62) 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
63) 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
64) 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
65) 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
66) When one unit charges another unit in the same company for goods it ships to its foreign
subsidiaries, the charge is called a(n) ________.
A) original price
B) transfer price
C) margin price
D) break-even price
E) customer value price
67) 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.
68) Dumping occurs when ________.
A) a company entering a foreign market charges either less than its costs or less than it charges at
home
B) a company entering a foreign market charges more than the price in its home market
C) a company entering a foreign market charges prices that are lower than those charged by its
competitors in this market
D) a company sets its price equal to its average cost of production
E) a company exports its products to a foreign country to increase its revenue in spite of excess
demand in the home country
69) Various governments force companies to charge the ________ price, which is charged by
other competitors for the same or a similar product.
A) gray market
B) implicit
C) arm’s-length
D) authorized
E) contingent
70) 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
71) 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
72) 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
73) 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
74) Companies can manage their international marketing activities in three ways: export
departments, international divisions, or ________.
A) global organization
B) fixed corporate headquarters
C) strong marketing department in the “host” country
D) local marketing efforts
E) strategic business units
75) A company that has the regional vice presidents for North America, Latin America, Europe,
and Africa reporting to the international division president is said to be a(n) ________.
A) international subsidiary
B) geographical organization
C) world product group
D) export department
E) hierarchical organization
76) Ajax Corp. is a multinational group that manufactures medical equipment and a variety of
household electrical appliances. Kevin O’Brien is the head of the SBU that produces and markets
medical equipment globally. The company’s operating units appear to be a(n) ________.
A) internal subsidiary
B) geographical organization
C) world product group
D) export department
E) regional headquarters
77) Forces promoting global integration include ________.
A) strong local preferences
B) heterogeneous demand
C) local standards and barriers
D) strong consumer resistance to foreign goods
E) capital-intensive production
78) 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
79) When forces for global integration are high and forces for national responsiveness are weak,
which of the following strategies makes most sense?
A) segment consumers on a regional basis
B) tailor the product on a city-by-city basis
C) treat the world as a heterogeneous market
D) treat the world as a single market
E) treat the world as a portfolio of national opportunities
80) When forces for global integration are low and forces for national responsiveness are high, a
strategy that ________ makes sense.
A) treats the world as a single market
B) views the marketplace as completely homogeneous
C) treats the world as a portfolio of national opportunities
D) standardizes all elements of the marketing mix
E) facilitates a straight extension
81) Luxury brands are usually not global because they target a niche market.
82) Global firms plan, operate, and coordinate their activities on a worldwide basis.
83) 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.
84) Companies enter the international market only when their domestic markets are saturated.
85) The first task of the internationalization process is moving a company from no regular
exports to regular export activities.
86) A waterfall approach to entering foreign markets is described as entering countries
simultaneously.
87) More than 90% of future population growth is projected to occur in the less developed
countries.
88) Smaller packaging and lower sales prices are often critical in markets where incomes are
limited.
89) Regional economic integration has intensified in recent years, which makes it more difficult
for marketers to expand globally.
90) The creation of the European Union has benefited marketers wanting to enter Europe
because they now have access to a homogeneous market consisting of 27 countries.
91) 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.
92) Domestic-based export merchants seek and negotiate foreign purchases for a commission.
93) Cooperative organizations carry on exporting activities on behalf of several producers and
are partly under their administrative control.
94) Indirect exports are characterized by high investment, and therefore high risk.
95) In licensing, the licensor issues a license to a foreign company to use an item of value for a
fee or royalty.
96) When the licensor provides the licensee with a complete brand concept and operating
system, the arrangement is called contract manufacturing.
97) Management contracts offer foreign owners the opportunity to manage businesses for a fee.
98) Contract manufacturing is one mode of licensing that allows a company to start faster, with
the opportunity to form a partnership or buy out the local manufacturer later.
99) The ultimate form of foreign investment is direct ownership of foreign-based assembly or
manufacturing facilities.
100) 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.
101) If a society is collectivist, it would imply that the self-worth of the people is rooted in
individual achievements.
102) Straight extension means using an established product’s brand name for a new item in the
same product category.
103) Product adaptation not only involves altering the product to meet local preferences, but also
calls for a change in the communication strategy.
104) Forward invention refers to reintroducing earlier product forms that are well adapted to a
foreign country’s needs.
105) Communication adaptation occurs when companies change marketing communications for
each local market.
106) 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.
107) The use of media may require international adaptation because media availability varies
from country to country.
108) When companies sell on the Internet, price becomes transparent, and price differentiation
between countries declines.
109) If a company charges its subsidiary in a foreign country too low a transfer price, it can be
accused of dumping.
110) Gray market activities harm distributor relations, tarnish the manufacturer’s brand equity,
and undermine the integrity of the distribution channel.