Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
Review and Discussion Questions
Chapter 4: Country Selection and Entry Strategies
Review questions
1. Define the terms market economy, planned economic systems, and mixed systems.
a. A market economy is an economy in which most economic decisions are made in the
marketplace. The marketplace may be found anywhere money changes hands in a
capitalist economic system. Purchases are influenced by supply and demand in
market economies.
2. Explain the concepts of capitalism, socialism, and communism in terms of market
economies, planned economic systems, and mixed systems.
a. Capitalism is the basis of a market economy. Purchases are determined by supply and
demand. Planned economic systems do run based upon capitalism, in the systems the
governments sets prices and decides what will be made available for purchase. Mixed
economies are partly guided by capitalism and partly by the government.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
3. Describe the terms most, less and least developed economies.
a. Most developed countries are industrialized countries with high per capital incomes.
Citizens in these economic systems enjoy abundance, prosperity, and a variety of
purchasing choices.
4. What are the five stages of the Rostow modernization model?
Rostow stages of development
Traditional society
Preconditions for take-off
5. How are emerging markets related to the five stages of the Rostow modernization model?
Countries moving through the transformation from developing to developed are termed
emerging markets. Emerging markets have moved past the stage of a traditional society
6. What is a newly industrialized country?
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
A newly industrialized country has experienced rapid economic expansion and
7. Describe a transition economy.
Transition economies occur in what were formally communist countries with centrally
planned economies. During the past 20 years, many of these countries, particularly those
8. Define the concept of national competitive advantage and list the factors that support a
nation’s competitive advantage.
a. The theory of national competitive advantage, introduced by Michael Porter, provides
an explanation for why countries succeed at certain industries and at others. These
factors move beyond the traditional focus on cost of labor, currency differences, or
the natural resources in the country and instead concentrate on what leads countries to
9. What are the five major competitive forces present at the industry level?
Threat of new entrants, threat of substitute products, bargaining power of suppliers,
bargaining power of consumers, and rivalry among competitors
10. Describe exporting and note which makes exporting the lowest cost, risk, and level of
control international marketing option.
Exporting is the mode of entry in which the product is shipped in one manner or another
into a foreign market. When a company exports, they simply take their product,
Instructor Resource
Baack et al., International Marketing, 2e
11. How is licensing different from exporting?
Licensing refers to a contract that grants a company the legal right to use another
company’s brand, image, and other marketing components. Licensing is different from
12. What are the features of a franchising arrangement?
Franchising involves the contractual agreement to implement a business model. The
contract describes the business model in a franchising relationship. In return for an
13. Why does a wholly-owned subsidiary feature the highest degree of control coupled with
the greatest levels of cost and risk?
When a company enters a country by establishing a 100% ownership stake in a business
in that country, the company has created a wholly-owned subsidiary (WOS). Thus, the
company maintains all control of their company. The time and money needed to enter
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
14. What two types of joint ventures are possible for international marketing organizations?
Some companies chose to partner with local businesses when entering a country. When
these legal partnerships involve an investment, a division of ownership, and the creation
15. Describe a strategic alliance.
A strategic alliance is a formal agreement between companies to work together to achieve
a common goal. Under this model, the companies do not have to create a joint venture.
16. Describe Internationalization Theory.
The theory states that companies go through four stages during the move to becoming a
completely global company: (1) no regular export activities, (2) export via independent
17. Explain Internalization Theory.
The model emphasizes that going global will be an incremental process. A company
begins by exporting to close, familiar markets. Through these exporting activities, the
company’s managers gain the knowledge needed to export to other close similar markets.
18. How does Eclectic Theory explain the mode of entry selection processes?
As with some of the other theories, the Eclectic Theory assumes that exporting will be the
most efficient and preferred form of entry but that inefficiencies or problems in the
Instructor Resource
Baack et al., International Marketing, 2e
Discussion questions
1. Explain how private property rights and marketplace competition are different in market
economies and command economies. What might be the difference in these two factors in
strong command economies versus moderate command economies? Do these economic
forms influence the rate of development in less or least developed countries? Why or why
not?
Private property rights allow individuals to buy land, machinery, and other goods.
Property rights are not universal. In market economies individuals are allowed to own
property whereas in command economies this is not guaranteed. By being able to own
private property rights individuals in market economies can own and start businesses.
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
2. What types of marketing opportunities would be present in BRIC countries that would
not be available in least developed economies? Would the number of bottom-of-the-
pyramid consumers in either country influence the ability to move toward become most–
developed? Why or why not? What other factors make it harder or easier for a national
economy to grow and expand?
BRIC countries offer international marketers large markets, lower costs relating to
production, and opportunities to learn about rapidly changing marketplaces. There
may be many opportunities to introduce new products into these markets, products
that are already in more developed nations.
3. Explain how the five main industry level competitive forces would affect marketing
programs for the following products:
Denim jeans for middle-aged consumers
o The five main industry level competitive factors would affect the marketing of
jeans for middle-aged consumers in many ways. The threat of substitute products
would mean the marketing program would need to differentiate their jeans from
other makers of jeans – letting consumers know why these jeans were better. The
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
threat of new entrants could also be lessened by the differentiation created by the
marketing program. The bargaining power of suppliers would influence the cost
of production of the jeans. The manufacturer may decide to supply their own
denim. The bargaining power of consumers can influence the price of the jeans,
the company can try to increase the number of consumers. The company can try
and protect their jeans from being copied by other competitors to reduce the
rivalry among competitors.
These answers apply to the products below also.
In each instance, how would a nation’s economic system impact the five competitive
forces?
The nation’s economic system would affect each product’s ability to enter into a market,
the way they are able to set their prices, bargain with suppliers, and produce a product.
4. Choose a mode of entry for the following products and defend your choice using one of
the three mode of entry theories:
Instructor Resource
Baack et al., International Marketing, 2e
SAGE Publishing, 2019
A Mexican salsa product to be exported to Paraguay
Automobile batteries exported from France to Turkey