Chapter 4: The Economic Environment
TRUE/FALSE
1. Global aspirants are mature global companies intent on adapting their existing product lines to capture
new, emerging global middle markets.
2. Three of the five major industrialized countries in the world that are referred to as the Group of Five
include Chile, Canada, and Mexico.
3. The main dimensions of a market can be captured by considering variables such as those relating to the
population and its various characteristics, infrastructure, and social development.
4. As the life expectancy in a market extends and new target markets become available, international
marketers may be able to extend product life cycles by marketing them abroad.
5. A household refers to only related people who live in the same housing unit.
6. Consumption patterns remain unaffected by increased urbanization of markets.
7. Purchasing power is a function of three distinct elements: available resources, climate, and supply.
8. Income is most indicative of the market potential for most consumer and industrial products and
services.
9. Purchasing power parity (PPP) refers to the rate at which one country’s currency can be exchanged for
another country’s currency.
10. Per capita GDP is often used as a primary indicator for evaluating purchasing power.
11. Engel’s laws state that as a family’s income rises, the percentage of the money spent on food will
increase.
12. The availability and quality of an infrastructure is critically important in evaluating marketing
operations abroad.
13. Data on the availability of commercial (marketing-related) infrastructure are often readily available.
14. The Physical Quality of Life Index (PQLI) is a composite measure of the level of welfare in a country.
15. The European Economic Community (EEC) was formally established by the Treaty of Rome.
16. The free trade area defined by NAFTA is the only free trade zone in the world.
17. Maquiladoras are landscape engineers who ensure that the free trade areas along the border of two
countries are neat and clean in order to attract more companies to set up businesses in these areas.
18. Developed countries do not benefit from the development of human and natural resources in emerging
markets.
19. Decisions regarding integrating markets must be assessed from four different perspectives: the range
and impact of changes resulting from integration, development of strategies to relate to these changes,
organizational changes needed to exploit these changes, and strategies to influence change in a more
favorable direction.
20. The introduction of the euro means increased coordination in pricing as compared to the relative
autonomy in price setting enjoyed by country organizations in the past.
MULTIPLE CHOICE
1. _____ are companies that traditionally provide low-priced goods for the bottom-of-the-pyramid
consumers in their home markets.
a.
Multinational incumbents
b.
Local upstarts
c.
Global aspirants
d.
Domestic giants
2. Global aspirants are:
a.
companies that traditionally provide low-priced goods for the bottom-of-the-pyramid
consumers in their home markets.
b.
mature global companies intent on adapting their existing product lines to capture these
new, emerging global middle markets.
c.
companies that have already developed products for their domestic middle markets and are
now seeking to parlay their existing capabilities to serve the external global middle class.
d.
companies that aim to increase employment in their home country by producing goods that
meet international standards.
3. _____ are mature global companies intent on adapting their existing product lines to capture new,
emerging global middle markets.
a.
International giants
b.
Zaibatsus
c.
Multinational incumbents
d.
Global aspirants
4. The assessment of a foreign market environment should start with:
a.
a monetary analysis of the host country’s currency volatility.
b.
the evaluation of economic variables relating to the size and nature of the market.
c.
a focus on providing local solutions.
d.
an expert analysis of the physical resources available.
5. The Group of Five refer to:
a.
the leading money managers who regulate worldwide currency rates.
b.
money, markets, media, message, and methodology.
c.
the major industrialized countries of the world.
d.
Saudi Arabia, South Africa, South Korea, Russia, and Indonesia.
6. Which of the following countries is part of the Group of Seven?
a.
Italy
b.
Russia
c.
China
d.
Brazil
7. Which of the following has been key to modernizing the newly emerging democracies of both Central
and Eastern Europe?
a.
Imported consumer goods
b.
Marketing know-how
c.
Western technology
d.
Hefty capital inflow
8. The _____ provides one of the most basic indicators of market size and is in itself indicative of the
potential demand for certain staple items that have universal appeal and are generally affordable.
a.
size of a household
b.
number of dwellings in a country
c.
number of people in a particular market
d.
number of stores in a city
9. As the life expectancy in a market extends and new target markets become available, international
marketers may be able to extend their products’ life cycles by _____.
a.
renaming the products
b.
increasing their supply in the domestic markets
c.
attracting local customers
d.
marketing them abroad
10. Age distribution and _____ correlate heavily with the level of development of the market.
a.
life expectancy
b.
gender
c.
nationality
d.
lifestyle
11. A _____ includes all persons, both related and unrelated, who occupy a housing unit.
a.
household
b.
family
c.
unit of survival
d.
focus group
12. Interpretation of demographics requires some degree of:
a.
consentual knowledge.
b.
experiential knowledge.
c.
intrinsic knowledge.
d.
vocational knowledge.
13. Which of the following has radically changed consumption patterns over the last few decades?
a.
Increased urbanization
b.
Political dissidence
c.
The greening of the globe
d.
The emergence of educated consumers
14. Purchasing power is a function of income, prices, savings, and _____.
a.
population
b.
education
c.
credit availability
d.
natural resources
15. Apart from population, which of the following is most indicative of the market potential for most
consumer and industrial products and services?
a.
Political stability
b.
Education levels
c.
Life span
d.
Income
16. _____ show how many units of currency are needed in one country to buy the amount of goods and
services that the same unit of currency will buy in another country.
a.
Price indexes
b.
Exchange rates
c.
Purchasing power parities
d.
Value added exchanges
17. Which of the following laws states that as a family’s income increases, the percentage spent on food
will decrease?
a.
Pareto’s law
b.
Engel’s law
c.
The law of diminishing returns
d.
Gresham’s law
18. Market information on the percentage of households that own a particular product is known as:
a.
product categorization.
b.
product diffusion.
c.
market potential.
d.
market penetration.
19. Which of the following is true about the international marketing environment?
a.
High saturation levels indicate lack of market potential in such markets.
b.
In high-inflation markets, the marketer should make economical products by focusing on
price and not on quality.
c.
The setting of maximum prices for products enables a strong demand for the products,
ensuring the international marketer continuous profits.
d.
In response to rapidly escalating prices, a government will often invoke price controls.
20. The availability and quality of _____ is critically important in evaluating marketing operations abroad.
a.
urban population
b.
infrastructure
c.
market diffusion
d.
education
21. A country’s use of computers, telephones, broadcast media, and print media is an indicator of:
a.
passive consumers.
b.
communication.
c.
distribution channel.
d.
transportation.
22. The three components of the Physical Quality of Life Index are infant mortality, adult literacy and
_____.
a.
social responsibility
b.
growth stability
c.
adolescent sustainability
d.
life expectancy
23. Which of the following is a composite measure of the level of welfare in a country?
a.
Consumer Price Index
b.
Human Development Index
c.
Physical Quality of Life Index
d.
Human Poverty Index
24. A common market is characterized by:
a.
use of a common currency among members.
b.
harmonization of monetary policies.
c.
factor mobility.
d.
uniform taxation among member nations.
25. Which of the following is true about forms of economic integration in regional markets?
a.
In a free trade area, members harmonize their monetary policies.
b.
A common currency is used by members in a free trade area.
c.
Capital mobility is not permitted in a common market.
d.
A customs union establishes a common trade policy with respect to nonmembers.
26. Which of the following currencies was introduced by the European Union?
a.
Deutsche Mark
b.
Euro
c.
Franc
d.
Pound
27. Which of the following is an example of a free trade area?
a.
NAFTA
b.
APEC
c.
SACU
d.
Group of Five
28. _____ began in 1994 to create the world’s largest free market.
a.
MERCUSOR
b.
ASEAN
c.
NAFTA
d.
AFTA
29. Opposition to NAFTA has centered on issues relating to:
a.
illegal migration to Mexico.
b.
gains for Canada.
c.
immobility of factors of production.
d.
labor and environment.
30. ____ are Mexican plants that make goods and process food for export to the United States.
a.
Zaibatsus
b.
Chaebols
c.
Maquiladoras
d.
Sogo shoshas
31. A(n) _____ market refers to a country making an effort to change and improve its economy with the
goal of raising its performance to that of the world’s most advanced nations.
a.
emerging
b.
equity
c.
developed
d.
saturated
32. Which of the following is an example of an emerging market?
a.
China
b.
Germany
c.
Japan
d.
USA
33. What is the first step an international marketer should take while making decisions regarding
integrating markets?
a.
Envision the effect of change
b.
Develop a strategic plan
c.
Reorganize the company
d.
Seek ways to influence the pertinent regulatory environment
34. After determining the effects of change, an international marketer will have to first indulge in _____.
a.
lobbying
b.
research
c.
strategic planning
d.
reorganizing
35. The act of international marketers seeking ways to influence the regulatory environment in which they
have to operate in is known as _____.
a.
lobbying
b.
integrating
c.
reorganizing
d.
restructuring
ESSAY
1. What is the Physical Quality of Life Index (PQLI)? What are its three components?
2. Which countries are part of NAFTA? What are the characteristics of NAFTA?
3. List and briefly describe the five elements of success that are required for an international marketer to
take advantage of and thrive in developing markets.
