Incoterms 2010 and International Business - 101
Incoterms 2010 and International Business - Wild - Chapter 12 - QUIZ
Incoterms 2010 and International Business - 101
International Business: The Challenges of Globalization, 8th Edition, Wild & Wild
Incoterms 2010 and International Business - Wild - Chapter 12 - QUIZ
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International Business, 8e (Wild/Wild)
Chapter 12 Analyzing International Opportunities
1) Locating production facilities within regional markets is popular because ________.
- A) regional markets offer greater range of resources needed for production
- B) it provides duty-free access to every consumer in a trade bloc
- C) the marketing strategies applied at the regional market level will also be applicable at the global level
- D) it simplifies political and economic activities
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
2) The first step in the screening process for potential markets and sites is to ________.
- A) select a favorable market or site
- B) measure the market or site potential
- C) identify the basic appeal of a market
- D) assess the national business environment
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
3) Which of the following steps of the market screening process involves examining the cost of transporting goods?
- A) identification of basic appeal of a market
- B) assessment of the national business environment
- C) measurement of market or site potential
- D) selection of the market or site
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
4) Which of the following steps of the market screening process involves the analysis of the quality of workforce, materials, and infrastructure?
- A) identification of basic appeal of a market
- B) assessment of the national business environment
- C) measurement of market or site potential
- D) selection of the market or site
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
5) Which of the following steps of the market screening process involves an evaluation of the government bureaucracy?
- A) identification of basic appeal of a market
- B) assessment of the national business environment
- C) measurement of market or site potential
- D) selection of the market or site
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
6) Which of the following government regulations or actions would indicate that a government is quite receptive to international trade and investment?
- A) creating investment barriers to ensure domestic control of an industry
- B) requiring companies to divulge proprietary secrets
- C) allowing companies to remove profits earned in the domestic market
- D) barring companies entirely from certain sectors of the domestic economy
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
7) The key element of political risk of greatest concern for global companies is ________.
- A) the cost of transporting materials and goods
- B) unforeseen political change
- C) currency and liquidity problems
- D) letting past political events blind future opportunities
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
8) The likelihood that a society will undergo governmental changes that negatively affect local business activity is known as ________.
- A) volatility risk
- B) systemic risk
- C) political risk
- D) credit risk
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
9) Which of the following will most likely force international companies to cancel proposed investments?
- A) low rates of inflation
- B) increasing budget deficits
- C) rising productivity levels
- D) an appreciating currency
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
10) Which of the following steps of the screening process for potential markets involves the evaluation of fiscal and monetary policies of a nation?
- A) identification of basic appeal of a market
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
11) Which of the following steps of the market screening process examines the effects of country image on market-entry decisions?
- A) identification of basic appeal of a market
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: C
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
12) Which of the following is least likely to be caused by poor fiscal and monetary policies of a nation's central bank?
- A) high rates of inflation
- B) increasing budget deficits
- C) depreciating currency
- D) increasing levels of innovation
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
13) ________ refers to management of the physical flow of products from the point of origin as raw materials to end users as finished products.
- A) Operations research
- B) Logistics
- C) Warehousing
- D) Environmental scanning
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
14) Which of the following statements is true about country image and its effects on global companies?
- A) It embodies all important facets of a nation's business environment.
- B) If a country's image is positive in one product class, it tends to be positive in all other product classes as well.
- C) An image, once formed, seldom changes over time.
- D) Products made in emerging countries are evaluated more positively than products made in developed countries.
Answer: A
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
15) Developing a market-potential indicator for an emerging market is useful for a company planning on ________.
- A) exporting
- B) licensing
- C) joint ventures
- D) acquisitions
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
16) Which of the following variables involved in market-potential analyses allows managers to rank countries from the largest to the smallest, regardless of a particular product?
- A) market growth rate
- B) market intensity
- C) market size
- D) market consumption capacity
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
Scenario: Chong's analysis of international markets
John Chong is an inexperienced entrepreneur in global business. He wants to sell his product, Zulu doll, a toy for kids below the age of eight, in every corner of the world. He wants to examine all potential markets but wants to keep his costs low. John has asked you to explain a few things about analyzing international markets.
17) When screening a potential market, which of the following would you advise John to do first?
- A) assess the national business environment
- B) select the market
- C) identify basic appeal for markets
- D) measure market potential
Answer: C
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
18) Which stage of the market-screening process is John involved in, while examining government regulations and bureaucracy in a market?
- A) assessment of the national business environment
- B) selection of the market
- C) identification of the basic appeal for markets
- D) measurement of market potential
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
19) Which step of the market-screening process involves determining the income elasticity of the Zulu doll?
- A) selection of the market
- B) assessment of the national business environment
- C) identification of the basic appeal for markets
- D) measurement of market potential
Answer: D
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
20) The first step in the screening of potential markets is an assessment of the national business environment.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
21) The first step in the identification of potential markets is an assessment of the basic demand for a product.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
22) A country's climate plays an important role in determining the basic demand for a company's product.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.1: Explain the importance of examining basic appeal and national factors.
23) Cultural elements can influence what kinds of products are sold and how they are sold in a country.
Answer: TRUE
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
24) Consumer products such as toothpaste and soft drinks undergo extensive adaptation to suit local preferences.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
25) Governments bar international companies from entering economic sectors like energy exploration for security reasons.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
26) Regulations for the purpose of environmental protection generally increase short-term production costs.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
27) Volatile currency values make it easier for firms to predict future earnings accurately in terms of the home-country currency.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
28) Products made in emerging countries tend to be evaluated more positively than those from relatively more developed countries.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
29) Companies usually create a single marketing plan to be used in all markets in which they sell their products.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
30) Briefly discuss the important political and legal forces that should be analyzed in the market/site screening process.
Answer: Political and legal forces also influence the market and site-location decision. Important factors include government regulation, government bureaucracy, and political stability.
A nation's culture, history, and current events cause differences in attitudes toward trade and investment. Some governments take a strong nationalistic stance, whereas others are quite receptive to international trade and investment. A government's attitude toward trade and investment is reflected in the quantity and types of restrictions it places on imports, exports, and investment in its country.
Government regulations can quickly eliminate a market or site from further consideration. First of all, they can create investment barriers to ensure domestic control of a company or industry. One way in which a government can accomplish this is by imposing investment rules on matters such as business ownership–for example, forcing foreign companies into joint ventures. Governments can extend investment rules to bar international companies entirely from competing in certain sectors of the domestic economy. The practice is usually defended as a matter of national security. Economic sectors commonly declared off-limits include television and radio broadcasting, automobile manufacturing, aircraft manufacturing, energy exploration, military-equipment manufacturing, and iron and steel production. Such industries are protected either because they are culturally important, are engines for economic growth, or are essential to any potential war effort. Host governments often fear that losing control in these economic sectors means placing their fate in the hands of international companies.
Second, governments can restrict international companies from freely removing profits earned in the nation. This policy can force a company to hold cash in the host country or to reinvest it in new projects there. Such policies are normally rooted in the inability of the host-country government to earn the foreign exchange needed to pay for badly needed imports.
Third, governments can impose very strict environmental regulations. In most industrial countries, factories that produce industrial chemicals as their main output or as byproducts must adhere to strict pollution standards. Regulations typically demand the installation of expensive pollution-control devices and close monitoring of nearby air, water, and soil quality. While protecting the environment, such regulations also increase short-term production costs. Many developing and emerging markets have far less strict environmental regulations. Regrettably, some companies are alleged to have moved production of toxic materials to emerging markets to take advantage of lax environmental regulations and, in turn, lower production costs. Although such behavior is roundly criticized as highly unethical, it will occur less often as nations continue cooperating to formulate common environmental protection policies.
Finally, governments can also require that companies divulge certain information.
Government Bureaucracy-A lean and smoothly operating government bureaucracy can make a market or site more attractive. Yet a bloated and cumbersome system of obtaining approvals and licenses from government agencies can make it less appealing. In many developing countries, the relatively simple matter of obtaining a license to establish a retail outlet often means acquiring numerous documents from several agencies. The bureaucrats in charge of these agencies generally are little concerned with providing businesses with high-quality service. Managers must be prepared to deal with administrative delays and a maze of rules.
Political Stability-Every nation's business environment is affected to some degree by political risk. Political risk is the likelihood that a society will undergo political changes that negatively affect local business activity. Political risk can threaten the market of an exporter, the production facilities of a manufacturer, or the ability of a company to remove profits from the country in which they were earned. The key element of political risk that concerns companies is unforeseen political change. Political risk tends to rise if a company cannot estimate the future political environment with a fair degree of accuracy. An event with a negative impact that is expected to occur in the future is not, in itself, bad for companies because the event can be planned for and necessary precautions taken. It is the unforeseen negative events that create political risk for companies.
Managers' perceptions of a market's political risk are often affected by their memories of past political unrest in the market. Yet managers cannot let past events blind them to future opportunities. International companies must try to monitor and predict political events that threaten operations and future profits. By investigating the political environment proactively, managers can focus on political risk and develop action plans for dealing with it.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
31) What is country image? Explain how it affects the screening process using examples.
Answer: Country image embodies every facet of a nation's business environment. It is highly relevant to the selection of sites for production, R&D, or any other activity. For example, country image affects the location of manufacturing or assembly operations because products must typically be stamped with labels identifying where they were made or assembled–such as "Made in China" or "Assembled in Brazil." Although such labels do not affect all products to the same degree, they can present important positive or negative images and boost or dampen sales.
Products made in relatively developed countries tend to be evaluated more positively than products from less developed countries. This relation is due to the perception among consumers that the workforces of certain nations have superior skills in making particular products. For example, consumer product giants Procter & Gamble (www.pg.com) and Unilever have manufacturing facilities in Vietnam. But Vietnamese consumers tend to shun these companies' locally made Close-Up toothpaste and Tide detergent, and instead they seek the identical products and brands produced in neighboring countries, such as Thailand. As one young Vietnamese shopper explained, "Tide from Thailand smells nicer." A general perception among Vietnamese consumers is that goods from Japan or Singapore are the best, followed by Thai goods. Unfortunately for Procter & Gamble and Unilever in Vietnam, many goods from other countries are smuggled in and sold on the black market, thereby denying the companies local sales revenue.
A country's image can be positive in one product class but negative in another. For example, the fact that Volkswagen's new Beetle is made in Mexico for the U.S. market has not hurt the Beetle's sales. But affluent consumers might be apprehensive to buy a hand-built Rolls-Royce automobile if it were produced in Mexico. Because Rolls-Royce buyers pay for the image of a brilliantly crafted luxury car, the Rolls-Royce image probably would not survive intact if the company were to produce its cars in Mexico.
Finally, country image can and does change over time. For example, "Made in India" has traditionally been associated with low-technology products such as soccer balls and many types of textile products. But today world-class computer software companies increasingly rely on the software-development skills of engineers located in southern India.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.1: Explain the importance of examining basic appeal and national factors.
32) Discuss the importance of cultural factors when assessing a national business environment, and explain why cultural differences between markets create difficulties when conducting international research.
Answer: Cultural Factors-Although countries display cultural similarities, they differ in language, attitudes toward business, religious beliefs, traditions, customs, and countless other ways. Some products are sold in global markets with little or no modification. These products include industrial machinery such as packaging equipment, consumer products such as toothpaste and soft drinks, and many other types of goods and services. Yet many other products must undergo extensive adaptation to suit local preferences, such as books, magazines, ready-to-eat meals, and other products.
Cultural elements can influence what kinds of products are sold and how they are sold. A company must assess how the local culture in a candidate market might affect the salability of its product.
Cultural elements in the business environment can also affect site-selection decisions. When substantial product modifications are needed for cultural reasons, a company might choose to establish production facilities in the target market itself. Yet serving customers' special needs in a target market must be offset against any potential loss of economies of scale due to producing in several locations rather than just one. Today companies can minimize such losses through the use of flexible manufacturing methods.
A qualified workforce is important to a company no matter what activity it is to undertake at a particular site. Also, a strong work ethic among the local workforce is essential to having productive operations. Managers must assess whether an appropriate work ethic exists in each potential country for the purposes of production, service, or any other business activity. An adequate level of educational attainment among the local workforce for the planned business activity is also very important. Although product-assembly operations may not require an advanced education, R&D, high-tech production, and certain services normally will require extensive higher education.
Cultural Differences-When conducting international research, marketers who conduct research in unfamiliar markets must pay attention to the ways in which cultural variables influence information. Perhaps the single most important variable is language. For example, if researchers are unfamiliar with a language in the market they are investigating, they might be forced to rely on interpreters. Interpreters might unintentionally misrepresent certain comments or be unable to convey the sentiment with which statements are made.
Researchers might also need to survey potential buyers through questionnaires written in the local language. To avoid any misstatement of questions or results, questionnaires must be translated into the language of the target market and the responses then translated back into the researcher's language. Written expressions must be highly accurate so that results do not become meaningless or misleading. The potential to conduct written surveys is also affected by the illiteracy rates among the local population. A written survey is generally impossible to conduct in countries with high illiteracy rates such as Morocco, Nigeria, and so on. Researchers would probably need to choose different information-gathering technique, such as personal interviews or observing retail purchases.
Companies that have little experience in an unfamiliar market often hire local agencies to perform some or all of their market research. Local researchers know the cultural terrain. They understand which practices are acceptable and which types of questions can be asked. And they typically know whom to approach for certain types of information. Perhaps most importantly, they know how to interpret the information they gather and are likely to understand its reliability. But a company that decides to conduct its own market research must, if necessary, adapt its research techniques to the local market. Many cultural elements that are taken for granted in the home market must be reassessed in the host business environment.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
33) Discuss how companies identify the basic appeal for products when screening a potential market, and explain how international organizations provide the essential information to researchers.
Answer: Determining Basic Demand-The first step in searching for potential markets means finding out whether there is a basic demand for a company's product. Important in determining this basic appeal is a country's climate. For example, no company would try to market snowboards in Indonesia, Sri Lanka, or Central America because they receive no snowfall. The same product, on the other hand, is well suited for markets in the Canadian Rockies, northern Japan, and the Swiss Alps. Although this stage seems simple, it cannot be taken too lightly. A classic example is when, during its initial forays into international business, Wal-Mart (www.walmart.com) found ice-fishing huts in its Puerto Rico inventory and no snowshoes at its stores in Ontario, Canada.
Certain countries also ban specific goods. Islamic countries, for instance, forbid the importation of alcoholic products, and the penalties for smuggling are stiff.
Determining Availability of Resources: Companies that require particular resources to carry out local business activities must be sure they are available. Raw materials needed for manufacturing must either be found in the national market or imported. Yet imports may encounter tariffs, quotas, or other government barriers. Managers must consider the additional costs of importing to ensure that total product cost does not rise to unacceptable levels.
The availability of labor is essential to production in any country. Many companies choose to relocate to countries where workers' wages are lower than they are in the home country. This practice is most common among makers of labor-intensive products–those for which labor accounts for a large portion of total cost. Companies considering local production must determine whether there is enough labor available locally for production operations.
Companies that hope to secure financing in a market abroad must determine the availability and cost of local capital. If local interest rates are too high, a company might be forced to obtain financing in its home country or in other markets in which it is active. On the other hand, access to low-cost financing may provide a powerful inducement to a company that is seeking to expand internationally.
There are excellent sources of much free and inexpensive information about product demand in particular countries. For example, the International Trade Statistics Yearbook published by the United Nations lists the export and import volumes of different products for each country. It also furnishes information on the value of exports and imports on an annual basis for the most recent five-year period. The International Trade Center, based in Geneva, Switzerland, also provides current import and export figures for more than 100 countries.
International development agencies, such as the World Bank, the International Monetary Fund, and the Asian Development Bank, also provide valuable secondary data. For example, the World Bank publishes annual data on each member nation's population and economic growth rate. Today, most secondary sources supply downloadable data through the Internet or through traditional printed versions.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 12.1: Explain the importance of examining basic appeal and national factors.
34) Which of the following steps should occur in the screening process for potential markets after the basic demand for a product has been identified?
- A) assessment of the national business environment
- B) selection of the market or site
- C) measurement of the market or site potential
- D) assessment of climate suitability
Answer: A
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
35) Which of the following is the final step in the screening process for potential markets and sites?
- A) assessment of the national business environment
- B) measurement of market or site potential
- C) selection of the market or site
- D) assessment of climate suitability
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
36) Which of the following steps of the market screening process involves the determination of a product's income elasticity?
- A) identification of basic appeal of a product
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
37) A typical industry analysis includes the ________.
- A) experience and qualifications of the researcher
- B) structure of the wholesale and retail distribution networks
- C) accurate forecast of unforeseen political changes in the country
- D) history of currency fluctuations
Answer: B
Skill: Concept
Difficulty: Moderate
LO: 12.2: Describe how companies measure and select a market or site.
38) The sensitivity of demand for a product relative to changes in income is called ________.
- A) income elasticity
- B) demand shaping
- C) income distribution
- D) market intensity
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
39) In the context of the sensitivity of demand for a product relative to changes in income, a coefficient greater than 1.0 conveys a(n) ________.
- A) surplus product
- B) economic equilibrium
- C) economic surplus
- D) income-elastic product
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
40) If the income-elasticity coefficient for coffee is 0.5, the demand for coffee will ________.
- A) decrease 0.5 percent for every 1.0 percent increase in income
- B) increase 1.0 percent for every 5.0 percent increase in income
- C) increase 0.5 percent for every 1.0 percent increase in income
- D) decrease 0.5 percent for every 0.5 percent increase in income
Answer: C
Skill: Concept
Difficulty: Moderate
LO: 12.2: Describe how companies measure and select a market or site.
41) Which of the following is an income-elastic product?
- A) food
- B) utilities
- C) jewelry
- D) beverages
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
42) When creating a market-potential indicator for an emerging market, an estimate of the wealth or buying power of a market can be formed by examining the ________.
- A) market intensity
- B) market growth rate
- C) market size
- D) market receptivity
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
43) Which of the following variables attempts to estimate market openness when creating a market-potential indicator for an emerging market?
- A) market consumption capacity
- B) market receptivity
- C) market size
- D) market intensity
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
44) When creating a market-potential indicator for an emerging market, ________ is estimated by determining a nation's volume of international trade as a percentage of GDP.
- A) market receptivity
- B) market intensity
- C) market consumption capacity
- D) market size
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
45) During which stage of the market or site screening process do managers normally want to visit locations?
- A) identification of basic appeal of a product
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
46) Issues regarding potential threat from substitute products in a market are addressed in ________.
- A) security analysis
- B) technical analysis
- C) product fit analysis
- D) competitor analysis
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
47) Which of the following stages of the market or site screening process involves an assessment of potential threat from substitute products?
- A) identification of basic appeal of a product
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
48) Which of the following stages of the market or site screening process involves competitor analysis?
- A) identification of basic appeal of a product
- B) measurement of market or site potential
- C) assessment of the national business environment
- D) selection of the market or site
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
Scenario: Chong's analysis of international markets
John Chong is an inexperienced entrepreneur in global business. He wants to sell his product, Zulu doll, a toy for kids below the age of eight, in every corner of the world. He wants to examine all potential markets but wants to keep his costs low. John has asked you to explain a few things about analyzing international markets.
49) Which of the following stages of the market-screening process would require John to visit a potential market personally?
- A) assessment of the national business environment
- B) selection of the market
- C) identification of the basic appeal for markets
- D) measurement of market potential
Answer: B
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.2: Describe how companies measure and select a market or site.
50) A product's income-elasticity refers to the sensitivity of the price of a product relative to changes in the income of consumer population.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
51) A product for which demand increases more relative to an increase in income has an income-elasticity coefficient less than 1.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.2: Describe how companies measure and select a market or site.
52) Food and utilities are examples of income-inelastic products.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.2: Describe how companies measure and select a market or site.
53) Assessing potential in emerging markets by ranking locations using market-potential indicators is useful only for companies involved in exporting.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.2: Describe how companies measure and select a market or site.
54) While assessing the market potential of emerging markets, market consumption capacity is generally obtained through estimates of energy consumption.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 12.2: Describe how companies measure and select a market or site.
55) Which of the following is an example of a legal force that is used to assess the national business environment?
- A) resource quality
- B) environmental regulations
- C) workforce qualifications
- D) liquidity issues
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
56) When developing a market-potential indicator for an emerging market, the size of the market is typically estimated from the nation's ________.
- A) income elasticity
- B) GDP
- C) total population
- D) GDP at purchasing power parity
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
57) When developing a market-potential indicator for an emerging market, market growth rate is typically estimated from the ________.
- A) per capita private consumption
- B) GDP
- C) total population
- D) percentage of a market's population in the middle class
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
58) When developing a market-potential indicator for an emerging market, market intensity is typically estimated from the ________.
- A) per capita private consumption
- B) GDP
- C) total population
- D) percentage of a market's population in the middle class
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
59) When developing a market-potential indicator for an emerging market, the ________ factor attempts to assess channels of distribution and communication.
- A) market size
- B) market intensity
- C) commercial infrastructure
- D) economic freedom
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
60) When creating a market-potential indicator for an emerging market, market consumption capacity is often estimated from the ________.
- A) growth in gross domestic product
- B) percentage of a market's population in the middle class
- C) gross domestic product at purchasing power parity
- D) amount of energy the total population produces
Answer: B
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
61) The annual income considered below the poverty line in one country is the annual income of a middle-class family in another country. Which of the following difficulties associated with conducting international market research does this scenario illustrate?
- A) availability of data
- B) protection of data
- C) marketability of data
- D) comparability of data
Answer: D
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
62) Some researches consist of errors due to misinterpretations by foreign language interpreters. Which of the following difficulties associated with conducting international market research does this example signify?
- A) protection of data
- B) availability of data
- C) cultural differences
- D) political differences
Answer: C
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
63) In countries with high illiteracy rates, a(n) ________ should not be used to collect information.
- A) personal interview
- B) written survey
- C) focus group
- D) field research
Answer: B
AACSB: Written and oral communication
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
64) The process of obtaining information that already exists within the company or that can be obtained from outside sources is called ________.
- A) secondary market research
- B) data mining
- C) data harvesting
- D) scientific data archiving
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
65) ________ is relatively inexpensive because it has already been collected, analyzed, and summarized by another party.
- A) Primary data
- B) Secondary data
- C) Raw data
- D) Transaction data
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
66) Which of the following is a source of secondary data for conducting international market research?
- A) surveys
- B) interviews
- C) focus groups
- D) trade associations
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
67) The process of collecting and analyzing original data and applying the results to current research needs is called ________.
- A) primary market research
- B) secondary market research
- C) data harvesting
- D) data mining
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
68) An exhibition at which members of an industry showcase their latest products, study activities of rivals, and examine recent trends and opportunities is called a(n) ________.
- A) focus group
- B) trade show
- C) environmental survey
- D) field research
Answer: B
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
69) A(n) ________ is an international trip by government officials and businesspeople that is organized by agencies of national or provincial governments for the purpose of exploring international business opportunities.
- A) focus group
- B) field research
- C) expo
- D) trade mission
Answer: D
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
70) Small and medium-sized companies often find trade missions very appealing because ________.
- A) it gives companies an opportunity to visit new places
- B) such trips are usually cheap even for the smallest of businesses
- C) it provides access to important business officials and executives
- D) it helps companies analyze the strategies of all major competitors
Answer: C
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
71) An ongoing process of gathering, analyzing, and dispensing information for tactical or strategic purposes is called ________.
- A) data harvesting
- B) peer production
- C) survey research
- D) environmental scanning
Answer: D
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
Scenario: Chong's analysis of international markets
John Chong is an inexperienced entrepreneur in global business. He wants to sell his product, Zulu doll, a toy for kids below the age of eight, in every corner of the world. He wants to examine all potential markets but wants to keep his costs low. John has asked you to explain a few things about analyzing international markets.
72) The income-elasticity coefficient for Zulu doll is 1.2, which means the demand for Zulu doll will ________.
- A) increase 1.2 percent for every 1.0 percent increase in income
- B) decrease 1.0 percent for every 1.2 percent increase in income
- C) decrease 1.2 percent for every 1.0 percent increase in income
- D) remain stagnant since 1.2 is the equilibrium value
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
Scenario: Markowitz Tools
Susan Markowitz is analyzing potential markets where Markowitz Tools can sell its products, and she has narrowed her search to three markets. Country A is a developing country with a low literacy rate, Country B has a group-oriented culture, and Country C is a highly developed nation.
73) If Susan wants to obtain information in the least expensive way, she should use ________.
- A) secondary market research
- B) consumer panels
- C) structured interviews
- D) large focus groups followed by surveys
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
74) Which of the following would be most appropriate for conducting primary market research on attitudes, behaviors, and purchasing habits in Country B?
- A) Internet-based research
- B) focus groups
- C) consumer panels
- D) data from trade agencies
Answer: C
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
75) Which of the following would be the least expensive method in terms of both time and money, for conducting a market research in Country C?
- A) structured interviews
- B) surveys
- C) data from the Internet
- D) focus groups
Answer: C
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
Scenario: Indy Bats LLC
Indy Bats LLC is looking for new markets for its products. Matt Johnson has been appointed head of a special team that has been given the responsibility of identifying new markets for the company's products. The company is especially interested in exploring emerging economies.
76) For several emerging markets, Matt has collected data on the number of telephones, TVs, and fax machines per capita, and population per retail outlet, which assesses the ________.
- A) economic freedom
- B) commercial infrastructure
- C) market growth rate
- D) market size
Answer: B
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
77) If Matt wants to estimate an emerging market's spending capacity, he should focus on the ________.
- A) population in the middle class
- B) need for consumer products
- C) demand for consumer and industrial products
- D) volume of imports
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
78) If Matt wants to estimate the extent to which free-market principles predominate in an emerging market, Matt should consider the variable called ________.
- A) economic freedom
- B) commercial infrastructure
- C) market receptivity
- D) market intensity
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
79) The potential to conduct written surveys is independent of the literacy rates among the local population.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
80) The process of obtaining information that already exists within the company is called secondary market research.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.3: Identify the main sources of secondary market research data.
81) Secondary data tends to be very expensive because it has already been analyzed and summarized by another party.
Answer: FALSE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
82) Industry data cannot indicate how individuals feel about a company or its products.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
83) Interviews and focus groups are two main sources of secondary data that help managers make informed decisions.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
84) What types of information are found in a typical industry analysis? How can companies use this information?
Answer: The information needed to estimate the market potential for a product in industrialized nations tends to be more readily available than in emerging markets. In fact, for the most developed markets, research agencies exist for the sole purpose of supplying market data to companies. Euromonitor is one such company with an extensive global reach in consumer goods. The company sells reports and does company-specific studies for many international corporations and entrepreneurs. Some of the information in a typical industry analysis includes:
- Names, production volumes, and market shares of the largest competitors
- Volume of exports and imports of the product
- Structure of the wholesale and retail distribution networks
- Background on the market, including population figures and key social trends
- Total expenditure on the product (and similar products) in the market
- Retail sales volume and market prices of the product
- Future outlook for the market and potential opportunities
The value of such information supplied by specialist agencies is readily apparent–these reports provide a quick overview of the size and structure of a nation's market for a product. Reports vary in their cost (depending on the market and product), but many can be had for around $750 to $1,500. The company also allows online purchase of reports in small segments for as little as $20 each.
Thus companies that enter the market in industrialized countries often have a great deal of data available on that particular market. What becomes important then is the forecast for the growth or contraction of a potential market. One way of forecasting market demand is determining a product's income elasticity–the sensitivity of demand for a product relative to changes in income. The income-elasticity coefficient for a product is calculated by dividing a percentage change in the quantity of a product demanded by a percentage change in income. A coefficient greater than 1.0 conveys an income-elastic product, or one for which demand increases more relative to an increase in income. These products tend to be discretionary purchases, such as computers, video games, jewelry, or expensive furniture–generally not considered essential items. A coefficient less than 1.0 conveys an income-inelastic product, or one for which demand increases less relative to an increase in income. These products are considered essential and include food, utilities, and beverages.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
85) Describe any five variables commonly included in creating a market-potential analysis for an emerging market.
Answer: The main variables commonly included in market-potential analyses are:
Market Size-This variable provides a snapshot of the size of a market at any point in time. It does not estimate the size of a market for a particular product but rather the size of the overall economy. Market-size data allow managers to rank countries from largest to smallest, regardless of a particular product. Market size is typically estimated from a nation's total population or the amount of energy it produces and consumes.
Market Growth Rate-This variable reflects the fact that, although the overall size of the market (economy) is important, so too is its rate of growth. It helps managers avoid markets that are large but shrinking and instead target those that are small but rapidly expanding. It is generally obtained through estimates of growth in gross domestic product (GDP) and energy consumption.
Market Intensity-This variable estimates the wealth or buying power of a market from the expenditures of both individuals and businesses. It is estimated from per capita private consumption and/or per capita gross domestic product (GDP) at purchasing power parity.
Market Consumption Capacity-The purpose of this variable is to estimate spending capacity. It is often estimated from the percentage of a market's population in the middle class, thereby concentrating on the core of an economy's buying power.
Commercial Infrastructure-This factor attempts to assess channels of distribution and communication. Variables may include the number of telephones, televisions, fax machines, or personal computers per capita; the density of paved roads or number of vehicles per capita; and the population per retail outlet. An increasingly important variable for businesses relying on the Internet for sales is the number of Internet hosts per capita. But because these data become outdated quickly, care must be taken to ensure accurate information from the most current sources.
Economic Freedom-This variable attempts to estimate the extent to which free-market principles predominate. It is typically a summary of government trade policies, government involvement in business, the enforcement of property rights, and the strength of the black market.
Market Receptivity-This variable attempts to estimate market "openness." One way it can be estimated is by determining a nation's volume of international trade as a percentage of gross domestic product (GDP). If a company wants to see how receptive a market is to goods from its home country, it can ascertain the amount of per capita imports entering the market from the home country. Managers can also examine the growth (or decline) in these imports.
Country Risk-This variable attempts to estimate the total risk of doing business, including political, economic, and financial risks. Some market-potential estimation techniques include this variable in the market-receptivity variable.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
86) What are the factors managers consider when analyzing industrialized markets? Discuss why the comparability of data is a major challenge while conducting international research.
Answer: The information needed to estimate the market potential for a product in industrialized nations tends to be more readily available than in emerging markets. In fact, for the most developed markets, research agencies exist for the sole purpose of supplying market data to companies. Euromonitor is one such company with an extensive global reach in consumer goods. The company sells reports and does company-specific studies for many international corporations and entrepreneurs. Some of the information in a typical industry analysis includes:
- Names, production volumes, and market shares of the largest competitors
- Volume of exports and imports of the product
- Structure of the wholesale and retail distribution networks
- Background on the market, including population figures and key social trends
- Total expenditure on the product (and similar products) in the market
- Retail sales volume and market prices of the product
- Future outlook for the market and potential opportunities
The value of such information supplied by specialist agencies is readily apparent–these reports provide a quick overview of the size and structure of a nation's market for a product.
The comparability of data is a challenge of conducting international research. Data obtained from other countries must be interpreted with great caution. Because terms such as poverty, consumption, and literacy differ greatly from one country to another, such data must be accompanied by precise definitions.
The different ways in which countries measure data also affect comparability across borders. For instance, some countries state the total quantity of foreign direct investment in their nations in terms of its monetary value. Others specify it in terms of the number of investment projects implemented during the year. But a single foreign direct investment into an industrialized nation can be worth many times what several or more projects are worth in a developing nation. To gather a complete picture of a nation's investments researchers will often need to obtain both figures. Moreover, reported statistics may not distinguish between foreign direct investment (accompanied by managerial control) and portfolio investment (which is not accompanied by managerial control). Misinterpreting data because one does not know how they are compiled or measured can sabotage even the best marketing plans and production strategies.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 12.3: Identify the main sources of secondary market research data.
87) Define secondary market research and briefly discuss any three secondary data sources.
Answer: Companies can consult a variety of sources to obtain information on a nation's business environment and markets. The particular source that managers should consult depends on the company's industry, the national markets it is considering, and how far along it is in its location-screening process. The process of obtaining information that already exists within the company or that can be obtained from outside sources is called secondary market research. Managers often use information gathered from secondary research activities to broadly estimate market demand for a product or to form a general impression of a nation's business environment. Secondary data are relatively inexpensive because they have already been collected, analyzed, and summarized by another party.
International Organizations-There are excellent sources of much free and inexpensive information about product demand in particular countries. For example, the International Trade Statistics Yearbook published by the United Nations lists the export and import volumes of different products for each country. It also furnishes information on the value of exports and imports on an annual basis for the most recent five-year period. Today, most secondary sources supply downloadable data through the Internet or through traditional printed versions.
Government Agencies-Commerce departments and international trade agencies of most countries typically supply information about import and export regulations, quality standards, and the size of various markets. These data are normally available directly from these departments, from agencies within each nation, and from the commercial attaché in each country's embassy abroad. In fact, visiting embassies and attending their social functions while visiting a potential location are excellent ways of making contact with potential future business partners.
Industry and Trade Associations-Companies often join associations composed of firms within their own industry or trade. In particular, companies trying to break into new markets join such associations to make contact with others in their field. The publications of these organizations keep members informed about current events and help managers to keep abreast of important issues and opportunities. Many associations publish special volumes of import and export data for domestic markets. They frequently compile directories that list each member's top executives, geographic scope, and contact information such as phone numbers and addresses. Today, many associations also maintain informative Web sites.
Service Organizations-Many international service organizations in fields such as banking, insurance, management consulting, and accounting offer information to their clients on cultural, regulatory, and financial conditions in a market.
Internet-Companies engaged in international business are quickly realizing the wealth of secondary research information available on the Internet and the World Wide Web. These electronic resources are usually user friendly and have vast amounts of information.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.3: Identify the main sources of secondary market research data.
88) An unstructured but in-depth interview of a small group of individuals by a moderator to learn the group's attitudes about a company or its products is called a ________.
- A) focus group
- B) literature review
- C) consumer panel
- D) brainstorming session
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
89) ________ cannot indicate how individuals feel about a company or its product.
- A) Surveys
- B) Industry data
- C) Consumer panels
- D) Interviews
Answer: B
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
90) It is often difficult to conduct focus groups in ________ cultures where people have a tendency to agree with others in the group.
- A) collectivist
- B) masculine
- C) low uncertainty avoidance
- D) long term oriented
Answer: A
AACSB: Diverse and multicultural work environments
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
91) Research in which people record information in personal diaries on their attitudes, behaviors, or purchasing habits is called a ________.
- A) survey
- B) focus group
- C) consumer panel
- D) literature review
Answer: C
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
92) Research in which an interviewer asks current or potential buyers to answer written or verbal questions to obtain facts, opinions, or attitudes is called a ________.
- A) survey
- B) covert observational research
- C) consumer panel
- D) brainstorming session
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
93) The single greatest advantage of ________ is the ability to collect vast amounts of data in a single sweep.
- A) survey research
- B) focus groups
- C) consumer panels
- D) interviews
Answer: A
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
Scenario: Markowitz Tools
Susan Markowitz is analyzing potential markets where Markowitz Tools can sell its products, and she has narrowed her search to three markets. Country A is a developing country with a low literacy rate, Country B has a group-oriented culture, and Country C is a highly developed nation.
94) Which of the following methods would be most appropriate for conducting primary market research in Country A?
- A) Internet research
- B) verbal questioning
- C) written surveys
- D) consumer panels
Answer: B
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.4: Describe common methods used to conduct primary market research.
Scenario: Indy Bats LLC
Indy Bats LLC is looking for new markets for its products. Matt Johnson has been appointed head of a special team that has been given the responsibility of identifying new markets for the company's products. The company is especially interested in exploring emerging economies.
95) To estimate an emerging market's openness, Matt could analyze its ________.
- A) market receptivity
- B) differentiation strategy
- C) commercial infrastructure
- D) country risk
Answer: A
AACSB: Analytical thinking
Skill: Application
Difficulty: Hard
LO: 12.4: Describe common methods used to conduct primary market research.
96) The process of collecting and analyzing original data and applying the results to current research needs is called primary market research.
Answer: TRUE
AACSB: Application of knowledge
Skill: Concept
Difficulty: Easy
LO: 12.4: Describe common methods used to conduct primary market research.
97) Trade missions are advantageous to small businesses as they are the most inexpensive method of getting introduced to important business contacts.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 12.4: Describe common methods used to conduct primary market research.
98) Focus group interviews tend to work best when moderators are natives of the countries where the interviews are held.
Answer: TRUE
Skill: Concept
Difficulty: Moderate
LO: 12.4: Describe common methods used to conduct primary market research.
99) The single greatest disadvantage of survey research is that it provides access to only a small amount of data in a single sweep.
Answer: FALSE
Skill: Concept
Difficulty: Moderate
LO: 12.4: Describe common methods used to conduct primary market research.
100) What is primary market research? Describe any four primary market research methods.
Answer: Although secondary information is very useful in the early stages of the screening process, sometimes more tailored data on a location are needed. Under such circumstances, it might be necessary to conduct primary market research–the process of collecting and analyzing original data and applying the results to current research needs. This type of information is very helpful in filling in the blanks left by secondary research. Yet it is often more expensive to obtain than secondary research data because studies must be conducted in their entirety.
Trade shows and Trade Missions-An exhibition at which members of an industry or group of industries showcase their latest products, study activities of rivals, and examine recent trends and opportunities is called a trade show. Trade shows are held on a continuing basis in virtually all markets and normally attract companies from around the globe. They are typically held by national or global industry trade associations or by government agencies. An excellent source of trade shows and exhibitions worldwide is Expo Central. A trade mission is an international trip by government officials and businesspeople that is organized by agencies of national or provincial governments for the purpose of exploring international business opportunities.
Interviews and Focus Groups-Although industry data are useful to companies early in the screening process for potential markets, subsequent steps must assess buyers' emotions, attitudes, and cultural beliefs. Industry data cannot tell us how individuals feel about a company or its product. This type of buyer information is required when deciding whether to enter a market and when developing an effective marketing plan.
Surveys-Research in which an interviewer asks current or potential buyers to answer written or verbal questions to obtain facts, opinions, or attitudes is called a survey. For example, if Saucony wants to learn about consumer attitudes toward its latest women's aerobics shoe, it could ask a sample of women about their attitudes toward the shoe. Verbal questioning could be done in person or over the telephone, whereas written questioning could be done in person, through the mail, or through forms completed at Saucony's Web site. The results would then be tabulated, analyzed, and applied to the development of a marketing plan.
Environmental Scanning-An ongoing process of gathering, analyzing, and dispensing information for tactical or strategic purposes is called environmental scanning. The environmental scanning process entails obtaining both factual and subjective information on the business environments in which a company is operating or considering entering. The continuous monitoring of events in other locations keeps managers aware of potential business opportunities and threats. Environmental scanning contributes to making well-informed decisions and the development of effective strategies. It also helps companies develop contingency plans for a particularly volatile environment.
AACSB: Application of knowledge
Skill: Concept
Difficulty: Moderate
LO: 12.4: Describe common methods used to conduct primary market research.
101) Discuss the importance of field trips in last stage of the market-screening process. How do trade shows and trade missions help companies conducting primary international research?
Answer: In the fourth stage of the process of screening a potential market, the importance of top managers making a personal visit to each remaining potential market or site cannot be overstated. Such trips typically involve attending strings of meetings and engaging in tough negotiations. The trip represents an opportunity for managers to see firsthand what they have so far seen only on paper. It gives them an opportunity to experience the culture, observe in action the workforce that they might soon employ, or make personal contact with potential new customers and distributors. Any remaining issues tend to be thoroughly investigated during field trips so that the terms of any agreement are known precisely in the event that a particular market or site is chosen. Managers can then usually return to the chosen location to put the terms of the final agreement in writing.
Trade shows and trade missions help companies conducting primary international research. An exhibition at which members of an industry or group of industries showcase their latest products, study activities of rivals, and examine recent trends and opportunities is called a trade show. Trade shows are held on a continuing basis in virtually all markets and normally attract companies from around the globe. They are typically held by national or global industry trade associations or by government agencies. An excellent source of trade shows and exhibitions worldwide is Expo Central.
Not surprisingly, the format and scope of trade shows differ from country to country. For example, because of its large domestic market, shows in the United States tend to be oriented toward business opportunities within the U.S. market. In line with U.S. culture, the atmosphere tends to be fairly informal. Conversely, because of the relatively smaller market of Germany and its participation in the European Union, trade shows there tend to showcase business opportunities in markets all across Europe and tend also to be quite formal.
A trade mission is an international trip by government officials and businesspeople that is organized by agencies of national or provincial governments for the purpose of exploring international business opportunities. Businesspeople who attend trade missions are typically introduced both to important business contacts and well-placed government officials.
Small and medium-sized companies often find trade missions very appealing for two reasons. First, the support of government officials gives them additional clout in the target country as well as access to officials and executives whom they would otherwise have little opportunity to meet. Second, although such trips can sometimes be expensive for the smallest of businesses, they are generally worth the money because they almost always reap cost-effective rewards. Trade missions to faraway places sometimes involve visits to several countries to maximize the return for the time and money invested. For instance, a trade mission for European businesspeople to Latin America may include stops in Argentina, Brazil, Chile, and Mexico. A trade mission to Asia for North American or European companies might include stops in China, Hong Kong, Japan, South Korea, and Thailand.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 12.4: Describe common methods used to conduct primary market research.
102) Explain why the availability of data is a challenge when conducting international research. How do interviews and focus groups help in the availability of data?
Answer: When trying to target specific population segments, marketing managers require highly detailed information. Fortunately, companies are often spared the time, money, and effort of collecting firsthand data for the simple reason that it has already been gathered. This is particularly true in highly industrialized countries, including Australia, Canada, Japan, those in Western Europe, and the United States, where both government agencies and private research firms supply information. Three of these information suppliers are SymphonyIRI Group, Survey Research Group, and ACNielsen.
In many emerging and developing countries, however, previously gathered quality information is hard to obtain. Even when market data are available, their reliability is questionable. For example, analysts sometimes charge the governments of certain emerging markets with trying to lure investors by overstating estimates of gross income and consumption levels. In addition to deliberate misrepresentation, tainted information can also result from improper local collection methods and analysis techniques. But research agencies in emerging and developing markets that specialize in gathering data for clients in industrialized countries are developing higher-quality techniques of collection and analysis.
Interviews and focus groups can act as a primary source of international information. Although industry data are useful to companies early in the screening process for potential markets, subsequent steps must assess buyers' emotions, attitudes, and cultural beliefs. Industry data cannot tell us how individuals feel about a company or its product. This type of buyer information is required when deciding whether to enter a market and when developing an effective marketing plan. Therefore, many companies supplement the large-scale collection of country data with other types of research such as interviews with prospective customers. Interviews, of course, must be conducted carefully if they are to yield reliable and unbiased information. Respondents in some cultures might be unwilling to answer certain questions or may intentionally give vague or misleading answers to avoid getting too personal. For example, although individuals in the United States are renowned for their willingness to divulge all sorts of information about their shopping habits and even their personal lives, this is very much the exception among other countries.
An unstructured but in-depth interview of a small group of individuals (8 to 12 people) by a moderator to learn the group's attitudes about a company or its product is called a focus group. Moderators guide a discussion on a topic and interfere as little as possible with the free flow of ideas. The interview is recorded for later evaluation to identify recurring or prominent themes among the participants. This type of research helps marketers to uncover negative perceptions among buyers and to design corrective marketing strategies. Because subtle differences in verbal and body language could go unnoticed, focus group interviews tend to work best when moderators are natives of the countries in which the interview is held. Ironically, it is sometimes difficult to conduct focus groups in collectivist cultures because people have a tendency to agree with others in the group. In such instances, it might be advisable to conduct a consumer panel–research in which people record in personal diaries information on their attitudes, behaviors, or purchasing habits.
AACSB: Application of knowledge
Skill: Synthesis
Difficulty: Hard
LO: 12.4: Describe common methods used to conduct primary market research.
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