END OF CHAPTER MATERIAL
Discussion and Critical Thinking
Discussion Questions
15.1. Explain what is meant by the term global firm and list the major decisions involved in
international marketing. (AASCB: Communication)
Answer:
A global firm is one that, by operating in more than one country, gains marketing,
production, R&D, and financial advantages that are not available to purely domestic
Figure 15.1 illustrates the six major decisions in international marketing: (1) understanding
15.2. Discuss the four types of country industrial structures and the opportunities each offers to
international marketers. (AACSB: Communication)
Answer:
The four types of industrial structures are as follows:
Subsistence economies: In a subsistence economy, the vast majority of people
Raw material exporting economies: These economies are rich in one or more natural
resources but poor in other ways. Much of their revenue comes from exporting
Emerging economies (industrializing economies): In an emerging economy, fast
growth in manufacturing results in rapid overall economic growth. As
Industrial economies: Industrial economies are major exporters of manufactured
15.3. What factors do companies consider when deciding on possible global markets to enter?
(AACSB: Communication; Reflective Thinking)
Answer:
Possible global markets should be ranked on several factors, including market size, market
growth, cost of doing business, competitive advantage, and risk level. The goal is to
15.4. Name and describe the four types of joint ventures as methods for entering another
country. How does joint venturing differ from other methods of entering a foreign
market? (AACSB: Communication; Reflective Thinking)
Answer:
Joint venturing involves joining with companies in a host country to produce or market
products or services. Joint venturing differs from exporting in that the company joins with a
host country partner to sell or market abroad. It differs from direct investment in that an
15.5. Explain what is meant by a whole-channel view and why it is important in international
marketing. (AACSB: Communication; Reflective Thinking)
Answer:
An international company must take a whole-channel view of the problem of distributing
products to final consumers. There are two major links between the seller and the final buyer.
Critical Thinking Exercises
15.6. Visit www.transparency.org and find the most recent Corruption Perceptions Index (CPI)
report. What is the most recent CPI for the following countries: Argentina, Denmark,
Jamaica, Myanmar, New Zealand, Somali, and the United States? What are the
implications of this index for U.S.-based companies doing business in these countries?
(AACSB: Communication; Use of IT; Reflective Thinking)
Answer:
The CPI score is based on multiple independent surveys and represents the perceived level of
public-sector corruption in a country. The most recent report at the time of this writing is
2014 (www.transparency.org/cpi2014/results). This Web site is interesting to show in the
Argentina 34
Denmark 92
A low number implies a high degree of corruption, so Somalia is perceived to have the most
The implications for companies doing business in a given country are that it may be more
difficult to do business in a country with a high degree of corruption. U.S. companies cannot
See also www.transparency.org/country/ for an interactive map that allows you to click on a
country and see other information in addition to corruption scores.
15.7. In a small group, identify and research an environmental threat—such as a regulatory
threat, a cultural threat, or and economic threat—posed to global marketers. Analyze the
issues related to this threat, discuss how affected companies are reacting, and make
recommendations regarding how these companies should address the threat. (AACSB:
Communication; Reflective Thinking)
Answer:
Students’ answers will vary. Instructors may want to assign students specific threats to
David Grossman, “Why Europe Is Defending Itself from Big US Tech Firms,” BBC
News, February 6, 2015, www.bbc.com/news/business-31164639. The author states that
Another author coined the term “Eurotechnopanic” to describe the fight against Google
.
Tom Fairless, “U.S. Tech Giants Battle Europe’s Sovereign States,” Wall Street Journal,
December 8, 2014, www.wsj.com/articles/europe-vs-u-s-tech-giants-1418085890.
Tom Fairless, “U.S. Tech Firms Increase EU Lobbying Efforts,” Wall Street Journal,
15.8. One way to analyze the cultural differences among countries is to conduct a Hofestede
analysis. Visit www.geert-hofstede.com/ to learn what this analysis involves. Develop a
presentation explaining how three countries of your choice differ from the United States.
(AACSB: Communication; Use of IT; Reflective Thinking)
Answer:
Hofestede considers five dimensions in his cultural analysis: power distance, individualism,
Minicases and Applications
Online, Mobile, and Social Media Marketing: Russian E-Commerce
Russia is emerging as the next big e-commerce frontier with a population of 143 million, 70
million of whom are Internet users. Although online sales in Russia are not has high as U.S.
online sales, they have grown rapidly in the last few years. That fact has caught the attention of
global e-commerce firms such as the U.S.’s Amazon and eBay and China’s equivalent of
Amazon, Alibaba. The leading local online retailer in Russia is Ozon Group, often referred to as
“Russia’s Amazon.” Ozon’s sales last year were close to $500 million, an almost 70 percent
increase in just two years. There are obstacles to e-commerce in Russia, however. The majority
of consumers do not have credit cards because many do not trust them to pay for purchases
online or offline, making Russia a heavily cash-based marketplace. Delivery is another problem.
To combat these barriers, Ozon developed its own courier system, and drivers not only collect
cash payments, they even offer style advice on apparel orders when delivered. Russian
consumers ordering items from international e-commerce sites such as Amazon may never
receive their packages. In fact, officials at Moscow airport reported having 500 metric tons of
unprocessed packages in one month alone. Seeing an opportunity for revenue, Russia’s Customs
Service is considering import duties on packages ordered from foreign Web sites.
15.9. What types of barriers are present in Russia that might slow the expansion of
international e-commerce there? (AACSB: Communication; Reflective Thinking)
Answer:
Currently, the only barriers seem to be non-tariff barriers. However, it appears that tariffs or
duties, which are taxes on imported products designed to raise revenue or protect domestic
Marketing Ethics: Global Safety Standards
India is home to some of the world’s deadliest roads. However, international automobile makers
do not provide standard safety features in entry-level cars sold in India that are required in other
developed countries. India’s death toll on the roads has ranked top in the world for eight straight
years, exceeding 130,000 fatalities a year. Despite this, auto makers strip safety features such as
air bags and anti-lock brakes out of the cars most people in India drive. They argue that Indian
consumers cannot afford or are not willing to pay for safety features that could increase the cost
of the car by 30 percent or more. Some manufacturers have begun to offer more safety features
as standard in their models. But other producers are offering them only as an option and some are
not offering them at all to maintain price competitiveness.
15.11. Is it right for manufacturers to include product safety features that are known to save
lives in countries that require them but not to include such features in one country where
they are not specifically required? (AACSB: Communication; Ethical Reasoning)
Answer:
Students’ responses will vary. Some may argue that marketers are offering what the market
15.12. Discuss world organizations that assist companies in developing and abiding by global
standards to protect consumers worldwide. (AACSB: Communication; Reflective
Thinking)
Answer:
Students’ answers will vary. One organization is the World Health Organization’s Global
Harmonization Task Force (GHTF) that encourages a convergence regarding safety and
health standards and regulations related to medical devices (see
Marketing by the Numbers: Netflix Global Expansion
Video streaming service Netflix is expanding rapidly around the globe. It is currently available in
50 countries with the goal of expanding to 200 countries by the end of 2016. Netflix’s
international slogan is “Have content, will travel.” There are challenges to international
expansion for this type of service, such as inadequate disposable household income and a low
percentage of households with high-speed Internet needed to stream videos. And even though
almost half of France’s TV-owning households have Internet connected TVs, cultural restrictions
limit English-language program content, requiring Netflix to invest in local content for French
customers. The next countries to get Netflix are Italy, Spain, and Portugal. Similar to Netflix’s
other European offerings, service will be offered at a price of €7.99 per month, which converts to
U.S. $8.97 during the time of expansion.
15.13. Refer to Appendix 3: Marketing by the Numbers to calculate the annual market sales
potential for Spain in euros and U.S. dollars. There are 18,217,300 television households
in Spain, with 75 percent having high-speed Internet. Assume 50 percent of the
households are willing and able to purchase the service and would purchase one
subscription at an average price of €7.99 per month ($8.97). (AACSB: Communication;
Analytical Reasoning; Reflective Thinking)
Answer:
One general but practical method used for estimating total market demand uses three
Q = n q p
where
Q = total market demand
n = number of buyers in the market
q = quantity purchased by an average buyer per year
p = price of an average unit
Therefore, the number of buyers would be the number of households (HHS) in Spain that
have high-speed Internet and are willing and able to purchase this service:
n (number of buyers) = 18,217,300 HHS x 0.75 x 0.50 = 6,831,487.5 HHS
Subscribers would purchase one subscription per month for twelve months, so the quantity
purchased per household is:
q (quantity purchased by an average buyer per year) = 1 x 12 = 12 per HHS
Subscribers would pay €7.99 per month ($8.97 per month) for twelve months, so the average
price:
peuro (average price per year) = €7.99 x 12 = €95.88 per year
pUSD (average price per year) = $8.97 x 12 = $107.64 per year
So the market sales potential (total market demand) is:
Qeuro = 6,831,487.5 HHS x 12 per year per HHS x €95.88 per year
= €7,860,036,258 per year
QUSD = 6,831,487.5 HHS x 12 per year per HHS x $107.64 per year
= $8,824,095,774 per year
(Note: If students converted their market sales potential for euros to dollars using the
conversion rate of 1 euro = 1.12380 USD (rate as of June 9, 2015), the answer is
$8,833,108,747. The difference is due to rounding.)
15.14. Calculate the market sales potential using the current exchange rate between euros and
U.S. dollars (see www.xe.com/currencyconverter/). Is the dollar currently strong or weak
compared to the euro? Why are U.S.-based international companies concerned when the
U.S. dollar is strong compared to other currencies? (AACSB: Communication; Analytic
Reasoning; Reflective Thinking)
Answer:
In the calculation above, the currency conversion rate was $1.00 = €0.89 or 1 euro = 1.12380
USD (June 9, 2015), so the dollar was weaker than the euro, but it is stronger than it had been