978-0134292663 Chapter 2 Solution Manual

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Chapter 2: Global, Ethical, and Sustainable Marketing

IV. END-OF-CHAPTER ANSWER GUIDE

CHAPTER QUESTIONS AND ACTIVITIES

 QUESTIONS: TEST YOUR KNOWLEDGE

2.1 Describe the market conditions that influence a firm’s decision to enter foreign markets.

2-2 Explain what world trade means. What is the role of the WTO and economic communities in

encouraging free trade? What is the role of the World Bank and the International Monetary

Fund in global trade? What is protectionism? Explain import quotas, embargoes, and tariffs.

World trade refers to the flow of goods and services among different countries—

may take place through cash, credit payments, or countertrade. The World trade organization

seeks to create a single open world market where trade flows “smoothly, predictably and

freely as possible.” Two additional organizations influence the advancement of global trade:

the World Bank and the International Monetary Fund (IMF). The IMF stabilizes

exchange rates to try to prevent problems with the balance of payments.

2.3 Explain how GDP, the categories of economic development, and the business cycle influence

marketers’ decisions in entering global markets. What are the BRICS countries? What is the

Group of Seven (G7)?

The most commonly used measure of economic health of a country is the gross domestic

product (GDP), the total dollar value of goods and services a country produces within its

borders in a year. A similar but less frequently used measure of economic health is the gross

When marketers scout the world for opportunities, it helps if they consider a country’s level

The largest of the developing countries, Brazil, Russia, India and China, are referred to as the

BRIC countries or simply as the BRICS. These four countries are the fastest growing of the

developing countries and they represent over 42 percent of the world’s population. The

Chapter 2: Global, Ethical, and Sustainable Marketing

2.4 Explain the types of competition marketers face: discretionary income competition, product

competition, and brand competition.

Discretionary income competition is the amount of money people have left after paying for

necessities such as housing, utilities, food, and clothing. Few consumers are wealthy enough

to buy anything and everything.

2.5 What are a monopoly, an oligopoly, monopolistic competition, and pure competition?

A monopoly is a market situation in which one firm, the only supplier of a particular product,

is able to control the price, quality and supply of the product.

2.6 What aspects of the political and legal environment influence a firm’s decision to enter a

foreign market? Why are human rights issues important to firms in their decisions to enter

global markets?

2.7 What do marketers mean when they refer to technological and sociocultural environments?

Why do they need to understand these environments in a global marketplace?

The technological environment provides firms with competitive advantages. The

technological environment profoundly affects marketing activities. Toll-free telephone

Chapter 2: Global, Ethical, and Sustainable Marketing

The sociocultural environment refers to the characteristics of the society, the people who live

in that society, and the culture that reflects the values and beliefs of the society. It includes

2.8 What is ethnocentricism?

Ethnocentricism relates to the tendency to prefer products or the people of one’s own culture

2.9 Describe the four globalization strategies representing levels of involvement for a firm:

exporting, contractual agreements, strategic alliances, and direct investment.

A firm deciding to go global must determine the level of commitment it is willing to make to

operate in another country. This commitment can range from a casual involvement to a

Exporting involves the least risk. If a firm chooses to export, it must decide whether it will

attempt to sell its products on its own or rely on intermediaries to represent it in the target

country. An exporting strategy allows a firm to sell its products in global markets and

The next level of commitment a firm can make to a foreign market is a contractual agreement

with a company in that country to conduct some or all of its business there. Two of the most

Firms seeking an even deeper commitment to a foreign market develop a strategic alliance

A deeper level of commitment occurs when a firm expands internationally by buying a

business outright in the host country. Direct investment allows a foreign firm to take

advantage of a domestic company’s political savvy and market position in the host country.

2.10 What are the arguments for standardization of marketing strategies in the global marketplace?

What are the arguments for localization? What are some ways a firm can standardize or localize

its marketing mix?

Chapter 2: Global, Ethical, and Sustainable Marketing

Advocates of standardization argue that the world has become so small, with tastes so

homogenized, that basic needs and wants are the same everywhere. Those in favor of

2.11 Describe the utilitarianism, rights, fairness or justice, common good, and virtue approaches to

ethical decision making. What is ethical relativism?

Utilitarian approach: The decision that provides the most good or the least harm



Rights approach: The decision that does the best job of protecting the moral rights of all

affected

2.12 Why is it increasingly important that firms engage in sustainability? What are some ways

strategies for the Four Ps can include sustainability?

With growing world populations and increasing demand for products, sustainable business

practices are necessary for life in the future. Many firms practice sustainability when then

develop target marketing, product, price, place/distribution, and promotion strategies

designed to protect the environment and the future of our communities.

Companies implement sustainable marketing practices in the following ways:

Target marketing strategies: They target green customers who are likely to buy

eco-friendly products.

Product strategies: Some firms choose fair trade suppliers who pay a fair price to

producers in developing countries

Chapter 2: Global, Ethical, and Sustainable Marketing

Sustainability metrics are tools that measure the benefits an organization achieves through the

implementation of sustainability.

ACTIVITIES: APPLY WHAT YOU’VE LEARNED

2.13 In Class, 10–25 Minutes for Teams Using the data in Table 2.2, select two countries that

are substantively dissimilar. Then select one of the products below. Use the data for the two

countries to develop arguments why each of the two countries would and would not be a

good opportunity for expansion of the market for your product.

1. New and more environmentally friendly method for heating and cooling houses.

2. A small automobile that runs on electricity.

3. Barbie and Ken dolls and accessories

4. A low-priced, easy to use, sewing machine that does not require electricity.

2-14 Creative Homework/Short Project With several members of your class, assume you are in

the marketing department for a low-end retail store chain; you might think of a chain similar

to Dollar General. Your firm has decided to begin an expansion into the global market.

Currently you are considering building stores in France, Ecuador, Brazil and Australia.

Gather information about these countries using the CIA Factbook available online and

other sources. Using the data you have about each country, develop ideas on the pros and

cons of entering each country. Which country do you feel is best? Present your findings to

your class.

2-15 For Further Research (Individual) Consider the six different ethical philosophies

in the chapter. Apply these six philosophies to one of the following ethical

dilemmas. What would be the most ethical decision for each? Explain why you think so.

Which would you be most likely to follow?

Decisions:

1. You see a fellow student cheating. Should you ignore what you saw, report it, or do

something else?

2. You are the president of a school club, which gives you access to the club’s money

You need to buy a new tire for your car but you won’t have enough money for a week.

You are considering borrowing the money from the club and paying it back in a

week.

3. You have been assigned to a class project team. In a different class, you have been

on a team with one of the members of your current team, and you know he or she

refuses to do any work but expects others the team to help him or her out. What are

your options, and what should you do?

2-16 In Class, 10–25 Minutes for Teams Assume you are the director of marketing for a U.S.

firm that produces one of the products listed below. Your firm is considering going after

the Indian market and is faced with the decision of the best entry strategy. Should your firm

simply export their products, or would a strategic alliance, licensing, a joint venture, or

direct investment be a better choice? Develop your ideas for a best entry strategy. Be

Chapter 2: Global, Ethical, and Sustainable Marketing

specific in your recommendations for a strategy, how to implement the strategy, and your

reasons for your recommendations.

Products:

1. Tablets (similar to the iPad) targeting the consumer market

2. Expansion of your discount retail store chain

3. Short-term (from an hour up) auto rentals

Teams can present their findings and recommendations to the class.

2-17 Creative Homework/Short Project Consumer ethnocentrism is the tendency for individuals

to prefer products from one’s own culture. Sometimes people think products made at home

are better than imported goods. Develop a small study to find out what students at your

university think about products made at home and abroad. Develop a survey that asks other

Within one class period, you could divide the class up into two groups: the survey creators

2.18 In Class, 10–25 Minutes for Teams Some people argue that our environment is not in

jeopardy and that sustainability efforts will only make products more expensive. Plan a

debate in your class with two teams, one arguing for sustainability efforts and one against.

2-19 For Further Research (Individual) You are planning a trip to another country for your

summer vacation. You are considering traveling to Greece, to Peru, to England, and to

Egypt. Determine the current forex rate for all four countries as well as the average forex

over the past five years for each. Based solely on the information you collect about forex

rates, explain where you would go and why.

Go to the library or the Internet to find out as much as you can about the forex rate for the

2-20 For Further Research (Groups) You are part of an up-and-coming coffeehouse chain in

the United States, and you know that you need to participate in competitive intelligence

activities to learn more about your competitors. Using the Internet, collect at least five

distinct pieces of information about either Starbucks or Dunkin’ Donuts that will enable

you to improve your marketing strategy.

Entering global markets involves a complex decision process. Marketers must fully

Chapter 2: Global, Ethical, and Sustainable Marketing

APPLY MARKETING METRICS

Many Western firms see their futures in the growing populations of developing countries,

where eight out of ten consumers now live. Consumers from countries such as Brazil, India,

China and Russia offer new opportunities for firms because growing numbers of them are

accumulating small but significant amounts of disposable income. Firms like worldwide

cosmetics giant Beirsdorf, producer of Nivea products, are adapting their products and their

marketing activities to meet the needs of these populations. Often this means selling miniature

or even single use packages of shampoo, dishwashing detergent or fabric softener for only a

few cents. The huge Swiss company Nestlé sells shrimp-flavored instant soup cubes for two

cents each in Ghana while the financial company Allianz, in a joint program with CARE, sells

micro-insurance for five cents a month to the very poor in India. However, how do these firms

measure their success in these new markets? Firms normally use such marketing metrics as

customer awareness or satisfaction, increases in market share or profits, or return on

marketing investment (ROMI). These metrics may not be right for the new markets in the

developing world where many millions of people buy streamlined versions of a firm’s

products at a fraction of their usual price. What do you think? Develop a list of possible

metrics that firms might use to measure their success in these new developing markets.

Large companies obviously take a huge risk with the adoption of such practices in developing

countries with the hope of a huge return on their marketing investment. Such risk-return

strategies may have to be developed within the perspective of a longer time period to see

ROMI grow, so building brand strength and equity in a such a developing market may be

more valued by a firm than immediate increases in market share or profits

2.21 Do you think about the approach described above is effective for entering BRICS markets

to appeal to consumers with small but growing disposable income?

2-22 How would the success of this approach be better measured—that is, what metrics would

be more useful than the typical metrics used in developed countries? Be creative and

develop a list of several possible metrics that firms might use to measure their success in

these new developing markets. Hint: Keep closely in mind what firms hope to accomplish by

increasing their presence and sales in those markets.

CHOICES: WHAT DO YOU THINK?

2-23 Critical Thinking and Ethics Assume you are the CMO for a firm that is a major producer

of chocolate candy and baking chocolate. The bulk of your chocolate products are sold in

the United States and Europe. For many years, your firm has purchased cocoa beans (from

which chocolate is made) from Country A. Country A produces 30 percent of the world’s

chocolate but recent reports of child labor have concerned many country leaders and

consumers. On some farms, children are made to work as much as 100 hours a week and are

physically abused. Furthermore, some receive no education whatsoever. You are considering

whether or not your company should change suppliers and buy cocoa from Country B.

Country B is the leader in ethically produced cocoa. Cocoa is produced in an

environmentally sustainable manner and the country is the world leader of “fair-trade

certified” cocoa production. Unfortunately, the price of cocoa from Country B is nearly

twice that of Country A. this means you would have to significantly increase the price of

Chapter 2: Global, Ethical, and Sustainable Marketing

your products which you expect to negatively affect the firm’s sales. This, in turn would

likely lead to closing some company facilities and laying off workers. On the other hand,

consumers in your markets are increasingly concerned about human rights abuses and seek

to buy fair trade products. Develop your thoughts on the following:

a. The positive and negative outcomes (in addition to those already discussed) of

continuing to purchase cocoa from Country A.

b. The positive and negative outcomes (other than those already discussed) of changing

suppliers and purchasing cocoa from Country B (in addition to those already

discussed).

c. Which country would you choose using the Utilitarian approach to decision making?

Why?

d. Which country would you choose using the rights approach to decision making? Why?

e. Which country would you personally choose? Why?

MyMarketingLab for answers to Assisted Graded Questions.

2-24 Critical Thinking What role has technology played in the globalization of businesses? Has

2-25 Critical Thinking LDCs are not required by the WTO to meet the same environment

standards as developed countries. Do you think LDCs should be excluded from WTO

2-26 Critical Thinking Some countries have been critical of the export of American culture via

movies, television, music and many American consumer goods by U.S. businesses. What

about American culture might be objectionable? Can you think of some products that U.S.

marketers export that can be objectionable to some foreign markets? What is the solution to

the problem?

2-27 Critical Thinking Some of the U.S. population supports free trade, whereas others are

unhappy, even angry, that the government has reduced regulations on imports of such

products as textiles and furniture, causing factories to shut down and employees to lose their

jobs. They feel that the U.S. government should legislate greater regulation of imported

goods to give American companies an advantage or at least to lessen the advantage that

companies in other countries receive from their government. What do you think? How do

you justify your answer?

Chapter 2: Global, Ethical, and Sustainable Marketing

2.28 Critical Thinking In 1999, several single European nations banded together to form the

European Union and converted their individual monetary systems over to the euro. Do you

believe there will ever be other economic communities that would follow this path? Explain

your reasoning and, if necessary, provide some possible examples. What about the

possibility of a single world currency? Could this happen? Why or why not?

2.29 Ethics Ethical relativism suggests that what is ethical in one culture may not be considered

ethical in another. What should the attitude of businesses be when differences occur? Should

businesses follow the ethical values and practices of their own country or of the host

country? What should governments do about this if anything? What is the role of the WTO?

2.30 Ethics Review the AMA Code of Ethical Norms and Values for Marketers, provided in the

chapter. Which of the areas represented within the document do you anticipate are the most

challenging for marketers to consistently follow? What makes these issues particularly

troublesome? Do you think marketing in general does a good job adhering to the AMA

Code? Provide specific evidence from your knowledge and experience to support your

position.

Chapter 2: Global, Ethical, and Sustainable Marketing

MINIPROJECT: LEARN BY DOING

The purpose of this miniproject is to gain experience in understanding what it takes to move a

product that is successful in its home market into a global market in which it will continue to

be successful. Assume that you are the director of marketing for a firm that produces its own

high-end brands of makeup, skin care, and hair care products for both men and women. The

products have been endorsed by a number of male and female musicians who are highly

popular with young people. The products are sold only in the company’s own retail outlets.

2.31 Describe your local competitive advantage and why you believe this competitive

advantage will serve you globally.

2.32 Determine which global market(s) is most attractive for your service. Will you target a

single country or an economic community? Describe your reasoning.

2.33 Decide which market-entry strategy you will pursue. Again, explain your reasoning.

2-34 Describe your marketing mix strategy:

• How might you need to adapt your product?

• What other product decisions do you need to make?

• How will you promote your products?

• How will you price your products?

• What place/distribution decisions must you consider?

Prepare a short presentation to share with your class.

V. MARKETING IN ACTION CASE: REAL CHOICES AT FORD

Summary of Case

Ford Motor Company is investing $1.6 billion to construct a plant in Mexico. This will create

Chapter 2: Global, Ethical, and Sustainable Marketing

2,800 jobs in the country. U.S. automotive labor costs average $30 per hour whereas Mexico’s

labor costs average $5 per hour. Ford can lower costs, become more competitive, and increase

profit margins. The investment in Mexico has critics. The issue of jobs leaving the country is a

part of political debate in Washington, D.C. The announcement of Ford’s plans was made during

the recent presidential campaign. One candidate called for increased tariffs and penalties for U.S.

firms, like Ford, that choose to relocate manufacturing to foreign markets. Increasing its presence

in Mexico is not Ford’s only initiative Ford. The company has expanded to Spain, Germany,

China, the Middle East, and Africa. While Ford’s improves its financial outlook, how will it deal

with the negative attention generated by moving jobs outside the United States? Is it possible for

the company to increase its profitability and reduce its dependence on foreign production? In the

current political climate should the company rethink its plans?

Suggestions for Presentation

This case could be assigned for various online or in-class discussion activities.

Online Assignment Suggestions

Go to Ford’s website and search around its various links for material regarding the controversy.

What news articles do they mention?

In-Class Assignment Suggestions

In groups or as individuals, discuss the various consumer and world reactions to this situation.

Divide the class into groups of three to five students and have each group conduct a strengths,

weaknesses, opportunities and threats (SWOT) analysis to determine how Ford should proceed

with t marketing strategies.

You Make the Call

2-35. What is the decision facing Ford?

Students should restate the questions posed at the end of the case description (or create new

ones on their own):

2-36. What factors are important in understanding this decision situation?

The important factors in this decision situation stem directly from the global marketing

environment:

The economic environments of Ford’s various marketplaces as well as of the countries

that Ford can potentially produce their products

Chapter 2: Global, Ethical, and Sustainable Marketing

2-37. What are the alternatives?

2-38. What decision(s) do you recommend?

2-39.What are some ways to implement your recommendation?

MY MARKETINGLAB

Go to mymktlab.com for Auto-graded writing questions as well as the following

Assisted-graded writing questions:

2-40 Creative Homework/Short Project. As a marketing manager, you must consider whether

2-41 Ethics. Some companies have been criticized for moving their manufacturing to other