Tapping into Global Markets Part III

62) A Gucci bag sells for $120 in Italy and $240 in the United States due to the differences in the costs of distributing the product in the two countries. This phenomenon is called a(n) ________. A) opportunity cost problem B) market pricing problem C) tactical pricing problem D) price escalation problem E) transfer pricing problem Answer: D 63) Trends Inc. produces and markets casual wear for men and women. The company wants to be a global brand and is planning to enter a few chosen markets across Europe and Asia. To accommodate the differences in purchasing power and costs of shipping goods to the retailers, the company has decided to use cost-based pricing in each country. In order to ensure that this strategy is successful, Trends must first make sure that ________. A) all the countries it is planning to enter have similar laws and regulations B) competing offerings in the different markets are not priced lower C) all competitors follow cost-based pricing D) its marketing communication targets rival firms in the respective markets to prove its superiority E) its transfer prices are high Answer: B 64) The problem with setting a uniform global price for a product is that ________. A) it allows intermediaries in low-price countries to reship their products to high-price countries B) the company would earn the same profits everywhere, regardless of the cost structure C) this strategy can price the product out of the market in countries where costs are high D) this strategy makes the price too high in poor countries and not high enough in rich countries E) it is ineffective for products that are homogeneous Answer: D 65) When companies are setting prices in different countries, the problem with setting a marketbased price in each country is that ________. A) it allows intermediaries in low-price countries to reship their products to high-price countries B) the company would earn the same profits everywhere, regardless of the cost structure C) this strategy might price the product out of the market in countries where costs are high D) this strategy would make the price too high in poor countries and not high enough in rich countries E) it prevents the company from differentiating its products Answer: A 66) When one unit charges another unit in the same company for goods it ships to its foreign subsidiaries, the charge is called a(n) ________. A) original price B) transfer price C) margin price D) break-even price E) customer value price Answer: B 67) Existence of gray markets lead to which of the following outcomes? A) They make the distribution channel stronger. B) They create a free-rider problem making legitimate distributors' investments in supporting a manufacturer's product less productive. C) Goods sold in grey markets are always counterfeit. D) Goods sold in grey markets come with standard product warranties. E) Taxes imposed on grey market products are very high. Answer: B 68) Dumping occurs when ________. A) a company entering a foreign market charges either less than its costs or less than it charges at home B) a company entering a foreign market charges more than the price in its home market C) a company entering a foreign market charges prices that are lower than those charged by its competitors in this market D) a company sets its price equal to its average cost of production E) a company exports its products to a foreign country to increase its revenue in spite of excess demand in the home country Answer: A 69) Various governments force companies to charge the ________ price, which is charged by other competitors for the same or a similar product. A) gray market B) implicit C) arm's-length D) authorized E) contingent Answer: C 70) Which of the following is likely if the distribution channel for a product in the foreign country is long? A) the foreign country buyers pay a high price B) the consumer will pay arms-length price C) the profit margin of the sellers increase D) the intermediaries are motivated to reship the product to another country to earn higher profits E) the seller can increase profit margins by charging a uniform price Answer: A 71) As people in developing countries often prefer to buy in smaller quantities, ________ is one of the most important functions of intermediaries in developing countries and helps perpetuate the long channels of distribution, which are a major obstacle to the expansion of retailing. A) product adaptation B) breaking bulk C) diversification D) transfer pricing E) dual adaptation Answer: B 72) As a result of the ad campaigns depicting Brazil as a multicultural land of carnivals and beaches, any mention of the country makes people think of sun and sand. This is an example of ________. A) anchoring effect B) target market impact C) regiocentrism D) country-of-origin effect E) cognitive dissonance Answer: D 73) The New Zealand Way program was an initiative by the government of New Zealand to raise awareness and attract tourists by showing the dramatic landscapes featured in "The Lord of the Rings" film trilogy. This is an example of a government trying to strengthen its ________. A) country-of-origin perceptions B) international subsidiaries C) internationalization D) contract manufacturing E) distributor relationships Answer: A 74) Companies can manage their international marketing activities in three ways: export departments, international divisions, or ________. A) global organization B) fixed corporate headquarters C) strong marketing department in the "host" country D) local marketing efforts E) strategic business units Answer: A 75) A company that has the regional vice presidents for North America, Latin America, Europe, and Africa reporting to the international division president is said to be a(n) ________. A) international subsidiary B) geographical organization C) world product group D) export department E) hierarchical organization Answer: B 76) Ajax Corp. is a multinational group that manufactures medical equipment and a variety of household electrical appliances. Kevin O'Brien is the head of the SBU that produces and markets medical equipment globally. The company's operating units appear to be a(n) ________. A) internal subsidiary B) geographical organization C) world product group D) export department E) regional headquarters Answer: C 77) Forces promoting global integration include ________. A) strong local preferences B) heterogeneous demand C) local standards and barriers D) strong consumer resistance to foreign goods E) capital-intensive production Answer: E 78) Forces promoting national responsiveness include ________. A) strong local preferences B) homogeneous demand C) strong global preferences D) strong consumer liking towards foreign goods E) capital-intensive production Answer: A 79) When forces for global integration are high and forces for national responsiveness are weak, which of the following strategies makes most sense? A) segment consumers on a regional basis B) tailor the product on a city-by-city basis C) treat the world as a heterogeneous market D) treat the world as a single market E) treat the world as a portfolio of national opportunities Answer: D 80) When forces for global integration are low and forces for national responsiveness are high, a strategy that ________ makes sense. A) treats the world as a single market B) views the marketplace as completely homogeneous C) treats the world as a portfolio of national opportunities D) standardizes all elements of the marketing mix E) facilitates a straight extension Answer: C 81) Luxury brands are usually not global because they target a niche market. Answer: FALSE 82) Global firms plan, operate, and coordinate their activities on a worldwide basis. Answer: TRUE 83) 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. Answer: TRUE 84) Companies enter the international market only when their domestic markets are saturated. Answer: FALSE 85) The first task of the internationalization process is moving a company from no regular exports to regular export activities. Answer: TRUE 86) A waterfall approach to entering foreign markets is described as entering countries simultaneously. Answer: FALSE 87) More than 90% of future population growth is projected to occur in the less developed countries. Answer: TRUE 88) Smaller packaging and lower sales prices are often critical in markets where incomes are limited. Answer: TRUE 89) Regional economic integration has intensified in recent years, which makes it more difficult for marketers to expand globally. Answer: FALSE 90) The creation of the European Union has benefited marketers wanting to enter Europe because they now have access to a homogeneous market consisting of 27 countries. Answer: FALSE 91) 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. Answer: TRUE 92) Domestic-based export merchants seek and negotiate foreign purchases for a commission. Answer: FALSE 93) Cooperative organizations carry on exporting activities on behalf of several producers and are partly under their administrative control. Answer: TRUE 94) Indirect exports are characterized by high investment, and therefore high risk. Answer: FALSE 95) In licensing, the licensor issues a license to a foreign company to use an item of value for a fee or royalty. Answer: TRUE 96) When the licensor provides the licensee with a complete brand concept and operating system, the arrangement is called contract manufacturing. Answer: FALSE 97) Management contracts offer foreign owners the opportunity to manage businesses for a fee. Answer: TRUE 98) 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. Answer: TRUE 99) The ultimate form of foreign investment is direct ownership of foreign-based assembly or manufacturing facilities. Answer: TRUE 100) 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. Answer: FALSE 101) If a society is collectivist, it would imply that the self-worth of the people is rooted in individual achievements. Answer: FALSE 102) Straight extension means using an established product's brand name for a new item in the same product category. Answer: FALSE 103) Product adaptation not only involves altering the product to meet local preferences, but also calls for a change in the communication strategy. Answer: FALSE 104) Forward invention refers to reintroducing earlier product forms that are well adapted to a foreign country's needs. Answer: FALSE 105) Communication adaptation occurs when companies change marketing communications for each local market. Answer: TRUE 106) If Kellogg's offered different varieties of breakfast cereals in India as compared to Australia, and also positioned its products differently in the two countries, then Kellogg's would be engaging in dual adaptation. Answer: TRUE 107) The use of media may require international adaptation because media availability varies from country to country. Answer: TRUE 108) When companies sell on the Internet, price becomes transparent, and price differentiation between countries declines. Answer: TRUE 109) If a company charges its subsidiary in a foreign country too low a transfer price, it can be accused of dumping. Answer: TRUE 110) Gray market activities harm distributor relations, tarnish the manufacturer's brand equity, and undermine the integrity of the distribution channel. Answer: TRUE