You are on page 1of 97

Chapter 18

Global Marketing and R&D

True / False Questions

1. The set of choices the firm offers to its targeted markets is known as the marketing mix.

True False

2. The marketing mix is comprised of product attributes, distribution strategy, communication strategy,
and pricing strategy.

True False

3. Markets can be segmented in only one way: by socio-cultural factors.

True False

4. The structure of market segments may differ significantly from country to country.

True False

5. Products sell well when their attributes match consumer needs.

True False

6. Firms based in less-developed nations tend to build a lot of extra performance attributes into their
products.

True False

18-1
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
7. If a firm manufactures its product in a particular country, it can sell directly to the consumer, to the
retailer, or to the wholesaler. The same options are not available to a firm that manufactures outside
the country.

True False

8. The four main differences between distribution systems are retail concentration, channel length,
channel exclusivity, and channel quality.

True False

9. In a concentrated retail system, there are many retailers but none of them have a significant share of
the market.

True False

10. An increase in car ownership, the number of two-income households, and the number of households
with a refrigerator have all contributed to the more fragmented retail system found in developed
countries.

True False

11. Concentrated retail systems tend to promote the growth of wholesalers to serve retailers, which
lengthens channels.

True False

12. The more fragmented the retail system, the more expensive it is for a firm to make contact with each
individual retailer.

True False

13. The entry of large discount superstores such as Tesco and Carrefour has shortened channel length in
some countries.

True False

18-2
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
14. Import agents are typically limited to independent trading houses.

True False

15. Source effects occur when the receiver of the message evaluates the message based on the status or
image of the sender.

True False

16. A company that depends on mass media advertising to communicate its marketing message to
potential consumers is using a push strategy.

True False

17. A push strategy makes sense when distribution channels are short.

True False

18. In a competitive market, prices have to be higher than in a market where the firm has a monopoly.

True False

19. Elasticity of demand for a product in a given country is determined by income level and competitive
conditions.

True False

20. Predatory pricing refers to the fact that a firm's pricing strategy in one market may have an impact on
its rivals' pricing strategy in another market.

True False

21. Firms pursuing a multipoint pricing strategy on an international scale will price low worldwide in an
attempt to build global sales volume as rapidly as possible.

True False

18-3
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
22. "Creative destruction" makes it important for companies to stay on the leading edge of technology.

True False

23. The rate of new-product development seems to be lesser in countries where more money is spent on
basic and applied research and development.

True False

24. Tight cross-functional integration between R&D, production, and marketing maximizes the time to
market.

True False

25. For a product development team to function effectively and meet all its development milestones, the
team should be composed of at least one member from each key function.

True False

Multiple Choice Questions

26. Which of the following is one of the four elements that constitute a firm's marketing mix?

A. Inventory accounting
B. Product reengineering
C. Reverse engineering
D. Distribution strategy

18-4
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
27. The set of choices the firm offers to its targeted market is known as the ____.

A. marketing mix
B. marketing concept
C. marketing strategy
D. market promotion

28. Research has long maintained that a major factor of success for new products is the closeness of the
relationship between:

A. finance and marketing.


B. marketing and R&D.
C. finance and materials management.
D. finance and R&D.

29. According to Levitt, which of the following statements is true?

A. Technology drives the world toward a converging commonalty.


B. There are accustomed differences in national preferences.
C. The multinational corporation operates in a number of countries at low relative costs.
D. The global corporation operates with resolute consistency at high relative costs.

30. The continuing persistence of _____ differences between nations acts as a major brake on any trend
toward global consumer tastes and preferences.

A. technological and industrial


B. institutional and political
C. cultural and economic
D. GNP level and growth rate

18-5
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
31. The identification of distinct groups of consumers whose purchasing behavior differs from others in
important ways is known as _____.

A. market segmentation
B. market penetration
C. diversification strategy
D. differentiation

32. If market segments transcend national borders:

A. the company should develop unique products for each national market.
B. the company can view the global market as a single entity and pursue a global strategy.
C. a localization strategy would be appropriate.
D. consumers will have differing purchasing behavior in different nations.

33. The most important aspect of a country's cultural differences, particularly important in foodstuffs and
beverages, is the impact of _____.

A. values
B. traditions
C. norms
D. attitudes

34. Consumers in highly developed countries value _____ as compared to their counterparts in less
developed nations.

A. product price
B. product reliability
C. product attributes
D. product value

18-6
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
35. Contrary to Levitt's suggestions, consumers in the most developed countries are often:

A. willing to sacrifice their preferred attributes for lower prices.


B. not willing to pay more for products that have additional features customized to their tastes.
C. not willing to sacrifice their preferred attributes for lower prices.
D. willing to accept globally standardized products that have been developed with the lowest common
denominator in mind.

36. The means a firm chooses for delivering the product to the consumer is its _____.

A. communication strategy
B. segmentation strategy
C. product attributes
D. distribution strategy

37. The way a product is delivered is determined by the _____.

A. firm's entry strategy


B. firm's product positioning
C. target market
D. market segments

38. In a concentrated retail system:

A. there are many retailers who have a major share of the market.
B. there are many retailers, no one of which has a major share of the market.
C. a few retailers supply a small segment of the market.
D. a few retailers supply most of the market.

18-7
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
39. A country with high car ownership, a large number of households with refrigerators, and a large
number of two-income families tend to have _____.

A. retail division
B. retail dispersion
C. retail concentration
D. retail fragmentation

40. A _____ retail system is one in which there are many retailers, no one of which has a major share of the
market.

A. concentrated
B. consolidated
C. focused
D. fragmented

41. Which of the following statements about retail systems is true?

A. One factor contributing to greater retail concentration is an increase in car ownership.


B. The number of households with refrigerators leads to lesser retail concentration in developed
countries.
C. There is a tendency for greater retail concentration in many developing countries.
D. Retail systems are very fragmented in developed countries.

42. Which of the following countries has a concentrated retail system?

A. China
B. United States
C. Japan
D. India

18-8
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
43. _____ refers to the number of intermediaries between the producer (or manufacturer) and the
consumer.

A. Channel length
B. Channel exclusivity
C. Channel quality
D. Channel speed

44. If a producer sells through an import agent, a wholesaler, and a retailer, then:

A. a long channel exists.


B. the retail system must be concentrated.
C. the internet probably plays a big role in the economy.
D. there is no channel.

45. The most important determinant of channel length is the degree to which a retail system is _____.

A. concentrated
B. fragmented
C. decentralized
D. globalized

46. Which of the following statements about fragmented retail systems is true?

A. Countries with fragmented retail systems tend to have short channels of distribution.
B. The more fragmented the retail system, the less expensive it is for a firm to make contact with each
individual retailer.
C. Fragmented retail systems tend to promote the growth of wholesalers to serve retailers.
D. When the retail sector is very fragmented, it makes sense for the firm to deal directly with retailers.

18-9
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
47. What kind of retail systems do rural India and China have?

A. Fragmented
B. Direct
C. Indirect
D. Concentrated

48. With a concentrated retail sector:

A. a relatively large sales force is required.


B. the orders generated from each sales call can be large.
C. there are long channels of distribution.
D. it is expensive for the firm to make contact with each individual retailer.

49. A(n) _____ distribution channel is one that is difficult for outsiders to access.

A. selective
B. intensive
C. exclusive
D. multi-channel

50. When a channel is exclusive:

A. the firm sells and distributes only high-end products.


B. it is controlled by market leaders or by firms who have a niche market.
C. the firm's products are focused only on the elite, upper class customers.
D. it is often difficult for a new firm to get access to shelf space in supermarkets.

18-10
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
51. _____ refers to the expertise, competencies, and skills of established retailers in a nation, and their
ability to sell and support the products of international businesses.

A. Channel exclusivity
B. Channel knowledge
C. Channel quality
D. Channel skill

52. Which of the following statements about the choice of distribution strategy is true?

A. The longer a channel, the greater the aggregate markup, and the higher the price that consumers
are charged for the final product.
B. If price is an important competitive weapon and if the firm does not want to see its profit margins
squeezed, other things being equal, the firm would prefer to use a longer channel.
C. The shorter a channel, the greater the aggregate markup, and the higher the price that consumers
are charged for the final product.
D. An international business must use shorter channels in countries where the retail sector is
fragmented and longer channels in countries where the retail sector is concentrated.

53. In the 1960s, the Swedish vacuum manufacturer Electrolux successfully marketed vacuums in the
United Kingdom with the slogan "Nothing sucks like an Electrolux".
The informal United States meaning of the word ‘sucks' was already well known in the United Kingdom
at the time, and the company hoped the slogan, with its possible double entendre, would gain
attention. When this slogan was used in the American market, it was a catastrophe. This is an example
of _____.

A. cultural differences
B. religious differences
C. source effects
D. noise levels

18-11
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
54. To overcome cultural barriers, companies should:

A. develop products specifically for each market.


B. focus on universal needs.
C. focus only on international market segments.
D. develop cross-cultural literacy.

55. When the receiver of a message evaluates a message based on the status or image of the sender,
_____ are said to have occurred.

A. sender effects
B. noise effects
C. source effects
D. communication effects

56. The extent to which the place of manufacturing influences product evaluations is known as _____.

A. source effects
B. country of origin effects
C. noise effects
D. location effects

57. The "Swiss Made" label has leveraged several watch-making companies (for example, TAG Heuer) for
decades now. This is an example of a ____ effect.

A. linguistic
B. country of origin
C. noise
D. cultural

18-12
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
58. Which of the following is an example of a positive source effect?

A. A 3M Post-it note
B. A Dell laptop
C. An Audi R8
D. An Apple iPod

59. The probability of effective communications is reduced by:

A. noise.
B. location effects.
C. country of origin effects.
D. source effects.

60. Which of the following statements about barriers to international communication is true?

A. Source effects occur when the receiver of the message evaluates the message on the basis of the
location of the sender.
B. The best way for a firm to overcome cultural barriers is to use local input.
C. Source effects and country of origin effects are always negative.
D. Noise is extremely high in highly developed countries such as the United States.

61. When a firm emphasizes personal selling rather than mass media advertising in the promotional mix,
the firm is using a _____.

A. standardized strategy
B. pull strategy
C. push strategy
D. localized strategy

18-13
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
62. Which of the following statements is true?

A. Firms in consumer goods industries that are trying to sell to a large segment of the market generally
favor a push strategy.
B. Mass communication has cost advantages for firms in consumer goods industries that are trying to
sell to a large segment of the market.
C. Direct selling may be the only way to reach consumers in poor nations with low literacy levels.
D. Firms that sell industrial products or other complex products favor a pull strategy.

63. A firm that depends more on mass media advertising to communicate the marketing message to
potential consumers is using a _____.

A. pull strategy
B. push strategy
C. standardized strategy
D. localized strategy

64. A push strategy is appropriate when:

A. there are many choices of electronic media.


B. the firm is selling consumer goods.
C. distribution channels are long.
D. the firm is selling complex new products.

65. A pull strategy should be used when:

A. the firm is selling industrial products.


B. the distribution channels are short.
C. the distribution channels are long.
D. few print or electronic media are available.

18-14
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
66. Which of the following is an argument that supports global advertising?

A. Standardized advertising lowers the costs of value creation by spreading the fixed costs of
developing the advertisements over many countries.
B. Because of concerns about the scarcity of creative talent, some feel that smaller efforts will produce
better results than one large effort to develop a campaign.
C. Even though there are cultural differences between nations, a single advertising theme that is
effective worldwide can be easily developed.
D. Standardized advertising may be implemented even in the face of advertising regulations.

67. When a company charges whatever the market will bear, the company is using _____.

A. strategic pricing
B. price discrimination
C. a push strategy
D. a pull strategy

68. In order for price discrimination to be successful:

A. there must be a strong case for arbitrage.


B. national markets must be kept separate.
C. demand must be very elastic.
D. a large change in demand must be triggered by a small change in price.

69. _____ occurs when an individual or business capitalizes on a price differential for a firm's product
between two countries by buying the product in the country where the price is low and reselling it in
the country where prices are higher.

A. Arbitrage
B. Strategic pricing
C. Price discrimination
D. Market pricing

18-15
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
70. A measure of the responsiveness of demand for a product to change in price is referred to as:

A. arbitrage demand.
B. predatory pricing.
C. price elasticity of demand.
D. experience curve pricing.

71. If a _____ change in a price produces a _____ change in demand, then demand is said to be elastic.

A. small; large
B. small; small
C. large; small
D. large; large

72. Which of the following statements about price discrimination is true?

A. It exists whenever consumers in a country are charged different prices for the same product.
B. A necessary condition for profitable price discrimination is different price elasticities of demand in
different countries.
C. It is the use of price as a competitive weapon to drive weaker competitors out of a national market.
D. It makes economic sense to charge the same prices across countries.

73. Which of the following is one of the important factors in determining the elasticity of demand for a
product in a given country?

A. Personal selling
B. Logistics
C. Operating revenue
D. Income level

18-16
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
74. In a country where competition is limited:

A. prices will be low.


B. there will be low elasticity of demand.
C. prices will be high.
D. consumers' bargaining power rises.

75. _____ pricing is the use of price as a competitive weapon to drive weaker competitors out of a national
market.

A. Multipoint
B. Value-based
C. Experience curve
D. Predatory

76. _____ refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals'
pricing strategy in another market.

A. Multipoint pricing
B. Experience curve pricing
C. Predatory pricing
D. Competitive pricing

77. Many firms pursuing a(n) _____ pricing strategy on an international scale will price low worldwide in
attempting to build global sales volume as rapidly as possible, even if this means taking large losses
initially.

A. multipoint
B. experience curve
C. predatory
D. competitive

18-17
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
78. _____ occurs whenever a firm sells a product for a price that is less than the cost of producing it.

A. Resale
B. Plunging
C. Bootlegging
D. Dumping

79. The _____ industry is often thought of as one in which global standardization of the marketing mix is
the norm.

A. financial services
B. IT
C. telecommunication
D. manufacturing

80. Other things being equal, the rate of new-product development seems to be greater in countries
where:

A. less money is spent on basic and applied R&D.


B. consumers are affluent.
C. underlying demand is weak.
D. competition is mild.

81. Tight cross-functional integration between R&D, production, and marketing can help a company to
ensure that which of the following take place?

A. Time to market is maximized.


B. Development costs are not a consideration in developing the best product.
C. New products are designed for ease of manufacture.
D. Product development projects are driven by internal needs.

18-18
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
82. Which of the following is an advantage of establishing cross-functional product development teams?

A. It reduces the need for collaboration within the development team.


B. It helps firms reduce the status differences between employees.
C. It facilitates integration between different functions in a firm.
D. It helps teams reduce the conflicts within product development teams.

83. Drober Consulting is a large software service provider. The company has the largest market share in
the industry. In order to restrain the smaller competitors in the market, the company sells some of its
products at very low prices. This is an example of _____ pricing.

A. penetration
B. multipoint
C. predatory
D. experience curve

84. Dumping occurs whenever a firm sells a product:

A. for a price that is less than the cost of producing it.


B. without paying the necessary regulatory charges.
C. for a price that is higher than the market rate.
D. by including a premium for the R&D activities of the firm.

85. If a marketer asks "Is the demand for the product among customers in the international market
segments targeted similar to domestic demands?," what element of the marketing mix is being
addressed?

A. Product strategy
B. Pricing strategy
C. Distribution strategy
D. Communication strategy

18-19
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
86. _____ involves issues such as (1) translation of questionnaires and reports into appropriate foreign
languages and (2) accounting for cultural and environmental differences in data collection.

A. Product research
B. Communication strategy
C. International market research
D. Product strategy

87. _____ is an international market research company based in London that works with more than half of
the Fortune 500 companies.

A. Ipsos
B. Nielsen
C. NPD Group
D. Kantar

88. This step in international market research often relates to the cost of collecting primary data that can
address the research problem and objectives directly versus using available secondary data.

A. Assessing the costs and benefits of the research


B. Collecting the data
C. Defining the research objectives
D. Determining the data sources

89. The process of identifying distinct groups of consumers whose purchasing behavior differs from others
in important ways is known as _____.

A. demographic analysis
B. market segmentation
C. product mix
D. consumer behavior analysis

18-20
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
90. Consumers in the most developed countries are:

A. typically most interested in products that have been developed with the lowest common
denominator in mind.
B. typically willing to sacrifice their preferred product attributes for lower prices.
C. often shun prefer globally standardized products.
D. often not willing to sacrifice their preferred attributes for lower prices.

91. Differences in _____ constrain the globalization of markets.

A. technical standards
B. measurement systems
C. manufacturing processes
D. government regulations

92. There is a tendency for greater retail concentration in _____.

A. rural areas
B. developed countries
C. urban areas
D. developing countries

93. The number of intermediaries between the producer and the consumer is known as the _____.

A. channel quality
B. marketing mix
C. channel length
D. experience curve

18-21
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
94. A channel is considered to be short if the producer sells:

A. through an import agent.


B. through a wholesaler.
C. through a retailer.
D. directly to the consumer.

95. Countries with _____ retail systems tend to have long channels of distribution.

A. fragmented
B. intermarket
C. concentrated
D. exclusive

96. A(n) _____ is one that is difficult for outsiders to access.

A. concentrated retail system


B. exclusive distribution channel
C. private distribution channel
D. fragmented retail system

97. French wine, Italian clothes, and German luxury cars all benefit from _____.

A. source effects
B. noise levels
C. cultural preferences
D. cultural differences

18-22
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
98. When a company emphasizes personal selling, the company is probably using a _____.

A. standardized strategy
B. push strategy
C. localized strategy
D. pull strategy

99. A _____ is generally favored by consumer goods firms that are trying to sell to a large segment of the
market.

A. push strategy
B. globalization strategy
C. pull strategy
D. localization strategy

100. A firm may be prevented from using _____ because of advertising regulations.

A. corporate advertising
B. culturally significant advertising
C. marketing strategies
D. standardized advertising

101. The use of price as a competitive weapon to drive weaker competitors out of a national market is
known as _____.

A. Experience curve pricing


B. Predatory pricing
C. Competitive pricing
D. Multipoint pricing

18-23
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
102. The increasing pace of _____ has resulted in a dramatic shortening of product life cycles.

A. manufacturing
B. distribution
C. market research
D. technological change

103. New-product development:

A. rarely results in high returns.


B. has a high failure rate.
C. always earns enormous returns.
D. has a low failure rate.

104. Designing for manufacturing:

A. decreases product quality.


B. increases costs.
C. can increase product quality.
D. not only increases costs, but also lowers product quality.

105. The need to integrate R&D and marketing to adequately commercialize new technologies poses
special problems in the international business because:

A. firms typically have all of their R&D centers in the home country.
B. commercialization means that the same version of a new product needs to be produced for all
countries.
C. firms typically do not have their R&D centers in the same country as their production facilities.
D. commercialization may require different versions of a new product to be produced for various
countries.

18-24
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Essay Questions

106. What is Theodore Levitt's contribution to international business?

107. What are the two main issues that managers must be aware of when considering market segmentation
in foreign countries?

108. How do levels of economic development affect consumer behavior? What are the implications for
marketing strategy?

18-25
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
109. Explain the difference between a concentrated retail system and a fragmented one. Why is this
distinction important to international businesses?

110. What are the four main differences between distribution systems across countries?

111. What are the three factors that contribute to the trend toward greater retail concentration in
developed countries? How have these factors promoted retail concentration?

18-26
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
112. What factors affect the success of a firm's international communications?

113. Compare and contrast push strategies and pull strategies.

114. What are the arguments for standardized advertising across international markets?

18-27
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
115. Explain the concept of price elasticity of demand. What are its determining factors?

116. Differentiate between multipoint pricing and experience curve pricing strategies.

117. Explain briefly the regulatory influences on pricing.

18-28
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
118. What factors affect the rate of new-product development in countries?

119. Discuss the role of technology in new-product development, including the concept of "creative
destruction."

120. Discuss the notion of cross-functional teams and their role in cross-functional integration. What are
the attributes that make a product development team successful?

18-29
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Chapter 18 Global Marketing and R&D Answer Key

True / False Questions

1. The set of choices the firm offers to its targeted markets is known as the marketing mix.

TRUE

The marketing mix is the set of choices the firm offers to its targeted markets.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Role of the Marketing Mix in International Marketing

2. The marketing mix is comprised of product attributes, distribution strategy, communication


strategy, and pricing strategy.

TRUE

The four elements that constitute a firm's marketing mix: product attributes, distribution strategy,
communication strategy, and pricing strategy.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Role of the Marketing Mix in International Marketing

18-30
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
3. Markets can be segmented in only one way: by socio-cultural factors.

FALSE

Markets can be segmented in numerous ways: by geography, demography (sex, age, income, race,
education level, etc.), sociocultural factors (social class, values, religion, lifestyle choices), and
psychological factors (personality).

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

4. The structure of market segments may differ significantly from country to country.

TRUE

An important market segment in a foreign country may have no parallel in the firm's home country,
and vice versa.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

5. Products sell well when their attributes match consumer needs.

TRUE

Products sell well when their attributes match consumer needs (and when their prices are
appropriate).

AACSB: Knowledge Application

18-31
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

6. Firms based in less-developed nations tend to build a lot of extra performance attributes into their
products.

FALSE

Firms based in highly developed countries tend to build a lot of extra performance attributes into
their products. These extra attributes are not usually demanded by consumers in less developed
nations, where the preference is for more basic products.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

7. If a firm manufactures its product in a particular country, it can sell directly to the consumer, to the
retailer, or to the wholesaler. The same options are not available to a firm that manufactures
outside the country.

FALSE

The same options are available to a firm that manufactures outside the country. Plus, the firm may
decide to sell to an import agent, which then deals with the wholesale distributor, the retailer, or
the consumer.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.

18-32
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Topic: Factors to Consider When Designing International Distribution Strategies

8. The four main differences between distribution systems are retail concentration, channel length,
channel exclusivity, and channel quality.

TRUE

The four main differences between distribution systems are retail concentration, channel length,
channel exclusivity, and channel quality.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

9. In a concentrated retail system, there are many retailers but none of them have a significant share
of the market.

FALSE

In a concentrated retail system, a few retailers supply most of the market.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-33
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
10. An increase in car ownership, the number of two-income households, and the number of
households with a refrigerator have all contributed to the more fragmented retail system found in
developed countries.

FALSE

There is a tendency for greater retail concentration in developed countries. Three factors that
contribute to this are the increases in car ownership, number of households with refrigerators and
freezers, and number of two-income households. All these factors have changed shopping habits
and facilitated the growth of large retail establishments sited away from traditional shopping areas.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

11. Concentrated retail systems tend to promote the growth of wholesalers to serve retailers, which
lengthens channels.

FALSE

Fragmented retail systems tend to promote the growth of wholesalers to serve retailers, which
lengthens channels.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-34
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
12. The more fragmented the retail system, the more expensive it is for a firm to make contact with
each individual retailer.

TRUE

The more fragmented the retail system, the more expensive it is for a firm to make contact with
each individual retailer.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

13. The entry of large discount superstores such as Tesco and Carrefour has shortened channel length
in some countries.

TRUE

The business model of these retailers is in part based upon the idea that in an attempt to lower
prices, they cut out wholesalers and instead deal directly with manufacturers.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-35
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
14. Import agents are typically limited to independent trading houses.

FALSE

Import agents are not limited to independent trading houses; any firm with a strong local
reputation could serve as well.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

15. Source effects occur when the receiver of the message evaluates the message based on the status
or image of the sender.

TRUE

Source effects occur when the receiver of the message evaluates the message on the basis of the
status or image of the sender.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-36
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
16. A company that depends on mass media advertising to communicate its marketing message to
potential consumers is using a push strategy.

FALSE

A push strategy emphasizes personal selling rather than mass media advertising in the promotional
mix. A pull strategy depends more on mass media advertising to communicate the marketing
message to potential consumers.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

17. A push strategy makes sense when distribution channels are short.

TRUE

Push strategies tend to be emphasized for industrial products or complex new products or when
distribution channels are short and when few print or electronic media are available.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-37
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
18. In a competitive market, prices have to be higher than in a market where the firm has a monopoly.

FALSE

Price discrimination involves charging whatever the market will bear; in a competitive market, prices
may have to be lower than in a market where the firm has a monopoly.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

19. Elasticity of demand for a product in a given country is determined by income level and
competitive conditions.

TRUE

The elasticity of demand for a product in a given country is determined by a number of factors, of
which income level and competitive conditions are the two most important.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-38
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
20. Predatory pricing refers to the fact that a firm's pricing strategy in one market may have an impact
on its rivals' pricing strategy in another market.

FALSE

Multipoint pricing refers to the fact that a firm's pricing strategy in one market may have an impact
on its rivals' pricing strategy in another market.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

21. Firms pursuing a multipoint pricing strategy on an international scale will price low worldwide in an
attempt to build global sales volume as rapidly as possible.

FALSE

Many firms pursuing an experience pricing curve strategy on an international scale will price low
worldwide in attempting to build global sales volume as rapidly as possible, even if this means
taking large losses initially. Such a firm believes that in several years, when it has moved down the
experience curve, it will be making substantial profits and have a cost advantage over its less
aggressive competitors.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-39
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
22. "Creative destruction" makes it important for companies to stay on the leading edge of
technology.

TRUE

"Creative destruction" unleashed by technological change makes it critical that a firm stay on the
leading edge of technology, lest it lose out to a competitor's innovations.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

23. The rate of new-product development seems to be lesser in countries where more money is spent
on basic and applied research and development.

FALSE

The rate of new-product development is greater in countries where more money is spent on basic
and applied research and development.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

18-40
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
24. Tight cross-functional integration between R&D, production, and marketing maximizes the time to
market.

FALSE

Tight cross-functional integration between R&D, production, and marketing can help a company to
ensure that time to market is minimized.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

25. For a product development team to function effectively and meet all its development milestones,
the team should be composed of at least one member from each key function.

TRUE

For effective functioning, a product development team should be composed of at least one
member from each key function.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

Multiple Choice Questions

18-41
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
26. Which of the following is one of the four elements that constitute a firm's marketing mix?

A. Inventory accounting
B. Product reengineering
C. Reverse engineering
D. Distribution strategy

The four elements that constitute a firm's marketing mix are product attributes, distribution
strategy, communication strategy, and pricing strategy.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-05 Understand how to configure the marketing mix globally.
Topic: The Role of the Marketing Mix in International Marketing

27. The set of choices the firm offers to its targeted market is known as the ____.

A. marketing mix
B. marketing concept
C. marketing strategy
D. market promotion

The marketing mix is the set of choices the firm offers to its targeted markets. Many firms vary their
marketing mix from country to country, depending on differences in national culture, economic
development, product standards, distribution channels, and so on.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Role of the Marketing Mix in International Marketing

18-42
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
28. Research has long maintained that a major factor of success for new products is the closeness of
the relationship between:

A. finance and marketing.


B. marketing and R&D.
C. finance and materials management.
D. finance and R&D.

Only marketing can tell R&D whether to produce globally standardized or locally customized
products. Research has long maintained that a major contributor to the success of new-product
introductions is a close relationship between marketing and R&D.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: How Globalization Affects New-Product Development

29. According to Levitt, which of the following statements is true?

A. Technology drives the world toward a converging commonalty.


B. There are accustomed differences in national preferences.
C. The multinational corporation operates in a number of countries at low relative costs.
D. The global corporation operates with resolute consistency at high relative costs.

Levitt says that a powerful force drives the world toward a converging commonalty, and that force
is technology. It has proletarianized communication, transport, and travel.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Challenges and Opportunities Created by Globalization

18-43
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
30. The continuing persistence of _____ differences between nations acts as a major brake on any trend
toward global consumer tastes and preferences.

A. technological and industrial


B. institutional and political
C. cultural and economic
D. GNP level and growth rate

The continuing persistence of cultural and economic differences between nations acts as a brake on
any trend toward the standardization of consumer tastes and preferences across nations. Some
writers have argued that the rise of global culture doesn't mean that consumers share the same
tastes and preferences. Rather, people in different nations, often with conflicting viewpoints, are
increasingly participating in a shared "global" conversation, drawing upon shared symbols that
include global brands.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Challenges and Opportunities Created by Globalization

18-44
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
31. The identification of distinct groups of consumers whose purchasing behavior differs from others in
important ways is known as _____.

A. market segmentation
B. market penetration
C. diversification strategy
D. differentiation

Market segmentation refers to identifying distinct groups of consumers whose purchasing behavior
differs from others in important ways. Markets can be segmented in numerous ways: by geography,
demography, sociocultural factors, and psychological factors.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

32. If market segments transcend national borders:

A. the company should develop unique products for each national market.
B. the company can view the global market as a single entity and pursue a global strategy.
C. a localization strategy would be appropriate.
D. consumers will have differing purchasing behavior in different nations.

The existence of market segments that transcend national borders clearly enhances the ability of an
international business to view the global marketplace as a single entity and pursue a global
strategy, selling a standardized product worldwide and using the same basic marketing mix to help
position and sell that product in a variety of national markets.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic

18-45
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

33. The most important aspect of a country's cultural differences, particularly important in foodstuffs
and beverages, is the impact of _____.

A. values
B. traditions
C. norms
D. attitudes

The most important aspect of cultural differences is probably the impact of tradition. Tradition is
particularly important in foodstuffs and beverages. For historical and idiosyncratic reasons, a range
of other cultural differences exist between countries.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

34. Consumers in highly developed countries value _____ as compared to their counterparts in less
developed nations.

A. product price
B. product reliability
C. product attributes
D. product value

Firms based in highly developed countries such as the United States tend to build a lot of extra
performance attributes into their products. Consumers in less developed nations, where the
preference is for more basic products, do not usually demand these extra attributes.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation

18-46
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

35. Contrary to Levitt's suggestions, consumers in the most developed countries are often:

A. willing to sacrifice their preferred attributes for lower prices.


B. not willing to pay more for products that have additional features customized to their tastes.
C. not willing to sacrifice their preferred attributes for lower prices.
D. willing to accept globally standardized products that have been developed with the lowest
common denominator in mind.

Consumers in the most advanced countries often shun globally standardized products that have
been developed with the lowest common denominator in mind. They are willing to pay more for
products that have additional features and attributes customized to their tastes and preferences.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

36. The means a firm chooses for delivering the product to the consumer is its _____.

A. communication strategy
B. segmentation strategy
C. product attributes
D. distribution strategy

A critical element of a firm's marketing mix is its distribution strategy: the means it chooses for
delivering the product to the consumer.

AACSB: Knowledge Application

18-47
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

37. The way a product is delivered is determined by the _____.

A. firm's entry strategy


B. firm's product positioning
C. target market
D. market segments

The way the product is delivered is determined by the firm's entry strategy.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

38. In a concentrated retail system:

A. there are many retailers who have a major share of the market.
B. there are many retailers, no one of which has a major share of the market.
C. a few retailers supply a small segment of the market.
D. a few retailers supply most of the market.

In a concentrated retail system, a few retailers supply most of the market. There is a tendency for
greater retail concentration in developed countries.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium

18-48
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

39. A country with high car ownership, a large number of households with refrigerators, and a large
number of two-income families tend to have _____.

A. retail division
B. retail dispersion
C. retail concentration
D. retail fragmentation

There is a tendency for greater retail concentration in developed countries because of the increases
in car ownership, the number of households with refrigerators and freezers, and the number of
two-income households. All these factors have changed shopping habits and facilitated the growth
of large retail establishments sited away from traditional shopping areas.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-49
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
40. A _____ retail system is one in which there are many retailers, no one of which has a major share of
the market.

A. concentrated
B. consolidated
C. focused
D. fragmented

A fragmented retail system is one in which there are many retailers, no one of which has a major
share of the market. Retail systems are very fragmented in many developing countries, which can
make for interesting distribution challenges.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

41. Which of the following statements about retail systems is true?

A. One factor contributing to greater retail concentration is an increase in car ownership.


B. The number of households with refrigerators leads to lesser retail concentration in developed
countries.
C. There is a tendency for greater retail concentration in many developing countries.
D. Retail systems are very fragmented in developed countries.

There is a tendency for greater retail concentration in developed countries because of the increases
in car ownership, the number of households with refrigerators and freezers, and the number of
two-income households. All these factors have changed shopping habits and facilitated the growth
of large retail establishments sited away from traditional shopping areas.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember

18-50
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

42. Which of the following countries has a concentrated retail system?

A. China
B. United States
C. Japan
D. India

In the United States, the importance of the automobile and the relative youth of many urban areas
have resulted in a retail system centered on large stores or shopping malls to which people can
drive.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

43. _____ refers to the number of intermediaries between the producer (or manufacturer) and the
consumer.

A. Channel length
B. Channel exclusivity
C. Channel quality
D. Channel speed

Channel length refers to the number of intermediaries between the producer (or manufacturer) and
the consumer.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation

18-51
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

44. If a producer sells through an import agent, a wholesaler, and a retailer, then:

A. a long channel exists.


B. the retail system must be concentrated.
C. the internet probably plays a big role in the economy.
D. there is no channel.

If the producer sells directly to the consumer, the channel is very short. If the producer sells through
an import agent, a wholesaler, and a retailer, a long channel exists. The choice of a short or long
channel is in part a strategic decision for the producing firm.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

45. The most important determinant of channel length is the degree to which a retail system is _____.

A. concentrated
B. fragmented
C. decentralized
D. globalized

The most important determinant of channel length is the degree to which a retail system is
fragmented. Fragmented retail systems tend to promote the growth of wholesalers to serve
retailers, which lengthens channels.

AACSB: Knowledge Application

18-52
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

46. Which of the following statements about fragmented retail systems is true?

A. Countries with fragmented retail systems tend to have short channels of distribution.
B. The more fragmented the retail system, the less expensive it is for a firm to make contact with
each individual retailer.
C. Fragmented retail systems tend to promote the growth of wholesalers to serve retailers.
D. When the retail sector is very fragmented, it makes sense for the firm to deal directly with
retailers.

Fragmented retail systems tend to promote the growth of wholesalers to serve retailers, which
lengthens channels. The more fragmented the retail system, the more expensive it is for a firm to
make contact with each individual retailer.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-53
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
47. What kind of retail systems do rural India and China have?

A. Fragmented
B. Direct
C. Indirect
D. Concentrated

In a country where there are more than a million small retailers, as in rural India and China, to sell
directly to the retailers, the firm would have to build a huge sales force. This would be very
expensive, particularly since each sales call would yield a very small order. Accordingly, it makes
economic sense for the firm to sell to the wholesalers and the wholesalers to deal with the retailers.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

48. With a concentrated retail sector:

A. a relatively large sales force is required.


B. the orders generated from each sales call can be large.
C. there are long channels of distribution.
D. it is expensive for the firm to make contact with each individual retailer.

A relatively small sales force is required to deal with a concentrated retail sector, and the orders
generated from each sales call can be large. Such circumstances tend to prevail in the United
States.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.

18-54
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Topic: Factors to Consider When Designing International Distribution Strategies

49. A(n) _____ distribution channel is one that is difficult for outsiders to access.

A. selective
B. intensive
C. exclusive
D. multi-channel

An exclusive distribution channel is one that is difficult for outsiders to access. This occurs because
retailers tend to prefer to carry the products of established manufacturers of foodstuffs with
national reputations rather than gamble on the products of unknown firms.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

50. When a channel is exclusive:

A. the firm sells and distributes only high-end products.


B. it is controlled by market leaders or by firms who have a niche market.
C. the firm's products are focused only on the elite, upper class customers.
D. it is often difficult for a new firm to get access to shelf space in supermarkets.

This occurs because retailers tend to prefer to carry the products of established manufacturers of
foodstuffs with national reputations rather than gamble on the products of unknown firms.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.

18-55
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Topic: Factors to Consider When Designing International Distribution Strategies

51. _____ refers to the expertise, competencies, and skills of established retailers in a nation, and their
ability to sell and support the products of international businesses.

A. Channel exclusivity
B. Channel knowledge
C. Channel quality
D. Channel skill

The expertise, competencies, and skills of established retailers in a nation, and their ability to sell
and support the products of international businesses, is referred to as their channel quality.
Although the quality of retailers is good in most developed nations, in emerging markets and less
developed nations, channel quality is variable at best.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-56
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
52. Which of the following statements about the choice of distribution strategy is true?

A. The longer a channel, the greater the aggregate markup, and the higher the price that
consumers are charged for the final product.
B. If price is an important competitive weapon and if the firm does not want to see its profit
margins squeezed, other things being equal, the firm would prefer to use a longer channel.
C. The shorter a channel, the greater the aggregate markup, and the higher the price that
consumers are charged for the final product.
D. An international business must use shorter channels in countries where the retail sector is
fragmented and longer channels in countries where the retail sector is concentrated.

Because each intermediary in a channel adds its own markup to the products, there is generally a
critical link between channel length, the final selling price, and the firm's profit margin. The longer a
channel, the greater the aggregate markup, and the higher the price that consumers are charged
for the final product. To ensure that prices do not get too high as a result of markups by multiple
intermediaries, a firm might be forced to operate with lower profit margins.

AACSB: Analytical Thinking


Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-57
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
53. In the 1960s, the Swedish vacuum manufacturer Electrolux successfully marketed vacuums in the
United Kingdom with the slogan "Nothing sucks like an Electrolux".
The informal United States meaning of the word ‘sucks' was already well known in the United
Kingdom at the time, and the company hoped the slogan, with its possible double entendre, would
gain attention. When this slogan was used in the American market, it was a catastrophe. This is an
example of _____.

A. cultural differences
B. religious differences
C. source effects
D. noise levels

Cultural differences limit a firm's ability to use the same marketing message and selling approach
worldwide. What works well in one country may be offensive in another.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

54. To overcome cultural barriers, companies should:

A. develop products specifically for each market.


B. focus on universal needs.
C. focus only on international market segments.
D. develop cross-cultural literacy.

The best way for a firm to overcome cultural barriers is to develop cross-cultural literacy. In addition
to developing cross-cultural literacy, the firm should use local input, such as a local advertising
agency, in developing its marketing message.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation

18-58
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

55. When the receiver of a message evaluates a message based on the status or image of the sender,
_____ are said to have occurred.

A. sender effects
B. noise effects
C. source effects
D. communication effects

Source effects occur when the receiver of a message evaluates the message on the basis of the
status or image of the sender. Source effects can be damaging for an international business when
potential consumers in a target country have a bias against foreign firms.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

56. The extent to which the place of manufacturing influences product evaluations is known as _____.

A. source effects
B. country of origin effects
C. noise effects
D. location effects

Research suggests that the consumer may use country of origin as a cue when evaluating a
product, particularly if he or she lacks more detailed knowledge of the product.

AACSB: Knowledge Application

18-59
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

57. The "Swiss Made" label has leveraged several watch-making companies (for example, TAG Heuer)
for decades now. This is an example of a ____ effect.

A. linguistic
B. country of origin
C. noise
D. cultural

The extent to which the place of manufacturing influences product evaluations is known as country
of origin effects.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-60
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
58. Which of the following is an example of a positive source effect?

A. A 3M Post-it note
B. A Dell laptop
C. An Audi R8
D. An Apple iPod

Source effects and country of origin effects are not always negative. French wine, Italian clothes,
and German luxury cars benefit from nearly universal positive source effects. In such cases, it may
pay a firm to emphasize its foreign origins.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

59. The probability of effective communications is reduced by:

A. noise.
B. location effects.
C. country of origin effects.
D. source effects.

Noise refers to the other messages competing for a potential consumer's attention, and this varies
across countries.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-61
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
60. Which of the following statements about barriers to international communication is true?

A. Source effects occur when the receiver of the message evaluates the message on the basis of
the location of the sender.
B. The best way for a firm to overcome cultural barriers is to use local input.
C. Source effects and country of origin effects are always negative.
D. Noise is extremely high in highly developed countries such as the United States.

Fewer firms vie for the attention of prospective customers in developing countries; thus, the noise
level is lower.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

61. When a firm emphasizes personal selling rather than mass media advertising in the promotional
mix, the firm is using a _____.

A. standardized strategy
B. pull strategy
C. push strategy
D. localized strategy

Although effective as a promotional tool, personal selling requires intensive use of a sales force and
is relatively costly.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-62
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
62. Which of the following statements is true?

A. Firms in consumer goods industries that are trying to sell to a large segment of the market
generally favor a push strategy.
B. Mass communication has cost advantages for firms in consumer goods industries that are trying
to sell to a large segment of the market.
C. Direct selling may be the only way to reach consumers in poor nations with low literacy levels.
D. Firms that sell industrial products or other complex products favor a pull strategy.

Exceptions can be found in poorer nations with low literacy levels, where direct selling may be the
only way to reach consumers.

AACSB: Analytical Thinking


Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

63. A firm that depends more on mass media advertising to communicate the marketing message to
potential consumers is using a _____.

A. pull strategy
B. push strategy
C. standardized strategy
D. localized strategy

Although some firms employ only a pull strategy and others only a push strategy, still other firms
combine direct selling with mass advertising to maximize communication effectiveness.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic

18-63
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

64. A push strategy is appropriate when:

A. there are many choices of electronic media.


B. the firm is selling consumer goods.
C. distribution channels are long.
D. the firm is selling complex new products.

Firms that sell industrial products or other complex products favor a push strategy. Direct selling
allows the firm to educate potential consumers about the features of the product.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

65. A pull strategy should be used when:

A. the firm is selling industrial products.


B. the distribution channels are short.
C. the distribution channels are long.
D. few print or electronic media are available.

Pull strategies tend to be emphasized for consumer goods, when distribution channels are long,
and when sufficient print and electronic media are available to carry the marketing message.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-64
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
66. Which of the following is an argument that supports global advertising?

A. Standardized advertising lowers the costs of value creation by spreading the fixed costs of
developing the advertisements over many countries.
B. Because of concerns about the scarcity of creative talent, some feel that smaller efforts will
produce better results than one large effort to develop a campaign.
C. Even though there are cultural differences between nations, a single advertising theme that is
effective worldwide can be easily developed.
D. Standardized advertising may be implemented even in the face of advertising regulations.

The support for global advertising is threefold. First, standardized advertising lowers the costs of
value creation. Second, there is the concern that creative talent is scarce and so one large effort to
develop a campaign will produce better results than 40 or 50 smaller efforts. A third justification for
a standardized approach is that many brand names are global.

AACSB: Analytical Thinking


Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

67. When a company charges whatever the market will bear, the company is using _____.

A. strategic pricing
B. price discrimination
C. a push strategy
D. a pull strategy

Price discrimination exists whenever consumers in different countries are charged different prices
for the same product or for slightly different variations of the product.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation

18-65
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

68. In order for price discrimination to be successful:

A. there must be a strong case for arbitrage.


B. national markets must be kept separate.
C. demand must be very elastic.
D. a large change in demand must be triggered by a small change in price.

In order for price discrimination to be successful, a firm must be able to keep its national markets
separate. If a firm cannot do this, individuals or businesses may undercut its attempt at price
discrimination by engaging in arbitrage.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-66
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
69. _____ occurs when an individual or business capitalizes on a price differential for a firm's product
between two countries by buying the product in the country where the price is low and reselling it
in the country where prices are higher.

A. Arbitrage
B. Strategic pricing
C. Price discrimination
D. Market pricing

Two conditions are necessary for profitable price discrimination. First, the firm must be able to keep
its national markets separate. If it cannot do this, individuals or businesses may undercut its attempt
at price discrimination by engaging in arbitrage.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

70. A measure of the responsiveness of demand for a product to change in price is referred to as:

A. arbitrage demand.
B. predatory pricing.
C. price elasticity of demand.
D. experience curve pricing.

The price elasticity of demand is a measure of the responsiveness of demand for a product to
change in price The elasticity of demand for a product in a given country is determined by a
number of factors, of which income level and competitive conditions are the two most important.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic

18-67
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

71. If a _____ change in a price produces a _____ change in demand, then demand is said to be elastic.

A. small; large
B. small; small
C. large; small
D. large; large

Demand is said to be elastic when a small change in price produces a large change in demand; it is
said to be inelastic when a large change in price produces only a small change in demand.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

72. Which of the following statements about price discrimination is true?

A. It exists whenever consumers in a country are charged different prices for the same product.
B. A necessary condition for profitable price discrimination is different price elasticities of demand
in different countries.
C. It is the use of price as a competitive weapon to drive weaker competitors out of a national
market.
D. It makes economic sense to charge the same prices across countries.

A necessary condition for profitable price discrimination is different price elasticities of demand in
different countries. The price elasticity of demand is a measure of the responsiveness of demand
for a product to change in price.

AACSB: Analytical Thinking


Accessibility: Keyboard Navigation
Blooms: Analyze

18-68
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

73. Which of the following is one of the important factors in determining the elasticity of demand for a
product in a given country?

A. Personal selling
B. Logistics
C. Operating revenue
D. Income level

Price elasticity tends to be greater in countries with low income levels. Consumers with limited
incomes tend to be very price conscious; they have less to spend, so they look much more closely
at price.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

74. In a country where competition is limited:

A. prices will be low.


B. there will be low elasticity of demand.
C. prices will be high.
D. consumers' bargaining power rises.

When competitors are limited, consumers' bargaining power is weaker and price is less important
as a competitive weapon. Thus, a firm may charge a higher price for its product in a country where
competition is limited than in one where competition is intense.

AACSB: Reflective Thinking

18-69
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

75. _____ pricing is the use of price as a competitive weapon to drive weaker competitors out of a
national market.

A. Multipoint
B. Value-based
C. Experience curve
D. Predatory

Once the competitors have left the market, the firm can raise prices and enjoy high profits. For such
a pricing strategy to work, the firm must normally have a profitable position in another national
market, which it can use to subsidize aggressive pricing in the market it is trying to monopolize.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-70
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
76. _____ refers to the fact that a firm's pricing strategy in one market may have an impact on its rivals'
pricing strategy in another market.

A. Multipoint pricing
B. Experience curve pricing
C. Predatory pricing
D. Competitive pricing

Aggressive pricing in one market may elicit a competitive response from a rival in another market.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

77. Many firms pursuing a(n) _____ pricing strategy on an international scale will price low worldwide in
attempting to build global sales volume as rapidly as possible, even if this means taking large losses
initially.

A. multipoint
B. experience curve
C. predatory
D. competitive

Many firms pursuing an experience curve pricing strategy on an international scale will price low
worldwide in attempting to build global sales volume as rapidly as possible, even if this means
taking large losses initially. Such a firm believes that in several years, when it has moved down the
experience curve, it will be making substantial profits and have a cost advantage over its less-
aggressive competitors.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply

18-71
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

78. _____ occurs whenever a firm sells a product for a price that is less than the cost of producing it.

A. Resale
B. Plunging
C. Bootlegging
D. Dumping

Both predatory pricing and experience curve pricing can run afoul of antidumping regulations.
Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing
it.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

79. The _____ industry is often thought of as one in which global standardization of the marketing mix is
the norm.

A. financial services
B. IT
C. telecommunication
D. manufacturing

The financial services industry is often thought of as one in which global standardization of the
marketing mix is the norm.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation

18-72
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-05 Understand how to configure the marketing mix globally.
Topic: The Role of the Marketing Mix in International Marketing

80. Other things being equal, the rate of new-product development seems to be greater in countries
where:

A. less money is spent on basic and applied R&D.


B. consumers are affluent.
C. underlying demand is weak.
D. competition is mild.

Basic and applied research and development discovers new technologies and then commercializes
them. Strong demand and affluent consumers create a potential market for new products. Intense
competition between firms stimulates innovation as the firms try to beat their competitors and reap
potentially enormous first-mover advantages that result from successful innovation.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

18-73
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
81. Tight cross-functional integration between R&D, production, and marketing can help a company to
ensure that which of the following take place?

A. Time to market is maximized.


B. Development costs are not a consideration in developing the best product.
C. New products are designed for ease of manufacture.
D. Product development projects are driven by internal needs.

Tight cross-functional integration between R&D, production, and marketing can help a company
ensure that product development projects are driven by customer needs.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

82. Which of the following is an advantage of establishing cross-functional product development


teams?

A. It reduces the need for collaboration within the development team.


B. It helps firms reduce the status differences between employees.
C. It facilitates integration between different functions in a firm.
D. It helps teams reduce the conflicts within product development teams.

Integration of R&D and marketing is crucial if a new product is to be properly commercialized.


Without integration of R&D and marketing, a company runs the risk of developing products for
which there is little or no demand. One way to achieve cross-functional integration is to establish
cross-functional product development teams composed of representatives from R&D, marketing,
and production.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply

18-74
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

83. Drober Consulting is a large software service provider. The company has the largest market share
in the industry. In order to restrain the smaller competitors in the market, the company sells some
of its products at very low prices. This is an example of _____ pricing.

A. penetration
B. multipoint
C. predatory
D. experience curve

Predatory pricing is the use of price as a competitive weapon to drive weaker competitors out of a
national market. Once the competitors have left the market, the firm can raise prices and enjoy high
profits. Drober Consulting is using predatory pricing here.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-75
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
84. Dumping occurs whenever a firm sells a product:

A. for a price that is less than the cost of producing it.


B. without paying the necessary regulatory charges.
C. for a price that is higher than the market rate.
D. by including a premium for the R&D activities of the firm.

Both predatory pricing and experience curve pricing can run afoul of antidumping regulations.
Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing
it.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

85. If a marketer asks "Is the demand for the product among customers in the international market
segments targeted similar to domestic demands?," what element of the marketing mix is being
addressed?

A. Product strategy
B. Pricing strategy
C. Distribution strategy
D. Communication strategy

If a marketer asks "Is the demand for the product among customers in the international market
segments targeted similar to domestic demands?," the pricing strategy element of the marketing
mix is being addressed.

AACSB: Analytical Thinking


Accessibility: Keyboard Navigation
Blooms: Analyze
Difficulty: 2 Medium
Gradable: automatic

18-76
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-05 Understand how to configure the marketing mix globally.
Topic: The Role of the Marketing Mix in International Marketing

86. _____ involves issues such as (1) translation of questionnaires and reports into appropriate foreign
languages and (2) accounting for cultural and environmental differences in data collection.

A. Product research
B. Communication strategy
C. International market research
D. Product strategy

International market research involves issues such as (1) translation of questionnaires and reports
into appropriate foreign languages and (2) accounting for cultural and environmental differences in
data collection.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-06 Understand the importance of international market research.
Topic: Problems with Market Research in Foreign Markets

18-77
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
87. _____ is an international market research company based in London that works with more than half
of the Fortune 500 companies.

A. Ipsos
B. Nielsen
C. NPD Group
D. Kantar

Kantar (www.kantar.com) is an international market research company based in London. The


company was founded in 1993 as the market research, insight, and consultancy division of WPP (an
advertising and public relations firm). It operates in more than 100 countries, employs some 28,000
people, and has revenues of about $4 billion annually. As a conglomerate of research companies,
Kantar works with more than half of the Fortune 500 companies (a "kantar" is a measure for cotton
that is still being used in the ports of Egypt today).

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-06 Understand the importance of international market research.
Topic: Problems with Market Research in Foreign Markets

18-78
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
88. This step in international market research often relates to the cost of collecting primary data that
can address the research problem and objectives directly versus using available secondary data.

A. Assessing the costs and benefits of the research


B. Collecting the data
C. Defining the research objectives
D. Determining the data sources

Assessing the costs and benefits of the research often relates to the cost of collecting primary data
that can address the research problem and objectives directly versus using available secondary
data. If secondary data are available, such data are typically available as a less costly alternative to
collecting primary data. The costs that drive up the spending in primary data collections broadly
include survey development and sampling frame issues.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-06 Understand the importance of international market research.
Topic: Problems with Market Research in Foreign Markets

89. The process of identifying distinct groups of consumers whose purchasing behavior differs from
others in important ways is known as _____.

A. demographic analysis
B. market segmentation
C. product mix
D. consumer behavior analysis

Market segmentation refers to identifying distinct groups of consumers whose purchasing behavior
differs from others in important ways.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember

18-79
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

90. Consumers in the most developed countries are:

A. typically most interested in products that have been developed with the lowest common
denominator in mind.
B. typically willing to sacrifice their preferred product attributes for lower prices.
C. often shun prefer globally standardized products.
D. often not willing to sacrifice their preferred attributes for lower prices.

Consumers in most developed countries are often not willing to sacrifice their preferred attributes
for lower prices. Consumers in the most advanced countries often shun globally standardized
products that have been developed with the lowest common denominator in mind.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

91. Differences in _____ constrain the globalization of markets.

A. technical standards
B. measurement systems
C. manufacturing processes
D. government regulations

Differing government-mandated product standards can rule out mass production and marketing of
a standardized product. Differences in technical standards also constrain the globalization of
markets.

AACSB: Knowledge Application

18-80
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

92. There is a tendency for greater retail concentration in _____.

A. rural areas
B. developed countries
C. urban areas
D. developing countries

There is a tendency for greater retail concentration in developed countries.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

93. The number of intermediaries between the producer and the consumer is known as the _____.

A. channel quality
B. marketing mix
C. channel length
D. experience curve

Channel length refers to the number of intermediaries between the producer (or manufacturer) and
the consumer.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy

18-81
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

94. A channel is considered to be short if the producer sells:

A. through an import agent.


B. through a wholesaler.
C. through a retailer.
D. directly to the consumer.

If the producer sells directly to the consumer, the channel is very short. If the producer sells through
an import agent, a wholesaler, and a retailer, a long channel exists.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

95. Countries with _____ retail systems tend to have long channels of distribution.

A. fragmented
B. intermarket
C. concentrated
D. exclusive

Countries with fragmented retail systems tend to have long channels of distribution, sometimes
with multiple layers.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.

18-82
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Topic: Factors to Consider When Designing International Distribution Strategies

96. A(n) _____ is one that is difficult for outsiders to access.

A. concentrated retail system


B. exclusive distribution channel
C. private distribution channel
D. fragmented retail system

An exclusive distribution channel is one that is difficult for outsiders to access.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

97. French wine, Italian clothes, and German luxury cars all benefit from _____.

A. source effects
B. noise levels
C. cultural preferences
D. cultural differences

Source effects and country of origin effects are not always negative. French wine, Italian clothes,
and German luxury cars benefit from nearly universal positive source effects.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-83
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
98. When a company emphasizes personal selling, the company is probably using a _____.

A. standardized strategy
B. push strategy
C. localized strategy
D. pull strategy

A push strategy emphasizes personal selling rather than mass media advertising in the promotional
mix.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

99. A _____ is generally favored by consumer goods firms that are trying to sell to a large segment of
the market.

A. push strategy
B. globalization strategy
C. pull strategy
D. localization strategy

Firms in consumer goods industries that are trying to sell to a large segment of the market
generally favor a pull strategy.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-84
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
100. A firm may be prevented from using _____ because of advertising regulations.

A. corporate advertising
B. culturally significant advertising
C. marketing strategies
D. standardized advertising

Advertising regulations may block implementation of standardized advertising.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

101. The use of price as a competitive weapon to drive weaker competitors out of a national market is
known as _____.

A. Experience curve pricing


B. Predatory pricing
C. Competitive pricing
D. Multipoint pricing

Predatory pricing is the use of price as a competitive weapon to drive weaker competitors out of a
national market. Once the competitors have left the market, the firm can raise prices and enjoy high
profits.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-85
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
102. The increasing pace of _____ has resulted in a dramatic shortening of product life cycles.

A. manufacturing
B. distribution
C. market research
D. technological change

The pace of technological change has accelerated since the Industrial Revolution in the eighteenth
century, and it continues to do so today. The result has been a dramatic shortening of product life
cycles.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

103. New-product development:

A. rarely results in high returns.


B. has a high failure rate.
C. always earns enormous returns.
D. has a low failure rate.

Although a firm that is successful at developing new products may earn enormous returns, new-
product development has a high failure rate.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

18-86
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
104. Designing for manufacturing:

A. decreases product quality.


B. increases costs.
C. can increase product quality.
D. not only increases costs, but also lowers product quality.

Designing for manufacturing can lower costs and increase product quality.

AACSB: Knowledge Application


Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Gradable: automatic
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

105. The need to integrate R&D and marketing to adequately commercialize new technologies poses
special problems in the international business because:

A. firms typically have all of their R&D centers in the home country.
B. commercialization means that the same version of a new product needs to be produced for all
countries.
C. firms typically do not have their R&D centers in the same country as their production facilities.
D. commercialization may require different versions of a new product to be produced for various
countries.

The need to integrate R&D and marketing to adequately commercialize new technologies poses
special problems in the international business because commercialization may require different
versions of a new product to be produced for various countries. To do this, the firm must build
close links between its R&D centers and its various country operations.

AACSB: Reflective Thinking


Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Gradable: automatic

18-87
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

Essay Questions

106. What is Theodore Levitt's contribution to international business?

Theodore Levitt wrote about the globalization of world markets in a now-classic Harvard Business
Review article. Levitt suggested that due to technology, the world was moving toward a converging
commonalty and the emergence of global markets for standardized consumer products. According
to Levitt, this convergence creates an opportunity for the global corporation to serve the entire
world as if it were a single entity, or in other words, sell the same thing in the same way
everywhere. Most academics believe that Levitt has overstated his case, that globalization in
consumer products is probably the exception rather than the rule. Furthermore, cultural and
economic differences between countries will continue to limit the effects of any movement toward
the standardization of consumer preferences and tastes. In addition, trade barriers and differences
in product and technical standards will also constrain a firm's ability to sell standardized products to
global markets using a standardized marketing strategy.

AACSB: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Challenges and Opportunities Created by Globalization

18-88
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
107. What are the two main issues that managers must be aware of when considering market
segmentation in foreign countries?

There are two key issues that managers must be aware of when using market segmentation in
foreign countries. First, managers must consider the differences between countries in the structure
of market segments, which may differ significantly from country to country. The firm may have to
develop a unique marketing mix to appeal to the purchasing behavior of a certain segment in a
given country. Second, managers must be aware of the existence of segments that transcend
national borders. Such segments would enhance the ability of a company to view the global
marketplace as a single entity and pursue a global strategy.

AACSB: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Differences Between Domestic and International Marketing

108. How do levels of economic development affect consumer behavior? What are the implications for
marketing strategy?

Consumers in the most advanced countries often shun globally standardized products that have
been developed with the lowest common denominator in mind. They are willing to pay more for
products that have additional features and attributes customized to their tastes and preferences. In
response to this behavior, firms marketing to consumers in highly developed markets tend to build
a lot of extra performance attributes into their products. In contrast, consumers in less-developed
countries typically demand a more basic product. In addition, product reliability becomes more
important as the purchase may account for a greater share of a consumer's income than for the
advanced country consumer. Consequently, products sold in developing countries typically lack
many of the features found in products sold in advanced countries.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual

18-89
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Factors to Consider When Developing International Product Strategies

109. Explain the difference between a concentrated retail system and a fragmented one. Why is this
distinction important to international businesses?

In some countries the retail system is very concentrated, where just a few retailers supply most of
the market. Other countries have a fragmented system in which there are many retailers, no one of
which has a major share of the market. In the U.S., for example, the retail system is a concentrated
one where there are large stores or shopping malls. In contrast, Japan's more fragmented retail
system involves many small stores that serve local neighborhoods.

AACSB: Analytical Thinking


Blooms: Understand
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

110. What are the four main differences between distribution systems across countries?

The four main differences between distribution systems are retail concentration, channel length,
channel exclusivity, and channel quality. Retail concentration refers to how many retailers supply
most of the market. Channel length refers to the number of intermediaries between the producer
and the consumer. Channel exclusivity refers to how difficult it is for outsiders to access the
channel. Finally, channel quality refers to the expertise, competencies, and skills of established
retailers in a nation and their ability to sell and support the products of international businesses.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

18-90
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
111. What are the three factors that contribute to the trend toward greater retail concentration in
developed countries? How have these factors promoted retail concentration?

There are three factors that contribute to the greater retail concentration in developed countries.
First is the increase in car ownership. Second is the increase in the number of households with
refrigerators and freezers. Third is the increase in the number of two-income households. All of
these factors have changed shopping habits and facilitated the growth of large retail
establishments sited away from traditional shopping areas.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Factors to Consider When Designing International Distribution Strategies

112. What factors affect the success of a firm's international communications?

The effectiveness of a firm's international communications can be jeopardized by three critical


variables: cultural barriers, source effects, and noise levels. Cultural barriers can make it difficult to
communicate messages across cultures. Source effects occur when the receiver of the message
evaluates the message based on the status or image of the sender. Finally, noise refers to the
amount of other messages competing for a potential consumer's attention.

AACSB: Reflective Thinking


Blooms: Evaluate
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-91
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
113. Compare and contrast push strategies and pull strategies.

When developing its communications strategy, a firm must decide between a push and a pull
strategy. A push strategy emphasizes personal selling rather than mass media advertising in the
promotional mix. This type of strategy requires intensive use of a sales force and is relatively costly.
In contrast, a pull strategy depends more on mass media advertising to communicate the
marketing message to potential customers.

AACSB: Analytical Thinking


Blooms: Analyze
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

114. What are the arguments for standardized advertising across international markets?

There are three main arguments supporting the notion of standardized advertising across markets.
First, such a campaign has significant economic advantages because it lowers the cost of value
creation by spreading the fixed costs of developing the advertisements across many countries.
Second, because of concerns about the scarcity of creative talent, one large effort to develop a
campaign will produce better results than 40 or 50 smaller efforts. Finally, many brand names are
global.

AACSB: Reflective Thinking


Blooms: Evaluate
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Factors That Influence International Advertising and Promotion Strategies

18-92
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
115. Explain the concept of price elasticity of demand. What are its determining factors?

The price elasticity of demand is a measure of the responsiveness of demand for a product to
change in price. Demand is said to be elastic when a small change in price produces a large change
in demand; it is said to be inelastic when a large change in price produces only a small change in
demand.
The elasticity of demand for a product in a given country is determined by a number of factors, of
which income level and competitive conditions are the two most important. Price elasticity tends to
be greater in countries with low income levels. Consumers with limited incomes tend to be very
price conscious; they have less to spend, so they look much more closely at price. In general, the
more competitors there are, the greater consumers' bargaining power will be and the more likely
consumers will be to buy from the firm that charges the lowest price. Thus, many competitors cause
high elasticity of demand. In such circumstances, if a firm raises its prices above those of its
competitors, consumers will switch to the competitors' products. The opposite is true when a firm
faces few competitors. When competitors are limited, consumers' bargaining power is weaker and
price is less important as a competitive weapon. Thus, a firm may charge a higher price for its
product in a country where competition is limited than in one where competition is intense.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

18-93
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
116. Differentiate between multipoint pricing and experience curve pricing strategies.

Multipoint pricing refers to the fact a firm's pricing strategy in one market may have an impact on
its rivals' pricing strategy in another market. Aggressive pricing in one market may elicit a
competitive response from a rival in another market. Many firms pursuing an experience curve
pricing strategy on an international scale will price low worldwide in attempting to build global
sales volume as rapidly as possible, even if this means taking large losses initially. Such a firm
believes that in several years, when it has moved down the experience curve, it will be making
substantial profits and have a cost advantage over its less-aggressive competitors.

AACSB: Analytical Thinking


Blooms: Analyze
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

117. Explain briefly the regulatory influences on pricing.

The ability to engage in either price discrimination or strategic pricing may be limited by national or
international regulations. Most important, a firm's freedom to set its own prices is constrained by
antidumping regulations and competition policy.
Antidumping Regulations: Both predatory pricing and experience curve pricing can run afoul of
antidumping regulations. Dumping occurs whenever a firm sells a product for a price that is less
than the cost of producing it. Antidumping rules set a floor under export prices and limit firms'
ability to pursue strategic pricing. The rather vague terminology used in most antidumping actions
suggests that a firm's ability to engage in price discrimination also may be challenged under
antidumping legislation.
Competition Policy: Most developed nations have regulations designed to promote competition
and to restrict monopoly practices. These regulations can be used to limit the prices a firm can
charge in a given country.

AACSB: Knowledge Application


Blooms: Understand

18-94
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Elements That Influence International Pricing Strategies

118. What factors affect the rate of new-product development in countries?

Ideas for new products are stimulated by the interactions of scientific research, demand conditions,
and competitive conditions. Other things being equal, the rate of new product development seems
to be greater in countries where

• More money is spent on basic and applied research and development.


• Underlying demand is strong.
• Consumers are affluent.
• Competition is intense.

Basic and applied research and development discovers new technologies and then commercializes
them. Strong demand and affluent consumers create a potential market for new products. Intense
competition between firms stimulates innovation as the firms try to beat their competitors and reap
potentially enormous first-mover advantages that result from successful innovation.

AACSB: Knowledge Application


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

18-95
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
119. Discuss the role of technology in new-product development, including the concept of "creative
destruction."

In today's world, competition is as much about technological innovation as anything else. The pace
of technological change has accelerated greatly, and it continues to do so today. The result has
been a dramatic shortening of product life cycles. Technological innovation is both creative and
destructive. This "creative destruction" unleashed by technological change makes it critical that a
firm stay on the leading edge of technology, lest it loses out to a competitor's innovations.

AACSB: Reflective Thinking


Blooms: Apply
Difficulty: 3 Hard
Gradable: manual
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

120. Discuss the notion of cross-functional teams and their role in cross-functional integration. What are
the attributes that make a product development team successful?

A firm can achieve cross-functional integration by establishing cross-functional product


development teams comprised of representatives from R&D, marketing, and production. The
objective of the team should be to take a product development project from the initial concept
development to market introduction. The success of such teams is dependent on three attributes.
First, the team should be led by "heavyweight" managers who have high status within the
organization, and who have the power and authority required to get the financial and human
resources the team needs to succeed. Second, the team should be comprised of at least one
member from each key function. Finally, the team should physically be in one location if possible to
create a sense of camaraderie and to facilitate communication.

AACSB: Reflective Thinking


Blooms: Evaluate
Difficulty: 3 Hard
Gradable: manual

18-96
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Learning Objective: 18-07 Describe how globalization is affecting product development.
Topic: How Globalization Affects New-Product Development

18-97
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.