82) Indirect exports are characterized by high investment, and therefore high risk.
83) In licensing, the licensor issues a license to a foreign company to use an item of value for a
fee or royalty.
84) When the licensor provides the licensee with a complete brand concept and operating
system, the arrangement is called contract manufacturing.
85) Management contracts offer foreign owners the opportunity to manage businesses for a fee.
86) 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.
87) The ultimate form of foreign investment is direct ownership of foreign-based assembly or
manufacturing facilities.
88) 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.
89) 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.
90) Explain how marketers are using the Web for international business.
91) Define a joint venture and list some of the advantages and disadvantages.
92) Define psychic proximity and explain why it is important for companies engaged in
exporting products.
93) Briefly describe the advantages of direct investment.
94) Your firm has decided to enter the international market with your product called “Trema,” a
new pocket organizer that can also be used as a cell phone. While discussing marketing plans,
your CMO decides that no changes will be necessary in either the marketing mix or the product
for export. What form of marketing strategy is the CMO advocating?
A) distributive marketing program
B) leveraged marketing program
C) adapted marketing program
D) engineering-driven marketing program
E) standardized marketing program
95) In an adapted marketing program, the company ________.
A) ensures that uniform practices are adopted across countries
B) focuses more on brand image than consumer preferences
C) ignores differences in the legal environment
D) ensures the lowest cost marketing program is adopted
E) tailors the marketing programs to each target market
96) When Kraft blends different coffees for the British (who drink coffee with milk), the French
(who drink it black), and Latin Americans (who want a chicory taste), it is engaged in ________.
A) straight extensions
B) product adaptation
C) retailer versions
D) backward invention
E) forward invention
97) A standardized marketing program involves ________.
A) adopting the strategy that best fits a given target market
B) consistently using the communication and distribution channels that entail the lowest costs
C) adjusting the product to suit market preferences
D) changing the features of the product to accommodate the host country
E) changing only the communication message to suit the different target markets
98) Which of the following is one of Hofstede’s four cultural dimensions that differentiate
countries?
A) customer relationship management versus power distance
B) strategic management versus marketing management
C) weak versus strong uncertainty avoidance
D) total quality management versus JIT deliveries
E) marketing management versus customer relationships
99) The United States imposed a duty of 44.99 to 47.59 percent on wind towers produced in
China and Vietnam and imported to the United States after they found evidence both countries
were selling them at below fair market value, or ________, the practice of charging less than its
costs or less than it charges at home to win a market.
A) arm’s-length pricing
B) gray marketing
C) counterfeiting
D) transfer pricing
E) dumping
100) In collectivist societies, ________.
A) all property is owned by the government
B) the self-worth of the individual is rooted more in the social system than in individual
achievement
C) the culture is dominated by the need to maintain low power distance and reduce income
inequality
D) the culture is dominated by a nurturing attitude as opposed to an assertive attitude
E) people are highly risk-averse
101) According to Hofstede, cultures with low power distance are ________.
A) collectivist
B) assertive
C) egalitarian
D) risk-averse
E) risk-tolerant
102) According to Hofstede, cultures with weak uncertainty avoidance are best described as
________.
A) collectivist
B) hierarchical
C) egalitarian
D) risk-averse
E) risk-tolerant
103) A risk averse attitude is associated with high ________.
A) uncertainty avoidance
B) femininity
C) power distance
D) individualism
E) collectivism
104) A market survey by LG revealed that Indians preferred not to mix vegetarian and non-
vegetarian food items. Hence, LG refrigerators in India include a special convertible box with
separate compartments to store and control the temperature of vegetarian and non-vegetarian
food. This is an example of customizing ________ to local needs.
A) advertising media
B) product features
C) packaging
D) brand name
E) labeling
105) Straight extension of the product means introducing ________.
A) the product to the foreign market without any changes to the product
B) the product to the foreign market with minor changes to the product
C) the product to the foreign market with major changes to the product
D) a customized product to the foreign market with a new marketing strategy
E) a customized product to the foreign market with existing marketing strategy
106) Which of the following is most likely to be successful when introduced in foreign markets
as a straight extension?
A) laundry detergent
B) khaki pants
C) dessert mixes
D) digital camera
E) condensed soup
107) For the launch of “Trema,” your company’s new pocket organizer that can also be used as a
cell phone, the CMO has decided that the product can be launched in international markets
without any changes in its features or the marketing strategy. This introduction can be described
as a ________.
A) dual adaptation
B) straight extension
C) product adaptation
D) forward invention
E) backward invention
108) Finnish cellular phone giant Nokia customized its 6100 series mobile phone for every major
market in which it is present. In Asia, for example, the series came with higher ring volume so
that it could be heard on the crowded Asian streets. This is an example of ________.
A) straight extension
B) forward invention
C) regional version
D) city version
E) country version
109) In an attempt to tailor its products to suit the requirements of consumers in India, LG
introduced the aero-comfort system. A remote control is programed to regulate both the air-
conditioning and the ceiling fan. Consumers can switch off the AC and increase the ceiling fan’s
flow once the desired temperature is achieved. This not only increases convenience, but also cuts
down electricity charges. LG’s aero-comfort system is an example of which of the following?
A) backward invention
B) dual invention
C) country version product
D) straight extension
E) communication adaptation
110) Your firm has decided to enter the international market with your product called “Trema,” a
combination of a pocket organizer and cell phone. Even though the product has been a huge
success in the home country, market research suggests some changes may be required before it
can be introduced in Europe. Your CMO is of the opinion that the product requires certain extra
features and the product will also have to be marketed differently. Your CMO is advocating
________.
A) product invention
B) dual adaptation
C) straight extension
D) forward adaptation
E) product standardization
111) Product adaptation involves ________.
A) altering the product to meet local preferences with no change in communication strategy
B) altering the product to meet minimum acceptable standards
C) altering both the product and the communication strategy to meet local preferences
D) altering neither the product nor the communication strategy while entering a new market
E) developing a new product and adapting the communication strategy to enter a new market
112) Backward invention occurs when a firm ________.
A) creates a new product to meet a need in another country
B) reintroduces earlier product forms adapted to suit another country’s needs
C) invents products that are similar to competing offerings
D) takes an existing product into a new market
E) produces its own raw materials
113) Forward invention is ________.
A) creating a new product to meet a need in another country
B) creating a new product to meet the need in the home country
C) inventing products that are superior to competing offerings
D) taking an existing product into a new market
E) inventing something that as yet has no “market”
114) Companies can run the same marketing communications programs as used in the home
market or change them for each local market, a process called ________.
A) product communications
B) market development
C) dual adaptation
D) diversification
E) communication adaptation
115) If a company adapts or changes both a product and the communications, the company
engages in a process called ________.
A) straight extension
B) product reinvention
C) product adaptation
D) dual adaptation
E) full adaptation
116) 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)
________ problem.
A) opportunity cost
B) market pricing
C) tactical pricing
D) price escalation
E) transfer pricing
117) 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
118) 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
119) 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
120) When one unit charges another unit in the same company for goods it ships to its foreign
subsidiaries, the charge is called a(n) ________ price.
A) original
B) transfer
C) margin
D) break-even
E) customer value