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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. The process of identifying distinct groups of consumers whose purchasing


behavior differs from others in important ways is known as consumer behavior
analysis.

True False
4. Markets can be segmented in only one way: by socio-cultural factors.

True False

5. The goal of market segmentation is to optimize the fit between the purchasing
behavior of consumers in a given segment and the marketing mix, thereby
maximizing sales to that segment.

True False

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

True False

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

True False

8. Firms based in less-developed nations tend to build a lot of extra performance


attributes into their products.

True False

9. Consumers in the most developed countries are typically willing to sacrifice their
preferred product attributes for lower prices.

True False
10. Differences in technical standards constrain the globalization of markets.

True False

11. 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

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

True False

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

True False

14. There is a tendency for greater retail concentration in developing countries.

True False
15. 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

16. The number of intermediaries between the producer and the consumer is known
as the channel length.

True False

17. A channel is considered to be long if the producer sells directly to the consumer.

True False

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

True False

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

True False
20. Countries with fragmented retail systems tend to have long channels of
distribution.

True False

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

True False

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

True False

23. One benefit of a shorter channel is that it cuts selling costs when the retail sector is
very fragmented.

True False

24. Import agents are typically limited to independent trading houses.

True False

25. The best way for a firm to overcome cultural barriers is to develop cross-cultural
literacy.

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

True False

27. Source effects and country of origin effects are always negative.

True False

28. A company that depends on mass media advertising to communicate its


marketing message to potential consumers is using a push strategy.

True False

29. When a company emphasizes personal selling, the company is probably using a
push strategy.

True False

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

True False

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

True False
32. A firm may be prevented from using standardized advertising because of
advertising regulations.

True False

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

True False

34. When a small change in price produces a large change in demand, demand is said
to be inelastic.

True False

35. The use of price as a competitive weapon to drive weaker competitors out of a
national market is known as predatory pricing.

True False

36. Pricing decisions around the world must be delegated to the managers of various
national subsidiaries.

True False
37. The increasing pace of technological change has resulted in a dramatic shortening
of product life cycles.

True False

38. To design the product so that it can be manufactured in a cost-effective manner,


the firm needs to build close links between R&D, marketing, and manufacturing.

True False

39. 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

40. New-product development has a high failure rate.

True False

41. Tight cross-functional integration between R&D, production, and marketing


maximizes the time to market.

True False
42. Designing for manufacturing increases not only product quality, but also costs
involved.

True False

43. 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

44. 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.

True False

Multiple Choice Questions


45. 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

46. 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

47. 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.


48. 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.

49. 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

50. 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
51. 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.

52. 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

53. 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
54. 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.

55. 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

56. The way a product is delivered is determined by:

A. the firm's entry strategy.

B. the firm's product positioning.

C. the target market.

D. the market segments.


57. 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.

58. 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.

59. 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
60. 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.

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

A. China

B. USA

C. Japan

D. India

62. ____ 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
63. 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.

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

A. concentrated

B. fragmented

C. decentralized

D. globalized
65. 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.

66. What kind of retail systems do rural India and China have?

A. Fragmented

B. Direct

C. Indirect

D. Concentrated

67. 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.
68. A(n) ____ distribution channel is one that is difficult for outsiders to access.

A. selective

B. intensive

C. exclusive

D. multi-channel

69. 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.

70. ____ 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
71. 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.

72. 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 US meaning of the word ‘sucks' was already well known in the UK 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.
73. 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.

74. 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

75. 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.
76. 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

77. 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

78. The probability of effective communications is reduced by:

A. noise.

B. location effects.

C. country of origin effects.

D. source effects.
79. Which of the following statements about barrier 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.

80. 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.
81. 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.

82. 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.
83. 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.

84. 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.

85. 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.
86. 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.

87. 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.

88. ____ 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
89. 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.

90. 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
91. 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.

92. 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

93. 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.


94. ____ 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

95. ____ refers to the fact 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

96. 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
97. ____ 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

98. 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

99. 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.
100.Tight cross-functional integration between R&D, production, and marketing can
help a company to ensure that all of the following take place except:

A. time to market is minimized.

B. development costs are kept in check.

C. new products are designed for ease of manufacture.

D. product development projects are driven by internal needs.

Essay Questions

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


102.Define market segmentation. What is its goal?

103.What are the two main issues that managers must be aware of when considering
market segmentation in foreign countries?
104.Discuss the notion of a product being a bundle of attributes. How can
approaching a product in this manner help a firm reach its target market?

105.How do levels of economic development affect consumer behavior? What are the
implications for marketing strategy?
106.Explain the difference between a concentrated retail system and a fragmented
one. Why is this distinction important to international businesses?

107.What are the four main differences between distribution systems across
countries?
108.What are the three factors that contribute to the trend toward greater retail
concentration in developed countries? How have these factors promoted retail
concentration?

109.What is channel length? What is the most important determinant of channel


length? Mention two factors that shorten channel length.
110.Describe an exclusive distribution channel. Consider the implications of channel
exclusivity for outside firms.

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

112.Compare and contrast push strategies and pull strategies.


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

114.Explain the concept of price elasticity of demand. What are its determining
factors?
115.What is predatory pricing? Describe how a firm might use predatory pricing.

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

117.Explain briefly the regulatory influences on pricing.


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

119.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?
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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Introduction

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Introduction

3. The process of identifying distinct groups of consumers whose purchasing


behavior differs from others in important ways is known as consumer behavior
analysis.

FALSE

Market segmentation refers to identifying distinct groups of consumers whose


purchasing behavior differs from others in important ways.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation

4. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation

5. The goal of market segmentation is to optimize the fit between the purchasing
behavior of consumers in a given segment and the marketing mix, thereby
maximizing sales to that segment.

TRUE

The goal is to optimize the fit between the purchasing behavior of consumers in
a given segment and the marketing mix, thereby maximizing sales to that
segment.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation

6. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation

7. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes

8. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
9. Consumers in the most developed countries are typically willing to sacrifice their
preferred product attributes for lower prices.

FALSE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes

10. Differences in technical standards constrain the globalization of markets.

TRUE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
11. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

12. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
13. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

14. There is a tendency for greater retail concentration in developing countries.

FALSE

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
15. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

16. The number of intermediaries between the producer and the consumer is
known as the channel length.

TRUE

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

17. A channel is considered to be long if the producer sells directly to the


consumer.

FALSE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

18. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
19. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

20. Countries with fragmented retail systems tend to have long channels of
distribution.

TRUE

Countries with fragmented retail systems tend to have long channels of


distribution, sometimes with multiple layers.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
21. The entry of large discount superstores such as Tesco and Carrefour have
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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

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

TRUE

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
23. One benefit of a shorter channel is that it cuts selling costs when the retail
sector is very fragmented.

FALSE

One benefit of a longer channel is that it cuts selling costs when the retail sector
is very fragmented.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

24. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
25. The best way for a firm to overcome cultural barriers is to develop cross-cultural
literacy.

TRUE

The best way for a firm to overcome cultural barriers is to develop cross-cultural
literacy.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

26. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
27. Source effects and country of origin effects are always negative.

FALSE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

28. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
29. When a company emphasizes personal selling, the company is probably using a
push strategy.

TRUE

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

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

FALSE

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
31. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

32. A firm may be prevented from using standardized advertising because of


advertising regulations.

TRUE

Advertising regulations may block implementation of standardized advertising.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
33. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy

34. When a small change in price produces a large change in demand, demand is
said to be inelastic.

FALSE

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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
35. The use of price as a competitive weapon to drive weaker competitors out of a
national market is known as predatory pricing.

TRUE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy

36. Pricing decisions around the world must be delegated to the managers of
various national subsidiaries.

FALSE

Pricing decisions around the world need to be centrally monitored though it is


tempting to delegate full responsibility for pricing decisions to the managers of
various national subsidiaries, thereby reaping the benefits of decentralization.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
37. The increasing pace of technological change has resulted in a dramatic
shortening of product life cycles.

TRUE

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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

38. To design the product so that it can be manufactured in a cost-effective


manner, the firm needs to build close links between R&D, marketing, and
manufacturing.

TRUE

The firm must apply technology to develop products that satisfy consumer
needs, and it must design the product so that it can be manufactured in a cost-
effective manner. To do that, the firm needs to build close links between R&D,
marketing, and manufacturing.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

39. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

40. New-product development has a high failure rate.

TRUE

Although a firm that is successful at developing new products may earn


enormous returns, new-product development has a high failure rate.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development
41. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

42. Designing for manufacturing increases not only product quality, but also costs
involved.

FALSE

Designing for manufacturing can lower costs and increase product quality.

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development
43. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development
44. 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.

TRUE

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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

Multiple Choice Questions


45. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Introduction
46. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Introduction
47. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Introduction
48. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Globalization of Markets and Brands
49. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Globalization of Markets and Brands
50. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
51. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
52. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
53. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
54. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
55. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

56. The way a product is delivered is determined by:

A. the firm's entry strategy.

B. the firm's product positioning.

C. the target market.

D. the market segments.

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

AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy

57. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
58. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
59. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
60. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
61. Which of the following countries has a concentrated retail system?

A. China

B. USA

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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
62. ____ 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
63. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
64. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
65. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
66. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
67. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
68. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
69. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
70. ____ 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
71. 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: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
72. 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 US meaning of the word ‘sucks' was already well known in the UK
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


Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
73. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
74. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
75. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
76. 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


Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
77. 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


Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
78. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
79. Which of the following statements about barrier 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
80. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
81. 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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
82. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
83. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
84. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
85. 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: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
86. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
87. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
88. ____ 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
89. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
90. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
91. 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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
92. 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: Analytic
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
93. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
94. ____ 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
95. ____ refers to the fact 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
96. 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: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
97. ____ 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
98. 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: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: Configuring the Marketing Mix
99. 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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development
100. Tight cross-functional integration between R&D, production, and marketing can
help a company to ensure that all of the following take place except:

A. time to market is minimized.

B. development costs are kept in check.

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


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development

Essay Questions
101. 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: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: The Globalization of Markets and Brands
102. Define market segmentation. What is its goal?

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, social-cultural
factors, and psychological factors. The goal of market segmentation is to
optimize the fit between the purchasing behavior of consumers in a given
segment and the marketing mix, thereby maximizing sales to that segment.

AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
103. 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: 2 Medium
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Market Segmentation
104. Discuss the notion of a product being a bundle of attributes. How can
approaching a product in this manner help a firm reach its target market?

A product can be viewed as a bundle of product attributes. Products sell when


their attributes match consumer needs. For example, BMW recognizes that its
consumers have a need for luxury, quality, and performance. Accordingly, the
company builds these attributes into its cars. If consumer needs were the same
across the world, the firm could simply sell the same product worldwide.
However, because consumer needs vary by country depending on culture and
the level of economic development, a firm's ability to sell the same product will
be constrained.

AACSB: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
105. 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: Understand
Difficulty: 3 Hard
Learning Objective: 18-01 Explain why it might make sense to vary the attributes of a product from country to country.
Topic: Product Attributes
106. 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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
107. 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: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
108. 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: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
109. What is channel length? What is the most important determinant of channel
length? Mention two factors that shorten channel length.

Channel length refers to the number of intermediaries between the producer


and the consumer. The most important determinant of channel length is the
degree to which the retail system is fragmented. Fragmented retail systems tend
to promote the growth of wholesalers to serve retailers, which lengthens
channels. However, the internet and the entry of large discount superstores
have served to shorten channel lengths.

AACSB: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
110. Describe an exclusive distribution channel. Consider the implications of channel
exclusivity for outside firms.

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


Channel exclusivity is very high in Japan, which makes the Japanese market so
difficult to penetrate effectively. In Japan, relationships between manufacturers,
wholesalers, and retailers often go back decades. Many of these relationships
are based on the understanding that distributors will not carry the products of
competing firms. Firms from other countries may find it very difficult to break
into the Japanese market as a result of this exclusivity.

AACSB: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-02 Recognize why and how a firm's distribution strategy might vary among countries.
Topic: Distribution Strategy
111. 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: Understand
Difficulty: 2 Medium
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

112. 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: Reflective Thinking


Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy

113. 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: Understand
Difficulty: 1 Easy
Learning Objective: 18-03 Identify why and how advertising and promotional strategies might vary among countries.
Topic: Communication Strategy
114. 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: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
115. What is predatory pricing? Describe how a firm might use predatory 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. 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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
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: Reflective Thinking


Blooms: Understand
Difficulty: 3 Hard
Learning Objective: 18-04 Explain why and how a firm's pricing strategy might vary among countries.
Topic: Pricing Strategy
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: Reflective Thinking


Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development
119. 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: Understand
Difficulty: 3 Hard
Learning Objective: 18-05 Describe how the globalization of the world economy is affecting new-product development within the
international business firm.
Topic: New-Product Development