Ch 6 - Understanding and Reaching Global Consumers and Markets

Question 1

Identify the major trends that have influenced world trade and global marketing.

Answer 1

Four major trends have influenced the landscape of global marketing in the past decade. First, there has been a decline of economic protectionism by individual countries, leading to a reduction in tariffs and quotas. Second, there is growing economic integration and free trade among nations, reflected in the creation of the European Union and the North American Free Trade Agreement. Third, there exists global competition among global companies for global consumers, resulting in firms adopting global marketing strategies and promoting global brands. And finally, a networked global marketspace has emerged using Internet technology as a tool for exchanging goods, services, and information on a global scale.

Question 2

Identify the environmental forces that shape global marketing efforts.

Answer 2

Three major environmental forces shape global marketing efforts. First, there are cultural forces, including values, customs, cultural symbols, and language. Economic forces also shape global marketing efforts. These include a country’s stage of economic development and economic infrastructure, consumer income and purchasing power, and currency exchange rates. Finally, political-regulatory forces in a country or region of the world create a favorable or unfavorable climate for global marketing efforts.

Question 3

Name and describe the alternative approaches companies use to enter global markets.

Answer 3

Companies have four alternative approaches for entering global markets. These are exporting, licensing, joint venture, and direct investment. Exporting involves producing goods in one country and selling them in another country. Under licensing, a company offers the right to a trademark, patent, trade secret, or similarly valued item of intellectual property in return for a royalty or fee. In a joint venture, a foreign company and a local firm invest together to create a local business. Direct investment entails a domestic firm actually investing in and owning a foreign subsidiary or division.

Question 4

Explain the distinction between standardization and customization when companies craft worldwide marketing programs.

Answer 4

Companies distinguish between standardization and customization when crafting worldwide marketing programs. Standardization means that all elements of the marketing program are the same across countries and cultures. Customization means that one or more elements of the marketing program are adapted to meet the needs or preferences of consumers in a particular country or culture. Global marketers apply a simple rule when crafting worldwide marketing programs: Standardize marketing programs whenever possible and customize them wherever necessary.

Question 5

back translation

Answer 5

The practice where a translated word or phrase is retranslated into the original language by a different interpreter to catch errors.

Question 6

cross-cultural analysis

Answer 6

The study of similarities and differences among consumers in two or more nations or societies.

Question 7

cultural symbols

Answer 7

Things that represent ideas and concepts.

Question 8

currency exchange rate

Answer 8

The price of one country’s currency expressed in terms of another country’s currency.

Question 9

customs

Answer 9

The normal and expected ways of doing things in a specific country.

Question 10

exporting

Answer 10

A global market-entry strategy in which a company produces goods in one country and sells them in another country.

Question 11

Foreign Corrupt Practices Act (1977)

Answer 11

A law, amended by the <i>International Anti-Dumping and Fair Competition Act</i> (1998), that makes it a crime for U.S. corporations to bribe an official of a foreign government or political party to obtain or retain business in a foreign country.

Question 12

global brand

Answer 12

A brand marketed under the same name in multiple countries with similar and centrally coordinated marketing programs.

Question 13

global competition

Answer 13

Exists when firms originate, produce, and market their products and services worldwide.

Question 14

global consumers

Answer 14

Consumer groups living in many countries or regions of the world who have similar needs or seek similar features and benefits from products or services.

Question 15

global marketing strategy

Answer 15

A strategy that a transnational firm uses that employs the practice of standardizing marketing activities when there are cultural similarities and adapting them when cultures differ.

Question 16

joint venture

Answer 16

A global market-entry strategy in which a foreign company and a local firm invest together to create a local business in order to share ownership, control, and profits of the new company.

Question 17

microfinance

Answer 17

The practice of offering small, collateral-free loans to individuals who otherwise would not have access to the capital necessary to begin small businesses or other income-generating activities.

Question 18

multidomestic marketing strategy

Answer 18

A strategy that a multinational firms uses that have as many different product variations, brand names, and advertising programs as countries in which they do business.

Question 19

protectionism

Answer 19

The practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas.

Question 20

quota

Answer 20

A restriction placed on the amount of a product allowed to enter or leave a country.

Question 21

tariff

Answer 21

A government tax on goods or services entering a country that primarily serves to raise prices on imports.

Question 22

values

Answer 22

A society’s personally or socially preferable modes of conduct or states of existence that tend to persist over time.

Question 23

World Trade Organization (WTO)

Answer 23

An institution that sets rules governing trade between its members through panels of trade experts who decide on trade disputes between members and issue binding decisions.

Question 24

What is protectionism?

Answer 24

Protectionism is the practice of shielding one or more industries within a country’s economy from foreign competition through the use of tariffs or quotas.

Question 25

The North American Free Trade Agreement was designed to promote free trade among which countries?

Answer 25

The United States, Canada, and Mexico

Question 26

What is the difference between a multidomestic marketing strategy and a global marketing strategy?

Answer 26

Multinational firms view the world as consisting of unique markets. As a result, they use a multidomestic marketing strategy because they have as many different product variations, brand names, and advertising programs as countries in which they do business. Transnational firms view the world as one market. As a result, they use a global marketing strategy to standardize marketing activities when there are cultural similarities and adapt it when cultures differ.

Question 27

Cross-cultural analysis involves the study of .

Answer 27

similarities and differences among consumers in two or more nations or societies

Question 28

When foreign currencies can buy more U.S. dollars, are U.S. products more or less expensive for a foreign consumer?

Answer 28

less expensive

Question 29

What mode of entry could a company follow if it has no previous experience in global marketing?

Answer 29

indirect exporting through intermediaries

Question 30

How does licensing differ from a joint venture?

Answer 30

Under licensing, a company offers the right to a trademark, patent, trade secret, or other similarly valued items of intellectual property in return for a fee or royalty. In a joint venture, a foreign company and a local firm invest together to create a local business to produce some product or service. The two companies share ownership, control, and profits of the new entity.

Question 31

Products may be sold globally in three ways. What are they?

Answer 31

Products can be sold: (1) in the same form as in their home market (product extension); (2) with some adaptations (product adaptation); and (3) as a totally new product (product invention).

Question 32

What is dumping?

Answer 32

Dumping is when a firm sells a product in a foreign country below its domestic price or below its actual cost to produce.