International Business: The Challenges of Globalization, 9e (Wild)
Chapter 12 Analyzing International Opportunities
1) Which of the following is not one of the three steps in increasing market share, revenue, and
profits?
A) assess alternative markets
B) evaluate respective costs, benefits, and risks
C) perform a situation analysis
D) select market with most potential for entry or expansion
2) The first step in the screening process for potential markets and sites is to ________.
A) select a favorable market or site
B) measure the market or site potential
C) identify the basic appeal of a market
D) assess the national business environment
3) Which of the following steps of the market screening process involves examining the cost of
transporting goods?
A) identification of basic appeal of a market
B) assessment of the national business environment
C) measurement of market or site potential
D) selection of the market or site
4) Which of the following steps of the market screening process involves the analysis of the
quality of workforce, materials, and infrastructure?
A) identification of basic appeal of a market
B) assessment of the national business environment
C) measurement of market or site potential
D) selection of the market or site
5) Countries differ significantly in their cultures, politics, laws, and economies. International
managers must work to understand these differences and to incorporate their understanding into
market- and site-selection decisions. Which of the following steps of the market screening
process involves an evaluation of the government bureaucracy?
A) identification of basic appeal of a market
B) assessment of the national business environment
C) measurement of market or site potential
D) selection of the market or site
6) Which of the following is a characteristic of foreign direct investment?
A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management
7) The key element of political risk of greatest concern for global companies is ________.
A) the cost of transporting materials and goods
B) government regulation, government bureaucracy, and political stability
C) currency and liquidity problems
D) letting past political events blind future opportunities
8) A type of risk faced by businesses that decisions made by the government, events, or
conditions will significantly affect the profitability of a business is known as ________.
A) volatility risk
B) systemic risk
C) political risk
D) credit risk
9) Which of the following is a characteristic of foreign direct investment?
A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management
10) Which of the following steps of the screening process for potential markets involves the
evaluation of fiscal and monetary policies of a nation?
A) identification of basic appeal of a market
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
11) Which of the following steps of the market screening process examines the effects of country
image on market-entry decisions?
A) identification of basic appeal of a market
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
12) Which of the following is most likely to be caused by poor fiscal and monetary policies of a
nation’s central bank?
A) increasing levels of productivity
B) decreasing budget deficits
C) appreciating currency
D) high rates of inflation
13) ________ refers to the continuous monitoring of events in other locations keeps managers
aware of potential business opportunities and threats.
A) Operations research
B) Logistics
C) Warehousing
D) Environmental scanning
14) Which of the following statements is true about country image and its effects on global
companies?
A) It embodies all important facets of a nation’s business environment.
B) If a country’s image is positive in one product class, it tends to be positive in all other product
classes as well.
C) An image, once formed, seldom changes over time.
D) Products made in emerging countries are evaluated more positively than products made in
developed countries.
15) ________ is the most common form of international business activity.
A) Exporting
B) Licensing
C) Greenfield strategy
D) Management contract
16) Which of the following is a characteristic of exporting?
A) high financial exposure
B) rapid market entry
C) logistical simplicity
D) local market knowledge
17) When screening a potential market, which of the following would you advise John to do
first?
A) assess the national business environment
B) select the market
C) identify basic appeal for markets
D) measure market potential
18) Which stage of the market-screening process is John involved in, while examining
government regulations and bureaucracy in a market?
A) assessment of the national business environment
B) selection of the market
C) identification of the basic appeal for markets
D) measurement of market potential
19) Which step of the market-screening process involves determining the income elasticity of the
Zulu doll?
A) select the market or site
B) assessment of the national business environment
C) identification of the basic appeal for markets
D) measure market or site potential
20) The first step in identifying potential markets is to assess the basic demand for a product.
21) Companies that require particular resources to carry out local business activities must be sure
they are available.
22) A country’s climate plays an important role in determining the basic demand for a company’s
product.
23) Cultural elements do not have any influence what kinds of products are sold and how they
are sold in a country.
24) Consumer products such as toothpaste and soft drinks undergo extensive adaptation to suit
local preferences.
25) Governments bar international companies from entering economic sectors like energy
exploration for security reasons.
26) Government regulations can quickly eliminate a market or site from further consideration.
27) Stable currency values make it easier for firms to predict future earnings accurately in terms
of the home-country currency.
28) Products made in emerging countries tend to be evaluated more positively than those from
relatively more developed countries.
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29) Companies usually modify or adapt elements of their marketing plan to be used in different
markets in which they sell their products.
30) Briefly discuss the important political and legal forces that should be analyzed in the
market/site screening process.
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Finally, governments can also require that companies divulge certain information.
Government Bureaucracy-A lean and smoothly operating government bureaucracy can make a
market or site more attractive. Yet a bloated and cumbersome system of obtaining approvals and
licenses from government agencies can make it less appealing. In many developing countries, the
relatively simple matter of obtaining a license to establish a retail outlet often means acquiring
numerous documents from several agencies. The bureaucrats in charge of these agencies
generally are little concerned with providing businesses with high-quality service. Managers
must be prepared to deal with administrative delays and a maze of rules.
Political Stability-Every nation’s business environment is affected to some degree by political
risk. Political risk is the likelihood that a society will undergo political changes that negatively
affect local business activity. Political risk can threaten the market of an exporter, the production
facilities of a manufacturer, or the ability of a company to remove profits from the country in
which they were earned. The key element of political risk that concerns companies is unforeseen
political change. Political risk tends to rise if a company cannot estimate the future political
environment with a fair degree of accuracy. An event with a negative impact that is expected to
occur in the future is not, in itself, bad for companies because the event can be planned for and
necessary precautions taken. It is the unforeseen negative events that create political risk for
companies.
Managers’ perceptions of a market’s political risk are often affected by their memories of past
political unrest in the market. Yet managers cannot let past events blind them to future
opportunities. International companies must try to monitor and predict political events that
threaten operations and future profits. By investigating the political environment proactively,
managers can focus on political risk and develop action plans for dealing with it.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
31) What is country image? Explain how it affects the screening process using examples.
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32) Discuss the importance of cultural factors when assessing a national business environment,
and explain why cultural differences between markets create difficulties when conducting
international research.
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Companies that have little experience in an unfamiliar market often hire local agencies to
perform some or all of their market research. Local researchers know the cultural terrain. They
understand which practices are acceptable and which types of questions can be asked. And they
typically know whom to approach for certain types of information. Perhaps most importantly,
they know how to interpret the information they gather and are likely to understand its reliability.
But a company that decides to conduct its own market research must, if necessary, adapt its
research techniques to the local market. Many cultural elements that are taken for granted in the
home market must be reassessed in the host business environment.
AACSB: Diverse and multicultural work environments
Skill: Synthesis
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
33) Discuss how companies identify the basic appeal for products when screening a potential
market, and explain how international organizations provide the essential information to
researchers.
34) Which of the following steps should occur in the screening process for potential markets
after the basic demand for a product has been identified?
A) assessment of the national business environment
B) selection of the market or site
C) measurement of the market or site potential
D) assessment of climate suitability
35) Which of the following is the final step in the screening process for potential markets and
sites?
A) assessment of the national business environment
B) measurement of market or site potential
C) selection of the market or site
D) assessment of climate suitability
36) Which of the following steps of the market screening process involves the determination of a
product’s income elasticity?
A) identification of basic appeal of a product
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
37) A typical industry analysis does not include the ________.
A) names, production volumes, and market shares of the largest competitors
B) structure of the wholesale and retail distribution networks
C) background on the market, including population figures and key social trends
D) history of currency fluctuations
38) The sensitivity of demand for a product relative to changes in income is called ________.
A) income elasticity
B) demand shaping
C) income distribution
D) market intensity
39) In the context of the sensitivity of demand for a product relative to changes in income, a
coefficient greater than 1.0 conveys a(n) ________.
A) surplus product
B) economic equilibrium
C) economic surplus
D) income-elastic product
40) If the income-elasticity coefficient for coffee is 0.5, the demand for coffee will ________.
A) decrease 0.5 percent for every 1.0 percent increase in income
B) increase 1.0 percent for every 5.0 percent increase in income
C) increase 0.5 percent for every 1.0 percent increase in income
D) decrease 0.5 percent for every 0.5 percent increase in income
41) Which of the following is an income-elastic product?
A) food
B) utilities
C) jewelry
D) beverages
42) When creating a market-potential indicator for an emerging market, an estimate of the wealth
or buying power of a market can be formed by examining the ________.
A) market intensity
B) market growth rate
C) market size
D) market receptivity
43) Which of the following variables attempts to estimate market openness when creating a
market-potential indicator for an emerging market?
A) market consumption capacity
B) market receptivity
C) market size
D) market intensity
44) When creating a market-potential indicator for an emerging market, ________ is estimated
by determining a nation’s volume of international trade as a percentage of GDP.
A) market receptivity
B) market intensity
C) market consumption capacity
D) market size
45) During which stage of the market or site screening process do managers normally want to
visit locations?
A) identification of basic appeal of a product
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
46) Issues regarding potential threat from substitute products in a market are addressed in
________.
A) security analysis
B) technical analysis
C) product fit analysis
D) competitor analysis
47) Which of the following stages of the market or site screening process involves an assessment
of potential threat from substitute products?
A) identification of basic appeal of a product
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
48) Which of the following stages of the market or site screening process involves competitor
analysis?
A) identification of basic appeal of a product
B) measurement of market or site potential
C) assessment of the national business environment
D) selection of the market or site
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Scenario: Chong’s Analysis of International Markets
John Chong is an inexperienced entrepreneur in global business. He wants to sell his product,
Zulu doll, a toy for kids below the age of eight, in every corner of the world. He wants to
examine all potential markets but wants to keep his costs low. John has asked you to explain a
few things about analyzing international markets.
49) Which of the following stages of the market-screening process would require John to visit a
potential market personally?
A) assessment of the national business environment
B) selection of the market
C) identification of the basic appeal for markets
D) measurement of market potential
50) A product’s income-elasticity refers to the sensitivity of the demand of a product relative to
changes in the income of consumer population.
51) A product for which demand increases more relative to an increase in income has an income-
elasticity coefficient less than 1.
52) Food and utilities are examples of income-inelastic products.
53) Assessing potential in emerging markets by ranking locations using market-potential
indicators is useful only for companies involved in exporting.
54) While assessing the market potential of emerging markets, market consumption capacity is
generally obtained through estimates of energy consumption.
55) Which of the following is an example of a legal force that is used to assess the national
business environment?
A) resource quality
B) environmental regulations
C) workforce qualifications
D) liquidity issues
56) When developing a market-potential indicator for an emerging market, the size of the market
is typically estimated from the nation’s ________.
A) income elasticity
B) GDP
C) total population
D) GDP at purchasing power parity