Marketing The Core 7th Edition Kerin Test Bank Download

Marketing The Core 7th Edition
Kerin Test Bank

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Chapter 06
Test Bank
1. Why has Amazon been aggressively pursuing the Indian market since 2013?
A. U.S. sales had begun to decrease.
B. Amazon believed it would be inexpensive to begin operations in India.
C. There was no competition to speak of for Amazon's e-commerce channel in India.
D. There were fewer restrictions in retailing in India.
E. The India market offered significant growth potential.
AACSB: Diversity
Accessibility: Keyboard Navigation
Blooms: Understand
Learning Objective: 06-01 Describe the nature and scope of world trade from a global perspective.
Level of Difficulty: 2 Medium
Topic: Marketing Globalization
Feedback: E-commerce industry analysts generally agree that India represents the last major e-commerce opportunity in the world. They expect that
Indian e-commerce revenue could reach $137 billion by 2020, more than 10 times the 2013 level of $13 billion.
2. All of the following are challenges faced by Amazon in its expansion into India except which?
A. Low rates of credit and debit card usage among Indian consumers, and many without bank accounts
B. Well-financed and capable domestic competitors in India
C. Political instability and social unrest in India
D. Underdeveloped technology requiring financial and technological investment in a localized cloud computing platform for India
E. Strict trade regulations that prevent direct sales to Indian consumers
AACSB: Diversity
Blooms: Understand
Feedback: Foreign companies, like Amazon, are prohibited from selling products directly to Indian consumers. Barely 60 percent of Indian
consumers have bank accounts, and only 12 percent have credit or debit cards. Amazon faces well-financed and capable domestic e-commerce
competitors in India, including Flipkart, Snapdeal, and Tata. Amazon has found it necessary to expand its cloud computing platform in India in 2016
to improve its service for Indian customers. Political and social unrest were not cited in the text as challenges.
3. Which of the following statements about the dynamics of world trade is most accurate?
A. Manufactured products and commodities account for only 25 percent of world trade.
B. Services such as telecommunications, transportation, and banking accounts are not included in calculations of world trade.
C. The United States has replaced China as the biggest country in terms of world trade.
D. All nations participate equally in world trade.
E. Dollar value of world trade has more than doubled in the past decade.
AACSB: Diversity
Blooms: Understand
Topic: Global Environmental Forces
6-1
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Feedback: All nations do not participate equally in world trade. Manufactured goods account for 75 percent of world trade, with service industries
accounting for 25%. World trade has more than doubled in the past decade.
4. Which of the following statements about the dynamics of world trade is most accurate?
A. As the largest international importer and exporter, the U.S. accounts for 65 percent of world trade.
B. World trade is calculated to include only the exchange of money for products or services.
C. An estimated 35 percent of world trade involves countertrade.
D. China, the United States, and Germany far outpace other countries in terms of imports and exports.
E. Because of the European Union, European intratrade no longer counted in calculations of world trade.
AACSB: Diversity
Blooms: Understand
Feedback: The United States, China, and Germany are the leaders in global merchandise trade by a wide margin. China exports more manufactured
products and commodities than it imports. The United States imports more manufactured products and commodities than it exports. Not all trade
involves the exchange of money for products or services. An estimated 10% to 15% of world trade involves countertrade.
5. Which of the following countries is the world's leading exporter?

A. United States
B. China
C. India
D. Germany
E. Japan
AACSB: Diversity
Blooms: Remember
Level of Difficulty: 1 Easy
Feedback: The United States, China, Japan, Western Europe, and Canada together account for more than two-thirds of world trade in manufactured
products and commodities. China is the world's leading exporter, followed by the United States and Germany. See Figure 6-1.
6. Which of the following countries is the world's leading importer?

A. United States
B. China
C. India
D. Germany
E. Japan
AACSB: Diversity
Blooms: Remember
Feedback: The United States, China, Japan, Western Europe, and Canada together account for more than two-thirds of world trade in manufactured
products and commodities. The U.S. is the world's leading importer, followed by China and Germany. See Figure 6-1.
7. All nations and regions of the world do not participate equally in world trade. World trade flows reflect
A. the influences of culture and language.
B. the differences among industries, countries, and regions.
C. interdependencies among industries, countries, and regions.
D. the challenges of currency and exchange imbalances.
E. the increasing importance of services verses products.
AACSB: Diversity
Blooms: Remember
Feedback: All nations and regions of the world do not participate equally in world trade. World trade flows reflect interdependencies among
industries, countries, and regions. These flows manifest themselves in country, company, industry, and regional exports and imports.
6-2
8. A country's imports
A. stimulate the imports of other countries.
B. have no effect on its exports.
C. have no relationship with its balance of trade.
D. affect its exports and exports affect its imports.
E. over time will decrease its overall economic activity.
AACSB: Diversity
Blooms: Understand
Feedback: A global perspective on world trade views exports and imports as complementary economic flows: A country's imports affect its exports
and exports affect its imports. Every nation's imports arise from the exports of other nations.
9. The complementary nature of economic flows internationally, whereby imports stimulate exports and vice versa, is called ________ and is one
argument for free trade among nations.
A. the balance of trade
B. countertrade
C. exchange trade
D. the trade feedback effect
E. global market trading
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—trade feedback effect.
10. The trade feedback effect is one argument for

A. decreasing a nation's exports.
B. free trade agreements.
C. increased tariffs and quotas.
D. international trade associations.
E. decreasing a nation's imports.
AACSB: Diversity
Blooms: Understand
Feedback: A global perspective on world trade views exports and imports as complementary economic flows: A country's imports affect its exports
and exports affect its imports. This phenomenon is called the trade feedback effect and is one argument for free trade among nations.
11. Countertrade refers to

A. the illegal agreement of one country to buy products exclusively from another.
B. the legal agreement of one country to buy and sell certain products exclusively from one another.
C. the practice of using barter rather than money for making global sales.
D. the sale of industrial goods from a brick and mortar outlet rather than directly from the manufacturer.
E. the use of foreign currency in making global purchases to minimize risk from currency fluctuation.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—countertrade.
12. An estimated 10 to 15 percent of world trade involves __________, the practice of using barter rather than money for making global sales.
A. tariffs
B. countertrade
C. the balance of trade
D. trade feedback
6-3
E. market trading
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—countertrade.
13. Volvo of North America delivered automobiles to the Siberian police force when Siberia had no cash to pay for them. It accepted payment in oil,
which it then sold for cash to pay for media advertising in the United States. This transaction is an example of
A. a quota.
B. countertrade.
C. balance of trade.
D. competitive advantage.
E. a trade feedback effect.
AACSB: Diversity
Blooms: Apply
Level of Difficulty: 3 Hard
Feedback: Countertrade is the practice of using barter rather than money for making global sales; in this case, exchanging police cars for oil.
14. The Malaysian government recently exchanged 20,000 tons of rice for an equivalent amount of Philippine corn. This transaction is an example of
a
A. countertrade.
B. competitive advantage.
C. balance of trade.
D. quota.
E. trade feedback.
AACSB: Diversity
Blooms: Apply
Feedback: Countertrade is the practice of using barter rather than money for making global sales; in this case, exchanging rice for corn.
15. Recipco and Tradaq are both companies that connect international companies who want to barter the products they make for the products they
need without using cash or credit. Recipco and Tradaq assist international companies in making
A. countertrades.
B. quota exchanges.
C. trading exchanges.
D. balances of trade.
E. WTO trade arrangements.
AACSB: Diversity
Blooms: Apply
Feedback: Countertrade is the practice of using barter rather than money for making global sales. Recipco and Tradaq assist companies in bartering
the products they make for products they need.
16. The monetary value of all products and services produced in a country during one year is referred to as the
A. balance of trade.
B. gross domestic product.
C. national monetary reserve.
D. monetary national balance.
E. annual national product.
AACSB: Diversity
6-4
Blooms: Remember
Feedback: Text term definition—gross domestic product.
17. Gross domestic product refers to

A. the monetary value of all products and services produced by a single manufacturer during one year.
B. the monetary value of all domestic exports of a nation during one year.
C. the monetary value of all products and services produced in a country during one year.
D. the monetary value of all domestic imports of a nation during one year.
E. the difference between all domestic exports and imports for any nation during the course of one fiscal year.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—gross domestic product.
18. The balance of trade is the

A. difference between the monetary value of a nation's exports and imports.
B. sum of the monetary value of a nation's exports and imports.
C. monetary value of a nation's exports divided by its imports.
D. surplus that occurs when nations engage in exporting.
E. state of equilibrium when two neighboring nations participate in countertrade.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—balance of trade.
19. When a country's exports exceed its imports,

A. it incurs a deficit in its balance of trade.
B. the result is the trade feedback effect.
C. it will try to rebalance its overall economy.
D. it will attempt to engage in a trade war.
E. it incurs a surplus in its balance of trade.
AACSB: Diversity
Blooms: Understand
Feedback: The difference between the monetary value of a nation's exports and imports is called the balance of trade. When a country's exports
exceed its imports, it incurs a surplus in its balance of trade. When imports exceed exports, a deficit results.
20. When a nation's nation's imports exceed its exports, it incurs a __________ in its balance of trade.
A. countertrade
B. trade feedback effect
C. deficit
D. surplus
E. tariff
AACSB: Diversity
Blooms: Understand
Feedback: The difference between the monetary value of a nation's exports and imports is called the balance of trade. When a country's exports
exceed its imports, it incurs a surplus in its balance of trade. When imports exceed exports, a deficit results.
6-5
21. Which of the following statements about the relationship between the imports into the United States and the exports from the United States during
the last 30 years is most accurate?
A. Exports from the United States have declined, while import levels have remained about constant.
B. The volume of both imports and exports has consistently decreased.
C. Imports into the United States and exports have been about equal, indicating balanced trade.
D. Exports have exceeded imports, indicating a continuing balance of trade surplus.
E. Imports have exceeded exports, indicating a continuing balance of trade deficit.
AACSB: Diversity
Blooms: Understand
Feedback: Two important things have happened in U.S. exports and imports over the past 30 years. First, imports have exceeded exports each year,
indicating that the United States has a continuing balance of trade deficit. Second, the volume of both exports and imports has increased dramatically.
22. The four largest importers of U.S. products and services are
A. Japan, Germany, China, and Canada.
B. Canada, Mexico, China, and Japan.
C. China, Brazil, Japan, and Germany.
D. Mexico, Canada, Brazil, and China.
E. England, Canada, Australia, and New Zealand.
AACSB: Diversity
Blooms: Understand
Feedback: The four largest exporters to the United States are Canada, Mexico, China, and Japan. These countries purchase approximately two-thirds
of U.S. exports.
23. Five trends in the past decade have significantly influenced the landscape of global marketing. One of them is
A. an increase in most countries' GDP coupled with an increased degree of consumer ethnocentrism.
B. a significant increase in economic protectionism and a decline in free trade.
C. a more aggressive attitude toward initiating international tariffs and quota systems.
D. a decrease in most countries' GDP and a renewal of nationalism.
E. a decline in economic protectionism by individual countries.
AACSB: Diversity
Blooms: Understand
Learning Objective: 06-02 Identify the major trends that have influenced world trade and global marketing.
Feedback: Five trends in the past decade have significantly influenced the landscape of global marketing: (1) the decline of economic protectionism
by individual countries, (2) the rise of economic integration and free trade among nations, (3) global competition among global companies for global
customers, (4) the emergence of networked global marketspace, and (5) the growing prevalence of economic espionage.
24. Five trends in the past decade have significantly influenced the landscape of global marketing. One of them is
A. the emergence of a networked global marketspace.
B. an increase in economic protectionism and a decline in free trade.
C. a more aggressive attitude toward initiating international tariffs and quota systems.
D. a sharp decline in economic espionage.
E. a gradual dissolution of unpopular trade agreements.
AACSB: Diversity
Blooms: Understand
Feedback: Five trends in the past decade have significantly influenced the landscape of global marketing: (1) the decline of economic protectionism
by individual countries, (2) the rise of economic integration and free trade among nations, (3) global competition among global companies for global
customers, (4) the emergence of networked global marketspace, and (5) the growing prevalence of economic espionage.
25. The practice of shielding one or more sectors of a country's economy from foreign competition through the use of tariffs or quotas is referred to
6-6
as
A. domestic imperialism.
B. protectionism.
C. blocked competition.
D. import taxation.
E. trade restriction.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—protectionism.
26. Arguments in favor of protectionism include that it

A. helps reduce tariffs and quotas.
B. encourages the development of domestic industries.
C. encourages economic reliance on foreign countries.
D. creates opportunities for the outsourcing of domestic jobs.
E. creates a more favorable environment for a global economy.
AACSB: Diversity
Blooms: Understand
Feedback: Protectionism is the practice of shielding one or more sectors of a country's economy from foreign competition through the use of tariffs or
quotas. The argument for protectionism is that it limits the outsourcing of jobs, protects a nation's political security, discourages economic
dependency on other countries, and encourages the development of domestic industries.
27. Recently, the United States imposed a 35% tariff on Chinese tire imports in hopes of sustaining U.S. jobs in tire manufacturing. This addition of
tariffs is an example of
A. imposing the rule of eminent domain.
B. increasing ethnocentrism.
C. enhancing domestic imperialism.
D. increasing protectionism.
E. slowing countertrade.
AACSB: Knowledge Application

Blooms: Apply
Feedback: Protectionism is the practice of shielding one or more sectors of a country's economy from foreign competition through the use of tariffs or
quotas. By adding the tariff, the United States is adding a protectionism measure for the U.S. tire industry.
28. Which of the following issues raises concerns about the ethics of protectionism?
A. Competitive advantage grows out of continuous improvement.
B. Small firms succeed in foreign niche markets.
C. Tariffs have declined from an average of 40 percent to less than 5 percent.
D. Regional trade agreements may provide preferential treatment for member nations.
E. Pan-European marketing strategies are possible due to greater uniformity in packaging standards.
AACSB: Ethics
Blooms: Understand
Feedback: Of the statements above, the possibility of preferential treatment is most likely to suggest an ethical consideration. See Making
Responsible Decisions in the text.
29. Government taxes on products or services entering a country that primarily serve to raise prices on imports are referred to as
A. tariffs.
B. quotas.
6-7
C. WTO taxes.
D. foreign excise taxes.
E. trade subsidies.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—tariffs.
30. Tariffs refer to

A. government payments to companies or industries that primarily serve to create competitive advantage for domestic products.
B. government taxes on products or services entering a country that primarily serve to raise prices on imports.
C. a restriction placed on the amount of a product allowed to enter or leave a country.
D. a minimum requirement for the purchase between two or more nations of products or services.
E. a refusal to purchase or exchange products or services with another nation unless certain financial or ideological requirements have been satisfied.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—tariffs.
31. The U.S. Rice Millers' Association claims that if the Japanese rice market were opened to imports by lowering __________, lower prices would
save Japanese consumers $6 billion annually and the United States would gain a large share of the Japanese rice market.
A. boycotts
B. quotas
C. sanctions
D. tariffs
E. subsidies
AACSB: Diversity
Blooms: Understand
Feedback: Tariffs are government taxes on products or services entering a country that primarily serve to raise prices on imports.
32. The __________ imposed on imported bananas by European Union countries cost consumers $2 billion a year in higher prices.
A. boycotts
B. quotas
C. sanctions
D. subsidies
E. tariffs
AACSB: Diversity
Blooms: Understand
33. U.S. citizens pay $5 billion more annually for shoes and Japanese citizens pay $6 billion more for rice than the actual cost of the products because
A. both countries have suffered major financial crises due to a severe trade imbalance.
B. both countries have imposed tariffs on imported goods to protect their domestic markets.
C. both countries have imposed limits on the quantity of these goods that can leave their respective domestic markets.
D. both products are considered essentials and as a result are more heavily taxed.
E. these products were purchased at a lower price from nations that currently are under governmental sanctions.
AACSB: Diversity
Blooms: Understand
6-8
34. Recently, the Japanese government, under pressure from its domestic farm lobby, slapped government taxes on mushrooms, leeks, and the reeds
used in tatami mats that were being imported from China. These taxes Japan levied are referred to as
A. WTO taxes.
B. quotas.
C. tariffs.
D. excise taxes.
E. subsidies.

Blooms: Apply
35. If you wanted to set up a business importing amber jewelry from Latvia to the United States, you would have to plan on paying the U.S. Customs
Service a government tax of roughly 11 percent of the value of the product as
A. a bribe.
B. a tariff.
C. a subsidy.
D. an excise tax.
E. a quota.

Blooms: Apply
36. Whirlpool asked the United States to impose __________ on washing machine imports made by LG Electronics and Samsung Electronics, both
South Korean companies, to raise the price of these products. Whirlpool accused these companies of selling below fair market value and receiving
anticompetitive export subsidies from their governments, both of which could jeopardize American jobs.
A. boycotts
B. quotas
C. sanctions
D. tariffs
E. embargoes

Blooms: Apply
37. A restriction placed on the amount of a product allowed to enter or leave a country is referred to as a
A. quota.
B. tariff.
C. GATT tax.
D. subsidy.
E. excise tax.
AACSB: Diversity
Blooms: Remember
6-9
Feedback: Key term definition—quota.
38. A quota refers to

A. a government tax on products or services entering a country that primarily serves to raise prices on imports.
B. government payments to companies or industries that serve to lower costs and provide a competitive advantage to domestic industries.
C. a restriction placed on the amount of a product allowed to enter or leave a country.
D. a minimum requirement for the purchase of specific products or services between two nations.
E. a refusal to purchase or exchange products or services with another nation unless certain financial or ideological requirements have been satisfied.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—quota.
39. The world's largest manufacturer of peppermint candy canes was located in Albany, Georgia, until it could no longer afford to buy the sugar
needed for its operation. It moved its manufacturing business to Mexico where there are no restrictions (like those that exist in the United States) on
the amount of sugar that can be brought into the nation. The business moved to Mexico because of __________ established by the U.S. government.
A. a tariff
B. a trade imbalance
C. an excise tax
D. a subsidy
E. a quota

Blooms: Apply
Feedback: A quota is a restriction placed on the amount of a product allowed to enter or leave a country. In this case, the U.S. government caused
domestically grown sugar to be priced higher than sugar on the world market due to its protectionist policies on sugar.
40. Russia currently has a limit on pork of 400,000 metric tons annually that can be imported from any country. This restriction would be considered
a
A. tariff.
B. trade imbalance.
C. excise tax.
D. quota.
E. subsidy.

Blooms: Apply
Feedback: A quota is a restriction placed on the amount of a product allowed to enter or leave a country. In this case, the Russian government has
protectionist quota policies restricting the amount of pork imports.
41. An institution that sets rules governing trade between its members through a panel of trade experts who decide on trade disputes between
members and issue binding decisions is referred to as the
A. League of Nations.
B. World Trade Organization (WTO).
C. Association for Commerce Equity (ACE).
D. United Nations Board of Trade (UNBT).
E. Global Better Business Bureau (BBB-G).
AACSB: Diversity
Blooms: Remember
Topic: Trade Agreements, Monetary Unions, and International Organizations
Feedback: Key term definition—World Trade Organization (WTO).
6-10
42. The World Trade Organization (WTO) refers to
A. the world's largest banking institution responsible for establishing and maintaining equitable exchange rates for all member nations.
B. the world's largest licensing institution responsible for the certification of products distributed to a global market.
C. an institution that sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members
and issue binding decisions.
D. a multinational trade organization composed of the world's wealthiest nations whose primary purpose is to aid in the economic growth of
developing nations.
E. a multinational trade organization comprised of the world's wealthiest nations whose primary purpose is to promote free trade economies.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—World Trade Organization (WTO).
43. There are __________ World Trade Organization countries, including the United States, which account for more than 90 percent of world trade.
A. 37
B. 52
C. 97
D. 113
E. 162
AACSB: Diversity
Blooms: Remember
Feedback: The World Trade Organization (WTO) was formed in 1995 to address a broad array of world trade issues. There are 162 WTO member
countries, including the United States, which account for more than 90 percent of world trade.
44. Which of the following statements about the World Trade Organization (WTO) is most accurate?
A. The WTO acts as an agent in trade negotiations between its members and the remainder of the world.
B. The 179 member countries of the WTO account for less than 25 percent of world trade.
C. The WTO was formed by the major industrialized nations in 1995 to address trade issues.
D. The WTO uses panels of trade experts who can issue nonbinding recommendations.
E. The WTO was formed by the United Nations.
AACSB: Diversity
Blooms: Understand
Feedback: The major industrialized nations of the world formed the WTO in 1995 to address an array of world trade issues. There are 162 WTO
member countries, including the United States, which account for more than 90 percent of world trade. The WTO is a permanent institution that sets
rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding
decisions.
45. Which of the following statements about the World Trade Organization (WTO) is most accurate?
A. The World Trade Organization is a temporary institution.
B. The 28 member countries of the WTO account for less than 25 percent of world trade.
C. The WTO sets rules governing trade between its members and the rest of the world.
D. The WTO uses panels of trade experts who can issue only nonbinding recommendations.
E. The WTO was formed by the major industrialized nations of the world.
AACSB: Diversity
Blooms: Understand
Feedback: The major industrialized nations of the world formed the WTO in 1995 to address an array of world trade issues. The 162 WTO member
countries, including the United States, account for more than 90 percent of world trade. The WTO is a permanent institution that sets rules governing
trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisions.
6-11
46. The European Union (EU) in early 2017 consisted of 28 countries with more than 500 million consumers. The EU has eliminated most barriers to
the free flow of products, capital, and labor across its borders. Which of the following countries is not a member of the EU?
A. Latvia
B. Greece
C. Ireland
D. Switzerland
E. England
AACSB: Diversity
Blooms: Remember
Feedback: Switzerland is not one of the 28 countries in the EU (as of early 2017). See Figure 6-3.
47. The European Union is an economic and political union of __________ member countries that have eliminated most barriers to the free flow of
products, services, capital, and labor across their borders.
A. 17
B. 20
C. 28
D. 30
E. 37
AACSB: Diversity
Blooms: Remember
Feedback: The European Union as of 2017 consisted of 28 countries that have eliminated most barriers to the free flow of products, services, capital,
and labor across their borders.
48. To eliminate the need to continually monitor currency exchange rates, 16 of the countries in the European Union (EU) have adopted a common
currency, which is called the
A. pound.
B. franc.
C. euro.
D. mark.
E. dollar.
AACSB: Diversity
Blooms: Remember
Feedback: To eliminate the need to continually monitor currency exchange rates, 16 of the countries in the European Union (EU) have adopted a
common currency, which is called the euro.
49. To eliminate the need to continually monitor currency exchange rates, __________ of the countries in the European Union (EU) have adopted a
common currency called the euro.
A. 11
B. 16
C. 20
D. 28
E. 32
AACSB: Diversity
Blooms: Remember
Feedback: To eliminate the need to continually monitor currency exchange rates, 16 of the countries in the European Union (EU) have adopted a
common currency, which is called the euro.
50. The European Union (EU) has been beneficial to electronic commerce because it is no longer necessary to
6-12
A. use multiple languages when settling accounts for purchases made across borders.
B. continually monitor currency exchange rates among participating nations.
C. trade with the former Eastern European communist countries.
D. obey international e-trade regulations.
E. use the American dollar as the economic standard.
AACSB: Diversity
Blooms: Understand
Feedback: One benefit of the EU was the adoption of the euro, which has been a boon to the electronic commerce in the EU by eliminating the need
to continually monitor currency exchange rates.
51. The EU has benefited firms in its member nations because

A. it provides a safe haven in times of world economic crises.
B. there is a common language advantage among EU consumers.
C. most companies within the EU are engaging in strategic global partnerships.
D. there is now a legally binding code of economic conduct.
E. firms do not need to market their products and services on a nation-by-nation basis.
AACSB: Diversity
Blooms: Understand
Feedback: The EU has benefited marketers because firms do not need to market their products and services on a nation-by-nation basis. Rather, pan-
European marketing strategies are possible due to greater uniformity in product and packaging standards; fewer regulatory restrictions on
transportation, advertising, and promotion imposed by countries; and removal of most tariffs that affect pricing practices.
52. The EU has benefited its member nations because firms do not need to market their products and services on a nation-by-nation basis; most tariffs
that affect pricing practices have been removed; and
A. there is a legally binding code of economic conduct.
B. there is immunity against world recessions.
C. there are fewer regulatory restrictions on transportation, advertising, and promotion.
D. there is a common language advantage among EU consumers.
E. most companies within the EU are engaging in strategic global partnerships.
AACSB: Diversity
Blooms: Understand
Feedback: The EU has benefited marketers because firms do not need to market their products and services on a nation-by-nation basis. Rather, pan-
European marketing strategies are possible due to greater uniformity in product and packaging standards; fewer regulatory restrictions on
transportation, advertising, and promotion imposed by countries; and removal of most tariffs that affect pricing practices.
53. The North American Free Trade Agreement was designed to encourage free trade between
A. North America, Central America, and South America.
B. the United States and the European Union.
C. member countries originally from NATO (North Atlantic Treaty Organization).
D. the United States, Canada, and Mexico.
E. the United States, Canada, and the United Kingdom.
AACSB: Diversity
Blooms: Remember
Feedback: The North American Free Trade Agreement lifted many trade barriers between Canada, Mexico, and the United States and created a
marketplace with more than 475 million consumers.
54. When firms originate, produce, and market their products and services worldwide, it is referred to as
A. acculturation.
6-13
B. free trade.
C. global branding.
D. global competition.
E. transactional exchange.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global competition.
55. Global competition exists when

A. a firm produces and markets its products domestically rather than internationally.
B. firms originate, produce, and market their products and services worldwide.
C. two firms from two different countries compete for market share in a single domestic market.
D. two or more firms from different nations combine their resources to market products in a single domestic market.
E. the firm from one nation dominates the market for its product in every nation.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global competition.
56. Coca-Cola has operations in all but two nations in the world and Pepsi-Cola is now available in about 200 countries and territories, making the
soft drink industry an example of
A. global competition.
B. acculturation.
C. free trade.
D. global branding.
E. transactional exchange.

Blooms: Apply
Feedback: Global competition exists when firms originate, produce, and market their products and services worldwide. Pepsi-Cola, now available in
about 200 countries and territories, accounts for a quarter of all soft drinks sold internationally. Coca-Cola is sold in every country except North
Korea and Cuba.
57. In terms of the global marketplace, there are three primary types of companies: __________ firms, multinational firms, and transnational firms.
A. worldwide
B. conglomerate
C. intercontinental
D. international
E. cosmopolitan
AACSB: Diversity
Blooms: Remember
Feedback: Three types of companies compete in the global marketplace: international firms, multinational firms, and transnational firms.
58. The administrative, marketing, and manufacturing operations that many international firms, multinational firms, and transnational firms have
around the world are often called
A. subsidiaries.
B. outlets.
C. departments.
D. markets.
E. holding companies.
6-14
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—divisions or subsidiaries.
59. In terms of the global marketplace, there are three primary types of companies: international firms, multinational firms, and transnational firms.
The key factor that distinguishes one from another is
A. the firm's financial capacity to take risks.
B. the willingness and ability to use diversity and cultural differences as a positive in its marketing efforts.
C. the firm's level of customization in marketing efforts as strategy for individual global markets.
D. the relative position of the product or service in terms of its life cycle.
E. the relative size of the firm both in financial terms and in production capacity.
AACSB: Diversity
Blooms: Understand
Feedback: The three types of companies that populate and compete in the global marketplace are (1) international firms, (2) multinational firms, and
(3) transnational firms. A firm's orientation and strategy for global markets and marketing defines the type of company it is or attempts to be.
60. A(n) __________ firm engages in trade and marketing in different countries as an extension of the marketing strategy in its home country.
A. multidomestic
B. meganational
C. international
D. multinational
E. transnational
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—international firm.
61. Generally speaking, __________ firm markets its existing products and services in other countries the same way it does in its home country.
A. a meganational
B. an international
C. a multinational
D. a transnational
E. an intranational
AACSB: Diversity
Blooms: Understand
Topic: International Firm
Feedback: International firms market their existing products and services in other countries the same way they do in their home country.
62. Mars, America's second-largest candy company, began doing business in Russia in the late 1980s. The Snickers bar is one of the top-selling
candies in Russia and is marketed in much the same way as it is in the United States. What type of global company is Mars?
A. an international firm
B. a multidomestic firm
C. a transnational firm
D. a meganational firm
E. a multinational firm

Blooms: Apply
6-15
Feedback: International firms engage in trade and marketing in different countries as an extension of the marketing strategy in their home country.
63. A firm that views the world as consisting of unique parts and markets to each part differently is referred to as
A. a meganational firm.
B. an extranational firm.
C. an international firm.
D. a multinational firm.
E. a transnational firm.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—multinational firm.
64. A multidomestic marketing strategy refers to

A. the strategy of transnational firms that employ the practice of standardizing marketing activities when there are cultural similarities and adapting
them when cultures differ.
B. the strategy used by firms that use the same product variations, brand names, and advertising programs for every country in which they do
business.
C. the strategy used by firms that have as many different product variations, brand names, and advertising programs as countries in which they do
business.
D. the strategy of seeking out already established firms in other nations and selling them the rights to manufacture and distribute the firm's products.
E. the strategy currently used by most U.S. domestic firms that when entering a new international market, these firms offer only those products that
require the least amount of product adaptation.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—multidomestic marketing strategy.
65. Companies that use __________ marketing strategy have as many different product variations, brand names, and advertising programs as
countries in which they do business.
A. an ethnocentric
B. a multidomestic
C. a transnational
D. a global
E. an international
AACSB: Diversity
Blooms: Remember
Feedback: Firms that have as many different product variations, brand names, and advertising programs as countries in which they do business use a
multidomestic marketing strategy.
66. Lever Europe, a division of Unilever, markets its Snuggle fabric softener in the United States. But in 10 European countries, it uses seven brand
names, including Kuschelweich in German, Coccolino in Italy, and Mimosin in France. These products also have different packages, different
advertising programs, and occasionally different formulas. From this information, we can assume that Lever Europe uses __________ marketing
strategy.
A. an ethnocentric
B. a transnational
C. a global
D. an international
E. a multidomestic

6-16
Blooms: Apply
Feedback: Firms that have as many different product variations, brand names, and advertising programs as countries in which they do business use a
multidomestic marketing strategy.
67. U.S. appliance manufacturers find that different customs about shopping must be used to determine local product design. For instance, people in
Northern Europe shop only once a week, so they need bigger refrigerators than Southern Europeans, who shop daily. Furthermore, Northern
Europeans insist that freezers should be on the top just as firmly as Southern Europeans want them on the bottom. Based on this, U.S. appliance
manufacturers would more likely be successful if they used __________ marketing strategy.
A. a global
B. a multidomestic
C. a transnational
D. a meganational
E. an international

Blooms: Apply
Feedback: A multinational firm views the world as consisting of unique parts and markets to each part differently. Multinationals use a multidomestic
marketing strategy, which means that they have as many different product variations, brand names, and advertising programs as countries in which
they do business.
68. Disney employed __________ marketing strategy for its Disneyland Paris, particularly when it came to the eateries in the park. These restaurants
featured recipes that were revised for local tastes, alcoholic beverages (not permitted in previous parks), and increased outdoor seating.
A. a global
B. a transnational
C. a multidomestic
D. a meganational
E. an international

Blooms: Apply
Feedback: Companies that use a multidomestic marketing strategy have as many different product variations as countries in which they do business.
69. A(n) __________ firm views the world as one market and emphasizes cultural similarities across countries or universal consumer needs and
wants more than differences.
A. transcontinental
B. multidomestic
C. international
D. multinational
E. transnational
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—transnational firm.
70. The strategy transnational firms employ that standardizes marketing activities when there are cultural similarities and adapts them when cultures
differ is referred to as
A. a global marketing strategy.
B. an integrated marketing strategy.
C. a transnational marketing strategy.
D. a meganational marketing strategy.
E. an international marketing strategy.
6-17
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global marketing strategy.
71. A global marketing strategy refers to

A. the strategy used by multinational firms that have as many different product variations, brand names, and advertising programs as countries in
which they do business.
B. the strategy of transnational firms not to employ adaptive marketing techniques when there are cultural differences, but to redirect their marketing
resources toward customer education.
C. the strategy of transnational firms that employ the practice of standardizing marketing activities when there are cultural similarities and adapting
them when cultures differ.
D. the global strategy of seeking out already established firms in other nations and selling them the rights to manufacture and distribute the firm's
products through a host nation's local businesses.
E. the strategy currently used by most U.S. domestic firms that when entering a new international market, these firms offer only those products that
require the least amount of product adaptation.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global marketing strategy.
72. Which of the following types of firms would be most likely to use a global marketing strategy?
A. multidomestic
B. multinational
C. multicountry
D. transnational
E. transborder
AACSB: Diversity
Blooms: Understand
Feedback: Transnational marketers employ a global marketing strategy—the practice of standardizing marketing activities when there are cultural
similarities and adapting them when cultures differ.
73. A brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs is referred to as
A. a transnational brand.
B. an international brand.
C. a multinational brand.
D. a global brand.
E. a meganational brand.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global brand.
74. A global brand refers to

A. two or more domestic products that coincidentally share the same brand name but represent two completely unrelated products.
B. two or more international products that coincidentally share the same brand name but represent two completely unrelated products.
C. a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.
D. a brand that is essentially the same but that has had minor adaptations made to meet the more specific needs of different nations.
E. a brand marketed under different names in multiple countries with similar and centrally coordinated marketing programs.
AACSB: Diversity
6-18
Blooms: Remember
Feedback: Key term definition—global brand.
75. Which of the following statements about global brands is most accurate?
A. A global brand has centrally coordinated marketing programs.
B. A global brand is marketed under different names but uses identical ads for all markets.
C. A global brand alters the product formulation or service for each geographical region.
D. A global brand delivers multiple benefits based on the GDP of each country.
E. A global brand is a collaborative effort among several different national firms.
AACSB: Diversity
Blooms: Understand
Feedback: A global brand is a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.
Global brands have the same product formulation or service concept, deliver the same benefits to consumers, and use consistent advertising across
multiple countries and cultures. Global brands are sometimes tailored to specific cultures or countries.
76. A global brand is a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.
However, adaptations of global brands are made
A. only if required by government regulations in the host market.
B. only in its initial introduction into a market and only until the brand is recognized.
C. by domestic competitors causing brand confusion.
D. only when necessary to better connect the brand to consumers in different markets.
E. when there is a serious drop in market share.
AACSB: Diversity
Blooms: Understand
Feedback: A global brand is a brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.
Global brands have the same product formulation or service concept, deliver the same benefits to consumers, and use consistent advertising across
multiple countries and cultures. Global brands are sometimes tailored to specific cultures or countries only when necessary to better connect the
brand to consumers in different markets.
77. Consumer groups living in many countries or regions of the world that have similar needs or seek similar features and benefits from products or
services are referred to as
A. transnational consumers.
B. meganational consumers.
C. international consumers.
D. multinational consumers.
E. global consumers.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global consumers.
78. Global consumers refers to

A. all potential consumers for any and all products or services regardless of cultural, ethnic, or national origins.
B. customers within a nation who consider the entire world a single marketplace.
C. consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or
services.
D. consumer groups living in many countries or regions of the world that have similar needs but seek customized features and benefits from products
or services that reflect their individual cultures.
E. multinational organizations whose products incorporate raw materials, assembly, and distribution contributions from multiple nations before they
are marketed.
6-19
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—global consumers.
79. Around the world, middle-class, youth, and elite markets that consume similar assortments of products and services, regardless of geographic
location, are referred to as
A. transnational consumers.
B. meganational consumers.
C. international consumers.
D. multinational consumers.
E. global consumers.
AACSB: Diversity
Blooms: Understand
Feedback: Global consumers consist of consumer groups living in many countries or regions of the world who have similar needs or seek similar
features and benefits from products or services. Evidence suggests the presence of a global middle-income class, a youth market, and an elite
segment, each consuming or using a common assortment of products and services, regardless of geographic location.
80. Thirteen- to nineteen-year-olds in Europe, North and South America, and the industrialized nations of Asia
A. are more similar than different regarding their purchase behaviors.
B. are becoming more similar, but still differ significantly in terms of fashion and design.
C. are rebelling against the Americanization of fashion and culture.
D. have very different tastes in fashions and music.
E. are more influenced by Asian culture than European culture.
AACSB: Diversity
Blooms: Understand
Feedback: The similarity among teens in Europe, North and South America, and the industrialized nations of Asia is greater than their differences. A
global study of middle-class teenagers' rooms in 25 industrialized countries indicated it was difficult, if not impossible, to tell where in the world the
rooms are located. See Marketing Matters in the text.
81. The appreciation of fashion and music, and a desire for novelty and trendier designs and images
A. are preferences found more in American teenagers than in most other cultures around the world.
B. actually begin at age 10, but begin to decline significantly as students enter high school.
C. ironically are found more frequently among teenagers who cannot afford to make those purchases than for those who can.
D. are preferences of teenagers around the world regardless of where they live.
E. are often established early among European teens and they typically linger well into adulthood.
AACSB: Diversity
Blooms: Understand
Feedback: Teenagers around the world appreciate fashion and music, and desire novelty and trendier designs and images. See Marketing Matters in
the text.
82. Based on a study of 6,500 teens in 26 countries, when asked what country had the most influence on their attitudes and purchase behavior, 54
percent of teens from the United States, 87 percent of those from Latin America, 80 percent of the Europeans, and 80 percent of those from Asia
named
A. the United States.
B. Japan.
C. the United Kingdom.
D. France.
E. China.
6-20
AACSB: Diversity
Blooms: Understand
Feedback: The study showed that the United States was the country that had the most influence on these teens. See Marketing Matters in the text.
83. The use of __________ as a tool for exchanging goods, services, and information on a global scale is one of the trends that has affected world
trade.
A. buying centers
B. Internet technology
C. language translators
D. tariff and quota policies
E. multinational marketing strategies
AACSB: Diversity
Blooms: Understand
Feedback: The use of Internet technology as a tool for exchanging goods, services, and information on a global scale is the fourth trend affecting
world trade.
84. Which of the following statements about the emergence of a networked global marketspace is most accurate?
A. Marketspace creates an unfair competitive environment for emerging nations.
B. More business-to-consumer marketing is done on the Internet than business-to-business marketing.
C. The most active participants in the networked global marketspace are companies in developing nations.
D. All business in the networked global marketspace is conducted in English.
E. A networked global marketspace enables the exchange of products, services, and information from sellers anywhere to buyers anywhere at any
time and at a lower cost.
AACSB: Diversity
Blooms: Understand
Feedback: The promise of a networked global marketspace is that it enables the exchange of products, services, and information from sellers
anywhere to buyers anywhere at any time and at a lower cost.
85. The clandestine collection of trade secrets or proprietary information about a company's competitors is referred to as
A. trade piracy.
B. transnational fraud.
C. economic espionage.
D. competitive duplicity.
E. transnational intelligence.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—economic espionage.
86. Economic espionage is the clandestine collection of trade secrets or

A. government economic information.
B. industrial intelligence.
C. government weapons information.
D. banking lists.
E. proprietary information about competitors.
AACSB: Diversity
Blooms: Remember
6-21
Feedback: Key term definition—economic espionage.
87. The estimated cost of economic espionage to firms in the United States is estimated to be
A. $10 billion per year.
B. $250 billion per year.
C. $750 billion per year.
D. $900 billion per year.
E. exceeding $1 trillion per year.
AACSB: Diversity
Blooms: Remember
Feedback: It is estimated that economic espionage costs U.S. firms $250 billion per year.
88. The Economic Espionage Act

A. allows the World Court in The Hague to adjudicate trade disputes on behalf of UN members and requires the home country to impose any
penalties.
B. imposes a personal fine on a convicted U.S. citizen of up to $10 million.
C. targets espionage activities that are commonplace in any industry that holds governmental contracts.
D. makes the theft of trade secrets by foreign entities a federal crime in the United States.
E. is well-intended in theory, but is virtually impossible to enforce.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—Economic Espionage Act (1996).
89. The prescribed penalty for agents of foreign governments found guilty of economic espionage is
A. up to 5 years in prison and fines up to $100,000.
B. expulsion from the WTO (World Trade Organization).
C. 25 years in prison and a $10 million fine.
D. permanent expulsion from the United States.
E. 30 years in prison and fines proportional to the damage caused.
AACSB: Diversity
Blooms: Remember
Feedback: The Economic Espionage Act (1996) makes the theft of trade secrets by foreign entities a federal crime in the United States. This act
prescribes prison sentences of up to 15 years and fines up to $500,000 for individuals. Agents of foreign governments found guilty of economic
espionage face a 25-year prison sentence and a $10 million fine.
90. Cross-cultural analysis refers to the study of

A. the subgroups within the larger, or national, culture with unique values, ideas, and attitudes.
B. the set of values, ideas, and attitudes that are learned and shared among the consumers of a country.
C. the similarities and differences among consumers in two or more nations or societies.
D. the buying behaviors within a given nation to identify similarities and differences among individuals.
E. the buying behaviors within a given nation that link a person's actions to the cultural group with which he or she identifies most.
AACSB: Diversity
Blooms: Remember
Learning Objective: 06-03 Identify the environmental forces that shape global marketing efforts.
Feedback: Key term definition—cross-cultural analysis.
6-22
91. The study of similarities and differences among consumers in two or more nations or societies is referred to as
A. market synthesis.
B. cross-cultural analysis.
C. international sociographics.
D. transnational anthropology.
E. multicultural ethnocentrism.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—cross-cultural analysis.
92. For the marketer, a thorough __________ involves an understanding of and an appreciation for the values, customs, symbols, and language of
other societies.
A. market synthesis
B. international sociographic study
C. anthropological examination
D. cross-cultural analysis
E. ethnocentrism assessment
AACSB: Diversity
Blooms: Understand
Feedback: Marketers must be sensitive to the cultural underpinnings of different societies if they are to initiate and consummate mutually beneficial
exchange relationships with global consumers. A necessary step in this process is cross-cultural analysis, which involves the study of similarities and
differences among consumers in two or more nations or societies. A thorough cross-cultural analysis involves an understanding of the values,
customs, symbols, and language of other societies.
93. A thorough cross-cultural analysis involves an understanding of and an appreciation of all of the following except which?
A. economics
B. symbols
C. values
D. languages
E. customs
AACSB: Diversity
Blooms: Understand
Feedback: A thorough cross-cultural analysis involves an understanding of and an appreciation for the values, customs, symbols, and language of
other societies.
94. Personally or socially preferable modes of conduct or states of existence that tend to persist over time are referred to as
A. customs.
B. ethics.
C. values.
D. culture.
E. beliefs.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—values.
95. Values refer to

A. personally or socially held core beliefs that are consistent within a given culture.
B. the beliefs that dictate a person's behavior, which are often derived from a religious code of conduct.
6-23
C. personally or socially preferable modes of conduct or states of existence that tend to persist over time.
D. the innate sense of what a person considers to be right or wrong in terms of his or her own conduct when dealing with others.
E. those personality traits regarding honesty and integrity that have been passed down from generation to generation.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—values.
96. The reverence that Japan shows toward its elderly is an example of that nation's
A. values.
B. beliefs.
C. customs.
D. religion.
E. cultural diversity.

Blooms: Apply
Feedback: A country's values are personally or socially preferable modes of conduct or states of existence that are enduring, such as the behavior of
one generation toward another in Japan.
97. Which of the following examples best demonstrates a company's appreciation of another country's values?
A. American companies in Germany encourage the use of all types of credit cards.
B. In Brazil, American companies are extremely careful to keep to a strict agenda and time schedule, even though an informal structure is preferred.
C. Bath products are advertised by portraying intimate scenes between husbands and wives in countries where personal privacy is important.
D. McDonald's restaurants in India sell the Maharaja Mac rather than beef products.
E. Vogue Italia published a feature with a model wearing "slave earrings," which it said were "worn by women of color during the slave trade."

Blooms: Apply
Feedback: In terms of cultural values, Germans are not comfortable with using unnecessary credit, many countries are more comfortable with a more
personalized informal structure, and some cultures are more considerate of personal privacy. Since 85 percent of the Indian population considers the
cow to be sacred, McDonald's is showing consideration for the country's values by not selling beef in India.
98. Which of the following examples best demonstrates a company's appreciation for another country's values?
A. A German company allows customers to make large purchases using layaway (paying small amounts until the item is paid for and delivered).
B. In Brazil, an appliance maintenance firm schedules service appointments allowing only 15 minutes of leeway for missed calls or no shows.
C. In Japan, a spa owner created special exercise classes for husbands and wives.
D. In India, a popular hamburger chain separated its dining area by color for people who wanted to eat beef and those who did not.
E. Calvin Klein reduced the number of outdoor advertising placements showing scantily clad models in countries with predominantly Muslim
populations.

Blooms: Apply
Feedback: Modesty is an important value within Muslim cultures, so Calvin Klein's efforts are an example of being sensitive to that value.
99. Almost all countries have some division of social class (upper, middle, and lower). The determining factor for the assignment to one of these
classes may differ from country to country. For example, in the United States, the primary determining factor is occupation; in India, it is birthright;
in China, it is geographical region and education; and in Singapore, it is income. These differences are best explained in terms of a country's
A. semiotics.
B. legal system.
C. ethnocentricity.
D. religion.
6-24
E. values.

Blooms: Apply
Feedback: A country's values are personally or socially preferable modes of conduct or states of existence that tend to persist over time.
100. What is considered normal and expected about the way people do things in a specific country is referred to as
A. morals.
B. ethics.
C. values.
D. customs.
E. beliefs.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—customs.
101. Customs refer to

A. what is considered normal and expected about the way people do things in a specific country.
B. those actions or activities within a community that are unique or distinctly different from any other group.
C. actions or behaviors that are repeated over time and carry a specific meaning to a unique group, nationality, or ethnicity.
D. traditions among a group of people, a nation, or ethnicity that affect their purchase behaviors.
E. what would be considered unusual or unexpected, and even unacceptable, about the way people do things in a specific country.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—customs.
102. In Japan, women give men chocolates on Valentine's Day. This is an example of
A. a custom.
B. a value.
C. a demographic pattern.
D. a belief.
E. an idiosyncrasy.

Blooms: Understand
Feedback: Customs are the norms and expectations about the way people do things in a specific country. Clearly customs can vary significantly from
country to country. Consider that Japanese women give Japanese men chocolates on Valentine's Day.
103. 3M Company executives were perplexed when the company's Scotch-Brite floor-cleaning product initially produced lukewarm sales in the
Philippines. A Filipino employee explained that consumers generally clean floors by pushing coconut shells around with their feet. 3M changed the
shape of the pad to a foot and sales soared. 3M changed its product in response to a Filipino
A. custom.
B. value.
C. demographic pattern.
D. belief.
E. idiosyncrasy.

Blooms: Apply
6-25
Feedback: Customs are the norms and expectations about the way people do things in a specific country. Clearly customs can vary significantly from
country to country. Since consumers in the Philippines clean floors with their feet, 3M adapted the shape of its floor-cleaning product to the custom.
104. KFC in Japan sells tempura crispy strips. In northern England, it stresses gravy and potatoes. In Thailand, it offers fresh rice. In Holland, instead
of potatoes, KFC offers customers a potato and onion croquette. In France, KFC sells pastries alongside its chicken. These examples illustrate that
KFC exhibits an appreciation for the __________ of other societies.
A. demographics
B. symbols
C. sensitivities
D. customs
E. values

Blooms: Apply
Feedback: Customs are what are considered normal and expected about the way people do things (including what they eat) in a specific country. KFC
serves food that suits the customary tastes of its target markets in each of the countries listed.
105. Which of the following statements about bribery is most accurate?

A. Bribes, kickbacks, and payoffs offered to entice someone to commit an illegal or improper act are deemed corrupt in some cultures but not in
others.
B. The world's major exporting nations have agreed to treat bribery of foreign government officials as a violation of trade agreements.
C. Bribes paid to foreign companies are in some cases a tax-deductible expense in the United States.
D. It is a crime for U.S. corporations to bribe an official of a foreign government or political party unless preapproved by the Federal Trade
Commission.
E. It is illegal for a U.S. corporation to bribe an official of a foreign government or political party to obtain or retain business in a foreign country.
AACSB: Diversity
Blooms: Understand
Feedback: Bribes, kickbacks, and payoffs offered to entice someone to commit an illegal or improper act on behalf of the giver for economic gain are
considered corrupt in any culture. The prevalence of it globally has led to an agreement among the world's major exporting nations to make bribery
of foreign government officials a criminal offense. It is illegal for a U.S. corporation to bribe an official of a foreign government or political party to
obtain or retain business in a foreign country.
106. The Foreign Corrupt Practices Act

A. makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign
country.
B. has different levels of punishment based upon the wealth of the host nation.
C. regulates only the behavior of U.S. businesses conducting business within the United States.
D. makes the theft of trade secrets by foreign entities a federal crime in the United States.
E. is a unilateral agreement the United States made with several developing nations.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—Foreign Corrupt Practices Act (1997).
107. The law, as amended by the International Anti-Dumping and Fair Competition Act, that makes it a crime for U.S. corporations to bribe an
official of a foreign government or political party to obtain or retain business in a foreign country, is referred to as the
A. International Law for Egalitarian Ethics Act.
B. International Fair Practices Act.
C. Law of International Equity Act.
D. International Law of Ethical Business Practices Act.
E. Foreign Corrupt Practices Act.
6-26
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—Foreign Corrupt Practices Act (1997).
108. Cultural symbols refer to

A. ideas that can be protected by international copyrights.
B. ideas that cannot be expressed by words or characters.
C. things that represent values that exist solely within a nation.
D. things that represent ideas and concepts.
E. words that represent pictures or designs.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—cultural symbols.
109. Because different cultures often attach different meanings to things, these representations of ideas are referred to as
A. accepted symbols.
B. cultural symbols.
C. symbolic concepts.
D. ideological representations.
E. cultural representations.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—cultural symbols.
110. A field of study that examines the correspondence between symbols and their role in the assignment of meaning for people is referred to as
A. back translation.
B. symbiotics.
C. semiotics.
D. symbolic linguistics.
E. cross-cultural analysis.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—semiotics.
111. Semiotics refers to

A. a field of study in marketing linguistics that identifies the connotative meanings behind words in order to create the most effective product or
brand names.
B. a field of study in marketing linguistics that identifies the connotative meanings behind words in order to create the most effective advertising
messages.
C. a field of study that examines the correspondence between symbols and their role in the assignment of meaning for people.
D. a field of linguistics that translates words into internationally recognized symbols to help companies carry their product message across
international boundaries.
E. the practice where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors.
AACSB: Diversity
Blooms: Remember
6-27
Feedback: Text term definition—semiotics.
112. A researcher studying the fact that in some nations black is a sign of mourning while in others white is a sign of mourning would be studying
A. semiotics.
B. semantics.
C. semaphorics.
D. cultural symbolism.
E. cultural linguistics.

Blooms: Apply
Feedback: So important is the role of symbols that a field of study, called semiotics, has emerged, which examines the correspondence between
symbols and their role in the assignment of meaning for people. The colors black and white are symbols with different meanings in different cultures.
113. By skillfully using __________, global marketers can tie positive meanings to their products, services, and brands to enhance their attractiveness
to consumers.
A. cultural symbols
B. visual icons
C. trademarks
D. brand names
E. ethnic emblems
AACSB: Diversity
Blooms: Understand
Feedback: Cultural symbols are things that represent ideas and concepts. By cleverly using cultural symbols, global marketers can tie positive
symbolism to their products, services, and brands to enhance their attractiveness to consumers.
114. Tiffany & Co. knows that Japanese are superstitious about the number four. As a result, Tiffany sells its fine glassware and china in sets of five,
not four, in Japan. Tiffany uses its knowledge of __________ to avoid connecting its products with the number four.
A. trademarks
B. visual icons
C. cultural symbols
D. brand names
E. ethnic emblems
AACSB: Diversity
Blooms: Understand
Feedback: The Japanese are superstitious about the number four, so to avoid a connection to this cultural symbol, Tiffany sells its products in sets of
five, not four.
115. The Parthenon evokes strong feelings from consumers in Greece and is referred to as the "holy rock." Coca-Cola marketers did not expect that
this __________, when used in a marketing campaign that replaced the columns with Coke bottles, would arouse such an angry response in that
country.
A. cultural symbol
B. anthropomorphic code
C. back translation
D. semantic representation
E. civil analysis
AACSB: Diversity
Blooms: Understand
6-28
Feedback: Cultural symbols are things that represent ideas and concepts in a specific culture. Symbols and symbolism play an important role in
cross-cultural analysis because different cultures attach different meanings to things.
116. Canada has two official languages, which are

A. English and Japanese.
B. English and Spanish.
C. English and French.
D. English and Italian.
E. English and German.
AACSB: Diversity
Blooms: Remember
Feedback: Canada has two official languages—English and French.
117. Even though there are hundreds of different languages and dialects, the three major languages used in global diplomacy and commerce are
A. English, Japanese, and Chinese.
B. English, French, and Spanish.
C. Japanese, Spanish, and French.
D. Japanese, Spanish, and English.
E. Spanish, English, and Chinese.
AACSB: Diversity
Blooms: Understand
Feedback: English, French, and Spanish are the principal languages used in global diplomacy and commerce. However, the best language in which to
communicate with consumers is their own.
118. The practice where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors is referred to as
A. locution.
B. heuristics.
C. transliteration.
D. back translation.
E. cross-cultural paraphrasing.
AACSB: Diversity
Blooms: Understand
Feedback: Key term definition—back translation.
119. If you were responsible for marketing communications at a company that manufactures office supplies and had to provide product literature to
be distributed in France, you would be wise to use __________, whereby you have someone translate your literature from American English into
French, and then have a second fluent French speaker translate the French into American English.
A. back talk
B. back translation
C. double talk
D. double entendre
E. double indemnity

Blooms: Apply
Feedback: Back translation is retranslating a word or phrase into the original language by a different interpreter to catch errors. By having the
literature translated into French and then back into English, you will be sure the literature conveys the intended meaning.
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120. A Tokyo shopkeeper would have been wise to use __________ to verify the accuracy of the new sign in English he purchased for his dry
cleaning business. The sign read, "Drop your pants here for best results," which he did not know had another suggestive meaning to native speakers.
A. cultural symbolism
B. dialect transformation
C. semantic analysis
D. linguistic exchange
E. back translation

Blooms: Apply
Feedback: Back translation is retranslating a word or phrase into the original language by a different interpreter to catch errors.
121. A New York car wash owner wanted to open a car wash in Quebec, Canada. He hired a U.S. translator to create signage for the new venture and
to design some simple advertising. It was not until the business was opened that he realized he should have used __________. His French signs
actually said "car bath" instead of "car wash."
A. Esperanto
B. back translation
C. semiotics
D. semantic symbolism
E. linguistic exchange

Blooms: Apply
Feedback: Back translation is retranslating a word or phrase into the original language by a different interpreter to catch errors.
122. Kit Kat bars are marketed by Nestlé worldwide. Kit Kat is pronounced "kitto katsu" in Japanese, which roughly translates to "surely win."
Japanese teens eat Kit Kat bars for good luck, particularly when taking crucial school exams. This positive result might have been missed had the
company used __________ and felt it necessary to use a name without an additional meaning.
A. intentional transliteration
B. semantic symbolism
C. back translation
D. semantic analysis
E. linguistic exchange

Blooms: Apply
Feedback: Experienced global marketers use back translation, in which a translated word or phrase is retranslated into the original language by a
different interpreter to catch errors. Nevertheless, unintended translations can produce favorable results. Consider Kit Kat bars marketed by Nestlé
worldwide. Kit Kat is pronounced "kitto katsu" in Japanese, which roughly translates to "surely win."
123. Since global marketing is affected by economic considerations, a scan of the global marketplace should include which of the following factors?
A. an analysis of cultural diversity within the country under consideration
B. regulatory constraints regarding contracts, mergers, and partnerships
C. measurement of consumer income in different countries
D. an assessment of language differences including dialect variation
E. political and ideological differences between the countries involved
AACSB: Diversity
Blooms: Understand
Feedback: A scan of the global marketplace should include (1) an assessment of the economic infrastructure in these countries, (2) measurement of
consumer income in different countries, and (3) recognition of a country's currency exchange rates.
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124. A country's communications, transportation, financial, and distribution systems are considered to be its
A. capital improvements.
B. fixed-asset base.
C. economic infrastructure.
D. geopolitical wealth.
E. asset wealth.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—economic infrastructure.
125. Economic infrastructure refers to

A. a nation's military-industrial complex.
B. a country's governmental services.
C. the people and the wealth of a nation.
D. a country's communications, transportation, financial, and distribution systems.
E. all of a country's natural resources, whether or not they are currently being exploited.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—economic infrastructure.
126. Two-thirds of the commercial transactions in Russia involve nonmonetary forms of payment due to limits in formal operating procedures among
financial institutions and even limits on the notion of private property there. These would best be described as constraints in the country's
A. capital infrastructure.
B. political infrastructure.
C. economic infrastructure.
D. geopolitical system.
E. financial exchange system.
AACSB: Diversity
Blooms: Understand
Feedback: Communications, transportation systems, financial services, as well as distribution systems contribute to a nation's economic
infrastructure.
127. In Latvia, only one six-lane highway exists, connecting Riga, its capital, with Moscow. Otherwise, the roads are two lanes and many are made
of cobblestones or bricks. This limits the speed with which deliveries can be made and requires that delivery trucks be quite small. The road network
in Latvia is an example of problems with a country's
A. capital improvements.
B. fixed-asset base.
C. geopolitical wealth.
D. asset wealth.
E. economic infrastructure.

Blooms: Apply
Feedback: Communications, transportation systems, financial services, as well as distribution systems contribute to a nation's economic
infrastructure.
128. A global marketer selling consumer products should consider what the __________ is among a country's consumers and how income is
distributed to determine a nation's purchasing power to understand the nation's purchasing power.
A. buying capacity
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B. currency exchange risk
C. tariff
D. per capita income
E. cost of living
AACSB: Diversity
Blooms: Understand
Feedback: A global marketer selling consumer products and services must consider what the average per capita or household income is among a
country's consumers and how the income is distributed to determine a nation's purchasing power.
129. A country's income distribution is important because it gives a more reliable picture of a country's ________ than just per capita income alone.
A. consumer tastes
B. taxable income
C. purchasing power
D. discretionary income
E. cost of living
AACSB: Diversity
Blooms: Understand
Feedback: A country's income distribution is important because it gives a more reliable picture of a country's purchasing power.
130. Foreign countries with very low per capita incomes may still be attractive markets for some goods. To get a more reliable picture of a country's
purchasing power, a country's __________ must also be considered.
A. total income
B. total area
C. geographical location
D. culture
E. income distribution

Blooms: Apply
Feedback: A country's income distribution is important because it gives a more reliable picture of a country's purchasing power. Generally, as the
proportion of middle-income households in a country increases, the greater a nation's purchasing capability tends to be.
131. Which of the following is an important indicator of a nation's increasing purchasing power?
A. a growing proportion of middle-income households
B. declining per capita income
C. stable household incomes
D. stable incomes for the wealthiest consumers
E. a large gap developing or persisting between top incomes and lowest incomes
AACSB: Diversity
Blooms: Understand
Feedback: Generally, as the proportion of middle-income households in a country increases, the greater a nation's purchasing capability tends to be.
132. Generally, as the proportion of middle-income households in a country increases, the nation's purchasing power
A. levels off.
B. decreases.
C. increases.
D. becomes less of an economic priority.
E. becomes progressively unstable.
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AACSB: Diversity
Blooms: Understand
Feedback: Generally, as the proportion of middle-income households in a country increases, the greater a nation's purchasing capability tends to be.
133. The price of one country's currency expressed in terms of another country's currency is referred to as the
A. balance of price.
B. currency exchange rate.
C. money conversion factor.
D. balance of payments.
E. transfer payment.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—currency exchange rate.
134. Currency exchange rate refers to

A. the unit equivalency of all international currency.
B. the ratio of a nation's basic unit of currency relative to the price of silver.
C. the ratio of a nation's basic unit of currency relative to the price of gold.
D. the price of one country's currency expressed in terms of another country's currency.
E. the unit of wealth (gold, oil, diamonds, etc.) upon which a nation bases its national currency.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—currency exchange rate.
135. Fluctuations in the __________ among the world's currencies have direct impact on the sales and profits made by global companies.
A. production costs
B. transportation
C. reciprocity
D. economic infrastructure
E. exchange rates
AACSB: Diversity
Blooms: Understand
Feedback: A currency exchange rate is the price of one country's currency expressed in terms of another country's currency, such as the U.S. dollar
expressed in Japanese yen, euros, or Swiss francs. Exchange rate fluctuations affect the sales and profits made by global companies.
136. When foreign currencies can buy more U.S. dollars,

A. U.S. products are more expensive to foreign customers.
B. U.S. products are more expensive to U.S. customers.
C. U.S. products are less expensive to foreign customers.
D. economists consider it an indicator of an impending long-term economic upturn.
E. American consumers will buy in large quantities and stockpile in fear of an impending economic crisis.
AACSB: Diversity
Blooms: Understand
Feedback: Exchange rate fluctuations affect the sales and profits made by global companies. When foreign currencies can buy more U.S. dollars,
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U.S. products are less expensive for the foreign customer.
137. Which of the following statements concerning currency exchange rates is most accurate?
A. Fluctuations in exchange rates among the world's currencies are of critical importance in global marketing.
B. Fluctuations in exchange rates among the world's currencies occur, but multinational companies are insulated from the effects because of direct
investment.
C. Exchange rate fluctuations are relatively rare, but when they occur, their effects are minimal.
D. Exchange rate fluctuations are now almost nonexistent due in great part to the stability of the euro.
E. Exchange rate fluctuations may affect the financial sector but rarely reach the consumer.
AACSB: Diversity
Blooms: Understand
Feedback: Fluctuations in exchange rates among the world's currencies are of critical importance in global marketing. Such fluctuations affect
everyone, from international tourists to global companies.
138. Chrysler Corp. wanted to sell its Jeeps in Japan. The car was priced in U.S. dollars at about $19,000, but when it reached the Japanese car
showrooms, its price was over 3,100,000 Japanese yen, and the Japanese could not afford to buy it. Its price was set without regard for the
A. balance of price.
B. currency exchange rate.
C. reciprocity price.
D. balance of payments.
E. balance of trade.

Blooms: Apply
Feedback: A currency exchange rate is the price of one country's currency expressed in terms of another country's currency.
139. Assessing the political and regulatory climate for marketing in a country or region of the world means not only identifying the current
environment but also determining how
A. it conducts its macrofinancing.
B. its citizens budget their money.
C. long a favorable or unfavorable climate will last.
D. the country's stocks are performing on the stock exchange.
E. its population ranks in size compared to other countries.
AACSB: Diversity
Blooms: Remember
Feedback: Assessing the political and regulatory climate for marketing in a country or region of the world means not only identifying the current
climate but also determining how long a favorable or unfavorable climate will last.
140. An assessment of a country's or region's political-regulatory climate includes an analysis of its political stability and
A. economic infrastructure.
B. stock market performance.
C. trade regulations.
D. cultural diversity.
E. currency exchange rates.
AACSB: Diversity
Blooms: Understand
Feedback: An assessment of a country's or region's political-regulatory climate includes an analysis of its political stability and trade regulations.
141. Trade among nations or regions depends on political stability. In recent times, billions of dollars have been lost in __________ and __________
6-34
as a result of internal political strife, terrorism, and war.
A. Russia; Poland
B. France; Spain
C. China; Japan
D. the Middle East; Africa
E. Germany; the United Kingdom
AACSB: Diversity
Blooms: Remember
Feedback: Trade among nations or regions depends on political stability. Billions of dollars in trade have been lost in the Middle East and Africa as a
result of internal political strife, terrorism, and war. Losses such as these encourage careful selection of politically stable countries and regions of the
world for trade.
142. The PRS Group maintains a website that can be used to determine
A. changing demographic and psychographic data for each country in the registry.
B. a country's political risk ratings that are useful in comparing global marketing locations.
C. the tariffs of each country and their relative effect on product and services sales.
D. the rankings of American products relative to domestic equivalents in each country.
E. changing social trends within different segments of the economy.
AACSB: Diversity
Blooms: Understand
Feedback: Marketing managers monitor political stability using a variety of measures and often track country risk ratings supplied by agencies such
as the PRS Group, Inc. PRS Group maintains multiple databases of country-specific information and projections, including country political risk
ratings for 100 countries.
143. In addition to about 11,000 trade regulations that specify how goods are to be made and marketed, Japanese car safety rules effectively require
all automobile replacement parts to be Japanese. Rules like these often function as
A. economic infrastructure.
B. trade barriers.
C. universal codes.
D. binding requirements.
E. targets for bribery.
AACSB: Diversity
Blooms: Understand
Feedback: Countries have a variety of rules that govern business practices within their borders. These rules often serve as trade barriers.
144. A firm's profit potential and control over marketing activities __________ as it moves from exporting to direct investment as a global market
entry strategy.
A. becomes more stable
B. increases
C. levels off
D. decreases
E. becomes more unpredictable
AACSB: Diversity
Blooms: Remember
Learning Objective: 06-04 Name and describe the alternative approaches companies use to enter global markets.
Topic: Market Entry Strategies
Feedback: A firm's profit potential and control over marketing activities increases as it moves from exporting to direct investment as a global market
entry strategy. But so does the firm's financial commitment, risk, marketing control, and profit potential. Firms often engage in exporting, licensing,
and joint ventures before pursuing a direct investment strategy. See Figure 6-4.
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145. Once a company has decided to enter the global marketplace, it must select a means of market entry. One of the four general options is
A. exporting.
B. accreditation.
C. countertrading.
D. cooperative.
E. franchising.
AACSB: Diversity
Blooms: Remember
Feedback: Four general options exist: (1) exporting, (2) licensing, (3) joint venture, and (4) direct investment. See Figure 6-4.
146. Once a company has decided to enter the global marketplace, it must select a means of market entry. One of the four general options is
A. franchising.
B. joint venture.
C. cooperative.
D. multiparty initiative.
E. mutual investment.
AACSB: Diversity
Blooms: Remember
Feedback: Four general options exist: (1) exporting, (2) licensing, (3) joint venture, and (4) direct investment. See Figure 6-4.
147. A global market entry strategy in which a company produces goods in one country and sells them in another country is referred to as
A. exporting.
B. direct investment.
C. countertrade.
D. licensing.
E. multinational marketing.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—exporting.
148. Exporting refers to a global market entry strategy

A. in which a company will sell its products in international markets but not in its own domestic market.
B. in which a company produces goods in one country and sells them in another country.
C. in which a company will manufacture its product in several countries at the same time using different brand names and slight product
modifications.
D. in which a company will manufacture products specifically designed for nondomestic markets, but will sell those products to distributors that take
title and resell the products to different companies around the world.
E. whereby a product is made in one country, assembled in a second country, and ultimately marketed to a third country.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—exporting.
149. What global market entry strategy allows a company to make the least number of changes in terms of its product, its organization, and even its
corporate goals?
A. exporting
B. licensing
C. joint venture
D. direct investment
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E. franchising
AACSB: Diversity
Blooms: Remember
Feedback: Exporting allows a company to make the least number of changes in terms of its product, its organization, and even its corporate goals.
150. Indirect exporting refers to

A. offering the right to a trademark, patent, trade secret, or similarly valued item of intellectual property in return for a royalty or fee.
B. selling a firm's domestically produced products in a foreign country without interference by that government.
C. contracting with a foreign firm to manufacture products according to stated specifications.
D. avoiding the use of additional parties when a firm sells its domestically produced products in another country.
E. selling a firm's domestically produced products in a foreign country through an intermediary.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—indirect exporting.
151. When a firm sells its domestically produced products in a foreign country through an intermediary, it is referred to as
A. direct exporting.
B. indirect exporting.
C. licensing.
D. franchising.
E. foreign assembly.
AACSB: Diversity
Blooms: Remember
152. In indirect exporting, a firm sells its domestically produced products in a foreign country
A. in violation of a quota.
B. without paying import tariffs.
C. without paying export duties.
D. through a joint venture.
E. through an intermediary.
AACSB: Diversity
Blooms: Remember
153. What type of exporting has the least amount of commitment and risk but will probably return the least profit?
A. direct
B. indirect
C. licensing
D. joint
E. unilateral
AACSB: Diversity
Blooms: Understand
6-37
Feedback: Indirect exporting has the least amount of commitment and risk but will probably return the least profit.
154. A small Canadian winery located in British Columbia has developed a superior wine. It has no overseas contacts but wants to get its wine on the
shelves in selected Asian and European markets where growth has been substantial in the past two years. What type of exporting option would best
suit this company?
A. direct exporting
B. licensing
C. indirect exporting
D. joint venture
E. cooperative partnership

Blooms: Apply
Feedback: Indirect exporting is ideal for a company that has no overseas contacts but wants to market abroad.
155. The U.S. motorcycle manufacturer Harley-Davidson uses intermediaries to sell its motorcycles in numerous nations outside the United States.
Harley-Davidson uses
B. licensing.
C. contract manufacturing.
D. indirect exporting.

Blooms: Apply
Feedback: Indirect exporting occurs when a firm sells its domestically produced goods in a foreign country through an intermediary.
156. U.S.-based Fran Wilson Creative Cosmetics attributes its success in Japan to a top-quality product, effective advertising, and a novel
__________ strategy, in which it uses Japanese distributors to reach beauty salons rather than department stores.
A. joint venture
B. licensing
C. franchising
D. indirect export
E. direct investment
AACSB: Diversity
Blooms: Understand
Feedback: Fran Wilson Creative Cosmetics does not sell to department stores. Rather, the company sells its Moodmatcher lipstick through a network
of Japanese distributors that reach Japan's 40,000 beauty salons—its novel indirect export strategy.
157. Direct exporting refers to

A. offering the right to a trademark, patent, trade secret, or similarly valued items of intellectual property in return for a royalty or fee.
B. contracting with a foreign firm to manufacture products according to certain specifications.
C. a foreign country and a local firm investing together to create a local business.
D. using additional parties when a firm sells its domestically produced goods in another country.
E. a firm selling its domestically produced goods in a foreign country without intermediaries.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—direct exporting.
158. What global market entry strategy involves slightly more risk than indirect exporting for a company but also opens the door to increased profits?
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A. direct exporting
B. licensing
C. cooperative
D. joint venture
E. direct investment
AACSB: Diversity
Blooms: Remember
Feedback: Direct exporting involves slightly more risk than indirect exporting for a company but also more opportunity for profit.
159. Most companies become involved in direct exporting when

A. foreign governments believe that they will benefit the most from allowing the entry of direct exports.
B. emerging markets in foreign countries become economically viable.
C. they believe their volume of sales will be sufficiently large and easy to obtain so that they do not require intermediaries.
D. the domestic market becomes saturated with competing products and services.
E. evolving technologies in foreign countries come online.
AACSB: Diversity
Blooms: Understand
Feedback: Most companies become involved in direct exporting when they believe their volume of sales will be sufficiently large and easy to obtain
so that they do not require intermediaries.
160. The prominent global market entry strategy among small- and medium-sized companies is
B. direct franchising.
C. licensing.
D. joint venture.
E. direct investment.
AACSB: Diversity
Blooms: Remember
Feedback: Direct exporting is the prominent global market entry strategy among small- and medium-sized companies. Ninety-seven percent of U.S.
firms exporting products have fewer than 500 employees but account for about 33 percent of total U.S. merchandise exports.
161. When a U.S. airplane manufacturer sells its airplanes to a company in Germany without using intermediaries, it is referred to as
C. licensing.
D. foreign manufacturing.

Blooms: Apply
Feedback: Direct exporting is when a firm sells its domestically produced goods in a foreign country without intermediaries.
162. Licensing refers to

C. when a foreign country and a local firm invest together to create a local business.
D. having a company handle its own exports directly without intermediaries.
E. exporting through an intermediary, which often has the knowledge and means to succeed in selling a firm's product abroad.
6-39
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—licensing.
163. Offering the right to a trademark, patent, trade secret, or similarly valued items of intellectual property in return for a royalty or fee is referred to
as
C. licensing.
D. contract manufacturing.
E. outside branding.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—licensing.
164. Which of the following is an advantage inherent in the use of licensing?

A. The licensor retains control of its product.
B. The licensor is protected from creating a potential competitor.
C. It provides an exemption from domestic trade regulations.
D. There is an increase in potential profit compared with direct investment.
E. The licensee gains information that can help it start with a competitive advantage.
AACSB: Diversity
Blooms: Understand
Feedback: With licensing, the advantages to the company granting the license are low risk and a capital-free entry into a foreign country. The
licensee gains information that allows it to start with a competitive advantage, and the foreign country gains employment by having the product
manufactured locally.
165. All of the following are advantages of licensing except which?

A. the foreign country gains employment by having the product manufactured locally
B. the licensee gains information that allows it to start with a competitive advantage
C. the lower risk to the company granting the license compared to direct investment
D. the licensor's ability to protect its brand name from harm
E. the capital-free entry into a foreign country
AACSB: Diversity
Blooms: Understand
Feedback: Under licensing, a company offers the right to a trademark, patent, trade secret, or other similarly valued item of intellectual property in
return for a royalty or a fee. The advantages to the company granting the license are low risk and a capital-free entry into a foreign country. The
licensee gains information that allows it to start with a competitive advantage, and the foreign country gains employment by having the product
manufactured locally. However, should the licensee prove to be a poor choice, the name or reputation of the company may be harmed.
166. Which of the following is a disadvantage associated with licensing?

A. The licensee pays lower wages and sells at lower prices.
B. The licensor may create its own competition.
C. The foreign government dislikes it because it does not increase local employment.
D. This is the most expensive and risky method for global expansion.
E. The firm's brand does not get international exposure.
AACSB: Diversity
6-40
Blooms: Understand
Feedback: There are some serious drawbacks to licensing. The licensor forgoes control of its product and reduces the potential profits gained from it.
In addition, while the relationship lasts, the licensor may be creating its own competition.
167. Which form of entry into a global market makes a firm the most vulnerable to harm regarding its brand name or reputation?
A. direct exporting
B. indirect exporting
C. licensing
E. joint venture
AACSB: Diversity
Blooms: Understand
Feedback: There are some serious drawbacks to licensing. The licensor forgoes control of its product and reduces the potential profits. In addition, it
may even be creating its own competition. Finally, should the licensee prove to be a poor choice, the brand name or reputation of the licensor may be
harmed.
168. Select Service Partner (SSP) Group has operations in 30 countries involving food and beverage establishments, often in transit hubs such as
airports and railway stations. SSP also operates Starbucks locations in airports in Finland, Sweden, and Norway. SSP pays Starbucks a royalty based
on sales, as well as a fee for each store. In these instances, Starbucks is engaged in
D. foreign assembly.
E. franchising.

Blooms: Apply
Feedback: Under licensing, a company offers the right to a trademark, patent, trade secret, or other similarly valued item of intellectual property in
return for a royalty or a fee. This is an example of franchising, which is a variation of licensing.
169. A form of low-risk and capital-free entry into international markets that includes local manufacturing is referred to as
A. indirect exporting.
B. direct ownership.
C. joint ventures.
D. licensing.
E. direct exporting.
AACSB: Diversity
Blooms: Understand
Feedback: The advantages to the company granting the license are low risk and a capital-free entry into a foreign country.
170. One variation of licensing is referred to as

A. direct investment.
B. joint ventures.
C. direct exporting.
D. franchising.
E. dual adaptation.
AACSB: Diversity
Blooms: Remember
6-41
Feedback: A variation of licensing is franchising. Franchising is one of the fastest growing market entry strategies. More than 75,000 franchises of
U.S. firms are located in countries throughout the world.
171. Yum! Brands, the restaurant division of PepsiCo, has 12,600 KFC restaurants abroad, with more than 3,700 restaurants in China. Many of the
latter are locally owned and subject to a contractual agreement that allows the owners to operate the business under the established KFC brand name
and according to specific rules. Yum! Brands is engaged in
A. contract assembly.
B. a joint venture.
D. a partnership.
E. franchising.

Blooms: Apply
Feedback: Franchising is a type of licensing.
172. Yogen Früz is a successful chain of frozen yogurt shops originating in Canada. Archeology Investments has an agreement with the Canadian
firm that grants rights to its company to open and operate Yogen Früz shops in Dubai, Oman, Qatar, Bahrain, and Kuwait. Yogen Früz is engaged in
A. dual adaptation.
B. a joint venture.
D. indirect exporting.
E. franchising.

Blooms: Apply
Feedback: Franchising is a type of licensing.
173. Joint venture refers to

C. when a foreign company and a local firm invest together to create a local business.
D. having a company handle its own exports directly, but using intermediaries for importing.
E. exporting through an intermediary, which often has the knowledge and means to succeed in selling a firm's products abroad.
AACSB: Diversity
Blooms: Remember
Feedback: Key term definition—joint venture.
174. A global market entry strategy in which a foreign company and a local firm invest together to create a local business in order to share
ownership, control, and profits of the new company is referred to as
A. licensing.
B. a joint venture.
D. contract assembly.
E. dual adaptation.
AACSB: Diversity
Blooms: Remember
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Feedback: Key term definition—joint venture.
175. PepsiCo and The Strauss Group have together formed an Israeli business to market Frito-Lay's Cheetos, Ruffles, and Doritos in Israel. This
global market entry strategy is known as
A. franchising.
B. a joint venture.
C. licensing.
D. direct investment.
E. exporting.
AACSB: Diversity
Blooms: Understand
Feedback: The Strauss Group has a joint venture with PepsiCo to market Frito-Lay's Cheetos, Doritos, and other snacks in Israel.
176. The __________ arrangement between Ericsson, a Swedish telecommunications firm, and CGCT, a French switch maker, enabled them
together to beat out AT&T for a $100 million French contract.
A. franchising
B. protectionism
C. joint venture
E. exporting
AACSB: Diversity
Blooms: Understand
Feedback: A joint venture between Ericsson, a Swedish telecommunications firm, and CGCT, a French switch maker, enabled them together to beat
out AT&T for a $100 million French contract. Ericsson's money and technology combined with CGCT's knowledge of the French market made it
possible.
177. A disadvantage of a joint venture arrangement when entering a new global market is that
A. intermediaries have the potential to harm the brand.
B. the firm entering the foreign market must pay royalties to the other firm.
C. one of the companies forgoes control over its product.
D. the two companies may disagree about policies.
E. this method is likely to provide the fewest subsidies from the host country's government.
AACSB: Diversity
Blooms: Understand
Feedback: The disadvantages arise when the two companies disagree about policies or courses of action for their joint venture or when governmental
bureaucracy bogs down the effort.
178. Starbucks and Tata Global Beverage have together formed Tata Starbucks Private Limited in order to bring Starbucks to India. The global
market entry strategy is known as
A. franchising.
B. a joint venture.
C. licensing.
E. exporting.

Blooms: Apply
Feedback: When a foreign company and a local firm invest together to create a local business, it is called a joint venture. These two companies share
the ownership, control, and profits of the new company.
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179. Direct investment in international marketing refers to
C. a national market entry strategy that entails a foreign company and a local firm investing together to create a local business.
D. having a company handle its own exports directly, without intermediaries.
E. a global market entry strategy that entails a domestic firm actually investing in and owning a foreign subsidiary or division.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—direct investment.
180. A global market entry strategy that entails a domestic firm actually investing in and owning a foreign subsidiary or division is referred to as
A. licensing.
B. local assembly.
C. a joint venture.
E. local manufacturing.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—direct investment.
181. When Nestlé actually owns a subsidiary or division in a foreign country, such as its own ice cream manufacturing operation in China, this global
market entry strategy is known as __________ and represents the greatest commitment a company can make to international sales.
A. licensing
B. local assembly
C. a joint venture
E. local manufacturing
AACSB: Diversity
Blooms: Understand
Feedback: The biggest commitment a company can make when entering the global market is direct investment, which entails a domestic firm
actually investing in and owning a foreign subsidiary or division.
182. Which form of entry into a foreign market requires the greatest commitment?
A. direct exporting
B. direct investment
C. joint venture
D. licensing
E. indirect exporting
AACSB: Diversity
Blooms: Understand
183. One advantage of direct investment when entering a new global market is that
B. the firm entering the foreign market does not have to pay royalties to the government.
C. the company forgoes control over its product.
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D. the firm gains and uses a better understanding of local market conditions.
E. this method is likely to provide the fewest subsidies from the host country's government.
AACSB: Diversity
Blooms: Understand
Feedback: The advantages to direct investment include cost savings, better understanding of local market conditions, and fewer local restrictions.
Firms entering foreign markets using direct investment believe that these advantages outweigh the financial commitments and risks involved.
184. One disadvantage of direct investment when entering a new global market is
B. the firm entering the foreign market must pay royalties to the government.
C. the company forgoes control over its product.
D. the financial commitments involved.
E. this method is likely to provide the fewest cost savings relative to the other global market entry options.
AACSB: Diversity
Blooms: Understand
Feedback: The advantages to direct investment include cost savings, better understanding of local market conditions, and fewer local restrictions.
Firms entering foreign markets using direct investment believe that these advantages outweigh the financial commitments and risks involved.
However, sometimes they don't. U.S.-based Target Stores entered Canada in 2013 only to withdraw in 2015 after sizable operating losses and an
investment of $5.7 billion.
185. Both Honda and Toyota have plants in the United States that use American labor. This illustrates Honda's and Toyota's use of
B. direct investment.
C. joint venture.
D. licensing.
E. indirect exporting.

Blooms: Apply
Feedback: Direct investment entails a domestic firm actually investing in and owning a foreign subsidiary or division. Honda and Toyota are
domestic firms (to Japan) that own a foreign (U.S.) subsidiary or division.
186. Yum! Brands, the parent company of KFC, has pursued an aggressive growth strategy in China. There are now more than 3,700 restaurants in
650 Chinese cities, and KFC has a 40 percent market share of the entire fast-food industry there. Yum! Brands China owns and directly manages
about 90 percent of its Chinese stores, so it appears that the company prefers __________ in this market.
A. licensing
B. local assembly
C. a joint venture
E. local manufacturing

Blooms: Apply
187. Global companies have five strategies for matching products and their promotion efforts to global markets. The strategy of selling virtually the
same product in other countries is referred to as
A. product adaptation.
B. product invention.
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C. brand adaptation.
D. product extension.
E. product integration.
AACSB: Diversity
Blooms: Remember
Learning Objective: 06-05 Explain the distinction between standardization and customization when companies craft worldwide marketing programs.
Topic: Alternative Marketing Mix Strategies for Global Marketing
Feedback: Text term definition—product extension. See Figure 6-5.
188. As a general rule, a product __________ strategy seems to work best when the consumer target market for the product is alike across countries
and cultures—that is, consumers share the same desires, needs, and use for the product.
A. adaptation
B. extension
C. integration
D. invention
E. customization
AACSB: Diversity
Blooms: Understand
Feedback: As a general rule, product extension seems to work best when the consumer market target for the product is alike across countries and
cultures—that is, consumers share the same desires, needs, and uses for the product. See Figure 6-5.
189. Harley-Davidson motorcycles, Gillette razors, and Nike apparel and shoes are being sold in the same form in many countries. This is an
example of which type of global marketing product and promotion strategy?
A. product customization
B. product adaptation
C. product extension
D. product integration
E. product invention

Blooms: Understand
Feedback: Harley-Davidson, Gillette, and Nike are using a product extension strategy—they are selling virtually the same product in other countries.
As a general rule, product extension seems to work best when the consumer market target for the product is alike across countries and cultures—that
is, consumers share the same desires, needs, and uses for the product. See Figure 6-5.
190. GlaxoSmithKline PLC of Great Britain makes Breathe-Right nasal strips. It sells the same product in many countries because customers all over
the world will use them in the same way. This is an example of which type of global marketing product and promotion strategy?
A. product customization
B. product extension
C. product adaptation
D. product invention
E. product integration

Blooms: Apply
Feedback: The product strategy of selling virtually the same product in other countries is a product extension strategy. As a general rule, product
extension seems to work best when the consumer market target for the product is alike across countries and cultures—that is, consumers share the
same desires, needs, and uses for the product. See Figure 6-5.
191. Global companies have five strategies for matching products and their promotion efforts to global markets. Changing a product in some way to
make it more appropriate for a country's climate or preferences is an example of which type of global marketing product and promotion strategy?
A. product extension
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B. product customization
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—product adaptation. See Figure 6-5.
192. Frito-Lay produces and markets potato chips in Russia that have seafood flavor. This is an example of which type of global marketing product
and promotion strategy?
A. product adaptation
B. product integration
C. product invention
D. product customization
E. product extension
AACSB: Diversity
Blooms: Understand
Feedback: Changing a product in some way to make it more appropriate for consumer preferences or a country's climate is a product adaptation
strategy. See Figure 6-5.
193. KFC in Japan altered the sweetness of its coleslaw to appeal to Japanese tastes. This is an example of which type of global marketing product
and promotion strategy?
B. product adaptation
C. product customization

Blooms: Apply
Feedback: Changing a product in some way to make it more appropriate for consumer preferences or a country's climate is a product adaptation
strategy. See Figure 6-5.
194. Global companies have five strategies for matching products and their promotion efforts to global markets. Designing a product to serve the
unmet needs of a foreign nation is which type of global marketing product and promotion strategy?
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—product invention. See Figure 6-5.
195. Black & Decker launched the Snake Light flexible flashlight. Created to address a global need for portable lighting, the product became a best
seller in North America, Europe, Latin America, and Australia. This is an example of which type of global marketing product and promotion
strategy?
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AACSB: Diversity
Blooms: Understand
Feedback: With product invention, companies invent totally new products designed to satisfy common needs across countries. See Figure 6-5.
196. KFC has created many offerings for its menus in China to appeal to local tastes, including the "Dragon Twister," which is a chicken wrap with
Peking-duck sauce. This is an example of which type of global marketing product and promotion strategy?

Blooms: Apply
Feedback: With product invention, companies invent totally new products designed to satisfy common needs across countries. See Figure 6-5.
197. Even though Exxon adapts its gasoline blends for different countries based on climate, the promotion message is unchanged: "Put a Tiger in
Your Tank." This type of global promotional strategy is known an
A. product extension.
B. product customization.
C. product adaptation.
D. dual adaptation.
E. dual integration.
AACSB: Analytical Thinking

Blooms: Understand
Feedback: Even though Exxon adapts its gasoline blends for different countries based on climate, the promotion message is unchanged: "Put a Tiger
in Your Tank." Changing only the product in some way to make it more appropriate for consumer preferences or a country's climate is a product
adaptation strategy. See Figure 6-5.
198. Nescafé coffee is marketed using different coffee blends and promotional campaigns to match consumer preferences in different countries. For
example, Nescafé generally emphasizes the taste, aroma, and warmth of shared moments in its advertising around the world. However, in Thailand,
Nescafé is advertised as a way to relax from the pressures of daily life. This is an example of which type of global marketing product and promotion
strategy?
D. dual adaptation
E. dual integration
AACSB: Diversity
Blooms: Understand
Feedback: A dual adaptation strategy means modifying both the products and promotion messages, which Nescafé has done in this example. See
Figure 6-5.
199. Adding to the complexity of global distribution is the need for ________, in addition to the channels within a foreign nation.
A. parallel importing
B. channels between nations
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C. communication adaptation
D. product adaptation
E. economic stability of the final consumer
AACSB: Diversity
Blooms: Understand
Feedback: Figure 6-6 outlines global distribution channels. The seller at its headquarters is the starting point and is responsible for the successful
distribution to the ultimate consumer. The second step is the seller's international marketing headquarters. The third step represents the channels
between nations. The fourth step represents the channels within a foreign nation. The final step represents the final or ultimate consumer. See Figure
6-6.
200. Consider the distribution channels through which a product manufactured in one country must travel to reach its destination in another country.
The distribution channels can be considered to have been successful when the product reaches the
A. seller.
B. channels between nations.
C. seller's international marketing headquarters.
D. final consumer.
E. channels within foreign nations.
AACSB: Diversity
Blooms: Understand
Feedback: Figure 6-6 outlines global distribution channels. While the first step involves the seller and its headquarters is the starting point, ultimately
the distribution is successful when the product line reaches the final consumer. See Figure 6-6.
201. Consider the distribution channels through which a product manufactured in one country must travel to reach its destination in another country.
Channels of distribution in global marketing are often long and complex. The availability and quality of retailers and wholesalers as well as
transportation, communication, and warehousing facilities are often determined by
A. the seller and the exporter.
B. a country's stage of economic development.
C. the seller's international marketing headquarters and the channels between nations.
D. channels between nations and the channels within the foreign nation.
E. channels within the foreign nation and the foreign retailer.
AACSB: Diversity
Blooms: Understand
Feedback: Figure 6-6 outlines global distribution channels. Distribution is of critical importance in global marketing. The availability and quality of
retailers and wholesalers as well as transportation, communication, and warehousing facilities are often determined by a country's stage of economic
development. See Figure 6-6.
202. When a firm sells a product in a foreign country below its domestic price or below its actual cost, the practice is referred to as
A. loss-leader pricing.
B. surplus marketing.
C. dumping.
D. second-market pricing.
E. entrepreneurial pricing.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—dumping.
203. In international trade, dumping refers to

A. illegally disposing of unusable or damaged goods to avoid paying removal fees and/or taxes.
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B. a firm selling damaged or unsalable goods below their original production cost.
C. a firm selling quality goods at significantly lower prices for the primary purpose of reducing inventory to make room for seasonal goods.
D. a firm selling quality goods at significantly lower prices for the primary purpose of reducing inventory to make room for newer or more expensive
models.
E. a firm selling a product in a foreign country below its domestic price or below its actual cost.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—dumping.
204. The U.S. Commerce Department imposed additional duties of 31 percent to 250 percent on imported photovoltaic products from Chinese solar
manufacturers after ruling that they sold them below cost. The Commerce Department took this action in response to what it saw as
A. tariff avoidance.
B. countertrade.
C. surplus marketing.
D. underbidding.
E. dumping.

Blooms: Apply
Feedback: A firm selling a product in a foreign country below its domestic price or below its actual cost is often accused of dumping.
205. A situation in which products are bought in a lower-priced country from a manufacturer's authorized reseller, shipped to higher-priced countries,
and then sold through unauthorized retailers below the manufacturer's suggested retail price is referred to as
A. the black market.
B. a gray market.
C. dumping.
D. a globalized market.
E. parallel exporting.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—gray market.
206. A gray market refers to

A. the segment of products specifically designed for the need of older buyers.
B. a once active and powerful market that is rapidly becoming the bottom of the barrel.
C. a situation where products are sold through unauthorized channels of distribution.
D. a pricing structure that is based upon haggling that is considered acceptable in some countries but not others.
E. the willingness of one party to accept gifts in exchange for better prices or price allowances.
AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—gray market.
207. Another term for a gray market is

A. equivalent exporting.
B. back-channel market.
C. mature marketing.
D. parallel importing.
E. transparent market.
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AACSB: Diversity
Blooms: Remember
Feedback: Text term definition—gray market or parallel importing.
208. The Japanese manufacture tractors for rice paddies. They are smaller than most U.S. tractors and perfect for a weekend farmer who wants to
tend to a small garden. The tractors are not sold in the United States through any authorized channels, yet they are available in the United States at
prices below the manufacturer's suggested retail price. These Japanese tractors are being sold
A. through the gray market.
B. under the table.
C. over the counter.
D. with bypassed global channels.
E. by breaking the distribution monopoly.

Blooms: Apply
Feedback: Gray marketing is a situation where products are bought in a lower-priced country from a manufacturer's authorized reseller, shipped to
higher-priced countries, and sold through unauthorized channels of distribution below the manufacturer's suggested retail price.
209. Before Apple's iPhone 6 was officially for sale in China, it was being sold there. These phones were purchased in the United States, Hong Kong,
and other markets, and then resold by unauthorized vendors in China for between $1,700 and $2,500. These products are considered to be part of
A. under-the-counter sales.
B. over-the-counter sales.
C. the gray market.
D. integrated global channels.
E. breaking the distribution monopoly.

Blooms: Apply
Feedback: Gray marketing is a situation where products are sold through unauthorized channels of distribution.
210. Mary Kay, Inc., can be classified as which type of company when marketing its products around the world?
A. multinational firm
B. transnational firm
C. international firm
D. global marketing firm
E. multidomestic firm
AACSB: Diversity
Blooms: Understand
Feedback: Mary Kay exhibits the structural characteristics of an international firm, one that engages in trade and marketing in different countries as
an extension of the marketing strategy in its home country. Mary Kay markets its existing products and services in other countries the same way it
does in its home country, the United States. See Video Case 7: Mary Kay, Inc.: Building a Brand in India.
211. Since 1963, the guiding principle of Mary Kay, Inc., has been based on
A. the Consumer Bill of Rights.
B. the Golden Rule.
C. caveat emptor.
D. the American Marketing Association Statement of Ethics.
E. maximizing profits so long as the firm stays within the rules.
AACSB: Diversity
6-51
Blooms: Remember
Feedback: Mary Kay Ash's founding principles were simple and time-tested, and they remain a fundamental company business philosophy. She
adopted the Golden Rule as her guiding principle, determining the best course of action in virtually any situation could be easily discerned by "doing
unto others as you would have them do unto you." See Video Case 7: Mary Kay, Inc.: Building a Brand in India.
212. What global market entry strategy did Mary Kay use when it entered India?
A. direct importing
B. licensing
C. indirect exporting
D. joint venture
E. direct exporting
AACSB: Diversity
Blooms: Understand
Feedback: Mary Kay used an exporting global market entry strategy. Specifically, the company employed direct exporting since it used no
intermediaries, relying instead on company-owned distribution centers and a direct sales force. See Video Case 7: Mary Kay, Inc.: Building a Brand
in India.
213. One global perspective on world trade views exports and imports as complementary economic flows. Explain this concept.
A country's imports affect its exports and exports affect its imports. Every nation's imports arise from the exports of other nations. As the exports of
one country increase, its national output and income rise, which in turn leads to an increase in the demand for imports. This nation's greater demand
for imports stimulates the exports of other countries. Increased demand for exports of other nations energizes their economic activity, resulting in
higher national income, which stimulates their demand for imports. In short, imports affect exports and vice versa.
AACSB: Diversity
Blooms: Understand
214. Explain the trade feedback effect.
Increased demand for exports of other nations energizes their economic activity, resulting in higher national income, which stimulates their demand
for imports. In short, imports affect exports and vice versa. This phenomenon is called the trade feedback effect and is one argument for free trade
among nations.
AACSB: Diversity
Blooms: Understand
215. Explain the concept of countertrade, and discuss its importance.
Not all trade involves the exchange of money for products or services. In a world where 70 percent of all countries do not have convertible currencies
or where government-owned enterprises lack sufficient cash or credit for imports, other means of payment are used. An estimated 10 to 15 percent of
world trade involves countertrade, the practice of using barter rather than money for making global sales.
Countertrade is popular with many Eastern European nations, Russia, and Asian countries. For example, Daimler AG agreed to sell 30 trucks to
Romania in exchange for 150 Romanian-made jeeps. Daimler then sold the jeeps in Ecuador in exchange for bananas, which it brought back to
Germany and sold to a German supermarket chain in exchange for cash. When PepsiCo entered India, the Indian government stipulated that part of
PepsiCo's local profits had to be used to purchase tomatoes. This requirement worked for PepsiCo, which also owned Pizza Hut at the time.
AACSB: Diversity
Blooms: Understand
216. Give at least one argument for and one argument against protectionism.
People who favor protectionism believe that it preserves jobs, protects a nation's political security, discourages economic dependency on other
6-52
countries, and encourages domestic industry. Those who oppose protectionism believe that it inhibits world trade and results in higher domestic
prices on goods and services produced by protected industries. While the decreased supply may raise prices, the tariffs are a virtually certain way to
do so.
AACSB: Diversity
Blooms: Understand
217. Play devil's advocate. Select any American industry and argue persuasively why protectionism is not only patriotic, it is absolutely essential for
survival.
A quality answer will provide at least three reasons (with examples) specific to the industry chosen, touching on such arguments as preserving jobs,
protecting a nation's political security, discouraging economic dependency on other countries, or encouraging domestic industry.

Blooms: Apply
218. "A signal that the world's trading nations are committed to open markets—and will resist protectionism—would inject confidence and energy
into our markets," says the Office of the U.S. Trade Representative. Discuss this statement.
This statement indicates that the U.S. Trade Representative is opposed to protectionism, believing it inhibits world trade and that it may result in
higher domestic prices on goods and services produced by protected industries. Lower prices will increase consumer buying and increased consumer
buying will increase production. Increased production will lead to more jobs, higher profits, and increased confidence.

Blooms: Apply
219. If your primary motive was to raise prices on imports, would you use tariffs or quotas? Why would you want to do this?
If your primary motive was to raise prices on imports, then your choice would be tariffs. Tariffs are government taxes on goods or services entering a
country. They help equalize price competition between foreign and domestic goods. Quotas are restrictions placed on the amount of a product that
may enter or leave a country. See Figure 6-2.
AACSB: Diversity
Blooms: Understand
Topic: Global Environmental Forces and Quotas
220. Describe the World Trade Organization (WTO) and its purpose.
The World Trade Organization (WTO) was formed in 1995 to address a broad array of world trade issues. There are 160 WTO member countries,
including the United States, which account for more than 90 percent of world trade. The WTO is a permanent institution that sets rules governing
trade between its members through panels of trade experts, who decide on trade disputes between members and issue binding decisions. The WTO
reviews more than 200 disputes annually.
AACSB: Diversity
Blooms: Understand
221. In recent years, a number of countries with similar economic goals have formed transnational trade groups or signed trade agreements for the
purpose of promoting free trade. Describe the two discussed in the textbook.
(1) In 2015 the European Union (EU) consisted of 28 countries with more than 500 million consumers. The EU has eliminated most barriers to the
free flow of products, services, capital, and labor across its borders. In addition, 16 countries have adopted the euro, eliminating the need to
continually monitor the currency exchange rate. (2) The North American Free Trade Agreement (NAFTA) lifted many trade barriers between
Canada, Mexico, and the United States and created a marketplace with more than 475 million consumers.
AACSB: Diversity
Blooms: Understand
6-53
222. Three types of companies populate and compete in the global marketplace. Identify and describe each type.
All three types of global companies employ people in different countries and many have administrative, marketing, and manufacturing operations
(often called divisions or subsidiaries) around the world. However, a firm's orientation toward and strategy for global markets and marketing defines
the type of company it is or attempts to be. The three are: (1) An international firm engages in trade and marketing in different countries as an
extension of the marketing strategy in its home country. (2) A multinational firm views the world as consisting of unique parts and markets to each
part differently. (3) A transnational firm views the world as one market and emphasizes cultural similarities across countries or universal consumer
needs more than differences.
AACSB: Diversity
Blooms: Remember
223. Identify and describe the factors a company should consider in order to do a thorough cross-cultural analysis. In your answer, define cross-
cultural analysis.
Cross-cultural analysis involves the study of similarities and differences among consumers in two or more nations or societies. A thorough analysis
should include a study of a country's values, customs, symbols, and language. Values are the personally or socially preferable modes of conduct or
states of existence that tend to persist over time. Customs are what is considered normal and expected about the way people do things in a specific
country. Cultural symbols are things that represent ideas and concepts. It is important not to assume that all symbols have a universal meaning.
Language study should include more than a literal translation; knowledge of nuances and idioms as well as an acknowledgment of dialects or
multiple national languages are important as well.
AACSB: Diversity
Blooms: Understand
224. Why is it wise for global marketers to use back translation? Provide an example to support your answer.
Back translation refers to a translated word or phrase being retranslated into the original language by a different interpreter to catch errors. This will
help prevent unintended meanings from occurring in marketing plans. Examples from the textbook of the unintended meanings of brand names are
(1) IBM's "Solution for a Small Planet" was translated in Japanese as "Answers that make people smaller" and (2) Kit Kat bars, which are marketed
by Nestlé worldwide. The brand name "Kit Kat" is pronounced "kitto katsu" in Japanese, which roughly translates to "Surely win." Japanese teens eat
Kit Kat bars for good luck, particularly when taking crucial school exams.
AACSB: Diversity
Blooms: Understand
225. Global marketing is affected by economic considerations. Identify the three steps that should be performed when scanning the global
marketplace.
A scan of the global marketplace should include (1) an assessment of the economic infrastructure in the countries, (2) measurement of consumer
income in different countries, and (3) recognition of a country's currency exchange rates.
AACSB: Diversity
Blooms: Understand
226. What is meant by the term economic infrastructure and how can this affect a firm's plans to enter a global market?
Economic infrastructure is a country's communication, transportation, financial, and distribution systems. This represents a critical consideration in a
company's determination of whether it should try to market to a country's consumers and organizations. You might have the best product in the
world, but if you are not able to physically reach your customer because the rains have washed away the roads, you will not be successful.
Communication infrastructures in countries differ. In developing countries, they may be limited or antiquated compared with that of developed
countries. Similarly, if the financial payment systems aren't developed (consumers lack credit cards; pay only in cash), exchange relationships may be
more limited.
AACSB: Diversity
Blooms: Understand
6-54
227. Define a currency exchange rate and discuss its importance to global companies.
Fluctuations in exchange rates among the world's currencies are of critical importance in global marketing. A currency exchange rate is the price of
one country's currency expressed in terms of another country's currency, such as the U.S. dollar expressed in Japanese yen, euros, or Swiss francs.
Failure to consider exchange rates when pricing products for global markets can have dire consequences if a company sets the prices for its products
without regard for how they would convert into foreign currencies. This could lead to high prices, lost sales, and forgone profits made by global
companies. When foreign currencies can buy more U.S. dollars, for example, U.S. products are less expensive for the foreign customer. Exchange
rate fluctuations in a country's currency can affect sales and profits made by global companies as well.
AACSB: Diversity
Blooms: Understand
228. What are the market entry strategy options available to a company seeking to enter the global marketplace? How do they relate to each other in
terms of profit potential, risk, financial commitment required, and marketing control?
Once a company has decided to enter the global marketplace, it may select one of four strategies: (1) exporting, which involves producing goods in
one country and selling them in another country; (2) licensing, where a company offers the right to a trademark, patent, trade secret, or other similarly
valued items of intellectual property in return for a royalty or a fee; (3) joint venture, which involves a foreign company and a local firm investing
together to create a local business; and (4) direct investment, which entails a domestic firm actually investing in and owning a foreign subsidiary or
division. The amount of financial commitment, risk, marketing control, and profit potential increases as the firm moves from exporting to direct
investment. See Figure 6-4.
AACSB: Diversity
Blooms: Understand
229. Explain the difference between indirect exporting and direct exporting. What are the advantages and disadvantages of each approach?
Indirect exporting refers to a firm selling its domestically produced goods in a foreign country through an intermediary. It has the least amount of
commitment and risk but will probably return the least profit. Indirect exporting is ideal for a company that has no overseas contacts but wants to
market abroad. The intermediary is often a distributor that has the marketing know-how and resources necessary for the effort to succeed. Direct
exporting refers to a firm selling its domestically produced goods in a foreign country without intermediaries. Direct exporting involves more risk
than indirect exporting for the company but also opens the door to increased profits. Most companies become involved in direct exporting when they
believe their volume of sales will be sufficiently large and easy to obtain so that they do not require intermediaries.
AACSB: Diversity
Blooms: Understand
230. Explain the difference between joint venture and direct investment market entry strategies. What are the advantages and disadvantages of each
approach?
When a foreign company and a local firm invest together to create a local business, it is called a joint venture. These two companies share ownership,
control, and profits of the new company. The advantages are twofold: First, one company may not have the necessary financial, physical, or
managerial resources to enter a foreign market alone. Second, a government may require or strongly encourage a joint venture before it allows a
foreign company to enter its market. The disadvantages arise when companies disagree about policies or courses of action or when governmental
bureaucracy bogs down the effort. Direct investment entails a domestic firm actually investing in and owning a foreign subsidiary or division.
Advantages include cost savings, better understanding of local market conditions, and fewer local restrictions. Disadvantages include increased
financial commitments and risks.
AACSB: Diversity
Blooms: Understand
231. Define licensing, cite its advantages and disadvantages, and explain what franchising is.
Licensing offers the right to a company trademark, patent, trade secret, or other similarly valued items of intellectual property in return for a royalty
or a fee. The advantages to the company granting the license are low risk and a capital-free entry into a foreign country. The licensee gains
6-55
information that allows it to start with a competitive advantage and the foreign country gains employment by having the product manufactured
locally. However, the licensor forgoes control of its product and reduces the potential profits gained from it. The licensor may be creating its own
competition. To offset this disadvantage, many companies strive to stay innovative so that the licensee remains dependent on them. Additionally,
should the licensee prove to be a poor choice, the name or reputation of the company may be harmed. A variation of licensing is franchising.
Franchises include soft drink, motel, retailing, fast-food, and car rental operations, and a variety of business services.
AACSB: Diversity
Blooms: Understand
232. What are the product and promotion strategies available to a company seeking to enter the global marketplace? How do they relate to each other
in terms of the same or adapted product and promotion?
There are five global marketing product and promotional strategies. (1) Sell the same home country product using the same home country promotion
in a foreign country (product extension strategy). (2) Sell the same home country product using an adapted promotion strategy in a foreign country
(communication adaptation strategy). (3) Sell an adapted home country product using the same home country promotion in a foreign country
(product adaptation strategy). (4) Sell an adapted home country product using an adapted home country promotion in a foreign country (dual
adaptation strategy). (5) Create a new product for a foreign market (product invention strategy). See Figure 6-5.
AACSB: Diversity
Blooms: Understand
233. Describe the elements in a global channel of distribution.
Figure 6-6 outlines the channel through which a product manufactured in one country must travel to reach its destination in another country. The first
step involves the seller; its headquarters is the starting point and is responsible for the successful distribution to the ultimate consumer. The next step
is the channel between two nations, moving the product from one country to another. Intermediaries that can handle this responsibility include
resident buyers in a foreign country, independent merchant wholesalers that buy and sell the product, or agents that bring buyers and sellers together.
Once the product is in the foreign nation, that country's distribution channels take over. These channels can be very long or surprisingly short,
depending on the product line. Ultimately, the products reach the final or ultimate consumer. See Figure 6-6.
AACSB: Diversity
Blooms: Understand
234. Explain the difference between dumping and parallel importing.
Dumping refers to a firm selling a product in a foreign country below its domestic price or below its actual cost. Parallel importing, also known as
gray marketing, refers to companies pricing their products very high in some countries but competitively in others. Individuals then buy products in a
lower-priced country from an authorized retailer, ship them to higher-priced countries, and sell them below the suggested retail price through
unauthorized retailers.
AACSB: Diversity
Blooms: Understand
Category # of Questions
AACSB: Analytical Thinking 1
AACSB: Diversity 188
AACSB: Ethics 1
AACSB: Knowledge Application 44
Accessibility: Keyboard Navigation 212
Blooms: Apply 45
Blooms: Remember 90
Blooms: Understand 99
Learning Objective: 06-01 Describe the nature and scope of world trade from a global perspective. 25
Learning Objective: 06-02 Identify the major trends that have influenced world trade and global marketing. 75
Learning Objective: 06-03 Identify the environmental forces that shape global marketing efforts. 60
Learning Objective: 06-04 Name and describe the alternative approaches companies use to enter global markets. 49
6-56
25
Level of Difficulty: 1 Easy 88
Level of Difficulty: 2 Medium 101
Level of Difficulty: 3 Hard 45
Topic: Alternative Marketing Mix Strategies for Global Marketing 27
Topic: Global Environmental Forces 101
Topic: Global Environmental Forces and Quotas 1
Topic: International Firm 1
Topic: Market Entry Strategies 48
Topic: Marketing Globalization 41
Topic: Trade Agreements, Monetary Unions, and International Organizations 16
6-57

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Marketing The Core 7th Edition

Kerin Test Bank

5. Which of the following countries is the world's leading exporter?

6. Which of the following countries is the world's leading importer?

Feedback: Text term definition—trade feedback effect.

10. The trade feedback effect is one argument for

11. Countertrade refers to

Feedback: Key term definition—countertrade.

Feedback: Key term definition—countertrade.

Feedback: Text term definition—gross domestic product.

17. Gross domestic product refers to

Feedback: Text term definition—gross domestic product.

18. The balance of trade is the

Feedback: Key term definition—balance of trade.

19. When a country's exports exceed its imports,

Feedback: Key term definition—protectionism.

26. Arguments in favor of protectionism include that it

AACSB: Knowledge Application

Feedback: Key term definition—tariffs.

30. Tariffs refer to

Feedback: Key term definition—tariffs.

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

38. A quota refers to

Feedback: Key term definition—quota.

AACSB: Knowledge Application

AACSB: Knowledge Application

Feedback: Key term definition—World Trade Organization (WTO).

Feedback: Key term definition—World Trade Organization (WTO).

51. The EU has benefited firms in its member nations because

Feedback: Key term definition—global competition.

55. Global competition exists when

Feedback: Key term definition—global competition.

AACSB: Knowledge Application

Feedback: Text term definition—divisions or subsidiaries.

Feedback: Text term definition—international firm.

AACSB: Knowledge Application

Feedback: Text term definition—multinational firm.

64. A multidomestic marketing strategy refers to

Feedback: Key term definition—multidomestic marketing strategy.

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

Feedback: Text term definition—transnational firm.

Feedback: Key term definition—global marketing strategy.

71. A global marketing strategy refers to

Feedback: Key term definition—global marketing strategy.

Feedback: Key term definition—global brand.

74. A global brand refers to

Feedback: Key term definition—global brand.

Feedback: Key term definition—global consumers.

78. Global consumers refers to

Feedback: Key term definition—global consumers.

Feedback: Key term definition—economic espionage.

86. Economic espionage is the clandestine collection of trade secrets or

Feedback: Key term definition—economic espionage.

88. The Economic Espionage Act

Feedback: Text term definition—Economic Espionage Act (1996).

90. Cross-cultural analysis refers to the study of

Feedback: Key term definition—cross-cultural analysis.

Feedback: Key term definition—cross-cultural analysis.

Feedback: Key term definition—values.