Albaum instructor guide

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor�s Manual

17 © Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012

ANSWERS TO QUESTIONS FOR DISCUSSION, Chapter 1

1.1 Why has there been such an increase in interest by business firms in international marketing? Will this interest continue to increase? Why or why not?

Students may approach this question in several ways.

Companies are increasingly selling to, buying from and competing with products from companies and individuals in other nations. International sales may provide additional profits, or even the major source of profits (Swiss pharmaceutical companies; CocaCola). Therefore, most companies must be interested in international marketing.

The increased interest was partly the result of the growth of international markets over many years and, since the recession of 2007�2010, the need to exploit every feasible market everywhere. This growth is due to many factors including: lowering barriers to trade and investment, improvements in transportation, logistics, and communications, new products with international appeal, increased linking of companies, markets, and financing and rapid expansion of world trade.

It is also due to: productive capacity exceeding domestic demand in many industries, increasing foreign and domestic competition in many domestic markets and the growth of overseas markets as standards of living increase in many nations.

The interest will continue to increase as globalization progresses, world trade again increases faster than world GDP, Foreign Direct Investment resumes its growth and the transportation, communication, cultural and governmental barriers to trade are reduced.

The growth in international trade and marketing has presented both new opportunities and new threats. Neither can be safely ignored.

Students may come up with a number of additional reasons for the continuing increase in international marketing.

1.2 What is meant by internationalization and how does this relate to the global marketer?

Internationalization is the process whereby a firm becomes increasingly committed to and involved in international business operations through specific products in specific markets. (Note: individual students may come up with somewhat different definitions based on other readings or interpretations.) The global marketer views major regions of the world as a simple or uniform market in which to market a standardized product in a standardized way in order to achieve low relative costs. The traditional multinational company often adapts/individualizes products and practices to specific nations/regions to increase local acceptability, but at an increased cost.

1.3 Is taking a global view limited to companies that view themselves as global companies? Explain.

Taking a global view is not limited to companies that view themselves as global. The automotive division of Rolls Royce (before the sale to Volkswagen) might not have considered itself a global company since production, development of marketing policies and administration were all concentrated in the UK. It could still have a global view, marketing the same product in the same way to the same market segment everywhere in the world (with only modular changes, such as right-hand or left-hand placement of steering wheels, to accommodate to local requirements).



1.4 Is it meaningful to attempt to measure the degree (or amount) of internationalization of a firm? Explain.

While not fully discussed in the text, it may be useful for a firm to measure its degree (or amount) of internationalization as the first step in a gap analysis: assessing where the company is now with respect to international sales, how international the company could be and how international it wants to be. The resulting analysis should assist the company in enabling it to identify actions and resources needed to move from where it is now to where it wants to be.

Exhibit 1.7 discusses programmes to help a company decide if it is ready to enter foreign markets.

1.5 What does it mean for a company to be �market driven?� Is this really important in today's environment or can a company be successful without being so driven? Explain.

It means that the product and the marketing programme are developed with the needs and interests of the consumer in mind. It is of critical importance to consider the consumer in every step of the marketing process from the analysis of markets and development of products through the after-sale service. In today's increasingly competitive market, if you do not provide exactly what the consumer wants, someone else will.

1.6 Explain the meaning of the following statement: �If a company is to be successful in foreign markets its management must have a good understanding of all aspects of the environment within which it will be operating�.

The statement applies to the need to view a marketing programme as a system. The system consists of the set of marketing activities (endogenous) that are controllable by a firm and the set of environmental characteristics that are outside the firm�s control (exogenous). Endogenous activities are used to adapt to the exogenous environment. Thus, if a company is to successfully adapt, it must know all it can about that economic, socio-cultural, competitive, political, etc. dimensions of the environment within which it operates. This relationship and the specific dimensions/activities involved are shown in Figure 1.2 of the text.

1.7 Give two or more examples of how external factors (exogenous variables) in the international environment make export marketing more complex than domestic marketing.

Some examples are:

(a) laws and regulations differ from country to country, and cover a multitude of factors including packaging and labeling requirements, health and safety requirements, etc.

(b) taxes, tariffs, quotas, and other restrictions may limit what you can sell, how much you can sell and/or the costs involved

(c) cultural or social differences may prevent the sale of certain products, or require modifications to the products or distribution systems

(d) economic levels may limit markets

(e) geographic or infrastructural constraints may limit distribution channels

(f) the extent and effectiveness of competition may be quite different.



1.8 What is the relationship between importing and exporting for an individual company?

A company may import goods or services primarily for sale in its home or other markets. Many companies, however, import/obtain goods, services, licenses and/or technology for use in making products for export. Machine tools may be imported in order to manufacture components or products domestically. Increasingly, companies are sourcing components worldwide for use in making final products to be sold both domestically and to other countries. From an individual company�s perspective, the knowledge, contacts, products and services gained through inward internationalization may influence the development of market entry and marketing activities used in outward internationalization.

1.9 What are the three distinct components of export planning and strategy development and how are they related?

The three distinct components of export planning and strategy are:

(a) goals (objectives to be achieved);

(b) programme (development of the marketing mix);

(c) organization (what resources will be used and how they will be put together).

The relationship among these components represents a �closed system�. That is, a company will start with some goal, then develop a programme to achieve the goal and must have an organization to implement the programme. If, for example, the organization is not suited to the marketing programme and the organization cannot be changed, the company must see if the programme can be altered. If this is not possible, then the objectives must be changed to fit the organization and the marketing programme�s capabilities.

1.10 Identify the potential barriers (or obstacles) that face companies considering � or expanding � international marketing operations. Which are the most important and which are less important? Explain.

Individual student answers may vary, but should include at least some of the following. There are several types of potential barriers faced by companies considering beginning or expanding international operations. Internal to the company might be a lack of knowledge of markets, exporting procedures, methods for evaluating risk, and costs, concern over communications, after-sale service and the maintenance of control and lack of qualified personnel and/or lack of support by top management. External to the company may be domestic export controls, foreign trade barriers and foreign attitudes and requirements. Which are most important depends upon a combination of the specific case and the perceptions of the management of the potential exporter.

1.11 Is the role of the international marketer only to attempt to increase sales? Explain.

The role of the international marketer is no longer simply to attempt to increase sales. While this may be of paramount importance in some cases, in other cases the marketer will need to be concerned with controlling demand. Examples of situations in which demand must be controlled include cases in which: (a) demand exceeds supply, either on a medium-term or long-term basis, as with some energy sources, (b) products or services must be allocated to various customers when there are temporary shortages of product, as with newly introduced products, (c) demand must be shifted from high-usage to low-usage periods, as in power generation, (d) specific products or services must be made available but for which full costs cannot be recovered, as in some medical services or (e) demand should be shifted from an environmentally undesirable product to one more environmentally sound, as moving from gasoline-powered automobiles to hybrid cars or public transportation.

Other students may base answers on the demand states given in Exhibit 1.8.



1.12 Is use of the World Wide Web appropriate only for large companies? Explain.

The World Wide Web can be of use to companies of all sizes. It allows even very small firms to advertise and provide other information to potential customers and suppliers. The Web sites of other organizations may provide information useful in determining whether they may be potential suppliers, customers or partners in cooperative ventures.

On the World Wide Web, a company�s size and physical facilities become less important than its ability to reach and attract others, and its ability to show that it can do or provide what is desired.

1.13 What is �e-business?�

E-business (electronic business) is the sale, purchase or exchange of goods, services or information over the Internet or other telecommunications networks. It includes business-to-consumer sales (B2C), business-to-business transactions (B2B) and also transactions among government organizations and consumers or businesses. It can also include a wide range of facilitating and supporting services and information such as scheduling and coordination, supply chain management, distribution chain management, customer relations management, etc.

1.14 Are online market places useful only to businesses? Explain.

Online market places are being used by companies of all sizes. But they are also useful to individuals interested in exchanging goods or services (E-bay, for example), to handicrafts producers looking for wider markets (through Novica, for example) and for governmental organizations.

1.15 Does e-business present a threat or an opportunity to traditional stores and wholesalers? Explain.

It presents both a threat and an opportunity. It provides opportunities for existing companies to promote their present or new products more effectively, to gain additional sales to present customers, to gain additional customers who may not normally visit their existing facilities and to expand to new market segments or new markets which can now be more easily reached. It allows new companies to enter existing markets.

The threat arises from the fact that existing competitors may use e-business to attract customers away from you, and new competitors may find it easier to enter your market.

1.16 What factors have resulted in the rapid rise in outsourcing of jobs overseas?

Improvements in communications technologies and capacities have made it possible for workers in one country (India, for example) to provide real-time, on-line information to users in another country (the US, for example). The wage differentials for well-educated people in India and the US, combined with decreases in communications costs, make the outsourcing of such work economically feasible.

1.17 Give an example of a �business model� and how it can give rise to an opportunity to enter markets overseas.

Students may select from a number of examples. Wal-Mart has used its unique expertise in organizing its supply and distribution systems in its penetration of foreign markets. Examples of six other companies that have used their business models to expand internationally are given in Exhibit 1.13.



TEST BANK, Chapter 1

1. Growing interest in international marketing is due to:

(a) increased opportunities to enter foreign markets.

(b) increased competition from domestic and foreign firms.

(c) lowered trade barriers.

(d) all of the above.

(e) none of the above.

2. More rapid growth in globalization has been limited by the lack of improvements in logistics and supply chain management.

(a) True

(b) False

3. China has become more important in international business

(a) as a major exporter of manufactured goods.

(b) as a major consumer of raw materials.

(c) because of its large and growing domestic market.



4. A major weakness of the Chinese economy is the almost complete lack of both domestic and foreign research and development facilities.

(a) True

(b) False

5. India

(a) continues to have a very low growth rate in its national economy.

(b) is now a major exporter of manufactured goods .

(c) has become a major exporter/international supplier of information services.



6. Greatly reduced turbulence in the international marketplace has been a major factor in increasing international trade.

(a) True

(b) False



7. Success in the international marketplace usually depends upon some combination of customer focus, innovation and market segmentation.

(a) True

(b) False

8. Internationalization may be viewed as:

(a) a process.

(b) an end result .

(c) a way of thinking.



9. With regard to internationalization and the global marketer:

(a) the multinational or global corporation should view the world as a single market for every product.

(b) the multinational or global corporation should view the world as a number of markets and provide complete standardization in products.

(c) the multinational or global corporation should take a contingency approach and standardize or adapt products depending upon the products and markets.



10. The variables in the marketing programme:

(a) include controllable variables such as geography and cultural characteristics.

(b) include uncontrollable variables such as the company's marketing activities.

(c) are independent of each other.



11. While many firms start out as market driven, most end up as product or technology driven.

(a) True

(b) False

12. The relative export profitability of any marketing programme or component is situation specific.

(a) True

(b) False



13. As long as an individual has an understanding of foreign environments and cultural empathy, it is not necessary to have technical competence in marketing to be a successful international marketing executive.

(a) True

(b) False

14. The export performance of a company is affected by the firm itself, the company's markets and industry and the export strategy chosen.

(a) True

(b) False

15. In the modern international environment, profit is no longer a necessary goal for the private business firm.

(a) True

(b) False

16. The basic marketing mix decision includes planning and strategy with regard to market entry, products, promotion, channels of distribution and price.

(a) True

(b) False

17. There is a single accepted definition for the term �globalization�.

(a) True

(b) False

18. A company with a global view operates without regard for national boundaries, except as they affect the relative desirability of one course of action over another.

(a) True

(b) False

19. Importing may be linked to making products for export by:

(a) importing technology/intellectual property for use in developing products for export.

(b) importing equipment to be used for producing exports.

(c) importing components for assembly into products to be exported.





20. The basic decisions facing potential and actual international marketing management are:

(a) whether to engage in international marketing activities at all.

(b) what specific individual markets are to be served.

(c) the method or system to be used to get the products into the hands of the users in foreign countries.



21. Innovations and changes have created new opportunities for some individuals and companies while creating threats or challenges to other companies.

(a) True

(b) False

22. The World Wide Web will soon replace the Internet.

(a) True

(b) False

23. E-business:

(a) includes only activities carried out on the World Wide Web.

(b) includes only the functions of buying and selling goods.

(c) has resulted in the development of an international industry in the development and marketing of software to support e-business.



24. At present, online marketplaces are being used primarily by large corporations.

(a) True

(b) False

25. The exporting of services of knowledge-industry workers is done almost exclusively by high technology companies in the highly developed countries.

(a) True

(b) False

26. One advantage that firms have in exporting business models is that they do not have to be adjusted for use in the foreign country.

(a) True

(b) False



27. A �virtual company� is one:

(a) that has no substantial physical headquarters or other physical facilities.

(b) that has contracts with other organizations to perform almost all business functions. (c) that may be comprised of only an individual with a desk, communications linkages and

knowledge.

(d) all of the above. (e) none of the above.

28. A business model can be successfully exported only if it needs no adjustments or modifications for use in the foreign country.

(a) True

(b) False

29. The recession of 2007�2010

(a) resulted in only a small drop in the most industrialized nations.

(b) hit China the hardest.

(c) hit India the hardest.



30. The three largest economies (by GDP) in the world in order are:

(a) China, Germany and the US.

(b) Japan, China and the US.

(c) the US, China and Japan

(d) China, Japan and the US.

(e) none of the above

31. For many countries, recovery from the 2007�2010 recession has been driven to a large extent by exports and entrepreneurship.

(a) True

(b) False

ANSWERS TO TEST BANK QUESTIONS, Chapter 1

1. (d) 2. (b) 3. (d) 4. (b) 5. (c) 6. (b) 7. (a) 8. (d)

9. (c) 10. (e) 11. (b) 12. (a) 13. (b) 14. (a) 15. (b) 16. (a)

17. (b) 18. (a) 19. (d) 20. (d) 21. (a) 22. (b) 23. (c) 24. (a)

25. (b) 26. (b) 27. (d) 28. (b) 29. (e) 30. (a) 31. (a)




2.1 What are the benefits arising from international trade? Are they the same for industrial goods as for consumer goods? What costs to consumers arise from international trade?

The major potential benefits are lower prices and an increased variety and supply of goods from which to choose. For the most part, these benefits are the same for industrial goods as they are for consumer goods. The import of consumer goods has a direct effect; the import of industrial goods results in lower domestic production costs and/or better products and/or the acquisition of new technology thereby benefiting the consumer indirectly. Consumers in the country of export may also benefit to the extent that domestic firms that export can generate economies of scale in production that can then be passed on to domestic buyers in the form of lower prices.

If exported products are in short supply relative to demand, then market prices in the producing country may be driven higher.

2.2 Discuss how exports and imports help to increase productivity and efficiency.

Briefly, exports and imports lead to increased international specialization, with the most efficient industries in each country tending to increase their output, thereby gaining economies of scale. The transfer of technology, including the importation of new equipment and systems, also leads to improved productivity.

2.3 The productivities of factor inputs with respect to different products are determined by a combination of natural and acquired advantages. Is the productivity of the Japanese due primarily to natural or acquired advantages? How about the French, or the Chinese? Explain.

Japan is not well endowed with the natural mineral resources or large amounts of arable land relative to the size of the population. Until recently, it was also short of capital. The high level of productivity of the Japanese, therefore, must be due to the acquired advantages of knowledge, skills and techniques. France is better endowed with the factors of production; so, some advantages have been natural. However, there has also been substantial acquisition in the form of learning how to use the factors available and in developing products that are less natural-resource-dependent. China has extensive natural resources, but is less rich in most of these, on a per-capita basis, than France. In its current economic development efforts, it is relying heavily on improving the skills and motivation of its people and on the acquisition of technology. In the end, all advantages due to managerial know-how and overall human resources are, in fact, acquired advantages.

2.4 (a) Briefly explain the different types of economic advantage for two countries, A and B, each able to produce two products, X and Y, and discuss the conditions for trade to be advantageous (assuming no transaction costs).

(b) How is it possible for an individual business firm to have a comparative advantage?

(a) If A can produce X more cheaply than B can produce X, and B can produce Y more cheaply than A can produce Y, we have a case of absolute advantage.

If A can produce both X and Y more cheaply than B can produce X and Y, but A has a proportionally greater cost advantage over B in producing X, it is a case of comparative advantage.



If A can produce both X and Y more cheaply than B can produce X and Y, and the ratios of A's advantages are the same for both products (say, for example, X can produce each of the products at exactly half of the cost that Y can produce them), it is a case of equal advantage or equal differences.

Trade is advantageous under conditions of absolute and comparative advantage, but not under conditions of equal advantage/differences.

(b) An individual business firm can have a comparative advantage in much the same way as a nation. But, this would apply to a multi-product company. If at least two of the products of this company were in demand at home and in a foreign country, and there was a company in the other country making the same products, relative cost differences could lead to a situation of comparative advantage. This could lead to a potential trading relationship if the products were relatively homogeneous and branding was not an important attribute.

2.5 Find an example of a country that is exporting a product for which it has an absolute disadvantage with a trading partner but where there is a comparative advantage. Explain the nature of this trading relationship.

Student answers will vary. One example the instructor could use would be the export of machine tools from China to the United States. In labour hours per unit of production of both standard machine tools and technically advanced machine tools, production in China is more costly. But the difference in the cost of producing technically advanced machine tools in China is relatively much higher than the cost of producing standard machine tools. Since the overall low level of productivity in China results in low wages relative to the US, China is able to export standard machine tools to the US while importing technically advanced machine tools from the US.

2.6 Explain the �product life cycle� concept as it relates to international trade and investment. What does the concept mean to the individual firm?

As a product goes through its life cycle of introduction, growth, maturity and decline, the location where it is most advantageous to produce the product tends to shift. In the introductory phase, the advantage is in the country of introduction (usually an economically developed nation), with rapid change and market uncertainties allowing high profit margins and dictating small-scale production. As output grows, exporting becomes possible. As the life cycle changes from growth to maturity, lower costs become a greater concern and production tends to shift to other consuming nations and/or lower labour-cost areas. Eventually, the country of origin may even import the product from a low labour cost area.

The way in which the product life cycle affects a company's export product mix is discussed in Chapter 10. At this point, it is sufficient to say that a company's product (i.e. its brand of the product) goes through such a cycle over time. Moreover, the product itself may be in different stages in different foreign markets. A company will find it difficult to manage a product in different stages of the cycle. Thus, the stage of a product in a foreign market may influence a company's decision to market it in that country.

As discussed in the text, a new and/or advanced product may be designed by a company in an economically advanced country, with the company immediately arranging for its manufacture in a less developed country.



2.7 Export motives may be classified as internal or external, and reactive or proactive. What is meant by these terms with respect to export marketing? Give examples of each of the combinations of export motives.

Internal motives are those that arise from stimuli within the firm, while external motives are those that arise from stimuli outside the firm. Reactive motives are those that arise simply in response to some occurrence in the environment, while proactive motives arise from the executives actively seeking new opportunities.

A decision to actively seek economies of scale by opening new markets overseas would represent proactive motives generated internally. A decision to undertake additional foreign marketing activities as a result of opportunities coming to their attention from outside would be classed as proactive, external. A decision to undertake activities in order to avoid risks in marketing only domestically would be classed as reactive, internal. Simply responding to unsolicited orders from overseas would be reactive, external.

Depending upon the circumstances, a particular action may be motivated by differing combinations, but understanding the classification scheme helps one understand how a particular company is motivated.

Student examples will differ.

2.8 Why might some companies be willing to undertake new or additional international and export marketing even though it apparently offers only similar (or even lower) levels of profitability?

The companies see offsetting advantages in increased stability of sales and/or profits, diversification of risk, greater growth opportunities, outlets for excess production or the need to protect existing overseas markets from new government restrictions.

2.9 What is meant by a �change agent� in export marketing? Give examples of each type of change agent.

A change agent in export marketing is some organization external to the company that encourages and assists the company in starting or expanding international marketing activities. Government agencies, trade associations, etc., may be active in this area. Other companies, such as export agents and foreign importers, may also do this.

Examples of change agents will vary.

2.10 Find an example of a company that has expanded its export/international marketing activity, or started such activity, and determine the company�s objectives for doing so and the results achieved.

If the student does not have personal knowledge of any such company, he or she can find examples in business periodicals. Toyota undertook exporting because the Japanese market was too small to provide the level of sales and profits they wanted. They began manufacturing overseas because of trade barriers in the US and European markets. They succeeded very well, for many years earning the greatest profits of any Japanese company. (See Case study 2.2)



2.11 How can a company make operational use of the network model and relationship marketing in planning and implementing international marketing programmes?

Selecting suppliers and distributors is a part of planning and implementing marketing programmes. Relationship marketing emphasizes the building of lasting relationships or informal partnerships, often with substantial sharing of information, with suppliers and distributors. The objectives are to reduce transaction costs, and to work cooperatively with others in the value chain to improve quality and responsiveness and lower costs. An assumption is that the value of such cooperation will more than offset the advantages of short-term competition over cost and quality between possible suppliers.

The network model portrays the relationships between the various partners as a set of networks that may be global in nature, and may be grouped by geographical areas, products, techniques, etc.

When a company recognizes the existence and importance of networks of business relationships in particular industries and regions, it is in a position to identify and expand its own position and relationships through international expansion into nets new to the firm, penetration by developing existing positions and international integration by increasing coordination between its positions in different national nets. Increased and improved relationships facilitate the gathering of information, the development of useful contacts with others that control or can facilitate access to needed resources (including, for example, marketing channels and government approval agencies) and the building of personal confidence.

2.12 There are many who believe that �whatever is legal is ethical�. Do you agree with this belief as it might apply to the international marketer? Explain your position and give examples of behaviour in the global marketplace that would support your position.

The position that what is legal may not be ethical is probably easier to defend. Nestlé�s promotion of baby formula in areas where it was not properly used was legal but considered unethical by many people. Activities resulting in serious contamination of the environment are legal in a number of countries (both less economically developed and more developed), but is considered unethical by many people. High-pressure tactics to sell unneeded or harmful products to children or the aged may be legal in some countries but is still viewed as unethical by many people, even in those countries.

2.13 Is being �right � or �wrong � about moral issues in international marketing activities an absolute or is it relative? Explain.

It is relative; that is, deciding whether some action is �right � or �wrong � depends upon the individual marketer, the host society and the marketer�s home society. Small (or even large) bribes are considered right (or even required) in some societies, while considered morally wrong by some people (and perhaps illegal under home country laws). Attempting to provide equal employment opportunity to women is some countries would be both wrong and illegal to the host society but would perhaps be considered morally right by a marketer from another society.

2.14 With what particular issues must international marketers be concerned?

The ethical, moral issues with which international marketers must be concerned include safety and effectiveness of the product, market entry and expansion methods conforming to local and home country values, honest advertising and promotion and activities of sales personnel monitored, prices set at a level viewed as fair and customers, employees and suppliers treated in a manner that is viewed as fair.



2.15 Are traditional views about the goals of business the same in Britain, the United States and the continental western European countries? If not, how do they differ?

They differ. Traditional British and the US views held that the primary goal of business organizations was to maximize profits/returns to the stockholders/owners. In much of continental Europe, business was believed to have much broader obligations including responsibilities toward customers, employees, suppliers and society as a whole. In the US, a more broad view of corporate responsibility is developing but is still far from many of the views in Europe.

2.16 In general, are businesses becoming more or less sensitive to social responsibility issues? Why?

Businesses are becoming more sensitive to social responsibility issues because of growing awareness of environmental and product problems, activities of public interest groups, lawsuits (particularly in the US), some proactive companies and the possibility that issues related to apparent failures of businesses to meet social responsibility needs may result in additional laws or regulations affecting business.



ANSWERS TO CASE QUESTIONS, Chapter 2

Case Study 2.1 BP

1. How can BP now go about attempting to create a real �safety first� attitude in the company�s managers and employees? What are the problems and how could they be solved?

Student answers may vary depending upon their own experiences in companies, on sports teams or elsewhere. As noted in the case, it is very difficult to establish a truly safety-first attitude in any company, particularly one that has a long history of putting speed and costs ahead of safety. Events leading up to the disaster on the Deepwater Horizon, and events at other BP facilities noted, are apparently typical of company priorities and actions. Employees at all levels in BP, from manual workers through technical workers and supervisors to high-level managers, appear to be more highly rewarded for pushing ahead to meet time and cost objectives than for selecting the safest methods and caution.

Several actions need to be taken to make BP a �safety first� company. There needs to be a method for preventing employees from, or penalizing them for, using unsafe methods and/or skipping required tests and/or failing to stop operations under unsafe conditions. Periodic careful checking of all records of safety checks is necessary, made by people with authority to repot discrepancies to a senior official in the company. The company needs to publish a clear statement to all employees stating that they, individually and collectively, are responsible for reporting any safety problems they see to the next higher level in the hierarchy, and they are further responsible to refer the matter to a higher level if it is not addressed. (This is a very radical approach, but was used successfully some years ago by then Chief of Naval Operations Admiral Zumwalt authorizing any enlisted man/woman to send him a �Z-gram � informing him of the continuance of any of several specific problems they commonly faced. The problems stopped.) The company should also send a clear written statement to all members of management stating that they would be held responsible for using unsafe methods and procedures.

Top management at BP would undoubtedly view taking such actions as too costly and slowing down operations too much. But the actions would be effective and, in the long run, be much less costly in money and reputation, than having more refinery disasters or another well-drilling disaster. Being sure that operations are being conducted safely can become a habit.

2. How fair to those having claims is the approach being used by the claims administrator? Is there any other solution that would be fair to both those filing claims and BP?

They are not fair to applicants because the applicants are required to give up rights to sue over health problems directly related to the disaster if those problems surface after they have accepted a settlement based on problems already apparent on the date of settlement.

The administrator has a fixed amount of money he is authorized to distribute, so he apparently feels that he must ensure that claims made after that money is gone must be denied. And, of course, BP does not want an open-ended liability.

It might seem fairer, however, if BP agreed to assume now a specified (large) future contingent obligation (without cash up front) with potential future claims to be paid out of that fund. Current applicants could be required to waive any future rights after that fund was depleted. Though, it is still not entirely fair, but it is possibly fairer to present applicants. For BP, though it would appear



on the company�s books as a contingent obligation, it would not require any additional cash outlay in the near future.

3. Should the US government try to prohibit any more deepwater drilling in the Gulf of Mexico? Why, why not? What factors should be considered in coming to a decision?

Students may have a variety of viewpoints on this, but the following factors should be considered in the discussion.

Not all of the Gulf of Mexico lies within US territorial waters, with other parts in Mexican territorial waters. Thus, the US cannot control all of the Gulf waters though much of present exploration and production is now in the US part.

The US obtains about 30% of its petroleum supplies from the Gulf. To reduce further exploration and drilling in the Gulf would render the nation increasingly dependent upon supplies from the Middle East and other overseas countries that are more subject to interruptions.

The US government needs to provide more effective oversight, inspections and enforcement of regulations. The oil companies need to increase their emphasis on ensuring safety in their operations.

4. Should other governments consider restricting deepwater drilling in their territories? Why, why not? What factors should be considered in coming to a decision?

Again, students can be expected to have a variety of opinions on this.

All governments should study the problems that led up to the BP disaster, and consider what they can do to prevent such problems from developing.

All governments should adopt an approach requiring the use of �best practices� in exploration, drilling and well operation.

Exposure of marine and nearby land environments should be a consideration in making such decisions.

As a practical matter,

even what �best practices� are is subject to differing interpretations,

the governments of some countries do not have in-country resources to adequately determine what should be required, and some countries may be reluctant to fund and enforce adequate safety requirements and inspections (It is obvious that the US government did not adequately enforce existing inspection requirements and rules.),

the desire for the additional income from petroleum production in their territorial waters will tend to make countries seek additional exploration and production.

Case Study 2.2 Toyota Motor Corporation

1. What do you think the long-term effects of the recalls will be on Toyota?

This will depend upon the actions Toyota takes from now on and how effective these actions are (including how many more major recalls Toyota may have, and how they respond to them). To the date of publication of this book, Toyota�s market share is recovering to a greater or lesser



TEST BANK, Chapter 2

1. Which theory of international trade is applicable to (or explains) the trading of all goods at all times?

(a) classical theory of international trade.

(b) the factor proportion theory of international trade.

(c) the product life cycle of international trade.



For Questions 2, 3, and 4 below: Both Germany and Denmark make machinery and furniture. For each of the following three cases in Column A, indicate which item from Column B is the type of advantage involved.

COLUMN A COLUMN B

2. In Germany, machinery costs $10 per unit and furniture costs $5 per unit; in Denmark, machinery costs $12 per unit and furniture costs $6 per unit.

(a) Comparative advantage

(b) No advantage

(c) Absolute advantage

3. In Germany, machinery costs $10 per unit and furniture costs $5 per unit; in Denmark, machinery costs $5 per unit and furniture costs $8 per unit.


(b) No advantage


4. In Germany, machinery costs $10 per unit and furniture costs $5 per unit; in Denmark machinery costs $12/unit & furniture $7/unit.


(b) No advantage


5. Motivation for engaging in exporting may come from which of the following combinations of factors?

(a) internal and proactive only.

(b) internal and reactive only.

(c) internal or external and proactive or reactive.

(d) external and proactive only.

(e) external and reactive only.



6. Although international trade grew rapidly in total amount during the last half of the 20th century, its relative importance decreased in most economies.

(a) True

(b) False

7. While imports provide consumers with an increase in the supply and variety of goods, they do not provide any benefits to domestic industry.

(a) True

(b) False

8. The product life cycle theory says that a nation will export that product for which a large amount of the relatively abundant (cheap) input is used, and it will import that product in the production of which the relatively scarce (expensive) input is used.

(a) True

(b) False

9. Many, but not all, exporting companies probably face less total risk than non-exporting firms by virtue of having diversified geographical markets.

(a) True

(b) False

10. Strengthening of a company's international network can be achieved by:

(a) international extension.

(b) penetration.

(c) international integration.

(d) all of the above


11. Relationship marketing is based upon several assumptions including the following:

(a) transaction costs will be higher, but lower prices will be paid for components purchased.

(b) continuous bidding from potential competing suppliers is highly desirable.

(c) presents dangers of loss of control and release of internal information.



12. Ethics is comprised of what most people in a society view as being moral, good, right.

(a) True

(b) False



13. Examples of differences in ethics between different societies include attitudes toward:

(a) the paying of interest on loans.

(b) the place of women in the workforce.

(c) the paying of bribes or �facilitating payments�.



14. The international marketer will always be safe following the laws and customs of the host country.

(a) True

(b) False

15. A universally agreed upon basis for ethical decision-making is:

(a) the principle of utilitarianism.

(b) the principle of rights.

(c) the principle of overall benefits to society as a whole.



16. In the stakeholder concept view of the corporation:

(a) stakeholders include those who have an interest or some share in the undertaking.

(b) some stakeholders have legal rights.

(c) some stakeholders may claim more rights.



17. There is a strong and increasing tendency for many societies to demand that companies act with increasing concern for overall societal and environmental needs.

(a) True

(b) False

18. Social responsibility and corporate profit are incompatible.

(a) True

(b) False



19. Japan and the United States have almost identical views of what is proper with respect to:

(a) legal practice.

(b) business-government relations.

(c) social responsibility.



20. In the BP case, the problems in the blowout and explosion aboard the Deepwater Horizon platform of the Macondo oil well in the Gulf of Mexico arose from:

(a) poorly performed or inadequate inspections by company personnel.

(b) inadequate inspections by US government officials.

(c) company rewards based more on speed and costs, than on safety.



21. In the Toyota Motor Corporation case, the key problem or problems was/were:

(a) inadequate training of workers in China and the US.

(b) unrealistic expectations by the American public.

(c) the culture and structure of Toyota�s management in Japan.



ANSWERS TO TEST BANK QUESTIONS, Chapter 2

1. (e) 2. (b) 3. (c) 4. (a) 5. (c) 6. (b) 7. (b) 8. (b)

9. (a) 10. (d) 11. (c) 12. (a) 13. (d) 14. (b) 15. (e) 16. (d)

17. (a) 18. (b) 19. (e) 20. (d) 21. (c)




3.1 Explain the meaning of �cultural universals�. Do these provide universal guides to behaviour in all societies? How can the international marketer use these universals? Explain.

Cultural universals are factors that are found in all cultures, such as the presence in all cultures of food taboos. However, they do not give us universal guides to behaviour in all societies. Some societies proscribe the eating of pork, others the eating of beef, others both pork and beef and others neither pork nor beef. The cultural universals simply give us a list of elements about which every society has some restrictions or conventions, but do not tell us what those specific conventions or prohibitions are. The international marketer can use the list(s) of cultural universals as checklists of what factors should be looked at in each international market. The marketer then needs to determine which of these factors should be adjusted for.

3.2 Do you agree that the international marketer does not need to study the culture from a narrow perspective, but rather needs only a broad perspective to learn about general patterns and themes? Explain your answer.

The export marketer needs to know the details of how values, attitudes, preferences and laws relate specifically to product and marketing requirements for the target group in the society. A broad perspective on the culture is very useful in providing a framework for understanding the market, knowing what to look for in the way of requirements and suggesting which products and approaches may be effective. But a broad perspective by itself is not sufficient to avoid problems and pitfalls.

3.3 Explain the meaning of the following statement: �Managing multiculturalism within the international marketing organization and within the markets it serves is what makes international marketing exciting and frustrating�.

This statement is designed to call attention to the human environment and the diversity in human beings. Characteristics such as language, religion, values, attitudes and social organizations vary across national markets and even within a national market. Although the primary impact may be the market and consumers/customers within the market, consideration must also be given for the people within the international marketing organization. Not only is exporting of relevance, but other modes of entry such as investment, licensing and joint ventures are affected as well. So-called �excitement and frustration� may arise also from consumption patterns of people, their political ideologies, nationalistic feelings and application of the self-reference criterion. Statements about what is exciting and what is frustrating will vary among students.

3.4 What is the �silent language� of international marketing and how does it relate to the concept of �culture is communication�?

Spoken and written language is obviously an important means of communication. But people also communicate through their behaviour in how close they stand, when they look directly into another's eyes or avert their gaze, posture, gestures, etc. The same behaviour may mean two different things to people from two different groups. The silent language is non-verbal communication.

The relationship between culture and communication is discussed in the section on �Culture and communication� in text.



3.5 What is the self-reference criterion and how should the international marketer apply it? Explain.

Using the self-reference criterion, the marketer defines problems in terms of his/her own society's cultural traits, habits or norms. What he/she needs to do is redefine problems in terms of the foreign cultural traits, habits and norms in order to see the likely effects of cultural bias and how this bias can be overcome.

3.6 Various classification schemes are sometimes used to given an indication of the potential of a foreign market/country. Explain why these schemes should or should not be used as a basis for deciding what markets to enter.

The various classification schemes may be used to provide a rough initial estimate of potential for sales of your products or services based on size, GNIs, income distribution, cultural similarities, etc. But the decision about whether to actually enter a specific market must be based on a comprehensive analysis including tastes, cultural values and their effects on the potential for sales of your specific products, competition, marketing channels (and also governmental, political and legal requirements as discussed in Chapter 4) � in effect all of the factors discussed in this book.

3.7 What is really meant by a company having a differential advantage over its competitors in one or more foreign markets?

A differential advantage is some unique advantage a firm has over its competitors in a given market. This may be a trademark, a marketing organization or distributing network, product characteristics, lower costs, higher quality or any other unique characteristics that real or potential competitors cannot duplicate at the present time.

3.8 Select a culture with which you have had contact. How does it differ from your own culture? How might these differences affect international marketing activities, business negotiations or ongoing business relationships? Explain!

Student answers will vary depending upon the countries the student compares. The text provides enough information about China and Japan in Chapters 1, 2 and 3 to allow a student to compare his/her own country to one of these.



Potential problems:

Preference effect may cause trade to flow in inefficient ways (trade diversion).

Regionalism may block efforts to liberalize trade worldwide.

The European Union has moved a long way towards the creation of a single internal market; but the exporter must still deal with differences in tastes, preferences, distribution structure, etc.

The EU has added a number of countries since its inception, including some with significantly lower per capita GNIs; more countries have applied for admission.

Even with economic integration, separate markets do not cease to exist.




4.1 Government can play many roles in international marketing. What are these roles and how does each affect individual business firms?

In general, the roles that government play, at all levels, are intervention roles of participator, planner, controller and stimulator. All these are designed to apply to the activities and behaviour of individual business firms. More specifically, individual companies are affected by having transactions (1) encouraged or facilitated through export promotion activities, (2) impeded by controls, and/or (3) replaced by, or at least facing competition from, state trading organizations.

4.2 Why is it that some exporters would support voluntary export restraints agreed to by their government?

Perhaps the major reason why exporters might support VERs is that it may be profitable to them to do so. Often, VERs may create a situation where a scarcity in the marketplace exists, particularly for certain market segments. Domestic products and those exported from other countries are not viewed by the market segments as being equal, or better, than that which is limited by a VER. This allows the exporters to sell the products they are allowed to ship for a higher unit price. When VERs were imposed on shipments of automobiles from Japan to the US, the profits of the major Japanese automobile manufacturers actually increased substantially.

4.3 For a country of your choice, determine what its government does to promote exports and other international marketing activity.

Student answers will vary. Some will be limited to national government activities while others will include what is available from sub-national government agencies. Some information about the activities of the Australian, Japanese and other governments was given in the text.

4.4 What is regional economic integration, what is its objective, how is it supposed to achieve its objective, and what impact is there on individual exporters?

Regional economic integration refers to arrangements that combine separate individual economies into a larger economy. One objective is to increase standards of living for consumers. It has the potential to result in greater trade, better allocation of resources, more efficient production through economies of scale, and greater investment and technological progress. It may impede worldwide integration and thus sub-optimize.

The potential impact on individual exporters depends upon whether an exporter is located inside the area or outside. In general, however, individual companies are affected by a preference effect and a growth effect. More efficient producers tend to benefit and less efficient producers tend to decline or go out of business.

4.5 Should an economically integrated region be considered as one market area? Explain your answer. Would your answer vary for the European Union in contrast to, say ASEAN?

Such an area should not be considered as one market area. Within the EU, and individual countries as well, for example, there are economic, demographic, social and cultural differences that create different market conditions. Tastes and requirements vary from area to area and/or group to group. There are also laws and regulations that differ from country to country within the EC, and within individual countries, although to a lesser extent. Within ASEAN, there are even greater differences and, to date, less progress in reducing trade barriers and harmonizing laws and regulations.



4.6 Can the European Union become too big? Is there a point of diminishing returns for a regional economic areas? Explain.

There is not sufficient information available at the present time to provide a clear answer to this question. Some EU countries are concerned about a number of potential problems, but is still in an expansionist mode overall. To date, the economically less-advanced nations that joined up to 2004 have grown more rapidly since joining. While growth of the more economically advanced nations has not been as rapid as some would like, to date the EU has been a success.

4.7 Distinguish between legal, political, and governmental influences on the international marketer.

The government passes laws that directly influence the international marketer. The government typically also has a political philosophy and beliefs that may directly (by regulations) or indirectly (by suggestions or slowness in approving project or activities) affect the international marketer. There are also beliefs and customs held by local businesses and the people in general within a given market that affect the international marketer (preferences for local products, etc.).

4.8 Explain how a single government can promote, impede and compete at the same time.

A government may:

promote/encourage/facilitate international/export marketing activities by export subsidies, efforts to attract international businesses, or other actions;

impede such activities by restriction on imports (and in some cases exports);

compete with or replace international activities by private business firms through government-operated organizations.

An example is the US government that not only has programmes to encourage companies to export but also has regulations on what can be exported and laws regarding international bribery that impede exports.

4.9 What role should sub-national government bodies play in the international environment?

Sub-national government bodies can assume any role in the international environment that the national government allows and/or actively encourages. Various regions within nations, when allowed or encouraged by the national government to do so, often have export promotion programmes and/or attempt to attract foreign investment. Regions within China, the UK, the US and many other countries have such programmes.

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Albaum instructor guide