CH 15 (1-25) CH 18 (26-54)

What type of distribution channel does Mary Kay use in India?
A) direct sellers

B) retail stores

C) home-country middlemen

D) trading companies

E) complementary marketers

(Answer: A)

A major part of Mary Kay’s marketing strategy in India relies on the relationship between
A) China and India.

B) large retailers and consumers.

C) Miss Universe and India

D) distributors and consumers.

E) the government and women.

(Answer: D)

Mary Kay’s distribution pattern fits with the growth and optimism of India’s consumer classes in part because it directly enables people to
A) move to the United States.

B) become entrepreneurs.

C) feel beautiful.

D) open retail stores.

E) become importer/exporters.

(Answer: B)

Although India is a geographically large country, Mary Kay has only regional distribution centers and Mary Kay Beauty Centers in Delhi and Mumbai. This is most likely because, when compared with the rest of the country, they
A) have inexpensive storage.

B) lack access to cosmetics.

C) are wealthy, populous cities.

D) have lower tariffs.

E) have fewer cosmetic retailers.

(Answer: C)

If Mary Kay were to open more distribution centers around India to make it easier for its sales representatives to collect their products, it could affect delivery times, warehousing costs, and the cost of its product. This is an example of the ______ of physical distribution activities.
A) interdependence

B) marketing mix

C) independence

D) positioning

E) margin

(Answer: A)

Which of the following statements is true regarding an import-oriented distribution structure?
A) The importer-wholesaler traditionally performs most of the marketing functions.

B) The relationship between the importer and any middleman is similar to that found in a mass-marketing system.

C) Several independent agencies providing functions such as advertising, marketing research, financing are part of this distribution structure.

D) The idea of a channel as a chain of intermediaries performing specific activities is common.

E) This distribution system is national in scope.

(Answer: A)

Which of the following statements is true of the Japanese market?
A) The costs of Japanese consumer goods are among the lowest in the world.

B) Manufacturers are independent of wholesalers for a multitude of services to other members of the distribution network.

C) The Japanese distribution structure supports long-term dealer-supplier relationships.

D) Japanese law favors the establishment of large retail stores.

E) Japanese consumers favor price over personal service.

(Answer: C)

Which of the following makes Walmart’s transactions with suppliers highly efficient and lowers its cost of operations?
A) Clean business reputation

B) Internal Internet-based system

C) Ability to beat competitors

D) Outreach programs to placate small retailers

E) Ability to influence foreign governments

(Answer: B)

Which of the following has proved to be an important way to break the trade barrier imposed by the Japanese distribution system?
A) Direct sales through catalogs

B) Large wholesale stores

C) Street corner kiosks

D) Internet shopping

E) Television advertising

(Answer: A)

Who are frequently criticized for not representing the best interests of a manufacturer?
A) Global wholesalers

B) Trading companies

C) Consumers

D) Merchant middlemen

E) Brokers

(Answer: D)

Which of the following statements is true regarding agent middlemen?
A) They take title to the merchandise.

B) They work on commission and arrange for sales in the foreign country.

C) Manufacturers cannot control them as much as they control merchant middlemen.

D) They do not represent the best interests of the manufacturer.

E) They assume trading risks.

(Answer: B)

A disadvantage when using home-country middlemen as intermediaries in the distribution process is the:
A) large financial investment required.

B) limited control over the distribution process.

C) large managerial investments required.

D) limited number of retailers in the foreign country who can be reached.

E) large amount of commission.

(Answer: B)

James Barker is the marketing manager of a firm with small international sales volume. He is looking for a middleman who can take responsibility for promotion of the company’s products, credit arrangements, physical handling, and market research. Also, the middleman must be able to provide information on financial, patent, and licensing matters. In addition, the middleman should agree to work under the name of the firm. Which of the following types of middlemen would be the best choice for Mr. Barker if he wants to meet his objectives?
A) A manufacturer’s export agent

B) An export merchant

C) A trade representative

D) An export management company

E) A complementary marketer

(Answer: D)

Which of the following statements is true regarding an export management company (EMC)?
A) It acts as a middleman for firms with relatively large international sales volume.

B) It operates under its own name while providing services to another firm.

C) It does not have direct responsibility to the parent firm.

D) It acts as a middleman for firms willing to involve their own personnel in international functions.

E) It calls for minimum investment from the parent firm to get into international markets.

(Answer: E)

For companies seeking entrance into the complicated Japanese distribution system, _____ offer one of the easiest routes to success because they virtually control distribution through all levels of channels in Japan.
A) trade representatives

B) trading companies

C) brokers

D) export management companies

E) complementary marketers

(Answer: B)

Companies with marketing facilities or contacts in different countries with excess distribution capacity or a desire for a broader product line sometimes take on additional lines for international distribution. The formal name for such activities is _____.
A) skimming

B) backhauling

C) complementary marketing

D) export marketing

E) demand shifting

(Answer: C)

A(n) _____ is an individual agent middleman or an agent middleman firm providing a selling service for manufacturers that covers only one or two markets.
A) manufacturer’s retail store

B) export management company

C) Webb-Pomerene export association

D) global retailer

E) manufacturer’s export agent

(Answer: E)

Which of the following factors affects the choice of distribution channels?
A) Distance from manufacturer

B) Language spoken in the target market

C) Available distribution intermediaries

D) Consumer literacy levels

E) Country’s per capita income

(Answer: C)

In which of the following modes of distribution in the foreign market will a company have to make maximum financial investment?
A) Export management companies

B) Trading companies

C) Export associations

D) Direct sales force

E) Complementary marketers

(Answer: D)

Most middlemen have little loyalty to their vendors. They handle brands in good times when the line is making money but quickly reject such products within a season or a year if they fail to produce during that period. This is an example of problems associated with which of the following six Cs of distribution channel strategy?
A) Character

B) Continuity

C) Control

D) Cost

E) Capital requirement

(Answer: B)

Which of the following actions should be taken to begin the search for prospective middlemen?
A) Short-listing the middleman

B) Studying the target market

C) Evaluating the available financial resources

D) Designing the sales force required

E) Understanding the mission of the manufacturing firm

(Answer: B)

Which of the following, according to experienced exporters, is the only way to select a middleman?
A) Conduct a background check on all the distributors available in the target market

B) Issue a request-for-proposal to all distributors in the target market and evaluate their responses

C) Consult other manufacturers of similar products and select the distributor recommended by them

D) Consult trade organizations and select the distributor recommended by them

E) Talk personally to ultimate consumers to find whom they consider to be the best distributors

(Answer: E)

A major disadvantage of _____ is that they can seldom afford to make the kind of market investment needed to establish deep distribution for products.
A) export management companies

B) trading companies

C) import associations

D) global retailers

E) complementary marketers

(Answer: A)

Which of the following is one of the highest costs of doing business in China?
A) Money required for the transportation of goods

B) Money required for obtaining appropriate permits

C) Cost of local advertising

D) Capital required to maintain effective distribution

E) Cost of customizing products for the Chinese market

(Answer: D)

One of the reasons that channels of distribution often pose longevity problems is that most middlemen _____.
A) do not maintain sufficient inventory to serve customers

B) lack product knowledge resulting in low sales volume

C) have little loyalty to their vendors

D) tend to slow down distribution to extract higher commissions

E) do not have sufficient knowledge of the target market

(Answer: C)

The ability to get an iPhone in Beijing before Apple or AT&T shipped them to China is an example of _________.
A) forfaiting

B) a parallel market

C) competitive distribution

D) exclusive distribution

E) Supply and demand

(Answer: B)

Based on this case, which of the following is a significant advantage of the gray market trade for Apple?
A) It increases competition among Apple-authorized partners.

B) It increases Apple’s profits from monthly fees.

C) It increases Apple’s profits from exchange rates.

D) It increases awareness of the Apple brand.

(Answer: D)

iPhone gray market sales got a boost from _______.
A) penetration pricing

B) exchange rates

C) skimming

D) full-cost pricing

E) competitive pricing

(Answer: B)

How might the purchase of unauthorized iPhones through the gray market have a negative impact?
A) Customers have no assurance of quality.

B) Customers have no assurance of warranty support.

C) The quality image of the product can be sullied if the product fails.

D) Customers may lack access to authorized service or replacement parts.

E) All of these.

(Answer: E)

Which of the following was true of the Brazilian market for disposable diapers prior to the entry of Procter & Gamble and Kimberly?
A) Disposable diapers were an essential item for a majority of the households in Brazil.

B) Disposable diapers sold in the market were of reasonably good quality.

C) People from low income groups could afford to buy diapers.

D) Disposable diapers that were available in the market were expensive.

E) They were plenty of good brands to choose from.

(Answer: D)

Procter & Gamble, with the launch of Pampers Uni, changed the economics of the diaper market for Brazilians by
A) launching a luxury product, targeting upper middle class Brazilians.

B) establishing an alliance with Kimberly-Clark to market its new line of diapers.

C) making diapers a nonessential product for consumers in the Brazilian market.

D) launching expensive diapers as the purchasing power of the people increased.

E) introducing relatively cheap, high-quality diapers for the Brazilian market.

(Answer: E)

“With Unilever’s help, Kimberly-Clark “push girls” invaded Brazilian markets. To increase market share, Kimberly-Clark formed an alliance with Kenko do Brazil, and created the “Monica” brand. Monica diapers were a big hit, and Kimberly-Clark became number one in the Brazilian market. This was a tough blow to P&G.” Which of the following actions did P&G take as a result of this stiff competition from other brands?
A) It introduced a cheaper version of the Monica brand called Tippy Basic.

B) It formed an alliance with Kenko do Brazil, the largest diaper brand in Brazil.

C) It introduced Pampers Uni, a of its kind, no-frills, unisex diaper.

D) It launched an inexpensive diaper called Super-Seca.

E) It cut down prices of its diapers and broadened its product range.

(Answer: E)

The continued price war between Procter & Gamble and Kimberly-Clark in the Brazilian market for disposable diapers, and the eventual entry of new firms, is likely to have led to which of the following outcomes?
A) New firms entering this market primarily targeted upper class Brazilians with premium products.

B) The overall prices of disposable diapers increased.

C) The market for disposable diapers in Brazil shrank in size.

D) New consumers, who found disposable diapers too expensive earlier, were now able to enter the market.

E) The level of competition in this market was substantially reduced.

(Answer: D)

The battle between Procter & Gamble and Kimberly-Clark in the Brazilian market for diapers led to the growth of local Brazilian diaper companies. Which of the following was true of the products offered by these new firms?
A) They were expensive, bulky, and leaky.

B) There was very limited demand for the diapers offered by these new firms.

C) Their introduction caused a phenomenal rise in diaper prices in Brazil.

D) They were low priced competitive diapers.

E) They were of a much higher quality than the diapers offered by Procter & Gamble.

(Answer: D)

Assuming that an international marketer has produced the right product, used the proper channel of distribution, and promoted the goods correctly, the effort is most likely to fail if the international marketer fails to:
A) inform the host government about all its marketing objectives.

B) set the right price for the goods or services.

C) set the import tariff for the goods or services.

D) form a joint venture in order to sell the product.

E) work on a franchise basis in the country.

(Answer: B)

Which of the following is most likely to be true of a company that views prices as an active instrument of accomplishing marketing objectives?
A) The company sets prices to achieve specific objectives.

B) The company follows market prices to achieve specific objectives.

C) The company exports only excess inventory.

D) The company views its export sales as an insignificant source of revenue.

E) The company places a low priority on foreign business.

(Answer: A)

A company that views pricing as a static element in a business decision most probably:
A) places a high priority on foreign business.

B) sets prices to achieve specific objectives such as targeted return on profit.

C) views export sales as active contributions to sales volume.

D) views domestic sales as an insignificant source of revenue.

E) exports only excess inventory.

(Answer: E)

Floral Group Inc., an importing organization in New York, buys perfumes from GS Inc. in France for $13 a unit. Unknown to GS, Floral Group sells this product in the United States for $15 a unit. This leads to a loss of revenue for GS Inc. as it also sells its perfume in the United States but for a higher price of $18. Which of the following best describes the above scenario?
A) Black-listed importing

B) Direct importing

C) Circular importing

D) Co-mingled importing

E) Parallel importing

(Answer: E)

_____, a practice often used by companies to maintain high retail margins to encourage retailers to maintain the exclusive-quality image of a product, can create a favorable condition for parallel importing.
A) Exclusive distribution

B) Speculative distribution

C) Intensive distribution

D) Lateral distribution

E) Dual distribution

(Answer: A)

Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of:
A) cultural differences in perceptions of pricing.

B) market segmentation from market to market.

C) the costs of production of the goods.

D) market segmentation from country to country.

E) competitive pricing in the market.

(Answer: C)

In _____, a firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.
A) full-cost pricing

B) fixed-cost pricing

C) variable-cost pricing

D) demand-based pricing

E) premium pricing

(Answer: C)

Which of the following characterizes the variable-cost pricing approach?
A) In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.

B) This approach insists that no unit of a similar product is different from any other unit in terms of cost.

C) This approach insists that each unit must bear its full share of the total fixed and variable cost.

D) This approach is suitable when a company has high variable costs relative to its fixed costs.

E) In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

(Answer: E)

Which of the following approaches to pricing is most suitable when a company has high variable costs relative to its fixed costs?
A) Full-cost pricing

B) Marginal-cost pricing

C) Variable-cost pricing

D) Demand-based pricing

E) Premium pricing

(Answer: A)

A company uses _____ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.
A) penetration pricing

B) everyday low pricing

C) predatory pricing

D) price skimming

E) psychological pricing

(Answer: D)

If the supply of a product in a market is limited, a company may follow a _____ approach to maximize revenue and to match demand to supply.
A) penetration pricing

B) psychological pricing

C) variable-cost pricing

D) predatory pricing

E) price skimming

(Answer: E)

A _____ policy is used to stimulate market and sales growth by deliberately offering products at low prices.
A) penetration pricing

B) variable-cost pricing

C) premium pricing

D) price skimming

E) full-cost pricing

(Answer: A)

Lush Cosmetics Corp., a U.S.-based firm, has recently started exporting cosmetics to India. Lush has introduced a new range of mineral-based makeup products for the first time in the Indian market. As Lush has no competitors in this segment of the Indian cosmetics market, it has set a very high price for its products in order to reach the premium, price insensitive segment of the market. This is an example of _____.
A) penetration pricing policy

B) psychological pricing policy

C) bundling

D) price skimming

E) cost-based pricing policy

(Answer: D)

In most cases, the reason why products cost relatively little in one country and cost more in another is:
A) the profiteering measures taken by exporting companies.

B) the consistency in perception of quality in all countries.

C) the inelastic demand of most consumer goods.

D) the requirement that all export goods must use set skimmed price.

E) the higher costs of exporting.

(Answer: E)

When the value of the dollar is weak relative to the buyer’s currency, sellers generally employ _____.
A) competition-based pricing

B) demand-based pricing

C) premium pricing

D) psychological pricing

E) cost-plus pricing

(Answer: E)

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported components had to either absorb the increased cost or _____.
A) raise the quantity of inputs they used in production

B) give discounts to their customers

C) increase the wages that they paid to labor

D) increase the production of PCs

E) raise the price of PCs

(Answer: E)

The creation of a free trade zone leads to:
A) a decline in exports.

B) an increase in taxes and duties levied on a product.

C) a reduction in the price escalation.

D) a decline in imports.

E) an increase in labor costs and overheads.

(Answer: C)

Which of the following is true of free trade zones (FTZs)?
A) In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the host country.

B) FTZs operate throughout the world, replacing imported goods with domestic goods.

C) An FTZ is, in essence, a taxable enclave and considered part of the country as far as import regulations are concerned.

D) An FTZ benefits export companies but does not offer any advantages to an importer.

E) The utilization of FTZs typically increases taxes, duties, surcharges, and freight charges on imported goods.

(Answer: A)

One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international market:
A) at a price below the cost of production.

B) only to the premium, price insensitive segment of the market.

C) where the demand for the product is lower than in the domestic market.

D) at a higher price than in the domestic market.

E) at the same price as in the domestic market.

(Answer: A)

Dumping in the world markets is most likely to increase when:
A) domestic production capacity is low.

B) demand in the home country is low.

C) demand in the foreign country is low.

D) foreign production capacity is high.

E) cost of production is low.

(Answer: B)