Chapter 19 The Global Marketplace



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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: 555

Skill: Concept

Objective: 19-1


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

A) leveling off

B) declining

C) erratic

D) intensifying

E) threatening

Answer: D

Diff: 1 Page Ref: 555

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 achieve more stability at home

B) but gain a competitive edge 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: 555

Skill: Concept

Objective: 19-1


4) A ________ is one that, by operating in more than one country, contains marketing, production, research and development, and financial advantages that are not available to purely domestic competitors.

A) global firm

B) global industry

C) whole-channel view

D) direct investment

E) free trade zone

Answer: A

Diff: 1 Page Ref: 555

Skill: Concept

Objective: 19-1

5) All of the following are major decisions a company faces in international marketing EXCEPT?

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) looking at the global marketing environment

Answer: C

Diff: 2 Page Ref: 556

AACSB: Analytic Skills

Skill: Concept

Objective: 19-1
6) 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: 1 Page Ref: 556

Skill: Concept

Objective: 19-1


7) 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: 1 Page Ref: 556

Skill: Concept

Objective: 19-1


8) 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) nontariff trade barrier

Answer: D

Diff: 2 Page Ref: 556

Skill: Concept

Objective: 19-1

9) 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: 3 Page Ref: 556

AACSB: Reflective Thinking

Skill: Concept

Objective: 19-1
10) 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: 3 Page Ref: 556

AACSB: Analytic Skills

Skill: Application

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: 1 Page Ref: 556

Skill: Concept

Objective: 19-1


12) The ________ is a 60-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: 557

Skill: Concept

Objective: 19-1

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: B

Diff: 2 Page Ref: 557

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: 557

AACSB: Ethical Reasoning

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: 557

Skill: Concept

Objective: 19-1


16) ________ is a group of nations organized to work toward common goals in the regulation of international trade.

A) A joint venture

B) A standardized marketing mix

C) An economic community

D) A global firm

E) A multinational enterprise

Answer: C

Diff: 1 Page Ref: 557

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: 1 Page Ref: 557

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: 1 Page Ref: 557-558

AACSB: Reflective Thinking

Skill: Concept

Objective: 19-1
19) 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.

C) NAFTA represents the world's single largest market.

D) Converting numerous currencies into the euro has been a failure.

E) CAFTA has been less successful than CAN.

Answer: B

Diff: 3 Page Ref: 558

AACSB: Analytic Skills

Skill: Concept

Objective: 19-1

20) 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: 557

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


21) 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: 557

Skill: Concept

Objective: 19-1


22) In January 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: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
23) 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) EU


B) NAFTA

C) CAFTA


D) FTAA

E) Mercusor

Answer: B

Diff: 3 Page Ref: 558

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1

24) 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

B) FTAA


C) CAN

D) NAFTA


E) EU

Answer: A

Diff: 2 Page Ref: 558

Skill: Concept

Objective: 19-1
25) What is the name of the single agreement that created a market of 443 million people and will eliminate all trade barriers and investment restrictions among the United States, Mexico, and Canada?

A) GATT


B) WTO

C) NAFTA


D) CAN

E) EU


Answer: C

Diff: 2 Page Ref: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
26) Given the apparent success of NAFTA, talks have been underway since 1994 to establish a free trade zone called ________. This zone would include 34 countries stretching from the Bering Strait to Cape Horn.

A) CAFTA


B) WTO

C) FTAA


D) CAN

E) AATF


Answer: C

Diff: 3 Page Ref: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1

27) Mercusor and CAN have agreed to unite, creating ________, which will make up the largest trading block after NAFTA and the European Union.

A) CAFTA

B) FTAA


C) Unasur

D) MCAN


E) GATT

Answer: C

Diff: 2 Page Ref: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


28) 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


D) Mercosur

E) Unasur

Answer: C

Diff: 3 Page Ref: 558

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1
29) All of the following are types of industrial structures EXCEPT?

A) subsistence economies

B) raw material exporting economies

C) developing economies

D) industrializing economies

E) industrial economies

Answer: C

Diff: 2 Page Ref: 558-559

Skill: Concept

Objective: 19-1

30) Much of Chile's revenues come from its tin and copper exports. Chile has a ________ economy.

A) subsistence

B) emerging

C) merchandise exporting

D) raw material exporting

E) industrializing

Answer: D

Diff: 1 Page Ref: 558

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1
31) 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: 1 Page Ref: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
32) 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: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
33) Very few market opportunities are available in a(n) ________ economy.

A) subsistence

B) raw material exporting

C) industrializing

D) emerging

E) industrial

Answer: A

Diff: 2 Page Ref: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1

34) 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: 558

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


35) ________ 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: 559

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
36) In a(n) ________ economy, manufacturing accounts for 10 to 20 percent of the country's economy. 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: 559

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1

37) Industrializing economies do NOT include ________.

A) Egypt

B) India


C) Brazil

D) Sweden

E) any of the above

Answer: D

Diff: 3 Page Ref: 559

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


38) All of the following are political-legal factors that should be considered when deciding whether to do business in a given country EXCEPT?

A) attitudes toward international buying

B) government bureaucracy

C) if a state religion is enforced

D) monetary regulations

E) political stability

Answer: C

Diff: 2 Page Ref: 559

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
39) Countries with ________ economies may 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: 559

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1

40) 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 ________ economy.

A) subsistence

B) emerging

C) raw material exporting

D) agrarian

E) industrializing

Answer: E

Diff: 3 Page Ref: 559

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1


41) 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: 560

Skill: Concept

Objective: 19-1


42) 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: 560

Skill: Concept

Objective: 19-1


43) All of the following are methods of countertrade EXCEPT?

A) paying in the seller's currency without further obligation

B) bartering goods or services

C) counterpurchasing

D) compensation

E) buyback

Answer: A

Diff: 2 Page Ref: 560

Skill: Concept

Objective: 19-1

44) What type of countertrade occurs when a seller sells a plant, equipment, or technology to another country and agrees to take payment in the resulting products?

A) barter

B) counterpurchase

C) rebuy


D) buyback

E) trade


Answer: D

Diff: 2 Page Ref: 560

Skill: Concept

Objective: 19-1


45) Japan's Fukusuke Corporation sold knitting machines and raw textile materials to Shanghai clothing manufacturer Chinatex in exchange for finished textiles produced on the machines. This is an example of which form of countertrade?

A) barter

B) compensation

C) rebuy


D) counterpurchase

E) blocked

Answer: B

Diff: 3 Page Ref: 560

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1
46) 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 form of countertrade?

A) counterpurchase

B) compensation

C) buyback

D) blocked currency

E) barter

Answer: E

Diff: 3 Page Ref: 560

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1

47) Daimler Chrysler agreed to sell 30 trucks to Romania in exchange for 150 Romanian jeeps, which it then sold to Ecuador for bananas, which were in turn sold to a German supermarket chain for German currency. What is this an example of?

A) joint venturing

B) product transportation

C) countertrading

D) adapted pay

E) global strategy

Answer: C

Diff: 2 Page Ref: 560

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1


48) Which of the following is the most common form of countertrade?

A) barter

B) compensation

C) buyback

D) counterpurchase

E) blocked currency

Answer: D

Diff: 3 Page Ref: 560

Skill: Concept

Objective: 19-1


49) The form of countertrade in which the seller receives full payment in cash but agrees to spend some of the money in the other country is known as ________.

A) counterpurchasing

B) bartering

C) compensation

D) buyback

E) blocked currency

Answer: A

Diff: 1 Page Ref: 560

Skill: Concept

Objective: 19-1


50) When Boeing sells aircraft to India and agrees to buy Indian coffee, rice, and castor oil and to sell these products elsewhere, Boeing is engaging in ________.

A) joint venturing

B) barter

C) buyback

D) compensation

E) counterpurchasing

Answer: E

Diff: 2 Page Ref: 560

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1

51) 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: 561

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


52) Some social critics say that globalization really means ________ the world's cultures.

A) Americanizing

B) modernizing

C) stabilizing

D) respecting

E) ignoring

Answer: A

Diff: 2 Page Ref: 562

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
53) 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: 1 Page Ref: 563

AACSB: Analytic Skills

Skill: Concept

Objective: 19-1

54) 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: 564

AACSB: Analytic Skills

Skill: Concept

Objective: 19-1


55) Several of the following factors might draw a company into the international arena EXCEPT?

A) Global competitors might offer better products at lower prices domestically.

B) Domestic markets might be stagnant or shrinking.

C) Managers are unsure of the effect of regulations and the political environments of other countries.

D) The company's customers may be expanding abroad.

E) Foreign markets present higher profit opportunities.

Answer: C

Diff: 2 Page Ref: 564

AACSB: Analytic Skills

Skill: Concept

Objective: 19-1
56) 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: 564

Skill: Concept

Objective: 19-1


57) 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: 565

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1

58) 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: 3 Page Ref: 565

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1


59) 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: 3 Page Ref: 565

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
60) Which of the following is an economic factor that a company should consider before deciding to enter and international market?

A) population size and growth

B) natural resources

C) cultural and social norms

D) political stability

E) climate

Answer: B

Diff: 3 Page Ref: 565

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-1
61) 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: 566

Skill: Concept

Objective: 19-2

62) 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: 1 Page Ref: 566

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1
63) 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: 566

Skill: Concept

Objective: 19-2


64) When entering a foreign market, companies typically start with ________, working through independent international marketing intermediaries.

A) direct exporting

B) embargo

C) product adaptation

D) indirect exporting

E) licensing

Answer: D

Diff: 2 Page Ref: 566

Skill: Concept

Objective: 19-2


65) ________ 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: 3 Page Ref: 566

Skill: Concept

Objective: 19-2

66) 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: 566

Skill: Concept

Objective: 19-2


67) 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: 566

AACSB: Reflective Thinking

Skill: Application

Objective: 19-2
68) A company can conduct direct exporting in all of the following ways EXCEPT?

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 work with foreign-based agents who sell goods on its behalf.

Answer: D

Diff: 3 Page Ref: 566

AACSB: Analytic Skills

Skill: Concept

Objective: 19-2
69) A ________ gives the seller more presence and program control in the foreign market and often serves as a display center and customer service center.

A) straight product extension

B) sales branch

C) market-centered company

D) market niche

E) foreign licensing agreement

Answer: B

Diff: 3 Page Ref: 566

Skill: Concept

Objective: 19-2

70) All of the following are four 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: 566

Skill: Concept

Objective: 19-2


71) 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: 566

Skill: Concept

Objective: 19-2


72) 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: 567

AACSB: Reflective Thinking

Skill: Application

Objective: 19-2
73) 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: 567

AACSB: Analytic Skills

Skill: Application

Objective: 19-2

74) 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: 567

AACSB: Reflective Thinking

Skill: Application

Objective: 19-2


75) ________ 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: 567

Skill: Concept

Objective: 19-2


76) 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: 1 Page Ref: 567

AACSB: Reflective Thinking

Skill: Application

Objective: 19-2

77) ________ 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: 568

Skill: Concept

Objective: 19-2
78) 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: 568

AACSB: Analytic Skills

Skill: Concept

Objective: 19-2
79) ________ means selling largely the same products and using the same marketing approaches worldwide.

A) Adapted global marketing

B) Global marketing mix

C) Standardized global marketing

D) Export marketing

E) Multinational strategy

Answer: C

Diff: 1 Page Ref: 568

AACSB: Communication

Skill: Concept

Objective: 19-3

80) ________ means adjusting the marketing strategy and mix elements to each international target market.

A) Standardized global marketing

B) Global marketing mix

C) Adapted global marketing

D) Communication adaptation

E) Whole channel view

Answer: C

Diff: 1 Page Ref: 568

AACSB: Communication

Skill: Concept

Objective: 19-3


81) In India, where cows are considered sacred, McDonald's serves McChicken, Filet-O-fish, McVeggie, and Pizza McPuffs. This is an example of ________.

A) standard global marketing

B) adapted global marketing

C) straight product extension

D) product invention

E) communication adaptation

Answer: B

Diff: 2 Page Ref: 569

AACSB: Multicultural and Diversity

Skill: Application

Objective: 19-3
82) All of the following are strategies for adapting product and marketing communications to a global market EXCEPT?

A) external extension

B) straight extension

C) communication adaptation

D) product adaptation

E) product invention

Answer: A

Diff: 2 Page Ref: 569

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-3
83) "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: 569

AACSB: Reflective Thinking

Skill: Concept

Objective: 19-3

84) Kellogg cereals, Gillette razors, Heineken beer, and Black & Decker tools are all 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: 569

AACSB: Analytic Skills

Skill: Application

Objective: 19-3


85) To make Oreo cookies sell well in China, Kraft completely reinvented 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: 570

AACSB: Analytic Skills

Skill: Application

Objective: 19-3
86) 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: 570

AACSB: Analytic Skills

Skill: Application

Objective: 19-3

87) Sony found that Japanese commuters had difficulty using standard laptops on crowded rush-hour trains since standing commuters have no laps. So it 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: 571

AACSB: Reflective Thinking

Skill: Application

Objective: 19-3


88) 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: 572

AACSB: Multicultural and Diversity

Skill: Concept

Objective: 19-3
89) 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: 572

AACSB: Analytic Skills

Skill: Application

Objective: 19-3

90) The global name for Microsoft's new operating system, Vista, runs out to be a disparaging term for a frumpy old woman in Lativa. Microsoft must adjust the name. This is an example of ________.

A) communication adaptation

B) standardized global marketing

C) straight product extension

D) product adaptation

E) communication extension

Answer: A

Diff: 3 Page Ref: 572

AACSB: Analytic Skills

Skill: Application

Objective: 19-3


91) 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: 572

AACSB: Analytic Skills

Skill: Application

Objective: 19-3
92) 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: 573

Skill: Concept

Objective: 19-3

93) 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: 573

AACSB: Analytic Skills

Skill: Application

Objective: 19-3
94) ________ 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: 1 Page Ref: 574

Skill: Concept

Objective: 19-3


95) The two major links between the seller and the final buyer of 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: 574

Skill: Concept

Objective: 19-3


96) The first link between the seller and the final buyer, ________ , moves 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: 574

Skill: Concept

Objective: 19-4

97) 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: 1 Page Ref: 575

Skill: Concept

Objective: 19-4

98) 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: 576

Skill: Concept

Objective: 19-4


99) In a(n) ________, executives are trained in worldwide operations, not just domestic or international.

A) direct exporting company

B) joint venture

C) international division

D) international subsidiary

E) global organization

Answer: E

Diff: 1 Page Ref: 576

Skill: Concept

Objective: 19-4


100) 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: 576

AACSB: Reflective Thinking

Skill: Application

Objective: 19-4

101) A global firm gains marketing, production, and financial advantages that are not available to purely domestic competitors.

Answer: TRUE

Diff: 1 Page Ref: 555

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: 556

Skill: Concept

Objective: 19-1
103) GATT is a 61-year-old treaty designed to promote world trade by reducing tariffs and other international trade barriers.

Answer: FALSE

Diff: 1 Page Ref: 557

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: 557

Skill: Concept

Objective: 19-1
105) Free trade zones are also known as economic communities.

Answer: TRUE

Diff: 2 Page Ref: 557

Skill: Concept

Objective: 19-1
106) The European Union represents one of the world's single largest markets.

Answer: TRUE

Diff: 1 Page Ref: 557

Skill: Concept

Objective: 19-1
107) CAFTA will eliminate all trade barriers and investment restrictions among the United States, Canada, and Mexico.

Answer: FALSE

Diff: 1 Page Ref: 558

Skill: Concept

Objective: 19-1

108) Unasur, a coming together of Mercusor and CAN, will be modeled after NAFTA.

Answer: FALSE

Diff: 3 Page Ref: 558

Skill: Concept

Objective: 19-1


109) Barter is often used in subsistence economies.

Answer: TRUE

Diff: 2 Page Ref: 558

Skill: Concept

Objective: 19-1
110) Barter is a form of countertrade.

Answer: TRUE

Diff: 2 Page Ref: 560

Skill: Concept

Objective: 19-1
111) The exchange of U.S. wheat for Russian vodka would be an example of barter.

Answer: TRUE

Diff: 1 Page Ref: 560

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1


112) Coca-Cola, McDonald's, Nike, and KFC have been singled out by antiglobalization protestors all over the world.

Answer: TRUE

Diff: 2 Page Ref: 562

Skill: Concept

Objective: 19-1
113) The simplest way to enter a foreign market is through exporting.

Answer: TRUE

Diff: 1 Page Ref: 566

Skill: Concept

Objective: 19-2
114) 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: 566

Skill: Concept

Objective: 19-2

115) When Sears used qualified, local manufacturers to produce many of the products it sells in its department stores in Mexico, it was using contract manufacturing.

Answer: TRUE

Diff: 2 Page Ref: 567

AACSB: Reflective Thinking

Skill: Application

Objective: 19-2
116) 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: 568

Skill: Concept

Objective: 19-2
117) Kellogg cereals are sold successfully in essentially the same form around the globe. This is an example of straight product extension.

Answer: TRUE

Diff: 3 Page Ref: 569

AACSB: Reflective Thinking

Skill: Application

Objective: 19-3


118) Coca-Cola is less sweet or less carbonated in certain countries. This is known as standardized global marketing.

Answer: FALSE

Diff: 3 Page Ref: 570

AACSB: Reflective Thinking

Skill: Application

Objective: 19-3


119) 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: 3 Page Ref: 570

AACSB: Communication

Skill: Application

Objective: 19-3


120) 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: 3 Page Ref: 572

AACSB: Communication

Skill: Application

Objective: 19-3

121) 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: 574

Skill: Concept

Objective: 19-3
122) 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: 574

Skill: Concept

Objective: 19-3
123) The Internet is making global price difference more obvious, forcing companies toward more standardized international pricing.

Answer: TRUE

Diff: 2 Page Ref: 574

Skill: Concept

Objective: 19-3
124) If a firm moves into joint ventures and direct investments, it will eventually need to create international divisions or subsidiaries.

Answer: TRUE

Diff: 2 Page Ref: 575

Skill: Concept

Objective: 19-4
125) International divisions can be organized as geographical organizations, world product groups, or national groups.

Answer: FALSE

Diff: 3 Page Ref: 576

Skill: Concept

Objective: 19-4
126) 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: 555

AACSB: Analytic Skills

Skill: Application

Objective: 19-1

127) 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: 1 Page Ref: 556

AACSB: Analytic Skills

Skill: Application

Objective: 19-1


128) Briefly explain why economic communities are formed.

Answer: These 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: 1 Page Ref: 557

AACSB: Analytic Skills

Skill: Application

Objective: 19-1


129) 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: 557

AACSB: Analytic Skills

Skill: Application

Objective: 19-1


130) Explain why some critics worry that American multinationals are causing countries around the globe to lose their individual identities, giving two examples 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: 562

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1

131) 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: 563

AACSB: Reflective Thinking

Skill: Application

Objective: 19-1


132) Name two of the five indicators of market potential and provide two examples 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: 565

AACSB: Analytic Skills

Skill: Application

Objective: 19-2


133) 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: 566

AACSB: Analytic Skills

Skill: Application

Objective: 19-2


134) 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: 567

AACSB: Analytic Skills

Skill: Application

Objective: 19-2


135) 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: 567

AACSB: Analytic Skills

Skill: Application

Objective: 19-2

136) 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: 1 Page Ref: 568

AACSB: Reflective Thinking

Skill: Application

Objective: 19-3


137) 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: 1 Page Ref: 572

AACSB: Analytic Skills

Skill: Application

Objective: 19-3


138) Why is 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: 574

AACSB: Analytic Skills

Skill: Application

Objective: 19-3


139) 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: 574

AACSB: Analytic Skills

Skill: Application

Objective: 19-3


140) 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: 575

Skill: Application

Objective: 19-4

141) Describe the purpose, roles, and achievements of GATT and the World Trade Organization.

Answer: The General Agreement on Tariffs and Trade (GATT) is a 60-year-old treaty designed to promote world trade by reducing tariffs and other international trade barriers. Member nations, currently numbering 150, 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: 557

AACSB: Analytic Skills

Skill: Application

Objective: 19-1
142) 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: 559

AACSB: Multicultural and Diversity

Skill: Application

Objective: 19-1

143) Discuss the three forms of countertrade and provide an example of each.

Answer: Most international trade involves cash transactions. Yet many nations have too little

hard currency to pay for their purchases from other countries. They may want to pay with

other items instead of cash, which has led to a growing practice called

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