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Question Paper

International Marketing (MB351M) : July 2006


Section A : Basic Concepts (30 Marks)
• This section consists of questions with serial number 1 - 30.
• Answer all questions.
• Each question carries one mark.
• Maximum time for answering Section A is 30 Minutes.

< Answer >


1. In which of the following sampling, scientific methods are not followed?
(a) Convenience sampling
(b) Quota sampling
(c) Panel sampling
(d) Judgment sampling
(e) Area sampling.
2. Rolls Royce and Harrods opt for following global target market strategy (ies) by concentrating only on < Answer >
the upscale, prestige and premium segment.
I. Concentrated global marketing strategy.
II. Undifferentiated global marketing strategy.
III. Differentiated global marketing strategy.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (II) above
(e) Both (I) and (III) above.
3. Which of the following psychographic segments consists of mostly women of different age groups, who < Answer >
face a constant financial and family pressure?
(a) Achievers
(b) Strivers
(c) Pressured
(d) Traditionals
(e) Adapters.
4. Which of the following forms of brand piracy means diluting the product quality and selling it under the < Answer >
same trademark?
(a) Passing off
(b) Reverse Engineering
(c) Dumping
(d) Counterfeiting
(e) Outright piracy.
< Answer >
5. IBRD refers to
(a) International Bank for Rural Development
(b) International Business Regulation and Design
(c) International Bank for Reconstruction and Development
(d) International Bank for Rehabilitation and Development
(e) International Bank for Research and Development.
(e) International Bank for Research and Development.
6. High-tech products, which are effectively positioned by highlighting their features belong to the category < Answer >
of
(a) Special interest products
(b) Technical products
(c) Demonstration products
(d) Global village products
(e) Products that use a universal theme.
< Answer >
7. Which of the following is not a commonly used trait in behavioral segmentation?
(a) Gender
(b) Occasions
(c) Usage rate
(d) Loyalty status
(e) Benefits sought.
< Answer >
8. Which of the following is not an advantage of marketing in less developed countries?
(a) Unexploited markets
(b) Tax advantages
(c) Less competition
(d) Unexplored resources
(e) Current size and growth potential.
9. Which of the following is not a factor influencing the product design decisions of international < Answer >
marketers?
(a) Preferences
(b) Cost
(c) Laws and Regulations
(d) Compatibility
(e) Usage.
10. Which of the following is a broader strategic alliance aimed at collaborating in areas, such as R&D, < Answer >
production and distribution?
(a) Takeover
(b) Contractual agreement
(c) Licensing
(d) Joint venture
(e) Franchising.
< Answer >
11. Which of the following is not an environmental influence on pricing decisions?
(a) Nature of product or Industry
(b) Devaluation and Revaluation
(c) International division structure
(d) Market demand
(e) Inflation.
12. Markets are unique and specific factors related to then have to be taken into account while making a < Answer >
pricing decision. Which global pricing alternative(s) does this, assumption underlie?
I. Ethnocentric approach.
II. Polycentric approach.
III. Geocentric approach.
(a) Only (I) above
(b) Only (II) above
(c) Only (III) above
(d) Both (I) and (III) above
(e) Both (II) and (III) above.
(e) Both (II) and (III) above.
13. While deciding on a brand name for the global market, all of the following aspects are taken into < Answer >
consideration except
(a) The brand name should not have any negative connotation
(b) It should differentiate the product from other similar products
(c) Ensure exchange of insights and best practices across their business units in different countries
(d) The name must indicate the products major benefits
(e) Must be compatible with other products in the product line.
14. “Market skimming strategy is adopted when the product is truly innovative. As the competition grows, < Answer >
companies lower their prices”. Which of the following groups adopt the product when the product has
almost reached the stage of maturity?
(a) Early adopters
(b) Trendsetters
(c) Late majority
(d) Early majority
(e) Laggards.
< Answer >
15. Which of the following is not a constraint in designing of international channels?
(a) Product
(b) Customers
(c) Price
(d) Intermediaries
(e) Environment.
< Answer >
16. In international marketing, all of the following ways differentiate publicity from advertising except
(a) Publicity is primarily informative, while advertising is both informative and persuasive
(b) Publicity is more subdued in tone compared to an advertisement
(c) It is more subjective than an advertisement
(d) Publicity does not identify the sponsor
(e) Information provided as a part of publicity is not repetitive while in advertising it is often
iterative.
< Answer >
17. Which of the following is/are external factor(s) influencing the global communication process?
I. Language.
II. Local economy.
III. Socio-cultural factors.
IV. Competition.
V. Laws.
(a) Only (IV) above
(b) Only (V) above
(c) Both (I) and (III) above
(d) (I), (II), (III) and (IV) above
(e) All (I), (II), (III), (IV) and (V) above.
< Answer >
18. Which of the following is not an element of international product program?
(a) Product attributes
(b) Warranties
(c) Influence of government
(d) Labeling
(e) Service policies.
< Answer >
19. Which of the following is/are factor(s) that contribute to the rise of private brands?
I. Substantial price decreases by major brand manufacturers.
II. Lack of variety in the quality of brands available in the market place.
III. Increasing power of retailers.
IV. As customers gain more knowledge of products in the market place, they become more careful and
intelligent buyers and when they find that private brands offer then the best value, they invariably
buy them.
(a) Only (I) above
(b) Only (III) above
(c) Both (II) and (IV) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.
< Answer >
20. Which of the following is not true with regard to effective brand planning programs?
(a) Involve an analysis of customers, competitors and the brand
(b) Involve an exclusive focus on product attributes
(c) Include brand equity measurement and goals
(d) Involve programs that communicate the brand’s identity
(e) Include a mechanism to tie global brand strategies to country brand strategies.
21. High-touch products that use universal emotions like love, play, heroism, meterialism, etc., to position < Answer >
themselves in the global markets belong to the category of
(a) Products that use universal themes
(b) Global village products
(c) Products that solve a common problem
(d) Special interest products
(e) Demonstration products.
< Answer >
22. In international marketing, which of the following is not a characteristic feature of product mix?
(a) Width
(b) Length
(c) Depth
(d) Breadth
(e) Consistency.
< Answer >
23. UNCTAD is
(a) United Nations Conference on Territory and Development
(b) United Nations Confederation on Trade and Distribution
(c) United Nations Conference on Trade and Development
(d) United Nations conference on Transnational and Development
(e) United Nations confederation on Transnational and Development.
< Answer >
24. Which of the following is/are problem(s) faced by an international marketing researcher?
I. Problem of numerous markets.
II. Problems with secondary data.
III. Comparing several markets.
IV. Problems with primary data.
V. Infrastructure constraints.
(a) Only (II) above
(b) Only (V) above
(c) Both (I) and (III) above
(d) (II), (III), (IV) and (V) above
(e) All (I), (II), (III), (IV) and (V) above.
25. Which of the following data relate to the existence of integrative networks, and the availability and cost < Answer >
of certain basic resources such as electricity, financial resources etc.?
(a) Political data
(b) Foreign Exchange data
(c) Infrastructure data
(d) Marketing data
(e) Legal and Regulatory data.
(e) Legal and Regulatory data.
< Answer >
26. Which industrial channel structure would be best suited to a business-to-business marketer like Boeing?
(a) A relatively direct channel
(b) A relatively indirect channel
(c) A channel that includes agents and brokers
(d) A channel that includes independent franchisees
(e) A channel that includes agents and distributors.
27. Control is the key to effective international management. Which of the following is not a factor affecting < Answer >
control?
(a) Gender
(b) The product
(c) Communication systems
(d) Size of international operations
(e) Management philosophy.
< Answer >
28. Which of the following is/are generally used interactive communication mode(s)?
I. Events.
II. Interactive forums.
III. Hosting/moderation.
IV. Focus groups and surveys.
(a) Only (III) above
(b) Only (IV) above
(c) Both (I) and (III) above
(d) (II), (III) and (IV) above
(e) All (I), (II), (III) and (IV) above.

29. Movement of new product to and in overseas market to make them available to foreign customers, is < Answer >
known as
(a) Production lag
(b) Product movement
(c) Market diffusion
(d) Market development
(e) Market lag.
< Answer >
30. Which of the following refers to the degree to which a culture fosters social inequality?
(a) Consumer ethnocentrism
(b) Power distance
(c) Individualism
(d) Uncertainty avoidance
(e) Psychographics.

END OF SECTION A

Section B : Caselets (50 Marks)


• This section consists of questions with serial number 1 – 7.
• Answer all questions.
• Marks are indicated against each question.
• Detailed explanations should form part of your answer.
• Do not spend more than 110 - 120 minutes on Section B.
Caselet 1
Read the caselet carefully and answer the following questions:
< Answer >
1. The objective of transfer pricing (from the point of view of the firm) is to ensure corporation-
wide efficiency. Explain the different approaches available for transfer pricing.
(6 marks)
< Answer >
2. With reference to the given caselet explain how the tour operators manage capacity in the
long-term?
(7 marks)
< Answer >
3. “Faced with a limited ability to reduce output in the short term, tour operators can, for the
most part, only try to match supply and demand via the price mechanism”. Explain this
process of price mechanism.
(6 marks)

UK holiday-makers take some 36 million overseas holidays each year. Of these, almost half are "packaged holidays"
where the consumer buys a complete package of accommodation, flight and other extras all bundled into one price. This
is a highly competitive market with a small number of large tour operators (including Thomson Holidays, Airtours, First
Choice, JMC) battling hard for market share.
Package holidays were devised partly as a way of achieving high sales volumes and reducing unit costs by allowing tour
operators to purchase the different elements (flight, catering, accommodation etc) in bulk, passing some of the savings
on to consumers.
Estimates of tour operating margins vary, but fairly low average figures - of the order of 5% (or around £22 on the
typical holiday price of around £450) are widely assumed in the mainstream segment of the market. It should however
be noted that vertically-integrated holiday operators (where the tour operator also owns an airline and a travel agency)
will normally also generate profit from consumers. Accordingly, the gross margins on the total operations of the
integrated operators may be larger than those on their tour operation activities alone.
Tour operators need to operate at high levels of capacity utilisation (figures of the order of 95% or more in terms of
holidays sold) in order to maintain profitability. Matching capacity and demand is therefore critical to profitability,
especially since package holidays are perishable goods - a given package loses all its value unless it is sold before its
departure date.
Perishable goods markets require highly flexible production and distribution systems so that supply and demand can be
closely matched and ‘waste’ production minimised. But suppliers of package holidays are severely hampered in
precisely aligning capacity and demand. They need to ‘produce’ (i.e. contract for the necessary flights, accommodation
etc) virtually the whole of what they expect to sell a long time before it is ‘consumed’ (i.e. when the consumer departs
for the holiday destination, or at the earliest, when the consumer pays the bulk of the price – usually around 8 weeks
before departure).
Tour operators’ capacity plans, and the associated contracts with hoteliers and airlines, are typically fixed 12-18 months
ahead of the holiday season. Some adjustments are possible after this date. However, within about 12 months of
departure date, once the booking season has begun (i.e. from about the summer of 2002 for departures in summer 2003)
the scope for changes is severely limited. This is due to the inflexibility of many commitments with suppliers and the
problems associated with changing dates, flights, hotels etc. of customers who have already booked.
Only by contracting for their expected needs well ahead of time, enabling suppliers to plan ahead, can tour operators
obtain a sufficiently low price to attract an adequate volume of profitable sales. Tour operators therefore need to
encourage early bookings. These improve cash-flow – a substantial deposit (usually around£100 per person, equivalent
to around 25% of a typical short-haul holiday price) is paid by consumers on booking; the balance is payable two
months in advance of departure (except, naturally, for ‘late’ bookings).
Tour operators also reduce the risk of unsold holidays, and the consequent need for discounting, later on. Adding
capacity is easier than reducing it during a season, although in some instances, e.g. where a particular resort is proving
especially popular, all suitable accommodation (and/or flights to the relevant airport) will already have been reserved, at
least for the peak period. But it is generally difficult for tour operators to ‘unwind’ their contracts, especially those for
air transport, without substantial penalties. The tour operator, accordingly, bears almost all of the risk of any contracted
capacity remaining unsold.
Faced with this limited ability to reduce output in the short-term (i.e. once the brochures are published and the selling
season has started), tour operators can, for the most part, only try to match supply and demand via the price mechanism
– in other words, by discounting once it becomes clear that sales of their holidays appear unlikely to match the supply
that they have contracted.
The fixed costs of tour operation (mainly, the cost of the airline seat and most of the accommodation and catering costs)
make up a high proportion of total costs, so that relatively high levels of discount can be applied if necessary to clear
unsold stock. Reductions of up to 25% off the initial brochure price are available on some ‘late’ sales – although
consumers will often in such cases be required to accept the operator’s choice of hotel, or even the resort, according to
availability.
Discounting of holidays during this ‘lates’ part of the selling season is a similar phenomenon to that of ‘end of season
stock clearance’ sales in other retail sectors (e.g. clothing). However the impact of discounting on ‘lates’ in a normal
season should be seen in the context of the operator’s turnover for the season; it is effectively reduced by only about 5%
(25% off 25% of holidays sold). Discounts (or equivalent incentives such as ‘free child’ places or ‘free insurance’) for
early purchase are also offered, but they are much less significant both as to the amount of the reduction (5-10% appears
typical) and its impact on costs and turnover. About three-quarters of all package holidays typically are sold at or close
to the brochure price.
The fundamental rigidities in the market have important consequences for competition. They make suppliers closely
dependent on each other from a strategic, as well as a short-term, viewpoint. In particular, any decision by a tour
operator to try to increase market share by increasing capacity (i.e. offering more holidays for sale) will lead to a fall in
prices unless competitors reduce their share by an equivalent amount by cutting capacity.

Caselet 2
Read the caselet carefully and answer the following questions:
< Answer >
4. “Brand is a combination of name, words, symbols, or design that identifies the product and its
source and distinguishes it from competing brands”. Explain the various ways in which
branding is practiced globally.
(7 marks)
< Answer >
5. Discuss the various marketing activities undertaken by ‘Skoda” along with its different
product launches and responses. Also, explain the key elements of the promotional mix used
by ‘Skoda’.
(9 marks)
Skoda had a monopoly in car manufacturing in Czechoslovakia until the 1989 'Velvet Revolution'. After this the Czech
government started looking for a commercial partner to revitalise its Skoda factories.
In 1991, Volkswagen took a 30% stake in Skoda and started work in training and educating the workforce to Western
quality standards. It invested over £2 billion in the plant, research, development and new models. Ten years later, in
2001, VW took total control of the business.
The first two launches from the new Skoda camp were well-received by the automotive press. The Felicia launched in
1994 was built as an old-style Skoda, but enjoyed the benefit of VW features. The 1998 Octavia was built on the VW
group platform.
The costs of the improved VW car structure pushed up Skoda prices. The cars carried a higher price tag and Skoda
needed to convince consumers that this price was worth paying.
A VW marketing manager working for Skoda explained:
"We needed to move away from being a cheap brand to being a value-for-money brand. At the same time, we badly
needed to find our own positioning within the group, rather than just trading on being part of the VW Group. Otherwise,
Otherwise, we might just as well have re-branded ourselves as VW, with very little reason for existence."
Skoda’s first VW-backed model was the Octavia. It was launched in the UK with a £10m promotional campaign-
Skoda's highest-ever spend on a marketing campaign.
However, the Octavia launch was a failure. Just 6,154 Octavia cars were sold over the year following the car's launch,
despite the fact that the car achieved almost unanimously good reviews. Market research at the time suggested that sixty
per cent of people said they “would never buy a Skoda”.
Only a fifth of early Octavia buyers were under the age of 45 and a third had previously owned Skoda cars. Skoda's
image was old, unfashionable and out of sync with its products.
VW resisted the temptation to scrap the Skoda brand altogether. Despite its poor image in the UK, Skoda still
commanded respect in Eastern Europe and held its own in other Western European countries.
The Skoda brand also had high “brand awareness” in the UK even if it was for the wrong reasons and a reliable
distribution channel through a network of independent car retailers.
The next product launch was the Skoda Fabia. It was launched with a much smaller marketing campaign and an
advertising message that poked gentle fun at Skoda’s customer perception:
"The Fabia is a car so good that you won't believe it's a Skoda"
Key elements of the promotional mix were as follows:
• The Fabia was launched with a number of television, print and poster ads
• The initial TV campaign ran for four-and-a-half weeks and the print and poster campaign ran for two weeks.
• Expensive TV and print campaigns were supported by both PR and direct mail campaigns
• The PR push targeted the consumer press and attempted to get journalists to discuss Skoda in a positive light
• The direct mailings tried to build on loyalty levels among Skoda drivers and get across the brand's new image.
Auto Express magazine carried a competition to win a Skoda car that generated 27,000 responses. The respondents who
didn't win the car were profiled to check their similarity to the average Skoda driver and followed up. Hot prospects
received a scale model as a consolation prize and an invitation to test drive a full-size model.
The results of the marketing campaign were impressive. By the end of 2000, more than 11,000 Fabias had been sold and
even Octavia sales were seeing a 29% increase on the previous year. In July 2000, the near impossible finally happened -
Skoda had a waiting-list for its cars.
There was also a less obvious, but equally important shift in the public's perception of Skoda. Only 42% of those polled
after the campaign said they would not consider buying a Skoda.
Many UK customers now don’t see a Skoda in front of them – they see a cut-price VW.
Critics of the Skoda would be surprised to hear the Skoda is now one of the fastest-growing car brands in the UK motor
industry. The Czech car company boosted its sales in the UK in 2001 by 24% as opposed to the average market growth
of 10.7%. This built on growth of 34% in 2000.

Caselet 3
Read the caselet carefully and answer the following questions:
< Answer >
6. Discuss the implications for brands in mature markets.
(7 marks)
< Answer >
7. With reference to the given caselet, explain the various strategies available to marketers for
managing brands in slow-growth or declining markets.
(8 marks)
Many consumer markets are now labeled“mature”. Take some examples:
• Tea and biscuits
• Cider and beer
• Fast food
• Ice cream
Mature markets are generally classified as those that experience sales growth of about two per cent a year –
somewhere near the rate of price inflation. The implication of this growth rate is that there is unlikely to be significant
volume growth in the market. And if there is, it implies that average selling prices are falling.
Firstly and most importantly the market may offer very few new or promising opportunities for rapid growth. Brands
in such markets may be nearing the end of their life cycles.
in such markets may be nearing the end of their life cycles.
It is generally believed that rapid improvements in technology and the push towards globalisation mean that the life-
cycles of brands are getting shorter.
It took the motor car market almost a century to reach the current level of maturity. Yet customers who wanted a
mobile phone got one within two years of the market taking off.
Part of the problem is that brands can be communicated much more effectively and wider than ever before. The
growth stage of a new product or brand can be much steeper but shorter.
Sales of many successful brands soar immediately after they launch, but often flatten out as they attract all the
potential customers they can and face competition from copycats (otherwise known as “me-too” brands!). After the
initial growth spurt, brands are forced into taking a range of measures, such as price cuts, introducing sales
promotions and special offers, and diverging into sub-branded products and off-shoots to keep interest and sales
momentum up.
One strategy is the re-launch and re-position mature brands. Lucozade and Ribena are excellent examples of mature
brands which have been successfully re-packaged and re-targeted in both cases at the youth market.
Product innovation is another strategy.
A good example is New Covent Garden Soups. This business focused on providing packaged fresh soups for sale by the
major grocery supermarkets who previously had only sold tinned or dried soups. In doing so, New Covent Garden
Soups grew rapidly by adding value to what was one of the most mature segments of the food market.
Marketers can also reverse the decline of brands and markets through what is known as "discontinuous innovation" -
a development that fundamentally alters the state and perceptions of a sector.
Haagen-Dazs heralded the rebirth of ice cream as a premium product and paved the way for brands such as Ben &
Jerry's to cash in on this enlivening of a once very stagnated market.
In a sector where loose tea ruled, tea bags revolutionised the way the drink was perceived - ending the ritual of
pouring tea from a pot and reinventing it as a fast turnover convenience drink. Round tea bags brought further
innovation to this market.
Cider, which was considered a declining market in the 1980’s, was re-invigorated by Diamond White - a high
strength white cider.
Another area of opportunity for mature brands and products is in emerging markets.
For example, US-based Kentucky Fried Chicken has recently announced that it is considering opening several
hundred new restaurants in the UK to sell the products of other brands owned by its US parent company (including
Taco bell). UK consumer trends towards more eating out more the lack of alternative restaurants and an unusual
willingness to eat fast food has made the UK a key market for US owned fast food chains, which face stagnation at
home.
In another example, Dell the direct sales computer manufacturer has announced it is responding to lower growth in
the personal computer market by launching a range of own-brand printers, rather than re-selling models from the likes
of Epson.
The more technologically advanced the product, the shorter it’s period of rapid growth, and the longer its era of flat
sales and eventual stagnation. There is little growth in sales of televisions, though innovation during the Eighties kept
the market buoyant. There is a replacement cycle, rather than growth in penetration, so people generally buy the latest
wide-screen TVs when they are looking for a new set. The experience of the computer market over the past year is a
convincing example of how quickly markets rise and fall.

END OF SECTION B

Section C : Applied Theory (20 Marks)


• This section consists of questions with serial number 8 - 9.
• Answer all questions.
• Marks are indicated against each question.
• Do not spend more than 25 -30 minutes on section C.

8. “The ability and competencies of a firm to realize its objectives in attaining or sustaining a < Answer >
competitive advantage is affected by the timing of entry of the firm”. In light of the above,
discuss the issues or factors on which the timing of entry in international markets depends.
(10 marks)
9. Explain the principles, which can help MNCs improve their promotional operations in foreign < Answer >
markets.
(10 marks)
END OF SECTION C

END OF QUESTION PAPER

Suggested Answers
International Marketing (MB351M) : July 2006
Section A : Basic Concepts
1. Answer : (a) < TOP
>
Reason : Convenience sampling: Under this method, the sample
is selected at the convenience of the researcher. This is
otherwise known as ‘Accidental Sampling’. Scientific
methods are not followed. There is a possibility that the
respondents may not represent the sample of a
population. There is a higher chance for personal bias.
Therefore, this method is not suggested for research.
2. Answer : (a) < TOP
>
Reason : Concentrated global marketing strategy
Under this method, marketers concentrate only on one
segment. Companies that adopt this strategy spend all
their resources on understanding this segment. They
design and develop the marketing mix according to the
needs and tastes of this target segment.
For eg: Rolls Royce and Harrods opt for this strategy
by concentrating only on the upscale, prestige and
premium segment. An advantage with this strategy is
that companies can avoid the attention of larger
competitors operating in other segments.
3. Answer : (c) < TOP
>
Reason : The pressured segment comprises mostly women of
different age groups. They face a constant financial and
family pressure.
4. Answer : (d) < TOP
>
Reason : Counterfeiting means diluting the product quality and
selling under the same trademark. This is quite
prevalent in the clothing industry. For eg. Counterfeited
versions of Levi’s branded Jeans are available in market
at Rs.250 when the original product costs more than
three times this price.
three times this price.
5. Answer : (c) < TOP
>
Reason : IBRD refers to International Bank for Reconstruction
and Development.
6. Answer : (b) < TOP
>
Reason : Technical products: Those who have a specialized need
purchase technical products. Computers, chemicals,
financial services etc., are examples of technical
products. Customers are knowledgeable about these
products. These types of products can be effectively
positioned by highlighting the features of the products.
7. Answer : (a) < TOP
>
Reason : Gender is a demographic factor of segmentation.
Options (b), (c), (d) and (e) all are commonly used traits
in behavioral segmentation.
8. Answer : (e) < TOP
>
Reason : Current size and growth potential is a criteria for
targeting.
Options (a), (b), (c) and (d) are advantages of
marketing in less developed countries.
9. Answer : (e) < TOP
>
Reason : Four factors influence the product design decisions of
international markets. Preferences, cost, laws and
regulations and compatibility.
Usage is a characteristic for classifying products.
10. Answer : (d) < TOP
>
Reason : Joint venture is a broader strategic alliance aimed at
collaborating in areas such as R&D, production and
distribution. For eg. General motors had joint-venture
agreements with Toyota and Suzuki in Japan.
11. Answer : (c) < TOP
>
Reason : International division structure is a pattern of
International organization development. Options (a),
(b), (d) and (e) are environmental influences on pricing
decisions.
12. Answer : (c) < TOP
>
Reason : Geocentric approach: A firm adopting this approach
takes a medium position between fixing a single price
worldwide and fixing different prices based on the
requirements of subsidiaries. One of the fundamental
assumptions underlying this approach is that markets
are unique, and specific factors related to them have to
be taken into account while making a pricing decision.
13. Answer : (c) < TOP
>
Reason : Ensure exchange of insights and best practices across
their business units in different countries is to realise
the benefits of global brand leadership.
Options (a), (b), (d) and (e) are taken into consideration
while deciding on a brand name for the global market.
14. Answer : (e) < TOP
>
Reason : Laggards are the last group to adopt the product when
the product has almost reached the stage of maturity.
the product has almost reached the stage of maturity.
15. Answer : (c) < TOP
>
Reason : Price is not a constraint in designing international
channels where as customers, product, environment and
intermediaries are constraints in designing international
channels.
16. Answer : (c) < TOP
>
Reason : Publicity is more objective than an advertisement.
17. Answer : (e) < TOP
>
Reason : The external factors influencing global communication
process are language, local economy, socio-cultural
factors, competition and laws.
18. Answer : (c) < TOP
>
Reason : Influence of government is a factor that encourages or
restrains product adaptation in different countries.
Product attributes, warranties, labeling and service
policies are elements of international product program.
19. Answer : (d) < TOP
>
Reason : The factors that contribute to the rise of private brands
are:
• Substantial price increases by major brand
manufacturers.
• Lack of variety in the quality of brands available in
the market place.
• Increasing power of retailers.
• As customers gain more knowledge of products in
the market place, they become more careful and
intelligent buyers. And when they find that private
brands offer them the best value, they invariably buy
them.
20. Answer : (b) < TOP
>
Reason : Involve an exclusive focus on product attributes is not
true with regard to effective brand planning programs.
Options (a), (c), (d) and (e) are true with regard to
effective brand planning programs.
21. Answer : (a) < TOP
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Reason : Products that use universal emotions like love, play,
heroism, materialism, etc., to position themselves in the
global markets belong to the category of products that
use universal themes. These themes are transnational
and are acceptable in any country irrespective of the
differences.
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22. Answer : (d) >
Reason : A product mix consists of all the product mix lines and
categories. It has a certain characteristic features like
product width, length, depth and consistency.
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23. Answer : (c) >
Reason : UNCTAD is United Nations Conference on Trade and
Development.
Development.
24. Answer : (e) < TOP
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Reason : The problems faced by an international marketing
researcher are:
• Problem of numerous markets.
• Problems with secondary data.
• Comparing several markets.
• Problems with primary data.
• Infrastructure constraints.
25. Answer : (c) < TOP
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Reason : Infrastructure data relate to existence of integrative
networks and the availability and cost of certain basic
resources such as electricity, financial resources etc.
26. Answer : (a) < TOP
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Reason : A relatively direct channel structure will be best suited
to a business-to-business marketer like Boeing.
27. Answer : (a) < TOP
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Reason : Gender is a demographic factor. Markets are segmented
on the basis of gender. Industries like textiles,
cosmetics, toiletries, magazines, hairdressing and shoes,
especially, use gender segmentation. The product,
communication systems, size of international operations
and management philosophy are all factors that effect
control.
28. Answer : (e) < TOP
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Reason : Interactive communication modes that are generally
used are:
 Events.
 Interactive forums.
 Hosting/moderation.
 Focus groups and surveys.
29. Answer : (c) < TOP
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Reason : Movement of new product to and in overseas market to
make them available to foreign customers is known as
Market diffusion.
30. Answer : (b) < TOP
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Reason : Power distance refers to the degree to which a culture
fosters social inequality.

Section B : Caselets
1. The different approaches available for transfer pricing are explained below:
Market-based transfer price
Prices prevailing in the market can be used as the basis for transfer pricing. Firms following this approach cannot
be held to be taking unfair advantage of transfer pricing mechanism. This method also appeals to tax authorities.
Transfer at cost
Firms following this approach treat manufacturing facilities as cost centers and not as profit centers. This method
resolves many internal disputes over allocation of profits. But tax authorities object to companies using this method
because no profit is allocated to the supplying unit. Even the supplying division is not happy following this
approach. It feels that it is subsidizing the international division and foregoing its profits unlike other profit centers.
Cost-plus pricing
Cost-plus pricing attempts to add some percentage to cost to make it acceptable to both supplying and international
divisions. The “plus” is generally either a percentage of production division overhead or a percentage return on
production division investment.
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2. • Tour operators need to operate at high levels of capacity utilization (figures of the order of 95% or more in
terms of holidays sold) in order to maintain profitability. Matching capacity and demand is therefore critical
to profitability, especially since package holidays are perishable goods - a given package loses all its value
unless it is sold before its departure date.
• Only by contracting for their expected needs well ahead of time, enabling suppliers to plan ahead, can tour
operators obtain a sufficiently low price to attract an adequate volume of profitable sales. Tour operators
therefore need to encourage early bookings.
• These improve cash flow – a substantial deposit (usually around£100 per person, equivalent to around 25%
of a typical short-haul holiday price) is paid by consumers on booking; the balance is payable two months in
advance of departure (except, naturally, for ‘late’ bookings).
• Tour operators also reduce the risk of unsold holidays, and the consequent need for discounting, later on.
Adding capacity is easier than reducing it during a season, although in some instances, e.g. where a particular
resort is proving especially popular, all suitable accommodation (and/or flights to the relevant airport) will
already have been reserved, at least for the peak period.
• But it is generally difficult for tour operators to ‘unwind’ their contracts, especially those for air transport,
without substantial penalties. The tour operator, accordingly, bears almost all of the risk of any contracted
capacity remaining unsold.
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3. Faced with this limited ability to reduce output in the short-term (i.e. once the brochures are published and the
selling season has started), tour operators can, for the most part, only try to match supply and demand via the price
mechanism – in other words, by discounting once it becomes clear that sales of their holidays appear unlikely to
match the supply that they have contracted.
The fixed costs of tour operation (mainly, the cost of the airline seat and most of the accommodation and catering
costs) make up a high proportion of total costs, so that relatively high levels of discount can be applied if necessary
to clear unsold stock. Reductions of up to 25% off the initial brochure price are available on some ‘late’ sales –
although consumers will often in such cases be required to accept the operator’s choice of hotel, or even the resort,
according to availability.
Discounting of holidays during this ‘lates’ part of the selling season is a similar phenomenon to that of ‘end of
season stock clearance’ sales in other retail sectors (e.g. clothing). However the impact of discounting on ‘lates’ in
a normal season should be seen in the context of the operator’s turnover for the season; it is effectively reduced by
only about 5% (25% off 25% of holidays sold). Discounts (or equivalent incentives such as ‘free child’ places or
‘free insurance’) for early purchase are also offered, but they are much less significant both as to the amount of the
reduction (5-10% appears typical) and its impact on costs and turnover. About three-quarters of all package
holidays typically are sold at or close to the brochure price.
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4. Branding is practiced in many ways. They are:


• Individual brand names: Firms adopting this strategy promote their products as stand-alone brands. When
promoting such brands, the firm rarely highlights its association with that particular brand.
• Blanket family name for all products: A firm following this strategy markets all its products under a single
umbrella. Sony sells all its products under a single family name.
• Separate family names for all products: Department stores practice this type of branding strategy. They
give different in-house brand names to different types of merchandise.
• Company name and individual product name: Ford adopts this branding strategy. It advertises
company’s name prominently along with the products. Kellogg’s is another company, which follows a similar
strategy.
• ‘No-name’, unbranded merchandise: Grocery stores adopt this strategy when they sell a range of generic
‘no-name’ products at discounted prices.
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5. The various marketing activities undertaken by ‘Skoda’ can be described as :
In 1991, Volkswagen took a 30% stake in Skoda and started work in training and educating the workforce to
Western quality standards. It invested over £2 billion in the plant, research, development and new models. Ten
years later, in 2001, VW took total control of the business.
The first two launches from the new Skoda camp were well-received by the automotive press. The Felicia -
launched in 1994 - was built as an old-style Skoda, but enjoyed the benefit of VW features. The 1998 Octavia was
built on the VW group platform.
The costs of the improved VW car structure pushed up Skoda prices. The cars carried a higher price tag and Skoda
needed to convince consumers that this price was worth paying.
A VW marketing manager working for Skoda explained:
"We needed to move away from being a cheap brand to being a value-for-money brand. At the same time, we
badly needed to find our own positioning within the group, rather than just trading on being part of the VW Group.
Otherwise, we might just as well have re-branded ourselves as VW, with very little reason for existence."
Skoda’s first VW-backed model was the Octavia. It was launched in the UK with a £10m promotional campaign-
Skoda's highest-ever spend on a marketing campaign.

Only a fifth of early Octavia buyers were under the age of 45 and a third had previously owned Skoda cars.
Skoda's image was old, unfashionable and out of sync with its products.

The Skoda brand also had high “brand awareness” in the UK –even if it was for the wrong reasons – and a reliable
distribution channel through a network of independent car retailers.

The next product launch was the Skoda Fabia. It was launched with a much smaller marketing campaign and an
advertising message that poked gentle fun at Skoda’s customer perception:

Auto Express magazine carried a competition to win a Skoda car that generated 27,000 responses. The respondents
who didn't win the car were profiled to check their similarity to the average Skoda driver and followed up. Hot
prospects received a scale model as a consolation prize and an invitation to test drive a full-size model.
The results of the marketing campaign were impressive. By the end of 2000, more than 11,000 Fabias had been
sold and even Octavia sales were seeing a 29% increase on the previous year. In July 2000, the near impossible
finally happened - Skoda had a waiting-list for its cars.
There was also a less obvious, but equally important shift in the public's perception of Skoda. Only 42% of those
polled after the campaign said they would not consider buying a Skoda.
Many UK customers now don’t see a Skoda in front of them – they see a cut-price VW.
Critics of the Skoda would be surprised to hear the Skoda is now one of the fastest-growing car brands in the UK
motor industry. The Czech car company boosted its sales in the UK in 2001 by 24% as opposed to the average
market growth of 10.7%. This built on growth of 34% in 2000.

Key elements of the promotional mix were as follows:


• The Fabia was launched with a number of television, print and poster ads
• The initial TV campaign ran for four-and-a-half weeks and the print and poster campaign ran for two
weeks.
• Expensive TV and print campaigns were supported by both PR and direct mail campaigns
• The PR push targeted the consumer press and attempted to get journalists to discuss Skoda in a positive
light
• The direct mailings tried to build on loyalty levels among Skoda drivers and get across the brand's new
image.
• Auto Express magazine carried a competition to win a Skoda car that generated 27,000 responses. The
respondents who didn't win the car were profiled to check their similarity to the average Skoda driver
and followed up. Hot prospects received a scale model as a consolation prize and an invitation to test-
drive a full-size model.
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6. Firstly – and most importantly – the market may offer very few new or promising opportunities for rapid growth.
Brands in such markets may be nearing the end of their life cycles.
It is generally believed that rapid improvements in technology and the push towards globalization mean that the life
cycles of brands are getting shorter.
It took the motorcar market almost a century to reach the current level of maturity. Yet customers who wanted a
mobile phone got one within two years of the market taking off.
Part of the problem is that brands can be communicated much more effectively and wider than ever before. The
growth stage of a new product or brand can be much steeper – but shorter.
Sales of many successful brands soar immediately after they launch, but often flatten out as they attract all the
potential customers they can and face competition from copycats (otherwise known as “me-too” brands!. After the
initial growth spurt, brands are forced into taking a range of measures, such as price cuts, introducing sales
promotions and special offers, and diverging into sub-branded products and off-shoots to keep interest and sales
momentum up.
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7. One strategy is the re-launch and re-position mature brands. Lucozade and Ribena are excellent examples of
mature brands, which have been successfully re-packaged and re-targeted – in both cases at the youth market.
Product innovation is another strategy.
A good example is New Covent Garden Soups. This business focused on providing packaged fresh soups for sale by
the major grocery supermarkets – who previously had only sold tinned or dried soups. In doing so, New Covent
Garden Soups grew rapidly by adding value to what was one of the most mature segments of the food market.
Marketers can also reverse the decline of brands and markets through what is known as "discontinuous innovation"
- a development that fundamentally alters the state and perceptions of a sector.
Haagen-Dazs heralded the rebirth of ice cream as a premium product and paved the way for brands such as Ben &
Jerry's to cash in on this enlivening of a once very stagnated market.
In a sector where loose tea ruled, tea bags revolutionised the way the drink was perceived - ending the ritual of
pouring tea from a pot and reinventing it as a fast turnover convenience drink. Round tea bags brought further
innovation to this market.
Cider, which was considered a declining market in the 1980’s, was re-invigorated by Diamond White - a high
strength white cider.
Another area of opportunity for mature brands and products is in emerging markets.
For example, US-based Kentucky Fried Chicken has recently announced that it is considering opening several
hundred new restaurants in the UK to sell the products of other brands owned by its US parent company (including
Taco bell). UK consumer trends towards more eating out more, the lack of alternative restaurants and an unusual
willingness to eat fast food - has made the UK a key market for US-owned fast food chains, which face stagnation
at home.
In another example, Dell - the direct sales computer manufacturer – has announced it is responding to lower growth
in the personal computer market by launching a range of own-brand printers, rather than re-selling models from the
likes of Epson.
The more technologically advanced the product, the shorter it’s period of rapid growth, and the longer its era of flat
sales and eventual stagnation. There is little growth in sales of televisions, though innovation during the Eighties
kept the market buoyant. There is a replacement cycle, rather than growth in penetration, so people generally buy
the latest wide-screen TVs when they are looking for a new set. The experience of the computer market over the
past year is a convincing example of how quickly markets rise and fall.
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Section C: Applied Theory


8. Timing of entry into International Markets
According to Green, Barcley, and Rayons, the competitive position, specifically the ability and competencies of a
firm to realize its objectives in attaining or sustaining a competitive advantage is affected by the timing of entry of
the firm. The timing of entry in international markets depends on the following:
Level of Internationalization
Li and Sullivan define the level of internationalization as the “degree of involvement of a firm in the international
markets”. According to Chang, Shaver, et al, firms which have good exposure in international markets will enter
new markets earlier. They leverage their experience and exposure and exploit new markets early. So, firms, which
have greater level of international experience, enter new markets at an early stage.
Size of the firm
According to Chandler, Hymer, and Knickerbocker, the size of the firm determines its market power both in the
domestic and international markets. Big firms can enter international markets early using their resources, and
economies of scope and scale. They can take risk and go in for a high control entry mode. They also “invest heavily
in building a strong market position”. In markets where there are stiffer regulations, they opt for joint ventures.
They easily gain access to suppliers and other scarce resources.
But small firms with small cash flows cannot commit high levels of resources and take risk. They enter foreign
markets either through exporting/licensing/franchising. They do not make huge investments in the first place.
Usually, they are late entrants.
Economies of Scope
Firms, which offer a wide range of services or products, have a better chance to enter new markets. Such firms are
better prepared and can handle uncertainties regarding the types of products that are required in the new markets.
Firms, which offer a wide range of products/services, can develop ‘synergy’ across products/services, which make
them efficient and maintain high quality at every stage of manufacturing and marketing. So, these firms take more
risk and enter new markets at an early stage. Small firms may not be able to meet uncertainties in the foreign
markets. So, they do not take a chance.
Availability of Information
According to some researchers, the “firm’s ability to obtain the market signals and opportunities” is an important
aspect that affect the actions of the firm. Availability of information is an important factor that affects the actions of
the firm. For example, an industrial equipment-manufacturing firm in the Midwest of US foresaw the saturation of
the domestic market and employed one of its team members to explore new markets. Subsequently, they entered
international markets even before the home market was saturated. Though they experienced hardships in the
beginning, soon they started earning profits. This deliberate trade-off strategy resulted in the increase of their
international sales from 5% of total corporate revenue in 1965 to 50% by 1980.
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9. Follwing the principles given below can help MNCs improve their promotional operations in foreign markets.
• Know the Market
• Know the Foreign Executives
• Work with a Single Network Agency
• Know the Foreign Advertising Account Executives
• Long Planning Lead Times
• Budget Approval Authority with the Home
Know the market
Both the international advertising executive situated at company headquarters and the local advertising executive
should have good market knowledge. They should collect market data continuously on their products or the
competitors, with regard to performance in international markets. Information like customer demographics (age,
sex, income level and occupation), shopping behaviour and product usage have to be on hand. Comparative
analysis of this data, collected from different markets, highlights the differences between them. Such analysis can
help decide whether to choose a standardized campaign or a differentiated one.
Know the foreign executives
It is important that MNC managers get to know the executive in their foreign affiliates, operating divisions and
independent distributorships. Getting cooperation is easier when managers know the strengths, weaknesses,
competencies and biases of their counterparts in other countries. This is equally true when they are working with
executives from other companies.
Work with a single network agency
It is better to work with a large international advertising agency with branches in a foreign marketing area than
with separate agencies in each area. Using a network agency makes for better coordination. Individual or separate
agencies often mean poor cooperation, lack of communication and inter-agency jealousies. All these can hamper an
effective advertising campaign.
Know the foreign advertising account executives
The MNC managers must also get to know the advertising agency they are going to work with, and the agency’s
personnel. This is important whether the company employs a network agency or separate local agencies. Managers
must insist on meeting local advertising agency executives. They should see sample of the advertising executives’
past work on other accounts. Becoming familiar with their style, media biases, preferences and other unique factors
helps realistic assessment of campaign suggestions.
Long planning lead times
There are inherent advantages with a long planning horizon. It gives enough time to visit markets that need special
attention. Longer lead times also allow foreign advertising managers to internalise stated campaign objectives.
More lead time is particularly useful when a firm is going in for non-standardized campaigns. It will have enough
time to develop a campaign suited to local conditions that is consistent with overall corporate goals.
Budget approval authority with the home office
Keeping budget approvals with the home office ensures that money is not sanctioned and disbursed till local
campaigns are appropriately developed. It also sees to it that a standardized campaign theme is suitably developed.
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