Chapter 12 Global Marketing Management: Planning and Organization

Chapter 12 Global Marketing Management: Planning and Organization Answer
Key

True / False Questions

1. In the 1970s, the market segmentation argument in global marketing was framed as "global integration
versus local responsiveness."

FALSE
In the 1970s, the market segmentation argument was framed as "standardization versus adaptation." In
the 1980s, it was "globalization versus localization," and in the 1990s, it was "global integration versus
local responsiveness."

AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty Level: 1 Easy
Learning Objective: 12-01 How global marketing management differs from international marketing management
Topic: Global Marketing Management

2. To be a success in the global marketplace today, the best companies will focus on country as the
primary segmentation variable.

FALSE
As global markets continue to homogenize and diversify simultaneously, the best companies will avoid
the trap of focusing on country as the primary segmentation variable.

Blooms: Remember

3. From the marketing perspective, the ideal market segment size, if customer satisfaction is the goal, is
one.

TRUE
As the information explosion allows marketers to segment markets ever more finely, it is only the
manufacturing and/or finance managers in companies who argue for standardization for the sake of
economies of scale. From the marketing perspective, customization is always best. The ideal market
segment size, if customer satisfaction is the goal, is one.

Blooms: Remember

12-1
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4. Age and gender have been the most obvious international market segmentation variables, particularly
for Americans.

FALSE
Country has been the most obvious segmentation variable, particularly for Americans.

Blooms: Remember

5. Spreading the portfolio of markets served brings important stability of revenues and operations to many
global companies.

TRUE
Spreading the portfolio of markets served brings important stability of revenues and operations to many
global companies.

Blooms: Remember

6. Tactical planning is essentially long term, incorporating generalized goals for an enterprise as a whole.

FALSE
International corporate planning is essentially long term, incorporating generalized goals for an
enterprise as a whole.

Blooms: Remember
Topic: Planning for Global Markets

7. Strategic planning is conducted at the highest levels of management and deals with products, capital,
research, and the long-and short-term goals of a company.

TRUE
Strategic planning is conducted at the highest levels of management and deals with products, capital,
research, and the long- and short-term goals of a company.

Blooms: Remember

12-2
8. In the context of planning for global markets, the planning process is a primary medium of
organizational learning.

TRUE
The planning process is a primary medium of organizational learning.

Blooms: Remember

9. The first step in the international planning process is to adapt the marketing mix to target markets.

FALSE
A critical first step in the international planning process is deciding in which existing country market to
make a market investment.

Blooms: Remember
Learning Objective: 12-02 The need for planning to achieve company goals

10. Incorrect decisions taken in Phase 2 of the international planning process lead to products inappropriate
for the intended market or costly mistakes in pricing, advertising, and promotion.

TRUE
A more detailed examination of the components of the marketing mix is the purpose of Phase 2 of the
international planning process. Incorrect decisions at this point lead to products inappropriate for the
intended market or costly mistakes in pricing, advertising, and promotion.

Blooms: Remember

11. In Phase 2 of the international planning process, the results of an analysis frequently indicate that the
marketing mix would require such drastic adaptation that a decision not to enter a particular market is
made.

TRUE
Frequently, the results of the analysis in Phase 2 of the international planning process indicate that the
marketing mix will require such drastic adaptation that a decision not to enter a particular market is
made. The primary goal of Phase 2 is to decide on a marketing mix adjusted to the cultural constraints
imposed by the uncontrollable elements of the environment that effectively achieves corporate
objectives and goals.

Blooms: Remember
12-3

12. Phase 3 of the international planning process involves developing a marketing plan and deciding
budgets and profit expectations.

TRUE
At the third stage of the international planning process, a marketing plan is developed for the target
market—whether it is a single country or a global market set. The specific plan establishes what is to be
done, by whom, how it is to be done, and when. Included are budgets and sales and profit expectations.

Blooms: Remember

13. With respect to the international planning process, the marketing plan begins with a situation analysis
and culminates in the selection of an entry mode and a specific action program for a market.

TRUE
In the context of the international planning process, the marketing plan begins with a situation analysis
and culminates in the selection of an entry mode and a specific action program for a market.

Blooms: Remember

14. The amount of equity required by a company to use different modes of entry in a new market affects the
risk, return, and control that it will have in each mode.

TRUE
The amount of equity required by a company to use different modes of entry in a new market affects the
risk, return, and control that it will have in each mode.

Blooms: Remember
Topic: Alternative Market-Entry Strategies

15. With indirect exporting, a company sells to a customer in another country without the use of any
intermediaries or distributors.

FALSE
Indirect exporting usually means that a company sells to a buyer (importer or distributor) in the home
country, which in turn exports the product.

Blooms: Remember
Learning Objective: 12-03 The important factors for each alternative market-entry strategy
12-4

16. A French company sells its products to a large retailer in France, who in turn sells the products all over
Europe and Asia. This is an example of indirect exporting.

TRUE
The goods of the French company being subsequently sold by the retailer in Europe and Asia is an
example of indirect exporting. Indirect exporting usually means that the company sells to a buyer
(importer or distributor) in the home country, which in turn exports the product.

AACSB: Reflective Thinking
Blooms: Apply
Difficulty Level: 2 Medium

17. Exporting is a common market-entry approach for mature international companies with strong
marketing and relational capabilities.

TRUE
Exporting is a common market-entry approach for mature international companies with strong
marketing and relational capabilities.

Blooms: Remember

18. Patent rights, trademark rights, and the rights to use technological processes are granted in foreign
licensing.

TRUE
Patent rights, trademark rights, and the rights to use technological processes are granted in foreign
licensing.

Blooms: Remember

19. In the context of foreign market entry, licensing is least suitable when capital is scarce.

FALSE
The advantages of licensing are most apparent when capital is scarce, import restrictions forbid other
means of entry, a country is sensitive to foreign ownership, or patents and trademarks must be protected
against cancellation for nonuse.

Blooms: Remember
12-5

20. Franchising is a rapidly growing form of licensing in which a franchiser provides a standard package of
products, systems, and management services, and a franchisee provides market knowledge, capital, and
personal involvement in management.

TRUE
Franchising is a rapidly growing form of licensing in which a franchiser provides a standard package of
products, systems, and management services, and a franchisee provides market knowledge, capital, and
personal involvement in management.

Blooms: Remember

21. A business relationship established by two or more companies to cooperate out of mutual need and to
share risk in achieving a common objective is called a strategic international alliance (SIA).

TRUE
A strategic international alliance (SIA) is a business relationship established by two or more companies
to cooperate out of mutual need and to share risk in achieving a common objective.

Blooms: Remember
Learning Objective: 12-04 The increasing importance of international strategic alliances

22. Joint ventures are similar in structure and organization to minority holdings by a multinational company
(MNC) in a local firm.

FALSE
A joint venture is different from other types of strategic alliances or collaborative relationships in that a
joint venture is a partnership of two or more participating companies that have joined forces to create a
separate legal entity. Joint ventures are different from minority holdings by an MNC in a local firm.

Blooms: Remember

23. Building a strategic international alliance (SIA) takes several steps to be successful. The first step in
building strategic alliances is called dating.

TRUE
The first step in building strategic alliances is called dating. Refer to Exhibit 12.3-Building Strategic
Alliances.

Blooms: Remember
12-6

24. Harry Jordan's company has just entered into an agreement with a German firm to create a separate
legal entity. This new firm will be allowed to conduct business and actively compete in various
European Union markets. A good description of the new company is a joint venture.

TRUE
In this case, the creation of a separate legal entity by Harry Jordan's company and the German firm is an
example of a joint venture. A joint venture is a partnership of two or more participating companies that
have joined forces to create a separate legal entity.

Blooms: Apply

25. Around the Asia Pacific Rim, where U.S. companies face unfamiliar legal and cultural barriers, it is
preferable to buy an existing business than to enter into a joint venture.

FALSE
Around the Asia Pacific Rim, where U.S. companies face unfamiliar legal and cultural barriers, joint
ventures are preferred to buying existing businesses.

Blooms: Remember

26. Ten high-technology companies joined forces to produce and market their products in China. By joining
together, these companies were able to enter the Chinese market for the first time. A good name for this
type of arrangement is a consortium.

TRUE
In this case, the arrangement by the ten high-technology companies to produce and market their
products together in the Chinese market is an example of a consortium. Consortia are similar to joint
ventures and could be classified as such except for two unique characteristics: (1) They typically
involve a large number of participants and (2) they frequently operate in a country or market in which
none of the participants is currently active.

Blooms: Apply

12-7
27. A Korean television manufacturer recently invested in a new television tube plant in Mexico. This form
of international business is aptly named international licensing.

FALSE
In this case, the Korean television manufacturer is engaged in direct foreign investment. In this type of
investment, companies may invest locally to capitalize on low-cost labor, to avoid high import taxes, to
reduce the high costs of transportation to market, to gain access to raw materials and technology, or as a
means of gaining market entry.

Blooms: Apply

28. The growth of free trade areas that are tariff-free among members but have a common tariff for non-
members creates an opportunity that can be capitalized on by direct investment.

TRUE
The growth of free trade areas that are tariff-free among members but have a common tariff for non-
members creates an opportunity that can be capitalized on by direct investment.

Blooms: Remember

29. An advantage of a matrix organization structure in international business is that it permits management
to respond to the conflicts that arise among functional activity, product, and geography.

TRUE
A matrix structure permits management to respond to the conflicts that arise among functional activity,
product, and geography.

Blooms: Remember
Topic: Organizing for Global Competition

30. If a product is culturally sensitive, then decisions related to the product are more likely to be
centralized.

FALSE
If a product is culturally sensitive, the decisions are more likely to be decentralized.

AACSB: Diversity
Blooms: Remember

12-8

Multiple Choice Questions

31. With respect to global marketing management, the argument for market segmentation in the 1980s was
framed as _____.

A. globalization versus localization

B. standardization versus adaptation
C. adaptation versus one-to-one marketing
D. globalization versus one-to-one marketing
E. standardization versus localization

Blooms: Remember

32. In the context of global marketing management, international marketers framed the argument toward
market segmentation during the 1970s as _____.

A. global integration versus one-to-one marketing

B. standardization versus adaptation
C. adaptation versus one-to-one marketing
D. global integration versus local responsiveness
E. standardization versus local responsiveness

Blooms: Remember

12-9
33. Which of the following companies has been known for its ability to adapt to local needs and wants in
the international marketplace since its inception in 1866?

A. Kodak
B. General Foods
C. R.J. Reynolds Tobacco
D. Ralston Purina
E. Nestlé
Nestlé has been international almost from its start in 1866 as a maker of infant formula. Nestlé certainly
hasn't been bothered by the debate on standardization versus adaptation. Its overall strategy can be
summarized in four points: (1) think and plan long term, (2) decentralize, (3) stick to what you know,
and (4) adapt to local tastes.

Blooms: Remember

34. Which of the following is true about international corporate planning?

A. It only addresses marketing and advertising questions.

B. It specifically deals with a company's products, capital, and research.
C. It predominantly deals with the tactical issues of marketing.
D. It is essentially long term in nature.
E. It refers to the plans that are made at the local level.
enterprise as a whole. Strategic planning is conducted at the highest levels of management and deals
with products, capital, research, and the long- and short-term goals of the company. Tactical planning,
or market planning, pertains to specific actions and to the allocation of resources used to implement
strategic planning goals in specific markets. Tactical plans are made at the local level and address
marketing and advertising questions.

Blooms: Understand

12-10
35. Which of the following is true about international corporate planning?

A. It predominantly deals with a company's products, capital, and research.

B. It only addresses marketing and advertising questions.
C. It refers to the plans that are made at the local level.
D. It incorporates generalized goals for an enterprise as a whole.
E. It solely deals with the tactical issues of marketing.
with products, capital, research, and the long- and short-term goals of a company. Tactical planning, or
market planning, pertains to specific actions and to the allocation of resources used to implement

Blooms: Understand

36. Which of the following is true about strategic planning?

A. It is conducted at the lowest levels of management.

B. It deals with a company's products and capital.
C. It excludes the research component of a company.
D. It is designed to solely address marketing and advertising questions at the local level.
E. It is most commonly referred to as market planning.

Blooms: Understand

12-11
37. Which of the following is true about tactical planning?

A. It is designed to address questions that relate to advertising and marketing.

B. It specifically deals with a company's products, capital, and research at a global level.
C. It is conducted at the highest levels of management.
D. It excludes plans that are made at the local level.
E. It is most commonly referred to as corporate planning.

Blooms: Understand

38. Simon and his team draft a plan for their organization, MG Corp. They primarily establish the overall
goals that MG should accomplish in the next 25 years. In this case, Simon and his team are most likely
engaged in _____ planning.

A. tactical
B. market
C. corporate
D. strategic
E. personnel
In this case, Simon and his team are most likely engaged in corporate planning. International corporate
planning is essentially long term, incorporating generalized goals for an enterprise as a whole.

Blooms: Apply
Difficulty Level: 3 Hard

12-12
39. _____ planning is conducted at the highest levels of management and deals with products, capital,

A. Market
B. Tactical
C. Single-use
D. Strategic
E. Personnel
Strategic planning is conducted at the highest levels of management and deals with products, capital,

Blooms: Remember

40. If a company were to focus on market planning that involved specific actions and allocation of
resources, the company would most likely be using _____ planning.

A. tactical
B. strategic
C. corporate
D. operational
E. synergistic
Tactical planning, or market planning, pertains to specific actions and to the allocation of resources used
to implement strategic planning goals in specific markets.

Blooms: Remember

41. Which of the following is the first phase in the international planning process?

A. Adapting the marketing mix to target markets

B. Developing the marketing plan
C. Matching company and country needs
D. Implementation and control
E. Defining market segments
Whether a company is new to international marketing or heavily involved, an evaluation of potential
markets is the first step in the planning process. A critical first step in the international planning process
is deciding in which existing country market to make a market investment. Refer to Exhibit 12.1-
International Planning Process.

Blooms: Remember
12-13

42. Which of these aspects of international marketing is analyzed in Phase 1 of the international planning
process?

A. Company character

B. Product adaptation
C. Advertising
D. Situation analysis
E. Budget
A critical first step in the international planning process is deciding in which existing country market to
make a market investment. A company's strengths and weaknesses, including the characteristics of its
home country, products, philosophies, modes of operation, and objectives must be matched with a
country's constraining factors and market potential. Refer to Exhibit 12.1-International Planning
Process.

Blooms: Remember

43. Which of these aspects of international marketing are analyzed in Phase 1 of the international planning
process?

A. Home-country constraints

B. Budgets
C. Situation analysis
D. Promotions
E. Product adaptations
Company character, home-country constraints, and host-country constraints are analyzed in the first
phase of the international planning process. A company's strengths and weaknesses, including the
characteristics of its home country, products, philosophies, modes of operation, and objectives must be
matched with a country's constraining factors and market potential. Refer to Exhibit 12.1-International
Planning Process.

Blooms: Remember

12-14
44. Which of these aspects of international marketing are analyzed in Phase 1 of the international planning
process?

A. Budgets
B. Promotions
C. Product adaptations
D. Action programs
E. Host-country constraints
Company character, home-country constraints, and host-country constraints are analyzed in the first
phase of the international planning process. A company's strengths and weaknesses, including the
characteristics of its home country, products, philosophies, modes of operation, and objectives must be
matched with a country's constraining factors and market potential. Refer to Exhibit 12.1-International
Planning Process.

Blooms: Remember

45. At which phase of the international planning process would a marketing manager conduct situation
analysis and make decisions involving objectives and goals, budgets, and action programs?

A. Adapting the marketing mix to target markets

B. Developing the marketing plan
C. Matching company and country needs
E. Defining company objectives and resources
Phase 3 of the international planning process involves developing the marketing plan. At this stage, a
marketing manager conducts situation analysis and makes decisions regarding objectives and goals,
strategy and tactics, mode of entry, budgets, and action programs. Refer to Exhibit 12.1-International
Planning Process.

Blooms: Remember

12-15
46. Analysis of which of the following factors is carried out in Phase 2 of the international planning
process?

A. Host-country constraints

B. Product adaptation
C. Company character
D. Situation analysis
E. Budgets
The primary goal of Phase 2 of the international planning process is to decide on a marketing mix
adjusted to the cultural constraints imposed by the uncontrollable elements of the environment that
effectively achieves corporate objectives and goals. Product characteristics including product
adaptation, pricing, promotion, and distribution are analyzed in Phase 2 of the international planning
process. Incorrect decisions at this point lead to products inappropriate for the intended market or costly
mistakes in pricing, advertising, and promotion. Refer to Exhibit 12.1-International Planning Process.

Blooms: Remember

process?


B. Pricing
D. Budgets
E. Standards
The primary goal of Phase 2 is to decide on a marketing mix—product, price, promotion, and
distribution—adjusted to the cultural constraints imposed by the uncontrollable elements of the
environment that effectively achieves corporate objectives and goals. Incorrect decisions at this point
lead to products inappropriate for the intended market or costly mistakes in pricing, advertising, and
promotion. Refer to Exhibit 12.1-International Planning Process.

Blooms: Remember

12-16
process?


B. Budgets
D. Advertising
E. Standards

Blooms: Remember

process?


B. Distribution
D. Budgets
E. Standards

Blooms: Remember

12-17
50. The primary goal of Phase 2 of the international planning process is to:

A. perform a preliminary analysis of a country.

B. perform a screening of the environment.
C. decide on a marketing mix according to the market segments.
D. perform a situation analysis for the country that has been selected for expansion.
E. implement action plans and measure performance.
The primary goal of Phase 2 of the international planning process is to decide on a marketing mix
adjusted to the cultural constraints imposed by the uncontrollable elements of the environment that
effectively achieves corporate objectives and goals.

Blooms: Remember

51. Big Donuts has already reviewed its objectives and capabilities, established the screening criteria for
reviewing potential foreign markets, and examined a series of environmental factors for the markets in
which it plans to operate. What should Big Donuts do next as it proceeds with the international planning
process?

A. Match the company to a country's needs.

B. Evaluate the marketing mix to target markets.
C. Modify the company's position to communication objectives.
D. Develop a marketing plan.
E. Implement and control information obtained in the initial examination.
Once target markets are selected, the marketing mix must be evaluated in light of the data generated in
Phase 1 of the international planning process.

Blooms: Apply

12-18
52. The answers to which of the following questions is generated in Phase 2 of the international marketing
process?

A. Are there identifiable market segments that allow for common marketing mix tactics across
countries?
B. Have objectives and goals been established?
C. Have all budgets been determined within the constraints of resources?
D. Are pre-existing channels of distribution in the new market mature enough to support the proposed
expansion?
E. Have responsibilities been established for implementation and control?
The answers to three major questions are generated in Phase 2 of the international marketing process: a)
Are there identifiable market segments that allow for common marketing mix tactics across countries?
b) Which cultural/environmental adaptations are necessary for successful acceptance of the marketing
mix? c) Will adaptation costs allow profitable market entry?

Blooms: Understand

53. Which of the following actions does the marketing plan in Phase 3 of the international planning process
begin with?

A. Creating a management performance guide

B. Evaluating host-country constraints
C. Conducting a situation analysis
D. Evaluating home-country constraints
E. Exploring the distribution options
In Phase 3 of the planning process, a marketing plan is developed for the target market—whether it is a
single country or a global market set. The marketing plan begins with a situation analysis and
culminates in the selection of an entry mode and a specific action program for the market.

Blooms: Remember

12-19
54. Harry Johnson Tractor Corp. has just completed a marketing plan for entering South Africa. Included in
this plan are budgets and sales and profit expectations. Which of the following phases of the
international planning process has Harry Johnson Tractor just completed?

A. Phase 1
B. Phase 2
C. Phase 3
D. Phase 4
E. Phase 5
In this case, Harry Johnson Tractor Corp. has just completed Phase 3 of the international planning
process. In Phase 3 of the international planning process, a marketing plan is developed for the target
market—whether it is a single country or a global market set. The marketing plan begins with a
situation analysis and culminates in the selection of an entry mode and a specific action program for the
market. The marketing plan includes budgets and sales and profit expectations.

Blooms: Apply

55. Harry Johnson Tractor Corp. wishes to expand its presence in Eastern Europe. Toward that end, it has
selected the countries where it will market its products. It has also selected a mode of entry. It is now in
the process of implementing specific plans. Which of the following phases of the international planning
process is Harry Johnson Tractor Corp. currently in?

A. Phase 1
B. Phase 2
C. Phase 3
D. Phase 4
E. Phase 5
In this case, Harry Johnson Tractor Corp. is currently in Phase 4 of the international planning process. A
"go" decision in Phase 3 triggers Phase 4 of the international planning process. Phase 4 involves
implementation of specific plans and anticipation of successful marketing.

Blooms: Apply

12-20
56. Pizza Hearth is in the process of deciding on the mode of entry into countries of Eastern Europe. Which
phase of the international planning process is Pizza Hearth currently in?

A. Preliminary analysis

B. Defining market segment
C. Developing the marketing plan
E. Standardization of the marketing mix
In this scenario, Pizza Hearth is currently in Phase 3 of the international planning process. In this phase,
a marketing plan is developed for the target market—whether it is a single country or a global market
set. The marketing plan begins with a situation analysis and culminates in the selection of an entry mode
and a specific action program for the market.

Blooms: Apply

57. Which of the following is most likely to occur in the international planning process once a "go" decision
in Phase 3 has been taken?

A. The objectives and goals phase

B. The budget phase
C. The action-program(s) phase
D. The implementation and control phase
E. The communication phase
A "go" decision in Phase 3 of the international planning process triggers implementation of specific
plans and anticipation of successful marketing.

Blooms: Remember

12-21
58. Which of the following subjects is explored after developing information and selecting a country market
in the international planning process?


B. The constraints of home country
C. Geography
D. Host-country constraints
E. The mode of entry
With the information developed in the international planning process and a country market selected, the
decision regarding the entry mode can be made. The choice of mode of entry is one of the more critical
decisions for a firm because the choice will define the firm's operations and affect all future decisions in
that market.

Blooms: Remember

59. Which of the following is the last step in the international planning process?

A. Defining target markets and adapting the marketing mix accordingly
B. Matching company and country needs
C. Adapting the marketing mix according to market segments
E. Developing the marketing plan
All marketing plans require coordination and control during the period of implementation.
Implementation and control constitute the last step in the international planning process.

Blooms: Remember

60. Which of the following modes of foreign market entry requires the most amount of equity and therefore,
creates the greatest risk?

A. Exporting
B. Joint venture
C. Contractual agreement
D. Strategic alliance
E. Direct foreign investment
Direct foreign investment requires the most equity of the four modes of foreign market entry and creates
the greatest risk while offering the most control and the potential highest return.

Blooms: Remember
12-22

61. Which of the following modes of foreign market entry offers the most control and the highest potential
return for a company?

A. Exporting
B. Joint venture
C. Contractual agreement
Direct foreign investment requires the most equity of the four modes of foreign market entry and creates
the greatest risk while offering the most control and the potential highest return.

Blooms: Remember

62. GHB Corp. is a manufacturer of consumer goods. It intends to sell its products in Vietnam as it is
looking to enter into Asian markets. It does not want to make any equity investment and is keen on
minimizing any risk of loss in the foreign market. It is also willing to settle for a low rate of return.
Which of the following types of foreign market-entry strategies is GHB most likely to follow?

A. Direct foreign investment

B. Joint Venture
C. Indirect exporting
E. Licensing
In this case, GHB Corp. is most likely to follow indirect exporting. The amount of equity required by a
company to use different modes affects the risk, return, and control that it will have in each mode.
Indirect exporting requires no equity investment and thus has a low risk, low rate of return, and little
control.

Blooms: Apply

12-23
63. In the context of foreign market entry, _____ requires no equity investment and thus has a low risk, low
rate of return, and little control.

A. licensing
B. indirect exporting
C. a strategic alliance
D. a joint venture
E. franchising
Indirect exporting requires no equity investment and thus has a low risk, low rate of return, and little
control.

Blooms: Remember

64. Pots and Pans Inc., a large U.S. kitchenware distributor, sells its inventory twice a year to CookWell
Corp., a kitchenware retailer in the United States. CookWell, in turn, sells those products through its
retail stores in Vietnam and Thailand. Which of the following is Pots and Pans most likely engaged in?

A. Franchising
B. Indirect exporting
C. A consortium
D. Direct foreign investment
E. A joint venture
Pots and Pans Inc. is engaged in indirect exporting. Indirect exporting usually means that a company
sells to a buyer (importer or distributor) in the home country, which in turn exports the product.

Blooms: Apply

12-24
65. Pots and Pans Inc., a large U.S. kitchenware distributor, takes a selection of its inventory twice a year to
Vietnam and sells it to CookWell Corp., a large Vietnam-based kitchen retailer. CookWell, in turn, sells
those products through its retail stores in Vietnam and Thailand. Which of the following best describes
the alternative market-entry strategy that Pots and Pans is engaged in?

A. Franchising
B. Licensing
C. Direct exporting
D. A joint venture
In this scenario, Pots and Pans Inc. is engaged in direct exporting. With direct exporting, a company
sells to a customer in another country. This method is the most common approach employed by
companies taking their first international step because the risks of financial loss can be minimized.

Blooms: Apply

66. A direct sales force may be required in a foreign country particularly for _____.

A. big ticket industrial products

B. low-technology products
C. personal care products
D. nonmechanical goods
E. traditional hand-made goods
Particularly for high-technology and big ticket industrial products, a direct sales force may be required
in a foreign country.

Blooms: Remember

67. In the context of foreign market entry, _____ are long-term, nonequity associations between a company
and another in a foreign market.

A. consortia
B. exporting arrangements
C. direct foreign investments
D. contractual agreements
E. joint ventures
Contractual agreements are long-term, nonequity associations between a company and another in a
foreign market.

12-25
Blooms: Remember

68. In the context of foreign market entry, _____ serve as a means of transfer of knowledge rather than
equity.

A. consortia
B. contractual agreements
C. strategic alliances
D. foreign direct investments
E. joint ventures
Contractual agreements serve as a means of transfer of knowledge rather than equity.

Blooms: Remember

69. In the context of foreign market entry strategies, the advantages of _____ are most apparent when
capital is scarce, import restrictions forbid other means of entry, a country is sensitive to foreign
ownership, or patents and trademarks must be protected against cancellation for nonuse.

A. consortia
B. exporting arrangements
C. strategic alliances
D. licensing
E. joint ventures
The advantages of licensing are most apparent when capital is scarce, import restrictions forbid other
means of entry, a country is sensitive to foreign ownership, or patents and trademarks must be protected
against cancellation for nonuse.

Blooms: Remember

12-26
70. Which of the following forms of business relationships lets a company grant patent rights, trademark
rights, and the rights to use technological processes to another company in a foreign country?

A. Licensing
B. Exporting arrangements
C. Joint ventures
D. Consortia
E. Strategic alliances
Patent rights, trademark rights, and the rights to use technological processes are granted in foreign
licensing.

Blooms: Remember

71. Which of the following is true of franchising?

A. It provides an effective blending of skill decentralization and operational centralization.

B. The franchisee provides market knowledge, capital, and personal involvement in management.
C. Foreign laws and regulations are usually hostile toward franchising.
D. It is an important form of horizontal market integration.
E. The franchiser has little control on marketing of the products at the point of final sale.
Franchising is a rapidly growing form of licensing in which the franchiser provides a standard package
of products, systems, and management services, and the franchisee provides market knowledge, capital,
and personal involvement in management. The combination of skills permits flexibility in dealing with
local market conditions and yet provides the parent firm with a reasonable degree of control. The
franchiser can follow through on marketing of the products to the point of final sale. It is an important
form of vertical market integration. Potentially, the franchise system provides an effective blending of
skill centralization and operational decentralization. Foreign laws and regulations are friendly toward
franchising because it tends to foster local ownership, operations, and employment.

Blooms: Understand

12-27
72. Kwok Winn wants to open a new business in his own country, Singapore. He has decided on a form of
licensing that will provide him with a standard package of products, systems, and management services
in order to sell fast food to local residents. Which of the following best describes the form of business
that Mr. Winn has chosen?

A. Direct sales

B. Indirect exporting
C. Joint venture
E. Franchising
In this case, Mr. Winn has chosen to conduct his business through franchising. Franchising is a rapidly
growing form of licensing in which the franchiser provides a standard package of products, systems, and
management services, and the franchisee provides market knowledge, capital, and personal involvement
in management.

Blooms: Apply

73. Which of the following is true of franchising?

A. It is an important form of horizontal market integration.

B. The franchiser has little control on marketing of the products at the point of final sale.
C. Foreign laws and regulations are friendly toward franchising.
D. It provides an effective blending of skill decentralization and operational centralization.
E. The franchiser provides market knowledge, capital, and personal involvement in management.
Franchising is a rapidly growing form of licensing in which the franchiser provides a standard package
of products, systems, and management services, and the franchisee provides market knowledge, capital,
and personal involvement in management. The combination of skills permits flexibility in dealing with
local market conditions and yet provides the parent firm with a reasonable degree of control. The
franchiser can follow through on marketing of the products to the point of final sale. It is an important
form of vertical market integration. Potentially, the franchise system provides an effective blending of
skill centralization and operational decentralization. Foreign laws and regulations are friendly toward
franchising because it tends to foster local ownership, operations, and employment.

Blooms: Understand

12-28
74. In the context of foreign market entry, a _____ is a business relationship established by two or more
companies to cooperate out of mutual need and to share risk in achieving a common objective without
forming a separate legal entity.

A. direct sales group

B. consortium arrangement
C. franchising arrangement
D. strategic international alliance
E. joint venture
to cooperate out of mutual need and to share risk in achieving a common objective.

Blooms: Remember

75. The first relationship activity in building a strategic alliance, where senior executives leverage their
personal networks is labeled as _____.

A. imaging
B. initiating
C. committing
D. dating
E. interfacing
The first relationship activity in building a strategic alliance is labeled as dating. It involves senior
executives leveraging personal networks and wondering how to respond to inquiries and how to seek
out possibilities. Refer to Exhibit 12.3-Building Strategic Alliances.

Blooms: Remember

12-29
76. Which of the following primary relationship activities in building strategic alliances involves seeing the
reality in possibilities of an alliance, creating a shared vision from being together, and involving trusted
senior managers?

A. Imaging
B. Committing
C. Interfacing
D. Dating
E. Initiating
The second relationship activity in building a strategic alliance is labeled as imaging. It involves seeing
the reality in possibilities of an alliance, creating a shared vision from being together, and involving
trusted senior managers. Refer to Exhibit 12.3-Building Strategic Alliances.

Blooms: Remember

77. Which of the following primary relationship activities in building strategic alliances involves bringing
key executives into action and creating trust through face-to-face time?

A. Dating
B. Initiating
C. Committing
D. Imaging
E. Interfacing
The third relationship activity in building a strategic alliance is labeled as initiating. It involves bringing
key executives into action and creating trust through face-to-face time. Refer to Exhibit 12.3-Building
Strategic Alliances.

Blooms: Remember

12-30
78. Which of the following primary relationship activities in building strategic alliances involves facilitating
the creation of personal relationships at many levels, traveling to partner facilities and engaging in
technical conversations, and blending social and business time?

A. Imaging
B. Initiating
C. Interfacing
D. Dating
E. Committing
The fourth relationship activity in building a strategic alliance is labeled as interfacing. It involves
facilitating the creation of personal relationships at many levels, traveling to partner facilities and
engaging in technical conversations, and blending social and business time. Refer to Exhibit 12.3-
Building Strategic Alliances.

Blooms: Remember

79. Which of the following relationship skills is necessary during the imaging activity of building a strategic
alliance?

A. Good relationship self-awareness

B. Creating intimacy
C. Trust building
D. Partnering
E. Commitment
Seeing the reality in possibilities, creating a shared vision from being together, and involving trusted
senior managers are actions taken during the imaging stage of building a strategic alliance. These
actions require the key relationship skill of creating intimacy. Refer to Exhibit 12.3-Building Strategic
Alliances.

Blooms: Remember

12-31
80. Which of the following relationship skills is necessary during the initiating activity of building a
strategic alliance?

A. Commitment
B. Partnering
C. Trust building
D. Creating intimacy
E. Good relationship self-awareness
The third relationship activity in building a strategic alliance is labeled as initiating. It involves bringing
key executives into action and creating trust through face-to-face time. These actions require the key
relationship skill of trust building. Refer to Exhibit 12.3-Building Strategic Alliances.

Blooms: Remember

81. Which of the following relationship skills is necessary during the interfacing activity of building a
strategic alliance?

A. Trust building

B. Creating intimacy
C. Good relationship self-awareness
D. Commitment
E. Partnering
The fourth relationship activity in building a strategic alliance is labeled as interfacing. It involves
facilitating the creation of personal relationships at many levels, traveling to partner facilities and
engaging in technical conversations, and blending social and business time. These actions require the
key relationship skill of partnering. Refer to Exhibit 12.3-Building Strategic Alliances.

Blooms: Remember

12-32
82. Which of the following refers to two or more participating companies joining forces to create a separate
legal entity to facilitate doing business in the international arena?

A. Indirect exporting

B. Franchise
C. License arrangement
D. Joint venture
E. Direct investment agreement
A joint venture is different from other types of strategic alliances or collaborative relationships in that a
joint venture is a partnership of two or more participating companies that have joined forces to create a
separate legal entity.

Blooms: Remember

83. _____ refers to a partnership of two or more participating companies that have joined forces to create a
separate legal entity to facilitate doing business in a country where none of the participants are currently
active.

A. A consortium
B. A franchise pact
C. A license arrangement
D. Indirect exporting
Consortia are similar to joint ventures and could be classified as such except for two unique
characteristics: (1) They typically involve a large number of participants and (2) they frequently operate
in a country or market in which none of the participants are currently active.

Blooms: Remember

12-33
84. A consortium is different from a joint venture in that a consortium:

A. usually operates in a country in which the participants are already active.
B. typically involves a large number of participants.
C. restricts the right to hold an equity position by its major partners.
D. does not involve the creation of a separate legal entity.
E. is formed mainly for executing short-term projects.
Four characteristics define joint ventures (JVs): (1) JVs are established, separate, legal entities; (2) they
acknowledge intent by the partners to share in the management of the JV; (3) they are partnerships
between legally incorporated entities, such as companies, chartered organizations, or governments, and
not between individuals; and (4) equity positions are held by each of the partners. Consortia are similar
to joint ventures and could be classified as such except for two unique characteristics: (1) They typically

Blooms: Understand

85. A joint venture is different from a consortium in that a joint venture:

A. usually operates in a country in which the participants are already present.
B. typically involves a large number of participants.
C. restricts the right to hold an equity position by its major partners.
D. does not involve the creation of a separate legal entity.
E. is formed mainly for executing short-term projects.
Four characteristics define joint ventures (JVs): (1) JVs are established, separate, legal entities; (2) they
acknowledge intent by the partners to share in the management of the JV; (3) they are partnerships
between legally incorporated entities, such as companies, chartered organizations, or governments, and
not between individuals; and (4) equity positions are held by each of the partners. Consortia are similar
to joint ventures and could be classified as such except for two unique characteristics: (1) They typically

Blooms: Understand

12-34
86. Devonaile Inc. is a small-scale apparel manufacturer in Florida. Devonaile and other similar firms from
Florida collaborate and form a separate company in India as none of the participants in this
collaboration have active operations in the Indian market. The newly created firm primarily
manufactures apparel suited to the tastes and preferences of the Indian customers. Identify the type of
foreign market-entry approach depicted in this scenario.

A. A franchising agreement

B. A consortium
C. A licensing agreement
D. Direct exporting
E. Indirect exporting
In this case, Devonaile Inc. and the other firms from Florida have formed a consortium. Consortia are
similar to joint ventures and could be classified as such except for two unique characteristics: (1) They
typically involve a large number of participants and (2) they frequently operate in a country or market in
which none of the participants is currently active. Consortia are developed to pool financial and
managerial resources and to lessen risks.

Blooms: Apply

87. Companies that adopt the _____ structure are generally experiencing rapid growth and have broad,
diverse product lines.

A. global product division

B. pyramid
C. hierarchical
D. geographical division
E. matrix organization
Companies that adopt the global product division structure are generally experiencing rapid growth and
have broad, diverse product lines.

Blooms: Remember

12-35
88. MedUmbrella Inc. provides a broad and diverse range of services for the healthcare industry. It also
manufactures a wide variety of hospital equipment. It wants to experience rapid growth and intends to
have an organizational structure to better face global competition. Which of the following
organizational structures will suit MedUmbrella best?

A. A global product division structure

B. A geographical division structure
C. A matrix structure
D. A pyramid structure
E. A hierarchical structure
In this case, a global product division structure will best suit MedUmbrella Inc. Companies that adopt
the global product division structure are generally experiencing rapid growth and have broad, diverse
product lines.

Blooms: Apply

89. Which of the following organizational structures is the most extensive of those usually adopted by
companies?

A. Transnational structure

B. Geographical division structure
C. Region-specific structure
D. Global product division structure
E. Matrix structure
The matrix form—the most extensive of the three organizational structures—is popular with companies
as they reorganize for global competition.

Blooms: Remember

Essay Questions

12-36
90. Briefly explain the benefits of global marketing operations.

When large international market segments can be identified, economies of scale in production and
marketing can bring important competitive advantage for multinational companies. Global marketing
facilitates a transfer of experience and know-how across countries through improved coordination and
integration of marketing activities. It also ensures access to the toughest customers. Such demanding
customers help companies develop highest quality products and services. Moreover, diversity of
markets served carries with it additional financial benefits. Spreading the portfolio of markets served
brings important stability of revenues and operations to many global companies.

Blooms: Understand

91. Discuss the differences between corporate, strategic, and tactical planning.

Corporate planning is essentially long term, incorporating generalized goals for an enterprise as a
whole. Strategic planning is conducted at the highest levels of management and deals with products,
capital, and research, and the long- and short-term goals of a company. Tactical planning, or market
planning, pertains to specific actions and to the allocation of resources used to implement strategic
planning goals in specific markets. Tactical plans are made at the local level and address marketing and
advertising questions.

Blooms: Understand

92. List the four phases of the international planning process.

The four phases are: (a) Phase 1—Preliminary analysis and screening (matching company/country
needs); (b) Phase 2—Defining target markets and adapting the marketing mix accordingly; (c) Phase 3
—Developing the marketing plan; and (d) Phase 4—Implementation and control.

Blooms: Remember

12-37
93. A company has a choice of four different modes of foreign market entry. Briefly describe each of these
modes.

The modes of foreign entry are exporting, contractual agreements, strategic alliances, and direct foreign
investment. Exporting can be either direct or indirect. With direct exporting, a company sells to a
customer in another country. Indirect exporting usually means that the company sells to a buyer
(importer or distributor) in the home country, which in turn exports the product. Contractual agreements
are long-term, nonequity associations between a company and another in a foreign market. Contractual
agreements generally involve the transfer of technology, processes, trademarks, and/or human skills. A
strategic international alliance (SIA) is a business relationship established by two or more companies to
cooperate out of mutual need and to share risk in achieving a common objective. The fourth means of
foreign market development and entry is direct foreign investment, that is, investment within a foreign
country. Companies may invest locally to capitalize on low-cost labor, to avoid high import taxes, to
reduce the high costs of transportation to market, to gain access to raw materials and technology, or as a
means of gaining market entry.

Blooms: Understand

94. Describe the two basic contractual agreements that most companies follow in their attempt to enter a
foreign market.

Contractual agreements generally involve the transfer of technology, processes, trademarks, or human
skills. The two basic forms of contractual agreements are licensing and franchising. Licensing is
associated with patent rights, trademark rights, and the rights to use technological processes in foreign
markets. It is a favorite strategy for small- and medium-sized companies. Franchising is a rapidly
growing form of licensing in which the franchiser provides a standard package of products, systems, and
management services, and the franchisee provides market knowledge, capital, and personal involvement
in management.

Blooms: Understand

12-38
95. Briefly explain a strategic international alliance (SIA).

to cooperate out of mutual need and to share risk in achieving a common objective. SIAs are sought as a
way to shore up weaknesses and increase competitive strengths. Firms enter into SIAs for several
reasons: opportunities for rapid expansion into new markets, access to new technology, more efficient
production and innovation, reduced marketing costs, strategic competitive moves, and access to
additional sources of products and capital. Studies have demonstrated that affiliations with prominent
financial institutions makes potential partners more attractive and resource deployment stability
enhances alliance performance. Finally, evidence suggests that SIAs often contribute nicely to profits.

Blooms: Understand

96. Explain the difference between joint ventures and consortia.

Joint ventures are partnerships of two or more participating companies that join forces to create a
separate legal entity. Consortia are similar to joint ventures but have two distinguishing characteristics:
(a) they typically involve a large number of participants and (b) they frequently operate in a country or
market in which none of the participants is currently active.

Blooms: Understand

97. You have just been hired as a consultant by Orange Mobility to advise them on how to enter the South
African market. You have decided that direct foreign investment would be the best mode for Orange
Mobility to follow at this point in time. Write a one-paragraph memo that outlines the benefits of direct
foreign investment in a country.

Students' answers may vary. Direct foreign investment is investment within a foreign country.
Companies may invest locally to capitalize on low-cost labor, to avoid high import taxes, to reduce the
high costs of transportation to market, to gain access to raw materials and technology, or as a means of
gaining market entry. Firms may either invest in or buy local companies or establish new operations
facilities. The local firms enjoy important benefits aside from the investments themselves, such as
substantial technology transfers and the capability to export to a more diversified customer base.

Blooms: Apply

12-39
98. Assume that you are a consultant for a telecom giant based in the United States that wishes to create a
joint venture with a Japanese electronics company. The joint venture is expected to enter and compete in
the Scandinavian market. Suggest an organizational structure that would be most suitable for this joint
venture. Also, comment on why the structure might be a good one to use.

Students' answers may vary. The three organizational structures are global product divisions, geographic
divisions, and matrix organizations. Students could select any of the three options; however, the text
suggests that the matrix form is popular with companies as they reorganize for global competition. A
matrix structure permits management to respond to the conflicts that arise between functional activity,
product, and geography. Since the new venture will be a joint venture, the matrix structure might allow
both companies to bring separate expertise to the table. Also, a matrix structure seems to be a natural fit
in this situation as it encourages sharing of experience, resources, expertise, technology, and
information.

Blooms: Apply

99. In the context of organizing for global competition, what are the different patterns that are found in
multinational firms?

An infinite number of organizational patterns for the headquarters' activities of multinational firms exist,
but most fit into one of three categories: centralized, regionalized, or decentralized organizations. The
fact that all of the systems are used indicates that each has certain advantages and disadvantages. The
chief advantages of centralization are the availability of experts at one location, the ability to exercise a
high degree of control on both the planning and implementation phases, and the centralization of all
records and information. Some companies effect extreme decentralization by selecting competent local
managers and giving them full responsibility for national or regional operations. In many cases, whether
a company's formal organizational structure is centralized or decentralized, the informal organization
reflects some aspect of all organizational systems.

Blooms: Understand

12-40

Chapter 12 Global Marketing Management: Planning and Organization

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Chapter 12 Global Marketing Management: Planning and Organization Answer

True / False Questions

Multiple Choice Questions

A. globalization versus localization

A. global integration versus one-to-one marketing

A. It only addresses marketing and advertising questions.

A. It predominantly deals with a company's products, capital, and research.

A. It is conducted at the lowest levels of management.

A. It is designed to address questions that relate to advertising and marketing.

A. Adapting the marketing mix to target markets

A. Company character

A. Home-country constraints

A. Adapting the marketing mix to target markets

A. Host-country constraints

A. Company character

A. Company character

A. Company character

A. perform a preliminary analysis of a country.

A. Match the company to a country's needs.

A. Creating a management performance guide

A. Preliminary analysis

A. The objectives and goals phase

A. Company character

A. Direct foreign investment

A. big ticket industrial products

A. It provides an effective blending of skill decentralization and operational centralization.

A. Direct sales

A. It is an important form of horizontal market integration.

A. direct sales group

A. Good relationship self-awareness

A. Trust building

A. Indirect exporting

A. A franchising agreement

A. global product division

A. A global product division structure

A. Transnational structure

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