MID TERM TEST

FACULTY OF BUSINESS & MANAGEMENT

BBCT 3023
Course : International Marketing

Date : 4th July 2022

Time : 9.00 am – 11.00 am

Duration : 2 hours

Module Lecturer : Nur Zafirah Binti Abdul Rahim

Total marks : 100 marks (40%)

Instructions to candidates:

1. Write your name and student number on the Examination Paper.

2. Answer questions according to the instruction for each section

3. Do not detach any portion of the examination paper

4. Begin writing, as indicated, after the reading time has ended

5. All questions to be answered in the answer booklet.

Materials allowed for this examination:

1. NIL.

DO NOT REMOVE ANY PART OF THIS EXAMINATION PAPER FROM THE EXAMINATION
ROOM

Student ID : 202009040088

NIRC/Passport No : 890305-05-5131

Program : BACHELOR OF BUSINESS ADMINISTRATION (HONS)

Date :4th July 2022 Course : BBCT 3023 INTERNATIONAL MARKETING

Lecturer : NUR ZAFIRAH BINTI ABDUL RAHIM

SECTION A – SHORT ANSWER QUESTIONS [Total = 60 marks]

Answer ALL questions.

QUESTION 1

Explain FIVE (5) international entry strategies. Provide an example.

(20 marks)

a) Exporting

Exporting is a typically the easiest way to enter an international market, and therefore most
firms begin their international expansion using this model of entry. Exporting is the sale of
products and services in foreign countries that are sourced from the home country. The
advantage of this mode of entry is that firms avoid the expense of establishing operations in
the new country. Firms must, however, have a way to distribute and market their products in
the new country, which they typically do through contractual agreements with a local company
or distributor. When exporting, the firm must give thought to labeling, packaging, and pricing
the offering appropriately for the market. In terms of marketing and promotion, the firm will
need to let potential buyers know of its offerings, be it through advertising, trade shows, or a
local sales force.

b) Licensing and Franchising

A franchise is a business agreement between a franchisor and a franchisee. The franchisor is

the owner of a business. The franchisor sells the rights to their brand including products and
services, intellectual property and more to a franchisee, who will open up a separate branch
under that brand’s name, which is essentially a duplicate of the original business. Licensing,
on the other hand, is a limited, legal business relationship where a specific party is granted
rights to use certain registered trademarks of a brand. The business relationship is between
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the licensor the one who owns the trademarks and licensee the one who is granted rights to
use them.

c) Partnerships and Strategic Alliances

Another way to enter a new market is through a strategic alliance with a local partner. A
strategic alliance involves a contractual agreement between two or more enterprises
stipulating that the involved parties will cooperate in a certain way for a certain time to achieve
a common purpose. For example, Cisco formed a strategic alliance with Fujitsu to develop
routers for Japan. In the alliance, Cisco decided to co-brand with the Fujitsu name so that it
could leverage
Fujitsu’s reputation in Japan for IT equipment and solutions while still retaining the Cisco name
to benefit from Cisco’s global reputation for switches and routers.

For example, one of the most famous examples of a franchise is McDonald’s. From a modest
start, the McDonald’s franchise now has more than 36,000 restaurants around the world. Two
of the most famous brands that operate licensing agreements are Disney and Calvin Klein.
Calvin Klein works with a number of manufacturers under licensing agreements. This means
that the Calvin Klein company has licensed, or loaned, its brand and trademarks to certain
manufacturers who then use the brand to sell their products. Calvin Klein products such as
underwear, perfume and jeans are all produced and branded under licensing agreements.

d) Acquisitions

An acquisition is a transaction in which a firm gains control of another firm by purchasing its
stock, exchanging the stock for its own, or, in the case of a private firm, paying the owners a
purchase price. In our increasingly flat world, cross-border acquisitions have risen
dramatically. In recent years, cross-border acquisitions have made up over 60 percent of all
acquisitions completed worldwide. Acquisitions are appealing because they give the company
quick, established access to a new market. However, they are expensive, which in the past
had put them out of reach as a strategy for companies in the undeveloped world to pursue.
What has changed over the years is the strength of different currencies. The higher interest
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rates in developing nations have strengthened their currencies relative to the dollar or euro. If
the acquiring firm is in a country with a strong currency, the acquisition is comparatively
cheaper to make.

e) Greenfield venturing

The process of establishing of a new, wholly owned subsidiary also called a greenfield venture
is often complex and potentially costly, but it affords the firm maximum control and has the
most potential to provide above-average returns. The costs and risks are high given the costs
of establishing a new business operation in a new country. The firm may have to acquire the
knowledge and expertise of the existing market by hiring either host-country nationals possibly
from competitive firms or costly consultants.

Each of these entry vehicles has its own particular set of advantages and disadvantages. By
choosing to export, a company can avoid the substantial costs of establishing its own
operations in the new country, but it must find a way to market and distribute its goods in that
country. By choosing to license or franchise its offerings, a firm lowers its financial risks but
also gives up control over the manufacturing and marketing of its products in the new country.
Partnerships and strategic alliances reduce the amount of investment that a company needs
to make because the costs are shared with the partner.

Partnerships are also helpful to make the new entrant appear to be more local because it
enters the market with a local partner. But the overall costs of partnerships and alliances are
higher than exporting, licensing, or franchising, and there is a potential for integration
problems between the corporate cultures of the partners. Acquisitions enable fast entry and
less risk from the standpoint that the operations are established and known, but they can be
expensive and may result in integration issues of the acquired firm to the home office.
Greenfield ventures give the firm the best opportunity to retain full control of operations, gain
local market knowledge, and be seen as an insider that employs locals. The disadvantages of
greenfield ventures are the slow time to enter the market because the firm must set up
operations and the high costs of establishing operations from scratch.

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QUESTION 2

Briefly discuss on benefits and costs of licensing.

(12 marks)

Licensing is a legal agreement made between a licensor and a licensee. The licensor is the
owner of a product, idea or service. The licensee is the organization that will manufacture,
market, and sell a product, service, or idea. In exchange for the rights to the product or idea,
the licensor will receive a royalty. Day after day, we walk to our mailboxes with slumped
shoulders to pick up piles of paper envelopes stuffed with bills we wish we didn’t have to pay,
store flyers selling things we don’t necessarily need, and offers for yet another credit card with
superior incentives to the five we already have tucked away in our wallets.

One of the biggest advantages for a licensor is that it allows you, the creative genius behind
your invention, to continue to do what you love: come up with new ideas for innovative
products or services. You won’t have to worry about starting or running your own business, or
the manufacturing and marketing necessary to become profitable. And, having already forged
relationships with well-established companies can open the door for further opportunities
down the line. You will not need to incur the costs of producing, promoting, packaging, or
selling your product. The licensee already has knowledge and know-how as it pertains to
breaking into an already established market, so there is no risk to you. Depending on the
terms of your agreement, your royalty payments can last a very long time.

Much of the decision pertaining to whether or not you choose to license is dependent upon
your goals. If you prefer to have complete control over your invention, including branding,
promotion, and packaging or design, you may not want to go the licensing route because you
will likely lose control over these aspects. If, however, you’d prefer not to risk financial loss if
your product does not do well, and you are more interested in creating other new products or
technologies, licensing can certainly benefit you more so than starting your own company.

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Date :4th July 2022 Course : BBCT 3023 INTERNATIONAL MARKETING

QUESTION

Define the following terms:

a. Tariffs

A tariff is a tax imposed by one country on the goods and services imported from
another country.

b. Franchising
A franchise is a joint venture between a franchisor and a franchisee. The
franchisor is the original business. It sells the right to use its name and idea. The
franchisee buys this right to sell the franchisor's goods or services under an existing
business model and trademark.

c. Product
A product is the item offered for sale. A product can be a service or an item. It
can be physical or in virtual or cyber form. Every product is made at a cost and each is
sold at a price. The price that can be charged depends on the market, the quality, the
marketing and the segment that is targeted.

d. Brand Equity
Brand equity has a direct effect on sales volume because consumers gravitate toward
products with great reputations. For example, when Apple releases a new product,
customers line up around the block to buy it even though it is usually priced higher
than similar products from competitors

(8 marks)

Elaborate THREE (3) product classification schemes. (10 marks)

a) Convenience Goods

Like the Crest toothpaste example, convenience goods are products that consumers
purchase repeatedly and without much thought. Once consumers choose their brand of
choice, they typically stick to it unless they see a reason to switch, such as an interesting
advertisement that compels them to try it or convenient placement at the checkout aisle.

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QUESTION

These products include gum, toilet paper, soap, toothpaste, shampoo, milk, and other
necessities that people buy regularly. To market a convenience good, you want to consider
that most people will impulse buy these products. Placing your products near the checkout
line at a store could be a good idea for these products which is why you'll often find candy and
gum at the front of a store.

b) Shopping Goods
Shopping goods are commodities consumers typically spend more time researching and
comparing before purchase. They can range from affordable items, like clothes and home
decor, to higher-end goods like cars and houses. These are more one-off purchases with a
higher economic impact. For instance, while you will buy toilet paper over and over again for
the rest of your life, you'll likely only purchase a house a few times at most. And, since it's an
expensive and important purchase, you'll spend a good amount of time deliberating on it,
attending different open houses, and comparing the pros and cons of your final selection.

c) Specialty Goods
A specialty good is the only product of its kind on the market, which means consumers
typically don't feel the need to compare and deliberate as much as they would with shopping
products. A good example of this? iPhones. I have been purchasing new iPhones for years,
and I haven't paused to consider other smartphone models because of Apple’s strong brand
identity and the perception I have of its product quality. When marketing a specialty good, you
don't necessarily need to spend too much time convincing consumers that your product is
different from competitors. They already know already. Instead, focus on how your products
are constantly innovating and improving. This will ensure your customers will remain loyal to
your brand.

Explain on Global Pricing Objectives & Strategies. (10 marks)

Penetration:
The first objective of a new entrant to an international market is to create demand for the
product. For this, the firm will be tempted to adopt low-price strategy, which may divert
demand from a regular channel of supply or to generate new demand. Low price strategy is
justified for the new entrant in the light of his image disadvantage and the nature of his
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QUESTION

product. However, the danger of this strategy is that it may invite anti-dumping charges from
foreign competitors apart from yielding low profits for the exporter.

Skimming:
Another objective of pricing policy may be to use a very high price to skim the cream of the
demand. High price strategy is generally used if the export firm is selling a unique or a new
product, or the exporter intends to establish a high quality image for the product. The
advantage of this strategy is that the exporter can earn higher profit margins but it can limit
the product’s marketability.

Holding Market Share:

Another objective of pricing in international marketing is to maintain their share in the market,
i.e., to survive in the face of strong competition in the market. In a market where there is
strong competition, weaker export firms will disappear and the stronger ones will survive the
competition. Price of the product should be fixed keeping in mind the competitive situation.
Hence, the export firm likes to fix a relatively low price for its product to discourage potential
customers.

Enhancing the Share:

One of the objectives of pricing decision maybe capturing the export market. A company fixes
comparatively lower prices for its products. Sometimes, prices are fixed at the lowest. which
may result in no profit to the business, but the main aim is to enhance the market share of the
product and the firm. Besides above-mentioned objectives, other objectives of pricing of
international marketing may be listed as under Fighting competition, preventing new entry,
Shortening payback period, Early cash recovery, Optimum capacity utilization, Profit
maximization.

Discuss on Channel Intermediaries. (10 marks)

Channel intermediaries are the groups and individuals who make it possible for consumers to
have access to products. A product's distribution process can vary based on the company
that owns the item and the delivery method used to deliver the product to customers.
Understanding what parties handle this process and how they distribute products can be
helpful to anyone interested in working in marketing or distribution. In this article, we define
channel intermediaries and intermediary marketing channels and list the main types of both.
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QUESTION

Channel intermediaries are the external groups, individuals and businesses that help a
company deliver its products to customers. They act as agents between the original creator of
the merchandise and the consumer who makes the last purchase. Companies need channel
intermediaries in order to deliver goods to their customers, making them a vital part of the
distribution process.

Companies and product manufacturers use channel intermediaries to deliver their products to
consumers without owning or being otherwise responsible for a supply train. With channel
intermediaries, they can make a profit from their product before the final buyer purchases the
item. These intermediaries provide logistic support and ensure that all buyers receive their
products according to schedule.

While intermediary channels cover who delivers products to consumers, intermediary

marketing channels explain how companies and intermediaries actually deliver the products.
Essentially, intermediary marketing channels are methods of distribution. They typically refer
to the business arrangement that manufacturers and intermediaries have with each other
regarding the physical distribution of goods.

-END OF QUESTIONS-

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