International Marketing Exam 2

Question 19

Dumping is an important global pricing strategy issue. The General Agreement on Tariff and Trade (GATT) 1979 antidumping code defined dumping as the sale of imported products as a price lower than that normally charged in a domestic market or country of origin. In addition, many countries have their own policies and procedures for protecting national companies from dumping. The U.S. Congress has defined dumping as an unfair trade practice that results in "injury, destruction, or prevention of the establishment of American industry." Under this definition, dumping occurs when imports sold in the U.S. market are priced either at levels that represent less than the cost of production plus an 8 percent profit margin or at levels below those prevailing in the producing country.

Question 15

Export price escalation is the increase in the final selling price of goods traded across borders that reflects these factors. The following is a list of eight basic considerations for those whose responsibility includes setting prices on goods that cross borders: Does the price reflect the product's quality? Is the price competitive given the local market conditions? Should the firm pursue market penetration, market skimming, or some other pricing objective? Which type of discount (trade, cash, quantity) and allowance (advertising, trade-off) should the firm offer its international customers? Should prices differ with market segment? Which pricing options are available if the firm's costs increase or decrease? Is demand in the international market elastic or inelastic? Are the firm's prices likely to be viewed by the host-country government as reasonable? Exploitative? Do the foreign country's dumping laws pose a problem? Companies frequently use a method known as cost-plus or cost-based pricing when selling goods outside their home-country markets. Cost-based pricing is based on the analysis of internal (e.g., materials, labor, testing) and external costs. As a starting point, firms that comply with Western cost-accounting principles typically use the full absorption cost method; this defines the per-unit product cost as the sum of all past or current direct and indirect manufacturing and overhead costs.

Question 34

Five Forces Model: comprise the threat of new entrants, the threat of substitute products or services, the bargaining power of buyers, the bargaining power of suppliers, and the competitive rivalry among current members of the industry. Pressure from any of the five forces can limit profitability.

Question 37

Focused Differentiation: offers only to a narrow target market adding the perception of product uniqueness at a premium price. For example, "high-end" audio equipment is distinguished by American superior craftsmanship and performance seen highly sought after by Asia (Japan and Hong Kong) and Europe.

Question 23

Form Utility: the availability of the product processed, prepared, in proper condition, and/or ready to use.

Question 11

Generally speaking, international trade results in lower prices for goods. Lower prices, in turn, help keep a country's rate of inflation in check. In a truly global market, the law of one price would prevail: All customers in the market could get the best product available for the best price.

Question 9

Global companies can also leverage strong brands by creating brand extensions. This strategy entails using an established brand name as an umbrella when entering new businesses or developing new product lines that represent new categories to the company. British entrepreneur Richard Branson is an acknowledged master of this approach: The Virgin brand has been attached to a wide range of businesses and products. Branson's business philosophy is that brands are built around reputation, quality, innovation, and price rather than image.

Question 41

Globalization: the speed of innovation that is required to compete in the world mandates that we must have seamless communication. For example, Japanese companies have been reluctant to place non-Japanese nationals in top positions, an American as an executive for Toyota.

Question 18

Gray market goods are trademarked products that are exported from one country to another and sold by unauthorized persons or organizations. Parallel importing occurs when companies employ a polycentric, multinational pricing policy that calls for setting different prices in different country markets. Gray markets can flourish when a product is in short supply, when producers employ skimming strategies in certain markets, or when the goods are subject to substantial markups.

Question 20

In most instances, it is illegal for representatives of two or more companies to secretly agree to set similar prices for their products. This practice, known as price fixing, is generally held to be an anticompetitive act. Companies that collude in this manner are usually trying to ensure higher prices for their products than would generally be available if markets were functioning freely.

Question 31

Inbound Logistics: suppliers in the early stages of the value chain. For example, IKEA purchases wood from various suppliers for their furniture. Outbound Logistics: towards the end stages of the value chain. For example, IKEA factories send furniture kits to IKEA stores.

Question 24

Information Utility: the availability of answers to questions and general communication.

Question 33

Intermodal Transportation: of goods, a combination of land and water shipping from the producer to the customer.

Question 26

Keiretsu: a consumer version of people who value a close and long-term relationship typically between an auto salesperson and the Japanese people.

Question 39

Leadership: Global marketing demands exceptional leadership. Leveraging worldwide learning, responds fully to local needs and wants, and draws on the talent and energy of every member of an organization. The challenge, direct creativity of everyone in the company toward a global effort that best utilizes organizational resources to exploit global opportunities .

Question 43

Lean Production: Toyota Production Systems (TPS) achieves 50 percent over typical mass production systems. TPS is based on two concepts; Jidoka, visualizing potential problems and building quality. Just-in-time (JIT) produces only what is needed, when it is needed, in the amount that is needed. Lean production cuts cost by making the business more efficient and responsive to market needs. Improves productivity and makes better use of factory floor space. Investing into employee training programs and encouraging employees to make suggestions with managers taking action.

Question 10

One of the facts of life in global marketing is that perceptions of and attitudes toward particular countries often extend to products and brands known to originate in those countries. Such perceptions contribute to the country-of-origin effect; they become part of a brand's image and contribute to brand equity.

Question 32

Order Processing: includes order entry, order handling (logistics), and order delivery (availability to the consumer).

Question 28

P&G recognizes "high frequency stores" as stores that sell single- use quantities to consumers who shop multiple times during the day. P&G responds by launching a "golden stores" program where stores are to carry at least 40 different P&G products.

Question 25

Peer-to-Peer Marketing: a model whereby individual consumers market products to other individuals. For example, eBay.

Question 21

Place Utility: the availability of a product or service in a location that is convenient to a potential customer.

Question 12

Price can be used as a strategic variable to achieve specific financial goals, including return on investment, profit, and rapid recovery of product development costs. When meeting financial criteria such as profit and maintenance of margins is the objective, the product must be part of a superior value proposition for buyers; in such a case, price is integral to the total positioning strategy. The market skimming pricing strategy is often part of a deliberate attempt to reach a market segment that is willing to pay a premium price for a particular brand or for a specialized or unique product.

Question 30

Supercenters: offer a wide range of aggressively priced grocery items plus general merchandise. For example, Walmart. Superstores (a.k.a category killers): specialize in selling vast assortments of specific product categories. For example, Home Depot and IKEA. Shopping malls: consist of a grouping of stores in one place.

Question 17

The first position, known as extension or ethnocentric pricing, calls for the per-unit price of an item to be the same no matter where in the world the buyer is located. In such instances, the importer must absorb freight and import duties. The extension approach has the advantage of extreme simplicity because it does not require information on competitive or market conditions for implementation. Its main disadvantage is that the ethnocentric approach does not respond to the competitive and market conditions of each national market and, therefore, does not maximize the company's profits in each national market or globally.

Question 16

The internationally accepted terms of trade are known as International Commercial Terms, shortened to Incoterms. Incoterms are classified into four categories. Ex-works (EXW), the sole "E-Term" or "origin" term among Incoterms, refers to a transaction in which the buyer takes delivery at the premises of the seller; the buyer bears all risks and expenses from that point on. Ex-works can be contrasted with several "D-Terms" ("post-main-carriage" or "arrival" terms). For example, delivered duty paid (DDP), the seller has agreed to deliver the goods to the buyer at the place the buyer names in the country of import, with all costs, including duties, paid. Under this contract, the seller is also responsible for obtaining the import license if one is required.

Question 3

The term consumer packaged goods (CPG) applies to a wide variety of products whose packaging is designed to protect or contain the product during shipping, at retail locations, and at the point of use or consumption. Packaging also serves important communication functions: Packages (and the labels attached to them) offer communication cues that can influence consumers when making a purchase decision. Today, many industry experts agree that packaging must engage the senses, make an emotional connection, and enhance a consumer's brand experience.

Question 27

The three basic elements that product and customer characteristics impact on channel structures are: the manufacturer's salesforce, distributors or agents, and wholesalers.

Question 29

There are seven specific guidelines to help prevent problems when companies are entering emerging markets, they are: 1. Select distributors. Don't let them select you. 2. Look for distributors capable of developing markets, rather than those with a few good customer contacts. 3. Treat local distributors as long-term partners, not as temporary market-entry vehicles. 4. Support market entry by committing money, managers, and proven marketing ideas. 5. From the start, maintain control over the marketing strategy. 6. Make sure distributors provide the company with detailed market and financial performance data. 7. Build links among national distributors at the earliest opportunity.

Question 35

Threats of New Entrants: economies of scale, product differentiation, capita; requirements, the one-time switching costs, access to distribution channels, government policy, cost advantages independent of scale economies, and competitor response.

Question 22

Time Utility: the availability of a product or service when desired by a customer.

Question 36

Walmart's bargaining power: Because Walmart purchases massive amounts of goods for sale they are in position to dictate terms to any vendor wishing to distribute products through Walmart's retail space. Walmart also has an influence on the music industry on what CDs to be sold in the stores based on elicit lyrics and album cover art.

Question 5

A brand is a complex bundle of images and experiences in the customer's mind. Brands perform two important functions. First, a brand represents a promise by a particular company regarding a particular product; it is a type of quality certification. Second, brands enable customers to better organize their shopping experience by helping them seek out and find a particular product. Thus, an important brand function is to differentiate a particular company's offering from all other companies' offerings.

Question 4

A critical element in the success of Corona Extra beer in export markets was management's decision to retain the traditional package design, which consists of a tall transparent bottle with "Made in Mexico" etched directly on the glass. At the time, the conventional wisdom in the brewing industry was that export beer bottles should be short, green or brown in color, with paper labels. In other words, the bottle should resemble Heineken's! The fact that consumers could see the beer inside the Corona Extra bottle made it seem more pure and natural. Today, Corona is the top-selling beer brand in the United States, Australia, Belgium, the Czech Republic, and several other countries.

Question 7

A local product or local brand is one that has achieved success in a single national market. Sometimes a global company creates local products and brands in an effort to cater to the needs and preferences of particular country markets. Coca-Cola for example has several branded drink products for sale only in Japan.

Question 1

A product is a good, service, or idea with both tangible and intangible attributes that collectively create value for a buyer or user. A product's tangible attributes can be assessed in physical terms, such as weight, dimensions, or materials used. The tangible, physical features and attributes translate into benefits that enhance enjoyment of watching HDTV broadcasts and Blu-ray movies. Intangible product attributes, including the status associated with product ownership, a manufacturer's service commitment, and a brand's overall reputation or mystique, are also important.

Question 2

A warranty can be an important element of a product's value proposition. An express warranty is a written guarantee that assures the buyer that he or she is getting what he or she paid for or that provides recourse in case a product's performance falls short of expectations. In global markets, warranties can be used as a competitive tool to position a company in a positive way.

Question 40

An important leadership task: articulating beliefs, values, policies, and the intended geographic scope of a company's activities.

Question 13

Because of these differences in national markets, the global marketer must develop pricing systems and pricing policies that take into account price floors, price ceilings, and optimum prices. A firm's pricing system and policies must also be consistent with other uniquely global opportunities and constraints. Companies must carefully consider how customers in one country or region will react if they discover they are paying significantly higher prices for the same product than customers in other parts of the world. Another important internal organizational consideration also exists besides cost. Within the typical corporation, there are many interest groups, and, frequently, conflicting price objectives. Divisional vice presidents, regional executives, and country managers are all concerned about profitability at their respective organizational levels. Similarly, the director of global marketing seeks competitive prices in world markets. The controller and the financial vice president are concerned about profits. The manufacturing vice president seeks long production runs for maximum manufacturing efficiency. The tax manager is concerned about compliance with government transfer pricing legislation. Finally, company counsel is concerned about the antitrust implications of global pricing practices. Ultimately, the prices for a company's products generally reflect the goals set by members of the sales staff, product managers, corporate division chiefs, and/or the company's chief executive.

Question 6

Brand equity represents the total value that accrues to a product as a result of a company's cumulative investments in the marketing of the brand. Brand equity can also be thought of as an asset representing the value created by the relationship between the brand and its customers over time: The stronger the relationship, the greater the equity. As outlined by branding expert Kevin Lane Keller, strong brand equity brings numerous benefits for the company: Greater loyalty Less vulnerability to marketing actions Less vulnerability to marketing crises Larger margins More inelastic consumer response to price increases More elastic consumer response to price decreases Increased marketing communication effectiveness

Question 8

Co-branding is a variation on combination branding in which two or more different company or product brands are featured prominently on product packaging or in advertising. When properly implemented, co-branding can engender customer loyalty and allow companies to achieve synergy. When done badly, it can confuse consumers and dilute brand equity. This approach works most effectively when the products involved complement each other.

Question 14

Companion products: A video game console has no value without video game software, and a DVD player has no value without movies available on DVD. Likewise, a razor handle has no value without blades. For many years, companion products pricing has been the preferred strategy of Vodaphone, AT&T, and other cellular service providers. They buy handsets at prices set by Motorola, Nokia, and other manufacturers, then subsidize the cost by offering significant discounts or (or even giving away) handsets to subscribers who sign long-term contracts. The carriers make up the price difference by charging additional fees for extras such as roaming, text messaging, and so on. However, this approach does not always work globally.

Question 42

Core Competence: something that an organization can do better than its competitors. Including three characteristics; It provides potential access to a wide variety of markets, it makes a significant contribution to perceived customer benefits, and it is difficult for competitors to imitate.

Question 44

Corporate Social Responsibility (CSR): a company's obligation to pursue goals and policies that are in society's best interest. Key issue with CSR is whose interests come first.

Question 38

Cost Focus: offering low prices to a narrow target market. For example, Aldi's private labeled products help keep cost down, Polish and Chinese shipyards offering simple standard vessel types and IKEA's contemporary knock-down furniture.