Global Mark. Testbank CH 4-8

Global Marketing
Chapter 4 Social and Cultural Environments
1) Despite high worldwide awareness levels of the Disney brand, as of 2006, only 25 percent of
the company's revenue came from outside the United States.
Answer: TRUE
Page Ref: 106
2) While marketers should be secure in their own convictions and traditions, generosity is
required to appreciate the integrity and value of other ways of life and points of view.
Answer: TRUE
Page Ref: 107
3) Anthropological research offers support for the view that cultural behavior is innate, i.e.,
present at birth.
Answer: FALSE
Page Ref: 107
4) Culture includes both conscious and unconscious values, idea, attitudes, and symbols that
shape human behavior and that are confined to one generation.
Answer: FALSE
Page Ref: 107
5) Food taboos, language, marriage, medicine, music, dancing, courtship, body adornment,
religious rituals, and residence rules are all examples of "cultural universals."
Answer: TRUE
Page Ref: 108
6) As cultural information and imagery flow freely across borders via satellite TV, the Internet,
and similar communication channels, new global consumer cultures are emerging.
Answer: TRUE
Page Ref: 108
7) When marketers refer to "fast-food culture", or "credit-card culture" they are referring to a
cosmopolitan culture which is comprised of various segments of the population which are
interconnected by information technology.
Answer: TRUE
Page Ref: 108
AACSB: Use of IT
8) A "value" is an organized pattern of knowledge that an individual holds to be true about the
world.
Answer: FALSE
Page Ref: 108
9) Vegetarians form a category of people that are embedded within a broad culture forming a
subculture, which in turn represent an attractive niche marketing opportunity.
Answer: TRUE
Page Ref: 109
10) "Mecca Cola" and "Qibla Cola" are brand names given to Coca-Cola for effective marketing
in Muslim countries.
Answer: FALSE
Page Ref: 109
11) KFC has made effective use of religious marketing themes in Indonesia and India where use
of pork and beef are restricted due to religious reasons.
Answer: TRUE
Page Ref: 109-110
12) Aesthetic elements that are attractive, appealing, and in good taste are perceived as decent
and accepted universally.
Answer: FALSE
Page Ref: 110-111
13) In the United States bridal gowns are white in color whereas in many countries they are red
in color. White is considered as a color of mourning in many Asian countries.
Answer: TRUE
Page Ref: 110-112
14) Gray color is associated with high quality and expensive in the United States, whereas it is
considered inexpensive in China and Japan.
Answer: TRUE
Page Ref: 110-112
15) Music represents a "transculture" that cannot be identified with any particular nation since
rhythm is a universal aspect of music.
Answer: TRUE
Page Ref: 112
16) As a component of abstract (as opposed to physical) culture, many forms of music exhibit
the same "think global, act local" paradox that is at the heart of global marketing.
Answer: TRUE
Page Ref: 113
17) In order to convey the sense of the country of origin it is advisable to use the same
background music in broadcast commercials in all parts of the world.
Answer: FALSE
Page Ref: 112-113
18) In China, authorities have the power to dictate which songs can be marketed and performed.
Answer: TRUE
Page Ref: 113
19) The Subway chain in India had to educate consumers about the benefits of the company's
sandwiches since Indians do not normally consume buns.
Answer: TRUE
Page Ref: 113
20) Domino's Pizza had to pull out of Italy because Italians perceived its products to be "too
American."
Answer: TRUE
Page Ref: 113
21) Since cultural sensitivity is important when it comes to food, drink, and medicine, serious
marketing mistakes can result if this is not taken into account.
Answer: TRUE
Page Ref: 114
22) While McDonald's continues to open new restaurants in France, the number of traditional
bistros has declined by over fifty percent.
Answer: TRUE
Page Ref: 114
23) Both the spoken and unspoken aspects of language are included in the broader linguistic filed
of semiotics, which is the study of signs and their meanings.
Answer: TRUE
Page Ref: 114
24) Diet Coke is sold as Coca-cola light in Middle East and other countries since the word diet
has a negative connotation.
Answer: TRUE
Page Ref: 115
25) Since there is no alphabet which sounds like a "P" in Arabic, "Popeye's" becomes "Bob eyes"
and Pepsi sounds like "Bebsi." This is an example of difference due to phonology.
Answer: TRUE
Page Ref: 115
26) Diesel founder Renzo Rosso has asserted that his brand's, 'Diesel' name is one of the few
words which is pronounced the same in almost every language. To a linguist, this comment is
best understood within the context of phonology.
Answer: FALSE
Page Ref: 115
27) The phonetic pronunciation of the numerical sequence 8282 means "hurry up" in Korean.
Answer: TRUE
Page Ref: 116
28) Top management at Matsushita concluded that a staid corporate culture that was exclusively
Japanese was eroding the company's competitiveness in global markets.
Answer: TRUE
Page Ref: 116
29) There is a greater expectation in Far Eastern countries that people will pick up nonverbal
cues and understand intuitively without being told.
Answer: TRUE
Page Ref: 116
30) "McDonaldization of culture," a term coined by Geert Hofstede, refers to the wide spread of
McDonald's restaurants in the world and its adverse impact on global culture.
Answer: FALSE
Page Ref: 119
31) "Slow Food" is developed as an idea in Italy which is intended to show that things should not
taste the same everywhere.
Answer: TRUE
Page Ref: 119
32) The president of an American company was interested in dealing with a company in Saudi
Arabia. The Saudi CEO made it clear at the outset that the credentials in the documents have less
credibility than personal trust and confidence. This shows that the Saudi Arabian culture is a
high-context culture.
Answer: FALSE
Page Ref: 120
33) If a potential Latin American customer insists on giving you a tour of the architectural
highlights of his city prior to discussing business, it s a clue that you are doing business in a
high-context culture.
Answer: TRUE
Page Ref: 120
34) Competitive bidding is infrequent in a low-context culture.

Answer: FALSE
Page Ref: 120
35) According to Hofstede's research on cultural values, Japan and Austria ranked highest in
masculinity.
Answer: TRUE
Page Ref: 121
36) Organizational anthropologist Geert Hofstede recognized a dimension of Asian culture called
"long-term orientation" with the help of a Chinese Value Survey.
Answer: TRUE
Page Ref: 122
37) The power distance dimension reflects the degree of trust among members of society. Thus
the higher the power distance (PDI), the higher the level of trust.
Answer: FALSE
Page Ref: 123
38) A sense of shame leads to sensitivity in social contacts within high-performing Asian
countries such as Hong Kong, Taiwan, and Japan.
Answer: TRUE
Page Ref: 122
39) Avoiding the Self-Reference Criterion (SRC) requires a person to suspend assumptions
based on prior experience and success and be prepared to acquire new knowledge about human
behavior and motivation.
Answer: TRUE
Page Ref: 125-1126
40) According to Roger's diffusion theory, most customers will not purchase expensive products
without the "hands-on" experience marketers call "trial."
Answer: TRUE
Page Ref: 127
41) The first 2.5 percent of people who bought Apple's iPhone can be categorized as early
adopters.
Answer: FALSE
Page Ref: 128-129
42) The cultural environment of a country is best defined by which characteristics?

A) standard of living and stage of economic development
B) production process and standards of measurement
C) attitudes, beliefs, and values
D) degree of nationalism and economic community membership
E) fast food culture and slow food culture
Answer: C
Page Ref: 108-109
43) Suppose you have a friend from India who is a lifelong vegetarian and who does not like
McDonald's because the company sells hamburgers in many countries. Which of the following
describes your friend?
A) "vegetarianism" represents a value, "dislike McDonald's" represents an attitude
B) "vegetarianism" represents an attitude, "dislike McDonald's" represents a value
C) "vegetarianism" and "dislike McDonald's" both represent an attitude
D) "vegetarianism" represents a value, "dislike McDonald's" represents a belief
E) "vegetarianism" and "dislike McDonald's" both represent values
Answer: A
Page Ref: 108-109
44) Cultural influences are also quite apparent in food preparation and consumption patterns and
habits. Domino's Pizza, the world's largest pizza-delivery company, pulled out of Italy because:
A) tomato sauce was too bold and competed with Italian products.
B) people did not like to eat at home.
C) Italians perceived its products to be "too American."
D) Italians wanted more toppings on thick crust.
E) Italians did not like anyone else to use the name pizza.
Answer: C
Page Ref: 113
45) While some food preferences remain deeply embedded in culture, there is plenty of evidence
that global dietary preferences are converging. Examples of such a change can be predicted
from:
A) the popularity of Domino's Pizza in Italy.
B) the preference for local hamburgers from a local chain, Jollibee's, in Philippines.
C) the growing number of McDonald's restaurants globally.
D) the increased sales of soups and noodles in Thailand.
E) popularity of Chinese foods in Taiwan.
Answer: C
Page Ref: 113
46) American Nancy McKinstry recently became the new CEO at Dutch publisher Wolters
Kluwer. As Ms. McKinstry noted, she had to drop the word "aggressive" in describing her
strategic plan to company managers. She said, "I learned that the word has a negative
connotation to a lot of Europeans. I was coming across too hard, too much of a results-driven
American to the people. I needed to get on board so I started describing our strategy as 'decisive'
and that made all the difference." Which of the following grammar topics is the critical element
in this passage?
A) syntax
B) semantics
C) morphology
D) phonology
E) semiotics
Answer: B
Page Ref: 114-118
47) An intern from the United Kingdom was working in an American software company during
summers. One day her boss gave her a memo asking her to post it, with the intention of having it
put on the bulletin board. To her boss's surprise the letter was mailed by the intern since the word
'post' means 'mail' in British English. In communication terms this error can be attributed due to:
A) syntax.
B) phonology.
C) morphology.
D) semantics.
E) semiotics.
Answer: D
Page Ref: 114-118
48) When the Coca-Cola Company was developing its new Dasani bottled water brand, linguists
helped guide the naming process. For example, the recurring "a" was chosen because it has a
soothing sound. In linguistics, issues pertaining to letters and sounds are matter of:
A) syntax.
B) semantics.
C) phonology.
D) semiotics.
E) semantics.
Answer: C
Page Ref: 114-118
49) In deference to local cultural traditions, when GM executives gave gifts from Tiffany's to
Chinese officials, the gifts were packaged in:
A) blue boxes with white ribbons.
B) blue boxes with red ribbons.
C) white boxes with blue ribbons.
D) white boxes with red ribbons.
E) red boxes with white and blue ribbons.
Answer: B
Page Ref: 110-112
50) Giving business cards with the left hand in Malaysia; showing soles of shoes to a host in
Saudi Arabia, and winking one eye in India are all considered impolite interpersonal
communication due to the fact that:
A) in Middle Eastern countries it is customary to take off shoes at the door.
B) it is difficult to notice when one winks eyes since there are many people in India.
C) people pick up nonverbal cues and understand intuitively without being told.
D) these actions distract people from hearing at meetings.
E) people are not aware of Western ways of doing business.
Answer: C
Page Ref: 119-120
51) A vice-president of an American software company introduced himself to a group of Korean

partners and added "you may just call me John." Although this verbal cue shows the underlying
reality that Americans have a high value on informality and equality, it needs adaptation due to
the reason that:
A) John is not a very popular name in Korea.
B) Ii is difficult to translate John in Korean language.
C) customs, hierarchies, and class structure of Korean culture has to be respected.
D) Korean culture requires that first and last name be used in addressing guests.
E) it is not appropriate to disclose nicknames in business meetings.
Answer: C
Page Ref: 119-120
52) A characteristic of a low-context culture which is prevalent in United States, Switzerland,

and Germany is:
A) less information is contained in verbal communication.
B) major emphasis on a person's values and position in society.
C) messages are explicit and specific.
D) a person's word is his or her bond.
E) negotiations are long and protracted.
Answer: C
Page Ref: 120-125
53) In high-context cultures, time is:

A) monochronic.
B) polychronic.
C) linear.
D) short.
E) common.
Answer: B
Page Ref: 120-125
54) According to Geert Hofstede, which of the following is a key cultural dimension that helps
account for rapid economic growth in Asia?
A) power distance
B) individualist/collectivist
C) feminine/masculine
D) uncertainty avoidance
E) long-term orientation
Answer: E
Page Ref: 120-125
55) Two countries that outrank the others in uncertainty avoidance are:
A) Austria and Belgium.
B) Japan and Hong Kong.
C) Greece and Portugal.
D) Denmark and Finland.
E) Ireland and Italy.
Answer: C
Page Ref: 121-123
56) Which is not considered as a long-term value?

A) persistence
B) sense of shame
C) thrift
D) ordering relationships
E) search for truth
Answer: E
Page Ref: 122-123
57) The power distance dimension reflects the degree of trust among members of society. Thus,
the higher the power distance (PDI) the:
A) greater is uncertainty avoidance.
B) lower is the level of trust.
C) higher is tolerance for ambiguity.
D) greater is male dominance.
E) lower is the harmony.
Answer: B
Page Ref: 121-124
58) In the 1990's Tamagotchi was designed as a virtual pet and test marketed in Tokyo. The
word-of-mouth publicity was so strong that toymaker Bandai was hard-pressed to keep up with
demand. By the time Tamagotchis reached New York toy retailer FAO Schwartz, the initial
shipment was sold out. This shows that:
A) virtual pets do not need special marketing efforts.
B) word-of-mouth marketing is highly effective in collectivist cultures.
C) demand for virtual pets is more in technologically advanced countries.
D) print marketing is not as effective as word-of-mouth publicity.
E) demand for innovative products is proportional to publicity.
Answer: B
Page Ref: 121-125
59) European consumers have faced a number of food-related issues in recent years, including an
outbreak of hoof-and-mouth disease and continuing concerns over mad cow disease. As a result,
many are skeptical about GMOs (genetically-modified organisms) and the benefits of eating food
products that incorporate genetically-engineered ingredients. As one French citizen noted
recently, "We have a very risk-averse society that has been completely traumatized by food
scares." Thinking about this situation in terms of Hofstede's cultural values framework, one
might reasonably interpret this remark to indicate that France ranks relatively high in:
A) power distance.
B) short-term orientation.
C) masculinity.
D) uncertainty avoidance.
E) individualism.
Answer: D
Page Ref: 120-125
60) Since being introduced in the Middle East, Barbie has faced opposition on political,
religious, and cultural grounds. Which of the following statements does not reflect the attitude of
parents, salesmen and religious leaders?
A) "I think the Barbie is more harmful than an American missile."
B) "There is a cultural gap when an Arab girl plays with a doll like Barbie."
C) "The average Arab girl's reality is different from Barbie's with her swimming pool, Cadillac,
blond hair and boyfriend Ken."
D) "Young girls are spending more time with their cell phones and digital music players."
E) "The plastic icon of Western girlhood is seen in the Middle East, where modesty matters, as
something of a tramp."
Answer: D
Page Ref: 112
61) Procter & Gamble's introduction of All-Temperature Cheer laundry detergent in Japan was a
flop at first. The problem was that Japanese women wash clothes in cold water– either tap water
or leftover bath water–so they don't care about all-temperature washing (which is a big selling
point in the U.S.). Also, Cheer was first introduced in Japan at a time when the market for fabric
softeners in Japan was rapidly expanding. However, when Japanese housewives added lots of
fabric softener to the water, Cheer didn't produce many suds (Americans don't use as much fabric
softener). P&G reformulated the product so it wouldn't be affected by fabric softeners, and ads
for Cheer in Japan pledged superior cleaning in cold water, not all temperatures. Which of the
following might have helped P&G avoid the initial problems with Cheer?
A) Maslow's hierarchy
B) high vs. low context culture
C) diffusion of innovation
D) self-reference criterion
E) polycentric orientation
Answer: D
Page Ref: 125-126
62) Which of the following best sums up the experience of Walt Disney Company executives
when creating Disney's theme park in Paris?
A) They were guided by the "think global, act local" principle.
B) They fell victim to the self-reference criterion.
C) They exhibited a geocentric management orientation.
D) They miscalculated the rate of diffusion of innovations in Europe.
E) They had an unbiased perception of existing culture in Europe.
Answer: B
Page Ref: 125-126
63) The lesson that SRC (Self-Reference Criterion) teaches can be summarized as:
A) a person's perception of market needs is framed by others cultural experience.
B) perceptual blockage and distortion about cultures are hard to reduce.
C) unbiased perception is a vital and critical skill in global marketing.
D) unconscious reference to one's cultural values is critical in global marketing.
E) prior success and ethnocentrism can override the SRC.
Answer: C
Page Ref: 125-126
64) When Walt Disney company's executives were planning to build a theme park in France,
they firmly believed that the success of McDonald's and Coke as well as their success in Tokyo
Disneyland ensures the runaway success of their plans. Disney policies prohibit sale or
consumption of alcohol inside the theme parks which they also implemented in France. This
proved to be a failure since consuming wine with the midday meal is a long-established custom
in France. This is a classical example of:
A) the "think global, act local" principle.
B) being victim to the self-reference criterion.
C) a geocentric management orientation.
D) miscalculation of the rate of diffusion of innovations in Europe.
E) an unbiased perception of existing culture in Europe.
Answer: C
Page Ref: 125-126
65) One of the basic elements of sociologist Everett Roger's Diffusion theory is the concept of an
"adoption process." The first step in this adoption process is:
A) interest.
B) evaluation.
C) trial.
D) adoption.
E) awareness.
Answer: E
Page Ref: 126-127
66) Which of the following shows the correct order of the product adoption process?
A) evaluation→trial→awareness→interest→adoption
B) trial→interest→evaluation→awareness→adoption
C) interest→awareness→adoption→trial→evaluation
D) awareness→interest→evaluation→trial→adoption
E) adoption→evaluation→trial→interest→awareness
Answer: D
Page Ref: 126-127
67) Which of the following can negatively influence the rate of diffusion of an innovation?
A) substantial relative advantage
B) high compatibility
C) high complexity
D) divisibility
E) high level of communicability
Answer: C
Page Ref: 127-128
68) That floppy disks are being dumped in favor of USB mass storage devices can be attributed
to which characteristics of innovation?
A) compatibility
B) relative advantage
C) divisibility
D) communicability
E) complexity
Answer: B
Page Ref: 127-128
69) To speed adoption of a new product, the marketing team should:

A) ensure that features and benefits can be communicated or demonstrated.
B) design the maximum amount of complexity into the product.
C) discourage limited use on a "trial" basis.
D) attempt to make a clean break with existing customer values.
E) rely heavily on word-of-mouth marketing.
Answer: A
Page Ref: 127-128
70) If a marketing manager plans to enter the newly industrializing countries (NICs) or other
Asia markets with a product that has proved to be successful in the home market, the product's
diffusion processes are likely to be:
A) negligible since consumers will take time to assess the relative advantage.
B) much slower than in the home market.
C) much faster than in the home market.
D) similar to that in the home market.
E) less compatible in the Asian market.
Answer: C
Page Ref: 129-130
71) In the 1990s, Philips Electronics developed a new consumer electronics product called the
Digital Compact Cassette player. DCC allowed users to record and playback in a new digital
format; DCC was also designed to play the older, analog cassette tapes that many people own.
This latter feature reflects which of the following characteristics of innovations?
A) relative advantage
B) communicability
C) compatibility
D) complexity
E) divisibility
Answer: C
Page Ref: 129-130
72) A few years ago, Philips Electronics developed a new consumer electronics product called
the Digital Compact Cassette player. DCC did more than allow users to record and playback in a
new digital format; DCC was also designed to play the older, analog cassette tapes that many
people own. However, die-hard audio buffs were the only ones to buy DCC and Philips
ultimately discontinued the product. Which of the following statements based on adopter
categories describes this?
A) early adopters bought, but innovators didn't
B) innovators bought, but early adopters didn't
C) innovators bought, and everyone else was a laggard
D) early majority bought, but late majority didn't
E) DCC was a laggard
Answer: B
Page Ref: 128-129
73) Adopter categories are classifications of individuals within a market on the basis of their
innovativeness. Recently Apple introduced the iPhone for which people waited in long lines
before the doors opened. According to experts these 2.5 percent of people who bought the
iPhone are categorized as:
A) early adopters.
B) innovators.
C) early majority.
D) late majority.
E) laggards.
Answer: B
Page Ref: 128-129
74) Together, innovators and early adopters make up about ________ percent of the potential
market for a new product.
A) 15.0
B) 25.0
C) 35.0
D) 45.0
E) 13.5
Answer: A
Page Ref: 128-129
75) Which of the following is true about the innovation diffusion process in Asia?
A) Japan has a high-context culture with a relatively homogeneous population.
B) Because risk avoidance is a cultural value, there are fewer innovators in Asia than in the
United States.
C) Once innovators in Asia have tried a product, early adopters and the early majority quickly
follow suit.
D) After a new product has achieved success in one Asian market, it is likely to be adopted in
other Asian markets at an even faster rate.
E) all of the above are true
Answer: E
Page Ref: 129-130
76) Comparing and contrasting the diffusion of innovations in Western countries and in Asia,
one can say that:
A) the process occurs in an identical manner in both regions.
B) in Asia, the adoption process begins more slowly but ramps up more rapidly than it does in
Western countries.
C) in Western countries, the adoption process begins more slowly but ramps up more rapidly
than it does in Asia.
D) the diffusion of innovation framework is applicable in the West but not in Asia.
E) the diffusion of innovation framework is applicable in Asia but not in the West.
Answer: B
Page Ref: 129-130
77) Which of the following is arranged starting with the highest level of environmental
sensitivity and ending with the lowest level?
A) food→computers→integrated circuits
B) integrated circuits→food→computers
C) integrated circuits→computers→food
D) computers→food→integrated circuits
E) none of the above
Answer: A
Page Ref: 129-130
78) The ________ the level of environmental sensitivity for a given product, the ________ the
need for managers to address country-specific economic, regulatory, technological, social and
cultural environmental conditions.
A) greater; greater
B) lower; greater
C) greater; lower
D) lower; lower
E) stronger; greater
Answer: A
Page Ref: 129-130
79) Which of the following is true about "coffee culture" in England?

A) Starbucks has been unsuccessful in its attempt to change the Brits' preference for tea.
B) American entrepreneurs found success in England with the Seattle Coffee Company which
Starbucks later acquired.
C) Starbucks succeeded in England only after changing the company's name to Seattle Coffee
Company.
D) Starbucks-style coffee shops have been a flop because tea culture is too deeply engrained.
E) Starbucks has been successful in England since it started selling beer.
Answer: B
Page Ref: 130-131
80) The fair-trade certification label on a bag or can of coffee indicates:
A) high quality beans were used in processing of coffee.
B) the coffee beans were harvested in Vietnam.
C) growers were paid a fair price for their crops.
D) coffee was stored in warehouses that were certified.
E) the package has instant coffee.
Answer: B
Page Ref: 134-135
81) Disney is hoping to appeal to India's family-oriented middle-class consumers; the core
themes include "believe in yourself, express yourself, and celebrate your family." Disney is also
using cable television for its program in a number of local languages and dialects. This is an
example of:
A) capitalizing on astrological beliefs of Indians.
B) a first step in introducing U.S. programs in emerging markets.
C) attracting families to theme parks in India.
D) emphasizing the role of families in emerging markets.
E) adapting to cultural differences and going native in emerging markets.
Answer: E
Page Ref: 133
82) There are considerable differences and similarities among world cultures. This makes the
task of the global marketer much more difficult. Giving examples, show what factors have to be
taken into account when planning marketing strategy for different parts of the world.
Answer: The task of the global marketer is twofold based on the differences and similarities
prevalent worldwide. First of all, marketers must study and understand the country cultures in
which conduction of business is planned. Secondly, marketers must incorporate this
understanding into the marketing planning process. Several adaptations will be needed in
developing strategies. Deep cultural understanding can actually be a source of competitive
advantage for global companies. It is not only the language but deep understanding of culture
and developing a relationship that is of paramount importance. In a new geographic market it
requires a combination of tough-mindedness and generosity. While marketers should be secure
in their own convictions and traditions, generosity is required to appreciate the integrity and
value of other ways of life as well as points of view. People should overcome the prejudices that
are a natural result of the human tendency toward ethnocentricity.
Page Ref: 107-108
83) Hofstede considers culture as "the collective programming of the mind," which makes it
necessary to look at the attitudes, beliefs, and values. Giving an example of a country, explain
how these attributes are so important.
Answer: An attitude is a learned tendency to respond in a consistent way to a given object or
entity. Actually, they are clusters of interrelated beliefs. Many Japanese believe that the West is
the source of important fashion trends and therefore they share a favorable attitude toward
American brands. A belief is an organized pattern of knowledge that an individual holds to be
true about the world. Japan's monocultural society reflects the belief among the Japanese that
they are unique in the world. Attitudes and beliefs are closely related to values. A value can be
defined as an enduring belief or feeling that a specific mode of conduct is personally or socially
preferable to another mode of conduct. Values represent the deepest level of a culture and are
present in the majority of the members of a particular culture. The Japanese, for example, strive
to achieve cooperation, consensus, self-denial, and harmony. Since these all represent feelings
about modes of conduct, they are values. Attitudes, beliefs, and values are all interrelated and
extremely important from a marketing point of view.
Page Ref: 108-109
84) London's Sunday Times reported that Mecca-Cola has become the drink which has come to
be seen as "politically preferable" to Pepsi or Coke in many Muslim countries. Also, Danish
products were boycotted in many Islamic countries in protest of an offensive cartoon that was
printed in Danish newspapers. Considering these two examples show how religion can have an
impact on marketing.
Answer: Religion is one of the most important sources of a culture's beliefs, attitudes, and
values. Hindus do not eat beef, which means that McDonald's does not serve hamburgers in
India. There was a big uproar when it was found that McDonald's french fries had beef as one of
the ingredients. Similarly Jews do not combine fish and dairy products, which make McDonald's
fish fillet a problem for them. Jews and Muslims do not eat pork, which rules out the use of
bacon in many products sold by fast food operations. Restaurants in Malaysia have to declare
that all meats are Halal or sacrificed in a specified religious way. In addition to religious
requirements, religious sentiments also play an important role. After the incidents of September
2001, there was a distinct feeling of anti-Americanism in many parts of the world, particularly
the Middle Eastern region. Mecca-Cola was an attempt to make indigenous products to compete
with American ones. Barbie doll in Iran, for example, is considered a symbol of the American
way of dressing up and so they came up with a doll that was dressed in traditional costumes.
Protests have taken place in different parts of the world when religious sentiments were hurt.
One of the concerns in allowing Turkey to join the European Union is that it is predominantly
Islamic, whereas other members are comprised of Christians. All these cases show that religion
plays a very important role in how people live as well as buy products and services.
Page Ref: 109-110
85) The diversity of cultures around the world is also reflected in languages and communication.
When KFC translated its slogan "Finger Licking Good" it became "Eat your fingers" in Chinese;
similarly "Pepsi is for Generations" became "your grandparents will come out of the grave to
drink Pepsi." Studies showing how linguists have divided the study of spoken or verbal language
demonstrates how verbal and non-verbal communication can have an impact on marketing
around the world.
Answer: Linguists have divided the study of spoken language into four main areas: syntax (rules
of sentence formation); semantics (system of meaning); phonology (system of sound patterns);
and morphology (word formation). Unspoken or nonverbal communication includes gestures,
touching, and other forms of body language. Both the spoken and unspoken aspects of language
are included in the broader field of semiotics, which is the study of signs and their meanings.
Language is a crucial tool for communicating with customers and channel intermediaries. Words
have different meanings in different cultures. For example post in America may refer to putting
something on a bulletin board, whereas in British English it may mean mailing. Similarly, Miller
Lite was considered to have less alcohol in Europe, whereas Diet Coke was considered as a
dietary supplement in the Middle East. Changes were made to market Miller Lite as Miller
Pilsner in Europe and Diet Coke as light coke in the Middle East. In addition to syntax and
semantics, phonology can have an impact. For example there is no alphabet that sounds like P in
Arabic so Pepsi sounds like Bebsi and Popeye's sounds like Bobeye's. Similarly sounds of r and l
are intermixed in Chinese. In the United States recently Sioux Gateway City airport decided to
keep the symbol "SUX" although there were a lot of comments about its phonology. On the other
hand the airport decided to use it in marketing by using the slogan "Fly SUX" thereby making it
easy for people to remember it. Semantics can also have an impact such as the word Esso has
negative connotation in some languages; Nova (as in Chevy Nova) meant it does not move and
Colgate means "go hang yourself" in Spanish. Also, nonverbal cues can have different meanings.
In some cultures shaking the head from right to left is considered as yes whereas it means no in
some other cultures. Shaking hands is considered as finalizing the deal in some cultures and in
others it is just an introduction. There are different ways of bowing in Far Eastern cultures to
indicate different aspects. Thus verbal and nonverbal communications have a distinct impact on
marketing practices.
Page Ref: 110-113
86) Giving examples, show how technology is providing interesting new opportunities for
exploiting linguistics in the name of marketing.
Answer: With the increased use of information technology and computers there has been a
noticeable positive and negative impact on linguistics. Text messaging and chat rooms have
made it much easier to abbreviate common words, primarily due to limited space on keyboards
of cell phones such as Blackberry and to reduce time involved. Thus a combination of numerical
and alphabetical abbreviations are being used. For example, GR8 (great); CU (see you); AFK
(away from keyboard); b4 (before); BBL (be back later); BRB (be right back); GMTA (great
minds think alike); l8r (later) and ^5 (high five). In Korean, the phonetic pronunciation of the
numerical sequence 8282 (Pal Yi PalYi) means hurry up and 7179 (Chil Han Chil Gu) sounds
like "close friend." In some languages numerology has different meanings which when decoded
can convey messages. In addition to being exciting, such use of terminology can make slogans
stick in the minds of consumers and therefore can be used effectively in marketing. Some of
these are getting universally accepted terms due to common use of computers and technological
gadgets.
Page Ref: 114-117
AACSB: Use of IT
87) What are some of the salient characteristics and differences between high- and low-context
cultures?
Answer: In a low-context culture, messages are explicit and specific; words carry most of the
communication power whereas in high-context culture, less information is contained in the
verbal part of a message. Much more resides in the context of communication, including the
background, associations, and basic values of the communicators. Japan and Saudi Arabia are
examples of high-context culture, where a great deal of emphasis is placed on a person's values
and position or place in society. In a low-context culture, such as the United States, Switzerland,
or Germany, deals are made with much less information about the character, background, and
values of the participants. In a high-context culture, a person's word is his or her bond. As a
result, lawyers are much less important in high-context cultures. This also makes negotiations
lengthy in high-context culture since several meetings or prodding is needed.
Page Ref: 120
88) Applying Hofstede's Typology show how Power Distance and Gender Differentiation can
influence the marketing of products and services in different countries.
Answer: Power Distance is the degree to which members of a particular society expect power to
be unequally shared. Hong Kong and France are both high power-distance cultures; low power
distance characterizes Germany, Australia, the Netherlands, and Scandinavia. The power
distance dimension reflects the degree of trust among members of society. The higher the power
distance, the lower the level of trust. Companies in high power-distance cultures prefer sole
ownership of subsidiaries because it provides them with more control. On the other hand,
companies in low power distance cultures are more apt to use joint ventures.
Masculinity describes a society in which men are expected to be assertive, competitive, and
concerned with material success, and women fulfill the role of nurturer and are concerned with
issues such as the welfare of children. Femininity, by contrast, describes a society in which the
social roles of men and women overlap, with neither gender exhibiting overly ambitious or
competitive behavior. Japan and Austria ranked highest in masculinity; whereas Spain, Taiwan,
the Netherlands, and the Scandinavian countries were among the lowest. The masculinity-
femininity dimension is likely to manifest itself in the relative importance of achievement and
possessions (masculine values) compared with a spirit of helpfulness and social support
(feminine values). An aggressive, achievement-oriented salesperson can be more successful in
Austria, Japan, or Mexico than with Denmark. The Japanese managers may react negatively to a
woman, especially if she is younger than they are.
Page Ref: 121-123
89) Reference to own cultural values or self-reference criterion (SRC) can create a cultural
myopia. It can consciously or unconsciously create considerable problems for marketing
professionals. Using Walt Disney's decision to build a theme park in France, address the
problem, following a systematic framework.
Answer: To address the problem and to eliminate or reduce cultural myopia, a systematic four-
step framework is proposed as described below:
Step 1. Define the problem or goal in terms of home-country cultural traits, habits and norms.
Disney executives believe there is virtually unlimited demand for American cultural exports all
over the world. Disney has a track record in exporting its American management system as seen
by the success of Tokyo Disneyland. However, Disney policies prohibit sale or consumption of
alcohol inside its theme parks.
Step 2. Define the problem or goal in terms of host-country cultural traits, habits, and norms.
Make no value judgments. Europeans in general and the French in particular are sensitive about
American cultural imperialism. Consuming wine with the midday meal is a long-established
custom in France. Many Disney characters are based on European folklore.
Step 3. Isolate the SRC influence and examine it carefully to see how it complicates the problem.
The differences noted in earlier steps suggest strongly that the needs upon which the American
and Japanese Disney theme parks were based did not exist in France
.
Step 4. Redefine the problem without the SRC influence and solve for the host-country market
situation. A modification in design of the theme park that is in keeping with French and
European cultural norms will solve the problem. Focus on French identity on the park.
Page Ref: 125-126
90) One of the basic elements of Roger's diffusion theory is the concept of adoption process
which deals with the mental stages through which an individual passes from the time of his or
her first knowledge of an innovation to the time of product adoption or purchase. Briefly
describe these stages given examples of Apples iPhone.
Answer: 1. Awareness. In the first stage the customer becomes aware for the first time of the
product or innovation. Mass media advertising was critical in informing customers about the new
iPhone. 2. Interest. Enough interest was generated by advertisement which did not fully disclose
the exciting features of iPhone but did provide some clues. 3. Evaluation. Customers became
curious and started mental assessment of the product's benefits in relation to present and
anticipated future needs. Also, comparative assessment was made to see how it is more versatile
than the existing technology. 4. Trial. Most customers did not purchase iPhone since it was
expensive and waited to get some "hands-on" experience. Such trials are common for many
products and services. 5. Adoption. This is the final stage where the individual will make a
decision to buy; purchases it; or adopts it. Personal sources of information are more important in
the entire process than impersonal sources. Word-of-mouth becomes a very important persuasive
force affecting the decision to buy.
Page Ref: 126-127
91) There are specific characteristics of innovations that affect which innovations are adopted.
Define those characteristics giving examples of products or services.
Answer: There are five different characteristics that are important in the adoption of
innovations. They are: 1. Relative advantage. This involves a comparative assessment of the
existing products or methods. If a product has a substantial relative advantage it is likely to gain
quick acceptance. The popularity of jump drives is an example for their preference over floppy
disk. 2. Compatibility. This concerns with the extent to which a product is consistent with
existing values and past experiences of adopters. For example, the first consumer VCR, the Sony
Betamax, failed because it could only record for one hour. Most customers wanted to record for
longer periods of time and thus selected VHS-format, although the recording quality of Sony-
Betamax was superior to VHS. 3. Complexity. The degree to which an innovation or new
product is difficult to understand, operate, and use. The more complex a product is, the slower
will be its adoption. The new digital cameras are an example of their slow adoption since their
operations are very complex. 4. Divisibility. This is the ability of a product to be tried and used
on a limited basis without great expense. There are wide discrepancies in income levels around
the world as well as the storage conditions. Smaller cans of Coke and Pepsi are popular in many
countries, with affordable prices and less storage space requirement. 5. Communicability. It is
the degree to which benefits of an innovation or the value of a product may be communicated to
a potential market. Many of the software programs go unsold since their benefits are not fully
communicated to customers. These characteristics give a clear outline of what is needed for an
innovation to be successful.
Page Ref: 126-128
Global Marketing, 6e (Keegan/Green)
Chapter 5 The Political, Legal, and Regulatory Environments
1) When Barack Obama was sworn in as the president of the United States, he inherited a
situation that had confounded his predecessors for half a century. America's complex relationship
with Cuba illustrates the impact the political, legal, and regulatory environments can have on
international trade and global marketing activities.
Answer: TRUE
Diff: 2 Page Ref: 136
2) In Europe, the individual EU countries are giving up the right to set their own product
standards, and are making other sacrifices in exchange for improved market access.
Answer: TRUE
Diff: 2 Page Ref: 137-138
3) Political risk is the possibility of a change in a country's political environment or government

policy that would positively affect a company's ability to operate effectively and profitably.
Answer: FALSE
AACSB: Reflective Thinking
4) It is estimated that 90 percent of the foreign cigarettes sold in China are smuggled in.
Answer: TRUE
5) When cars cross borders from France to Switzerland or from France to Great Britain, they
contain several bottles of wine, due to high excise and VAT can also encourage legal cross-
border shopping.
Answer: TRUE
6) It has been estimated that tax minimization of foreign companies doing business in the United
Sates cost the government $3 billion each year.
Answer: TRUE
7) The various forms of asset seizure represent the ultimate threat that a government can direct
toward a company.
Answer: TRUE
1
Copyright © 2011 Pearson Education, Inc.
8) If a foreign company is taken over by the host country government and some form of
compensation is paid, "confiscation" has occurred.
Answer: FALSE
9) If a foreign company is taken over by the host country government and some form of
compensation is paid, "expropriation" has occurred.
Answer: TRUE
10) If a foreign country decides to take over banking business from private banks to benefit
public and pays adequate payment then it is referred to as nationalization.
Answer: TRUE
11) Nationalization, expropriation, and confiscation are approved by international law as a

legitimate exercise of government power as long as the act satisfies a "public purpose."
Answer: FALSE
12) When a foreign country expropriates an American corporation, the U.S. court can get
involved in arbitration.
Answer: FALSE
13) A 'civil-law country' is one in which the legal system reflects the structural concepts and
principles of the Roman Empire in the sixth century.
Answer: TRUE
14) Louisiana is the only state that has not fully adopted the Uniform Commercial Code (UCC)
since its laws are heavily influenced by the French civil code.
Answer: TRUE
15) India, Pakistan, Malaysia, Korea, and Japan have common-law jurisdictions.
Answer: FALSE
2
16) "Sharia" and "haram" are important concepts in civil-code laws, which are commonly
practiced in Middle Eastern countries.
Answer: FALSE
17) The requirement that all restaurants declare that the meat is "halal" is based on Islamic Laws.
Answer: TRUE
18) If a foreign company only has a sign board in any state in the United States then that
company is subject to the jurisdiction of U.S. courts.
Answer: TRUE
19) A trademark gives the inventor of a product the exclusive legal right to make, use, and sell an
invention for a specific period of time.
Answer: FALSE
20) To establish ownership of a written, recorded, performed, or filmed creative work, it is

necessary to apply for and be granted a patent.
Answer: FALSE
21) Patents and trademarks that are registered in the United States are protected in all countries
of the world.
Answer: FALSE
22) A patent is a distinctive motto that a manufacturer affixes to a particular product or package
to distinguish it from goods produced by other manufacturers.
Answer: FALSE
23) A U.S. company wishing to obtain foreign patent rights must apply to the Paris Union within
one year of filing in the United States or risk a permanent loss of patent rights abroad.
Answer: TRUE
3
24) The Patent Cooperation Treaty (PCT) requires companies to file separate applications in all
signatory countries.
Answer: FALSE
25) A company wishing to register a trademark in the European Union can only do so on a
country-by-country basis.
Answer: FALSE
26) Japan has recently promised to speed up patent examinations, eliminate challenges to patent
submissions, and allow patent applications to be filed in English.
Answer: TRUE
27) Under current U.S. patent laws, patents are valid for 20 years after the application filing date.
Answer: TRUE
28) A recent rash of antitrust actions brought in the United States against foreign companies has
raised concerns that the United States is violating international law as well as the sovereignty of
other nations.
Answer: TRUE
AACSB: Analytic Skills
29) Microsoft is subject to U.S. antitrust laws no matter what country it is doing business in.
Answer: TRUE
30) Procter & Gamble instigated a review of Colgate-Palmolive's 1995 acquisition of Brazil's
Kolynos oral care company under antitrust laws since Colgate will have 79 percent of the
market.
Answer: TRUE
31) KLM and Northwest airlines won an exemption from antitrust rules in the United States and
now share computer codes and set prices jointly.
Answer: TRUE
4
32) Formation of a cartel like OPEC, consisting of oil-producing companies, would most likely
be illegal in the United States.
Answer: TRUE
33) Trade secrets are confidential information or knowledge that has commercial value and is not
in the public domain, and for which steps have been taken to keep it secret.
Answer: TRUE
34) A company hoping to protect its trade secrets from being stolen by a foreign company can
seek relief under the TRIPs agreement if both companies do business in GATT signatory
countries.
Answer: TRUE
35) Finland ranks highest in bribery as listed by the Corruption Perceptions Index (CPI) by
Transparency International in 2006.
Answer: FALSE
36) If an American businessperson pays a Russian customs agent a $20 cash "processing fee" to
avoid delay in leaving Russia, the American has violated the FCPA.
Answer: FALSE
37) Bribery payments are considered a deductible business expense in many European countries.
Answer: TRUE
38) In emerging countries, journalists may themselves become targets if they criticize the rich or
powerful.
Answer: TRUE
39) The United Nations Conference on International Trade Law (UNCITRAL) has also been a
significant force in the area of arbitration.
Answer: TRUE
5
40) The European Court of Justice, based in Luxembourg, is the European Union's highest legal
authority.
Answer: TRUE
41) Any company doing business outside the home country should first carefully study the
________ in the target country.
A) political culture
B) nationalization
C) political risk
D) jurisdiction
E) sovereignty
Answer: A
42) Part of the functions offered by OPIC include:

A) distribution of oil to different countries of the world.
B) providing various types of political risk insurance to U.S. companies.
C) providing subsidies to large corporations.
D) collecting tax revenues to help social services.
E) collecting import duties from foreign companies.
Answer: B
43) What does value added taxes (VAT) encourage in countries such as China?
A) They make trademarks and copyrights more valuable.
B) They result in cross-border shopping and smuggling.
C) They make it harder to bribe officials.
D) They protect companies from antitrust scrutiny.
E) Global companies refrain from offering bribes.
Answer: B
6
44) After Fidel Castro took power in Cuba in 1959, his government seized control of American
property without paying compensation. Coca-Cola, DuPont, Texaco, and dozens of other
American companies have filed claims against Cuba seeking financial settlements. Which of the
following terms most specifically describes the action Castro took against these companies?
A) nationalization
B) confiscation
C) expropriation
D) internationalization
E) deportation
Answer: B
45) Located in The Hague, the International Court of Justice (ICJ) is the judicial arm of the:
A) United States.
B) European Union.
C) United Nations.
D) Netherlands.
E) United Kingdom.
Answer: C
46) What type of international disputes would be taken before the International Court of Justice?
A) disputes between two nations
B) disputes between two companies
C) disputes between a company and a nation
D) disputes between a citizen of one country and a company from a different country
E) disputes between profit and non-profit organizations
Answer: A
47) Which of the following is not an institution for arbitrating trade disputes?
A) American Arbitration Association
B) UN Conference on International Trade Law
C) International Chamber of Commerce
D) European Court of Justice
E) International Court of Justice
Answer: E
7
48) The Uniform Commercial Code (UCC) is fully adopted by all U.S. states except:
A) Virginia.
B) North Dakota.
C) Wisconsin.
D) Louisiana.
E) Montana.
Answer: D
49) Which of the following is not a common-law country?

A) India
B) Pakistan
C) Malaysia
D) Korea
E) Singapore
Answer: D
50) In West Africa, Burkina Faso, the Ivory Coast and Senegal are former French colonies, while
Nigeria, Sierra Leone, and Ghana are former British colonies. Based on this information, which
of the following would be correct?
A) Burkina Faso, the Ivory Coast and Senegal are civil-code countries, while Nigeria, Sierra
Leone, and Ghana are common-law countries
B) Burkina Faso, the Ivory Coast and Senegal are common-law countries, while Nigeria, Sierra
Leone, and Ghana are civil-code countries.
C) In West Africa, Ivory Coast and Senegal are the only common-law countries
D) All the West African nations mentioned above are likely to be civil-code countries.
E) All the West African nations mentioned above are likely to be common-law countries
Answer: A
51) Islamic law is a comprehensive code based in part on:

A) Anglo-Saxon common law.
B) Roman law and the Napoleonic Code.
C) the Uniform Commercial Code.
D) the Koran.
E) the French civil Code.
Answer: D
8
52) Any Western country doing business in Malaysia or the Middle East should have
understanding of:
A) the French civil Code.
B) Anglo-Saxon common law.
C) Islamic law.
D) the Uniform Commercial Code.
E) Roman law and the Napoleonic Code.
Answer: C
53) In a recent case, Revlon sued United Overseas Limited (UOL) in U.S. District Court for the
Southern District of New York for breach of contract. UOL countered by asking the court to
dismiss the claim since they are not operating in that area. Revlon cited the presence of a UOL
sign above the entrance to the offices of a New York company in which UOL had a 50 percent
ownership. The court dismissed UOL's claim. This is an issue related with:
A) jurisdiction.
B) antitrust.
C) dilution of equity.
D) bribery and corruption.
E) intellectual property.
Answer: A
54) In 2005, representatives from several wine regions in the United States and the EU signed a
Joint Declaration to Protect Wine Place & Origin. In addition, a Wine Accord signed by the
United States and EU bans the:
A) use of alcohol in public places.
B) purchase of wine from country of origin.
C) misuse of 16 place names by marketers of wine products that do not originate in those places.
D) misuse of labels which does not include the origin of ingredients.
E) use of word "champagne" on wine made in the United States.
Answer: C
55) Engineers at a company in a developing country study an American computer chip design,
copy it, and produce identical chips that are then sold to local computer makers. What form of
intellectual property has been wrongly appropriated?
A) patent
B) copyright
C) trademark
D) trade secrets
E) technological
Answer: A
9
56) In many developing countries, manufacturers "knock off" clothing by Calvin Klein, Tommy
Hilfiger, and other designers. The unauthorized goods bear the designer's name, but are often of
inferior quality and sell for lower prices than the real thing. What form of intellectual property
has been wrongly appropriated?
A) patent
B) copyright
C) trademark
D) trade secrets
E) trade dress
Answer: C
57) In many parts of the world, sales of unauthorized videos of Hollywood movies cost the
movie studios billions of dollars. When illegal copies of movies are made, what form of
intellectual property has been wrongly appropriated?
A) patent
B) copyright
C) trademark
D) trade secrets
E) down loading
Answer: B
58) Which of the following would constitute a copyright violation?

A) manufacturing and selling illegal videocassette copies of "Spiderman 2"
B) manufacturing and selling illegal copies of Levi "501" jeans
C) printing and selling illegally copies of Harry Potter books
D) A, B, and C are copyright violations
E) A and B are copyright violations
Answer: D
59) Harley-Davidson has applied for federal protection of an unusual form of intellectual
property; the "soul- pleasing rumble" produced by its motorcycles. What type of protection is
Harley-Davidson seeking?
A) copyright
B) trademark
C) license
D) patent
E) trade dress
Answer: B
10
60) Only Sony can use the "Walkman" name on its line of personal stereos. This is because:
A) Sony has a patent on the Walkman.
B) "Walkman" is a registered Sony trademark.
C) Sony has copyrighted the Walkman name.
D) Sony's trade secrets are protected by international law.
E) Sony has an international business license.
Answer: B
61) Which of the following statements is correct?

A) The Paris Convention protects patents, the Berne Convention protects copyrights.
B) The Paris Convention protects copyrights, the Berne Convention protects patents.
C) The Berne Convention and Paris Convention are different names for the same thing.
D) Neither the Berne Convention nor the Paris Convention is concerned with intellectual
property.
E) The International Union for the Protection of Literary and Artistic Property is different from
the Berne Convention.
Answer: A
62) Which of the following is true about protection of computer software?

A) Copyright laws protect both the actual code and the idea embodied in the code.
B) Patent laws protect both the actual code and the idea embodied in the code.
C) Patent laws protect the actual code, while copyright laws protect the idea.
D) Copyright laws protect the actual code, while patent laws protect the idea.
E) License protects both the actual code and the idea embodied in the code.
Answer: D
63) A company can obtain foreign patent protection in 100 countries by registering with which
organization?
A) Frankfurt Union
B) London Union
C) Paris Union
D) Tokyo Union
E) Brussels Union
Answer: C
11
64) In order to fight piracy in China, Budweiser Beer's approach includes:
A) printing labels in Chinese.
B) changing color of beer cans.
C) beer cans in China have fluted edges.
D) printing labels both in Chinese and English.
E) making beer very cheap in price in China.
Answer: C
65) Which of the following is true about revised U.S. patent laws?
A) Patents are valid for 17 years after the patent is granted.
B) Patents are valid for 17 years after the patent is filed.
C) Patents are valid for 20 years after the patent is granted.
D) Patents are valid for 20 years after the filing date of the application.
E) Patents are valid as long as the product is manufactured.
Answer: D
66) Which company has received the most U.S. patents in 2005 according to the U.S. Patent and
Trademark Office?
A) Hewlett-Packard
B) Intel
C) Siemens
D) Toshiba
E) IBM
Answer: E
67) Which of the following actions were approved both by the Antitrust Review in the EU as
well as in the United States?
A) acquisition of Honeywell (U.S.) by GE (U.S.)
B) joint venture between music businesses of EMI group (Great Britain) and Time Warner (U.S.)
C) merger of Sony Music (Japan) and BMG (Germany)
D) merger of WorldCom (U.S.) and MCI (U.S.)
E) British Airways (U.K.) and American Airlines (U.S.)
Answer: C
12
68) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese
companies to raise fax paper prices in the United States. The Japanese government denounced
the U.S. indictment of Nippon Paper as a violation of international law and nation's sovereignty.
This shows the importance of ________ issues in global marketing:
A) expropriation
B) bribery
C) intellectual property
D) licensing
E) antitrust
Answer: E
69) A proposed merger between two Swiss-based global pharmaceutical companies, Ciba-Geigy
AG and Sandoz AG, would be subject to review by regulators from which of the following?
A) European Commission antitrust
B) UN Conference on International Trade Law
C) International Chamber of Commerce
D) International Court of Justice
Answer: A
70) Consten, a French company, had exclusive rights to import and distribute German Grundig's
electronic products into France. One of the competitors started bringing "parallel imports" into
France illegally, importing Grundig product bought from a foreign supplier. Which of the
following does not represent an action taken by different legal bodies?
A) Consten's complaint was upheld by two French courts.
B) the Paris Court of Appeals suspending the judgment of the French courts
C) The Paris Court of Appeal's judgment was based on pending a ruling by the European
Commission.
D) The European Commission ruled against Consten on the grounds that territorial protection
proved to be damaging to the Common Market.
E) The European Commission ruled that German Grundig was in violation of the laws of the
Common Market.
Answer: E
13
71) Which of the following best describes the legal basis for protection of trade secrets, patents,
and copyrights in the United States?
A) Trade secrets, patents, and copyrights are protected by federal statutes.
B) Trade secrets, patents, and copyrights are protected by state law.
C) Trade secrets are protected by state law, while patents and copyrights are protected by federal
statutes.
D) Trade secrets are protected by federal statutes, while patents and copyrights are protected by
state law.
E) Trade secrets, patents, and copyrights are not protected by any laws.
Answer: C
72) The U.S. Justice Department objected to a recent patent license agreement between S.C.
Johnson & Sons and Bayer AG. The antitrust unit at the Justice department objected to:
A) the duration of the license.
B) the amount of royalties Johnson agreed to pay.
C) Bayer's attempts to circumvent FDA policies.
D) the exclusive nature of the license agreement.
E) the hostile arrangement between Bayer and Johnson.
Answer: D
73) As part of their alliance relationship, Northwest Airlines and KLM Royal Dutch set air fare
prices jointly and coordinate flight schedules. Normally, such behavior would be considered
harmful to competition, but the U.S. government has granted the two airlines special exemptions
from laws concerning:
A) intellectual property.
B) antitrust.
C) jurisdiction.
D) licensing.
E) arbitration.
Answer: B
74) OPEC can be considered as a 'cartel' which is a group of separate companies that
collectively:
A) set prices, control output, or take other actions to maximize profits.
B) dictates how other countries should used their products.
C) produces more products in order to beat the competition.
D) conducts activities that are considered illegal in United States.
E) works on forming a union against management of other companies.
Answer: A
14
75) A proposed alliance between British Airways and American Airlines would be subject to
review by antitrust regulators from which of the following?
A) the European Union only
B) the United States only
C) both the European Union and the United States antitrust
D) Great Britain and the United States only
E) the European Court of Justice only
Answer: C
76) Transparency International compiles an annual report ranking countries in terms of a

Corruption Perceptions Index (CPI). According to 2008 ranking the lowest ranked country is:
A) Haiti.
B) Iraq.
C) Sudan.
D) Somalia.
E) Chad.
Answer: D
77) The United States has more lawyers than any other country in the world and is arguably the
most litigious nation on earth. This is a reflection of:
A) the lack of class action lawsuits.
B) the low-context nature of the American culture.
C) the lack of spirit of confrontational competitiveness.
D) the fact that lawyers cannot undertake cases on contingency fee basis.
E) the fact that conflicts arise more in the United States.
Answer: B
78) Which of the following is true of the arbitration framework created by the New York
Convention?
A) Signatory countries can require parties to an arbitration agreement to actually use arbitration
B) Signatory countries recognize and can enforce arbitration judgments.
C) There are limited grounds for appealing arbitration decisions.
D) The grounds that are recognized are different than the typical appeals that are permitted in a
court of law.
E) all of the above
Answer: E
15
79) A company stands a better chance of having an international arbitration award upheld if its
home country government has signed:
A) the Paris Convention.
B) the Prague Convention.
C) the New York Convention.
D) the Vienna Convention.
E) the Geneva Convention.
Answer: C
80) A Russian businessperson flying from Moscow to the U.S. with a layover in Frankfurt
discovers, at the last minute, that she must have a visa to enter Germany. The reason: EU
regulations. Accordingly, she reroutes her connection to another major airport in a non-EU
country where no visa is required for her to enter the country. What city should she connect
through?
A) Barcelona
B) Paris
C) Amsterdam
D) Zurich
E) London
Answer: D
81) The ultimate threat a foreign government can pose toward a company is seizing assets. South
Korea nationalized Kia, the nation's number three automaker, in the wake of the Asian currency
crisis. How does this nationalization differ from expropriation and confiscation?
Answer: Nationalization is generally broader in scope than expropriation. It occurs when the
government takes control of some or all of the enterprises in a particular industry. This is
recognized by international law as a legitimate exercise of government power, as long as the act
satisfies a "public purpose" and is accompanied by "adequate payment." On the other hand,
expropriation refers to governmental action to dispossess a foreign company or investor.
Compensation is generally provided, although not often in a prompt, effective, and adequate
manner. Also, it may not match with international standards. If no compensation is provided then
it is referred to as confiscation. Confiscation is generally prohibited under international law and
is considered as unfair practice.
16
82) In Malaysia and Saudi Arabia it is common to see that restaurants have signs declaring that
all food is "Halal." Also, it is seen that courts handle marriages, divorces, distribution of family
assets, and business practices by the "Sharia." What are these tenets and how does it have an
impact on international business.
Answer: The legal system in many Middle Eastern and some Far Eastern countries is identified
with the laws of Islam. These laws are associated with "the one and only one God, the
Almighty." In Islamic law, the sharia refers to a comprehensive code governing Muslim conduct
in all areas of life, including business. The code is primarily derived from two sources. The first
and foremost source is the Koran or the Holy Book that is a record of the revelations made to the
Prophet Mohammed by Allah (God). The second source is the Hadith which is an interpretation
of Koran based on the sayings and practices of Prophet Muhammad. In particular, the Hadith
spells out the products and practices that are Haram (forbidden) compared to Halal (allowed).
Any non-Muslim doing business in Islamic countries should be aware of the Islamic laws which
has wide implications for commercial activities including advertisement and promotion.
AACSB: Multicultural and Diversity
83) What are the differences between a patent, trademark, and a copyright? What do you
understand by counterfeiting?
Answer: A patent is a formal legal document that gives an inventor the exclusive right to make,
use, and sell an invention for a specified period of time. Typically this invention should be a
new, novel and/or nonobvious creation. On the other hand a trademark is defined as a distinctive
mark, motto, device, or emblem that a manufacturer affixes to a particular product or package to
distinguish it from goods produced by other manufacturers. A copyright establishes ownership of
a written, recorded, performed, or filmed creative work.
Counterfeiting is the unauthorized copying and production of a product. An associative

counterfeit, or imitation, uses a product name that differs slightly from a well-known brand but is
close enough that consumers will associate it with the genuine product. The worst form of
counterfeiting is known as piracy, which is the unauthorized publication or reproduction of
copyrighted work. Counterfeiting and piracy are particularly important in industries such as
motion pictures, recorded music, computer software, and textbook publishing. The United States
in particular has a vested interest in intellectual property protection worldwide since it is home to
many companies which have patents, trademarks, and copyrighted materials.
17
84) When a company invents a product or service, it should have a right to defend its creativity
with intellectual patents. However, there are some countries like Italy and China where piracy
and copyright violations are common. How can a corporation prevent this by having some built-
in measures in products and services?
Answer: Individuals or companies sometimes find ways to exploit loopholes or other unique
opportunities in patent, trademark, and copyrights. A company should take measures to protect
itself from such piracy situations. For many of the technological products, certain codes can be
built into the software program such that it is self-destructive or becomes inaccessible for those
who would like to use piracy. One of the sure safe methods is to make the product or service of
such a quality that it becomes very difficult or expensive for anyone to copy. One such example
can be seen in the formulas of Coke and Pepsi beverages. The product has special features and it
is distributed so cheaply such that there is no money left for the counterfeiters. Similarly,
packages and containers can be made in such a way that it will become expensive or otherwise
technologically impossible to copy. For example, in China, Budweiser cans have fluted edges
that are difficult to manufacture. Thus there can be some inherent qualities or manufactured
processes which can make it difficult, if not impossible, to duplicate.
85) Nippon Paper Industries was found guilty in a U.S. court of conspiring with other Japanese
companies to raise fax paper prices in the United States under the Antitrust laws. What are the
implications of such a law and how does it affect international business?
Answer: Antitrust laws in the United States and other countries are designed to combat
restrictive business practices and to encourage competition. Agencies such as the U.S. Federal
Trade Commission, Japan's Fair Trade Commission, and the European Commission enforce
antitrust laws. According to some legal experts, the pressures of global competition have resulted
in an increased incidence of price-fixing and collusion among companies. The Sherman Act of
1890 prohibits certain restrictive business practices, including fixing prices, limiting production,
allocating markets, or any other scheme designed to limit or avoid competition. The law applies
to the activities of U.S. companies outside U.S. boundaries, as well as to foreign companies
conducting business in the United States. Nippon Paper Industries was found guilty in a U.S.
court of conspiring with other Japanese companies to raise fax paper prices in the United States.
The Japanese government denounced the U.S. indictment as a violation of international law and
Japan's sovereignty. A U.S. federal judge struck down the indictment, ruling that the Sherman
Act does not apply to foreign conduct. However, a federal appeals court reversed the decision.
18
86) For years Coca-Cola corporation did not enter India since the government wanted some kind
of disclosure of their trade secrets. Why are the trade secrets so important and what happens if a
licensee or a government gains access to the licensor's trade secret?
Answer: Trade secrets, like the formula of Coke, are confidential information or knowledge that
has commercial value and is not in the public or government domain. Careful steps have to be
taken by those who have access to these trade secrets. Trade secrets include manufacturing
processes, formulas, designs, and customer lists. To prevent disclosure, the licensing of
unpatented trade secrets should be linked to a confidentiality contract with everyone who has
access to the protected information. In the United States, trade secrets are protected by state law
rather than federal statute. The U.S. law provides trade secret liability against third parties that
obtain confidential information through an intermediary. Remedies include damages and other
forms of relief.
87) In the United States, the Foreign Corrupt Practices Act (FCPA) is a legacy of the Watergate
scandal during Richard Nixon's presidency. Administered by the Department of Justice and the
Securities and Exchange Commission, the act is concerned with disclosure and prohibition. What
is this law concerned with and why is it a subject of criticism by many?
Answer: The act concerns disclosure and prohibition. The disclosure part of the act required
publicly held companies to institute internal accounting controls that would record all
transactions. The prohibition part makes it a crime for U.S. corporations to bribe an official of a
foreign government or political party to obtain or retain business. Payments to third parties were
also prohibited when they can be channeled to some related official as a bribe. Some critics of
the FCPA feel strongly that this act is a sort of regrettable display of moral imperialism. The
problem is the extra-territorial extension and sovereignty of U.S. law. To impose U.S. laws,
standards, values, and mores on American companies and citizens worldwide is considered
wrong. A second criticism of the FCPA is that it puts U.S. companies in a difficult position vis-à-
vis foreign competitors. It is perceived that the act adversely affects U.S. businesses overseas.
Bribes offered by non-U.S. companies are considerable and can provide a competitive advantage
to other companies.
AACSB: Ethical Reasoning
19
88) What should a U.S. company do if competitors are willing to offer a bribe for business in a
foreign country?
Answer: Managers have to realize the fact that bribery is a fact of life in world markets. It is not
going to change overnight or based on how ethical the U.S. companies feel about their business.
In fact, bribery payments are considered a deductible business expense in many European
countries. Two alternative courses of action are possible. One is to ignore bribery and act as if it
does not exist. This may be a very hard option. The other is to recognize the existence of bribery
and evaluate its effect on the customer's purchase decision. In other words, treating it as just
another element of the marketing mix. The overall value of a company's offer must be as good
as, or better than, the competitor's overall offering, including bribe. If possible, a lower price, a
better product, a better distribution system, or better advertisement/promotion can be undertaken
to beat the competition. The best line of defense is to have a product or service that is superior to
that of the competition, whether a bribe is included or not. Thus a bribe should not be a factor
that will sway the purchase decision.
AACSB: Ethical Reasoning
89) Some firms and lawyers inexperienced in the practice of international commercial arbitration
consider arbitration clauses in a contract as "any other clause." This can be a gross
misunderstanding of the clauses. Why are these clauses different and so significant?
Answer: The terms of every contract are vastly different and, therefore, no two arbitration
clauses are the same. Also, the countries involved in the arbitration may be very different each
time. For example, if an American firm and a Chinese firm are involved, the question of the
place of arbitration and the language will become issues. Where will the arbitration take place? It
cannot be Beijing or New York since it may not be agreeable to either parties. They may have to
agree on a neutral venue such as Singapore or Geneva. Also, in what language the proceedings
are conducted will be another problem to solve. Also, if the parties agree to a patent-licensing
arrangement in the arbitration clause that the validity of the patent cannot be contested, the
enforceability of such a provision can be a problem. Which country's laws will be used as the
standard for invalidity will be another question? Courts in either country may not accept an
arbitrator's decision in patent disputes, further complicating the situation. Therefore, care should
be taken when drafting arbitration clauses.
20
90) In most of the European Union countries, the influence of regulatory agencies is pervasive.
What steps will be necessary of a corporation to protect business interest and advance new
programs?
Answer: Executives of companies who would like to go global should realize that the influence
of regulatory agencies worldwide is getting very pervasive. One way to understand the operation
and legal aspects related to business environment is to have permanent representation of the
company in the country. International companies such as McDonald's, Nike, and Toyota have
several people representing their interests to the European Commission. Companies hire several
lobbyists to represent their interests as well as to influence the direction of the regulatory
process. U.S. law firms and consulting firms also have sharply increased in number and can be
seen having offices in Brussels. This way they can gain insight into EU politics and have access
to its policy makers. It may also be possible to hire local people as official representatives of the
companies. It is estimated that currently there are 15,000 lobbyists in Brussels representing about
1,400 companies and nonprofit organizations from around the world.
21
Chapter 6 Global Information Systems and Market Research
1) One component of a firm's MIS is a business intelligence (BI) network that helps managers
make decisions; one of its major objectives is to enable manipulation of the data obtained by
interactive access.
Answer: TRUE
2) Intranet is a private network that allows authorized company personnel or outsiders to share
information electronically in a secure fashion.
Answer: TRUE
AACSB: Use of IT
3) EDI links with vendors to enable retailers to improve inventory management and restock hot-
selling products in a timely, cost-effective manner.
Answer: TRUE
AACSB: Use of IT
4) ECR is a joint initiative by members of the supply chain to work towards improving and
optimizing aspects of the supply chain to benefit managers.
Answer: FALSE
AACSB: Use of IT
5) Supply chain innovations, such as radio frequency identification tags (RFID), are likely to
provide increased momentum for ECR.
Answer: TRUE
AACSB: Use of IT
6) CRM tools allow companies like Credit Suisse, AT&T, and Hewlett-Packard to determine
which customers are most valuable and to react in a timely manner with customized products and
service offerings that closely match customer needs.
Answer: TRUE
AACSB: Use of IT
7) In the EU companies that use CRM to collect data about individual consumers must satisfy the
regulations in each of the member countries.
Answer: TRUE
AACSB: Use of IT
1
8) The term "safe harbor agreement" applies to privacy issues pertaining to the companies that
gather information about consumers.
Answer: TRUE
9) Direct sensory perception such as seeing, feeling, hearing, smelling, or tasting is the best way
to know what is going on in a country rather than taking information from secondary sources.
Answer: TRUE
10) Market research is the project-specific, systematic gathering of data and is the activity that
links the consumer, customer, and public to the marketer through information.
Answer: TRUE
11) Market research may prevent psychological overload that may be faced by a company
entering more than one new geographic market.
Answer: TRUE
12) The first step in global marketing research is the collection of data.
Answer: FALSE
13) Market research should focus on finding out how a potential customer can be changed into
an actual customer.
Answer: TRUE
14) Mattel toys thought that Barbie would be as popular in Japan as it is the United States. This
assumption was due to the self-reference criterion (SRC).
Answer: TRUE
15) An awareness of SRC can help ensure that the research effort is designed with minimal
home-country or second-country bias.
Answer: TRUE
2
16) Global marketing research in countries such as China and India should be conducted mainly
using the entire country as the unit of analysis.
Answer: FALSE
17) By definition, secondary data is data gathered from country markets that rank as "secondary"
in terms of income and population figures.
Answer: FALSE
18) In addition to big, showy, custom motorcycles, Harley-Davidson has a broad range of bikes
that well suit European riding habits.
Answer: TRUE
19) Companies wishing to minimize the cost and effort associated with market research should
start by collecting and analyzing primary data.
Answer: FALSE
20) Industrial growth patterns generally reveal consumption patterns, which in turn can be
helpful in knowing production patterns that can be used in assessing market opportunities.
Answer: TRUE
21) If a market researcher would like to know how much the typical Nigerian consumer spends
on soft drinks, the information can be obtained from GNP or GDP.
Answer: FALSE
22) Market researchers should be alert to the fact that the quality of government statistics can
vary greatly from country to country.
Answer: TRUE
23) The small markets around the world and the relatively low profit potential justifies only
modest expenditures for market research.
Answer: TRUE
3
24) If Avon would like to sell cosmetics in India, a good estimate can be achieved by researching
the average wage of an office secretary.
Answer: TRUE
25) Triangulation is a useful method in global market research where data is collected from three
different sources within the same country.
Answer: FALSE
26) Demand and market potential depend, in part, on whether the market being studied can be
classified as existing or potential.
Answer: TRUE
27) Toyota's decision to launch the new Sienna minivan in the United States reflects the
company's understanding of latent and incipient markets.
Answer: FALSE
28) Japanese companies relied heavily on traditional survey research in identifying the potential
market for fax machines.
Answer: FALSE
29) Motorola learned the hard way that there was no latent market for a premium-priced global
satellite telephone service.
Answer: TRUE
30) Volkswagen, Peugeot, Chrysler, and other global automakers have established
manufacturing operations in China since they consider it to be an incipient market.
Answer: TRUE
31) It will be convenient to do a telephone survey in rural areas in China since, according to the
Ministry of Information Industry reports, 40 percent households have at least one fixed-line
telephone.
Answer: FALSE
4
32) "Back translation" is a technique used to ensure that currency conversion is performed
correctly when financial statements of foreign subsidiaries are consolidated with financial
statements at headquarters.
Answer: FALSE
33) "Back translation" is a technique whereby a survey or other document that has been
translated is returned (i.e. "sent back") to the translator for corrections.
Answer: FALSE
34) Nielsen now uses an electronic device for getting national audience data, which is known as
a peoplemeter.
Answer: TRUE
35) A marketer of breakfast cereals might send researchers to preselected households at 6 a.m. to
watch families go about their morning routines
Answer: TRUE
36) When using a "projective technique," the researcher presents close-ended or ambiguous
stimuli to a subject in a focus group
Answer: FALSE
37) In global marketing research, it is important to establish scalar equivalence when obtaining
information from different countries.
Answer: TRUE
38) In marketing research, factor analysis is a useful technique for reducing large quantities of
data to a few underlying dimensions.
Answer: TRUE
39) It is advisable to present marketing research findings, including complex quantitative

analysis and terminology, to executives so that they will fully comprehend the analysis.
Answer: FALSE
5
40) Many global firms are creating flattened organizations, with less hierarchical, less centralized
decision-making structures, which facilitate the exchange and flow of information.
Answer: TRUE
41) In addition to providing a means for gathering, analyzing, classifying, storing, retrieving, and
reporting relevant data, MIS should also cover:
A) a company's external environment.
B) customers.
C) competitors.
D) strategy.
E) all of the above
Answer: E
42) Reed Krakoff, head designer for Coach Brand handbags and accessories stated "When
something doesn't sell, I never say, 'Well, people didn't understand it.' If people don't understand
it, it doesn't belong in the store." This statement underscores the fact that:
A) consumer preference changes with time.
B) seasonal variation and store displays are important.
C) market research is vital for success.
D) Coach Brand is not very popular.
E) people dislike brands that are newly introduced.
Answer: C
43) A(n) ________ is a company's private data network, accessible only by authorized persons
inside the organization
A) electronic data interchange (EDI)
B) internet
C) intranet
D) EPOS
E) EDI
Answer: C
44) Which of the following is an IT tool designed specifically to help retailers work more closely
with vendors on stock replenishment?
A) BOLD
B) ECR
C) data warehouse
D) projection
E) EDI
Answer: B
6
45) Which of the following can be defined as a business philosophy that values two-way
communication between a company and individual customers?
A) ECR
B) CRM
C) EDI
D) EPOS
E) BOLD
Answer: B
46) One of the key advantages of an EDI (Electronic Data Interchange) system is:
A) it allows easy access to all company data to vendors.
B) its transaction formats are universal.
C) it allows third-party transmission connections to company data.
D) it saves both time and money by using different languages.
E) vendors receive orders by voice mail.
Answer: B
AACSB: Use of IT
47) CRM tools allow companies such as Credit Suisse, AT&T , Hewlett-Packard and others to
determine:
A) warranty of products sold to consumers.
B) amount paid by consumers in different countries.
C) which customers are most valuable.
D) the use of credit cards for payment.
E) the use of laptop computers by customers.
Answer: C
48) Direct Sensory Perception provides a vital background for the information that comes from
human and documentary sources since:
A) it provides second-hand information.
B) it is easy and most economical way of collecting data.
C) it means first-hand seeing, feeling, hearing, smelling, and tasting.
D) it involves reading and reviewing documents.
E) top executives are involved in getting first-hand information.
Answer: C
7
49) Which of the following environmental factors may require marketers to adjust their approach
to conducting international as opposed to domestic marketing research?
A) Researchers must be prepared for new parameters of doing business.
B) Company personnel must come to grips with a new set of culture-based assumptions about
conducting business.
C) Research may help reduce psychological overload.
D) Researchers may have to broaden the definition of competitors to include competitive
pressures not present in the domestic market.
E) all of the above
Answer: E
50) A vice-president of a shoe company was in India to assess the market. He found that many
people in the southern part of India were walking bare footed. This can be indicative of either the
fact that there is a potential market for shoes or there is no market for shoes in that part of the
world. To formally confirm one instinct or the other the vice-president should:
A) establish an office to start manufacturing shoes in India.
B) give free shoe samples to a selected group of customers.
C) conduct a research to find the potential and actual customers.
D) find out if that is true for other Asian countries.
E) give up the idea of doing business in India.
Answer: C
51) When Mattel first introduced Barbie in Japan, managers assumed that Japanese girls would
find the doll's design just as appealing as American girls did. This may be due to:
A) Barbie's physical features such as long legs and blonde hair.
B) Barbie being a symbol of American lifestyle.
C) the SRC tendency on the part of American managers.
D) the SRC tendency on the part of Japanese consumers.
E) the limited competition for dolls in Japan.
Answer: C
8
52) Which of the following lists some of the steps in the market research process in the correct
order?
A) determine information requiremen→problem definition→choose unit of analysis→examine
data availability→assess value of research
B) problem definition→assess value of research→determine information requirement→choose
unit of analysis→examine data availability
C) examine data availability→problem definition→choose unit of analysis→assess value of
research→determine information requirement
D) choose unit of analysis→assess value of research→problem definition→determine
information requirement→examine data availability
E) examine data availability→assess the value of research→problem definition→presentation
Answer: A
53) Anyone undertaking a market research project should understand that the first step is:
A) setting the budget.
B) determining the methodology to use.
C) deciding who will see the final report.
D) defining the problem.
E) determining the information requirement.
Answer: E
54) For consumer products, qualitative research is especially well suited to:
A) get close to the consumer.
B) describe the cultural context of consumer behavior.
C) identify core brand equity.
D) identify what people really feel.
E) all of the above
Answer: E
55) Potential markets can be subdivided into:

A) latent and parallel markets.
B) existing and incipient markets.
C) latent and incipient markets.
D) existing and latent markets.
E) incipient and existing markets.
Answer: C
9
56) Marketers must be aware of the impact of SRC and other cultural assumptions since:
A) it can have several positive effects on market planning.
B) it enhances management's willingness to pursue market research.
C) it can help ensure that the research effort is designed with minimal home-country bias.
D) it can help ensure that the research effort is designed with minimal second-country bias.
E) All of the above are correct.
Answer: E
57) Which of the following is not true of secondary data about global markets?
A) It was not gathered specifically for the research project at hand.
B) It is often so expensive that small companies can't afford to use it.
C) It can be accessed quickly.
D) A great deal is available from government agencies.
E) It cannot be retrieved on-line.
Answer: B
58) Harley-Davidson intentionally limits the production of motorcycles in spite of the high
demand in order to:
A) restrict sales to a limited number of countries.
B) use available resources conservatively.
C) keep the quality high.
D) increase the selling price.
E) sell other bikes manufactured by them.
Answer: C
59) Which of the following correctly reflects marketing expert David Arnold's recommendations
for companies engaged in global market research?
A) use multiple indicators
B) develop customized measures specific to an industry or product
C) conduct comparative assessments in neighboring countries
D) observation should be weighted more heavily than statements of purchase intention
E) all of the above
Answer: E
10
60) When the Coca-Cola Company convened focus groups in Europe and Asia to assess potential
market acceptance of a contoured aluminum soft drink can, it was attempting to collect
________ data
A) primary
B) secondary
C) incipient
D) quantitative
E) MIS
Answer: A
61) The decision by Toyota executives to introduce the Sienna minivan in the U.S. market was
based on their study of a(n) ________ market
A) existing
B) latent
C) parallel
D) incipient
E) global
Answer: A
62) The international marketing manager of an office furniture company ordered a research
report on global telecommunications equipment sales. The report noted that, in the early 1990s,
AT&T was awarded a $4 billion contract to provide communication network products and
services in Saudi Arabia. The manager took this as a cue to put Saudi Arabia on her information
agenda, reasoning that office furniture sales would increase as the country's telephone system
was improved. As described here, the marketing manager is viewing Saudi Arabia as a(n):
A) latent market.
B) incipient market.
C) cluster market.
D) existing market.
E) primary market.
Answer: B
11
63) Predicting economic and income growth rates is particularly important when researching
which type of market?
A) existing markets
B) latent markets
C) parallel markets
D) incipient markets
E) local markets
Answer: D
64) Tools that can be used for collecting primary data include:
A) survey research and interviews.
B) consumer panels and observation.
C) focus groups and survey research.
D) interviews and observation.
E) all of the above
Answer: E
65) When a survey questionnaire in English is translated into Korean for use in South Korea and
then translated back into English to check its accuracy it is described as:
A) incipient translation.
B) comparative translation.
C) native translation.
D) parallel translation.
E) back translation.
Answer: E
66) When a trained person is recording the items selected in a grocery cart or basket, the research
method is known as:
A) observation.
B) survey research.
C) focus study.
D) secondary data collection.
E) personal interviews.
Answer: A
12
67) It has been reported by Nielsen that there is a significant drop-off in viewership among
American men aged 18 to 34. This group was found to be spending more time surfing the
internet or playing video games during prime TV viewing hours. In order to get accurate data, a
monitor unit was provided to selected households that detect when a TV set is turned on and the
channel to which it is tuned. This monitoring system is called:
A) focus group study instrument.
B) personal interviews assessor.
C) the pedometer.
D) the consumer panel analyzer.
E) the peoplemeter.
Answer: E
68) Manufacturers of Splenda, a low calorie sugar, wanted to arrange a focus group to find out
its use in different markets. Open-ended questions were used in order to secure the unconscious
attitudes and biases held by the subjects. This type of technique is known as:
A) scaling technique.
B) qualitative technique.
C) projective technique.
D) reactivity technique.
E) MDS technique.
Answer: C
69) In Singapore Coca-Cola wanted to develop an advertisement program. They selected a group
of teenagers in a room and a trained moderator facilitated discussion asking questions on brand's
image, advertisement, social trends, TV watching habits, and snack usage. This type of research
is called:
A) survey research.
B) observational studies.
C) comparison studies.
D) focus group research.
E) experimental research.
Answer: D
13
70) In Mexico City, only 55-60% of the population owns a telephone. The number drops to less
than 50% in Guadalajara and Monterey, and 35% or lower in other cities. This will complicate
the task of market researchers hoping to use a telephone survey to obtain a ________ of the
Mexican population.
A) probability sample.
B) convenience sample.
C) secondary sample.
D) focus group sample.
E) quota sample.
Answer: A
71) One study of adult involvement in household tasks revealed greater similarities between the
UK and the U.S. compared with France, Belgium, and French Canada. Thus, the U.S. and UK
were "twins" based on common language. This study is an example of:
A) market latency.
B) conjoint analysis.
C) factor analysis.
D) multidimensional scaling.
E) cluster analysis.
Answer: E
72) When consumers have difficulty in verbalizing their perceptions and there are different
alternative brands of toothpaste, what is the best method of judging them in terms of similarity?
A) cluster analysis
B) MDS
C) dependence techniques
D) factor loading
E) focus group
Answer: B
73) Suppose Apple has collected extensive survey data about its new iPhone and respondents
have rated it on twenty different features and benefits. Now researchers want to reduce the
amount of data to a few underlying dimensions. Which data analysis technique should the
researchers use?
A) analogy
B) conjoint analysis
C) factor analysis
D) multidimensional scaling
E) cluster analysis
Answer: C
14
74) A market researcher who uses multidimensional scaling (MDS) will:
A) attempt to estimate market size by analogy.
B) ask respondents to rate a particular product or brand in terms of multiple characteristics or
attributes.
C) ask respondents to evaluate product or brand pairs in terms of similarity.
D) attempt to determine the combination of product features that create the greatest utility for
consumers.
E) conduct a focus group
Answer: C
75) Analyzing global income data, Volkswagen executives noted that Nigeria has approximately
the same per capita income as China. However, if China had the same ratio of cars to people as
Nigeria, there would be 10 million cars in China today, instead of 1.2 million. If this insight were
stated as "925,000 cars are to Nigeria as 10 million cars are to China," Volkswagen executives
would be using which form of data analysis?
A) demand pattern analysis
B) income elastic analysis
C) polycentrism
D) market estimation by analogy
E) multidimensional scaling
Answer: D
76) According to David Arnold there are four possible approaches to forecasting by analogy,
which does not include which of the following?
A) Data is available on a comparable product in the same country.
B) Data is available on the same product in a comparable country.
C) Data is available on the same product from an dependent distributor in a neighboring country.
D) Data is available about a comparable company in the same country.
E) Data is available on the same product in every country.
Answer: E
77) Catalog sales in the United States represent about 3 percent of overall retail sales; whereas in
Germany they account for 5.8 percent. This suggests that there is a good chance of catalog
marketing in Germany. This type of research is described as:
A) demand pattern analysis.
B) income elastic analysis.
C) time series displacement.
D) polycentrism.
E) comparative analysis.
Answer: E
15
78) Which of the following is true about etic and emic approaches to country analysis?
A) The etic and emic approaches are identical.
B) An emic approach studies a culture from within; etic analysis is "from the outside."
C) An emic approach studies a culture "from the outside"; etic analysis studies a culture from
within.
D) The emic/etic distinction is not useful in cultural studies.
E) The emic/etic approaches cannot be applied to Asian countries
Answer: B
79) A market research study of soft drink consumption and distribution in Hungary
commissioned by an American company indicated that soft drinks were available in drugstores.
However, Western-style drugstores do not exist in Hungary. This illustrates an important issue in
global marketing research, namely:
A) inflated data.
B) using convenience samples.
C) market estimation by analogy.
D) comparability of data.
E) using multiple dimensional scaling.
Answer: D
80) Market research undertaken by Whirlpool helped tremendously by showing that:

A) listening to customers is only possible in America.
B) data collected in the U.S. should be applicable in Europe.
C) consumers in different countries prefer different types of features.
D) in China white colored washers will sell more since colored ones are expensive.
E) in India it is not possible to use washers since "saris" are very long and delicate.
Answer: C
16
81) Globalization puts tremendous pressure on companies to achieve as many economies as
possible. How can IT provide valuable tools in global marketing research?
Answer: There are different IT programs that can provide valuable tools for marketing. EDI
(Electronic data interchange) links with vendors to enable retailers to improve inventory
management and restock popular products in a timely, cost-effective manner. Also, effective
consumer response (ECR) is another program which allows management to work more closely
with vendors on stock replenishment. ECR systems utilize electronic point of sale (EPOS) data
gathered by checkout scanners that help retailers identify product sales patterns as well as record
consumer preferences separated by geographical areas. All these tools are also helpful in
improving the ability of businesses to target consumers and increase loyalty. Customer
relationship management (CRM) is another method by which a relationship is developed with
the customer. It helps in determining which customers are most valuable and to react in a timely
manner with customized product and service offerings that closely match customer needs. It also
makes employees more productive and enhances corporate profitability. It also benefits
customers by providing value-added products and services. Data warehouses store a company's
CRM system as well as other IT systems. These data warehouses can provide multiple uses such
as helping retailers with multiple store locations fine-tune their product assortments. In addition
to internet, intranet can be a valuable tool, which can connect individuals within a company on a
private basis.
AACSB: Use of IT
82) Authors Michael Czinkota and Illka Ronkainen identified four specific environmental factors
that may require international research efforts to be conducted differently than domestic
research. Describe those factors to outline the differences.
Answer: The four specific environmental factors that may require international research efforts
to be conducted differently than domestic research are: (1) researchers must be prepared for new
parameters for doing business. The requirements and ways in which rules are applied may differ
from country to country. (2) A "cultural mega-shock" may occur as company personal come to
grips with a new set of culture-based assumptions about conducting business. (3) a company
entering more than one new geographic market faces a burgeoning network of interacting
factors. Research may help prevent psychological overload in that case. (4) Company researchers
may have to broaden the definition of competitors in international markets to include competitive
pressures that would not be present in the domestic market.
17
83) The vice president of finance and marketing of a cosmetic company were traveling around
the world to estimate the market potential for their products. They came to a busy metropolitan
area in India and noticed that most of the women were not using mascara and false eyelashes.
The vice president of finance said, "There is no evidence of any market for our products and let
us not waste time." However the vice president of marketing remarked, "We have a great
opportunity to market our products." What do you understand from this and how will you
suggest testing the instinct of either vice president?
Answer: This is a classic example which demonstrates the need to identify the information
required to do market research. To formally confirm the assumptions, organized research is
necessary. Identification of the need will form the first step for conducting this marketing
research in a different country. The need for research also arises when there is a problem, crisis
or opportunity. Local taste preferences vary based on several factors ranging from social, cultural
to economic reasons. Unless a research is conducted formally or informally it is impossible to
arrive at a conclusion. Also, it is quite possible that a potential market can be missed or lost to
competitors on false assumption or instincts. Thus, research should be undertaken to determine
the potential market and how it can be converted into actual market. This should lead to a
stepwise process for conducting marketing research.
84) Many of the fast food operations are entering markets in Middle Eastern countries. In the
United States, breakfast items are very popular and are responsible for a bulk of profit from
sales; primarily through drive-in customers. However, to their dismay, managers found that there
was practically no demand for breakfast items. Firstly, due to hot weather conditions, people
sleep late and wake up late. Secondly, they do not eat burgers, and sausage or bacon is prohibited
food. Also, drive-in business is not popular since people go to work at different periods of time.
Explain the possible reason(s) behind such a decision and account for its/their failure.
Answer: When conducting research in a foreign country one has to be completely free from any
kind of bias or prejudice. A person's home-country values and beliefs may consciously or
unconsciously influence the assessment of a foreign culture or country. This is referred to as
SRC (self-reference criterion). The SRC tendency underscores the importance of understanding
the cultural environments of global markets. As in the above case, assumptions based on home-
country marketing success turned out to be wrong when applied in a Middle Eastern country. A
marketing program that is successful in one country does not guarantee success in another
country. Thus, marketers must be aware of the SRC and its impact. Such awareness can have
several positive effects. It can enhance management's willingness to conduct market research in
the first place. Also, an awareness of SRC can help in ensuring the validity of research with
minimal home-country or second-country bias. In other words, the research will have potentially
useful results which managers will be able to accept and implement.
18
85) What are the secondary sources of data and how do these sources differ from primary
sources? Give examples of sources from which secondary data can be obtained.
Answer: A low-cost approach to market research and data collection begins with desk research.
There are a lot of secondary sources which are a good place to start. Data from census bureaus;
government and private agencies; trade associations; chamber of commerce; published reports;
academic institutions; and public libraries are not only extensive but can provide valuable
information in a very cost-effective manner. All of these are considered as secondary sources
since the data already exist and is not based on the research conducted by the company. Data
obtained by conducting research by the company is considered as a primary source. This may
also include company's unpublished reports and other financial data. Other secondary sources
include the U.S. Government's National Trade Data Base (NTDB), an online resource from the
Department of Commerce. Similarly there are other data which are published by almost most of
the federal government agencies. Most countries compile data related to the gross national
product (GNP), gross domestic product (GDP), consumption, investment, government
expenditures, price levels, and import/export expenditures. Demographic data are available from
the United Nations' agencies as well as other international agencies. The Statistical Yearbook of
the United Nations contains global data on agriculture, mining, manufacturing, construction,
energy production consumption, internal and external trade, health, housing, education and lot of
other services. Similar data are collected by the U.S. Central intelligence Agency which
publishes World Fact book. Other sources are the World Bank, the International Monetary Fund.
The Economist and Financial Times regularly compile comprehensive surveys of regional and
country markets and include them in their publications. Data from many of these sources are
generally available in both print and electronic forms. There are also different country websites
which also provide some useful information. Syndicated studies published by private research
companies are another source of secondary data and information.
86) Discuss the guidelines submitted by David Arnold pertaining to the importance of data
gathering for market research. Indicate the rationale behind each guideline.
Answer: David Arnold has offered certain guidelines for data gathering which are listed as
follows:
(a) Multiple indicators should be used rather than a single measure. This approach will decrease
the level of uncertainty for decision makers.
(b) Individual companies should develop customized indicators specific to the industry, product
market, or business model. Such indicators should leverage a company's previous experience in
global markets.
(c) Comparative assessments should always be conducted in multiple markets. Comparative
assessment enables management to develop a "portfolio" approach in which alternative priorities
and scenarios can be developed.
(d) Observations of purchasing patterns and other behavior should be weighed more heavily than
reports or opinions regarding purchase intention or price sensitivity. Sometimes it is different to
accurately survey consumer perceptions.
19
87) Grey China Advertising agency gathers a wealth of information about attitudes and buying
patterns of Chinese in its Grey China Base Annual Consumer Study. Recent findings point to
growing concerns about the future, Westernization of grocery purchases, growing market
saturation, increasingly discerning customers and a rise in consumer willingness to try new
products. These data can be very inconsistent since conflicting findings were reported by
different agencies. For example, data gathered by Euromonitor International estimates soft-drink
consumption at 23 billion liters in China, while Coca- Cola's in-house marketing research team
places the figure at 39 billion liters. Similar differences were noted in other data published by
different agencies. What is the best approach in such situations so that finite decisions can be
made? What are the differences between latent and incipient markets?
Answer: These types of discrepancies are expected due to the research methodology, design,
analyses and scores of other factors. In such situations, and in countries where such data are not
available, researchers must first estimate the market size, the level of demand, or the rate of
product purchase or consumption. A second research objective in existing markets may be
assessment of the company's overall competitiveness in terms of product appeal, price,
distribution, and promotional coverage and effectiveness. Researchers may be able to find out
special aspects or weaknesses in competitors' way of doing business. Unserved market segments
may also be discovered. In some instances, there is no existing market to research. Such potential
markets can be further subdivided into latent and incipient markets. A latent market is, in
essence, an undiscovered market segment. It is a market in which demand would materialize if
an appropriate product or service were made available. In a latent market, demand is zero before
the product is offered. An incipient market is a market that will emerge if a particular economic,
demographic, political, or socio-cultural trend continues. A company is not likely to achieve
satisfactory results if it offers a product in an incipient market before the trends have taken roots.
After the trends have had a chance to unfold, the incipient market will become latent and, later,
existing markets.
20
88) How can observational studies and focus groups be used in marketing research? What are the
different methods by which these studies are conducted?
Answer: In observation method one or more trained observers or a mechanical device watch and
record the behavior of actual or prospective buyers. The research results are used to guide
marketing managers in their decision making. For example, observations are done as to how
male or female customers open the door of cars and sit. This simple act can be of tremendous
help in designing the doors of cars and the adjustment of seats. Similarly, observing how
consumers are picking items in a grocery store or observing the items in shopping carts can give
better understanding of the actual purchase behavior of consumers. It should be noted that since
consumers are unaware of being watched, actual behavior can be recorded and interpreted.
Marketers can also observe the eating behavior by observation or the plate wastages after dinner
to assess food preferences of consumers. Companies using observation as a research
methodology must be sensitive to public concerns about privacy issues, particularly if the
subjects know that they are being watched. In focus group research, a trained moderator
facilitates discussion of a product concept, a brand's image and personality, advertisement, social
trends, or other related topic with a group comprised of 6 to 10 people. Selection of focus group
participants has to be done very carefully since the number of participants is very limited. They
should also meet the criteria which closely
fit the overall population under study. Usually focus group meetings are conducted in a specially
equipment room in an undisturbed environment. The questions are carefully framed and answers
are solicited from all participants in an organized manner. Recordings are made of the entire
process and analyzed after the conclusion of the session. A one-way mirror or a video screening
is simultaneously conducted where focus group participants are being watched. Also the trained
moderator is connected by earphones with others including business managers, so that
appropriate instant questions may be prompted to be used in discussion. Focus group research
yields qualitative data that does not lend itself to statistical projection. Such data are extremely
valuable in the exploratory phase of a project and is typically used in conjunction with data
gathered via observation and other methods.
21
89) What are "interdependence techniques" in the analysis of data? What type of measurement is
possible with this technique and what are different methods that are used in marketing research.
Answer: Interdependence techniques show the interaction between variables and comprises of
factor analysis, cluster analysis, and multidimensional scaling (MDS). Factor analysis can be
used to transform large amounts of data into manageable units. Specialized statistical programs
can reduce or group the data by distilling out certain meaningful factors. These factors are
selected by the program on the basis of attitudes and perceptions that can be closely aligned from
a multitude of survey responses.
Factor analysis is useful in psychographic segmentation studies. It can also be used to create
perceptual maps.
Cluster analysis allows the researcher to group variables into clusters that maximize within-
group similarities and between-group differences. Cluster analysis shares some characteristics of
factor analysis in that it does not classify variables as dependent or independent. It can also be
used in psychographic segmentation. It is well suited to global marketing research because
similarities and differences can be established between local, national, and regional markets of
the world. Cluster analysis can also be used to perform benefit segmentation and identify new
product opportunities.
MDS is another technique for creating perceptual maps. When the researcher is using MDS the
respondent is given the task of comparing products or brands, one pair at a time, and judging
them in terms of similarity. The researcher then infers the dimensions that underlie the
judgments. MDS is particularly useful when there are many alternatives from which to choose
and when consumers may have difficulty verbalizing their perceptions. To create a well-defined
spatial map, a minimum of eight products or brands should be used.
90) What do you understand by Comparative Analysis and Market Estimation by Analogy? How
can these be helpful in marketing research?
Answer: In global marketing research it may be necessary to conduct comparisons of market
potential and marketing performance in different countries or regional markets at the same point
in time. This analysis can be intra-company cross- national comparison. There may be
differences even under similar conditions from one country to another. For example, catalog
sales in the United States represent about 3 percent of overall retail sales. By comparison, catalog
sales in Germany account for 5.8 percent of overall sales. This suggests that there is a catalog
marketing opportunity in Germany. Sometimes data may not be available for a particular country
or regional market. In such cases it is sometimes possible to draw an analogy. In other words the
comparison is based on partial resemblance since data are not available. Time-series
displacement is an analogy technique based on the assumption that an analogy between markets
exists in different time periods. The time displacement method requires a marketer to estimate
when two markets are at similar stages of development.
22
Global Marketing
Chapter 7 Segmentation, Targeting, and Positioning
1) Many Chinese women use whitening creams to lighten and brighten their complexions since
white skin is associated with wealth.
Answer: TRUE
Page Ref: 202
2) Market Segmentation is the process of evaluating the segments and focusing marketing efforts
on a country, region, or group of people that has significant potential to respond.
Answer: FALSE
Page Ref: 203
3) Sushi, Falafel, Tandoori Chicken or Pizza are in demand in many parts of the world. This
phenomenon can be due to pluralization of consumption and segment simultaneity.
Answer: TRUE
Page Ref: 204
4) The fact that significant numbers of pizza-loving consumers are found in many countries
indicates that they are eating the exact same thing in all parts of the world.
Answer: FALSE
Page Ref: 204
5) Conventional wisdom about market segmentation calls for acknowledging the emergence of
global market segments that transcend national boundaries.
Answer: FALSE
Page Ref: 204
6) The process of global market segmentation begins with the choice of one or more variables to
use as a basis for grouping customers.
Answer: TRUE
Page Ref: 205
7) A fact found by demographic segmentation is that by the year 2030, 20 percent of the U.S.
population or 70 million will be 65 years old or older.
Answer: TRUE
Page Ref: 205
8) The assumption of homogeneity should be the cornerstone of a company's market

segmentation effort.
Answer: FALSE
Page Ref: 206
9) About two-thirds of world GNI is generated in the Triad countries, whereas only about 12
percent of the world's population is located in those countries.
Answer: TRUE
Page Ref: 206
10) The United States ranks number one among nations in terms of both per capita income and in
terms of income adjusted for purchasing power.
Answer: FALSE
Page Ref: 206
11) Swedish companies such as IKEA, Ericsson, and Saab have looked beyond their borders for
significant growth opportunities since they have a high per capita income.
Answer: FALSE
Page Ref: 207
12) When assessing market segments in terms of income data, global companies should avoid
targeting countries with per capita incomes of less than $755.
Answer: FALSE
Page Ref: 207
13) An extrapolation of current economic growth trends suggest that China, with its combination
of high real income growth and relatively low population growth, is a strong candidate to
become a leading world economic power.
Answer: TRUE
Page Ref: 208
14) Ten most populous countries in the world account for roughly 60 percent of the world
population.
Answer: TRUE
Page Ref: 208
15) Using averages alone, it is possible to underestimate a market's potential, for example, fast-
growing, higher income segments are present both in India and China.
Answer: TRUE
Page Ref: 208-209
16) The vast majority of India's population comprises a "bullock cart" segment whose
households lack most comforts but typically own a television.
Answer: TRUE
Page Ref: 209
17) A psychographic study showed that Porsche buyers could be divided into several distinct
categories, one consisting of "Top Guns" who buy Porsches and expect to be noticed.
Answer: TRUE
Page Ref: 211
18) Categories such as "successful idealists" and "affluent materialists" can be used to describe
psychographic segments.
Answer: TRUE
Page Ref: 211
19) The segmentation and targeting approach used by the same company can vary from country
to country.
Answer: TRUE
Page Ref: 211
20) For behavior segmentation, marketers use the 80/20 rule when assessing the consumers'
usage rate, which means that 20 percent of the company's revenues or profits are accounted for
by 80 percent of the firm's products or customers.
Answer: FALSE
Page Ref: 213
21) Global benefit segmentation is based on a marketer's understanding of the problem a product
solves, the benefit it offers, or the issue it addresses, regardless of geography.
Answer: TRUE
Page Ref: 214
22) Based on the trends and segmentation of Europe's Single Market, marketers are particularly
advised to take the Golden Grays seriously and market brands that provide happiness,
convenience, and time savings.
Answer: TRUE
Page Ref: 214
23) The widespread adoption of the Internet and other new technologies will result in new
segmentation approaches to be developed in response to changing business environment.
Answer: TRUE
Page Ref: 216
24) Thai Americans, Vietnamese Americans, and Chinese Americans, each of whom speak a
different language, can be separated by ethnic segmentation.
Answer: TRUE
Page Ref: 215
25) When assessing potential country target markets, management should rely heavily on its
network of contacts as a primary criterion for targeting.
Answer: FALSE
Page Ref: 216
26) About 1.3 million cars are sold each year in India; in absolute terms, this is a relatively small
number.
Answer: TRUE
Page Ref: 217
27) India is the world's fastest growing cell phone market with the industry expanding at a rate of
50 percent annually with 5 million new subscribers added every month. This is an indication of
continued private-sector growth.
Answer: FALSE
Page Ref: 217-218
28) A market segment or country market characterized by strong competition may be a segment
to target since it will be easier to enter a proven market.
Answer: FALSE
Page Ref: 218
29) Honda first created the market for small-displacement dirt bikes and then moved up market
with bigger bikes targeted at casual riders.
Answer: TRUE
Page Ref: 219
30) Marketing model drivers are key elements or factors required for a business to take root and
grow in a particular country market environment.
Answer: TRUE
Page Ref: 220
31) In India, refrigeration is not widely available and this restricts many foreign companies to
market items that need refrigeration. This can be considered as one of the "enabling conditions"
that needs to be considered in a marketing model.
Answer: TRUE
Page Ref: 220
32) When making a decision about market entry timing, a company's management team should
understand that the first-mover always becomes the market leader.
Answer: FALSE
Page Ref: 221
33) Before targeting the North American market, the Lexus marketing team succeeded in making
Lexus the number one luxury-car nameplate in Japan.
Answer: FALSE
Page Ref: 222
34) Standardized global marketing is analogous to mass marketing in a single country and is also
known as differentiated target marketing.
Answer: FALSE
Page Ref: 223
35) Differentiated global marketing represents a more ambitious approach than concentrated
target marketing.
Answer: TRUE
Page Ref: 224
36) There is a significant difference between the "mass market" and the "premium market." In
the premium market customers are looking for a good deal whereas in the mass market
customers are looking for a product that fulfills their expectations.
Answer: FALSE
Page Ref: 223-224
37) BMW's slogan "the ultimate driving machine," is an example of an attribute or benefit which
has proven successful in their positioning strategy.
Answer: TRUE
Page Ref: 224-225
38) IKEA, the home furnishings retailer based in Sweden, wraps itself in the Swedish flag —
literally, since inside and out, their stores are decorated in the national colors of blue and yellow.
This is an example of local consumer culture positioning.
Answer: FALSE
Page Ref: 228-229
39) Benetton uses the slogan "United Colors of Benetton" to position itself as a brand concerned
with the unity of humankind. This type of strategy is referred to as GCCP (global consumer
culture positioning).
Answer: TRUE
Page Ref: 227-228
40) In France, the National Assembly approved a bill that would require Apple to share the
iTunes software codes with other companies so that music downloads would play on all digital
music players, not just iPods.
Answer: TRUE
Page Ref: 230
41) Market segmentation represents:

A) targeting prospective customers.
B) finding customers who can respond to advertisement.
C) promoting products and services internationally.
D) identify customers who can help in promoting products.
E) an effort to identify and categorize customers based on common characteristics.
Answer: E
Page Ref: 203
42) When identifying global market segments, a fundamental guiding principle should be the
need to determine:
A) shared demographic characteristics.
B) similar languages.
C) similar needs and buying behavior.
D) similar ethnic backgrounds.
E) similar geographic regions.
Answer: C
Page Ref: 204
43) Global marketing authority Theodore Levitt has noted that many ethnic and regional foods–
sushi, for example–is enjoying popularity in many countries of the world. This observation is
known as:
A) the pluralization of consumption.
B) the ethnicitization of consumption.
C) the democratization of consumption.
D) the sophistication of consumption.
E) the domestication of consumption.
Answer: A
Page Ref: 204
44) Which of the following does not represent "conventional wisdom" regarding global
segmentation?
A) assume heterogeneity between countries
B) assume homogeneity within a given country
C) focus heavily on macro-level cultural differences
D) acknowledge the existence of within country differences
E) assigning secondary priority to within country microsegments
Answer: D
Page Ref: 204
45) Income and population are two variables that can be used in which type of segmentation?
A) ethnic segmentation
B) demographic segmentation
C) psychographic segmentation
D) behavioral segmentation
E) gender segmentation
Answer: B
Page Ref: 205
46) Ideally, for comparative purposes, GNI and other measures of national income converted to
U.S. dollars should be calculated on the basis of:
A) per capita income.
B) purchasing power parities.
C) high income countries.
D) low income countries.
E) local currency.
Answer: B
Page Ref: 206-207
47) Ericsson, IKEA, Saab, and other companies based in Sweden have looked beyond their
borders for significant growth market because:
A) it has high total annual income.
B) it has low total annual income.
C) it has a smaller population.
D) it is land locked geographically.
E) it has relaxed export policies.
Answer: C
Page Ref: 207
48) The concentration of income in the high-income and large-population countries means that a
company can be "global" by targeting buyers in:
A) just 50 countries.
B) just 20 countries.
C) just 10 or fewer countries.
D) just 30 countries.
Answer: C
Page Ref: 208
49) A global segment is referred to as "global elite" which include:

A) people between the ages of 12 and 19.
B) affluent, well-traveled persons.
C) graying population.
D) technology professionals.
E) persons having power.
Answer: B
Page Ref: 209
50) Based on 2007 projections, the top ten nations ranked by GNI does not include:
A) United States.
B) Japan.
C) Russia.
D) Spain.
E) Italy.
Answer: C
Page Ref: 207
51) McDonald's operates in over 120 countries, however, 80 percent of its restaurants are located
in nine countries which does not include the following country market:
A) Australia.
B) Brazil.
C) Germany.
D) India.
E) Japan.
Answer: D
Page Ref: 208
52) Psychographic segmentation involves grouping people in terms of their:

A) combined household income.
B) age and income.
C) attitudes, values and lifestyle.
D) psychological well being.
E) gender.
Answer: C
Page Ref: 210-211
53) Porsche AG uses the label "Top Guns" to describe one segment of its customers, namely
those who care about power and control and who expect to be noticed. Such a profile would be
based on which type of segmentation?
A) demographic
B) occupational
C) psychographic
D) behavioral
E) gender
Answer: C
Page Ref: 210-211
54) A marketing manager for the Mars candy company is studying a single-country
psychographic profile that includes segment labels such as "Cossacks" and "kuptsy." What
country does the survey cover?
A) India
B) Japan
C) Russia
D) China
E) Vietnam
Answer: C
Page Ref: 212
55) "Generation Y," "Golden Grays," and "Globerations" are three market segments that have
been described in:
A) Japan.
B) Russia.
C) the European Union.
D) the United States.
E) Brazil.
Answer: C
Page Ref: 214
56) Which of the following is not a characteristic associated with the Golden Grays segment in
Europe's single market?
A) consider it important to mix fun and work
B) enjoy high-tech gaming
C) deluged with passive information
D) expect biotechnology to extend life expectancy
E) share few family activities
Answer: E
Page Ref: 214
57) Which of the following is not a characteristic associated with the Generation Y segment in
Europe's single market?
A) share numerous family activities
B) less reverence toward established authorities
C) view leisure time in "pay-per-play" terms
D) increasingly tech-savvy
E) deluged with positive information
Answer: E
Page Ref: 214
58) Tambrands markets feminine hygiene products around the globe. The company divides
markets on the basis of past, present, and future product usage. Which kind of segmentation does
this represent?
A) demographic
B) occupational
C) psychographic
D) behavioral
E) geographic
Answer: D
Page Ref: 213-214
59) Diageo PLC; V&S Vin & Spirit AB; and Seagram and other marketers know that Russians
consume a great deal of Vodka. This type of market segmentation can be classified as:
A) demographic.
B) behavioral.
C) psychographic.
D) occupational.
E) benefit.
Answer: B
Page Ref: 212
60) "Usage rates" and "user status" are important criteria for which segmentation variable?
A) demographic
B) occupational
C) psychographic
D) behavioral
E) benefit
Answer: D
Page Ref: 213-214
61) Which of the following is probably the biggest impediment to Tambrands's efforts to expand
the market for its Tampax brand feminine hygiene products in developing nations?
A) lack of demographic information
B) underdeveloped distribution infrastructure
C) religious and cultural mores
D) preference for less expensive local brands
E) lack of advertisement and promotion
Answer: C
Page Ref: 215
62) Procter & Gamble has identified a group of consumers in Europe who are willing to pay
premium prices for pet food that will improve the health of their pets. This is an example of
________ segmentation:
A) demographic
B) psychographic
C) ethnic
D) behavioral
E) benefit
Answer: E
Page Ref: 214-215
63) Which of the following is true about efforts by automakers to target the Hispanic segment in
the United States?
A) Honda, Toyota, Ford, and GM all began targeting the segment years ago.
B) Honda and Toyota began targeting the segment years ago; Ford and GM launched their
efforts more recently.
C) Ford and GM began targeting the segment years ago; Honda and Toyota launched their
efforts more recently.
D) Only Ford and GM are targeting the Hispanic segment.
Answer: B
Page Ref: 215-216
64) Which of the following best describes the decision by South Korean automaker Kia Motors
about targeting the U.S. automotive market?
A) Kia is staying away because Japanese competition is too strong.
B) Kia is staying away because of slow growth in the sport utility segment.
C) Kia is aggressively launching inexpensive, value-priced vehicles.
D) Kia is selectively targeting upscale U.S. buyers.
E) Kia is avoiding America because it cannot afford the expense of a U.S. product launch.
Answer: C
Page Ref: 217-218
65) Which of the following criteria should marketers use when assessing opportunity in global
target markets?
A) current size of the segment
B) anticipated growth potential
C) competition
D) compatibility with company's overall objectives.
E) all of the above
Answer: E
Page Ref: 217
66) Basic criteria that marketers should keep in mind while assessing opportunities in global
market include all of the following except:
A) current size of the market segment.
B) anticipated growth potential of the market.
C) compatibility with company's overall objectives.
D) competition in the market.
E) securing first mover advantage.
Answer: E
Page Ref: 217
67) The feasibility of targeting a particular market segment can be negatively impacted by
various factors which does not include:
A) regulatory hurdles.
B) cultural barriers.
C) lack of distribution system.
D) time required to establish business.
E) surplus demand.
Answer: E
Page Ref: 219
68) Companies like Coca-Cola had the first-mover advantage since they were the first company
to enter a global market. However, there are also first-mover disadvantages which include:
A) best chance of becoming world leader.
B) advantage in adapting to the local culture.
C) lead in advertising and promotion exposure.
D) gain business experience.
E) substantial investments in marketing.
Answer: E
Page Ref: 221
69) Managers must decide how well a company's product fits the country market by asking the
following questions except:
A) Will adaptation be required?
B) Will import restriction drive up the product price?
C) Is it advisable to source locally?
D) Will strong home currency have an adverse impact on product price?
E) Will it be possible to neglect home country regulations?
Answer: A
Page Ref: 221
70) The basis for global marketing expert David Arnold's framework for screening intercountry
comparisons include:
A) demographic data.
B) "top-down" segmentation analysis.
C) "bottom-up" segmentation analysis.
D) income level.
E) population data.
Answer: C
Page Ref: 220
71) The Swatch Group markets watches in all price ranges, from the Swatch brand at the low end
to luxury brands such as Longines, Blancpain, and Breguet. Which target market strategy does
this illustrate?
A) standardized global marketing
B) concentrated global marketing
C) differentiated global marketing
D) psychographic global marketing
Answer: C
Page Ref: 223-224
72) Positioning refers to the act of:

A) determining on what points on the globe to target.
B) ensuring a choice retail shelf location.
C) differentiating a brand in customer's mind.
D) formulating a private label strategy.
E) formulating a companion product.
Answer: C
Page Ref: 224
73) For years, ads for Volvo automobiles stressed safety features and protection in the event of a
crash. Thus, Volvo automobiles developed a reputation based on which positioning strategy?
A) use/user
B) attribute/benefit
C) competition
D) high touch
E) quality/price
Answer: B
Page Ref: 224-225
74) Ads by BMW advertise it as the "ultimate driving machine" which is described as
positioning based on:
A) high touch.
B) use/user.
C) attribute/benefit.
D) competition.
E) quality/price.
Answer: C
Page Ref: 224-225
75) Some of Body Shop's recent advertising has emphasized the difference between the
company's principles and those of "mainstream" cosmetics companies on such issues as animal
testing. As described here, Body Shop's ads illustrate positioning by ________.
A) competition
B) niche
C) quality/price
D) attribute/benefit
E) culture
Answer: A
Page Ref: 225-226
76) Which of the following is generally true about the marketing of high-touch products such as
fine china and crystal?
A) It relies equally on specialized information and image.
B) It relies less on image and more on specialized information.
C) It relies less on specialized information and more on image.
D) Neither image nor specialized information is relevant to the marketing of high-touch
products.
E) It relies partially on specialized information and partially on image.
Answer: C
Page Ref: 227-228
77) Consumers shopping for high-touch products such as fine perfume are generally energized
by ________ motives.
A) emotional
B) rational
C) both emotional and rational
D) neither emotional nor rational
E) high tech
Answer: A
Page Ref: 227-228
78) When a marketer understands that a product satisfies a buyer's rational criteria while also
evoking an emotional response, the marketer should:
A) only target consumers in high-income countries.
B) utilize a multitiered targeting strategy rather than a concentrated strategy.
C) commission psychographic segmentation studies to augment demographic data.
D) create advertising that reflects a bipolar, high-tech and high-touch approach.
E) follow normal targeting strategy.
Answer: C
Page Ref: 227-228
79) Which of the following is true of advertising for the Heineken and Foster's brands in the
United States?
A) Both Heineken and Foster's utilize the GCCP strategy.
B) Both Heineken and Foster's utilize the FCCP strategy.
C) Heineken utilizes the GCCP strategy; Foster's utilizes the FCCP strategy.
D) Heineken utilizes the FCCP strategy; Foster's utilizes the GCCP strategy.
E) Heineken utilizes the LCCP strategy; Foster's utilizes the GCCP strategy.
Answer: C
Page Ref: 226-228
80) Thinking about U.S. advertising for Foster's and Budweiser beer, one can observe that:
A) Foster's uses FCCP, Budweiser uses LCCP.
B) Foster's uses LCCP, Budweiser uses FCCP.
C) both Foster's and Budweiser use LCCP.
D) both Foster's and Budweiser use FCCP.
E) both Foster's and Budweiser use GCCP.
Answer: A
Page Ref: 226-228
81) What is psychographic segmentation and how do marketers use it in targeting different world
markets?
Answer: Psychographic segmentation involves grouping people in terms of their attitudes,
values, and lifestyles. Respondents are carefully selected by asking questions to assess their
attitudes, values, and lifestyles. There are different companies that provide services and help in
assessing these psychographic variables. Different groups are given names based on the
attributes which describe their attitudes, values, and lifestyles. Automakers rely on this
segmentation since the purchase behavior of a considerable size of consumers is dependent on
psychographic values. A psychographic study showed that Porsche buyers could be divided into
several distinct categories. One of the categories, "Top Gun" was found to buy Porsches and
expect to be noticed. Proud Patrons and Fantasists, on the other hand, found such conspicuous
consumption as irrelevant. Thus, automakers can design autos based on the preferences of
populations grouped under each category. It is preferable to market to a mind-set rather than a
particular age group. For finding such a group, psychographic studies are important. These
analyses are expensive and require careful interpretations. SRI International, one of the market
research organizations, has developed VALS/VALS 2 analyses of consumers based on
psychographic values. A research team in Europe identified four lifestyle groups: Successful
Idealists, Affluent Materialists, Comfortable Belongers and Disaffected Survivors. The first two
groups represent the elite, while the latter two represented the mainstream European consumers.
It should be noted that the segmentation and targeting approach used by a company can vary
from country to country. Methods that can truly assess a population segment of a country should
be employed for psychographic segmentation.
Page Ref: 210-213
AACSB: Use of IT
82) Due to globalization "it is a small world after all." Also, vast scale migration of populations
due to various reasons, including opportunities, has created large segments of ethnic population.
Considering these facts, highlight the ethnic segmentation and its importance.
Answer: Due to several reasons, in many countries the population consists of ethnic groups. For
example, in the United States there are three major ethnic segments — African/Black Americans;
Asian Americans; and Hispanic Americans. In other countries there are such different
combinations of ethnic population. Each segment shows great diversity and can be further
subdivided. Even those coming from one country may have differences in language, culture,
religion, and other attitudinal aspects. Their purchasing behavior is different within groups and
sub-groups. From a marketing standpoint these groups offer great opportunity. Companies in a
variety of industry sectors, primarily food and beverages; household goods, and financing
services can benefit by targeting these groups. For example, Japanese automakers have been
successful in targeting ethnic populations in different parts of the world.
Page Ref: 215-216
83) What are some of the pitfalls in assessing market potential and choosing target markets or
segments?
Answer: After segmenting the market the next important step is to assess the attractiveness of
the identified segments. This is an important part when assessing emerging country markets as
potential targets. Several potential pitfalls in assessment should be taken into account. In general,
there is a tendency to overstate the size and short-term attractiveness of individual country
markets. This can happen if estimates are based primarily on demographic data such as income
and population. For example, the population figures in India and China can create a bloated
image. Short-term profitability may be hard, due to prevailing conditions in these emerging
markets. Persistence and long-term outlook often pays off in new markets. A second pitfall may
originate from pressures placed on marketers by shareholders or competitors. The possibility of
missing out on entering a condition is in itself a stress-causing factor. Marketers may find
themselves overwhelmed at times by such pressures and the urge to react quickly. Another factor
may be the decisions made based on convenience or opinion of persons/advisors not residing in
the home country. The right representatives or distributors should be selected in order to be
successful.
Page Ref: 216-217
84) In India, 60 million middle class men and women earn more than $ 275 per month. The
segment is growing rapidly and is expected to increase to 73 million by 2010. Young consumers
are buying international brands and the economy is strong. India is also the world's fastest
growing cell phone market. The industry is expanding at a rate of 50 percent annually, with 5
million new subscribers added every month. Still, barriers originating in the political and
regulatory environments have shackled private-sector growth. Considering all of the above-
mentioned aspects, is the market segment large enough for a company to utilize the opportunity
and make a profit? Does it have enough potential for future growth to make it attractive for any
company to pursue a long-term strategy?
Answer: All of the influencing factors should be taken into consideration before targeting any
country. It is possible that the segment in a single-country market might be small, even a narrow
segment can be served profitably if the segment exists in several countries. One of the major
factors that should be considered is the purchasing power. In India the purchasing power is seen
by the purchasing of international branded items, although there is a big disparity among income
levels. The segment of the population is considerable to portray profit by selling goods and
services. Percentages, therefore, can be deceiving in such situations. Also, by virtue of its size
and purchasing power, the global segment can be extremely attractive to consumer goods
companies. The huge country market prevalent in India or China, combined with the segment
size and growth potential, has to be taken into account. There may also be differences between
populations residing in urban areas compared to the ones in rural areas. Although the majority of
population resides in rural areas in India, the numbers of urban consumers are large enough and
will be able to afford different consumer goods. The fact that there is a huge market for cell
phones is indicative of the potential business opportunities. Consideration should be given to all
these factors before entering into India or any other similar country.
Page Ref: 218-219
85) Assume that the market segment is judged to be large enough, and the strong competitors are
either absent or deemed to be vulnerable, then is it safe to enter the country? Justify your answer
by giving reasons.
Answer: If the market segment is judged to be large enough and there is no strong existing or
potential competitors, one should not assume that it is safe to enter the country. There are several
other factors that can negatively impact a business. For example, significant regulatory hurdles
may be present that limit market access. The company may also encounter cultural barriers or
religious restrictions. Other marketing-specific issues can arise. For example, in India, three to
five years are required to build an effective distribution system for many consumer products.
Also, the approvals may take a considerably long period of time. Thus, apparent potential does
not guarantee success. Managers have a difficult decision in such conditions. If there are certain
prevailing conditions that require adaptation of products, then that should be taken into account.
Also, it is important to consider the question of whether targeting a particular segment is
compatible with the company's overall goals, its brand image, or established sources of
competitive advantage.
Page Ref: 219
86) Discuss the basics of a framework for selecting target markets highlighting the salient
features of David Arnold's framework.
Answer: A framework for selecting target markets should take into account the market size of
the targeted market. The market size should then be multiplied by the competitive advantage in
that country. Multiplying the market size and competitive advantage index yields a market
potential. The next step in the analysis requires an assessment of the various market access
considerations. Finally, multiplying the market potential by the terms of access index gives the
final market potential. This framework takes into account the competitive advantage, market
potential and the terms of access. This framework should prove useful as a preliminary screening
tool for intercountry comparisons. However, it does not go far enough in terms of assessing
actual market potential. Global marketing expert David Arnold has developed a framework that
goes beyond demographic data and considers other marketing-oriented assessments of market
size and growth potential. Thus, instead of a "top-down" segmentation analysis beginning with,
for example, income or population data from a particular country, Arnold's framework is based
on a "bottom-up" analysis that begins at the product-market level. The product-market refers to a
market defined by a product category. For example, in the automotive industry that would refer
to luxury car market. Arnold's framework incorporates two core concepts: marketing model
drivers and enabling conditions. Marketing model drivers are key elements or factors required
for a business to take root and grow in a particular country market environment. The drivers may
differ depending on whether a company serves consumer or industrial markets. Enabling
conditions are structural market characteristics whose presence or absence can determine where
the marketing model can succeed. For example, in India, refrigeration is not widely available in
shops and market food stalls. This creates challenges for storing dairy products and confections.
So the enabling conditions are very important. After marketing-model drivers and enabling
conditions have been identified the management should weigh the estimated costs associated
with entering and serving the market with potential short- and long-term revenue streams. One
way to determine the marketing model drivers and enabling conditions is to create a product-
market profile.
Page Ref: 220-221
87) After evaluating the identified segments, decisions have to be made whether to pursue a
particular opportunity or not. Assuming the decision is made to proceed, an appropriate targeting
strategy must be developed. Explain the basic categories of target marketing strategies and how
they can be implemented.
Answer: The three basic categories of target marketing strategies are: standardized marketing,
concentrated marketing, and differentiated marketing. Standardized global marketing is
analogous to mass marketing in a single country. It involves creating the same marketing mix for
a broad mass market of potential buyers. It is also known as undifferentiated target marketing
since it is based on the premise that a mass market exists around the world. Product adaptation is
minimized, and a strategy of intensive distribution ensures that the product is available in the
maximum number of retail outlets. The appeal of standardized global marketing is due to the
lower production costs. The concentrated target marketing involves devising a marketing mix to
reach a niche. A niche is single segment of the global market. For example, in cosmetics, Chanel
has used to target the upscale, prestige segment of the market. Concentrated targeting is also the
strategy employed by the hidden champions of global marketing. Companies unknown to most
people that have succeeded by serving a niche market that exists in many countries. These
companies define their markets narrowly and strive for global depth rather than national breadth.
The narrowing of market definition is the key principle in this strategy. The third category,
differentiated global marketing represents a more ambitious approach than concentrated target
marketing. It is also known as multisegment targeting. It entails targeting two or more distinct
market segments with multiple marketing mix offerings. This strategy allows a company to
achieve wider market coverage. For example, in the sport utility vehicle segment Rover has a
Range Rover at the high end of the market. A scaled down version, the Land Rover Discovery is
offered which competes directly with the Jeep Grand Cherokee. The Freelander, its newest
vehicle, has been on sale in Europe for several years. Thus, there is a multi-pronged approach to
marketing.
Page Ref: 222-223
88) Harley-Davidson, a very popular adventure seeking company is very well known in the
United States. How did they develop "think global, act local" strategies to target adventure
seekers in global markets?
Answer: Harley-Davidson (H-D) company has grown impressively during its first 100 years of
operation. As the twenty-first century began, they started moving overseas with having
dealerships in about 48 countries. There was a six-month waiting period in many countries to get
their motorcycles. The company was very slow to move in overseas markets as well as slow in
reacting to a growing threat from Japanese manufacturers. Their marketing efforts were not very
aggressive and even their print advertising used word-for-word translations of their U.S. ads. By
late 1980's they realized that they wer losing their competitive edge and they needed to think
global but act local. In Japan, H-D's rugged image and high quality helped make it the best-
selling imported motorcycle. Still their tag line from the U.S., "One steady constant in an
increasingly screwed-up world" did not go very well with Japanese consumers since they really
did not connect with the meaning of the slogan. Finally, the president of the H-D's Japanese
division convinced the U.S. manufacturer to use advertising campaigns using Japanese
characters and verbiage. A rickshaw and a geisha represented the background depicting the
Japanese fashion and customized bikes. In Europe, H-D discovered that an "evening out" means
something different than it does in America. The company sponsored a rally in France, where
beer and live rock music were available until midnight. The rally went until 3 or 4 am. Again, it
shows the cultural differences that needed to be considered by H-D. The company had to make
design changes since German bikers often traveled at a speed exceeding 100 miles per hour.
Also, the German marketing effort included focusing on accessories to increase rider protection.
They realized the core picture and demand of the European customers and developed their
strategies accordingly. The demand increased considerably and those who were driving
motorbikes were actually high-income earners. The company intentionally keeps low production
limits to emphasize high quality.
Page Ref: 213-215
89) Colgate Total toothpaste is positioned as the brand that addresses all aspects of oral health.
Such positioning is very important from the business point of view. How does positioning help in
deciding on a marketing strategy? What are the differences between using "attribute or benefit"
and "quality and price" as positioning strategy?
Answer: Positioning refers to the act of differentiating a brand in customers' minds in relation to
competitors in terms of attributes and benefits that the brand does and does not offer. It is the
process of developing strategies for marketing purposes. It is frequently used in conjunction with
the segmentation variables and targeting strategies. "Attribute or benefit" strategies are used to
expose a particular product attribute, benefit or other special feature. Aspects such as economy,
reliability, multiple uses, durability, and simplicity are very commonly used to describe the
attributes of a product or service. For example, Visa's advertising theme "It's Everywhere You
Want to Be" exposes its benefit of being useful at any place in the world. Thus, these types of
slogans, themes, or jingles very cleverly outline the benefits or attributes of a product. A similar
strategy that is used is related to "Quality and Price." This strategy can be considered in light of a
continuum from high fashion/quality and high price to good value. Swatch watches advertise
their quality, Swiss origin, as well as affordable price. This way price is always tied to the quality
and durability of the product or service.
Page Ref: 224-225
90) What are the major differences between Global, Foreign, and Local consumer culture
positioning? Why are these differences significant? Give examples of how companies are trying
to lure customers using these positioning strategies.
Answer: Global consumer culture positioning (GCCP) is defined as a strategy that identifies the
brand as a symbol of a particular global culture or segment. It has proven to be an effective
strategy for communicating with global teens, cosmopolitan elites, and globe- trotting laptop
warriors who consider themselves members of a transnational commerce culture. For example,
Sony's slogan "My first Sony" is positioned as the electronics brand for youngsters around the
globe with discerning parents. Benetton uses the slogan "United Colors of Benetton" to position
itself as a brand concerned with the unity of humankind. Categories of products that lend
themselves to this positioning are both associated with high levels of customer involvement and
by a shared "language" among users. High tech products such as iPod; iPhone; MP3 players;
video cameras; and all such technology-prone items fall into these categories.
Foreign consumer culture positioning (FCCP) associates the brand's users, use occasions, or
production origins with a foreign country or culture. Foster's Brewing Group's U.S. advertising
proudly uses the brand's nation origin in all of its print ads and other promotions as being
Australian. Local consumer culture positioning (LCCP) strategy associates the brand with local
cultural meanings, reflects the local culture's norms, portrays the brand as consumed by local
people in the national culture, or depicts the product as locally produced for local consumers.
Budweiser's U.S. advertising particularly focuses on local aspects.
Page Ref: 226-230
Chapter 8 Importing, Exporting, and Sourcing
1) The success of Chinese and Vietnamese exporters and the EU's subsequent imposition of
tariffs, serves as a reminder of the impact exporting and importing can have on national and
region economies.
Answer: TRUE
2) The terms 'export selling' and 'export marketing' are interchangeable.

Answer: FALSE
3) 'Export selling' involves tailoring various elements of the marketing mix to global market
requirements.
Answer: FALSE
4) Export marketing requires an understanding of the target market environment.

Answer: TRUE
5) After the research effort has zeroed in on potential markets, there is no substitute for a
personal visit to size up the market firsthand and begin the development of an actual export
marketing program.
Answer: TRUE
6) One way to visit a potential market is through a trade show or a state- or federally-sponsored
trade mission.
Answer: TRUE
7) Locating market is one of the potential export problems.

Answer: TRUE
8) It was found by research that even the most experienced exporters express lack of confidence
in their knowledge about shipping arrangements, payment procedures, and regulations.
Answer: TRUE
1
9) Officially, the EU tariffs on Chinese and Vietnamese shoe imports are known as anti-dumping
duties.
Answer: TRUE
10) The four tigers — Singapore, South Korea, Taiwan and Hong Kong — learned from the
Japanese experience and built strong export-based economies of their own.
Answer: TRUE
11) Tax incentives treat earnings from export activities preferentially either by applying a lower
rate to earnings from these activities or by refunding taxes already paid on income associated
with exporting.
Answer: TRUE
12) The WTO recently ruled that America's foreign sales corporation (FSC) law was acceptable
to signatory countries.
Answer: FALSE
13) The Common Agricultural Policy (CAP) determines the level of subsidies granted to farmers
in Latin America.
Answer: FALSE
14) In an effort to facilitate exports, countries are designating certain areas as 'free trade zones'
(FTZ) or 'special economic zones' (SEZ).
Answer: TRUE
15) Tariffs can be thought of as the "three R's" of global business: rules, rigor, and regulations of
individual countries.
Answer: FALSE
16) The Harmonized Tariff System (HTS) is currently the dominant system for determining
tariffs.
Answer: TRUE
2
17) Under the HTS, only U.S. exports valued at more than $2,500 are counted in export
statistics.
Answer: TRUE
18) The Harmonized Tariff System (HTS) has eliminated virtually all problems associated with
assigning tariff classifications to new products.
Answer: FALSE
19) According to the recent import regulations in the United States, action figures that represent
non-human creatures such as monsters or robots are categorized as toys and qualified for lower
duties than human figures that are classified as dolls.
Answer: FALSE
20) A nontariff barrier (NTB) is a hidden trade barrier which is a deterrent or obstacle to the sale
of products in a foreign market.
Answer: TRUE
21) The Buy American Act of 1933 which stipulates that U.S. federal agencies must buy articles
produced in the United States unless domestically produced goods are not available is an
example of discriminatory procurement policies.
Answer: TRUE
22) The Fly American Act is an example of a nontariff barrier.

Answer: TRUE
23) The NTR (normal trade relations) status is really a misnomer since the United States has
given that status to some 180 countries around the world.
Answer: TRUE
24) A preferential tariff is a reduced tariff rate applied to imports from only GATT members.
Answer: FALSE
3
25) When Honda's U.S. manufacturing subsidiaries purchase parts from Japan, customs
authorities in the United States have the right to scrutinize the transfer price to make sure it is a
fair reflection of market value.
Answer: TRUE
26) An ad valorem duty is expressed as a percentage of the value of goods.

Answer: TRUE
27) CVDs are duties imposed on imported videodiscs.

Answer: FALSE
28) Foreign purchasing agents are also referred to as jobbers.

Answer: FALSE
29) "Piggyback exporter," "cooperative exporter," and "export vendor" are all terms used to
describe an export broker.
Answer: FALSE
30) The cooperative exporters are sometimes referred to as 'mother hen.'

Answer: TRUE
31) In an export/import transaction requiring a letter of credit (L/C), the exporter's (seller's) bank
can be known as the "advising" bank, the "confirming" bank, or both.
Answer: TRUE
32) When a letter of credit is used in an import/export transaction, the payment obligation lies
with the importer's bank rather than the importer itself.
Answer: TRUE
4
33) Goods that are sold on open account are paid for before delivery.
Answer: FALSE
34) The Customs Trade Partnership Against Terrorism (C-TPAT) recognizes that U.S. Customs
and Border Protection (CBP) is responsible for screening import cargo transactions.
Answer: TRUE
35) Duty drawback refers to refunds of duties paid on imports that are processed or incorporated
into other goods and then reexported.
Answer: TRUE
36) Outsourcing means shifting undesirable jobs or work assignments to another company to cut
costs. When the outsourced work moves to another country, the terms 'global outsourcing' or
'offshoring' are used.
Answer: FALSE
37) One of the keys to the success of The Swatch Group's Swatch watch brand has been
manufacturing in low wage Asian countries.
Answer: FALSE
38) The application of advanced computer controls and other new manufacturing technologies
has reduced the proportion of labor relative to capital for many businesses.
Answer: TRUE
AACSB: Use of IT
39) Dell Computer recently rerouted some of its call center jobs back to the United States after
complaints from key business customers that Indian tech support workers were offering scripted
responses and having difficulty answering complex problems.
Answer: TRUE
40) In deciding where to source a product or locate a manufacturing activity, a manger must take
into account foreign exchange rate trends in various parts of the world.
Answer: TRUE
5
41) Export marketing does not require:
A) an understanding of the target market environment.
B) the use of marketing research.
C) identification of market potential.
D) a selling approach.
E) any decisions concerning product design.
Answer: D
42) Which of the following is not true about trade shows?

A) By attending, company representatives can find buyers outside the home country.
B) They can provide important competitor information.
C) The federal government has exclusive rights to sponsor U.S. trade shows.
D) Company representatives can establish contacts with agents and distributors..
E) find distributors and agents
Answer: C
43) According to percent market share of top ten apparel exporting countries to the United
States, which country ranked as number one in 2008?
A) Taiwan
B) China
C) Mexico
D) India
E) Honduras
Answer: B
44) The Ministry of International Trade and Industry (MITI) has helped devise export strategies
for companies in:
A) Singapore.
B) South Korea.
C) Taiwan.
D) Hong Kong.
E) Japan.
Answer: E
6
45) Which of the following was a major U.S. tax incentive for exporters that the WTO recently
ruled was an illegal subsidy?
A) NTR
B) CVD
C) FSC
D) NTB
E) HTS
Answer: C
46) The export and import process can entail red tape and bureaucratic delays. In an effort to
facilitate exports, countries are designating certain areas as:
A) import control zone.
B) special tariff zone.
C) global business zone.
D) free trade zone.
E) duty free zone.
Answer: D
47) Which of the following is described as the three R's of global business: rules, rate schedules,
and regulations?
A) quotas
B) tariffs
C) NTBs
D) NTR
E) Duties
Answer: B
48) Which of the following refers to a system of farm subsidies in Europe?

A) CVD
B) FSC
C) CAP
D) HTS
E) NTR
Answer: C
7
49) Which of the following establishes classification numbers that must be used by importers and
exporters?
A) NTR
B) CVD
C) FSC
D) NTB
E) HTS
Answer: E
50) In the mid-1990s, officials at South Korea's Shinsegi Telecomm were reportedly under
pressure to restrict purchases of foreign-made equipment. Such pressure from the Ministry of
Information and Communications would be consistent with plans to foster development of a
domestic high-tech telecommunications industry. If allegations about such pressure were true,
they would be evidence of ________ by the South Korean government.
A) discriminatory procurement policies
B) the use of piggyback marketing
C) countervailing duties
D) countertrade deals
E) non-tariff barrier
Answer: A
51) In an effort to attract assembly operations, Brazil allows certain product components to be
imported at reduced tariff rates. This is an example of:
A) offsets.
B) preferential tariffs.
C) the effect of the Customs Valuation Code.
D) an EMC.
E) discriminatory procurement.
Answer: B
52) A duty that represents a certain percentage of the value of a particular product is a(n):
A) specific duty.
B) ad valorem duty.
C) BTN duty.
D) "schedule B" duty.
E) antidumping duties.
Answer: B
8
53) The "specific" duty is expressed as follows except:
A) US$0.50 per pound.
B) US$1.00 per pair.
C) US$0.25 per square yard.
D) US$0.50per cubic feet.
Answer: E
54) Which of the following types of duties would be imposed on a company whose home
country government provided export subsidies?
A) ad valorem duty
B) countervailing duty
C) antidumping duty
D) specific duty
E) customs duty
Answer: B
55) Sweden applies a system to certain categories of imported agricultural products which is
referred to as:
A) temporary surcharges.
B) ad valorem duty.
C) variable import levies.
D) specific duty.
E) countervailing duty.
Answer: C
56) Which of the following is sometimes referred to as a 'buyer for export' or an 'export
commission house' and operates on behalf of a buyer from a foreign country?
A) foreign purchasing agent
B) export broker
C) export merchant
D) export management company
E) freight forwarder
Answer: A
9
57) Which of the following receives a fee for bringing together an exporter and a buyer in
another country?
B) export broker
C) export merchant
Answer: B
58) Which of the following, sometimes known as a 'jobber,' buys staples or unbranded products
that are in demand in various parts of the world?
B) export broker
C) export merchant
Answer: D
59) Which of the following acts as the export arm of one or more U.S. manufacturers and helps
establish an overseas market for a company's products?
B) export broker
C) export merchant
Answer: D
60) Which of the following specializes in traffic operations, customs clearance, and tariff rates
and schedules?
B) export broker
C) export merchant
Answer: E
10
61) The possible arrangements of the responsibilities for handling exports include all of the
following except:
A) as a part-time activity performed by domestic employees.
B) through an export partner affiliated with the domestic marketing structure.
C) through an export department within an international division.
D) through an export department that is independent of the domestic marketing structure.
E) through an export department of an embassy in foreign country.
Answer: E
62) Direct representation, as opposed to representation by independent intermediaries for

exporting in the market country, has several advantages which does not include:
A) facilitates control and communications.
B) allows decisions concerning program development and resource allocation.
C) benefits when a product is not yet established in a market.
D) ensures marketer's interest and special efforts.
E) helps selling products directly to the consumer in the market country.
Answer: E
63) Which of the following offers a company the best assurance of being paid for exported
goods?
A) a letter of credit
B) a "piggyback" arrangement
C) a swap
D) an in-house export organization
E) a certified check
Answer: A
64) An irrevocable letter of credit transfers the payment obligation for an export deal from the
buyer to the buyer's _______:
A) in-house export organization
B) bank
C) freight forwarder
D) credit union
E) checking account
Answer: B
11
65) The international standard by which letters of credit (L/Cs) are interpreted is known as the
________ 500.
A) UCP
B) NTR
C) FSC
D) NTB
E) HTS
Answer: A
66) Which set of documents generally represents the minimum documentation required to clear a
shipment through customs?
A) packing list, commercial invoice
B) bill of exchange, commercial invoice
C) certificate of origin, bill of exchange
D) packing list, insurance certificate
E) letter of credit, commercial invoice
Answer: B
67) Which of the following correctly states the role of banks in import/export transactions
involving a letter of credit (L/C)?
A) The importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing
bank.
B) The exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing
bank.
C) The exporter's bank is the advising, confirming, and issuing bank.
D) The importer's bank is the advising, confirming, and issuing bank.
Answer: B
68) In which of the following forms of export financing does a bank assume a financial
obligation?
A) with an L/C but not a documentary collection.
B) with a documentary collection but not an L/C.
C) neither an L/C nor a documentary collection requires a bank to assume financial obligation.
D) with either an L/C or a collection letter
E) with both an L/C and a documentary collection.
Answer: B
12
69) Which of the following correctly states the role of banks in import/export transactions
involving a letter of credit (L/C)?
A) The importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing
bank.
B) The exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing
bank.
C) The exporter's bank is the advising, confirming, and issuing bank.
D) The importer's bank is the advising, confirming, and issuing bank.
E) The exporter's bank is neither advising nor confirming bank.
Answer: B
70) Which of the following documents represents title to goods in an export transaction?
A) bill of lading
B) invoice
C) packing list
D) certificate of origin
E) insurance certificates
Answer: A
71) Which of the following financing methods would be used by an exporter that enjoys good
relations with a buyer in a well-established market?
A) letter of credit
B) cash in advance
C) sales on open account
D) barter
E) arrival draft
Answer: C
72) Which of the following arranges export financing payment methods in descending order
starting with the most secure/reliable and ending with the least secure/reliable:
A) sales on open account→cash in advance→documentary credit (L/C) →documentary
collection (draft)
B) documentary credit (L/C)→sales on open account→documentary collection (draft)→cash in
advance
C) documentary collection (draft)→documentary credit (L/C)→cash in advance→sales on open
account
D) cash in advance→documentary credit (L/C)→documentary collection (draft)→sales on open
account
Answer: D
13
73) Which of the following methods of payment is also known as a "draft"?
A) letter of credit
B) documentary collection
C) cash in advance
D) sales on open account
E) L/C
Answer: B
74) Which of the following completely eliminates the risk of nonpayment by an importer or a
bank in an international transaction?
A) documentary credit (letter of credit)
C) cash in advance
E) draft
Answer: C
75) Which of the following methods of financing would be used if the exporting and importing
parties had a strong, long-standing relationship?
A) documentary credit (letter of credit)
C) cash in advance
E) bank draft
Answer: D
76) In the post-September 11 business environment in the United States, imports have come
under increased security. One of the initiatives taken in the interest of national security is:
A) NAFTA.
B) C-TPAT.
C) WTO.
D) NTB.
E) FSC.
Answer: B
14
77) The organizational decision to purchase production inputs, components, or finished goods
from domestic or foreign producers is known as the ________ decision:
A) import/export
B) NTB
C) preferential
D) sourcing
E) security
Answer: D
78) The chief executives of Swiss Swatch Group and Japanese Canon would like to:
A) outsource all of the manufacturing units overseas in order to save money.
B) outsource a majority of the manufacturing functions overseas.
C) retain a majority, if not all, of the manufacturing in home country.
D) establish "call centers" in developing countries in order to save labor costs.
E) outsource a full line of new products only.
Answer: C
79) The furniture industry has become one of the fastest-growing sectors of China's economy.
Furniture imports are flooding into the United States from China. This can be attributed to:
A) the quality of furniture is better than those made in Europe.
B) American tastes in décor have changed.
C) China's low labor rates translate into reasonable prices for consumers.
D) China can survive tough competition.
E) replacement parts are readily available from China.
Answer: C
80) If the dollar, the yen, or the euro becomes seriously overvalued, a company with a
production capacity in other locations can achieve competitive advantage by:
A) buying different currencies before major fluctuations take place.
B) conducting transactions in different currencies of the world.
C) shifting production among different sites.
D) cutting down production and waiting until the currency rate is reasonable.
E) reducing production and labor force simultaneously.
Answer: C
15
81) The success of Chinese and Vietnamese exporters and the EU's subsequent imposition of
tariffs serve as a reminder of the impact exporting and importing can have on national and
regional economies. Discuss the importance of export marketing and show how it differs from
export selling. What are the requirements that have to be met in order for a company to be
successful in export marketing?
Answer: Export marketing is the integrated marketing of goods and services that are destined for
customers in international markets. Export selling does not involve tailoring the product, the
price, or the promotional material to suit the requirements of global markets. The only marketing
mix that gets impacted is location or place. As companies mature in the global marketplace or as
new competitors enter the market, export marketing becomes important. Export marketing
targets the customer in the context of the total market environment. The export marketer does not
simply take the domestic product "as is" and sells it to the international customers. The product
offered in the home market is just the starting point. Based on the preferences of the international
target markets, many modifications and adaptations are necessary. Also, the export marketer sets
prices to fit the market and does not merely sell at the home-country price. There are several
charges in export such as packaging, transportation, and financing that have to be taken into
account, which in turn will have an impact on the prices charged in other markets. The price
charged in one market may be completely different than the one that is charged in another
country, for the same product. The export marketing requires: (a) a thorough understanding of
the target market environment; (b) the use of marketing research; (c) the identification of market
potential; and (c) decision concerning product design, pricing, distribution and channels,
advertising, and communication.
16
82) Governments in Japan, Singapore, South Korea and China have supported exports for years
which have tremendously helped their economies. Since exporting is a very important
component of a countries' business strategy many government programs are offered that support
exports. Describe ways by which governments can support exports.
Answer: Countries benefit a lot based on their facilitating of export and import business. For
example, China has attracted increased foreign investment from DaimlerChrysler, Hewlett-
Packard, GM, and other similar corporations by accommodating them to set up production
facilities that will support local sales, as well as exports to world markets. Governments
commonly use four activities to support and encourage firms that engage in exporting. These are
tax incentives, subsidies, export assistance, and free trade zones. Tax incentives treat earnings
from export activities preferentially either by applying a lower rate to earnings or by refunding
taxes already paid on income associated with exporting. Also, tax benefits are offered by
governments which may include tax exemption or tax deferral on export income, accelerated
depreciation of export-related assets, and generous tax treatment of overseas market development
activities. Governments also support export performance by providing outright subsidies.
Subsidies are direct or indirect financial contributions or incentives that benefit producers.
Governments also provide assistance to exporters. Companies can avail themselves of a great
deal of governmental information concerning the location of markets and credit risks. Assistance
may also be oriented toward export promotion. Various agencies at different levels hold trade
fairs and trade missions designed to promote sales to foreign customers. In an effort to facilitate
exports, countries are designating certain areas as "free trade zones" and particular "special
economic zones." These zones are geographic entities that offer manufacturers simplified
customs procedures, operational flexibility, and a general environment of relaxed regulations.
Thus, these ways are very helpful and have helped several companies.
17
83) Governmental actions at times are designed to discourage imports and block market access.
Why do governments want to curtail imports? Explain some of the barriers that are placed to
discourage imports.
Answer: In order to promote domestic industries and agriculture, and restrict the inflow of
materials from un-favored nations, some governments impose certain barriers. The tariffs which
can be regarded as the three R's of global business: rules, rate schedules, and regulations are
imposed by countries. Duties can be imposed on goods and services, thereby making it difficult
for importers to import as well as for consumers to buy. A Harmonized Tariff System (HTS) bas
been adopted by the majority of trading nations, under which importers and exporters have to
determine the correct classification number for a given product or service that will cross borders.
This classification helps in the identifying of the product and applicable tariff. A nontariff (NTB)
can also be imposed which is any measure other than a tariff that is a deterrent or obstacle to the
sale of products in a foreign market. This includes quotas, discriminatory procurement policies,
restrictive customs procedures, arbitrary monetary policies, and restrictive regulations. A quota is
a government-imposed limit or restriction on the number of units or the total value of a particular
product or product category that can be imported. In addition, discriminatory procurement
policies can take the form of government rules and administrative regulations specifying that
local vendors or suppliers receive priority consideration. Customs procedures are also considered
restrictive if they are administered in a way that makes compliance difficult and expensive.
Discriminatory exchange rate policies are imposed to distort trade in much the same way as
selective import duties and export subsidies. Finally, restrictive administrative and technical
regulations can create barriers to trade. These may take the form of antidumping regulations,
product size regulations, and safety and health regulations. Some of these regulations are
intended to keep out foreign goods; others are directed toward legitimate domestic objectives.
84) Why does the tariff system vary from country to country? Explain, giving examples of tariffs
imposed by the United States with particular emphasis on preferential tariffs. What are the
conditions under which GATT allows the use of preferential tariffs?
Answer: Tariff systems provide either a single rate of duty for each item applicable to all
countries or two or more rates, applicable to different countries or groups of countries. The
single-column tariff is the simplest type of tariff. It includes a schedule of duties in which the
rate applies to imports from all countries on the same basis. Under the two-column tariff the first
column includes "general" duties plus "special" duties indicating reduced rates determined by
tariff negotiations with other countries. Rates agreed upon by "convention" are extended to all
countries that qualify for normal trade relation (NTR). The United States have given NTR status
to some 180 countries around the world. A preferential tariff is a reduced tariff rate applied to
imports from certain countries. GATT prohibits the use of preferential tariffs, with three major
exceptions. First are historical preference arrangements such as the British Commonwealth
preferences and similar arrangements that existed before GATT. Second, preference schemes
that are part of a formal economic integration treaty, such as free trade areas or common markets,
are excluded. Third, industrial countries are permitted to grant preferential market access to
companies based in less-developed countries.
18
85) What are customs duties? How do they work in controlling imported goods? Discuss in light
of the different categories of customs duties.
Answer: There are two main categories of customs duties. Their calculation method is the
differentiating factor. They may be calculated either as a percentage of the value of the goods (ad
valorem duty), as a specific amount per unit (specific duty), or as a combination of both of these
methods. An ad valorem duty is expressed as a percentage of the value of goods. The definition
of customs value varies from country to country. An exporter has to determine the duty
applicable and the method used for calculations. For countries under GATT conventions the
customs value is landed cost, insurance, and freight amount at the port of importation. On the
other hand a specific duty is expressed as a specific amount of currency per unit of weight,
volume, length, or other units of measurement. Specific duties are usually expressed in the
currency of the importing country, but there are exceptions, particularly in countries that have
experienced sustained inflation. Both ad valorem and specific duties are occasionally set out in
the custom tariff for a given product. Compound or mixed duties provide for specific, plus ad
valorem, rates to be levied on the same articles.
86) What are the differences between antidumping and countervailing duties? Under what
conditions are these duties imposed?
Answer: Dumping essentially refers to the sale of merchandise in export markets at unfair
prices. In order to offset the impact of dumping and to penalize guilty companies, most countries
have introduced legislation providing for the imposition of antidumping duties. These duties are
levied if injury is caused to domestic producers. Such duties are normally imposed as special
additional import charges equal to the dumping margin. They are almost invariably applied to
products that are also manufactured or grown in the importing country. In the United States,
antidumping duties are assessed after the commerce department finds a foreign company guilty
of dumping and the International Trade Commission rules if the dumped products injured
American companies. Countervailing duties, on the other hand, are additional duties levied to
offset subsidies granted in the exporting country. In the United States, countervailing duty
legislation and procedures are very similar to those pertaining to dumping. The U.S. Commerce
Department and the International Trade Commission jointly administer both the countervailing
duty and antidumping laws.
19
87) What are some of the entities that an exporter should be familiar with? Describe and explain
the role played by each of these entities, separating those that have responsibilities from
exporters from those that have no responsibilities from the exporters.
Answer: Key export entities include purchasing agents, export brokers, and export merchants.
They have no responsibility from the client. Others are export management companies,
manufacturer's export representatives, export distributors, and freight forwarders. They are
assigned responsibilities by the exporter. Foreign purchasing agents operate on behalf of, and are
compensated by, an overseas customer known as a "principal." They generally seek out the
manufacturer whose price and quality match the specifications of their principal. They often
represent governments, utilities, railroads, and other large users of materials. Purchases may be
completed as domestic transactions with the purchasing agent handling all export packing and
shipping details or the agent may rely on the manufacturers to handle the shipping arrangements.
The export broker receives a fee for bringing together the seller and the overseas buyer. This fee
is usually paid by the seller. The broker takes no title to the goods and assumes no financial
responsibility. A broker usually specializes in a specific commodity, such as grain or cotton, and
is less frequently involved in the export of manufactured goods. Export merchants are sometimes
referred to as "jobbers" and they identify market opportunities in one country or region and make
purchases in other countries to fill these needs. They typically buy unbranded products directly
from the producer or manufacturer. The export merchant then brands the goods and performs all
other marketing activities, including distribution. Export Management Company is the term used
to designate an independent marketing intermediary that acts as the export department for two or
more manufacturers whose product lines do not compete with each other. It may act as an
independent distributor, purchasing and reselling goods at an established price or profit margin.
It may also act as a commission representative taking no title or financial risk. Manufacturer's
export agent act as an export distributor or as an export commission representative. On the other
hand, an export distributor assumes financial risk; whereas the export commission representative
assumes no financial risk. The cooperative exporter is an export organization of a manufacturing
company retained by other independent manufacturers to sell their products to foreign markets.
Freight forwarders are licensed specialists in traffic operations, customs clearance, and shipping
tariffs and schedules. A licensed forwarder receives brokerage fees or rebates from shipping
companies for booked space.
20
88) An executive is undecided whether to rely on in-house or external export specialists/
intermediaries in home country. He is leaning towards direct representation in a market. What
are the benefits of going forth with direct representation?
Answer: It is a common problem faced by many executives planning on exporting goods and
services to foreign countries. There are two specific advantages to direct representation in a
market. It allows decisions concerning program development, resource allocation, or price
changes to be implemented unilaterally. Thus, control and communication aspects are major
benefits. This is very significant when a product is not yet established in a market. It will require
special marketing efforts for which direct efforts will be necessary rather than relying on
intermediaries. Also, the marketer's investment ensures special efforts that are undertaken to
achieve sales. With indirect or independent representation, such efforts and investment may not
be that effective due to lack of incentives. It is also advantageous to get feedback and first-hand
information related to the market. This information can greatly improve export marketing
decisions concerning product, price, communications, and distribution. In essence, all
operational parameters are under control. However, it should be noted that direct representation
will depend on the size of the market. It may not be possible to have it when market size is small.
89) What do you understand by "documentary credit?" How does "documentary collection"
differ from "cash in advance" and "sales on open account?"
Answer: Documentary credits, also referred to as letters of credit (L/C), relates to a document
stating that a bank has substituted its creditworthiness for that of the importer-buyer. Next to
cash in advance, an L/C offers the exporter the best assurance of being paid. Since the payment
obligation under an L/C lies with the buyer's bank and not with the buyer, it is an assured form of
payment. After an exporter and an importer have established a good working relationship, it may
be possible to have a documentary collection or open-account method of payment. In this
method of payment a bill of exchange, also known as a draft, is used. A bill of exchange is a
negotiable instrument that is easily transferable from one party to another. With a documentary
draft, the exporter delivers documents such as the bill of lading, the commercial invoice, a
certificate of origin, and an insurance certificate to a bank in the exporter's country. The shipper
or bank prepares a collection letter (draft) and sends it via courier to a correspondent bank in the
importer-buyer's country. The draft is presented to the importer and payment takes place in
accordance with the terms specified in the draft. Cash in advance refers to whole or partial
payment in advance of shipment. When the exporter/importer is in the beginning stages of
business, cash in advance is usually the method of financial transactions. It is also used when
exchange restrictions are present in a country or an unusually long period of time for financial
transactions is involved. A company that manufactures a unique product for which there are no
substitutes available can also use cash in advance method. On the other hand, goods that are sold
on open account are paid for after delivery. Open-account terms generally prevail in areas where
exchange controls are minimal and exporters have had long-standing relations with good buyers
in nearby or long-established markets.
21
90) Recently "Call Centers" have mushroomed in countries like India, China, and Philippines
due to the outsourcing by many Western countries. What are the benefits and disadvantages to
this method of sourcing? What factors should be taken into account when deciding to outsource?
Answer: Outsourcing refers to shifting production jobs or work assignments to another company
in order to cut costs. When the outsourced work moves to another country it becomes "global
outsourcing" or "offshoring." Due to intense competition in the marketplace, more and more
companies are under pressure to lower costs. One way to do this is to locate manufacturing or
consumer relation activities in China, India, Philippines, or other low-wage countries. In theory,
this situation bestows great flexibility on companies and in reality, the consumer is unaware of
the country where a product is manufactured or service is delivered. However, in the case of call
centers, consumers get in direct contact with the service provider or its representative. Call
centers also perform outbound services such as telemarketing. A variety of tasks such as airline
reservation, completing tax returns, reading medical charts, and drawing up manufacturing
blueprints are done by persons who do the job at a fraction of the cost compared to what it will
cost in the home country. The decision to use outsourcing requires careful analysis since saving
cost may not be the only factor for success of many products or services. This requires careful
consideration of management's vision, costs and conditions, customer needs, logistics, country
infrastructure, political factors, and foreign exchange rates. In formulating a sourcing strategy,
company managers and executives should also recognize the declining importance of direct
manufacturing labor as a percentage of total product cost. For example, Compaq found that the
human labor portion in manufacturing a PC is only about 15 minutes. Thus, the cost involved in
saving human labor is not as high as one would imagine and outsourcing may not be the best
choice for all products or services. Also, the company image and customer loyalty can be
adversely affected if outsourced services are not quality conscious.
22

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Global Marketing

Chapter 4 Social and Cultural Environments

34) Competitive bidding is infrequent in a low-context culture.

42) The cultural environment of a country is best defined by which characteristics?

51) A vice-president of an American software company introduced himself to a group of Korean

52) A characteristic of a low-context culture which is prevalent in United States, Switzerland,

53) In high-context cultures, time is:

56) Which is not considered as a long-term value?

69) To speed adoption of a new product, the marketing team should:

79) Which of the following is true about "coffee culture" in England?

3) Political risk is the possibility of a change in a country's political environment or government

11) Nationalization, expropriation, and confiscation are approved by international law as a

20) To establish ownership of a written, recorded, performed, or filmed creative work, it is

42) Part of the functions offered by OPIC include:

49) Which of the following is not a common-law country?

51) Islamic law is a comprehensive code based in part on:

58) Which of the following would constitute a copyright violation?

61) Which of the following statements is correct?

62) Which of the following is true about protection of computer software?

76) Transparency International compiles an annual report ranking countries in terms of a

Counterfeiting is the unauthorized copying and production of a product. An associative

39) It is advisable to present marketing research findings, including complex quantitative

55) Potential markets can be subdivided into:

80) Market research undertaken by Whirlpool helped tremendously by showing that:

8) The assumption of homogeneity should be the cornerstone of a company's market

41) Market segmentation represents:

49) A global segment is referred to as "global elite" which include:

52) Psychographic segmentation involves grouping people in terms of their:

72) Positioning refers to the act of:

2) The terms 'export selling' and 'export marketing' are interchangeable.

4) Export marketing requires an understanding of the target market environment.

7) Locating market is one of the potential export problems.

22) The Fly American Act is an example of a nontariff barrier.

26) An ad valorem duty is expressed as a percentage of the value of goods.

27) CVDs are duties imposed on imported videodiscs.

28) Foreign purchasing agents are also referred to as jobbers.

30) The cooperative exporters are sometimes referred to as 'mother hen.'

42) Which of the following is not true about trade shows?

48) Which of the following refers to a system of farm subsidies in Europe?

62) Direct representation, as opposed to representation by independent intermediaries for

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