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QUESTION NO: 6
The least risky method of entering a market in a foreign country is by
A. Indirect exports.
C. Direct exports.
D. Direct investments.
An indirect export strategy operates through intermediaries, such as home-country
merchants who buy and resell the product, home-country agents who negotiate
transactions with foreign buyers fora commission, cooperatives that represent groups of
sellers, and export-management firms that receive fees for administering the firm\’s export
efforts. Indirect export requires lower investment than direct export and is less risky
because of the intermediaries\’ expertise.
QUESTION NO: 1
Which of the following is the most significant reason that domestic governments and
international organizations seek to eliminate cartels?
A. The increased sales price reduces the amount of corporate tax revenues payable to the
B. True competition keeps prices as low as possible, thus increasing efficiency in the
C. Small businesses cannot survive or grow without government protection.
D. The economic stability of developing countries depends on a global free market.
A cartel is an organization of sellers (e.g., the oil cartel OPEC) who undertake joint action
to maximize members\’ profits by controlling the supply, and therefore the price, of their
product. Under the laws of many nations, such collusive conduct is illegal when engaged in
by firms subject to those laws. The reason is that, as a result of the monopolistic and
anticompetitive practices of cartels, supply is lower, prices are high, competition is
restrained, and the relevant industry is less efficient. Accordingly, governmental and
international organizations seek to protect consumers and the health of the domestic and
global economy through anti-cartel efforts.
QUESTION NO: 7
An advantage of a direct investment strategy when entering a foreign market is
A. Reduction in the capital at risk.
B. Shared control and responsibility.
C. Assurance of access when the foreign country imposes domestic content rules.
D. Avoidance of interaction with the local bureaucracy.
Direct investment has many advantages:
(1) cheaper materials or labor,
(2) receipt of investment incentives from the host government,
(3) a strong relationship with interested parties in the host country,
(4) control of the investment,
(5) a better image in the host country,
(6) market access when domestic contest rules are in effect. However, direct investment is
risky because of exposure to currency fluctuations, expropriation, potentially high exit
barriers, and restraints on sending profits out of the country.
QUESTION NO: 8
A firm that moves from not exporting on a regular basis to establishing plants in foreign
The internationalization process is of crucial interest to nations that wish to encourage local
firms to grow and to operate globally. According to Swedish researchers, it involves the
(1) Lack of regular exports;
(2) export via independent agents with a few markets, with later expansion to more
(3) creation of sales subsidiaries in larger markets;
(4) establishment of plants in foreign countries.
QUESTION NO: 3
A global firm
A. Has achieved economies of scale in the firm\’s domestic market.
B. Plans, operates, and coordinates business globally.
C. Relies on indirect export.
D. Tends to rely more on one product market.
According to Kotler, “Global firms plan, operate, and coordinate their activities on a
worldwide basis.” Thus, a global firm secures cost or product differentiation advantages not
available to domestic firms.
QUESTION NO: 10
Which strategy for a global marketing organization balances local responsiveness and
A glocal strategy combines some elements of local responsiveness or adaptation with
some elements of global integration. Successful telecommunications firms are examples of
balancing these elements. Local responsiveness is indicated when local product tastes and
preferences, regulations, and barriers are significant. Global integration is indicated when
demand is homogeneous and economies of productive scale are large.
QUESTION NO: 11
The creation of regional free trade zones is a global phenomenon. Trade barriers are
lowered in these areas, and other steps are taken to promote economic cooperation. For
example, a common currency has been adopted by the nations of:
D. The European Union.
The European Union (Eli) is a collection of 27 European nations that have lowered trade
barriers among member states, and most of the nations share a common currency and
trade policy. The euro is the common currency of the European Union.
QUESTION NO: 2
When a multinational firm decides to sell its products abroad, one of the risks the firm faces
is that the government of the foreign market charges the firm with dumping. Dumping
A. The same product sells at different prices in different countries.
B. A firm charges less than the cost to make the product so as to enter or win a market.
C. Lower quality versions of the product are sold abroad so as to be affordable.
D. Transfer prices are set artificially high so as to minimize tax payments.
Dumping is an unfair trade practice that violates international agreements. It occurs when a
firmcharges a price (1) lower than that in its home market or (2) less than the cost to make
the product. Dumping may be done to penetrate a market or as a result of export subsidies.
QUESTION NO: 4
A firm expands into international markets to
A. Be in foreign markets.
B. Eliminate foreign competition
C. Pursue new, higher-profit opportunities.
D. Preclude piracy of the firm\’s products.
A firm may decide to go abroad for many reasons, for example, to respond to a competitive
challenge in its home country by another global firm, to pursue opportunities yielding
greater profits, to achieve economies of scale, to diversify, or to follow customers who need
QUESTION NO: 9
Which strategy for a global marketing organization is based on a portfolio of national
A. reaction of a division to manage international marketing.
B. A multinational strategy.
C. A global strategy.
D. Creation of an export department
International marketing efforts take three basic forms:creation of an export department,
creation of a division to manage international marketing, or global organization. The latter
encompasses genuinely worldwide functions, e.g., manufacturing, marketing, finance, and
logistics. Thus, worldwide operations are the organization\’s focus, not merely that of a
department or division of a national firm. A global organization may follow a multinational,
global, or glocal strategy. A multinational strategy adopts a portfolio approach. Its emphasis
is on national markets because the need for global integration is not strong. The product is
customized for each market and therefore incurs higher production costs. Decision making
is primarily local with a minimum of central control. This strategy is most effective given
large differences between countries. Also, exchange rate risk is reduced when conducting
business in this manner.
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