engages in a process called ________.
A) straight extension
B) product reinvention
C) product adaptation
D) dual adaptation
E) full adaptation
37) A Gucci bag sells for $120 in Italy and $240 in the United States due to the differences in the
costs of distributing the product in the two countries. This phenomenon is called a(n) ________.
A) opportunity cost problem
B) market pricing problem
C) tactical pricing problem
D) price escalation problem
E) transfer pricing problem
38) Trends Inc. produces and markets casual wear for men and women. The company wants to
be a global brand and is planning to enter a few chosen markets across Europe and Asia. To
accommodate the differences in purchasing power and costs of shipping goods to the retailers,
the company has decided to use cost-based pricing in each country. In order to ensure that this
strategy is successful, Trends must first make sure that ________.
A) all the countries it is planning to enter have similar laws and regulations
B) competing offerings in the different markets are not priced lower
C) all competitors follow cost-based pricing
D) its marketing communication targets rival firms in the respective markets to prove its
superiority
E) its transfer prices are high
39) The problem with setting a uniform global price for a product is that ________.
A) it allows intermediaries in low-price countries to reship their products to high-price countries
B) the company would earn the same profits everywhere, regardless of the cost structure
C) this strategy can price the product out of the market in countries where costs are high
D) this strategy makes the price too high in poor countries and not high enough in rich countries
E) it is ineffective for products that are homogeneous
40) When companies are setting prices in different countries, the problem with setting a market-
based price in each country is that ________.
A) it allows intermediaries in low-price countries to reship their products to high-price countries
B) the company would earn the same profits everywhere, regardless of the cost structure
C) this strategy might price the product out of the market in countries where costs are high
D) this strategy would make the price too high in poor countries and not high enough in rich
countries
E) it prevents the company from differentiating its products
41) Existence of gray markets lead to which of the following outcomes?
A) They make the distribution channel stronger.
B) They create a free-rider problem making legitimate distributors’ investments in supporting a
manufacturer’s product less productive.
C) Goods sold in grey markets are always counterfeit.
D) Goods sold in grey markets come with standard product warranties.
E) Taxes imposed on grey market products are very high.
42) Which of the following is likely if the distribution channel for a product in the foreign
country is long?
A) the foreign country buyers pay a high price
B) the consumer will pay arms-length price
C) the profit margin of the sellers increase
D) the intermediaries are motivated to reship the product to another country to earn higher profits
E) the seller can increase profit margins by charging a uniform price
43) As people in developing countries often prefer to buy in smaller quantities, ________ is one
of the most important functions of intermediaries in developing countries and helps perpetuate
the long channels of distribution, which are a major obstacle to the expansion of retailing.
A) product adaptation
B) breaking bulk
C) diversification
D) transfer pricing
E) dual adaptation
44) As a result of the ad campaigns depicting Brazil as a multicultural land of carnivals and
beaches, any mention of the country makes people think of sun and sand. This is an example of
________.
A) anchoring effect
B) target market impact
C) regiocentrism
D) country-of-origin effect
E) cognitive dissonance
45) The New Zealand Way program was an initiative by the government of New Zealand to raise
awareness and attract tourists by showing the dramatic landscapes featured in “The Lord of the
Rings” film trilogy. This is an example of a government trying to strengthen its ________.
A) country-of-origin perceptions
B) international subsidiaries
C) internationalization
D) contract manufacturing
E) distributor relationships
46) Forces promoting national responsiveness include ________.
A) strong local preferences
B) homogeneous demand
C) strong global preferences
D) strong consumer liking towards foreign goods
E) capital-intensive production
47) Global firms plan, operate, and coordinate their activities on a worldwide basis.
48) A global firm is a firm that operates in more than one country and captures R&D,
production, logistical, marketing, and financial advantages not available to purely domestic
competitors.
49) Companies enter the international market only when their domestic markets are saturated.
50) A waterfall approach to entering foreign markets is described as entering countries
simultaneously.
51) Once a company decides to target a particular country, it must determine the best mode of
entry. Its broad choices are indirect exporting, direct exporting, licensing, joint ventures, and
direct investment.
52) Indirect exports are characterized by high investment, and therefore high risk.
53) In licensing, the licensor issues a license to a foreign company to use an item of value for a
fee or royalty.
54) When the licensor provides the licensee with a complete brand concept and operating
system, the arrangement is called contract manufacturing.
55) The ultimate form of foreign investment is direct ownership of foreign-based assembly or
manufacturing facilities.
56) The main disadvantage of direct investment is that the firm loses access to the market in case
the government of that country insists locally purchased goods have domestic content.
57) Straight extension means using an established product’s brand name for a new item in the
same product category.
58) Product adaptation not only involves altering the product to meet local preferences, but also
calls for a change in the communication strategy.
59) Forward invention refers to reintroducing earlier product forms that are well adapted to a
foreign country’s needs.
60) Communication adaptation occurs when companies change marketing communications for
each local market.
61) If Kellogg’s offered different varieties of breakfast cereals in India as compared to Australia,
and also positioned its products differently in the two countries, then Kellogg’s would be
engaging in dual adaptation.
62) The use of media may require international adaptation because media availability varies from
country to country.
63) When companies sell on the Internet, price becomes transparent, and price differentiation
between countries declines.
64) Gray market activities harm distributor relations, tarnish the manufacturer’s brand equity, and
undermine the integrity of the distribution channel.
65) Web-crawling technology searches for counterfeit storefronts and sales by detecting domain
names similar to legitimate brands.
66) As required levels of distribution increase, so do customer prices relative to the importer’s
price.
67) Country-of-origin effects refer to the attitude anything produced by the home country is
better than imported goods.
68) People are often ethnocentric and favorably predisposed to their own country’s products,
unless they come from a less developed country.
69) The impact of country of origin is independent of the type of product.
70) A firm normally gets into international marketing simply by shipping out its goods.
71) Most companies would prefer to remain domestic if their domestic market were large
enough. Yet several factors are drawing more and more companies into the international arena.
List some of these factors.
72) What are the various risks that a company must consider before making a decision to enter
foreign markets?
73) Outline the major decisions that a firm must undergo in making a decision to market
internationally.
74) Once a company decides to target a particular country, it must determine the best mode of
entry. Each of its market entry strategies involves more commitment, risk, control, and profit
potential. List these market entry strategies in order from low risk to high risk.
75) Explain how marketers are using the Web for international business.
76) Define a joint venture and list some of the advantages and disadvantages.
77) Most brands are adapted to some extent to reflect significant differences in consumer
behavior, brand development, competitive forces, and the legal or political environment. Identify
the five international product and communication strategies available to firms that expand their
businesses to foreign countries.
78) Name the three choices that companies have for setting prices in different countries.
79) Explain the country-of-origin effect.
80) A company that is planning to go global must decide on how many countries to enter and
how fast to expand. A company’s entry strategy typically follows one of two possible
approaches. What are those approaches?