University of Houston, Downtown

MBA 6208

Chapter 8 Tapping into Global Markets

1)What is a global firm?

A firm that operates in one country and exports its goods and services to foreign countries.

1. A firm that operates in more than one country and has a sales and marketing staff in those countries.
2. A firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages not available to purely domestic competitors.
3. A firm that sells its products and services across the world but restricts manufacturing to the home country.
4. A firm that operates in more than one country but restricts the sale of its products to the home country.

2. Which of the following is NOT true about Tata Nano?
   1. Its cost is three times India's annual per capita income.
   2. It targets the 7 million Indians who buy scooters and motorcycles every year.
   3. It has a negative stigma attached to it because it is considered a "cheap" car.
   4. It has received positive feedback for reminding people of the tuk-tuk.
   5. Some target customers were intimidated by Tata's showrooms.

3. Which of the following can induce a firm to expand into the international arena?
   1. Consumer preferences in the domestic market vary widely.
   2. Average income level of domestic consumers is high.
   3. The firm operates in an industry that caters to the mass market.
   4. The firm finds that the domestic market is almost saturated.
   5. The firm is yet to achieve economies of scale even though the domestic market has potential.

4. Zodiac Inc. is one of the leading producers of designer bags in its country. The company is considering shifting some of its production to India. Which of the following could have prompted this move?
   1. People in India prefer imported designer bags.
   2. Zodiac can target a niche market of high-profile consumers who have a high income.
   3. Zodiac can improve its market share if it can offer better prices than its competitors.
   4. People in the home country have an ethnocentric approach.
   5. Market research indicates that Indian consumers have a low per-capita income.

5. Which of the following is a risk that firms must consider prior to expanding abroad?
   1. The domestic consumers prefer low-priced products.
   2. The market in the foreign country may be too similar to the domestic market.
   3. Consumers in the foreign country are very particular about the quality of the goods they consume.
   4. The foreign country has very low pollution control standards.
   5. The foreign country's business culture may be too different from the domestic country.

6. Services account for nearly                     percent of global trade.
   1. 10
   2. 15
   3. 20
   4. 25
   5. 30

7. Which of the following is NOT a challenge associated with international marketing?
   1. Managers need to learn new languages and laws.
   2. Managers need to deal with volatile currencies.
   3. Managers face political and legal uncertainties.
   4. International markets are less safe.
   5. All of the above are challenges.

8. Which of the following is the first stage of the internationalization process that can induce firms to enter the international arena?
   1. no regular export activities
   2. export via independent representatives (agents)
   3. establishment of one or more sales subsidiaries
   4. establishment of production facilities abroad
   5. adoption of a flexible exchange rate regime

9. Once a firm decides to enter the international market, what is the next step in the decision-making process?
   1. deciding on the marketing organization
   2. deciding on the marketing program
   3. deciding how to enter the market
   4. deciding how to adapt the product to the new market
   5. deciding which markets to enter

10. Luxury brands are usually not global because they target a niche market.

11. A global profile is essential for firms like Prada, Gucci, and Louis Vuitton to profitably grow because the addressable market is small.

12. The World Trade Organization, consisting of 158 countries, works to erect entry barriers or regulations that limit free trade.

13. Global firms plan, operate, and coordinate their activities on a worldwide basis.
14. Services represent the fastest-growing sector of the global economy and account for two-thirds of global output.

15. Services account for nearly 40 percent of global trade.

16. Most companies would prefer to remain domestic if their domestic market were large enough.

17. A global firm is a firm that operates in more than one country and captures R&D, production, logistical, marketing, and financial advantages not available to purely domestic competitors.

18. Companies enter the international market only when their domestic markets are saturated.

19. The first task of the internationalization process is moving a company from no regular exports to regular export activities.

24. WayToGrow Inc. is one of the most popular brands of toys in its home market. The company decides to expand its business abroad and its board of directors feel that instead of trying to establish its presence all at once in multiple markets, it is better to expand one country at a time. This would limit their risk and allow them to analyze customer response, after which they could expand to other similar countries. WayToGrow is following a        approach.
    1. shotgun
    2. continuous
    3. born global
    4. sprinkler
    5. waterfall

25. Microsoft sold more than 60 million licenses and upgrades of Windows 8 in the first 10 weeks after its October 26, 2012, global launch. Marketing spanned 42 countries with TV, print, and banner ads, outdoor posters, and branded entertainment. They used a        approach for the launch.
    1. shotgun
    2. continuous
    3. born global
    4. sprinkler
    5. waterfall

26. The main risk in a                       approach is the substantial resources needed and the difficulty of planning entry strategies for many diverse markets.
    1. shotgun
    2. continuous
    3. born global
    4. sprinkler
    5. waterfall

27. When innovation at Siemens enables the company to offer solutions that can make the generation of hydroelectricity more environment-friendly, the company will want to reap the benefits of being the first to introduce such a product across countries. In this case, which of the following approaches is likely to be the best approach to entering foreign markets?
    1. the rifle approach
    2. the continuous approach
    3. the born global approach
    4. the sprinkler approach
    5. the waterfall approach

28. A2Z Inc. is a producer of a wide variety of consumer goods in Brazil. It has successfully captured a huge share of the domestic market and has been able to create a very strong brand. It is now considering a foray into foreign markets. Its board of directors decides to first try out some of its products in the neighboring country of Argentina. A2Z plans to eventually expand its presence in other countries, after they analyze the impact of their entry into the Argentine market. A2Z Inc. is following a               approach.
    1. born global
    2. waterfall
    3. sprinkler
    4. franchisee
    5. shotgun

29. In a waterfall approach to international expansion,                 .
    1. firms enter countries gradually in a sequence
    2. firms enter those countries first where the demand for the product is greatest
    3. countries are entered based upon the availability of government subsidies
    4. firms enter those countries first where the supply of raw material is greatest
    5. countries are entered based upon ease of entry

30. In a sprinkler approach to international expansion,                 .
    1. countries are entered when competition is limited
    2. countries are gradually entered sequentially
    3. countries in which the supply of raw material is greatest are entered first
    4. countries in which the demand for the product is greatest are entered first
    5. many countries are entered simultaneously

31. When first-mover advantage is crucial and a high degree of competitive intensity prevails, the        approach is better.
    1. waterfall
    2. born global
    3. rifle
    4. sprinkler
    5. franchisee

32. A waterfall approach to entering foreign markets is described as entering countries simultaneously.

33. The sprinkler approach is an entry strategy where a company gradually enters countries in sequence.

34. It often makes sense to operate in fewer countries, with a deeper commitment and penetration in each.

35. In general, a company prefers to enter countries that have high market attractiveness and high market risk, regardless of whether it possesses a competitive advantage.

36. Important developing or emerging markets include Brazil, Russia, India, Canada, and South Africa, often called "BRICS" for short.

37. Regional economic integration means companies are more likely to enter entire regions at the same time.

38. The Organization for Economic Cooperation & Development (OECD) cautions that economic reforms have stagnated and ranks Russia as one of the most corrupt countries in the world.

40. "BRICS" is an acronym for                       .
    1. Brazil, Russia, India, China, and South Africa
    2. Bolivia, Russia, Indonesia, China, and South Africa
    3. Brazil, Russia, Indonesia, China, and South Africa
    4. Bolivia, Russia, India, Canada, and South Africa
    5. Bolivia, Russia, Indonesia, Canada, and South Africa

41. "CIVETS" is an acronym for                        .
    1. Columbia, Indonesia, Vietnam, Egypt, Turkey, and Syria
    2. China, India, Vietnam, Egypt, Turkey, and South Africa
    3. Columbia, Indonesia, Vietnam, Egypt, Turkey, and South Africa
    4. China, India, Vietnam, Egypt, Turkey, and Syria
    5. Columbia, Indonesia, Vietnam, Egypt, Turkey, and Saudi Arabia

42.                      is the sixth largest economy in the world, and it is expected to move into fourth place by 2050, meaning it would economically be larger than countries like Germany, Japan, and the United Kingdom.
    1. South Africa
    2. Brazil
    3. Russia
    4. India
    5. China

43. Which of the following does NOT contribute to the custo Brasil ("the cost of Brazil") for businesses?
    1. Brazil had serious disputes with neighboring countries.
    2. Brazil's transportation costs are higher than other markets.
    3. Unloading a container is twice as expensive in India and takes three times longer than in China.
    4. Strict and costly labor laws inspire an underground economy that takes urban jobs.
    5. Crime and corruption are problems.

44. A2Z Inc. is a producer of a huge variety of consumer goods, from soaps to shower gels, and shampoos to detergents. It is a market leader in the United States and is planning to tap the immense potential in the emerging markets. Market research, however, indicates that the Brazilian culture and society are substantially different from their American counterparts. If the company wants to target the masses, which of the following options is most likely to succeed?
    1. A2Z can use a price skimming strategy to increase market share.
    2. The company's existing strategies in the United States will work just as well in Brazil.
    3. A2Z can introduce smaller "sachets" of shampoos and detergents that are priced lower.
    4. The company can introduce large family packs of shampoos and soaps even if they are priced higher than competitors.
    5. A2Z can use a predatory pricing strategy to capture the market.

45. Which of the following causes a difference between marketing in developed countries and marketing in developing countries?
    1. The cost of production varies substantially between the developed and the developing world.
    2. The disparity between the rich and the poor in the developing world is reducing.
    3. There are substantial cultural differences between the developed and the developing world.
    4. Marketing in developing countries is far more expensive than in the developed world.
    5. The developing countries have more trade barriers in place than the developed countries.

46. Regional economic integration is defined as the creation of trading agreements between             .
    1. a firm and its suppliers and distributors
    2. firms targeting the same market
    3. individual firms in an industry
    4. related industries
    5. blocs of countries

47. Many US firms prefer to sell in Canada, England, and Australia — rather than in larger markets such as Germany and

France — because they feel more comfortable with the languages, laws, and culture, which reflect the these countries and the United States.

1. 1. self-serving bias
   2. coincident development
   3. psychic proximity
   4. cognitive dissonance
   5. backward invention

48. NAFTA is a free trade zone comprising of which of the following countries?
    1. Canada, Mexico, and South America
    2. Canada, Mexico, and Peru
    3. Mexico, South America, and the United States
    4. Canada, Mexico, and the United States
    5. Canada, Japan, and the United States

between

49.                      consumers drank an average of only 14 eight-ounce bottles of Coke in 2012, compared with an average of 241 bottles in Brazil and 745 bottles in Mexico, leading Coca-Cola to announce a $5 billion investment over 2012-2020.
    1. Venezuelan
    2. Indian
    3. Indonesian
    4. South African
    5. Chinese

50. While choosing countries to invest in, companies often choose psychic proximity to their own country. Psychic proximity can best be defined as countries  .
    1. in which the company feels comfortable with the language, laws, and culture
    2. that are located close
    3. that the home country's management team have visited
    4. that have no trade barriers
    5. with good infrastructure and stable political environment

51. More than 90 percent of future population growth is projected to occur in the less developed countries.

52. Nestlé, Unilever, and Model?z get close to or above 40 percent of their total business coming from emerging markets.

53. Smaller packaging and lower sales prices are often critical in markets where incomes are limited.

54. Regional economic integration has intensified in recent years, which makes it more difficult for marketers to expand globally.

57. Which of the following modes of entry into a foreign market involves the maximum commitment and risk?
    1. franchising
    2. direct investment
    3. joint ventures
    4. licensing
    5. direct exporting

58. Domestic-based export merchants                 .
    1. buy manufacturers' products and then sell them abroad
    2. manage a company's export activities for a fee
    3. buy foreign products and sell them in the domestic country
    4. seek and negotiate foreign purchases
    5. carry on exporting activities on behalf of several producers

59. Domestic-based export agents perform a valuable service for companies seeking to enter foreign markets. The primary function of these agents is to          .
    1. carry on exporting activities on behalf of several producers
    2. buy the manufacturer's products and then sell them abroad
    3. buy foreign products and sell them in the domestic country
    4. seek and negotiate foreign purchases for a commission
    5. produce and export products to foreign countries

60. Companies typically start their international foray with                  , which involves working through independent intermediaries who sell their products abroad.
    1. indirect exporting
    2. licensing
    3. franchising
    4. direct exporting
    5. joint ventures

61. Indirect exports have two advantages for a firm: less investment and less               .
    1. paperwork
    2. intrusion by the government
    3. risk
    4. competition
    5. customer suits

62. James Franks lives in Miami. He buys local products from manufacturers in Miami and other parts of Florida and sells them abroad, mainly to Caribbean nations. Mr. Franks is a(n) .
    1. domestic-based export merchant
    2. domestic-based export agent
    3. cooperative agent
    4. export-management agent
    5. direct exporting agent

63. Nash & Associates is a firm that takes care of all export procedures on behalf of its clients. In exchange for a fee, the firm acts as the liaison between domestic manufacturers and prospective foreign buyers. It has access to established distribution networks in other countries that domestic small-scale producers are unlikely to have, and facilitates communication between foreign importers and domestic producers. Nash & Associates is most likely a(n)                                                                                                                                                                                                                          .
    1. domestic-based export merchant
    2. domestic-based export agent
    3. cooperative organization
    4. export-management company
    5. direct exporter

64.                      agree to manage a company's export activities for a fee.
    1. Cooperative organizations
    2. Domestic-based export agents
    3. Export-management companies
    4. Domestic-based export merchants
    5. Contract manufacturing organizations

65. After successfully exporting its products through export merchants, Boyes Inc. decides to take control of its exports. It sets up its own unit in the home country that takes care of all export-related activities. Boyes Inc. is most likely using

                   .

1. 1. foreign-based distributors or agents
   2. a domestic-based export department
   3. export merchants in foreign countries
   4. export-management companies
   5. traveling export sales representatives

66. A well-known producer of breakfast cereals has decided to hire producers in different countries so that the cereals marketed under their brand are locally produced in the respective countries. This would not only appeal more to consumers who prefer domestically produced goods, but would also create jobs in the host-country enhancing the brand's image further. This is an example of        .
    1. management contracting
    2. franchising
    3. greenfield venturing
    4. contract manufacturing
    5. straight extension

67. Which of the following statements is true about licensing?
    1. It is one of the most complex ways to engage in international marketing.
    2. The licensor gains entry into the new market at low risk.
    3. The licensee has no access to proprietary information.
    4. The licensee receives a fee or royalty.
    5. The only benefit for a licensee is the production expertise it gains.

68. Hotel chains such as Hyatt and Marriott sell a variation of the licensing agreement called                   to the owners of foreign hotels to manage these businesses for a fee.
    1. greenfield venturing
    2. management contracts
    3. strategic alliance
    4. indirect exporting
    5. direct exporting

69. In which of the following modes of licensing does the firm hire local producers to produce the product, giving the company less control over the manufacturing process?
    1. contract manufacturing
    2. management contracts
    3. direct investment
    4. joint venture production
    5. greenfield venturing

70. Toshiba, Hitachi, and other Japanese television manufacturers use                to service the Eastern European market.
    1. contract manufacturing
    2. management contracts
    3. direct investment
    4. joint venture production
    5. greenfield venturing

71. A company can enter a foreign market through a                 , which is a complete form of licensing in which the company offers a complete brand concept and operating system.
    1. contract manufacturing
    2. cooperative agreement
    3. management contract
    4. joint venture
    5. franchising arrangement

72. Which of the following can cause a firm to choose joint ventures as a mode of expansion into foreign markets?
    1. excellent managerial resources
    2. lack of sufficient finances
    3. lack of conflicting regulations in the host country
    4. preferences of target consumers in the host country
    5. psychic proximity of the host country

73. Identify a benefit of using a joint venture to enter a foreign market.
    1. It entails minimum risk.
    2. It provides access to an established distribution network in the host country.
    3. It yields the highest returns.
    4. It retains full control of its investment in the host country.
    5. It is the best strategy for countries with psychic proximity.

74. Which of the following is true about direct investment as a mode of international expansion?
    1. It allows a firm to retain full control over its investment.
    2. It yields lower returns than joint ventures.
    3. It involves the least amount of risk.
    4. It involves the least cost.
    5. It does not allow the firm to diversify.

75. Cisco had no presence in India before 2005, but it used a                   approach and already opened a second headquarters in Bangalore to take advantage of opportunities in India and other locations such as Dubai.
    1. direct investment
    2. joint venture
    3. contract manufacturing agreement
    4. licensing agreement
    5. franchising agreement

76. Whirlpool took a 53 percent stake in the Dutch electronics group Phillips' home appliances business to leapfrog into the European market. This is an example of a         .
    1. straight extension
    2. joint venture
    3. contract manufacturing agreement
    4. licensing agreement
    5. franchising agreement

77. Which of the following is NOT one of the ways direct exporting happens?
    1. overseas sales branch or subsidiary
    2. domestic-based export agents
    3. domestic-based export division
    4. traveling export sales representatives
    5. foreign-based distributors or agents

78. GE Capital, GE's lending arm, uses                       with financial institutions in South Korea, Spain, Turkey, and elsewhere to reach more geographic and technological markets and to diversify investments and risk.
    1. licensing deals
    2. direct investment
    3. indirect exporting
    4. joint ventures
    5. direct exporting

79. Once a company decides to target a particular country, it must determine the best mode of entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and direct investment.

80. Domestic-based export merchants seek and negotiate foreign purchases for a commission.

81. Cooperative organizations carry on exporting activities on behalf of several producers and are partly under their administrative control.

82. Indirect exports are characterized by high investment, and therefore high risk.

83. In licensing, the licensor issues a license to a foreign company to use an item of value for a fee or royalty.

84. When the licensor provides the licensee with a complete brand concept and operating system, the arrangement is called contract manufacturing.

85. Management contracts offer foreign owners the opportunity to manage businesses for a fee.

86. Contract manufacturing is one mode of licensing that allows a company to start faster, with the opportunity to form a partnership or buy out the local manufacturer later.

87. The ultimate form of foreign investment is direct ownership of foreign-based assembly or manufacturing facilities.

88. The main disadvantage of direct investment is that the firm loses access to the market in case the government of that country insists locally purchased goods have domestic content.

96. When Kraft blends different coffees for the British (who drink coffee with milk), the French (who drink it black), and Latin Americans (who want a chicory taste), it is engaged in .
    1. straight extensions
    2. product adaptation
    3. retailer versions
    4. backward invention
    5. forward invention

97. A standardized marketing program involves                   .
    1. adopting the strategy that best fits a given target market
    2. consistently using the communication and distribution channels that entail the lowest costs
    3. adjusting the product to suit market preferences
    4. changing the features of the product to accommodate the host country
    5. changing only the communication message to suit the different target markets

98. Which of the following is one of Hofstede's four cultural dimensions that differentiate countries?
    1. customer relationship management versus power distance
    2. strategic management versus marketing management
    3. weak versus strong uncertainty avoidance
    4. total quality management versus JIT deliveries
    5. marketing management versus customer relationships

99. The United States imposed a duty of 44.99 to 47.59 percent on wind towers produced in China and Vietnam and imported to the United States after they found evidence both countries were selling them at below fair market value, or

                   , the practice of charging less than its costs or less than it charges at home to win a market.

1. 1. arm's-length pricing
   2. gray marketing
   3. counterfeiting
   4. transfer pricing
   5. dumping