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QuESTIONS
12-1. Why is it challenging to estimate demand in emerging markets?
(LO 12.4; AACSB: Application of knowledge)
■ Estimating the demand for products/services in emerging markets is challenging
because of the unique commercial environments.
■ They are limited in terms of reliable data, market research firms, and trained
12-2. What types of products are in greatest demand in emerging markets?
(LO 12.2; LO 12.4; AACSB: Application of knowledge)
■ Mobile phones
■ Autos
12-3. Why do researchers often need to use innovative approaches to estimate
demand in emerging markets?
(LO 12.4; AACSB: Application of knowledge)
■ Assessing market demand in emerging markets presents even greater challenge than
in developed international markets.
■ Traditional methods are meaningless.
■ Examples-
●The government usually measures wallpaper imports by weight and value.
●Regarding bandages, the government published import statistics, yet the
● SUGGESTED SOLUTIONS TO CASE QUESTIONS
12-4. Do you believe ABD’s products are in a state of readiness to begin exporting
to Europe? Why or why not? Are the products ready for exporting to emerging
markets (e.g., China, Mexico, Russia)? Why or why not? What factors suggest
Speedheal products might enjoy demand in all types of foreign markets?
(LO 12.3; AACSB: Analytical Thinking)
■ Product Readiness: It seems that at least one ABD product, Speedheal, is ready for
export to Europe.
■ ABD has received orders from European countries, and the technology is
■ Conditions in Europe, including the need for climate control facilities, flexible
■ Emerging markets: Perhaps more research is necessary to determine if broad
■ In fact, the product may be appropriate for all three countries, however the market
■ For example, Speedheal may sell well in private, cutting edge hospitals and clinics in
■ ABD must investigate local conditions to assure that these valuable, lightweight, and
■ Demand in foreign markets: ABD has had unsolicited orders from abroad, and
12-5. Does management at ABD possess the appropriate knowledge, skills, and
capabilities for internationalization? Justify your answer. What steps should
management take to better prepare the firm, managers, and employees to
internationalize?
(LO 12.1; AACSB: Analytical Thinking)
■ ABD management possesses perhaps the most important factor for
■ The company has committed resources, agreed to hire a vice president for
■ Nevertheless, top management recognizes that it has much to learn to guarantee
■ More working capital is necessary for warehousing and maintaining inventory abroad.
12-6. How well did ABD complete the key tasks in global market opportunity
assessment? Evaluate whether it accomplished each task well or poorly. Did ABD
achieve each of the objectives set out for the tasks?
(LO 12.1; AACSB: Analytical Thinking)
■ Students should note the six key tasks to assessing global market opportunity.
■ They should find and state specific evidence to support the claim that ABD analyzed
its organizational readiness (task one), assessed the suitability of the product in Europe
12-7. If you were a member of ABD’s management team, what countries would
you recommend targeting first? As a manager, you would need to justify your
recommendation. A good approach is to investigate key characteristics of
specific countries via globalEDGE™ (www.globalEDGE.msu.edu) or similar
websites.
(LO 12.3; AACSB: Analytical Thinking)
■ Based on the information noted in the answers to questions one and two, students
■ Then, students could examine reports prepared by the U.S. Department of Commerce
■ Product or industry level reports will provide basic references to countries interested
■ From there, students can read the specific Country Commercial Guides to learn the
12-8. What approaches could ABD employ to estimate the firm’s sales potential
for markets in Europe and other affluent economies? Justify your answer.
(LO 12.4; AACSB: Analytical Thinking)
Europe and other affluent economies made sense:
■ Though ABD’s plan to internationalize was in its early stages, management intended
■ ABD’s initial foreign markets would be Australia, Canada, Western Europe, and
■ Conditions in Europe, including the need for climate control facilities, flexible
V. END OF CHAPTER QUESTIONS
● TEST YOUR COMPREHENSION
12-9. What is a global market opportunity? What opportunities do firms seek
abroad?
(LO 12.1; AACSB: Application of knowledge)
■ A global market opportunity is a favorable combination of circumstances, locations, or
■ Firms may seek to sell products and services overseas, establish factories or
12-10. Identify and explain the six major tasks in global market opportunity
assessment.
Visit MyManagementLab for suggested answers.
(LO 12.1; AACSB: Application of knowledge)
12-11. Identify the issues managers consider when they analyze organizational
readiness to internationalize.
(LO 12.1; AACSB: Application of knowledge)
There are four issues:
1. What does the firm hope to gain from international business, and is this
expansion consistent with other firm goals,
2. What demands will internationalization place on company resources,
3. How demands will be met, and
1. What is the basis of the firm’s competitive advantage?
12-12. Describe the characteristics of products or services most likely to sell
well in foreign markets?
Visit MyManagementLab for suggested answers.
(LO 12.2; AACSB: Application of knowledge)
12-13. What are the typical variables used in indexing and ranking?
(LO 12.3; AACSB: Application of knowledge)
There are eight variables:
1. Market size,
2. Market growth rate,
3. Market intensity,
4. Market consumption capacity,
5. Commercial infrastructure,
6. Economic freedom,
7. Market receptivity to imports, and
8. Country risk.
12-14. What types of variables should the researcher consider when screening
for each of the following: export markets, foreign direct investment, and global
sourcing?
(LO 12.3; AACSB: Application of knowledge)
■ For exports, the answer is similar to #12-13 above.
■ For FDI, a researcher should consider long term prospects for growth, cost of doing
12-15. What tasks does assessing industry market potential entail?
(LO 12.4; AACSB: Application of knowledge)
■ Managers need data and insights on the following variables: market size, growth rate,
12-16. What are the major issues to consider when selecting foreign business
partners?
(LO 12.5; AACSB: Application of knowledge)
■ The firm should find a partner who promises a good strategic fit, a good resource
● APPLY YOUR UNDERSTANDING
12-17. Target® is a large retailer with about 1,800 stores in the United States, but
very few in other countries. It has a reputation for merchandising thousands of
trendy yet inexpensive products for the home; including apparel, furniture,
electronics, toys, and sporting goods. Management wants to open stores in major
European cities but will have limited floor space there. Target hires you as a
consultant to decide which products to offer in Europe. Write a brief report in
which you describe the selection criteria you will use and offer some examples to
back up your ideas. Be sure to justify your answer using the advice and other
information included in this chapter.
(LO 12.3; AACSB: Analytical Thinking)
■ Students will first note the chosen locations (major European cities), and then refer to
the characteristics that Target should apply to the various product lines.
■ Those characteristics include products that:
■ Students should also address buyer characteristics, and describe the primary and
secondary data they should use for investigating this.
■ They should also propose that Target collect primary data from retailers and
importers, and secondary data from U.S. Department of Commerce information found in
various places including www.export.gov.
12-18. Upon graduation, you are hired by Pullman Corporation, a manufacturer of
accessories for luxury cars. Management wants you to conduct research to
locate foreign markets with the best sales potential. You discover that markets
are fairly saturated in advanced economies, but you are aware of numerous
emerging markets that the industry has overlooked. Using your knowledge of
Exhibit 12.3, Market Potential Index, develop a list of the top five emerging
markets that Pullman should target. Be sure to justify your choice, based on
indicators from this chapter such as market size, market growth rate, market
intensity, and market consumption capacity.
(LO 12.3; LO 12.4; AACSB: Analytical Thinking)
■ For this case, students should assume Pullman Corporation will export its products
because of excess capacity, saturated local markets, or a desire to grow faster.
■ Responses may vary, but based on the overall index, students may choose Hong
12-19. Ethical Dilemma
Steven Sanchez is the export manager at Leon Industries, a manufacturer of
office furnishings. He has identified Russia as a promising market and decides to
attend a furniture trade fair in Moscow. As he prepares for the fair, a consultant
suggests hiring two female models in revealing clothing to work the company’s
booth. The consultant says the models will create buzz and increase Leon’s
visibility at the crowded fair. Sanchez is skeptical and seeks advice from two
colleagues. One colleague says the idea “amounts to exploiting women and
could invite sexual harassment charges. . . . It is sex discrimination. The booth
workers’ gender and good looks are a condition for their employment.” Another
colleague tells Sanchez that hiring the models is no problem. He says those who
oppose such a practice “perpetuate stereotypes of women as delicate creatures
who cannot decide what’s best for themselves.” Besides, he continues, “Russia
is a male-dominated society and people are not offended by such practices.”
What do you think? Using the ethical framework in Chapter 4, analyze the issue
and make a recommendation.
(LO 12.2; AACSB: Reflective thinking)
■ The initial step in conducting cross-border transactions is to assess the national
culture in that country, in terms of ethics and moral thought.
■ Even the act of opening a booth at a trade fair deserves some research to familiarize
■ Whether the notion of hiring two female models in revealing clothing to attract people
to their booth is unethical is debatable.
■ In one sense the company is not doing anything wrong, they are in fact creating jobs
for these women who may otherwise not have been earning any income at the time.
■ This case rests on two facets: The willingness of the models and the morals of the
Russians.
■ The first question is, are these models willing to do this.
■ Modeling is not a well-defined profession in terms of limitations.
■ Pretty much anything goes. So it is really up to the individuals- the model is the one
who ultimately refuses or accepts this job offer.
■ In addressing alternative cultural venues, clearly, sex sells in America.
■ Deciding to do the right thing is challenging, simply because the right thing is highly
■ The idea of bringing these models along to the fair is not unethical, but doing it in the
■ The Utilitarian approach would suggest that Mr. Sanchez keep his company’s best
■ In this case he should allow the models to have a say in what they wear while still
■ The rights of everyone involved are not an issue in this dilemma because nobody is
■ The models are simply doing their job and are fully cooperative.
■ The idea of treating everyone fairly is another level in the ethical framework.
■ In business the idea is to create competitive advantages and distinguish your firm
■ Fairness does not enter into the competitive advantage scenario.
■ The law is one way to establish fairness and no laws are being broken in this case.
■ By contrast, one can measure the common good of this action.
■ In this case one potential option for Mr. Sanchez is to ensure common good by
■ This ensures that the people attending the fair will not find this strategy to be
■ In determining the virtue of Mr. Sanchez, he must choose for himself what he thinks
is best.
■ At such fairs it is all about getting people to your booth and these women may help in
■ The initial step of people noticing your booth is half of the battle.
■ Certainly, instituting the WOW appeal would facilitate this initial step.
● GlobalEDGE™ INTERNET EXERCISES http://globaledge.msu.edu
12-20. China is a huge attractive market, with growing affluence. Before exporting
to China, most firms conduct market research to better understand the Chinese
market. Two useful research sites are the China Business Information Center
(CBIC; www.export.gov/china) and UK Trade and Investment
(www.uktradeinvest.gov.uk). At the CBIC, for example, firms can find out if they are
“China Ready.” They can access trade leads and read current news about
business in China. Suppose you are hired by a firm that wants to begin exporting
to China three products: (a) breakfast cereal, (b) popular music on CDs, and (c)
laptop computers. For each of these product categories, using the above Web
sites and globalEDGE™, prepare a list of the information that the firm should
gather prior to making a decision to export to China.
(LO 12.4; LO 12.6; AACSB: Analytical Thinking)
■ For all the products, Chinese import regulations, U.S. export regulations, tariffs,
a) Breakfast Cereal
■ For breakfast cereal, Chinese tastes must be taken into account.
◘ Are sweet, sugary cereals preferred, or are different flavors and ingredients
desired?
(b) Popular Music on CDs
■ For music CDs, a primary concern is intellectual property protection.
■ China is notorious for rampant piracy, and this can greatly affect product sales.
■ The firm should seek to understand the legal system and methods of protecting
against offenders.
■ Music-style preferences of the Chinese must be considered.
(c) Laptop Computers
■ Laptop computers are a complex product.
■ Mechanical issues such as the voltage used in China and hardware and software
compatibility must be considered.
■ Once the laptops are sold in China, will our company be able to provide customer
12-21. Walmart is a huge retailer but gets only about a quarter of its sales from
outside the United States. Coles is one of the largest retailers in Australia and
gets very little of its sales outside Australia. Assess the international retailing
sector using online resources such as globalEDGE™ and A. T. Kearney
(www.atkearney.com). Based on your research (a) what factors should these top
retailers consider in choosing countries for internationalizing their operations?
(b) What are the best markets for these firms to target for foreign expansion?
(c) What types of questions should management at each firm ask in assessing its
readiness to internationalize?
(LO 12.1; LO 12.4; AACSB: Analytical Thinking)
■ A.T. Kearney’s Global Retail Development Index ranks emerging countries according
■ Brazil, Chile, and China take the top three spots (2012 Index).
■ Retailers looking to expand their international operations should consider not only the
■ Kearney also recommends exploring other countries in Asia that show the possibility
■ Kearney suggests that “the real story isn't about foreign companies encroaching on
■ Companies such as Coles and especially Walmart should focus on ensuring that
■ Companies should consider if they have adequate resources and the market
■ They must understand a country’s regulations, shopping habits and tastes, and should
■ To adopt an even more international feel, companies can adopt more familiar names,
■ Companies should analyze foreign competitors that have attempted to enter specific
12-22. The United States Bureau of the Census tracks foreign trade statistics.
Visit the site at www.census.gov/foreign-trade and find the most recent versions of
the “Profile of U.S. Exporting Companies” report by entering this title in the
search engine. Peruse the report and address the following questions. (a) What
types of firms export from the United States? That is, what is the breakdown by
company type of U.S. exporters? For example, are the exporters mainly large or
small firms? Do they operate mainly in the manufacturing, agricultural, or
services sectors? (b) What is the role of small and medium-sized exporters in
U.S. trade? What percent of U.S. exporters are these types of firms, and for what
proportion of total exports do they account? (c) What countries are the three
these countries the top markets for U.S. firms?
■ According to the latest Profile, manufacturers account for the majority of export
activity – 60%.
■ Exporters are also mainly small and medium size enterprises (SMEs; those employing
500 or fewer workers), with companies employing 1 to 19 workers accounting for 38.4%
of the number of exporters.
■ SME exporters comprised over 97% of all identified exporters and accounted for
33.7% of the known export value, indicating their substantial role in U.S. trade.
CAREER TOOLBOX EXERCISE
ASSESSING MARKETS FOR CANCER INSURANCE
Visit MyManagementLab for more information.
MyManagementLab
Mymanagementlab.com for Auto-graded writing questions as well as the following
Assisted-graded writing questions:
12-23. Why is it important for the firm to assess its readiness to
internationalize?
12-24. Summarize the screening methodology for identifying potential country
markets.
12-25. MyManagementLab Only– comprehensive writing assignment for this chapter.
Visit MyManagementLab for suggested answers.
