Global Marketing and R&D
1. The set of choices the firm offers to its targeted markets is known as the marketing mix.
2. The marketing mix is comprised of product attributes, distribution strategy, communication
strategy and pricing strategy.
3. Most academics support Theodore Levitt's assertion that global markets are becoming more
standardized.
4. The process of identifying distinct groups of consumers whose purchasing behavior differs
from others in important ways is known as the marketing mix.
5. The goal of market segmentation is to optimize the fit between the purchasing behavior of
consumers in a given segment and the marketing mix, thereby maximizing sales to that
segment.
6. The structure of market segments may differ significantly from country to country.
7. Products sell well when their attributes match consumer needs.
8. The most important aspect of cultural differences is values.
9. Firms based in less-developed nations tend to build a lot of extra performance attributes into
their products.
10. Consumers in the most developed countries are typically willing to sacrifice their preferred
product attributes for lower prices.
11. Differences in technical standards can prevent a firm from standardizing products across
markets.
12. The four main differences between distribution systems are retail concentration, channel
length, channel exclusivity and channel quality.
13. In a concentrated retail system, there are many retailers, no one of which has a significant
share of the market.
14. Developing countries tend toward greater retail concentration.
15. An increase in car ownership, the number of two-income households and the number of
households with a refrigerator have all contributed to the more fragmented retail system found
in developed countries.
16. The number of intermediaries between the producer and the consumer is known as the
channel length.
17. A channel is considered to be long when a producer sells through an import agent, a
wholesaler and a retailer.
18. The most important determinant of channel length is the degree to which the retail system is
concentrated.
19. Countries with fragmented retail systems tend to have long channels of distribution.
20. The entry of large discount superstores such as Tesco and Carrefour have shortened channel
length in some countries.
21. One benefit of a shorter channel is that it cuts selling costs when the retail sector is very
fragmented.
22. Import agents are typically limited to independent trading houses.
23. Source effects occur when the receiver of the message evaluates the message based on the
status or image of the sender.
24. Source effects and country of origin effects are always negative.
25. A company that depends on mass media advertising to communicate its marketing message
to potential consumers is using a push strategy.
26. When a company emphasizes personal selling, the company is probably using a push
strategy.
27. A push strategy is generally favored by consumer goods firms that are trying to sell to a
large segment of the market.
28. A push strategy makes sense when distribution channels are short.
29. A firm may be prevented from using standardized advertising because of advertising
regulations.
30. Price discrimination involves charging whatever the market will bear.
31. When a small change in price produces a large change in demand, demand is said to be
inelastic.
32. The use of price as a competitive weapon to drive weaker competitors out of a national
market is known as predatory pricing.
33. Pricing decisions around the world must be delegated to the managers of various national
subsidiaries.
34. The "customization versus standardization" debate is an all or nothing issue.
35. The rate of new-product development seems to be lesser in countries where more money is
spent on basic and applied research and development.
36. Over the past 20 years, the U.S. monopoly on new-product development has strengthened
significantly.
37. New-product development has a high failure rate.
38. A company's customers can be a primary source of new-product ideas.
39. Designing for manufacturing increases not only product quality, but also costs involved.
40. One solution many international businesses adopt for allocating product development
responsibilities to various centers involves establishing a global network of R&D centers.
Multiple Choice Questions
41. Which of the following is not an element that constitutes a firm's marketing mix?
A. Product attributes
B. Communication strategy
C. Reverse engineering
D. Distribution strategy
42. The set of choices the firm offers to its targeted market is known as the
A. Marketing mix
B. Marketing concept
C. Marketing strategy
D. Market promotion
43. Research has long maintained that a major factor of success for new products is the
closeness of the relationship between
A. Finance and marketing
B. Marketing and R&D
C. Finance and materials management
D. Finance and R&D
44. According to Levitt, which of the following statements is ?
A. Technology drives the world toward a converging commonalty
B. There are accustomed differences in national preferences
C. The multinational corporation operates in a number of countries at low relative costs
D. The global corporation operates with resolute consistency at high relative costs
45. The continuing persistence of _____ differences between nations acts as a major brake on
any trend toward global consumer tastes and preferences.
A. Technological and industrial
B. Institutional and political
C. Cultural and economic
D. GNP level and growth rate
46. The identification of distinct groups of consumers whose purchasing behavior differs from
others in important ways is known as
A. Market segmentation
B. Market penetration
C. Diversification strategy
D. Differentiation
47. If market segments transcend national borders,
A. The company should develop unique products for each national market
B. The company can view the global market as a single entity and pursue a global strategy
C. A localization strategy would be appropriate
D. Consumers will have differing purchasing behavior in different nations
48. The most important aspect of a country's cultural differences, particularly important in
foodstuffs and beverages is the impact of
A. Values
B. Traditions
C. Norms
D. Attitudes
49. Consumers in highly developed countries value _____ as compared to their counterparts in
less developed nations.
A. Price
B. Product reliability
C. Product attributes
D. Standardized products
50. Which of the following statements is
?
A. Product reliability may be a more important attribute in most advanced countries
B. Consumers in highly developed countries tend to build a lot of extra performance attributes
into their products
C. Consumers in the most developed countries are often not willing to sacrifice their preferred
attributes for lower prices
D. Consumers in the most advanced countries often shun globally standardized products that
have been developed with the lowest common denominator in mind
51. The means a firm chooses for delivering the product to the consumer is its
A. Communication strategy
B. Segmentation strategy
C. Product attributes
D. Distribution strategy
52. The way a product is delivered is determined by
A. A firm's entry strategy
B. A firm's product positioning
C. The target market
D. Market segmentation
53. Contrary to Levitt's suggestions, consumers in the most developed countries are often
A. Willing to sacrifice their preferred attributes for lower prices
B. Not willing to pay more for products that have additional features customized to their tastes
C. Not willing to sacrifice their preferred attributes for lower prices
D. Willing to accept globally standardized products that have been developed with the lowest
common denominator in mind
54. In a concentrated retail system,
A. There are many retailers who have a major share of the market
B. There are many retailers, no one of which has a major share of the market
C. A few retailers supply a small segment of the market
D. A few retailers supply most of the market
55. By acquiring retailers in different countries, large global retailers such as Carrefour and
Wal-Mart have increased
A. Retail concentration
B. Retail fragmentation
C. Retail dispersion
D. Retail crowding
56. A country with high car ownership, a large number of households with refrigerators and a
large number of two income families tend to have
A. Retail division
B. Retail dispersion
C. Retail concentration
D. Retail fragmentation
57. In a _____ retail system, a few retailers supply most of the market.
A. Fragmented
B. Dispersed
C. Focused
D. Concentrated
58. Which of the following is not a key difference between distribution systems in different
countries?
A. Channel speed
B. Channel length
C. Channel exclusivity
D. Channel quality
59. A _____ retail system is one in which there are many retailers, no one of which has a major
share of the market.
A. Concentrated
B. Consolidated
C. Focused
D. Fragmented
60. Which of the following statements about retail systems is ?
A. One factor contributing to greater retail concentration is an increase in car ownership
B. The number of households with refrigerators leads to lesser retail concentration in developed
countries
C. There is a tendency for greater retail concentration in many developing countries
D. Retail systems are very fragmented in developed countries
61. In terms of retail concentration, developed countries tend to have a higher degree of
concentration than developing countries for all of the following reasons except
A. Number of households with refrigerators and freezers
B. Tradition of established local neighborhoods in which people walk to stores
C. Increase in car ownership
D. Number of two-income households that accompany development
62. Developed countries are more likely to have a
A. Concentrated retail system
B. Fragmented retail system
C. Crowded retail system
D. Dispersed retail system
63. The number of intermediaries between the manufacturer and the consumer is referred to as
A. Channel reach
B. Channel concentration
C. Channel exclusivity
D. Channel length
64. If a producer sells through an import agent, a wholesaler and a retailer, then
A. A long channel exists
B. The retail system must be concentrated
C. The internet probably plays a big role in the economy
D. There is no channel
65. The most important determinant of channel length is the degree to which a retail system is
A. Concentrated
B. Fragmented
C. Decentralized
D. Globalized
66. Which of the following statements about fragmented retail systems is ?
A. Countries with fragmented retail systems tend to have short channels of distribution
B. The more fragmented the retail system, the less expensive it is for a firm to make contact
with each individual retailer
C. Fragmented retail systems tend to promote the growth of wholesalers to serve retailers
D. When the retail sector is very fragmented, it makes sense for the firm to deal directly with
retailers
67. What kind of retail systems do rural India and China have?
A. Fragmented
B. Direct
C. Indirect
D. Concentrated
68. With a concentrated retail sector,
A. A relatively large sales force is required
B. The orders generated from each sales call can be large
C. There are long channels of distribution
D. It is expensive for the firm to make contact with each individual retailer
69. A(n) _____ distribution channel is one that is difficult for outsiders to access.
A. Selective
B. Intensive
C. Exclusive
D. Multichannel
70. When a channel is exclusive
A. It carries only high-end products
B. It is controlled by market leaders or by firms who have a niche market
C. It focuses on only on elite customers
D. It is often difficult for a new firm to get access to shelf space in supermarkets
71. The expertise, competencies and skills of established retailers in a nation and their ability to
sell and support the products of international businesses is
A. Channel exclusivity
B. Channel knowledge
C. Channel quality
D. Channel skill
72. Which of the following does not affect a firm's international communication?
A. Cultural barriers
B. Source effects
C. Channel exclusivity
D. Noise levels
73. To overcome cultural barriers, companies should
A. Develop products specifically for each market
B. Focus on universal needs
C. Focus only on market segments that transcend national boundaries
D. Develop cross-cultural literacy
74. When the receiver of a message evaluates a message based on the status or image of the
sender, _____ are said to have occurred.
A. Sender effects
B. Noise effects
C. Source effects
D. Communication effects
75. The extent to which the place of manufacturing influences product evaluations is known as
A. Source effects
B. Country of origin effects
C. Noise effects
D. Location effects
76. The probability of effective communications is reduced by
A. Noise effects
B. Location effects
C. Country of origin effects
D. Source effects
77. Which of the following statements about barrier to international communication is ?
A. Source effects occur when the receiver of the message evaluates the message on the basis of
the location of the sender
B. The best way for a firm to overcome cultural barriers is to use local input
C. Source effects and country of origin effects are always negative
D. Noise is extremely high in highly developed countries such as the United States
78. When a firm emphasizes personal selling rather than mass media advertising in the
promotional mix, the firm is using a
A. Standardized strategy
B. Pull strategy
C. Push strategy
D. Localized strategy
79. Which of the following statements is ?
A. Firms in consumer goods industries that are trying to sell to a large segment of the market
generally favor a push strategy
B. Mass communication has cost advantages for firms in consumer goods industries that are
trying to sell to a large segment of the market
C. Direct selling may be the only way to reach consumers in poor nations with low literacy
levels
D. Firms that sell industrial products or other complex products favor a pull strategy
80. A firm that depends more on mass media advertising to communicate the marketing
message to potential consumers is using a
A. Pull strategy
B. Push strategy
C. Standardized strategy
D. Localized strategy
81. Factors that determine the relative attractiveness of push and pull strategies include all of
the following except
A. Product type relative to consumer sophistication
B. Channel length
C. Noise levels
D. Media availability
82. When firms in the consumer goods industry are trying to sell to a large segment of the
market they favor a
A. Push strategy
B. Pull strategy
C. Standardized strategy
D. Localized strategy
83. A(n) _____ strategy is favored by firms that sell industrial products or other complex
products.
A. Localized
B. Indirect
C. Push
D. Pull
84. If media availability is limited, a firm should
A. Use a push strategy
B. Use a pull strategy
C. Consider a longer channel
D. Consider a shorter channel
85. When distribution channels are short, firms should
A. Use a direct channel
B. Use a push strategy
C. Focus on consumer products or other standardized products
D. Focus on industrial products or other complex products
86. A push strategy is appropriate when
A. There are many choices of electronic media
B. The firm is selling consumer goods
C. Distribution channels are long
D. The firm is selling complex new products
87. If a firm is facing long distribution channels, the firm should choose a _____ strategy.
A. Competitive advertising
B. Price discrimination
C. Predatory pricing
D. Pull
88. Which of the following is an argument that supports global advertising?
A. Standardized advertising lowers the costs of value creation by spreading the fixed costs of
developing the advertisements over many countries
B. Because of concerns about the scarcity of creative talent, some feel that smaller efforts will
produce better results than one large effort to develop a campaign
C. Even though there are cultural differences between nations, a single advertising theme that is
effective worldwide can be easily developed
D. Standardized advertising may be implemented even in the face of advertising regulations
89. When a company charges whatever the market will bear, the company is using
A. Strategic pricing
B. Price discrimination
C. A push strategy
D. A pull strategy
90. In order for price discrimination to be successful
A. There must be a strong case for arbitrage
B. Markets must be kept separate
C. Demand must be very elastic
D. A large change in demand must be triggered by a small change in price
91. If a _____ change in a price produces a _____ change in demand, then price is elastic.
A. Small; large
B. Small; small
C. Large; small
D. Large; large
92. A measure of the responsiveness of demand for a product to change in price is referred to as
A. Arbitrage demand
B. Predatory pricing
C. Price elasticity of demand
D. Experience curve pricing
93. _____ occurs when an individual or business capitalizes on a price differential for a firm's
product between two countries by buying the product in the country where the price is low and
reselling it in the country where prices are higher.
A. Arbitrage
B. Strategic pricing
C. Price discrimination
D. Market pricing
94. Which of the following statements about price discrimination is ?
A. It exists whenever consumers in a country are charged different prices for the same product
B. It involves charging whatever the market will bear
C. It is the use of price as a competitive weapon to drive weaker competitors out of a national
market
D. It makes economic sense to charge the same prices across countries
95. What is the most important factor in determining the elasticity of demand for a product in a
given country?
A. Personal selling
B. Logistics
C. Operating revenue
D. Income level
96. Which of the following statements is
?
A. The lesser the number of competitors, the higher the elasticity of demand
B. When competitors are limited, consumers' bargaining power is weaker
C. A firm may charge a higher price for its product in a country where competition is limited
than in one where competition is intense
D. When there is high elasticity of demand and a firm raises its prices above those of its
competitors, consumers will switch to the competitors' products
97. In a country where competition is limited,
A. Prices will be low
B. There will be low elasticity of demand
C. Prices will be high
D. Consumers' bargaining power rises
98. For _____ to work, the firm must normally have a profitable position in another national
market, which it can use to subsidize aggressive pricing in the market it is trying to
monopolize.
A. Multipoint pricing
B. Value-based pricing
C. Experience curve pricing
D. Predatory pricing
99. This refers to impact a firm's pricing strategy in one market may have on its rivals' pricing
strategy in another market.
A. Multipoint pricing
B. Experience curve pricing
C. Predatory pricing
D. Competitive pricing
100. Tight cross-functional integration between R&D, production and marketing can help a
company to ensure that all of the following take place except
A. Time to market is minimized
B. Development costs are kept in check
C. New products are designed for ease of manufacture
D. Product development projects are driven by internal needs
Essay Questions
101. What is Theodore Levitt's contribution to international business?
Theodore Levitt wrote about the globalization of world markets in a now-classic Harvard
Business Review article. Levitt suggested that due to technology, the world was moving toward
a converging commonalty and the emergence of global markets for standardized consumer
products. According to Levitt, this convergence creates an opportunity for the global
corporation to serve the entire world as if it were a single entity or in other words, sell the same
thing in the same way everywhere. Most academics believe that Levitt has overstated his case,
that globalization in consumer products is probably the exception rather than the rule.
Furthermore, cultural and economic differences between countries will continue to limit the
effects of any movement toward the standardization of consumer preferences and tastes. In
addition, trade barriers and differences in product and technical standards will also constrain a
firm's ability to sell standardized products to global markets using a standardized marketing
strategy.
102. Define market segmentation. What is its goal?
Market segmentation refers to identifying distinct groups of consumers whose purchasing
behavior differs from others in important ways. Markets can be segmented in numerous ways:
by geography, demography, social-cultural factors and psychological factors. The goal of
market segmentation is to optimize the fit between the purchasing behavior of consumers in a
given segment and the marketing mix, thereby maximizing sales to that segment.
103. What are the two main issues that managers must be aware of when considering market
segmentation in foreign countries?
There are two key issues that managers must be aware of when using market segmentation in
foreign countries. First, managers must consider the differences between countries in the
structure of market segments, which may differ significantly from country to country. The firm
may have to develop a unique marketing mix to appeal to the purchasing behavior of a certain
segment in a given country. Second, managers must be aware of the existence of segments that
transcend national borders. Such segments would enhance the ability of a company to view the
global marketplace as a single entity and pursue a global strategy.
104. Discuss the notion of a product being a bundle of attributes. How can approaching a
product in this manner help a firm reach its target market?
A product can be viewed as a bundle of product attributes. Products sell when their attributes
match consumer needs. For example, BMW recognizes that its consumers have a need for
luxury, quality and performance. Accordingly, the company builds these attributes into its cars.
If consumer needs were the same across the world, the firm could simply sell the same product
worldwide. However, because consumer needs vary by country depending on culture and the
level of economic development, a firm's ability to sell the same product will be constrained.
105. How do levels of economic development affect consumer behavior? What are the
implications for marketing strategy?
Consumers in the most advanced countries often shun globally standardized products that have
been developed with the lowest common denominator in mind. They are willing to pay more
for products that have additional features and attributes customized to their tastes and
preferences. In response to this behavior, firms marketing to consumers in highly developed
markets tend to build a lot of extra performance attributes into their products. In contrast,
consumers in less-developed countries typically demand a more basic product. In addition,
product reliability becomes more important as the purchase may account for a greater share of a
consumer's income than for the advanced country consumer. Consequently, products sold in
developing countries typically lack many of the features found in products sold in advanced
countries.
106. Explain the difference between a concentrated retail system and a fragmented one. Why is
this distinction important to international businesses?
In some countries the retail system is very concentrated, where just a few retailers supply most
of the market. Other countries have a fragmented system in which there are many retailers, no
one of which has a major share of the market. In the U.S., for example, the retail system is a
concentrated one where there are large stores or shopping malls. In contrast, Japan's more
fragmented retail system involves many small stores that serve local neighborhoods.
107. What are the four main differences between distribution systems across countries?
The four main differences between distribution systems are retail concentration, channel
length, channel exclusivity and channel quality. Retail concentration refers to how many
retailers supply most of the market. Channel length refers to the number of intermediaries
between the producer and the consumer. Channel exclusivity refers to how difficult it is for
outsiders to access the channel. Finally, channel quality refers to the expertise, competencies
and skills of established retailers in a nation and their ability to sell and support the products of
international businesses.
108. What are the three factors that contribute to the trend toward greater retail concentration in
developed countries? How have these factors promoted retail concentration?
There are three factors that contribute to the greater retail concentration in developed countries.
First is the increase in car ownership. Second is the increase in the number of households with
refrigerators and freezers. Third is the increase in the number of two-income households. All of
these factors have changed shopping habits and facilitated the growth of large retail
establishments sited away from traditional shopping areas.
109. What is channel length? What is the most important determinant of channel length?
Mention two factors that shorten channel length.
Channel length refers to the number of intermediaries between the producer and the consumer.
The most important determinant of channel length is the degree to which the retail system is
fragmented. Fragmented retail systems tend to promote the growth of wholesalers to serve
retailers, which lengthens channels. However, the internet and the entry of large discount
superstores have served to shorten channel lengths.
110. Describe an exclusive distribution channel. Consider the implications of channel
exclusivity for outside firms.
An exclusive distribution channel is one that is difficult for outsiders to access. Channel
exclusivity is very high in Japan, which makes the Japanese market so difficult to penetrate
effectively. In Japan, relationships between manufacturers, wholesalers and retailers often go
back decades. Many of these relationships are based on the understanding that distributors will
not carry the products of competing firms. Firms from other countries may find it very difficult
to break into the Japanese market as a result of this exclusivity.
111. What factors affect the success of a firm's international communications?
The effectiveness of a firm's international communications can be jeopardized by three critical
variables: cultural barriers, source effects and noise levels. Cultural barriers can make it
difficult to communicate messages across cultures. Source effects occur when the receiver of
the message evaluates the message based on the status or image of the sender. Finally, noise
refers to the amount of other messages competing for a potential consumer's attention.
112. Compare and contrast push strategies and pull strategies.
When developing its communications strategy, a firm must decide between a push and a pull
strategy. A push strategy emphasizes personal selling rather than mass media advertising in the
promotional mix. This type of strategy requires intensive use of a sales force and is relatively
costly. In contrast, a pull strategy depends more on mass media advertising to communicate the
marketing message to potential customers.
113. What are the arguments for standardized advertising across international markets?
There are three main arguments supporting the notion of standardized advertising across
markets. First, such a campaign has significant economic advantages because it lowers the cost
of value creation by spreading the fixed costs of developing the advertisements across many
countries. Second, because of concerns about the scarcity of creative talent, one large effort to
develop a campaign will produce better results than 40 or 50 smaller efforts. Finally, many
brand names are global.
114. What is predatory pricing? Describe how a firm might use predatory pricing.
Predatory pricing is the use of price as a competitive weapon to drive weaker competitors out of
a national market. Once the competitors have left the market, the firm can raise prices and enjoy
high profits. For such a pricing strategy to work the firm must normally have a profitable
position in another national market, which it can use to subsidize aggressive pricing in the
market it is trying to monopolize.
115. Discuss the notion of cross-functional teams and their role in cross-functional integration.
What are the attributes that make a product development team successful?
A firm can achieve cross-functional integration by establishing cross-functional product
development teams comprised of representatives from R&D, marketing and production. The
objective of the team should be to take a product development project from the initial concept
development to market introduction. The success of such teams is dependent on three attributes.
First, the team should be led by "heavyweight" managers who have high status within the
organization and who have the power and authority required to get the financial and human
resources the team needs to succeed. Second, the team should be comprised of at least one
member from each key function. Finally, the team should physically be in one location if
possible to create a sense of camaraderie and to facilitate communication.