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Chapter 5—Developing a Global Vision
TRUE/FALSE
1. Having a global vision means management recognizes and reacts to international marketing
opportunities, uses effective global marketing strategies, and is aware of threats from foreign
competitors in all markets.
ANS: T PTS: 1 REF: 133 OBJ: 05-1

TOP: AACSB Reflective Thinking KEY: CB&E Model International Perspective
MSC: BLOOMS Level I Knowledge
2. Global trade has climbed to about $200 billion a year.
ANS: F
Over the past two decades, global trade has climbed from $200 billion a year to $12.5 trillion in 2009.
PTS: 1 REF: 133 OBJ: 05-1 TOP: AACSB Reflective Thinking

KEY: CB&E Model International Perspective
MSC: BLOOMS Level II Comprehension
3. About 85 percent of U.S. companies export their products to other countries on a regular basis.
ANS: F
About 85 percent of all U.S. exports of manufactured goods are shipped by 250 companies; less than
10 percent of all manufacturing businesses export their goods on a regular basis.

4. The falling U.S. dollar makes the possibility of manufacturing in the United States more attractive than
in the past.

MSC: BLOOMS Level IV Analysis
5. Globalization deserves credit for helping lift many nations out of poverty and for improving standards
of living of low-wage families.

6. Multinational companies typically begin the development of their global business with direct
investment and continue using this strategy throughout the company's life span.
ANS: F
Multinational companies typically go through at least three stages in the development of their global
business. High-tech businesses typically have four stages of development.

KEY: CB&E Model International Perspective | CB&E Model Strategy
7. If a country’s currency appreciates, more of that currency will be needed to buy another country’s
currency.
ANS: F
If a country’s currency appreciates, less of that currency is needed to buy another country’s currency.

8. The price of one country’s currency in terms of another country’s currency is called the conversion
price.
ANS: F
It is called the exchange rate.

9. Global marketing standardization presumes that the markets throughout the world are becoming more
alike.

10. The same environmental factors that operate in the domestic market also exist internationally. These
factors (culture, economic, political structure and actions, demographic makeup, and natural resources)
should be examined regardless of the country.

11. In general, average family incomes are higher in more developed countries than in the less developed
countries.

12. While some countries have elements of both capitalism and socialism, most nations are at one political
extreme or the other.
ANS: F
Rarely will a political environment be at one extreme or the other. Rather, elements of many systems
are often present.

13. According to research done by the World Bank, countries with the greatest amount of business
regulation foster the strongest economies.
ANS: F
Those with the least amount of business regulation foster the strongest economies.

14. The U.S. government limits the amount of sugar cane that is imported into the country. This is an
example of a tariff.
ANS: F
This is an example of a quota—a limit on the amount of a specific product that can enter a country.

MSC: BLOOMS Level III Application
15. The U.S. government prohibits the importation of Havana cigars because of political differences with
Cuba. This is an example of a boycott.

16. The Uruguay Round of trade negotiations dramatically increased trade barriers worldwide.
ANS: F
It lowered trade barriers.

17. NAFTA is the New American Foreign Trade Amendment, which allows for balanced trade with the
European Union (EU).
ANS: F
NAFTA is the North American Free Trade Agreement, which creates a free-trade zone among Canada,
the United States, and Mexico.

18. The European Union Commission and the courts have come under widespread criticism for “rubber-
stamping” or approving most business deals involving U.S. multinationals.
ANS: F
In fact, the European Union Commission and the courts have not always been kind to U.S.
multinationals.
PTS: 1 REF: 151-152 OBJ: 05-3 TOP: AACSB Reflective Thinking

19. The Group of Twenty is the largest free trade agreement in the world.
ANS: F
The Group of Twenty is a forum for international economic development that promotes discussion
between industrial and emerging-market countries on key issues in the global economy.

20. Even though it is not actively involved in global marketing, Hennessey Enterprises, a U.S.-based
business, agreed to sell two thousand of its stress-reducing products to a distribution company in
Norway. This would be an example of direct investment.
ANS: F
This is an example of exporting.

21. Licensing agreements reduce the risk for manufacturers and sometimes even remove the requirement
for a manufacturer to produce its own product.
TOP: AACSB Reflective Thinking
22. Private-label manufacturing by a foreign country is called franchising.
ANS: F
It is called contract manufacturing.

23. U.S.-based Procter & Gamble and Italian-based Fater agreed to produce and market diapers for the
European market. This is an example of a joint venture.

TOP: AACSB Reflective Thinking
24. The form of global organization that provides the highest potential for return on investment as well as
the highest level of risk is contract manufacturing.
ANS: F
Direct foreign investment carries the highest risk level and the greatest potential return on investment.

25. Global marketing research is not any more difficult than domestic marketing research.
ANS: F
Global marketing research is conducted in vastly different environments and can be very difficult in
developing countries.
PTS: 1 REF: 162 OBJ: 05-5 TOP: AACSB Diversity

KEY: CB&E Model Research | CB&E Model International Perspective
MSC: BLOOMS Level VI Evaluation
26. Suppose a Chinese firm makes computer chips at $4.00 per chip but sells the chips for $2.00 in
American markets. American producers of computer chips cannot supply chips at the low rates that the
Chinese firm is supplying them. The Chinese firm is engaging in dumping.

TOP: AACSB Diversity
27. In the context of global marketing, product invention can be taken to mean either creating a new
product for a market or drastically changing an existing product.
TOP: AACSB Diversity
28. Marketers typically target lower-income consumers when they enter global markets.
ANS: F
Though some firms are finding profitable opportunities by serving the poor, marketers have
traditionally targeted the middle- to upper-income consumers when they have entered global markets.

29. The rules, regulations, and habits used for brick-and-mortar stores tend to restrain and limit the success
of those retailers engaged in e-commerce.

TOP: AACSB Technology
KEY: CB&E Model Online/Computer | CB&E Model International Perspective
MULTIPLE CHOICE
1. Individuals and organizations utilizing a global vision to effectively market goods and services across
the world are engaged in:
a. international selling schemes
b. borderless commerce
c. global marketing standardization
d. global logistics
e. global marketing
ANS: E
Global marketing targets markets throughout the world.

2. Basketball is played nearly everywhere in the world and is an easily understood sport. The National
Basketball Association (NBA) finals reached more than 600 million televisions in 195 countries. From
this information, you should be able to infer that the NBA is:
a. developing international selling schemes
b. implementing standard international marketing
c. implementing global marketing standardization
d. supplementing its foreign vision
e. practicing global marketing
ANS: E PTS: 1 REF: 133 OBJ: 05-1
3. All of the following statements about global marketing are true EXCEPT:
a. Marketing to target markets throughout the world has become an imperative for business.
b. Often a U.S. firm's toughest domestic competition comes from foreign companies.
c. Marketing managers must develop a global vision not only to recognize and react to
international marketing opportunities but also to remain competitive at home.
d. Adopting a global vision can be lucrative for a company, and global marketing can offset
weak domestic performance.
e. Foreign competitors have not gained significant market share in the U.S.
ANS: E
Many U.S. businesses have lost significant market share to imported products.

4. Sawyer Components manufactures high-cost, customized roller parts for paper mills and is expanding
into China because of the opportunity for significant growth in this developing country. The owner
uses effective global strategies and is aware of threats from foreign competitors. This illustrates that
the owner has a global:
a. advantage
b. imperative
c. vision
d. outsource
e. introspection
ANS: C
A global vision is recognizing and reacting to international marketing opportunities.

5. H. J. Heinz, the ketchup company, gets over half of its revenue from international sales. This shows
that:
a. U.S. citizens are using less ketchup
b. their market share should increase
c. Heinz needs to abandon the U.S. market
d. sales need to be increased domestically
e. adopting a global vision can pay off
ANS: E
Adopting a global vision can be very lucrative to a company.

6. Which of the following statements about the impact of international business on the U.S. economy is
NOT true?
a. America exports over $1.7 trillion in goods and services each year.
b. Almost one-third of U.S. corporate profits come from international trade and foreign
investment.
c. Every U.S. state has realized net employment gains directly attributed to foreign trade.
d. Exports create jobs for over 50 million Americans.
e. The U.S. exports about 20 percent of its industrial production.
ANS: D
Exports create jobs for over 10 million Americans.

7. The total market value of all final goods and services produced in a country for a given time period is
called:
a. the exchange rate
b. gross domestic product (GDP)
c. the trade balance
d. gross national product (GNP)
e. gross operating surplus (GOS)
ANS: B
This is the definition of gross domestic product.

8. The primary reason large U.S. companies send U.S. jobs abroad is because labor costs are higher here
in the United States. They are engaging in _____.
a. outsourcing
b. global trade
c. multinational employee searches
d. employee export
e. global employment
ANS: A
Job outsourcing is sending U.S. jobs abroad.

9. Many people fear world trade because it:

a. will inevitably lead to inflation
b. will cause living standards to increase at a slower rate
c. causes some people to lose their jobs as production shifts abroad
d. has brought entire nations out of poverty
e. has increased per capita income for some countries
ANS: C
Global competition and cheap imports help keep inflation down, and world trade has caused the
standards of living for many countries to increase at a faster rate. The other options describe
advantages.

10. Which of the following factors make the possibility of manufacturing in the United States more
attractive than in the past?
a. Wages in China are rising 10 to 15 percent a year.
b. In recent years, the value of the U.S. dollar has fallen against the Chinese yuan.
c. Shipping costs have risen dramatically across the globe.
d. All of the above.
e. None of the above.
ANS: D
All of these factors make the possibility of manufacturing in the U.S. more attractive than in the past.

11. Globalization:
a. relies on strong government regulations to keep down prices
b. promotes economic freedom and increases living standards
c. tends to dry up the flow of foreign capital in less developed countries
d. has made it easier for governments to abuse the freedom and property of their citizens
e. has kept wages low in developing countries around the world
ANS: B
Globalization expands economic freedom, spurs competition, and raises the productivity and living
standards of people in countries that open themselves up to the global marketplace.

12. A(n) _____ is a company that is heavily engaged in international trade and moves its resources, goods,
services, and skills across national boundaries.
a. international facilitator
b. global trader
c. multinational corporation
d. exporting company
e. international merchant
ANS: C
A multinational corporation is a company that is heavily engaged in international trade, beyond
exporting and importing.

13. When European demand for a certain solvent declined, Dow Chemical instructed its German plant to
switch to manufacturing a chemical that had been imported from Louisiana and Texas. Dow Chemical
would be best described as a(n):
a. global enterprise
b. global trader
c. cultural marketer
e. multinational corporation
ANS: E
A company that is heavily engaged in global trade and moves resources, goods, services, and skills
across national boundaries is called a multinational corporation.

14. Apple Inc. has partnerships with wireless carriers in Japan, Spain and a handful of other European
countries. Apple Inc works with suppliers and retailers worldwide. This means that Apple is a:
a. multinational corporation
b. worldwide competitor
c. marketplace competitor
d. domestic corporation
e. foreign investor
ANS: A
Multinational corporations are heavily engaged in international trade beyond exporting and importing.

15. Otis Elevators has entered into a strategic alliance with a company in France from which it gets its
elevator door systems. It has a similar agreement with a manufacturer in Japan that provides it with
special motor drives. A manufacturer in Spain has worked closely with Otis to create small geared
parts necessary for the manufacture of elevators. The component parts are assembled at its plant in the
United States. Otis elevators can be found in buildings all over the world. Otis Elevators is an example
of a(n):
a. cultural marketer
b. global trader
c. multinational corporation
e. global enterprise
ANS: C
Otis Elevators is heavily engaged in international trade beyond exporting and importing.

16. Which of the following statements about multinational firms is true?

a. Multinationals typically do not change their methods of reaching their global markets if
they are successful with their initial strategy.
b. Multinationals are defined as companies heavily engaged in exporting and importing.
c. All multinationals must enter the fourth stage of globalization before they are fully
internationalized.
d. Multinationals often develop their global businesses in stages.
e. The five stages of globalization closely mirror the five stages of the product life cycle.
ANS: D
Multinationals can go through up to four stages in their quest to globalize their business. Generally,
only high-tech firms ever reach the fourth stage. Multinationals are companies that heavily engage in
international trade, beyond exporting and importing.
17. The Patton Awning company produces tents, tarps, awning, and other canvas products. The firm is in
stage one of creating its global business. This means that they:
a. operate in one country and sell to others
b. have set up a foreign subsidiary
c. operate an entire line of business in another country
d. have top executives and core corporate functions in different countries
e. they operate in every country in the world
ANS: A
Stage one is where companies operate in one country and sell to other countries.

18. Defeet International creates its apparel in North Carolina and sells it domestically and abroad. The
company is in which stage of global business?
a. Stage one
b. Stage two
c. Stage three
d. Stage four
e. Stage five
ANS: A
Defeet is in stage one where they are creating the product in one country, the U.S, and sell to other
countries.

19. In which stage do multicultural companies operate when they set up foreign subsidiaries to handle
sales in one country?
a. Stage one
b. Stage two
c. Stage three
d. Stage four
e. Stage five
ANS: B
Stage two is characterized by a multinational company setting up foreign subsidiaries to handle sales
in one country.

20. Cooley Manufacturing is a multinational company selling plumbing components around the world.
This company has progressed to the point that it operates an entire of line of business in several other
countries. Which stage of multinational business does this represent?
a. Stage one
b. Stage two
c. Stage three
d. Stage four
e. Stage five
ANS: C
Stage three is characterized by operating an entire line of business in another country.

21. Which of the following is a criticism of multinational corporations?

a. Multinationals sometimes support reactionary and oppressive regimes.
b. Multinationals require excessive employment information.
c. Multinationals often engage in countertrading.
d. Multinationalism is responsible for the transference of labor-intensive technology.
e. Multinationals do not do enough to standardize their marketing mixes.
ANS: A
Multinationals sometimes support reactionary and oppressive regimes if it is in their best interests to
do so.

22. A company that is capital-intensive:

a. has an altered fiscal strategy for overseas operations
b. spends more on equipment than on labor
c. makes better use of benchmarking than other types of business
d. creates employment monopolies
e. must engage in countertrading due to restrictive foreign legislature
ANS: B
A capital-intensive means the company spends more for equipment than for labor and is a criticism of
multinational companies because it does need a significant labor force.

KEY: CB&E Model Strategy MSC: BLOOMS Level I Knowledge
23. Suppose three months ago the dollar price of a yen was $0.012. Today the dollar price of one yen is
$0.018. If you are in the market for a brand new Honda automobile today, you will find that:
a. the price of the auto will be much less than it was three months ago
b. you will have trouble purchasing an auto because the dealership cannot keep up with the
high demand
c. it will be impossible to obtain financing for the new auto
d. you will have to pay more for the auto than you would have paid three months ago
e. the trade-in value of your old vehicle will be much less than it would have been three
months ago
ANS: C
If a country’s currency depreciates, more of that currency will be needed to buy another country’s
currency. As the dollar depreciates, the price of foreign goods rise for U.S. residents.
24. With a _____, a firm produces standardized products to be sold the same way all over the world.
a. traditional marketing strategy
b. global marketing standardization approach
c. product extension approach
d. culturally based marketing strategy
e. synergistic approach to marketing
ANS: B
Global marketing standardization is the production of uniform products that can be sold the same way
all over the world.

25. Global marketing standardization:

a. is becoming less popular with the large multinationals
b. encourages product, packaging, and advertising variations for each nation or local market
c. actually raises production costs
d. presumes markets throughout the world are becoming more alike
e. is more popular with consumer products than with industrial goods
ANS: D
With a global marketing standardization approach, a firm produces standardized products to be sold
the same way worldwide. This approach assumes all customers have the same needs and wants.

26. The Victorinox Swiss Army Knife is found all over the world. It is manufactured and marketed
similarly to all consumers. Victorinox uses a(n):
a. ethnocentric strategy
b. global marketing standardization approach
c. synergistic approach to globalization
d. cultural marketing strategy
e. traditional approach to marketing
ANS: B
Global standardization produces uniform products that can be sold the same way all over the world.

27. When multinational firms enable individual subsidiaries to compete independently in domestic
nations, they are engaged in:
a. global marketing standardization
b. multidomestic strategy
c. product extension
d. technological receptivity
e. marketing hegemony
ANS: B
A multidomestic strategy is how multinational firms use strategic business units.
PTS: 1 REF: 141 OBJ: 05-2 TOP: AACSB Analytic

28. A business thinking of expanding into global markets needs to examine all of the following external
environments EXCEPT:
a. culture
b. political structure and actions
c. its marketing mix
d. natural resources
e. demographic makeup
ANS: C
The marketing mix is the keystone of a company's internal environment.

29. Central to any society is a common set of values shared by its citizens that determines what is socially
acceptable. Marketers refer to these values collectively as a country's:
a. ethical system
b. culture
c. ethnocentrism
d. national personality
e. socialization
ANS: B
This is definition of culture.

KEY: CB&E Model Customer MSC: BLOOMS Level I Knowledge
30. A soft drink manufacturer who was thinking of investing in a bottling plant in the Czech Republic
should know the nation is proud of the fact it is among the world's biggest beer drinkers. Czechs
consume an average of one-half liter of beer a day for every man, woman, and child in the country.
The _____ environment of this country could very easily prevent the soft drink bottling company from
succeeding.
a. demographic
b. economic
c. cultural
d. political
e. technological
ANS: C
Culture influences product preferences.

KEY: CB&E Model International Perspective | CB&E Model Customer
31. Muslim countries are receptive to most Disney products, but they have asked Disney not to include
Piglet when it sells its Winnie the Pooh characters because Muslims (as a part of their religious beliefs)
contend that pork in any form is unclean. This is an example of a _____ factor that directly affects
Disney's global operation.
a. political structure
b. cultural
c. technological
d. competitive
e. natural resource
ANS: B
Religious beliefs are part of the cultural environment.

32. Which of the following is an important cultural factor that should be considered by global marketers?
a. Competitive synergy
b. Language
c. Natural resources
d. Technology sensitivity
e. Level of economic development
ANS: B
Language is an important aspect of culture that can create problems for marketers.

33. American firms should never try to do business in Europe in August because they will find that
everyone has gone on vacation. Today, all European countries have laws requiring companies to
provide employees with vacations of at least four to five weeks. This would be an important part of the
European _____ environment that any multinational firm doing business there needs to be aware of.
a. cultural
b. political
c. economic
d. technological
e. natural
ANS: A
Holidays and vacation time are determined by cultures.

34. When IKEA, the Swedish home furnishings retailer, first entered the Japanese market, it failed. It was
more successful in its second try because it was aware of the need to adapt its furnishings to fit the
smaller Japanese homes. The _____ environment had the greatest influence on IKEA's first failure in
Japan.
a. demographic
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Chapter 5—Developing a Global Vision

ANS: T PTS: 1 REF: 133 OBJ: 05-1

2. Global trade has climbed to about $200 billion a year.

PTS: 1 REF: 133 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 135 OBJ: 05-1 TOP: AACSB Reflective Thinking

ANS: T PTS: 1 REF: 136 OBJ: 05-1

ANS: T PTS: 1 REF: 137 OBJ: 05-1

PTS: 1 REF: 138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 140 OBJ: 05-2 TOP: AACSB Reflective Thinking

It is called the exchange rate.

PTS: 1 REF: 141 OBJ: 05-2 TOP: AACSB Reflective Thinking

ANS: T PTS: 1 REF: 141 OBJ: 05-2

ANS: T PTS: 1 REF: 142 OBJ: 05-3

ANS: T PTS: 1 REF: 144 OBJ: 05-3

PTS: 1 REF: 146 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 146 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 147 OBJ: 05-3 TOP: AACSB Reflective Thinking

ANS: T PTS: 1 REF: 147 OBJ: 05-3

PTS: 1 REF: 148 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 149 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 151-152 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 153 OBJ: 05-3 TOP: AACSB Reflective Thinking

PTS: 1 REF: 156 OBJ: 05-4 TOP: AACSB Reflective Thinking

22. Private-label manufacturing by a foreign country is called franchising.

PTS: 1 REF: 159 OBJ: 05-4 TOP: AACSB Reflective Thinking

ANS: T PTS: 1 REF: 161 OBJ: 05-4

PTS: 1 REF: 161 OBJ: 05-4 TOP: AACSB Reflective Thinking

PTS: 1 REF: 162 OBJ: 05-5 TOP: AACSB Diversity

ANS: T PTS: 1 REF: 162 OBJ: 05-5

PTS: 1 REF: 164 OBJ: 05-5 TOP: AACSB Diversity

ANS: T PTS: 1 REF: 170 OBJ: 05-6

PTS: 1 REF: 133 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 133-134 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 133 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 134 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 134-135 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 135 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 135 OBJ: 05-1 TOP: AACSB Reflective Thinking

9. Many people fear world trade because it:

PTS: 1 REF: 135-136 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 136 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 136-137 OBJ: 05-1 TOP: AACSB Reflective Thinking

PTS: 1 REF: 137 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 137-138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 137-138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 137-138 OBJ: 05-2 TOP: AACSB Reflective Thinking

16. Which of the following statements about multinational firms is true?

PTS: 1 REF: 138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 138 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 138 OBJ: 05-2 TOP: AACSB Reflective Thinking

21. Which of the following is a criticism of multinational corporations?

PTS: 1 REF: 139 OBJ: 05-2 TOP: AACSB Reflective Thinking

22. A company that is capital-intensive:

PTS: 1 REF: 139 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 140 OBJ: 05-2 TOP: AACSB Reflective Thinking

25. Global marketing standardization:

PTS: 1 REF: 141 OBJ: 05-2 TOP: AACSB Reflective Thinking

PTS: 1 REF: 141 OBJ: 05-2 TOP: AACSB Reflective Thinking