Wild Ib9 Tif 12

International Business: The Challenges of Globalization, 9e, Global Edition (Wild)
Chapter 12 Analyzing International Opportunities
1) Which of the following is not one of the three steps in increasing market share, revenue, and
profits?
A) assess alternative markets
B) evaluate respective costs, benefits, and risks
C) perform a situation analysis
D) select market with most potential for entry or expansion
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
2) The first step in the screening process for potential markets and sites is to ________.
A) select a favorable market or site
B) measure the market or site potential
C) identify the basic appeal of a market
D) assess the national business environment
Answer: C
Skill: Concept
Difficulty: Easy
3) Which of the following steps of the market screening process involves examining the cost of
transporting goods?
A) identification of basic appeal of a market
B) assessment of the national business environment
C) measurement of market or site potential
D) selection of the market or site
Answer: B
Skill: Concept
Difficulty: Easy
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4) Which of the following steps of the market screening process involves the analysis of the
quality of workforce, materials, and infrastructure?
Answer: C
Skill: Concept
Difficulty: Easy
5) Countries differ significantly in their cultures, politics, laws, and economies. International
managers must work to understand these differences and to incorporate their understanding into
market- and site-selection decisions. Which of the following steps of the market screening
process involves an evaluation of the government bureaucracy?
Answer: B
Skill: Concept
Difficulty: Easy
6) Which of the following is a characteristic of foreign direct investment?

A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management
Answer: C
Skill: Concept
7) The key element of political risk of greatest concern for global companies is ________.
A) the cost of transporting materials and goods
B) government regulation, government bureaucracy, and political stability
C) currency and liquidity problems
D) letting past political events blind future opportunities
Answer: B
Skill: Concept
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8) A type of risk faced by businesses that decisions made by the government, events, or
conditions will significantly affect the profitability of a business is known as ________.
A) volatility risk
B) systemic risk
C) political risk
D) credit risk
Answer: C
Skill: Concept
Difficulty: Easy
9) Which of the following is a characteristic of foreign direct investment?

A) relatively low financial investment
B) low exposure to political risk
C) high profit potential
D) simple management
Answer: C
Skill: Concept
Difficulty: Easy
10) Which of the following steps of the screening process for potential markets involves the
evaluation of fiscal and monetary policies of a nation?
B) measurement of market or site potential
C) assessment of the national business environment
Answer: C
Skill: Concept
Difficulty: Easy
11) Which of the following steps of the market screening process examines the effects of country
image on market-entry decisions?
Answer: C
Skill: Concept
Difficulty: Easy
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12) Which of the following is most likely to be caused by poor fiscal and monetary policies of a
nation's central bank?
A) increasing levels of productivity
B) decreasing budget deficits
C) appreciating currency
D) high rates of inflation
Answer: D
Skill: Concept
13) ________ refers to the continuous monitoring of events in other locations keeps managers
aware of potential business opportunities and threats.
A) Operations research
B) Logistics
C) Warehousing
D) Environmental scanning
Answer: D
Skill: Concept
Difficulty: Easy
14) Which of the following statements is true about country image and its effects on global
companies?
A) It embodies all important facets of a nation's business environment.
B) If a country's image is positive in one product class, it tends to be positive in all other product
classes as well.
C) An image, once formed, seldom changes over time.
D) Products made in emerging countries are evaluated more positively than products made in
developed countries.
Answer: A
AACSB: Analytical thinking
Skill: Concept
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15) ________ is the most common form of international business activity.
A) Exporting
B) Licensing
C) Greenfield strategy
D) Management contract
Answer: A
Skill: Concept
Difficulty: Easy
16) Which of the following is a characteristic of exporting?

A) high financial exposure
B) rapid market entry
C) logistical simplicity
D) local market knowledge
Answer: D
Skill: Concept
Difficulty: Easy
Scenario: Chong's Analysis of International Markets

John Chong is an inexperienced entrepreneur in global business. He wants to sell his product,
Zulu doll, a toy for kids below the age of eight, in every corner of the world. He wants to
examine all potential markets but wants to keep his costs low. John has asked you to explain a
few things about analyzing international markets.
17) When screening a potential market, which of the following would you advise John to do
first?
A) assess the national business environment
B) select the market
C) identify basic appeal for markets
D) measure market potential
Answer: C
Skill: Application
Difficulty: Hard
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18) Which stage of the market-screening process is John involved in, while examining
government regulations and bureaucracy in a market?
A) assessment of the national business environment
B) selection of the market
C) identification of the basic appeal for markets
D) measurement of market potential
Answer: A
Skill: Application
Difficulty: Hard
19) Which step of the market-screening process involves determining the income elasticity of the
Zulu doll?
A) select the market or site
D) measure market or site potential
Answer: D
Skill: Application
Difficulty: Hard
20) The first step in identifying potential markets is to assess the basic demand for a product.
Answer: TRUE
Skill: Concept
Difficulty: Easy
21) Companies that require particular resources to carry out local business activities must be sure
they are available.
Answer: TRUE
Skill: Concept
Difficulty: Easy
22) A country's climate plays an important role in determining the basic demand for a company's
product.
Answer: TRUE
Skill: Concept
Difficulty: Easy
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23) Cultural elements do not have any influence what kinds of products are sold and how they
are sold in a country.
Answer: FALSE
AACSB: Diverse and multicultural work environments
Skill: Concept
24) Consumer products such as toothpaste and soft drinks undergo extensive adaptation to suit
local preferences.
Answer: FALSE
Skill: Concept
25) Governments bar international companies from entering economic sectors like energy
exploration for security reasons.
Answer: TRUE
Skill: Concept
26) Government regulations can quickly eliminate a market or site from further consideration.
Answer: TRUE
Skill: Concept
27) Stable currency values make it easier for firms to predict future earnings accurately in terms
of the home-country currency.
Answer: TRUE
Skill: Concept
28) Products made in emerging countries tend to be evaluated more positively than those from
relatively more developed countries.
Answer: FALSE
Skill: Concept
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29) Companies usually modify or adapt elements of their marketing plan to be used in different
markets in which they sell their products.
Answer: TRUE
Skill: Concept
30) Briefly discuss the important political and legal forces that should be analyzed in the
market/site screening process.
Answer: Political and legal forces also influence the market and site-location decision.
Important factors include government regulation, government bureaucracy, and political
stability.
A nation's culture, history, and current events cause differences in attitudes toward trade and
investment. Some governments take a strong nationalistic stance, whereas others are quite
receptive to international trade and investment. A government's attitude toward trade and
investment is reflected in the quantity and types of restrictions it places on imports, exports, and
investment in its country.
Government regulations can quickly eliminate a market or site from further consideration. First
of all, they can create investment barriers to ensure domestic control of a company or industry.
One way in which a government can accomplish this is by imposing investment rules on matters
such as business ownership—for example, forcing foreign companies into joint ventures.
Governments can extend investment rules to bar international companies entirely from
competing in certain sectors of the domestic economy. The practice is usually defended as a
matter of national security. Economic sectors commonly declared off-limits include television
and radio broadcasting, automobile manufacturing, aircraft manufacturing, energy exploration,
military-equipment manufacturing, and iron and steel production. Such industries are protected
either because they are culturally important, are engines for economic growth, or are essential to
any potential war effort. Host governments often fear that losing control in these economic
sectors means placing their fate in the hands of international companies.
Second, governments can restrict international companies from freely removing profits earned in
the nation. This policy can force a company to hold cash in the host country or to reinvest it in
new projects there. Such policies are normally rooted in the inability of the host-country
government to earn the foreign exchange needed to pay for badly needed imports.
Third, governments can impose very strict environmental regulations. In most industrial
countries, factories that produce industrial chemicals as their main output or as byproducts must
adhere to strict pollution standards. Regulations typically demand the installation of expensive
pollution-control devices and close monitoring of nearby air, water, and soil quality. While
protecting the environment, such regulations also increase short-term production costs. Many
developing and emerging markets have far less strict environmental regulations. Regrettably,
some companies are alleged to have moved production of toxic materials to emerging markets to
take advantage of lax environmental regulations and, in turn, lower production costs. Although
such behavior is roundly criticized as highly unethical, it will occur less often as nations continue
cooperating to formulate common environmental protection policies.
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Finally, governments can also require that companies divulge certain information.
Government Bureaucracy-A lean and smoothly operating government bureaucracy can make a
market or site more attractive. Yet a bloated and cumbersome system of obtaining approvals and
licenses from government agencies can make it less appealing. In many developing countries, the
relatively simple matter of obtaining a license to establish a retail outlet often means acquiring
numerous documents from several agencies. The bureaucrats in charge of these agencies
generally are little concerned with providing businesses with high-quality service. Managers
must be prepared to deal with administrative delays and a maze of rules.
Political Stability-Every nation's business environment is affected to some degree by political
risk. Political risk is the likelihood that a society will undergo political changes that negatively
affect local business activity. Political risk can threaten the market of an exporter, the production
facilities of a manufacturer, or the ability of a company to remove profits from the country in
which they were earned. The key element of political risk that concerns companies is unforeseen
political change. Political risk tends to rise if a company cannot estimate the future political
environment with a fair degree of accuracy. An event with a negative impact that is expected to
occur in the future is not, in itself, bad for companies because the event can be planned for and
necessary precautions taken. It is the unforeseen negative events that create political risk for
companies.
Managers' perceptions of a market's political risk are often affected by their memories of past
political unrest in the market. Yet managers cannot let past events blind them to future
opportunities. International companies must try to monitor and predict political events that
threaten operations and future profits. By investigating the political environment proactively,
managers can focus on political risk and develop action plans for dealing with it.
Skill: Concept
Difficulty: Hard
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31) What is country image? Explain how it affects the screening process using examples.
Answer: Country image embodies every facet of a nation's business environment. It is highly
relevant to the selection of sites for production, R&D, or any other activity. For example, country
image affects the location of manufacturing or assembly operations because products must
typically be stamped with labels identifying where they were made or assembled—such as
"Made in China" or "Assembled in Brazil." Although such labels do not affect all products to the
same degree, they can present important positive or negative images and boost or dampen sales.
Products made in relatively developed countries tend to be evaluated more positively than
products from less developed countries. This relation is due to the perception among consumers
that the workforces of certain nations have superior skills in making particular products. For
example, consumer product giants Procter & Gamble (www.pg.com) and Unilever have
manufacturing facilities in Vietnam. But Vietnamese consumers tend to shun these companies'
locally made Close-Up toothpaste and Tide detergent, and instead they seek the identical
products and brands produced in neighboring countries, such as Thailand. As one young
Vietnamese shopper explained, "Tide from Thailand smells nicer." A general perception among
Vietnamese consumers is that goods from Japan or Singapore are the best, followed by Thai
goods. Unfortunately for Procter & Gamble and Unilever in Vietnam, many goods from other
countries are smuggled in and sold on the black market, thereby denying the companies local
sales revenue.
A country's image can be positive in one product class but negative in another. For example, the
fact that Volkswagen's new Beetle is made in Mexico for the U.S. market has not hurt the
Beetle's sales. But affluent consumers might be apprehensive to buy a hand-built Rolls-Royce
automobile if it were produced in Mexico. Because Rolls-Royce buyers pay for the image of a
brilliantly crafted luxury car, the Rolls-Royce image probably would not survive intact if the
company were to produce its cars in Mexico.
Finally, country image can and does change over time. For example, "Made in India" has
traditionally been associated with low-technology products such as soccer balls and many types
of textile products. But today world-class computer software companies increasingly rely on the
software-development skills of engineers located in southern India.
AACSB: Application of knowledge; Diverse and multicultural work environments
Skill: Concept
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32) Discuss the importance of cultural factors when assessing a national business environment,
and explain why cultural differences between markets create difficulties when conducting
international research.
Answer: Cultural Factors—Although countries display cultural similarities, they differ in
language, attitudes toward business, religious beliefs, traditions, customs, and countless other
ways. Some products are sold in global markets with little or no modification. These products
include industrial machinery such as packaging equipment, consumer products such as
toothpaste and soft drinks, and many other types of goods and services. Yet many other products
must undergo extensive adaptation to suit local preferences, such as books, magazines, ready-to-
eat meals, and other products.
Cultural elements can influence what kinds of products are sold and how they are sold. A
company must assess how the local culture in a candidate market might affect the salability of its
product.
Cultural elements in the business environment can also affect site-selection decisions. When
substantial product modifications are needed for cultural reasons, a company might choose to
establish production facilities in the target market itself. Yet serving customers' special needs in a
target market must be offset against any potential loss of economies of scale due to producing in
several locations rather than just one. Today companies can minimize such losses through the
use of flexible manufacturing methods.
A qualified workforce is important to a company no matter what activity it is to undertake at a
particular site. Also, a strong work ethic among the local workforce is essential to having
productive operations. Managers must assess whether an appropriate work ethic exists in each
potential country for the purposes of production, service, or any other business activity. An
adequate level of educational attainment among the local workforce for the planned business
activity is also very important. Although product-assembly operations may not require an
advanced education, R&D, high-tech production, and certain services normally will require
extensive higher education.
Cultural Differences—When conducting international research, marketers who conduct research
in unfamiliar markets must pay attention to the ways in which cultural variables influence
information. Perhaps the single most important variable is language. For example, if researchers
are unfamiliar with a language in the market they are investigating, they might be forced to rely
on interpreters. Interpreters might unintentionally misrepresent certain comments or be unable to
convey the sentiment with which statements are made.
Researchers might also need to survey potential buyers through questionnaires written in the
local language. To avoid any misstatement of questions or results, questionnaires must be
translated into the language of the target market and the responses then translated back into the
researcher's language. Written expressions must be highly accurate so that results do not become
meaningless or misleading. The potential to conduct written surveys is also affected by the
illiteracy rates among the local population. A written survey is generally impossible to conduct
in countries with high illiteracy rates such as Morocco, Nigeria, and so on. Researchers would
probably need to choose different information-gathering technique, such as personal interviews
or observing retail purchases.
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Companies that have little experience in an unfamiliar market often hire local agencies to
perform some or all of their market research. Local researchers know the cultural terrain. They
understand which practices are acceptable and which types of questions can be asked. And they
typically know whom to approach for certain types of information. Perhaps most importantly,
they know how to interpret the information they gather and are likely to understand its reliability.
But a company that decides to conduct its own market research must, if necessary, adapt its
research techniques to the local market. Many cultural elements that are taken for granted in the
home market must be reassessed in the host business environment.
Skill: Synthesis
Difficulty: Hard
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33) Discuss how companies identify the basic appeal for products when screening a potential
market, and explain how international organizations provide the essential information to
researchers.
Answer: Determining Basic Demand—The first step in searching for potential markets means
finding out whether there is a basic demand for a company's product. Important in determining
this basic appeal is a country's climate. For example, no company would try to market
snowboards in Indonesia, Sri Lanka, or Central America because they receive no snowfall. The
same product, on the other hand, is well suited for markets in the Canadian Rockies, northern
Japan, and the Swiss Alps. Although this stage seems simple, it cannot be taken too lightly. A
classic example is when, during its initial forays into international business, Wal-Mart
(www.walmart.com) found ice-fishing huts in its Puerto Rico inventory and no snowshoes at its
stores in Ontario, Canada.
Certain countries also ban specific goods. Islamic countries, for instance, forbid the importation
of alcoholic products, and the penalties for smuggling are stiff.
Determining Availability of Resources: Companies that require particular resources to carry out
local business activities must be sure they are available. Raw materials needed for manufacturing
must either be found in the national market or imported. Yet imports may encounter tariffs,
quotas, or other government barriers. Managers must consider the additional costs of importing
to ensure that total product cost does not rise to unacceptable levels.
The availability of labor is essential to production in any country. Many companies choose to
relocate to countries where workers' wages are lower than they are in the home country. This
practice is most common among makers of labor-intensive products—those for which labor
accounts for a large portion of total cost. Companies considering local production must
determine whether there is enough labor available locally for production operations.
Companies that hope to secure financing in a market abroad must determine the availability and
cost of local capital. If local interest rates are too high, a company might be forced to obtain
financing in its home country or in other markets in which it is active. On the other hand, access
to low-cost financing may provide a powerful inducement to a company that is seeking to
expand internationally.
There are excellent sources of much free and inexpensive information about product demand in
particular countries. For example, the International Trade Statistics Yearbook published by the
United Nations lists the export and import volumes of different products for each country. It also
furnishes information on the value of exports and imports on an annual basis for the most recent
five-year period. The International Trade Center, based in Geneva, Switzerland, also provides
current import and export figures for more than 100 countries.
International development agencies, such as the World Bank, the International Monetary Fund,
and the Asian Development Bank, also provide valuable secondary data. For example, the World
Bank publishes annual data on each member nation's population and economic growth rate.
Today, most secondary sources supply downloadable data through the Internet or through
traditional printed versions.
Skill: Synthesis
Difficulty: Hard
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34) Which of the following steps should occur in the screening process for potential markets
after the basic demand for a product has been identified?
B) selection of the market or site
C) measurement of the market or site potential
D) assessment of climate suitability
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
35) Which of the following is the final step in the screening process for potential markets and
sites?
C) selection of the market or site
D) assessment of climate suitability
Answer: C
Skill: Concept
Difficulty: Easy
36) Which of the following steps of the market screening process involves the determination of a
product's income elasticity?
A) identification of basic appeal of a product
Answer: B
Skill: Concept
Difficulty: Easy
37) A typical industry analysis does not include the ________.

A) names, production volumes, and market shares of the largest competitors
B) structure of the wholesale and retail distribution networks
C) background on the market, including population figures and key social trends
D) history of currency fluctuations
Answer: D
Skill: Concept
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38) The sensitivity of demand for a product relative to changes in income is called ________.
A) income elasticity
B) demand shaping
C) income distribution
D) market intensity
Answer: A
Skill: Concept
Difficulty: Easy
39) In the context of the sensitivity of demand for a product relative to changes in income, a
coefficient greater than 1.0 conveys a(n) ________.
A) surplus product
B) economic equilibrium
C) economic surplus
D) income-elastic product
Answer: D
Skill: Concept
Difficulty: Easy
40) If the income-elasticity coefficient for coffee is 0.5, the demand for coffee will ________.
A) decrease 0.5 percent for every 1.0 percent increase in income
B) increase 1.0 percent for every 5.0 percent increase in income
C) increase 0.5 percent for every 1.0 percent increase in income
D) decrease 0.5 percent for every 0.5 percent increase in income
Answer: C
Skill: Concept
41) Which of the following is an income-elastic product?

A) food
B) utilities
C) jewelry
D) beverages
Answer: C
Skill: Concept
Difficulty: Easy
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42) When creating a market-potential indicator for an emerging market, an estimate of the wealth
or buying power of a market can be formed by examining the ________.
A) market intensity
B) market growth rate
C) market size
D) market receptivity
Answer: A
Skill: Concept
Difficulty: Easy
43) Which of the following variables attempts to estimate market openness when creating a
market-potential indicator for an emerging market?
A) market consumption capacity
B) market receptivity
C) market size
D) market intensity
Answer: B
Skill: Concept
Difficulty: Easy
44) When creating a market-potential indicator for an emerging market, ________ is estimated
by determining a nation's volume of international trade as a percentage of GDP.
A) market receptivity
B) market intensity
C) market consumption capacity
D) market size
Answer: A
Skill: Concept
Difficulty: Easy
45) During which stage of the market or site screening process do managers normally want to
visit locations?
Answer: D
Skill: Concept
Difficulty: Easy
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46) Issues regarding potential threat from substitute products in a market are addressed in
________.
A) security analysis
B) technical analysis
C) product fit analysis
D) competitor analysis
Answer: D
Skill: Concept
Difficulty: Easy
47) Which of the following stages of the market or site screening process involves an assessment
of potential threat from substitute products?
Answer: D
Skill: Concept
Difficulty: Easy
48) Which of the following stages of the market or site screening process involves competitor
analysis?
Answer: D
Skill: Concept
Difficulty: Easy
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49) Which of the following stages of the market-screening process would require John to visit a
potential market personally?
B) selection of the market
D) measurement of market potential
Answer: B
Skill: Application
Difficulty: Hard
50) A product's income-elasticity refers to the sensitivity of the demand of a product relative to
changes in the income of consumer population.
Answer: TRUE
Skill: Concept
Difficulty: Easy
51) A product for which demand increases more relative to an increase in income has an income-
elasticity coefficient less than 1.
Answer: FALSE
Skill: Concept
52) Food and utilities are examples of income-inelastic products.

Answer: TRUE
Skill: Concept
Difficulty: Easy
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53) Assessing potential in emerging markets by ranking locations using market-potential
indicators is useful only for companies involved in exporting.
Answer: TRUE
Skill: Concept
54) While assessing the market potential of emerging markets, market consumption capacity is
generally obtained through estimates of energy consumption.
Answer: FALSE
Skill: Concept
55) Which of the following is an example of a legal force that is used to assess the national
business environment?
A) resource quality
B) environmental regulations
C) workforce qualifications
D) liquidity issues
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
56) When developing a market-potential indicator for an emerging market, the size of the market
is typically estimated from the nation's ________.
A) income elasticity
B) GDP
C) total population
D) GDP at purchasing power parity
Answer: C
Skill: Concept
Difficulty: Easy
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57) When developing a market-potential indicator for an emerging market, market growth rate is
typically estimated from the ________.
A) per capita private consumption
B) GDP
C) total population
D) percentage of a market's population in the middle class
Answer: B
Skill: Concept
Difficulty: Easy
58) When developing a market-potential indicator for an emerging market, market intensity is
typically estimated from the ________.
A) per capita private consumption
B) GDP
C) total population
D) percentage of a market's population in the middle class
Answer: A
Skill: Concept
Difficulty: Easy
59) When developing a market-potential indicator for an emerging market, the ________ factor
attempts to assess channels of distribution and communication.
A) market size
B) market intensity
C) commercial infrastructure
D) economic freedom
Answer: C
Skill: Concept
Difficulty: Easy
60) When creating a market-potential indicator for an emerging market, market consumption
capacity is often estimated from the ________.
A) growth in gross domestic product
B) percentage of a market's population in the middle class
C) gross domestic product at purchasing power parity
D) amount of energy the total population produces
Answer: B
Skill: Concept
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61) The annual income considered below the poverty line in one country is the annual income of
a middle-class family in another country. Which of the following difficulties associated with
conducting international market research does this scenario illustrate?
A) availability of data
B) protection of data
C) marketability of data
D) comparability of data
Answer: D
Skill: Concept
Difficulty: Easy
62) Some researches consist of errors due to misinterpretations by foreign language interpreters.
Which of the following difficulties associated with conducting international market research
does this example signify?
A) protection of data
B) availability of data
C) cultural differences
D) political differences
Answer: C
Skill: Concept
Difficulty: Easy
63) In countries with high illiteracy rates, a(n) ________ should not be used to collect
information.
A) personal interview
B) written survey
C) focus group
D) field research
Answer: B
AACSB: Written and oral communication
Skill: Concept
Difficulty: Easy
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64) The process of obtaining information that already exists within the company or that can be
obtained from outside sources is called ________.
A) secondary market research
B) data mining
C) data harvesting
D) scientific data archiving
Answer: A
Skill: Concept
Difficulty: Easy
65) ________ is relatively inexpensive because it has already been collected, analyzed, and
summarized by another party.
A) Primary data
B) Secondary data
C) Raw data
D) Transaction data
Answer: B
Skill: Concept
Difficulty: Easy
66) Which of the following is a source of secondary data for conducting international market
research?
A) surveys
B) interviews
C) focus groups
D) trade associations
Answer: D
Skill: Concept
Difficulty: Easy
67) The process of collecting and analyzing original data and applying the results to current
research needs is called ________.
A) primary market research
B) secondary market research
C) data harvesting
D) data mining
Answer: A
Skill: Concept
Difficulty: Easy
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68) An exhibition at which members of an industry showcase their latest products, study
activities of rivals, and examine recent trends and opportunities is called a(n) ________.
A) focus group
B) trade show
C) environmental survey
D) field research
Answer: B
Skill: Concept
Difficulty: Easy
69) A(n) ________ is an international trip by government officials and businesspeople that is
organized by agencies of national or provincial governments for the purpose of exploring
international business opportunities.
A) focus group
B) field research
C) expo
D) trade mission
Answer: D
Skill: Concept
Difficulty: Easy
70) Small and medium-sized companies often find trade missions very appealing because
________.
A) it gives companies an opportunity to visit new places
B) such trips are usually cheap even for the smallest of businesses
C) it provides access to important business officials and executives
D) it helps companies analyze the strategies of all major competitors
Answer: C
AACSB: Application of knowledge; Written and oral communication
Skill: Concept
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71) An ongoing process of gathering, analyzing, and dispensing information for tactical or
strategic purposes is called ________.
A) data harvesting
B) peer production
C) survey research
D) environmental scanning
Answer: D
Skill: Concept
Difficulty: Easy

72) The income-elasticity coefficient for Zulu doll is 1.2, which means the demand for Zulu doll
will ________.
A) increase 1.2 percent for every 1.0 percent increase in income
B) decrease 1.0 percent for every 1.2 percent increase in income
C) decrease 1.2 percent for every 1.0 percent increase in income
D) remain stagnant since 1.2 is the equilibrium value
Answer: A
Skill: Application
Difficulty: Hard
Scenario: Markowitz Tools

Susan Markowitz is analyzing potential markets where Markowitz Tools can sell its products,
and she has narrowed her search to three markets. Country A is a developing country with a low
literacy rate, Country B has a group-oriented culture, and Country C is a highly developed
nation.
73) If Susan wants to obtain information in the least expensive way, she should use ________.
A) secondary market research
B) consumer panels
C) structured interviews
D) large focus groups followed by surveys
Answer: A
Skill: Application
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74) Which of the following would be most appropriate for conducting primary market research
on attitudes, behaviors, and purchasing habits in Country B?
A) Internet-based research
B) focus groups
C) consumer panels
D) data from trade agencies
Answer: C
Skill: Application
Difficulty: Hard
75) Which of the following would be the least expensive method in terms of both time and
money, for conducting a market research in Country C?
A) structured interviews
B) surveys
C) data from the Internet
D) focus groups
Answer: C
Skill: Application
Difficulty: Hard
Scenario: Indy Bats LLC

Indy Bats LLC is looking for new markets for its products. Matt Johnson has been appointed
head of a special team that has been given the responsibility of identifying new markets for the
company's products. The company is especially interested in exploring emerging economies.
76) For several emerging markets, Matt has collected data on the number of telephones, TVs,
and fax machines per capita, and population per retail outlet, which assesses the ________.
A) economic freedom
B) commercial infrastructure
C) market growth rate
D) market size
Answer: B
Skill: Application
Difficulty: Hard
25
77) If Matt wants to estimate an emerging market's spending capacity, he should focus on the
________.
A) population in the middle class
B) need for consumer products
C) demand for consumer and industrial products
D) volume of imports
Answer: A
Skill: Application
Difficulty: Easy
78) If Matt wants to estimate the extent to which free-market principles predominate in an
emerging market, Matt should consider the variable called ________.
A) economic freedom
B) commercial infrastructure
C) market receptivity
D) market intensity
Answer: A
Skill: Application
Difficulty: Hard
79) The potential to conduct written surveys is independent of the literacy rates among the local
population.
Answer: FALSE
Skill: Concept
80) The process of obtaining information that already exists within the company or that can be
obtained from outside sources is called secondary market research.
Answer: TRUE
Skill: Concept
Difficulty: Easy
81) Secondary data tends to be very expensive because it has already been analyzed and
summarized by another party.
Answer: FALSE
Skill: Concept
26
82) Industry data cannot indicate how individuals feel about a company or its products.
Answer: TRUE
Skill: Concept
83) Interviews and focus groups are two main sources of secondary data that help managers
make informed decisions.
Answer: FALSE
Skill: Concept
27
84) What types of information are found in a typical industry analysis? How can companies use
this information?
Answer: The information needed to estimate the market potential for a product in industrialized
nations tends to be more readily available than in emerging markets. In fact, for the most
developed markets, research agencies exist for the sole purpose of supplying market data to
companies. Euromonitor is one such company with an extensive global reach in consumer goods.
The company sells reports and does company-specific studies for many international
corporations and entrepreneurs. Some of the information in a typical industry analysis includes:
1. Names, production volumes, and market shares of the largest competitors
2. Volume of exports and imports of the product
3. Structure of the wholesale and retail distribution networks
4. Background on the market, including population figures and key social trends
5. Total expenditure on the product (and similar products) in the market
6. Retail sales volume and market prices of the product
7. Future outlook for the market and potential opportunities
The value of such information supplied by specialist agencies is readily apparent—these reports
provide a quick overview of the size and structure of a nation's market for a product. Reports
vary in their cost (depending on the market and product), but many can be had for around $750
to $1,500. The company also allows online purchase of reports in small segments for as little as
$20 each.
Thus companies that enter the market in industrialized countries often have a great deal of data
available on that particular market. What becomes important then is the forecast for the growth
or contraction of a potential market. One way of forecasting market demand is determining a
product's income elasticity—the sensitivity of demand for a product relative to changes in
income. The income-elasticity coefficient for a product is calculated by dividing a percentage
change in the quantity of a product demanded by a percentage change in income. A coefficient
greater than 1.0 conveys an income-elastic product, or one for which demand increases more
relative to an increase in income. These products tend to be discretionary purchases, such as
computers, video games, jewelry, or expensive furniture—generally not considered essential
items. A coefficient less than 1.0 conveys an income-inelastic product, or one for which demand
increases less relative to an increase in income. These products are considered essential and
include food, utilities, and beverages.
Skill: Concept
28
85) Describe any five variables commonly included in creating a market-potential analysis for an
emerging market.
Answer: The main variables commonly included in market-potential analyses are:
Market Size—This variable provides a snapshot of the size of a market at any point in time. It
does not estimate the size of a market for a particular product but rather the size of the overall
economy. Market-size data allow managers to rank countries from largest to smallest, regardless
of a particular product. Market size is typically estimated from a nation's total population or the
amount of energy it produces and consumes.
Market Growth Rate—This variable reflects the fact that, although the overall size of the market
(economy) is important, so too is its rate of growth. It helps managers avoid markets that are
large but shrinking and instead target those that are small but rapidly expanding. It is generally
obtained through estimates of growth in gross domestic product (GDP) and energy consumption.
Market Intensity—This variable estimates the wealth or buying power of a market from the
expenditures of both individuals and businesses. It is estimated from per capita private
consumption and/or per capita gross domestic product (GDP) at purchasing power parity.
Market Consumption Capacity—The purpose of this variable is to estimate spending capacity. It
is often estimated from the percentage of a market's population in the middle class, thereby
concentrating on the core of an economy's buying power.
Commercial Infrastructure—This factor attempts to assess channels of distribution and
communication. Variables may include the number of telephones, televisions, fax machines, or
personal computers per capita; the density of paved roads or number of vehicles per capita; and
the population per retail outlet. An increasingly important variable for businesses relying on the
Internet for sales is the number of Internet hosts per capita. But because these data become
outdated quickly, care must be taken to ensure accurate information from the most current
sources.
Economic Freedom—This variable attempts to estimate the extent to which free-market
principles predominate. It is typically a summary of government trade policies, government
involvement in business, the enforcement of property rights, and the strength of the black
market.
Market Receptivity—This variable attempts to estimate market "openness." One way it can be
estimated is by determining a nation's volume of international trade as a percentage of gross
domestic product (GDP). If a company wants to see how receptive a market is to goods from its
home country, it can ascertain the amount of per capita imports entering the market from the
home country. Managers can also examine the growth (or decline) in these imports.
Country Risk—This variable attempts to estimate the total risk of doing business, including
political, economic, and financial risks. Some market-potential estimation techniques include this
variable in the market-receptivity variable.
Skill: Concept
Difficulty: Hard
29
86) What are the factors managers consider when analyzing industrialized markets? Discuss why
the comparability of data is a major challenge while conducting international research.
Answer: The information needed to estimate the market potential for a product in industrialized
nations tends to be more readily available than in emerging markets. In fact, for the most
developed markets, research agencies exist for the sole purpose of supplying market data to
companies. Euromonitor is one such company with an extensive global reach in consumer goods.
The company sells reports and does company-specific studies for many international
corporations and entrepreneurs. Some of the information in a typical industry analysis includes:
1. Names, production volumes, and market shares of the largest competitors
2. Volume of exports and imports of the product
3. Structure of the wholesale and retail distribution networks
4. Background on the market, including population figures and key social trends
5. Total expenditure on the product (and similar products) in the market
6. Retail sales volume and market prices of the product
7. Future outlook for the market and potential opportunities
The value of such information supplied by specialist agencies is readily apparent—these reports
provide a quick overview of the size and structure of a nation's market for a product.
The comparability of data is a challenge of conducting international research. Data obtained from
other countries must be interpreted with great caution. Because terms such as poverty,
consumption, and literacy differ greatly from one country to another, such data must be
accompanied by precise definitions.
The different ways in which countries measure data also affect comparability across borders. For
instance, some countries state the total quantity of foreign direct investment in their nations in
terms of its monetary value. Others specify it in terms of the number of investment projects
implemented during the year. But a single foreign direct investment into an industrialized nation
can be worth many times what several or more projects are worth in a developing nation. To
gather a complete picture of a nation's investments researchers will often need to obtain both
figures. Moreover, reported statistics may not distinguish between foreign direct investment
(accompanied by managerial control) and portfolio investment (which is not accompanied by
managerial control). Misinterpreting data because one does not know how they are compiled or
measured can sabotage even the best marketing plans and production strategies.
Skill: Synthesis
Difficulty: Hard
30
87) Define secondary market research and briefly discuss any three secondary data sources.
Answer: Companies can consult a variety of sources to obtain information on a nation's business
environment and markets. The particular source that managers should consult depends on the
company's industry, the national markets it is considering, and how far along it is in its location-
screening process. The process of obtaining information that already exists within the company
or that can be obtained from outside sources is called secondary market research. Managers often
use information gathered from secondary research activities to broadly estimate market demand
for a product or to form a general impression of a nation's business environment. Secondary data
are relatively inexpensive because they have already been collected, analyzed, and summarized
by another party.
International Organizations—There are excellent sources of much free and inexpensive
information about product demand in particular countries. For example, the International Trade
Statistics Yearbook published by the United Nations lists the export and import volumes of
different products for each country. It also furnishes information on the value of exports and
imports on an annual basis for the most recent five-year period. Today, most secondary sources
supply downloadable data through the Internet or through traditional printed versions.
Government Agencies—Commerce departments and international trade agencies of most
countries typically supply information about import and export regulations, quality standards,
and the size of various markets. These data are normally available directly from these
departments, from agencies within each nation, and from the commercial attaché in each
country's embassy abroad. In fact, visiting embassies and attending their social functions while
visiting a potential location are excellent ways of making contact with potential future business
partners.
Industry and Trade Associations—Companies often join associations composed of firms within
their own industry or trade. In particular, companies trying to break into new markets join such
associations to make contact with others in their field. The publications of these organizations
keep members informed about current events and help managers to keep abreast of important
issues and opportunities. Many associations publish special volumes of import and export data
for domestic markets. They frequently compile directories that list each member's top executives,
geographic scope, and contact information such as phone numbers and addresses. Today, many
associations also maintain informative Web sites.
Service Organizations—Many international service organizations in fields such as banking,
insurance, management consulting, and accounting offer information to their clients on cultural,
regulatory, and financial conditions in a market.
Internet-Companies engaged in international business are quickly realizing the wealth of
secondary research information available on the Internet and the World Wide Web. These
electronic resources are usually user friendly and have vast amounts of information.
Skill: Concept
31
88) An unstructured but in-depth interview of a small group of individuals by a moderator to
learn the group's attitudes about a company or its products is called a ________.
A) focus group
B) literature review
C) consumer panel
D) brainstorming session
Answer: A
AACSB: Interpersonal relations and teamwork
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
89) ________ cannot indicate how individuals feel about a company or its product.
A) Surveys
B) Industry data
C) Consumer panels
D) Interviews
Answer: B
Skill: Concept
Difficulty: Easy
90) It is often difficult to conduct focus groups in ________ cultures where people have a
tendency to agree with others in the group.
A) collectivist
B) masculine
C) low uncertainty avoidance
D) long term oriented
Answer: A
Skill: Concept
Difficulty: Easy
91) Research in which people record information in personal diaries on their attitudes, behaviors,
or purchasing habits is called a ________.
A) survey
B) focus group
C) consumer panel
D) literature review
Answer: C
Skill: Concept
Difficulty: Easy
32
92) Research in which an interviewer asks current or potential buyers to answer written or verbal
questions to obtain facts, opinions, or attitudes is called a ________.
A) survey
B) covert observational research
C) consumer panel
D) brainstorming session
Answer: A
Skill: Concept
Difficulty: Easy
93) The single greatest advantage of ________ is the ability to collect vast amounts of data in a
single sweep.
A) survey research
B) focus groups
C) consumer panels
D) interviews
Answer: A
Skill: Concept
Difficulty: Easy
Scenario: Markowitz Tools

Susan Markowitz is analyzing potential markets where Markowitz Tools can sell its products,
and she has narrowed her search to three markets. Country A is a developing country with a low
literacy rate, Country B has a group-oriented culture, and Country C is a highly developed
nation.
94) Which of the following methods would be most appropriate for conducting primary market
research in Country A?
A) Internet research
B) verbal questioning
C) written surveys
D) consumer panels
Answer: B
Skill: Application
Difficulty: Hard
33
Scenario: Indy Bats LLC
Indy Bats LLC is looking for new markets for its products. Matt Johnson has been appointed
head of a special team that has been given the responsibility of identifying new markets for the
company's products. The company is especially interested in exploring emerging economies.
95) To estimate an emerging market's openness, Matt could analyze its ________.
A) market receptivity
B) differentiation strategy
C) commercial infrastructure
D) country risk
Answer: A
Skill: Application
Difficulty: Hard
96) The process of collecting and analyzing original data and applying the results to current
research needs is called primary market research.
Answer: TRUE
Skill: Concept
Difficulty: Easy
97) Trade missions are advantageous to small businesses as they are the most inexpensive
method of getting introduced to important business contacts.
Answer: FALSE
Skill: Concept
98) Focus group interviews tend to work best when moderators are natives of the countries
where the interviews are held.
Answer: TRUE
Skill: Concept
99) The single greatest disadvantage of survey research is that it provides access to only a small
amount of data in a single sweep.
Answer: FALSE
Skill: Concept
34
100) What is primary market research? Describe any four primary market research methods.
Answer: Although secondary information is very useful in the early stages of the screening
process, sometimes more tailored data on a location are needed. Under such circumstances, it
might be necessary to conduct primary market research—the process of collecting and analyzing
original data and applying the results to current research needs. This type of information is very
helpful in filling in the blanks left by secondary research. Yet it is often more expensive to obtain
than secondary research data because studies must be conducted in their entirety.
Trade shows and Trade Missions—An exhibition at which members of an industry or group of
industries showcase their latest products, study activities of rivals, and examine recent trends and
opportunities is called a trade show. Trade shows are held on a continuing basis in virtually all
markets and normally attract companies from around the globe. They are typically held by
national or global industry trade associations or by government agencies. An excellent source of
trade shows and exhibitions worldwide is Expo Central. A trade mission is an international trip
by government officials and businesspeople that is organized by agencies of national or
provincial governments for the purpose of exploring international business opportunities.
Interviews and Focus Groups—Although industry data are useful to companies early in the
screening process for potential markets, subsequent steps must assess buyers' emotions, attitudes,
and cultural beliefs. Industry data cannot tell us how individuals feel about a company or its
product. This type of buyer information is required when deciding whether to enter a market and
when developing an effective marketing plan.
Surveys—Research in which an interviewer asks current or potential buyers to answer written or
verbal questions to obtain facts, opinions, or attitudes is called a survey. For example, if Saucony
wants to learn about consumer attitudes toward its latest women's aerobics shoe, it could ask a
sample of women about their attitudes toward the shoe. Verbal questioning could be done in
person or over the telephone, whereas written questioning could be done in person, through the
mail, or through forms completed at Saucony's Web site. The results would then be tabulated,
analyzed, and applied to the development of a marketing plan.
Environmental Scanning—An ongoing process of gathering, analyzing, and dispensing
information for tactical or strategic purposes is called environmental scanning. The
environmental scanning process entails obtaining both factual and subjective information on the
business environments in which a company is operating or considering entering. The continuous
monitoring of events in other locations keeps managers aware of potential business opportunities
and threats. Environmental scanning contributes to making well-informed decisions and the
development of effective strategies. It also helps companies develop contingency plans for a
particularly volatile environment.
Skill: Concept
35
101) Discuss the importance of field trips in last stage of the market-screening process. How do
trade shows and trade missions help companies conducting primary international research?
Answer: In the fourth stage of the process of screening a potential market, the importance of top
managers making a personal visit to each remaining potential market or site cannot be
overstated. Such trips typically involve attending strings of meetings and engaging in tough
negotiations. The trip represents an opportunity for managers to see firsthand what they have so
far seen only on paper. It gives them an opportunity to experience the culture, observe in action
the workforce that they might soon employ, or make personal contact with potential new
customers and distributors. Any remaining issues tend to be thoroughly investigated during field
trips so that the terms of any agreement are known precisely in the event that a particular market
or site is chosen. Managers can then usually return to the chosen location to put the terms of the
final agreement in writing.
Trade shows and trade missions help companies conducting primary international research. An
exhibition at which members of an industry or group of industries showcase their latest products,
study activities of rivals, and examine recent trends and opportunities is called a trade show.
Trade shows are held on a continuing basis in virtually all markets and normally attract
companies from around the globe. They are typically held by national or global industry trade
associations or by government agencies. An excellent source of trade shows and exhibitions
worldwide is Expo Central.
Not surprisingly, the format and scope of trade shows differ from country to country. For
example, because of its large domestic market, shows in the United States tend to be oriented
toward business opportunities within the U.S. market. In line with U.S. culture, the atmosphere
tends to be fairly informal. Conversely, because of the relatively smaller market of Germany and
its participation in the European Union, trade shows there tend to showcase business
opportunities in markets all across Europe and tend also to be quite formal.
A trade mission is an international trip by government officials and businesspeople that is
organized by agencies of national or provincial governments for the purpose of exploring
international business opportunities. Businesspeople who attend trade missions are typically
introduced both to important business contacts and well-placed government officials.
Small and medium-sized companies often find trade missions very appealing for two reasons.
First, the support of government officials gives them additional clout in the target country as well
as access to officials and executives whom they would otherwise have little opportunity to meet.
Second, although such trips can sometimes be expensive for the smallest of businesses, they are
generally worth the money because they almost always reap cost-effective rewards. Trade
missions to faraway places sometimes involve visits to several countries to maximize the return
for the time and money invested. For instance, a trade mission for European businesspeople to
Latin America may include stops in Argentina, Brazil, Chile, and Mexico. A trade mission to
Asia for North American or European companies might include stops in China, Hong Kong,
Japan, South Korea, and Thailand.
Skill: Synthesis
Difficulty: Hard
36
102) Explain why the availability of data is a challenge when conducting international research.
How do interviews and focus groups help in the availability of data?
Answer: When trying to target specific population segments, marketing managers require highly
detailed information. Fortunately, companies are often spared the time, money, and effort of
collecting firsthand data for the simple reason that it has already been gathered. This is
particularly true in highly industrialized countries, including Australia, Canada, Japan, those in
Western Europe, and the United States, where both government agencies and private research
firms supply information. Three of these information suppliers are SymphonyIRI Group, Survey
Research Group, and ACNielsen.
In many emerging and developing countries, however, previously gathered quality information is
hard to obtain. Even when market data are available, their reliability is questionable. For
example, analysts sometimes charge the governments of certain emerging markets with trying to
lure investors by overstating estimates of gross income and consumption levels. In addition to
deliberate misrepresentation, tainted information can also result from improper local collection
methods and analysis techniques. But research agencies in emerging and developing markets that
specialize in gathering data for clients in industrialized countries are developing higher-quality
techniques of collection and analysis.
Interviews and focus groups can act as a primary source of international information. Although
industry data are useful to companies early in the screening process for potential markets,
subsequent steps must assess buyers' emotions, attitudes, and cultural beliefs. Industry data
cannot tell us how individuals feel about a company or its product. This type of buyer
information is required when deciding whether to enter a market and when developing an
effective marketing plan. Therefore, many companies supplement the large-scale collection of
country data with other types of research such as interviews with prospective customers.
Interviews, of course, must be conducted carefully if they are to yield reliable and unbiased
information. Respondents in some cultures might be unwilling to answer certain questions or
may intentionally give vague or misleading answers to avoid getting too personal. For example,
although individuals in the United States are renowned for their willingness to divulge all sorts
of information about their shopping habits and even their personal lives, this is very much the
exception among other countries.
An unstructured but in-depth interview of a small group of individuals (8 to 12 people) by a
moderator to learn the group's attitudes about a company or its product is called a focus group.
Moderators guide a discussion on a topic and interfere as little as possible with the free flow of
ideas. The interview is recorded for later evaluation to identify recurring or prominent themes
among the participants. This type of research helps marketers to uncover negative perceptions
among buyers and to design corrective marketing strategies. Because subtle differences in verbal
and body language could go unnoticed, focus group interviews tend to work best when
moderators are natives of the countries in which the interview is held. Ironically, it is sometimes
difficult to conduct focus groups in collectivist cultures because people have a tendency to agree
with others in the group. In such instances, it might be advisable to conduct a consumer panel—
research in which people record in personal diaries information on their attitudes, behaviors, or
purchasing habits.
Skill: Synthesis
Difficulty: Hard
37

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International Business: The Challenges of Globalization, 9e, Global Edition (Wild)

Chapter 12 Analyzing International Opportunities

6) Which of the following is a characteristic of foreign direct investment?

9) Which of the following is a characteristic of foreign direct investment?

16) Which of the following is a characteristic of exporting?

Scenario: Chong's Analysis of International Markets

37) A typical industry analysis does not include the ________.

41) Which of the following is an income-elastic product?

52) Food and utilities are examples of income-inelastic products.

Scenario: Chong's Analysis of International Markets

Scenario: Markowitz Tools

Scenario: Indy Bats LLC

Scenario: Markowitz Tools

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