International Marketing IMT 17

Global Marketing Test Bank

Refenrences:-

http://crab.rutgers.edu/~ckaufman/gntestbank.html

http://www.oocities.org/duehing/ibus330quiz4.txt

MAJOR MODELS AND FRAMEWORKS :

We have covered several major models and analytical frameworks during this course that enable

you to analyze a situation in making marketing-related decisions.

1. Changes in consumer buying and usage habits in recessionary conditions (p. 93)

2. ABCD Model (p. 108): consumer access, buying, consumption, disposal as a framework to

organize the examination of the various aspects of consumer response. Built on industrial models of

B2B.

3. Drivers Model (p. 254): organizes a four-component model of various major factors that affect a

business's strategies

4. Opportunity Matrix (p. 286): allows the company to compare perceived level of political risk

and perceived level of opportunity in a destination market.

5. Types of Tariffs (p. 151)

6. Segmentation (p. 219) - grouping of consumers based on factors meaningful to our business.

7. Positioning (p. 235, 236, 240): Definition, gap analysis, types, use of positioning

8. Market Entry Flowchart (p. 283, 288) - a systematic analysis

9. Market Entry Table (p. 309) - why are certain methods chosen?

10. Analytical product models, comparative analysis of attributes (p. 357, 363): taste tests, product

concept tests, conjoint analysis, analogy - these are methods from new product development that

allow us to analyze consumer reactions to various product attributes

11. Product standardization, adaptation - in creating a global brand, when and what can be

standardized? What can and should be adapted? Sanex case example

12. Branding and Country of Origin Effects (p. 404) - what types of brand emphasis can be given?

What attributes of a brand contribute to the brand image?

13. Pricing (425, 435, 478): euro

14. Communications: model, adaptations - we examine the specific encoding that is chosen when

communicating with consumers in various cultures. Do our meanings communicate what we

intend? Can the message be decoded appropriately?

15. Sales, Table p. 494

16. Global E-commerce issues: p. 605, 611

http://crab.rutgers.edu/~ckaufman/gntestbank.html

http://www.oocities.org/duehing/ibus330quiz4.txt

QUESTIONS:

The Questions below illustrate the types of major issues

that we have been covering in the course since the

Midterm. There are varied formats. The test bank will be

updated periodically to represent our discussions.

Chapter 11 – PRODUCT CONCEPTS Ikea, the Swedish furniture chain, insists that all its stores

carry the basic product line with little room for

adaptation to local tastes. If research of the U.S. market

showed that Americans preferred larger beds than their

Swedish counterparts, which of the following strategies

would be advisable for Ikea?

a. standardization.

b. new product development.

c. adaptation.

d. withdraw from market.

e. lower prices to encourage attitude change.

Answer: (c) Difficulty: (1) Knowledge: (A) Page: 34

6

In the Australian market, rather than manufacturing

disposable diapers, Proctor & Gamble decided to import

them since the size of the market did not warrant local

manufacturing according to P&G. Unfortunately, by

using packaging designed for the Asian region with non-

English labeling, P&G alienated its customers in

Australia. This is an example of improper:

a. global policy decisions.

b. pricing decisions.

c. brand policy decisions.

d. product policy decisions.

e. company policy decisions.

Answer: (d) Difficulty: (3) Knowledge: (F) Page: 34

7

Explain what could have been done to prevent the

problem. Suppose that you have been hired to correct the

problem. What would you do?

The primary advantage to using a standardization

approach to marketing a product in the international

arena is:

a. minimization of costs (which can be passed on to

customers).

b. more profit.

c. less service complaints.

d. less product returns.

e. standard budgets.

Answer: (a) Difficulty: (2) Knowledge: (F) Page: 3

51

Which of the following would NOT be one of the five

key product characteristics that contribute to its

acceptance?

a. low service maintenance

b. relative advantage

c. compatibility

d. complexity

e. trialability


57-358

In the new product roundtable, a student brought in a

product that promised to be a “tea for babies” that

numbed their gums during teething. To what extent does

the new product offer more perceived value to potential

adopters than existing alternatives, would be a

Questionthat best fits with which of the following key

product characteristics acceptance categories?

a. observability


c. compatibility

d. complexity

e. trialability

Answer: (b) Difficulty: (1) Knowledge: (A) Page: 3

57

Is the product consistent with existing values and

attitudes of the individuals in the social system, would be

a Questionthat best fits with which of the following key

product characteristics acceptance categories?

a. observability


c. compatibility

d. complexity

e. trialability


57

Another student brought a “white fungus” product that

required two hours of soaking before it could be used in a

recipe for soup or stew. Is the product easy to understand

or use, would be a Questionthat best fits with which of

the following key product characteristics acceptance

categories?

a. observability


c. compatibility

d. complexity

e. trialability

Answer: (d) Difficulty: (3) Knowledge: (A) Page: 3

58

Also – a product example could consider how much

change is required of the consumer in adopting the

product into their own lives.

Congruent innovations

Continuous innovations

Dynamically continuous innovations

Discontinuous innovations

If a consumer considered four attributes to be important

in the purchase of a TV, by using ________________

the researcher might be able to determine the trade-offs

between the different product attributes (such as purchase

price or number of channels that could be received) when

the consumer evaluated the alternatives for eventual

purchase.

a. chi-square

b. correlation analysis

c. focus groups

d. regression analysis

e. conjoint analysis

Answer: (e) Difficulty: (3) Knowledge: (A) Page: 3

63

A(n) ________________ is essentially a field

experiment where the new product is marketed in a

select set of cities to assess its sales potential and scores

of other performance measures.

a. attitude screen

b. product model

c. product concept

d. test market

e. focus concept


67

CHAPTER 12 – BRAND CONCEPTS

A ____________ is a name, term, sign, symbol, or

combination of them which is intended to identify the

goods and services of one seller or group of sellers and to

differentiate them from those of competitors.

a. trademark

b. patent

c. signature

d. brand equity

e. brand

Answer: (e) Difficulty: (1) Knowledge: (F) Page: 3

77

Brand-name awareness, perceived quality, and other

associations invoked by the brand name in the customer’s

mind are all illustrations of the concept

called _______________.

a. proprietary investments.

b. brand equity.

c. brand warranty.

d. local brand name.

e. brand mark.

Answer: (b) Difficulty: (3) Knowledge: (F) Page: 3

77

All of the following are items that might be used as a

checklist for analyzing globalization propositions

EXCEPT:

a. What is the cost of creating and maintaining

awareness and associations for a

local brand versus a global one?

b. Are there significant economies of scale in the

creation and running of a communication program

globally?

c. Is there value to associations of a global brand or

of a brand associated with the source country?

d. Is global branding a requirement of forming

strategic alliances?

e. What local associations will be generated by the

global name?


86

With respect to a brand name changeover strategy, the

_________________ strategy ties the new global brand

name to the existing local brand name. After a transition

period, the old name is dropped.

a. transparent forewarning

b. summary axing

c. fade-in/fade-out

d. pyramid focusing

e. parallel dimension

Answer: (c) Difficulty: (1) Knowledge: (F) Page: 3

86

Euro Disney eventually becoming Disneyland Paris

(where the Euro shrunk until “land” could be added in

its place) is an example of which of the following brand

name changeover strategies?


b. summary axing

c. fade-in/fade-out

d. pyramid focusing



86

When Mars candy company took over Raider candy

products and used the theme line “Now Raider becomes

Twix, for it is Twix everywhere in the world,” the

company used the ________________ strategy for

changing brand names.


b. summary axing

c. fade-in/fade-out

d. pyramid focusing


Answer: (a) Difficulty: (3) Knowledge: (A) Page: 3

87

When Matsushita uses brand names like JVC &

Panasonic as their banner brands, they are using a(n)

_______ system.

a. domestic branding

b. national branding

c. manufacturer’s branding

d. store branding or private labeling

e. umbrella (corporate) branding


91

. When Nokia (a leading maker of cellular phones)

consolidated scores of brand names into their one

_________ brand, they found that strength

occurred because consumers were able to equate the

Nokia quality with more products.

a. domestic brand

b. national brand

c. manufacturer’s brand

d. store brand or private label

e. umbrella or banner brand


91

Deciding to move toward global branding is a difficult

decision. This must often be considered with respect to

the globalization versus localization issue. What are the

Questions that might be useful in reaching a decision as

to whether to pursue globalization over localization?

Answer: The Questionasks you to speculate on the

applicability of global versus local brand

names. Obviously, cultural differences are a heavy

factor. One way to begin the discussion is to remind the

students of David Aaker’s list for analyzing global

propositions:

1). What is the cost of creating and maintaining

awareness and associations for a local brand versus a

global one?

2). Are there significant economies of scale in

the creation and running of a communication program

globally?

3). Is there value to associations of a global

brand or of a brand associated with the source country?

4). What local associations will be generated by

the global name? symbol? slogan? imagery?

5). Is it culturally and legally do-able to use the

brand name, symbol, slogan across the different

countries?

6). What is the value of the awareness and

associations that a regional brand might create?

CHAPTER 13 - PRICING

When developing a pricing strategy for its global

markets, one of the first steps that a company must go

through is to decide:

a. what the actual price should be.

b. how high or low to price.

c. how much money will the price bring in.

d. what it wants to accomplish with its strategy.

e. what form of controls will regulate price.


15

. In the international marketplace, ______ pricing adds

international costs and a mark-up to the domestic

manufacturing cost.

a. dynamic incremental pricing

b. export price

c. import price

d. cost-plus price

e. target-return price

Answer: (d)Difficulty:(3) Knowledge:(F) Page: 416-

417

Examples of exporting-related ___ include

manufacturing costs, shipping expenses, insurance, and

overseas promotional costs.

a. incremental costs

b. demand costs

c. fixed costs

d. target costs

e. service costs


17

When demand is highly price sensitive, the company

needs to consider how it can _____from a global

perspective.

a. raise prices

b. lower prices

c. lower service

d. raise quality

e. reduce costs


17

Recall the examples we had in class of the Japanese

products being too expensive for the Indian market if the

current price, given in US$, is retained.

If Wrigley chewing gum company were to make 3-stick

rather than 5-stick packages of gum for the Philippines

market, this would be an example of ______ for low per-

capita income market.

a. downsizing

b. upgrading

c. synthesis

d. copying

e. paralleling


17

Sales tax rates, tariffs, and price controls are all examples

of ______ that can have a direct or indirect impact on

the pricing policies of a firm in the international

marketplace.

a. sales volume policies

b. price policies

c. government policies

d. restrictions

e. punishments


20

There are two ways to deal with the price escalation

phenomenon. One of these methods is to cut the export

price. The other is to:

a. change the promotion strategy.

b. position the product as a (super) premium brand.

c. position the product as a lower quality brand.

d. reduce retailer margins.

e. reduce distances that the good must be shipped.


1

There’s many more than this! You can reduce the Cost

Insurance and Freight. You can use FTZ’s. MANY

MORE!

When the U.S. levied a 10 percent tax on plus-$30,000

luxury cars, Land Rover changed the weight of Range

Rover models so they could be classed as a truck and

thereby avoid the luxury status, the company was

attempting to follow which of the

price strategies listed below for lowering the price of

an exported product?

a. rearrange the distribution channel.

b. eliminate costly features (or make them optional).

c. downsize the product.

d. adapt the product to escape tariffs or tax levies.

e. assemble or manufacture the product in foreign

markets.


21

Which of the following are considered to be exporter

strategies when the domestic (home market) currency is

weak?

a. conduct conventional cash-for-goods trade.

b. engage in nonprice competition by improving

quality, delivery, and aftersale service.

c. improve productivity and engage in vigorous cost

reduction.

d. shift sourcing and manufacturing overseas.

e. give priority to exports to relatively strong-

currency countries.


25, Exhibit 13-3

CHAPTER 14

In Spanish, five different words can be used for the word

“tires” (cauchos, cubiertas, gomas, llantas, and

neumaticos). Obviously, this might present problems in

advertising. This would be an example of which of the

following types of translation errors?

a. simple carelessness.

b. idioms.

c. local slang.

d. multiple-meaning words.

e. incorrect grammar.


49

In an advertising message, the original slogan was

“Body by Fisher.” The translation in a foreign market

was “Corpse by Fisher.” This would be an example of

which of the following constraints on international

promotion?

a. language barriers.

b. advertising regulations.

c. cultural constraints.

d. local attitudes toward advertising.

e. poor media infrastructure.


49

As an illustration of a barrier to advertising

standardization, Ray-Ban had to re-shoot a sunglasses

commercial for Malaysia because the original version

had Caucasian actors. In Malaysia, ads featuring

Caucasians are not allowed. This example would be an

example of which of the following barriers to

standardization of international advertising?

a. cultural differences.

b. budget.

c. advertising regulations.

d. differences in the degree of market development.

e. the “Not Invented Here” syndrome.


61

Sampling, price-offs, coupons, sweepstakes, bonus

packs, and trade allowances are all examples of

____________.

a. advertising

b. sales promotion

c. direct marketing

d. public relations

e. publicity


77

CHAPTER 15 - Personal Selling

What is meant by power distance? How can it affect how

people relate to each other in a personal selling situation?

The form of selling that best describes the way that the

majority of cars are sold in Japan is:

a. at car lots or dealerships.

b. via the Internet.

c. by door-to-door salespeople.

d. direct from the manufacturer.

e. via used car lots.


85

. Selling through an Export Management Company

(EMC) or an Export Trading Company (ETC) is

considered a _______ involvement approach

to international sales.

a. low

b. middle

c. high

d. backward

e. parallel


88

Which of the following degrees of involvement would

probably be in use when there is a traveling global sales

force and high technology experts are used by the firm?

a. limited foreign involvement and visibility

b. local management and sales force

c. expatriate management and local sales force

(mixed)

d. heavy to complete expatriate sales force

e. maximum global control and world wide

ownership


89, Exhibit 15-2

. Based on Geert Hofstede’s cultural dimensions scale,

which of the following countries most likely scores high

on the power distance scale?

a. Japan

b. United States

c. Germany

d. Australia

e. Canada


94, Exhibit 15-3

Based on Geert Hofstede’s cultural dimensions scale,

which of the following countries most likely scores high

on the individualism versus collectivism scale?

a. Japan

b. United States

c. China

d. Mexico

e. Pakistan


94, Exhibit 15-3

Based on Geert Hofstede’s cultural dimensions scale,

which of the following

countries most likely scores high on the long-term

orientation scale?

a. Hong Kong

b. United States

c. Great Britain

d. Germany

e. Pakistan


94, Exhibit 15-3

If a company attempted to integrate men and women in

the sales force in Saudi Arabia, the company would have

to deal with __________________ problems.

a. focus

b. vision

c. mission

d. corporate culture

e. country culture


93-494

Setting sales force objectives internationally will not only

depend on the company goals but will also depend on:

a. the training procedures.

b. the recruiting procedures.

c. the evaluation procedures.

d. an analysis of the culture and the values of the

country it is entering.

e. management standards for excellence.


97

Not all United States sales methods or systems can

automatically be exported abroad. Considering the

information provided by research on different cultural

dimensions, why might it be difficult to adopt a U.S.-

style commission system for salespeople in such

countries as Japan or Mexico. Be sure to remember how

these two countries might rank on the five cultural

dimension scales.

CHAPTER 16 - Retailing and Distribution

Consider the KFC video that we viewed in class. Even

though the video represents KFC's entrance into Japan

several years ago, many of the same operating principles

apply today with global firm's expansion into many new

markets. Explain.

2. In our discussion of the Tricon Branding article, we

learned that KFC has been the target of some protest

actions following the September 11, 2001 events. KFC

has 5,000 US restaurants and 6,000 abroad (Nov. 26,

2001), including stores in more than 80 countries. How

can KFC's analysts use the notion of political risk to

estimate such threats?

http://www.prsgroup.com/

_______ is defined as the design and management of a

system that directs and controls the flows of materials

into, through and out of the firm across

national boundaries to achieve its corporate objectives at

a minimum total cost.

a. Global goods flow

b. Global distribution

c. Global logistics

d. Global wholesaling

e. Global shipping

Answer: (c) Difficulty: (2) Knowledge: (F) Page: 5

14

Multinational corporations can use _______________ as

a strategic tool in dealing with currency fluctuations and

as a hedge against inflation.

a. buying power

b. just-in-time management

c. just-in-time delivery

d. purchasing management

e. inventory


19

When companies like Dell Computer and Chrysler (that

rely heavily on components such as auto parts and

computer chips) are able to take advantage of free trade

zones, they usually do it by having:

a. cheap parts sent to their manufacturing facility

from abroad.

b. their manufacturing facilities designated as

subzones of an FTZ.

c. buying cheap “dumped” products.

d. creating gray markets.

e. by passing customs because of being designated a

security area.


9

CHAPTER 17 - EXPORTING

1. We considered numerous standard export forms in

class. One is the "country of origin" form. Describe what

this concept means and why it is so important in global

trade.

2. As an aid to expanding information about world trade,

increasingly, international marketing information is

available in the form of _____________________.

a. CD-ROMs.

b. electronic encyclopedias.

c. electronic databases.

d. CIA reports.

e. government intelligence reports.

Answer: (c) Difficulty: (2) Knowledge: (F) Page:

544

3. We used several electronic databases in class to

research exporting laws, regulations, market research

information, and documentation. Describe one of the

databases and its usefulness to an exporter.

4. Conducting export research on China and Russia

would best be done by:

a. doing database research.

b. doing on-line searches.

c. doing field work.

d. using existing government facts and figures.

e. using data supplied by trade missions.


44

5. Explain Your Answer.

When the exporter quotes a price for the goods, including

charges for delivery of the goods alongside a vessel at a

port (the seller covers all costs of unloading

and wharfage at the shipment port and the buyer covers

all other charges to get the goods to the buyer), this form

of terms of shipment is called:

a. ex-works.

b. free alongside ship (FAS).

c. free on board (FOB).

d. cost and freight (CFR).

e. Cost, Insurance, and Freight (CIF).


5 Exhibit 17-6

CHAPTER - E-COMMERCE

1. We looked at several barriers to e-commerce in

various country settings. Name three and explain why

they are barriers.

2. How can infrastructure affect individuals' likelihood of

adopting Internet service?

3. One of the major limitations on consumer purchasing

on the Internet is:

a. Products are not available that they seek

b. Prices are not acceptable on web site

c. They often do not have a credit card to make their

purchases

d. Consumers always prefer to see products in person

SANEX QUESTIONS: you many have a short case

described on the final. Be prepared to Answer

Questions similar to those used in the Sanex case Consider the Sanex case in the text. The product under

consideration is a liquid hand soap. Here is a link to an

online site so that you can see the product and some

competitors.

http://store.europe.yahoo.com/pharmacy2u-uk/personal-

care-bath---shower-preparations-soaps---handwash-

liquid-soap.html

1. Following up on your new product Questionabout the

research you’d want to conduct, comment on the

appropriateness of the research conducted for Sanex. If

you were a product manager who could give the “go

ahead” for the product, would you? How would you

have designed the initial research?

2. Analyze this product in terms of product

innovativeness and change concepts used in class.

3. Sanex was initially introduced with a Spanish theme.

In moving to other markets, suppose that you were

http://www.prsgroup.com/

http://store.europe.yahoo.com/pharmacy2u-uk/personal-care-bath---shower-preparations-soaps---handwash-liquid-soap.html



considering whether any local market adaptations were

necessary, such as those we discussed in your assignment

(e.g. color, scent, etc). How would you determine their

importance?

4. Suppose the product were under consideration for

export to a lesser developed country where liquid

handsoap is not known. How would you analyze the

degree of behavioral change assumed by the product

design?

5. The name “Sanex” was created in order to make this

brand a Eurobrand, and later a global brand. Suppose that

CVL could have acquired a local brand instead in Spain,

such as Henkel or Nivea. What do you advise?

6. Let’s just suppose that CVL acquired Ernopon and was

attempting to determine whether to use fade in/fade out,

transparent forewarning, summary axing, or a dual new

brand plus local strategy. How would you analyze the

situation and make recommendations? Please draw

connections to our discussions of "Shark".

7. Sanex was initially priced as a “premium” product in

Spain as a signal of high quality. The product was later

taken to several other countries with great success, such

France. Suppose that you were asked to investigate

pricing strategies for the EU given the impending date

for euro integration.

8. Suppose that you are considering bringing the product

to India, but are concerned that the price is higher than

the typical consumer might accept. You consider using a

target price approach rather than a cost-based approach.

Explain.

9. The promotion for the product needed to encode the

message of “healthy skin” in a way that allowed

consumers to decode the message accurately. One ad

showed a woman kissing a man’s armpit. Explain

possible problems in terms of encoding and decoding.

10. Consumer education was used early in the

process. Why?

STARBUCKS CASE:

1. What type of brand positioning is Starbucks

attempting to use?

2. Recent studies have identified Starbucks as a

successful global brand.

a. What is a global brand? Can you define it?

b. Why can we consider Starbucks to be a global brand?

3. Starbucks took a way of doing business that was

developed in the United States and has successfully

brought that business format to other markets. Is their

approach ethnocentric? Why or why not?

ANHEUSER BUSCH CASE:

1. What model can we use to help AB management

determine whether they should enter a certain market?

2. The spending power of consumers in many foreign

markets is often reduced due to currency

fluctuations. How could AC modify their marketing to

maximize consumer value?

3. AB originally intended to utilize advertising developed

for Hispanic markets in the United States. Would these

be likely to communicate correctly to persons in AB's

destination markets of Mexico and Brazil? Why or why

not? Can you use the communications model to support

your point?

PEPSI ONE:

1. This product was introduced to other markets as

"PEPSI MAX." We have studied the importance of

branding in a global context. Did Pepsi follow the correct

strategy?

2. In choosing the name Pepsi One, the benefit of

maximum taste is removed from the name as a benefit

cue. Do you agree or disagree with this move? Explain.

3. Research needed to be carried out to determine

whether gender is a relevant variable in the U.S. market

and what attributes were the key drivers of product

purchase. This must be done before new advertising can

be designed. Discuss the type of research that you would

recommend in order to Answer these major Questions.

4. Suppose we were going to use the communications

model to analyze and diagnose U.S. consumers' reactions

to ads for Pepsi One that are aimed at young adventurous

men. We want to design a study testing women's

reactions to the current series of ads using Cuba Gooding

Jr. What type of information would we want to

examine?

5. There were several major problems with using the

European data to build a strategy for the U.S. market.

Identify and discuss three of the problem areas.

6. We considered the "House of Quality" article in terms

of the Pepsi One case.First, describe the major ideas in

the articles. Next, suggest a possible analysis for Pepsi

One using the frameworks that are proposed.

WAL-MART

1. Suppose you were going to consult with WM in

determining a site selection plan. You have studied

information about how consumers shop in Brazil. What

type of site might maximize your ability to meet

consumer needs?

2. Consumers are known to buy in bulk in Brazil and to

have their families accompany them in their shopping

trips. There are several ways to buy in bulk: single large

packages, multiple small packages, and so forth. Which

method would you recommend for WM and why?

3. How does this case compare to the video shown

regarding Kentucky Fried Chicken's entry into

Japan? Suppose that you showed the KFC video to a

group of managers for KFC's international division. What

would you want them to learn?

AOL

1. What is the difference betweeen the technology of

AOL as a service and the appliance used to make it

available? Did AOL take this into account?

2. Joint venture partners can help with acquiring market

access if they are the "right" fit with a company's needs.

Comment on the original AOL joint venture discussed in

the case.

3. Suppose that you were consulting with AOL back at

the time of their entry into Japan. Describe and defend

three types of research that you would recommend.

THE GAP

1. GAP has three different store formats at different

levels of cost and quality. How can these formats be

utilized when consumer spending power has been

reduced?

2. Compare and contrast the market entry strategies

chosen for Germany and Japan.

3. It is wise to work with an advertising agency in

Germany in addressing potential regulations in that

market. Why?

From another Question Bank with mistakes

Question1 Multiple Choice 0 of 1 point(s)

______ received the smallest amount of inward FDI in

2001.

Your Answer: The United States

Correct Answer: Africa

Feedback: Difficulty: MediumPage: 218


McDonalds has expanded into foreign markets primarily

through

Your Answer: franchising.

Correct Answer: franchising.



_______ foreign direct investment is FDI in the same

industry as a firm operates in at home.

Your Answer: Horizontal

Correct Answer: Horizontal



The _____ of FDI refers to the total amount of FDI

undertaken over a given time period (normally a year).

Your Answer: portfolio

Correct Answer: flow

Feedback: Difficulty: EasyPage: 215

Question5 True/False 0 of 1 point(s)

The flow of FDI has not only accelerated over the last

quarter century, but is also accelerated faster than the

growth in world trade.

Your Answer: false

Correct Answer: true



In the context of the form of FDI, the data suggests the

majority of cross-border investment is in the form of

green-field investments rather than in the form of

mergers and acquisitions.

Your Answer: false

Correct Answer: false



The advantage claimed for licensing over FDI is that the

licensor:

Your Answer: does not have to pay taxes on royalty

income

Correct Answer: does not have to pay for opening a

foreign market



Governments are the main source of impediments to the

free flow of products between nations.

Your Answer: true




The location-specific advantages argument association

with John Dunning helps explain the _____ of FDI, both

with regard to horizontal and vertical FDI.

Your Answer: direction

Correct Answer: direction



Raymond Vernon, the originator of the product life-

cycle theory, has argued that firms undertake FDI at

particular stages in the life cycle of a product they have

pioneered.

Your Answer: true




According to our textbook, _____ are the main source of

impediments to the free flow of products between

nations.

Your Answer: individuals

Correct Answer: governments



One theory used to explain foreign direct investment

patterns is based on the idea that firms follow their

domestic competitors overseas. First expounded by

__________, this theory has been developed with regard

to oligopolistic industries.

Your Answer: F.T. Knickerbocker

Correct Answer: F.T. Knickerbocker



Firms undertake FDI at _______ is Raymond Vernon's

view of foreign direct investment.

Your Answer: early stages in their corporate histories

Correct Answer: particular stages in the life cycle of a

product they have pioneered



If Siemens, a German firm, purchased a 20% interest in

a manufacturing firm in the United States, Siemens

would be engaging in

Your Answer: cross-boarder international investment.

Correct Answer: foreign direct investment.



Since World War II, Great Britain has traditionally been

by far the largest source country for FDI.

Your Answer: true




______ foreign direct investment is FDI in an industry

that provides inputs for a firm's domestic operations, or it

may be FDI in an industry abroad that sells the outputs of

a firm's domestic operations.

Your Answer: Horizontal

Correct Answer: Vertical



A firm will favor foreign direct investment over

exporting as an entry strategy when transportation costs

or trade barriers make exporting unattractive.

Your Answer: false




The source of FDI by country remains highly

concentrated, with the largest six countries accounting

for about _____ percent of all foreign direct investments

outflows in 2001.

Your Answer: 70

Correct Answer: 70

Feedback: Difficulty: HardPage: 221


Foreign direct investment occurs when a firm invests

directly in facilities to produce and/or market a product

in a foreign country.

Your Answer: false




There has been a rapid decrease in the total volume of

FDI over the past 20 years.

Your Answer: true




When Starbucks invested $10 million in Starbucks

Coffee of Japan in 1996, it was engaging in:

Your Answer: international capital investment

Correct Answer: foreign direct investment



The ______ of FDI refers to the total accumulated value

of foreign-owned assets at a given time.

Your Answer: selection

Correct Answer: stock





Your Answer: stock




________ FDI is FDI into an industry abroad that sells

the outputs of a firm's domestic production processes.

Your Answer: Forward horizontal

Correct Answer: Forward vertical



If General Electric, a U.S. based corporation, purchased a

50% interest in a company in Italy, that purchase would

be an example of _________

Your Answer: multinational investment.




FDI is growing more rapidly than world trade but not

more rapidly than world output.

Your Answer: true




The investment by individuals, firms, or public bodies in

foreign financial instruments is referred to as:

Your Answer: foreign direct investment

Correct Answer: foreign portfolio investment



The high level of FDI outflows from the U.S. has been

driven by a combination of factors including a strong

U.S. economy; strong corporate profits and cash flow;

and a relatively strong currency.

Your Answer: true




Foreign portfolio investment involves taking a significant

equity stake in a foreign business entity.

Your Answer: true




FDI is growing more rapidly than:

Your Answer: world output but not world trade

Correct Answer: world trade and world output





Your Answer: true




The licensor _______ in return for licensing one of its

products to a foreign firm.

Your Answer: gets a special subsidy from the country

of the licensee

Correct Answer: collects a royalty fee on every unit the

licensee sells




through





Externalities are knowledge spillovers that occur when

companies in the same industry locate in the same area.

Your Answer: true




When a firm invests directly in new facilities to produce

and/or market a product in a foreign country, _____

occurs.

Your Answer: reciprocal foreign investment




Impediments to the free flow of products between nations

decrease the profitability of ______, relative to _____.

Your Answer: FDI, exporting and licensing

Correct Answer: exporting, FDI and licensing





nations.

Your Answer: special interest groups




In general, foreign direct investment is less expensive

and less risky than either licensing or exporting.

Your Answer: false




Raymond Vernon, the originator of the product life-cycle

theory, has argued that firms undertake FDI at particular

stages in the life cycle of a product they have pioneered.

Your Answer: false




The establishment of a wholly new operation in a foreign

country is referred to as a green-field investment.

Your Answer: true




Firms undertake FDI at _______ is Raymond Vernon's

view of foreign direct investment.

Your Answer: late stages in their corporate histories

Correct Answer: particular stages in the life cycle of a

product they have pioneered






Your Answer: true




Camelot Baby Carriages decided to enter the European

market. Sam's Strollers followed to ensure that Camelot

would not gain competitive advantage in Europe that

could lead to the same thing occurring in Asia. Sam's

then decides to enter the Australian market, and Camelot

follows. This is an example of:

Your Answer: monopoint competition.

Correct Answer: multipoint competition.



A(n) _______ is a company that conducts business in

more than one country.

Your Answer: multinational enterprise

Correct Answer: multinational enterprise





Your Answer: true






occurs.





Vertical FDI takes two forms. These are:

Your Answer: upward vertical FDI and downward

vertical FDI

Correct Answer: backward vertical FDI and forward

vertical FDI



Once a firm undertakes FDI, it becomes a(n)

Your Answer: multinational enterprise.

Correct Answer: multinational enterprise.



The eclectic paradigm has come under sharp criticism by

British economist John Dunning.

Your Answer: true







Your Answer: true









Your Answer: Michael Porter




When two or more enterprises encounter each other in

different regional markets, national markets, or

industries, _______ arises.

Your Answer: multipoint competition

Correct Answer: multipoint competition



If 3M, an American firm, produces adhesive tape in St.

Paul, Minnesota, and ships the tape to South Korea to be

sold, that is an example of:

Your Answer: exporting.

Correct Answer: exporting.




through







Your Answer: true







outflows in 2001.

Your Answer: 70

Correct Answer: 70



An industry composed of a limited number of large firms

(i.e. an industry in which four firm's control 80 percent of

a domestic market) is referred to as a(n):

Your Answer: oligopoly.

Correct Answer: oligopoly.





Your Answer: portfolio




With regard to horizontal FDI, market imperfections

arise in two circumstances. These are:

Your Answer: when tariff rates are high, and when

import quotas are restrictive

Correct Answer: when there are impediments to the

free flow of products between nations, and when there

are impediments to the sale of know-how





Your Answer: false



Name: Quiz 4: Chapter 6

Status: Completed

Score: 4 out of 10 point(s)

Time Elapsed: 6 minutes and 53 seconds out of 10

minutes allowed.

Instructions:















Because a firm must establish production facilities in a

foreign country or acquire a foreign enterprise, FDI is

expensive.

Your Answer: false








Your Answer: true






Your Answer: false




__________ FDI is FDI into an industry abroad that

sells the outputs of a firm's domestic production

processes.

Your Answer: Forward horizontal




Once a firm undertakes FDI for more than two years, it

becomes a multinational enterprise.

Your Answer: true




Which of the following involves granting a foreign

entity the right to produce and sell the firm's product in

return for a royalty fee on every unit sold?

Your Answer: Licensing

Correct Answer: Licensing



The ______ approach points to the importance of

investments in specialized assets and imperfections in the

market for know-how as factors that increase the relative

attractiveness of vertical FDI.

Your Answer: location-specific advantages

Correct Answer: market imperfections



A rationale for wanting control over the operations of a

foreign entity is that the firm might wish to take

advantage of differences in factor costs across countries,

producing only part of its final product in a given

country, while importing other parts from where they can

be produced at a lower cost.

Your Answer: true








Your Answer: true




FDI takes on two main forms. They are:

Your Answer: green-field investments and acquiring or

merging with an existing firm

Correct Answer: green-field investments and acquiring

or merging with an existing firm



Most FDI has been directed at the developed nations of

the world as firms based in advanced countries invested

in the others' markets.

Your Answer: true




Impediments to the free flow of products between

nations decrease the profitability of ______, relative to

_____.

Your Answer: exporting and licensing, FDI




Recently, FDI inflows into the world's developing

nations have been on the decline.

Your Answer: false




A(n) _______ is a company that conducts business in

more than one country.

Your Answer: multinational enterprise

Correct Answer: multinational enterprise



According to the textbook, a firm will favor ______ over

_____ when it wishes to maintain control over its

technological know-how, or over its operations and

business strategy.

Your Answer: foreign direct investment, exporting

Correct Answer: foreign direct investment, licensing



The flow of FDI has not only accelerated over the last

quarter century, but is also accelerated faster than the

growth in world trade.

Your Answer: true




Historically, most FDI has been directed at the ______

nations of the world as firms based in advanced countries

invested in _______.

Your Answer: underdeveloped, each other's markets

Correct Answer: developed, each other's markets






Your Answer: true







Your Answer: true




Dunning argues that combining location specific assets

or resource endowments and the firm's own unique

capabilities often requires:

Your Answer: FDI.

Correct Answer: FDI.



According to economic theory, there are three reasons the

market does not always work well as a mechanism for

selling know-how. Which of the following is not one of

these reasons?

Your Answer: A firm's know-how may not be amenable

to licensing

Correct Answer: Uncertainties in tariff rates make

licensing unattractive, particularly if tariff rates go up

Feedback: Difficulty: HardPage: 224-225











If Siemens, a German firm, purchased a 20% interest in a

manufacturing firm in the United States, Siemens would

be engaging in

Your Answer: foreign direct investment.











_________ FDI is FDI into an industry abroad that sells


Your Answer: Forward vertical







Your Answer: true










Your Answer: true











_____ received the smallest amount of inward FDI in

2001.

Your Answer: Africa

Correct Answer: Africa



Thirty years ago, Starbucks was a single store. Today, it

is a global roaster and retailer of coffee with over 3,500

stores, more than 310 of which are located in Japan.

Your Answer: true







outflows in 2001.

Your Answer: 70

Correct Answer: 70



The flow of foreign investment refers to the number of

countries a firm is investing in at any given point in time.

Your Answer: true




The flow of foreign direct investment out of a country is

Your Answer: outflow of FDI.

Correct Answer: outflow of FDI.





















Your Answer: exporting, FDI and licensing






Your Answer: flow






Your Answer: when there are impediments to the free

flow of products between nations, and when there are

impediments to the sale of know-how















Your Answer: flow








Your Answer: false












outflows in 2001.

Your Answer: 70

Correct Answer: 70



Vertical foreign direct investment is FDI in an industry

that provides inputs for a firm's domestic operations, or it

may be FDI in an industry abroad that sells the outputs of

a firm's domestic operations.

Your Answer: true




The high level of FDI outflows from the U.S. has been

driven by a combination of factors including a strong

U.S. economy; strong corporate profits and cash flow;

and a relatively strong currency.

Your Answer: true






Your Answer: false




Which of the following factors is not one of the factors

identified in the textbook that alters the relative

attractiveness of exporting, licensing, and FDI?

Your Answer: Strategic behavior

Correct Answer: Tax implications

Feedback: Difficulty: MediumPage: 224-226


The flow of foreign direct investment into a country is

referred to as the

Your Answer: inflow of FDI.

Correct Answer: inflow of FDI.






Your Answer: true






Your Answer: false




_____ are factors that inhibit markets from working

perfectly.

Your Answer: Market imperfections

Correct Answer: Market imperfections










Your Answer: when there are impediments to the free

flow of products between nations, and when there are

impediments to the sale of know-how






If General Electric, a U.S. based corporation, purchased a

50% interest in a company in Italy, that purchase would

be an example of





Vertical FDI takes two forms. These are:

Your Answer: backward vertical FDI and forward

vertical FDI

Correct Answer: backward vertical FDI and forward

vertical FDI



The stock of foreign direct investment refers to the total

accumulated value of foreign-owned assets at a given

time.

Your Answer: true




According to ______, firms undertake FDI to exploit

resource endowments or assets that are location specific.

Your Answer: Porter

Correct Answer: Dunning





Your Answer: false




The flow of foreign direct investment out of a country is

Your Answer: outflow of FDI.

Correct Answer: outflow of FDI.



The ______ of FDI refers to the total accumulated value

of foreign-owned assets at a given time.

Your Answer: flow

Correct Answer: stock









In general, foreign direct investment is less expensive

and less risky than either licensing or exporting.

Your Answer: false






Your Answer: false




Gross fixed capital formation summarizes the total

amount of capital invested in factories, stores, office

buildings, and the like.

Your Answer: true












Your Answer: Tax implications




According to economic theory, there are three reasons the

market does not always work well as a mechanism for

selling know-how. Which of the following is not one of

these reasons?

Your Answer: Licensing does not give a firm the tight

control over manufacturing, marketing, and strategy in a

foreign country that may be required to profitably exploit

its advantage in know-how

Correct Answer: Uncertainties in tariff rates make

licensing unattractive, particularly if tariff rates go up












The total amount of capital invested in factories, stores,

office buildings, and the like is summarized by:

Your Answer: gross fixed capital formation

Correct Answer: gross fixed capital formation



F.T. Knickerbocker looked at the relationship between

FDI and rivalry in oligopolistic industries.

Your Answer: true




The flow of FDI refers to the total accumulated value of

foreign-owned assets at any given time.

Your Answer: false




Although it normally involves much longer-term

commitments, franchising is essentially the service

industry version of:

Your Answer: licensing.

Correct Answer: licensing.



Gross fixed capital formation summarizes the total

amount of capital invested in factories, stores, office

buildings, and the like.

Your Answer: true






Your Answer: true




According to internalization theory, licensing has three

major drawbacks as a strategy for exploiting foreign

market opportunities. Each of the following is a

drawback of licensing except:

Your Answer: licensing does not give a firm the tight

control over manufacturing, marketing, and strategy in a

foreign country that may be required to maximize its

profitability.

Correct Answer: licensing helps a firm avoid making a

direct foreign investment in a foreign country.





Your Answer: false







Your Answer: Tax implications




Because a firm must establish production facilities in a

foreign country or acquire a foreign enterprise, FDI is

expensive.

Your Answer: true




If General Electric, a U.S. based corporation, purchased

a 50% interest in a company in Italy, that purchase would

be an example of











Your Answer: true




When _______, a firm will favor FDI over exporting as

an entry strategy, according to the textbook.

Your Answer: transportation costs or trade barriers

make exporting unattractive

Correct Answer: transportation costs or trade barriers

make exporting unattractive







Your Answer: true






occurs.





In the international business literature, the marketing

imperfection approach to FDI is typically referred to as:

Your Answer: international commerce theory

Correct Answer: internalization theory



Once a firm undertakes FDI for more than two years, it

becomes a multinational enterprise.

Your Answer: false







Your Answer: true




__________ FDI is FDI into an industry abroad that sells


Your Answer: Forward vertical






Your Answer: exporting, FDI and licensing






Your Answer: foreign indirect investment




The eclectic paradigm has been championed by the

British economist __________.

Your Answer: John Dunning

Correct Answer: John Dunning









Your Answer: true






Your Answer: false




Foreign direct investment occurs when a firm invests

directly in facilities to produce and/or market a product

in a foreign country.

Your Answer: true




According to the textbook, a firm will favor ______ over

_____ when it wishes to maintain control over its

technological know-how, or over its operations and

business strategy.

Your Answer: foreign direct investment, licensing

Correct Answer: foreign direct investment, licensing






Your Answer: true




FDI is growing more rapidly than:

Your Answer: world trade and world output

Correct Answer: world trade and world output





nations.

Your Answer: governments




The eclectic paradigm is a theory of FDI that combines

two other perspectives into a single holistic explanation

of FDI.

Your Answer: true










High transportation costs and/or tariffs imposed on

imports help explain why many firms prefer ______ over

______.

Your Answer: foreign direct investment or licensing,

exporting

Correct Answer: foreign direct investment or licensing,

exporting



FDI is an acronym that stands for

Your Answer: Foreign Direct Investment.

Correct Answer: Foreign Direct Investment.





Your Answer: false




The ______ approach points to the importance of

investments in specialized assets and imperfections in the

market for know-how as factors that increase the relative

attractiveness of vertical FDI.

Your Answer: market imperfections

Correct Answer: market imperfections



Historically, most backward vertical FDI has been in:

Your Answer: services industries

Correct Answer: extractive industries






outflows in 2001.

Your Answer: 60

Correct Answer: 70



Foreign portfolio investment involves taking a significant

equity stake in a foreign business entity.

Your Answer: false




When transportation costs are added to production costs,

it becomes unprofitable to ship some products over a

large distance. This is particularly true of products that

have a(n)

Your Answer: low value-to-weight ratio.

Correct Answer: low value-to-weight ratio.









International Marketing IMT 17

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