing orientations realize that successful international marketing requires serious consideration of potential environmental, health, social, and work-related problems that may arise when selling or making their products abroad.
(difficult, page 478)
57. In a short essay, describe the various reasons for product alternation.
a. Legal reasons—Explicit legal requirements are the most obvious reasons for altering products for foreign markets. The exact requirements vary widely by country, but are usually meant to protect consumers. One of the more cumbersome product alterations for companies is adjusting to different laws on packaging that protect the environment. Marketing managers must also watch for the indirect legal requirements that may affect product content or demand.
b. Cultural reasons—Marketing managers find it difficult to determine in advance whether consumers in foreign markets will accept new or different products because of differences in consumer cultures.
c. Economic reasons—If foreign consumers lack sufficient income, they may not be able to buy the product the MNE sells domestically. The company therefore may have to design a cheaper model. Even if a market segment has sufficient income to purchase the same product the company sells at home, differences in infrastructure may require product alterations.
(moderate, page 481)
58. In a short essay, discuss the reasons that make pricing internationally more complex than pricing domestically.
All of the following are reasons that make pricing internationally more complex than pricing domestically.
a. different degrees of governmental intervention
b. greater diversity of markets
c. price escalation of exports
d. changing values of currencies
e. differences in fixed vs. variable pricing practices
f. retailers’ strength with suppliers
(easy, page 483)
59. Define price escalation in exporting and explain why it occurs.
Price escalation occurs if standard markups occur within distribution channels and lengthening the channels or adding expenses somewhere within the system further increases the price to the consumer. Price escalation in export sales occurs for two reasons: (1) channels of distribution usually span greater distances and so exporters need to contract with organizations that know how to sell in foreign markets, and (2) tariffs are an additional cost that may be passed on to consumers.
(moderate, page 484)
60. What is the gray market? Why are companies concerned about it?
The selling of goods through unofficial distributors, the gray market, can undermine the longer-term viability of the distributorship system, cause a company’s plants in different countries to compete with each other, and make it harder for companies to spot counterfeit goods.
(easy, page 486)
61. In a short essay, discuss the push-pull mix.
Promotion may be categorized as push, which uses direct selling techniques, or pull, which relies on mass media. Most companies use combinations of both marketing strategies. For each product in each country, a company must determine its total promotional budget as well as the mix of the budget between push and pull. Generally, the more tightly controlled the distribution system, the more likely a company is to emphasize a push strategy because it requires a greater effort to get distributors to handle a product. Also affecting the push-pull mix is the amount of contact between salespeople and consumers.
(moderate, page 488)
62. In a short essay, discuss the standardization of advertising programs.
In addition to reducing costs, advertising standardization may improve the quality of advertising at the local level, prevent internationally mobile consumers from being confused by different images, and speed the entry of products into different countries. Standardized advertising usually means a program that is similar from market to market rather than one that is identical in each. Some of the problems that hinder complete standardization of advertising relate to translation, legality, and message needs. Standardization usually implies using the same advertising agency globally. However, companies may differentiate campaigns among countries even if they use the same agency everywhere.
(moderate, page 489)
63. In a short essay, discuss branding.
A brand is an identifying mark for products or services. When a company registers a brand legally, it is a trademark. A brand gives a product or service instant recognition and may save promotional costs. MNEs must make four major branding decisions:
a. brand vs. no brand
b. manufacturer’s brand vs. private brand
c. one brand vs. multiple brands
d. worldwide brand vs. local brands
(moderate, page 491)
64. In a short essay, discuss the difficulty of standardization in distribution.
Within the marketing mix, MNEs find distribution one of the most difficult functions to standardize internationally, for several reasons. Each country has its own distribution system, which an MNE finds difficult to modify because it is entwined with the country’s cultural, economic, and legal environments.
(easy, page 494)
65. What challenges does selling internationally through the Internet create?
Many households, especially in emerging economies, lack access to Internet connections. Therefore, if a company wants to reach mass global markets, it will need to supplement its Internet sales with sales using other means of promoting and distribution. A company also needs to set up and promote its Internet sales, which can be very expensive. A company cannot easily differentiate its marketing program for each country where it operates. If a company makes international sales over the Internet, it must deliver what it sells expeditiously. This may necessitate placing warehouses and service facilities abroad, which the company may or may not own and manage itself. Finally, the company’s Internet ads and prices must comply with the laws of each country where the company makes sales. This is a challenge because a company’s web page reaches Internet users everywhere.
(moderate, page 498)