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International Business: The New Realities, 4e (Cavusgil)
Chapter 16 Marketing in the Global Firm
1) In international business, marketing is concerned with ________.

A) disseminating the organizational culture of a firm across global subsidiaries
B) identifying, measuring, and pursuing customer needs and market opportunities abroad
C) maintaining a steady flow of product-based innovations
D) interacting with global business leaders
Answer: B
Diff: 1: Easy
Skill: Concept
Objective: 16-1: Explain global market segmentation
AACSB: Analytical Thinking
2) Which of the following best characterizes the purpose of a global marketing strategy?
A) guides firms on hiring highly skilled resources
B) provides managers with demographic data
C) helps managers check high employee turnover
D) guides firms in targeting the right customer segments
Answer: D
Diff: 1: Easy
Skill: Concept
3) ________ is the process of dividing the firm's total customer base into homogeneous clusters
in a way that allows management to formulate unique marketing strategies for each group.
A) Brand management
B) Customer relationship management
C) Market segmentation
D) Market diversification
Answer: C
Diff: 1: Easy
Skill: Concept
1
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4) In international business, firms frequently formulate market segments by ________.
A) selling only those products that create derived demand for other related products in the
market
B) grouping countries based on macro-level variables
C) grouping competitors based on their hiring strategies
D) grouping identical customers in underground economies
Answer: B
Diff: 1: Easy
Skill: Concept
5) A global market segment refers to ________.

A) a group of customers who share similar characteristics across many national markets
B) a group of customers belonging to the same generational group within a country
C) a group of less-affluent customers in the global market
D) a group of buyers in the international market who are largely unaffected by changes in pricing
Answer: A
Diff: 2: Moderate
Skill: Concept
6) Which of the following is true with regard to a global market segment?

A) A global market segment refers to a group of customers belonging to the same generational
group within a country.
B) Firms target global market segments by using a relatively uniform marketing strategy and
programs.
C) Buyers in a global market segment are typically characterized by low spending power.
D) Buyers in a global market segment rarely buy products representing luxury and style.
Answer: B
Diff: 2: Moderate
Skill: Concept
2
7) ________ refers to a marketing strategy in which the firm develops both the product and its
marketing to evoke a distinct impression in the customer's mind, emphasizing differences from
competitors' offerings.
A) Positioning
B) Standardization
C) Diversifying
D) Adaptation
Answer: A
Diff: 1: Easy
Skill: Concept
8) Which of the following is true with regard to positioning?

A) Unlike branding, positioning is not intended to evoke the specific attributes that consumers
associate with a product.
B) More often than not, positioning dilutes brand equity.
C) Through positioning, firms emphasize differences from competitors' offerings.
D) Positioning refers to the process of scaling up production in a market characterized by high
demand.
Answer: C
Diff: 2: Moderate
Skill: Concept
9) Which of the following is true with regard to a global positioning strategy?

A) A global positioning strategy does not address the shared expectations of a global customer
market segment.
B) More often than not, global positioning dilutes brand equity in the international market.
C) A global positioning strategy reduces international marketing costs.
D) Internationalizing firms rarely aim for a global positioning strategy.
Answer: C
Diff: 2: Moderate
Skill: Concept
10) Frequent business travelers, who are also affluent and eager spenders, represent a global
market segment.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
3
11) Branding refers to the process of dividing a firm's total customer base into homogeneous
clusters in a way that allows management to formulate unique marketing strategies for each
group.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
12) In international business, marketing is concerned with identifying, measuring, and

responding to market opportunities abroad
Answer: TRUE
Diff: 1: Easy
Skill: Concept
13) A reputed American automaker competes in the premium car market segment. It targets
affluent buyers with refined tastes who would not mind paying several thousand dollars for a
premium car. This is an example of positioning.
Answer: TRUE
Diff: 2: Moderate
Skill: Application
14) What is market segmentation? In a short essay, discuss how international firms use market
segmentation.
Answer: Market segmentation refers to the process of dividing the firm's total customer base
into homogeneous clusters in a way that allows management to formulate unique marketing
strategies for each group. Within each market segment, customers exhibit similar characteristics
regarding income level, lifestyle, demographic profile, or desired product benefits.
In international business, firms frequently formulate market segments by grouping countries
based on macro-level variables, such as level of economic development or cultural dimensions.
Many MNEs group Latin American countries based on a common language (Spanish) or
European countries based on similar economic conditions. This approach has proven most
effective for product categories in which governments play a key regulatory role (such as
telecommunications, medical products, and processed foods) or where national characteristics
prevail in determining product acceptance and usage.
Diff: 2: Moderate
Skill: Concept
4
15) Explain the purpose of positioning. How does a global positioning strategy assist firms
participating in international business? What benefit does a global positioning strategy offer?
Answer: A key objective in pursuing global market segments is to create a unique position in the
minds of target customers. Positioning is a marketing strategy in which the firm develops both
the product and its marketing to evoke a distinct impression in the customer's mind, emphasizing
differences from competitors' offerings. In the theme park business, Disney positions itself as
standing for family values and "good, clean fun" to attract families around the world. Starbucks
positions its products at customers with sophisticated tastes who do not mind paying several
dollars for a cup of coffee.
Positioning may also evoke the specific attributes that consumers associate with a product. Diet
Coke elicits an image of someone who wants to lose or maintain weight. When Coca-Cola first
entered Japan, research revealed that Japanese women do not like products labeled "diet," nor is
the population considered overweight. Thus, management altered the product's positioning in
Japan by changing the name to Coke Light.
Internationalizing firms aim for a global positioning strategy, which positions the offering
similarly in the minds of targeted buyers worldwide. Starbucks, Volvo, and Sony successfully use
this approach. Consumers worldwide view these strong brands in the same way. Global
positioning strategy reduces international marketing costs by addressing the shared expectations
of a global customer market segment.
Diff: 2: Moderate
Skill: Concept
16) Explain the importance of a global market strategy. How does a global market strategy affect
the choice of adaption versus standardization for an international marketing program?
Answer: A global marketing strategy is a plan of action that a firm develops for foreign markets
that guides its decision-making on (1) how to position itself and its offerings, (2) which customer
segments to target, and (3) to what degree it should standardize or adapt its marketing program
elements.
In addition to guiding targeting and positioning, global marketing strategy also articulates the
degree to which the firm's marketing program should vary between different foreign markets.
With adaptation, the firm modifies one or more elements of its international marketing program
to accommodate specific customer requirements in a particular market.
Standardization makes the marketing program elements uniform, with a view to targeting entire
regions, or even the global marketplace, with the same product or service.
Diff: 2: Moderate
Skill: Synthesis
Objective: 16-1, 16-2: Explain global market segmentation, Understand standardization and
adaptation of international marketing
5
17) Taken together, the key elements of a company's marketing program are known as the
________.
A) product mix
B) value chain
C) product lifecycle
D) marketing mix
Answer: D
Diff: 1: Easy
Skill: Concept
Objective: 16-2: Understand standardization and adaptation of international marketing
18) Adaptation is defined as ________.

A) the firm's efforts to make its marketing program elements uniform, with a view to targeting
entire regions, or even the global marketplace, with the same product or service
B) the firm's attempt at altering its organizational structure to facilitate internationalization
C) the firm's efforts to modify one or more elements of its international marketing program to
accommodate specific customer requirements in a particular market
D) the firm's effort to minimize employee attrition by rewarding performance
Answer: C
Diff: 2: Moderate
Skill: Concept
19) In which of the following industries is standardization more likely to be pursued?

A) local industries
B) furniture
C) publishing
D) credit cards
Answer: D
Diff: 1: Easy
Skill: Concept
20) A furniture company that makes its marketing program elements uniform, targeting entire
regions with similar products, is demonstrating ________.
A) product diversification
B) customization
C) standardization
D) adaptation
Answer: C
Diff: 2: Moderate
Skill: Application
6
21) When managers attempt to standardize their international marketing program, they can
expect ________.
A) diminished efficiency
B) cost reduction
C) brand dilution
D) very high profit margins
Answer: B
Diff: 1: Easy
Skill: Concept
22) A global brand can best be defined as ________.

A) a brand with a complicated value-chain
B) a brand that focuses on a single generational group within a country
C) a brand that uses a variety of marketing campaigns in different markets
D) a brand whose positioning, advertising strategy, look, and personality are standardized
worldwide
Answer: D
Diff: 1: Easy
Skill: Concept
23) Adaptation is often necessitated due to ________.

A) differences across countries in language, culture, economic conditions, and other factors
B) unstable demand
C) high import tariffs
D) similarities in customer preferences across various demographic groups worldwide and the
increased emphasis on the homogenization of global markets
Answer: A
Diff: 2: Moderate
Skill: Concept
7
24) In which of the following industries is an adaptation strategy LEAST likely to be
appropriate?
A) consumer electronics
B) publishing
C) furniture
D) television broadcasting
Answer: A
Diff: 1: Easy
Skill: Concept
25) Managers consider several different rationales when adapting marketing program elements,
such as ________.
A) high and relatively stable incomes of buyers belonging to the global market segment
B) stable demand of consumer goods worldwide
C) differences in living standards and economic conditions
D) need for improved planning and control
Answer: C
Diff: 1: Easy
Skill: Concept
Refrigerator Adaptations (Scenario)

Cold-Aire Inc. manufactures refrigerators from its facilities in the United States and China and
ships them to retail stores around the world. Kitchen sizes vary around the world, and as a result,
refrigerator sizes must vary as well. U.S. retailers want large refrigerators, while European and
Asian retailers demand smaller units. Cold-Aire manufactures over 20 different models of
refrigerators, which often vary in size by only a few inches. Cold-Aire managers are concerned
that the firm is losing money because of product adaptations. Cold-Aire management is meeting
to discuss the various cost-saving options for the firm.
26) Which of the following questions would be the most important for Cold-Aire managers to
evaluate when determining how the firm could reduce production costs in a single market?
A) Has the demand for Cold-Aire refrigerators declined in recent years?
B) Are customized Cold-Aire refrigerators as user friendly as the ones that are not?
C) Can Cold-Aire standardize its refrigerators?
D) Is Cold-Aire refrigerators likely to have greater demand in warmer countries than in colder
regions?
Answer: C
Diff: 3: Hard
Skill: Critical Thinking
AACSB: Analytical Thinking; Environments and Reflective Thinking
8
27) Which of the following most likely supports Cold-Aire implementing a regional strategy of
refrigerator standardization?
A) Refrigerator sizes within Latin America tend to be similar.
B) Distribution channels in Asian countries are usually complicated.
C) American kitchens are typically more spacious than Asian ones.
D) Customers in Europe demand exterior ice and water dispensers.
Answer: A
Diff: 2: Moderate
28) Which of the following best supports Cold-Aire making fewer refrigerator adaptations?
A) Adaptation caters to local consumer demands.
B) Standardization reduces manufacturing expenses.
C) Adaptation establishes a sense of buyer loyalty.
D) Standardization limits choices available to consumers.
Answer: B
Diff: 2: Moderate
29) Which of the following would most likely be a result of increased standardization of Cold-
Aire refrigerators?
A) Cold-Aire would stop exporting refrigerators completely.
B) Cold-Aire would open a facility to produce customized refrigerator models.
C) Cold-Aire would implement a uniform international marketing campaign.
D) Cold-Aire would hire fewer workers and pay lower wages.
Answer: C
Diff: 2: Moderate
30) Which of the following refers to an advantage for firms that adapt a unique marketing
program for an individual market?
A) By doing so, firms decrease their reliance on foreign market intermediaries for large sales.
B) By doing so, firms scale up production substantially to meet the needs of a large and growing
market.
C) Products are tailored to specifically meet the exclusive needs of customers in that market.
D) Governments provide heavy tax reliefs to firms that modify products and services.
Answer: C
Diff: 2: Moderate
Skill: Concept
9
31) Adaptation is more costly than standardization because ________.
A) a firm that chooses adaptation over standardization is likely to lose customers in the long run
B) adaptation often requires the firm to engage in substantial modifications to product design,
manufacturing, pricing, distribution, and communications
C) adaptation requires the firm to scale up production without regard to quality
D) standardization holds no market risks
Answer: B
Diff: 1: Easy
Skill: Concept
32) Perhaps the most important distinction between standardization and adaptation is that
________.
A) standardization helps the firm customize products according to customer preferences, while
adaptation helps the firm save time
B) standardization helps the firm cut costs, while local adaptation helps the firm more precisely
cater to local needs and requirements
C) standardization helps the firm cater to the needs of local customers, while adaptation helps the
firm save costs through mass production
D) standardization helps the firm upgrade quality to suit the unique tastes of consumers, while
adaptation emphasizes uniformity
Answer: B
Diff: 2: Moderate
Skill: Concept
33) Adaptation refers to the process of making the marketing program elements uniform, with a
view to targeting entire regions, or even the global marketplace, with the same product or
service.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
34) A standardized marketing approach is inappropriate when products have universal

specifications.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
10
35) A standardized marketing approach is appropriate when customers seek similar features in
the product or service.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
36) Commodities, industrial equipment, and technology products are difficult to standardize.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
37) Varying income levels among nations usually necessitate that firms make price adjustments
and product modifications for individual markets.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
38) Adaptation is counterproductive in multidomestic industries.

Answer: FALSE
Diff: 1: Easy
Skill: Concept
11
39) Briefly discuss the principal advantages of standardization.
Answer: When managers build on commonalities in customer preferences and attempt to
standardize their international marketing program, they can expect at least three major benefits:
a. Cost Reduction: Standardization reduces costs by making possible economies of scale in
design, sourcing, manufacturing, and marketing. Offering a similar marketing program to the
global marketplace or across entire regions is more efficient than having to adapt products for
each of the numerous individual markets.
b. Improved Planning and Control: Standardization provides for improved planning and control
of value-adding activities. Fewer offerings mean that management can simplify quality control
and reduce the number of parts that it stocks for repairing defective products. Marketing
activities are also simplified. Instead of designing a unique marketing campaign for individual
countries, the firm is able to standardize its campaigns.
c. Ability to portray a consistent image and build global brands: A brand is a name, sign, symbol,
or design intended to identify the firm's product and differentiate it from those of competitors. A
global brand is a brand whose positioning, advertising strategy, look, and personality are
standardized worldwide. Standardization allows the firm to establish and project a globally
recognized corporate or product brand. It increases customer interest and reduces the confusion
that arises from proliferation of products and marketing programs.
Diff: 2: Moderate
Skill: Concept
12
40) Discuss four factors that would persuade firms to adapt elements of their marketing programs
for individual markets. Provide suitable examples.
Answer: Although firms usually prefer to standardize their products, adaptation is often
necessitated due to differences across countries in language, culture, economic conditions, and
other factors. Adaptation becomes necessary under the following situations:
a. Differences in National Preferences: Adaptation makes the offering more acceptable to
customers in individual markets. Differences in consumer behavior around the world are a major
driver of local adaptation. For example, in Japan, customers favor green tea-flavored ice cream.
b. Differences in Laws and Regulations: The promotion of certain products is restricted in some
countries. For example, laws in Europe, including Germany, Norway, and Switzerland, restrict
advertising directed at children. In Quebec, Canada's French-speaking province, local law
requires product packaging to be in both English and French. In some markets, the use of certain
sales promotion activities such as coupons and sales contests is restricted.
c. Differences in Living Standards and Economic Conditions: Because income levels vary
substantially around the world, firms typically adjust both the pricing and the complexity of their
product offerings for individual markets. For example, Dell sells simplified versions of its
computers in developing economies to accommodate lower local spending power.
d. Differences in National Infrastructure: The quality and reach of transportation networks,
marketing intermediaries, and overall business infrastructure influence the marketing
communications and distribution systems that firms employ abroad. Infrastructure is especially
poor in the rural parts of developing economies, necessitating innovative approaches for getting
products to customers. Road and rail networks in western China are underdeveloped, so firms
use small trucks to reach retailers in outlying communities. Undeveloped media also require
substantial adaptations to carry marketing communications. In rural Vietnam, most consumers
cannot access television, magazines, or the Internet. Radio, billboards, and brochures are favored
for targeting low-income buyers.
Diff: 2: Moderate
Skill: Concept
13
41) When is a standardized marketing approach the most appropriate? Define global brand.
Answer: Standardization represents a tendency toward global integration. Standardization is
more likely to be pursued in global industries such as aircraft manufacturing, pharmaceuticals,
and credit cards. Airbus, Pfizer, and MasterCard use a standardized marketing strategy with great
success. Their offerings are largely uniform across many markets worldwide. A standardized
marketing approach is most appropriate when market segments and customer needs are
consistent across numerous countries. Products that feature universal specifications are also
candidates for a standardized approach. In industrial sales, businesses often prefer parts and
components of similar specifications, quality, and performance, and other product attributes.
The feasibility of standardization varies across industries and product categories. Commodities,
industrial equipment, and technology products lend themselves to a high degree of
standardization.
A global brand is one whose positioning, advertising strategy, look, and personality are
standardized worldwide. Global branding increases customer interest and reduces the confusion
that can arise when the firm offers numerous adapted products and marketing programs.
Diff: 2: Moderate
Skill: Concept
42) In a short essay, explain why a "one offering-one world" marketing strategy is difficult, and
cite an example of an industry that has attempted a "one offering-one world" approach. How
does culture affect variances in marketing programs around the world?
Answer: Firms rarely find it feasible or practical to follow a "one offering-one world" strategy
across all dimensions of the marketing program. Automotive companies tried for years to market
a "world car" that meets customer preferences everywhere and complies with various
governments' safety specifications. Ambitious experiments such as the Ford Mondeo failed to
meet the approval of customers and regulatory bodies around the world. Ford was forced to
modify its design to accommodate climate and geography (which affected engine specifications),
government emissions standards, gas prices, and customer preferences for frills such as
cupholders. As a compromise, some firms pursue standardization as part of a regional strategy,
formulating international marketing elements to exploit commonalities across a geographic
region instead of the whole world. General Motors (www.gm.com) markets distinctive car
models for China (Buick, HRV), Europe (Opel, Vauxhall), and North America (Cadillac,
Chevrolet). Convergence of regional preferences, regional economic integration, harmonization
of product standards, and growth of regional media and distribution channels all make regional
marketing more feasible than pursuing global marketing approaches.
Culture affects the content of marketing programs because it determines buyer attitudes toward
the role and function of advertising, humor content, the depiction of characters (such as the roles
of men and women), and decency standards. Advertising conveys a message encoded in
language, symbols, colors, and other attributes, each of which may have distinctive meanings.
Buyer receptiveness differs as a function of culture and language.
Diff: 2: Moderate
Skill: Synthesis
Objective: 16-2, 16-5: Understand standardization and adaptation of international marketing,
Understand international marketing communications
14
43) Brand equity can best be defined as the ________.
A) market value of a brand
B) attractiveness of a brand name
C) durability of a brand
D) lack of customer confidence in a brand
Answer: A
Diff: 1: Easy
Skill: Concept
Objective: 16-3: Describe global branding and product development
44) Which of the following characterize the most successful global brands?
A) low visibility
B) narrow appeal
C) status symbols
D) highly complex product features
Answer: C
Diff: 1: Easy
Skill: Concept
45) An American automaker operating in the Asian and the European markets designs various
models around a standardized platform. The firm adds parts, features, and regular units to this
basic standardized platform according to the preferences of its customers. This exemplifies
________.
A) segmentation
B) customer relations management
C) brand dilution
D) modular architecture
Answer: D
Diff: 2: Moderate
Skill: Application
46) All of the following are true of global new-product planning teams EXCEPT ________.
A) they assemble employees with special knowledge and expertise
B) they are responsible for global promotion of products and services
C) they include geographically-diverse employees in team activities
D) they determine which elements of the product will be standardized
Answer: B
Diff: 2: Moderate
Skill: Concept
15
47) A ________ is a group of managers within a firm that determines which elements of the
product will be standardized and which will be adapted locally.
A) research and development team
B) global new-product planning team
C) customer relations management
D) talent management team
Answer: B
Diff: 1: Easy
Skill: Concept
48) Consumers prefer globally branded products because branding provides a sense of trust and
confidence in their purchasing.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
49) A firm can reduce its marketing and advertising costs substantially by focusing on numerous
national brands instead of a single global brand.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
50) The strength of a global brand is best measured by its brand equity.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
51) Global new-product planning teams formulate best practices that the firm implements in all
its units worldwide.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
16
52) In a short essay, explain why consumers prefer global brands. What are some of the
important characteristics of the most successful global brands?
Answer: Consumers frequently prefer globally branded products because global branding
provides a sense of trust and confidence in their purchasing.
A strong global brand:
∙ increases the efficiency and effectiveness of marketing programs
∙ stimulates brand loyalty
∙ allows the firm to charge premium prices
∙ increases the firm's leverage with intermediaries and retailers
∙ enhances the firm's competitive advantage in global markets
The firm can reduce its marketing and advertising costs by concentrating on a single global
brand instead of numerous national brands. The strength of a global brand is best measured by its
brand equity-the market value of the brand.
The most successful global brands tend to have several of the following characteristics:
1. High, conspicuous visibility, such as consumer electronics and jeans.
2. Status symbols, such as cars and jewelry.
3. Widespread appeal, due to innovative features that seem to fit everyone's lifestyle, such as
mobile phones, credit cards, and cosmetics.
4. Close identification with a particular country, such as Levi's (U.S. style) and IKEA furniture
(Scandinavian style).
Diff: 2: Moderate
Skill: Concept
53) Which of the following constitutes a major disadvantage for exporting firms that primarily
use independent distributors based abroad?
A) inability to monitor currency exchange rates
B) lack of control over pricing
C) absence of brand loyalty among customers
D) limited access to low-cost labor
Answer: B
Diff: 1: Easy
Skill: Concept
Objective: 16-4: Explain international pricing
54) Locating manufacturing in countries with low-cost labor enables a firm to ________.
A) charge premium prices
B) create artificial demand
C) standardize products
D) charge lower prices
Answer: D
Diff: 1: Easy
Skill: Concept
17
55) All of the following refer to external factors that impact international pricing EXCEPT
________.
A) cost of manufacturing
B) value-added taxes
C) shipping
D) anticipated fluctuations in currency exchange rates
Answer: A
Diff: 1: Easy
Skill: Concept
56) The problem of end-user prices reaching exorbitant levels in the export market, caused by
multilayered distribution channels, intermediary margins, tariffs, and other international
customer costs is known as ________.
A) international price escalation
B) incremental pricing
C) standardization
D) puffery
Answer: A
Diff: 1: Easy
Skill: Concept
57) Which of the following refers to a key strategy used by corporations to combat international
price escalation?
A) lengthen the distribution channel
B) ship assembled products to save additional labor costs
C) redesign the product to remove costly features
D) centralize production and sourcing to a single location
Answer: C
Diff: 1: Easy
Skill: Concept
18
58) Galaxy Inc., a reputed global conglomerate, has suffered substantial losses in recent months
owing to the problem of end-user prices shooting high up in the export market. In order to regain
its competitive advantage abroad, Galaxy must ________.
A) increase its budget on technical research
B) hire a greater number of semi-skilled workers
C) shorten the distribution channel
D) centralize production and sourcing to a single location
Answer: C
Diff: 2: Moderate
Skill: Application
59) The practice of pricing intermediate or finished products exchanged among the subsidiaries
and affiliates of the same corporate family located in different countries is known as ________.
A) transfer pricing
B) breakeven pricing
C) premium pricing
D) discounting
Answer: A
Diff: 1: Easy
Skill: Concept
60) MNEs often engage in transfer pricing for ________.

A) stabilizing their annual revenues
B) generating additional sales by depressing prices in developing countries and increasing prices
in advanced economies
C) shifting profits out of a country that has high corporate income taxes into a country with low
corporate income taxes to increase company-wide profitability
D) boosting productivity and efficiency in the long run
Answer: C
Diff: 1: Easy
Skill: Concept
19
61) A subsidiary is most likely to receive favorable treatment from an MNE if it is located in a
country with ________.
A) lower corporate income-tax rates
B) significant restrictions on profit repatriation
C) low tariffs for the product in question
D) political instability
Answer: A
Diff: 1: Easy
Skill: Concept
62) Which of the following refers to an advantage of firms that enter new markets through FDI?
A) low employee attrition
B) minimal competition from other players in the market
C) direct selling of products to consumers through the Internet
D) control over pricing strategy
Answer: D
Diff: 1: Easy
Skill: Concept
63) Gray marketers are ________.

A) typically large business conglomerates
B) unauthorized intermediaries
C) authorized distributors
D) a firm's most effective promotional channels
Answer: B
Diff: 1: Easy
Skill: Concept
64) Gray market activity is also called ________.

A) market diversification
B) target costing
C) puffery
D) parallel importation
Answer: D
Diff: 1: Easy
Skill: Concept
20
International Price Setting (Scenario)
The Comfy Couch Corporation (CCC) is a leading American manufacturer of sofas, sectionals,
and lounge chairs. Managers from the U.S.-based firm recently met a London retailer who
expressed an interest in selling CCC lounge chairs in his stores. The retailer sells a number of
different furniture brands in his stores, so CCC managers need to price their furniture
appropriately if the firm is to be competitive in the European market.
65) Which of the following questions would be the most important to evaluate before setting a
price for the lounge chairs exported to England?
A) What is the mark up price quoted by the London retailer for CCC's products?
B) What is the average price that Londoners pay for upholstered chairs?
C) How many lounge chairs are sold in London retail stores every year and at what price?
D) Do many global market segments exist in the European Union?
Answer: A
Diff: 2: Moderate
66) Which of the following should most likely be considered by managers of CCC before setting
the price for the lounge chairs manufactured by the company?
A) In what other markets could CCC export its high-priced line of furniture?
B) Would the London retailer be able to recommend appropriate intermediaries?
C) What type of pricing strategy best corresponds to the corporate goals of CCC?
D) Does CCC plan to implement product diversification in the future?
Answer: C
Diff: 2: Moderate
67) If CCC managers employ rigid cost-plus pricing they would most likely be disadvantaged
because ________.
A) rigid cost-plus pricing often fails to account for local market conditions
B) through rigid cost-plus pricing, added costs of doing business abroad cannot be adjusted
C) rigid cost-plus pricing overly focuses on the prevailing conditions in the local markets
D) rigid cost-plus pricing is primarily driven by buyer demand in the local markets
Answer: A
Diff: 2: Moderate
21
68) The root cause of gray market activity is ________.
A) a firm's inability to control production and distribution costs
B) a significant difference in price between national distributors
C) the dominance of substandard products in local markets
D) a large enough difference in price of the same product between two countries
Answer: D
Diff: 1: Easy
Skill: Concept
69) Manufacturers of branded products are concerned about gray market activity because it can
lead to ________.
A) a tarnished brand image
B) empowerment of distributors
C) lower quality outputs
D) decreased productivity
Answer: A
Diff: 1: Easy
Skill: Concept
70) Differences in culture, laws, and media availability imply ________.

A) that culture is a weak determinant of buyer attitudes toward the role and function of
advertising
B) that international advertising expenditures tend to remain unchanged regardless of the firm's
foreign operations
C) that it is seldom possible to duplicate in foreign markets the type and mix of advertising used
in the home market
D) that it is difficult to influence buyer perception through media
Answer: C
Diff: 2: Moderate
Skill: Concept
71) Rigid cost-plus pricing refers to setting prices to cover only the firm's variable costs, but not
its fixed costs.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
22
72) Prices do not affect customers' perception of value.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
73) Rigid cost-plus pricing is typically favored by highly experienced exporters.

Answer: FALSE
Diff: 1: Easy
Skill: Concept
74) Incremental pricing refers to setting prices to cover only the firm's variable costs, but not its
fixed costs.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
75) When an exporter gains a price advantage because its home-country currency is weakening
relative to its customer's currency, then it should consider lowering the prices of its products.
Answer: FALSE
Diff: 2: Moderate
Skill: Concept
76) MNEs typically centralize transfer pricing under the direction of the chief financial officer at
corporate headquarters.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
77) The root cause of gray market activity is a large enough difference in price of the same
product between two countries.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
23
78) Gray market activity often leads to enhanced brand equity.
Answer: FALSE
Diff: 2: Moderate
Skill: Concept
79) In a short essay, discuss the three common pricing strategies. How do firms employ each
strategy? What are the main advantages and disadvantages of using such strategies?
Answer: The three common pricing strategies in international business are:
a. Rigid cost-plus pricing refers to setting a fixed price for all export markets. It is an approach
favored by less experienced exporters. In most cases, management simply adds a flat percentage
to the domestic price to compensate for the added costs of doing business abroad. The export
customer's final price includes a mark-up to cover transporting and marketing the product, as
well as profit margins for both intermediaries and the manufacturer. This method often fails to
account for local market conditions, such as buyer demand, income level, and competition.
b. Flexible cost-plus pricing is used when management includes any added costs of doing
business abroad in its final price. Management also accounts for local market and competitive
conditions, such as customer purchasing power, demand, competitor prices, and other external
variables. This approach is more sophisticated than rigid cost-plus pricing because it accounts for
specific circumstances in the target market.
c. Incremental pricing refers to setting prices to cover only the firm's variable costs, but not its
fixed costs. Here, management assumes fixed costs are already paid from sales of the product in
the firm's home country or other markets. The approach enables the firm to offer competitive
prices, but it may result in suboptimal profits. When carried to an extreme, incremental pricing
may invite competitors to accuse a company of dumping-charging a lower price for exported
products, sometimes below manufacturing cost, potentially driving local suppliers out of
business.
Diff: 2: Moderate
Skill: Concept
24
80) Define international price escalation. Discuss how distribution channel length affects
international business transactions.
Answer: International price escalation refers to the problem of end-user prices reaching
exorbitant levels in the export market caused by multilayered distribution channels, intermediary
margins, tariffs, and other international customer costs. International price escalation means the
retail price in the export market can be significantly higher than the domestic price, creating a
competitive disadvantage for the exporter.
Distribution channel length refers to the number of distributors or other intermediaries that it
takes to get the product from the manufacturer to the market. The longer the channel, the more
intermediaries the firm must compensate, and the costlier the channel. High channel costs
contribute to international price escalation, creating a competitive disadvantage for the firm.
Diff: 2: Moderate
Skill: Synthesis
Objective: 16-4, 16-6: Explain international pricing, Describe international distribution
81) Buyer receptiveness differs as a function of ________.

A) culture and language
B) lobbying
C) media expenses
D) product quality
Answer: A
Diff: 1: Easy
Skill: Concept
Objective: 16-5: Understand international marketing communications
82) All of the following factors are important to consider about the target audience of an
international advertising campaign EXCEPT ________.
A) buying motivations
B) entrepreneurial experiences of consumers
C) purchasing power
D) age and education
Answer: B
Diff: 1: Easy
Skill: Concept
25
International Advertising (Scenario)
Quik-Vac Corporation, a U.S.-based company, manufactures small, inexpensive vacuum cleaners
that work on rechargeable batteries. Quik-Vac customers typically live in small apartments where
a large vacuum cleaner is neither necessary nor easy to use. Quik-Vac managers believe there is a
market for the vacuum cleaners outside of the United States, especially in communities where
living space is limited. The Quik-Vac marketing department has been assigned the task of
creating an advertising campaign to introduce Quik-Vac's offerings to global consumers.
83) Before developing a print media campaign, which of the following must the marketing
department of Quik-Vac determine about the company's target market?
A) the number of homes with TVs
B) the percentage of people owning radios
C) the number of global ad agencies in the target market
D) the literacy rate among the target population
Answer: D
Diff: 2: Moderate
Skill: Application
84) Standardized advertising, if used by Quik-Vac, would most likely ________.

A) cater to customers with varied preferences worldwide
B) simplify Quik-Vac's communications strategy and save costs
C) appeal to the highly literate populations only
D) make importation of raw materials mandatory for Quik-Vac
Answer: B
Diff: 2: Moderate
85) Which of the following can be reasonably inferred if Quik-Vac places increased emphasis on
international promotional activities?
A) that it intends to scale down production of vacuum cleaners
B) that it is disinclined to enter emerging markets
C) that it intends to stimulate an initial purchase, immediate purchase, or increased purchases of
its products
D) that it is overly dependent on foreign intermediaries
Answer: C
Diff: 2: Moderate
26
86) Many MNEs employ relatively standardized advertising around the world, primarily because
by doing so ________.
A) they can cater to a wide variety of audiences with different preferences
B) they benefit from consumer inputs on effective marketing
C) they are able to produce high-quality ads
D) they are able to save costs
Answer: D
Diff: 2: Moderate
Skill: Concept
87) Which of the following is true with regard to global advertising agencies?
A) They are also known as unauthorized intermediaries.
B) They rarely offer additional services such as market research, publicity, and package design.
C) They can create advertising that is both global and sensitive to local conditions.
D) Typically, they do not cater to MNEs.
Answer: C
Diff: 1: Easy
Skill: Concept
88) Promotional activities ________.

A) are intended to stabilize the demand for consumer goods in advanced economies
B) are short-term marketing activities intended to stimulate an initial purchase, immediate
purchase, or increased purchases of the product
C) do not include coupons and demonstrations
D) are strategies designed to tap the market potential of products that have a short shelf life in
emerging markets and developing economies
Answer: B
Diff: 1: Easy
Skill: Concept
89) Serving a key global customer in a consistent and standardized manner, regardless of where
in the world it operates is known as ________.
A) global account management
B) offshoring
C) marketing communications
D) insourcing
Answer: A
Diff: 1: Easy
Skill: Concept
27
90) ________ refers to the number of distributors or other intermediaries that it takes to get the
product from the manufacturer to the market.
A) Channel depth
B) Marketing mix
C) Channel length
D) Social network
Answer: C
Diff: 1: Easy
Skill: Concept
91) International advertising expenditures vary depending on the size and extent of a firm's
foreign operations.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
92) Promotional activities are typically long-term marketing activities.

Answer: FALSE
Diff: 1: Easy
Skill: Concept
93) Promotions usually require a high level of intermediary or retailer sophistication to succeed.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
94) Most MNEs employ advertising agencies to create promotional content and select media for
foreign markets.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
28
95) How does culture affect international advertising campaigns? Provide an example of an
international advertising campaign which was unsuccessful owing to cultural differences.
Answer: Advertising conveys a message encoded in language, symbols, colors, and other
attributes, each of which may have distinctive meanings. Buyer receptiveness differs as a
function of culture and language. Culture determines buyer attitudes toward the role and function
of advertising, humor content, the depiction of characters (such as the role of men and women),
and decency standards.
For example, in China, Nike Inc. ran an ad produced for the U.S. audience in which NBA
basketball star LeBron James battles-and defeats-a computer-generated Chinese Kung Fu master.
Chinese consumers were offended and China's national government banned the advertisement.
Diff: 2: Moderate
Skill: Concept
AACSB: Analytical Thinking; Diverse and Multicultural Work
96) What is global account management? Briefly describe the role of global account
management in international business.
Answer: Serving a key global customer in a consistent and standardized manner, regardless of
where in the world it operates is known as global account management (GAM).
In a gradually globalizing world, foreign customers increasingly seek uniform and consistent
prices, quality, and customer service.
Key accounts such as Migros, Zellers, and Walmart typically purchase from a collection of
preferred suppliers that meet their specifications. Suppliers target these key customers by shifting
resources from national, regional, and function-based operations to GAM, whose programs
feature dedicated cross-functional teams, specialized coordination activities for specific
accounts, and formalized structures and processes. Private IT-based portals facilitate the
implementation of such systems. Each global customer is assigned a global account manager, or
team, who provides the customer with coordinated marketing support and service across various
countries.
Diff: 2: Moderate
Skill: Concept
97) A firm that uses the Internet to provide detailed product information and the means for
foreigners to buy offerings is using ________.
A) modular architecture
B) direct marketing
C) lengthy distribution channels
D) internal marketing
Answer: B
Diff: 2: Moderate
Skill: Concept
Objective: 16-6: Describe international distribution
29
98) Channel length can best be defined as ________.
A) the number of products sold under a single brand name
B) the number of transactions a business buyer makes in the market at a given point of time
C) the number of intermediaries between the manufacturer and the retailer
D) the length of time it takes for goods to be manufactured for sale
Answer: C
Diff: 2: Moderate
Skill: Concept
99) Direct marketing entails selling directly to end users.

Answer: TRUE
Diff: 1: Easy
Skill: Concept
100) Channel length refers to the number of distributors or other intermediaries that it takes to
get the product from the manufacturer to the market.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
101) The longer the channel, the lesser intermediaries the firm must compensate.
Answer: FALSE
Diff: 1: Easy
Skill: Concept
102) Global account management means serving a key global customer in a consistent and
standardized manner, regardless of where in the world it operates.
Answer: TRUE
Diff: 1: Easy
Skill: Concept
30

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International Business: The New Realities, 4e (Cavusgil)

Chapter 16 Marketing in the Global Firm

1) In international business, marketing is concerned with ________.

5) A global market segment refers to ________.

6) Which of the following is true with regard to a global market segment?

8) Which of the following is true with regard to positioning?

9) Which of the following is true with regard to a global positioning strategy?

12) In international business, marketing is concerned with identifying, measuring, and

18) Adaptation is defined as ________.

19) In which of the following industries is standardization more likely to be pursued?

22) A global brand can best be defined as ________.

23) Adaptation is often necessitated due to ________.

Refrigerator Adaptations (Scenario)

34) A standardized marketing approach is inappropriate when products have universal

38) Adaptation is counterproductive in multidomestic industries.

60) MNEs often engage in transfer pricing for ________.

63) Gray marketers are ________.

64) Gray market activity is also called ________.

70) Differences in culture, laws, and media availability imply ________.

73) Rigid cost-plus pricing is typically favored by highly experienced exporters.

81) Buyer receptiveness differs as a function of ________.

84) Standardized advertising, if used by Quik-Vac, would most likely ________.

88) Promotional activities ________.

92) Promotional activities are typically long-term marketing activities.

99) Direct marketing entails selling directly to end users.

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