Marketing Chapter 15

30) ________ is a method of going global in which a company makes agreements with producers in the foreign market to produce its product or provide its service. A) Contract manufacturing B) Direct investment C) Acquisition D) Exporting E) Management contracting

A) Contract manufacturing

40) Which of the following is most likely a benefit of joint ownership? A) It allows a firm to gain the financial and managerial resources that it may otherwise lack. B) It is the simplest way for a domestic company to enter a foreign market. C) It minimizes the need to build a new manufacturing facility in the foreign market. D) It allows one firm to acquire complete ownership of the other firm in the venture. E) It provides significant economies of scale for both the local firm and the foreign investor.

A) It allows a firm to gain the financial and managerial resources that it may otherwise lack.

36) Which of the following is a drawback of management contracting? A) It prevents a company from setting up its own operations for a period of time. B) It is a high-risk method of getting into a foreign market. C) It yields income to the contracting firm only much later in the process. D) It does not provide the option of buying shares in the managed company later on. E) It requires a domestic firm to export its products to a foreign company.

A) It prevents a company from setting up its own operations for a period of time.

23) ________ is a method of entering a foreign market by associating with foreign companies to produce or market products or services. A) Joint venturing B) Indirect exporting C) Direct investment D) Importing E) Direct exporting

A) Joint venturing

8) Which of the following is true of free trade zones? A) They are groups of nations organized to work toward common goals. B) They were formed to increase trade barriers between member nations. C) They were formed to mediate global trade disputes. D) They require member countries to establish one currency. E) They tend to improve imports and hinder exports.

A) They are groups of nations organized to work toward common goals.

17) Which of the following statements is true of industrial economies? A) They export their goods to other types of economies for raw materials. B) They have a declining middle class population. C) They depend on agriculture as the primary revenue generator. D) They do not trade goods amongst themselves. E) They consume most of their output and barter the rest for simple goods and services.

A) They export their goods to other types of economies for raw materials.

60) Which of the following is most likely true about a global organization? A) Worldwide policies are planned by top corporate management. B) Global operating units report to international division chiefs. C) Executive training is restricted to domestic operations. D) Employees are recruited exclusively from the home country. E) It considers itself a national marketer that sells abroad.

A) Worldwide policies are planned by top corporate management.

15) An emerging economy is also known as a(n) ________ economy. A) industrializing B) industrial C) subsistence D) raw material exporting E) developed

A) industrializing

56) Lemon N' Honey is a juice manufacturing company in the United States. It exports its products to Australia, licenses to China, has a joint ownership venture in France, and owns a subsidiary in Brazil. The firm will most likely need to create a(n) ________ to handle all its worldwide activities. A) international division B) domestic market C) value delivery network D) export department E) domestic division

A) international division

28) Montano Boutiques promotes its brand in new international markets by providing rights to local boutiques to use its patented designs and brand name. In this case, Montano Boutiques' market-entering strategy is referred to as ________. A) licensing B) exporting C) joint ownership D) contract manufacturing E) management contracting

A) licensing

52) Regardless of how companies go about pricing their products, their foreign prices probably will be higher than their domestic prices for comparable products. This is known as the ________ problem. A) price escalation B) demand escalation C) inflation D) skimming price E) deflation

A) price escalation

3) The purpose of a quota is to ________. A) protect local employment B) provide competition to local industry C) eliminate trade barriers between nations D) increase the amount of foreign imports E) increase the amount of foreign exchange

A) protect local employment

41) ________ is a method of entering a foreign market by developing foreign-based assembly or manufacturing facilities. A) Exporting B) Direct investment C) Licensing D) Indirect exporting E) Management contracting

B) Direct investment

47) ________ means marketing a product in a foreign market without making any changes to the product. A) Product adaptation B) Straight product extension C) Communication extension D) Product invention E) Communication adaptation

B) Straight product extension

31) Which of the following is most likely a drawback of contract manufacturing? A) There are low chances of quickly starting the process. B) There is decreased control over the manufacturing process. C) There are significant political and economic risks involved. D) There is little opportunity of later forming a partnership. E) There is no possibility of buying out the local manufacturer

B) There is decreased control over the manufacturing process.

44) Botsford, a U.S. firm, builds automotive transmissions in its manufacturing facility in Taiwan to capitalize on the availability of cheap labor. Botsford's involvement in foreign markets is most likely through ________. A) joint ownership B) direct investment C) management contracting D) contract manufacturing E) indirect exporting

B) direct investment

19) The simplest way to enter a foreign market is through ________. A) joint ownership B) exporting C) direct investment D) licensing E) contract manufacturing

B) exporting

25) Which of the following is a type of joint venture? A) direct exporting B) management contracting C) direct investment D) retailing E) wholesaling

B) management contracting

34) Pizzaria, a renowned restaurant in Italy, enters into an agreement with Ruth's Pizza House in the United States to operate a chain of restaurants. Ruth's will provide capital for running the chain and Pizzaria will contribute its world-renowned expertise on consumer tastes. In this case, Pizzaria enters a foreign market through ________. A) contract manufacturing B) management contracting C) licensing D) joint ownership E) direct investment

B) management contracting

13) A country in South America has large reserves of copper and tin. Mining forms the pillar of its economy. A major part of its revenue is generated from exporting these resources. This country is poor in many other ways. It is a good market for large equipment, tools, supplies, and trucks. Since there are many foreign residents in this country and a wealthy upper class, it is also a market for luxury goods. This country most likely has a(n) ________ economy. A) subsistence B) raw material exporting C) emerging D) developed E) industrial

B) raw material exporting

55) Through which of the following routes do firms generally get into international marketing? A) buying shares of an international company B) shipping products to foreign customers C) organizing an international division D) establishing a joint venture E) acquiring a foreign firm

B) shipping products to foreign customers

58) Which of the following is an international division organized based on different merchandise categories? A) global organization B) world product group C) geographical organization D) export department E) international subsidiary

B) world product group

42) Which of the following is an advantage of direct investment? A) Direct investment involves fewer risks than joint ownership. B) Direct investment ensures that a firm is shielded from market changes. C) Direct investment allows a firm to keep full control over the investment. D) Direct investment involves minimal financial or time expenditures. E) Direct investment protects the firm from currency devaluation.

C) Direct investment allows a firm to keep full control over the investment.

59) ________ are international divisions responsible for the sales and profits of their own operating units. A) World product groups B) Geographical organizations C) International subsidiaries D) Global organizations E) Export departments

C) International subsidiaries

32) Which of the following is most likely a benefit of contract manufacturing? A) Investing companies have complete control over the foreign manufacturer's processes. B) Investing companies gain significant profits from handling the manufacturing of products. C) Investing companies that are new entrants in international markets get a chance to start faster. D) Investing companies provide new jobs in their home countries by developing manufacturing facilities. E) Investing companies do not require the services of an overseas marketing organization or network.

C) Investing companies that are new entrants in international markets get a chance to start faster.

9) Which of the following established a free trade zone between the United States, Mexico, and Canada? A) Union of South American Nations B) European Union C) North American Free Trade Agreement D) Central American Free Trade Agreement E) Latin American Free Trade Association

C) North American Free Trade Agreement

38) Which of the following is true of joint ownership? A) The domestic firm exports management services rather than products. B) Foreign investors gain complete possession and control over the local firm. C) The arrangement is mandatory for businesses to enter some foreign markets. D) A domestic company seldom needs a host country partner to enter into the market. E) The domestic company loses its title of ownership to foreign investors in the arrangement.

C) The arrangement is mandatory for businesses to enter some foreign markets.

27) Which of the following is an advantage of licensing? A) The licensee is not required to invest money in the business. B) The licensor has more control over the licensee than it does in its own operations. C) The licensee gains recognition without having to develop a product from scratch. D) The licensor earns profits without having to share its intellectual property with anyone. E) The licensor faces no threats of competition from the licensee after the contract ends.

C) The licensee gains recognition without having to develop a product from scratch.

4) Which of the following is an example of a nontariff trade barrier? A) a sales tax B) customs duty C) a host-country regulation D) excise duty E) an import quota

C) a host-country regulation

51) When companies fully adapt their advertising messages to local markets, they follow a strategy of ________. A) communication extension B) product invention C) communication adaptation D) straight product extension E) product adaptation

C) communication adaptation

21) Valdo, a cosmetic firm located in the United States, markets its products in Asian and European countries through independent distributors. In this case, Valdo has entered international markets through ________. A) joint ownership B) joint venturing C) indirect exporting D) direct investment E) franchising

C) indirect exporting

16) Japan is a major exporter of manufactured goods, services, and investment funds. Japan also exports its goods to other types of economies for raw materials and semifinished goods. The country's industrial structure is referred to as a(n) ________ economy. A) agricultural B) emerging C) industrial D) raw material exporting E) subsistence

C) industrial

46) Compared to standardized global marketing, adapted global marketing ________. A) uses the same marketing mix elements in all target markets B) lowers marketing costs by using home country sales teams C) modifies marketing strategies to meet local needs D) maintains uniformity across all markets E) results in greater brand power

C) modifies marketing strategies to meet local needs

11) Which type of economy consumes most of its output and barters the rest for simple goods and services? A) industrial economy B) developed economy C) subsistence economy D) emerging economy E) raw material exporting economy

C) subsistence economy

24) Which of the following is true about joint venturing? A) Management contracting is highly risky for the domestic firm. B) Contract manufacturing gives significant control to the domestic firm. C) Licensing is a highly complex method for entering global markets. D) A host country partner is necessary for selling or marketing products. E) Companies are required to invest in the construction of foreign-based facilities.

D) A host country partner is necessary for selling or marketing products.

48) Which of the following is a disadvantage of straight product extension? A) It involves additional product development costs. B) It involves changing the product to meet local requirements. C) It requires planning a new promotional strategy to promote the product. D) It can be costly in the long run if products fail to satisfy consumers. E) It requires making changes in the manufacturing process.

D) It can be costly in the long run if products fail to satisfy consumers.

20) Which of the following is true of exporting? A) It is the most complex way to enter a foreign market. B) It involves the association of companies with host country partners. C) It typically requires products to be extensively modified for the foreign market. D) It involves the least change in a company's product lines. E) It involves a huge investment if done through independent international distributors.

D) It involves the least change in a company's product lines.

7) Which of the following is true of the Uruguay Round of the WTO? A) It promoted short-term global trade growth. B) It increased the world's merchandise tariffs by 50 percent. C) It reduced the influence of the WTO in agriculture. D) It toughened the international protection of intellectual property. E) It consisted of discussions that lasted for two years.

D) It toughened the international protection of intellectual property.

35) Which of the following is an advantage of management contracting? A) It involves the least change in a company's product lines. B) It allows a contracting firm to set up its own operations at the beginning of the contract. C) It is the simplest way to enter a foreign market. D) It yields income from the beginning of the contract. E) It gives a contracting firm an option to buy shares in the managed company immediately.

D) It yields income from the beginning of the contract.

50) ________ consists of creating something new to meet the needs of consumers in a given country. A) Product adaptation B) Straight product extension C) Undifferentiated marketing D) Product invention E) Standardized manufacturing

D) Product invention

29) Which of the following is a disadvantage of licensing? A) The licensing company gains entry into a foreign market at a high risk. B) It takes a lot of time for the licensee to gain production expertise and name. C) Licensing is a complex way for a manufacturer to enter international marketing. D) The licensor potentially creates a competitor in the form of the licensee. E) The licensee is restricted from gaining knowledge about the licensor's intellectual property.

D) The licensor potentially creates a competitor in the form of the licensee.

12) Which of the following is true of raw material exporting economies? A) These economies are major exporters of agricultural products. B) These economies are poor markets for large equipment and trucks. C) These economies are major exporters of manufactured goods, services, and investment funds. D) These economies are rich in one or more resources but poor in other ways. E) These economies consume most of their output and barter the rest.

D) These economies are rich in one or more resources but poor in other ways.

43) What is the most likely disadvantage of direct investment for an investing company? A) weak relationships with local distributors B) minimal investment control C) product standardization requirements D) devalued currency risks E) excessive freight charges

D) devalued currency risks

39) Kimlee, a food manufacturer based in China, recognizes the immense demand for noodles in the Australian market. Kimlee forms a new business venture to manufacture instant noodles and decides to share possession and control of the new business with a local food processing company. In this case, Kimlee has entered a foreign market through ________. A) licensing B) contract manufacturing C) direct investment D) joint ownership E) management contracting

D) joint ownership

5) Restrictive product standards are ________. A) tariffs B) excise duties C) quotas D) nontariff trade barriers E) exchange controls

D) nontariff trade barriers

1) Which of the following is most likely true of a global firm? A) A global firm typically operates from one country. B) A global firm engages in joint partnerships overseas. C) A global firm sees the world as many different markets. D) A global firm maximizes the importance of national boundaries. E) A global firm manufactures and markets goods wherever it can do the best job.

E) A global firm manufactures and markets goods wherever it can do the best job.

57) Which of the following is true of international divisions that are structured as geographical organizations? A) Geographical organizations are operating units under the export department. B) Geographical organizations are usually formed to implement whole-channel supply chains. C) Geographical organizations are managed by product managers, each responsible for different product groups. D) Geographical organizations are inadequate if the firm moves into joint ventures or direct investments. E) Geographical organizations are managed by country managers responsible for salespeople, distributors, and licensees in their respective countries.

E) Geographical organizations are managed by country managers responsible for salespeople, distributors, and licensees in their respective countries.

6) Which of the following is true of the World Trade Organization (WTO)? A) It was replaced by the GATT in 1995. B) It increases tariffs and other international trade barriers. C) It lacks the power to impose international trade sanctions. D) It restricts the maximum number of member nations to 100. E) It mediates global trade disputes.

E) It mediates global trade disputes.

37) ________ ventures consist of one company collaborating with foreign investors to create a local business in which they share possession and control. A) Licensing B) Direct investment C) Contract manufacturing D) Management contracting E) Joint ownership

E) Joint ownership

10) A subsistence economy is one in which ________. A) much of the revenue comes from exporting one or more natural resources B) fast growth in manufacturing results in overall economic growth C) a majority of the produced outputs is exported D) manufactured goods form a majority of the exports E) a vast majority of people engage in simple agriculture

E) a vast majority of people engage in simple agriculture

33) Under management contracting, a domestic firm ________. A) adopts management know-how from a foreign company B) manufactures the products of a foreign company C) exports its products to a foreign company D) provides financial capital to a foreign company E) exports management services to a foreign company

E) exports management services to a foreign company

53) In a global value delivery network, the second link moves company products to ________. A) distribution centers B) wholesalers C) market entry points D) points of production E) final buyers

E) final buyers

14) An emerging economy is one which ________. A) imports large amounts of finished textiles and automobiles B) offers few market opportunities for imported goods C) consumes all or most of its output D) needs few imports of raw textile materials and steel E) has a rapid growth in manufacturing

E) has a rapid growth in manufacturing

22) The difference between direct and indirect exporting is that indirect exporting involves ________. A) higher risks B) self-handling of exports C) greater returns D) more product alterations E) less investment

E) less investment

26) Providing a host-country partner the right to use a company's manufacturing process, trademark, patent, trade secret, or other item of value is referred to as ________. A) joint ownership B) direct exporting C) direct investment D) management contracting E) licensing

E) licensing

54) In managing their international marketing activities, most companies first ________. A) organize an import department B) create an international division C) initiate foreign direct investment D) form a domestic subsidiary E) organize an export department

E) organize an export department

49) Kola, a leading soft drink manufacturer, has recently forayed into the Middle East markets. Based on its research that consumers in the Middle East prefer sweeter drinks, it is manufacturing soft drinks with extra sugar to meet the local requirements. In this scenario, Kola is using a(n) ________ strategy to market its product. A) communication adaptation B) undifferentiated marketing C) straight product extension D) product invention E) product adaptation

E) product adaptation

18) Which type of economy consists mostly of households with very low family incomes? A) post-industrial B) developed C) emerging D) industrial E) subsistence

E) subsistence

2) A tax on an imported product designed to raise revenue or protect domestic firms is referred to as a(n) ________. A) exchange B) excise C) fine D) quota E) tariff

E) tariff

45) Compared to adapted global marketing, standardized global marketing ________. A) adjusts promotional efforts to address cultural differences in target markets B) results in additional marketing and manufacturing costs C) relies on social media to develop customer relationships D) usually results in diluted brand power over time E) uses the same marketing mix worldwide

E) uses the same marketing mix worldwide