International Marketing and Export Management 7th Edition by Gerald Albaum – Test Bank

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Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
5.6 Explain the difference between a proactive market selection approach and one that
is reactive. Is one approach better than the other? Why?
In a reactive market selection approach, the exporter (or potential exporter) simply responds to
incoming orders or proposals from foreign distributors. In a proactive approach, the exporter
carries out systematic research to find and assess potential markets. An in-between approach
occurs when a business person becomes aware of opportunities regarding a potential market
through personal travel or comments from colleagues, and then takes action.
There is no definitive answer to the question of which approach is better. Much depends upon
an individual company and its objectives and size as well as its commitment to doing business
in foreign markets. The proactive approach is one that involves more formal processes for
market selection and is marketing-oriented. In contrast, reactive market selection is informal,
unsystematic for the most part, and purchasing-oriented; export marketing, therefore, is
sporadic.
5.7 What are psychic, psychological and cultural distances? How useful is it to a
manager to be able to measure (by index or scales) such distance between
countries? Explain.
Psychic, psychological and cultural distances, and other measures proposed over the years,
attempt to measure how much marketing managers feel their country differs from foreign
countries they are considering entering.
It is believed that such factors, when quantified and applied in country rankings or groupings,
may assist international/export marketers in making a preliminary determination as to which
markets they should consider entering.
Their usefulness may be limited since some marketers simply prefer to enter markets
geographically near their home country.
5.8 Which distance is most important to a manager who is considering foreign markets
to enter?
Any of these may be of value in making a preliminary list of possible countries to enter or not
enter. It should be noted, however, that some marketers simply prefer to enter markets
geographically near their home country.
In any case before deciding which markets to actually enter, in-depth research must be carried
out regarding all the differences between the home country and foreign country that may affect
the desirability, costs and potential benefits of marketing and doing business there.
Exhibit 5.6, in the text, provides an outline of variables relevant for evaluating the potential of
foreign markets.
5.9 Distinguish between expansive and contractible market selection procedures. If
you were making a decision on such a procedure, which would you favor, and
why?
In the expansive or clustering methods of market selection procedures, expansion proceeds
from the home market to a similar one(s), and then on to other similar ones based on
experience. In the contractible market selection procedure, the company starts with a review of
all national markets and uses a series of screenings to eliminate the less promising markets.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
Responses to the question about which approach is preferred can be expected to vary.
Empirically, reported research suggests that the expansive method is most commonly used in
practice, at least among small and medium-sized exporters.
5.10 Differentiate between market concentration and market spreading as expansion
strategies. Is one universally better than the others for a given product?
In a market concentration strategy, the company enters relatively few foreign markets and
devotes a high level of effort to developing each one deeply (achieving a high level of market
penetration). In a market spreading strategy, the company enters a larger number of markets
and spreads its resources more thinly, often relying on foreign agents and preserving flexibility.
It is not possible to state categorically that one strategy is better than the other, even for
companies marketing the same product. For any company, it is situational. Table 4.4 in the text
summarizes the major considerations.
5.11 If sales response functions are S-curves, is it more cost effective to expend a little
marketing effort in each of several markets, or to concentrate efforts in fewer
markets? What if the sales response functions are concave?
If the sales response function is S-shaped, it means that the response to lower levels of
marketing effort is very low, but increases more than proportionally with increased effort.
Therefore, more marketing effort should be expended in fewer markets. With a concave sales
response function, the greatest returns are generated by expending a little effort each in a larger
number of markets.
5.12 Using the variables shown in Table 5.5 develop operational measures of each,
specify differential weights you feel are realistic, and apply these for a matrix
analysis (such as shown in Figure 5.5) of the European Union and ASEAN
countries, using a consumer durable product.
Answers will vary, but each student should have followed a similar approach. Choose a
particular product (e.g. a Whirlpool TM clothes washing machine). The country attractiveness for
each country must be determined. First assign a weight to each of the seven items in the first
column of Table 4.6. Then, for each country, indicate how it ranks on a scale of l–10. Multiply
the assigned weights by the assigned importance and sum the results to obtain a ‘country
attractiveness’ of between 1 and 10. Then do the same for the nine ‘competitive strength’
characteristics from the second column for the particular product for the particular company.
This will enable you to place each product–country combination in a matrix such as that shown
in Figure 4.6.
5.13 Repeat the exercise stated in question 5.12 for an industrial product. Explain any
difference in the resulting matrix from that derived in 4.11.
Question 5.13 will be answered using the same general method that was used in Question 5.12.
The weighting of individual elements and the rankings can be expected to be different for the
industrial product than they were for the consumer durable product.
5.14 What changes would you make in the variables used in Table 5.5 to measure
country attractiveness and competitive strength? Explain why you have added or
deleted variables to those shown.
Student answers will vary.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
ANSWERS TO CASE QUESTIONS, Chapter 5
Case Study 5.1 IKEA
1. Evaluate the market expansion approach taken by IKEA.
IKEA’s initial international expansion involved foreign sourcing of products (inward
internationalization, as discussed in Chapter 1) because of inability to obtain goods from local
manufacturers at a low price. In international marketing they adopted an expansive strategy with
a modification first to target the most conservative market in Europe, followed by relatively slow
further expansion into other northern European countries and higher income, English-speaking
nations.
The approach is appropriate for a company that has identified its competitive strengths as
design and marketing of high-quality, mass-produced, reasonably priced furniture in kit form.
Assembly is left to the final consumer. The emphasis on working with manufacturers to ensure
quality components and feasible designs coupled with the relatively slow approach to expansion
has avoided over-extension, a cause of failure for some other marketers.
2. Is it better for IKEA to own its factories or to contract for it products?
In general, it is better for IKEA to contract for its products rather than to purchase or build
factories. Its competitive advantages, as discussed in the answer to question #1, are in design
and marketing. It has been able to ensure feasibility of design and quality of components by
working closely with contract suppliers. Owning more factories would tie up money that can be
used more effectively in expansion of marketing activities, and would expose the company to
more risk. In special cases, taking an ownership position or providing financing may be
necessary to assure availability of components, quality or responsiveness by suppliers.
Case Study 5.2 Seven-Eleven Japan
1. What factors accounted for Seven-Eleven’s initial success in Japan?
Seven-Eleven’ initial success was due to:
(a) their recognition of the potential market for a business of their kind because of demographic
changes with more women in the workforce, less time for them to shop and high income
levels,
(b) high concentrations of people going to and from work and other activities that made it easy
for many potential customers to reach well-located stores,
(c) cultural willingness to pay more for extra service,
(d) a lack of competitors willing and able to serve this market,
(e) a recognition that economies in distribution could be made by developing their own
distribution chain, and
(f) recognizing the value of having a host country partner because of the business
environment.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
2. What factors accounted for Seven-Eleven’s continuing success in Japan?
Their continuing success is due to continual innovation:
(a) continually improving the mix of products and the quality of products,
(b) continually improving and expanding the services available (and hereby attracting more
customers and store-visits, as well as increasing earnings through the sale of services),
(c) developing improved information systems to support inventory and supply systems,
(d) working cooperatively with other companies in order to more efficiently and effectively offer
additional products at competitive prices.
Seven-Eleven Japan has kept ahead of their competitors in most of these areas.
3. Would it appear to be a good idea for Seven-Eleven in the US to offer payment
services? Why or why not?
It would not be a good idea. (1) Customers in the US do not have packages delivered to stores
to be picked up by customers as is the case in Japan. (2) US consumers have many payment
options now, including payment via cell phones, and do not need another.
4. What might be the reason for Seven-Eleven’s not being in most European countries?
In spite of the high percentage of women who work in many European countries, there is little
demand for the types of take-out foods and snacks that Seven-Eleven’s offer. There are many
very good small restaurants available for family dining when desired, there are many grocery
shops and specialty shops such as bakeries and green grocers available and eating at home
and home cooking are still family events for many people.
5. Is the offering of more services in Japan, including banking, provision of in-store
terminals for use by customers, etc., likely to cause problems for part-time workers in
the franchises?
It is likely to cause problems for part-time workers in the franchises. Since some (or many)
individual franchisees may not have the resources to provide the necessary training, Seven-
Eleven itself must do this as it continues to expand its offering and install associate equipments.
This is likely to involve substantial costs unless turnover rates are quite low.
The costs of the additional training must be justified by the additional traffic, revenue and profits
generated for Seven-Eleven.
6. Does China offer good potential for further expansion for Seven-Eleven?
China does offer good potential for Seven-Eleven because of its concentrations of large
numbers of people in a number of cities, increasing incomes and interest in greater
convenience. There are also dangers because of the lack of transparency, the importance of
relationships and sometimes a lack of consistency in policy in business and government in
China. The choice of partners is critical. Reliability, trustworthiness and appropriate political/
societal contacts of partners are extremely important.
7. Was Seven-Eleven’s entry strategy appropriate for the country? Explain why or
why not.
The entry strategy was appropriate. The initial use of licensing agreements allowed them to
determine the viability of the market and the appropriateness of possible product mixes. It also
provided them with a better understanding of the cultural/business/political environments. With
this experience, the company was then in a good position to undertake equity investments with
partners.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
Case Study 5.3 Better Way Company Limited
1. What are the major considerations in Mistine’s attempts to continue its growth and
dominance in the market?
In product development, it needs to: (1) continue developing high quality new products in order
to keep present customers interested and to attract new customers, (2) continue to attract
additional salespeople, and retain a satisfactory percentage of existing salespeople, with
backgrounds appropriate for existing and targeted new market segments, (3) identify and
expand domestically and internationally to attractive new market segments and (4) continue to
develop advertising, promotion and sales person motivation appropriate to existing and new
market segments.
2. Evaluate the growth strategy that Better Way has been using both domestically and
internationally.
It has been very effective in Thailand as evidenced by its market dominance and sales growth.
This has been accomplished by identifying new market segments, such as teenagers and men,
by product development and by effective promotion. Internationally, it is using top
manufacturers around the world to produce its products. It has introduced its products in nearby
low-income countries and is investing in manufacturing facilities in Vietnam and the Philippines
(which should increase it local presence and recognition).
3. What actions would you recommend over the next 5 years? How would you apply
specific marketing mix decisions to those actions you recommended?
The company needs to be sure that its marketing methods (including identification of
appropriate marketing segments, specific products to be introduced, pricing, organization
structure and treatment of managers, attraction and remuneration of sales personnel,
advertising and promotion) are appropriate to the cultures in each of the countries in which it
operates. Laws and customs must be accurately determined and carefully followed. In Taiwan,
with its higher income levels, selecting target markets and pricing will be of particular
importance. If distribution is to be done through intermediaries in Taiwan, this must be carefully
thought out and monitored so that brand name and company reputation are maintained. It can
be expected that possible entry to Hungary and Russia, with their different cultures and
economic structures, will need to be carefully researched, planned and executed.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
TEST BANK, Chapter 5
1. The international marketer must focus on:
(a) individual products and their foreign markets.
(b) strategic measures used in strategic planning.
(c) the role of each product within the corporate portfolio.
(d) all of the above.
(e) none of the above.
2. Experienced international marketers virtually never fail to determine if there is an adequate
market for their products or services prior to market entry.
(a) True
(b) False
3. With the introduction of the Euro, the European customers comprise a single market in
every way.
(a) True
(b) False
4. Market segmentation is a process of breaking down overall markets into segments of types
of customers for particular products in particular countries.
(a) True
(b) False
5. In market segmentation, ‘actionability’ refers to deciding whether or not to take action.
(a) True
(b) False
6. In choosing an export market expansion strategy, a market concentration strategy is
characterized by:
(a) funneling resources that can be made available to a small number of markets.
(b) a gradual rate of growth in the number of markets served.
(c) both of the above.
(d) none of the above.
7. In market selection procedures:
(a) contractible methods are used to reduce total foreign involvement.
(b) contractible methods usually focus first on the nearest neighbor.
(c) expansive methods work outward from the core.
(d) all of the above.
(e) none of the above.

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
8. In the contractible method of market selection procedures, you work outward from the core
market to the nearest neighbors.
(a) True
(b) False
9. In the expansive method of market selection, the exporter/international marketer:
(a) will not adapt products.
(b) will not target other segments.
(c) may or may not adapt products and target other segments.
(d) all of the above.
(e) none of the above.
10. The expansive method of market selection is sometimes called the nearest neighbor
approach.
(a) True
(b) False
11. There are many possible methods to use in export market segmentation and applying mixed
criteria can create the most meaningful segments.
(a) True
(b) False
12. In the market selection process, many companies begin exporting through reactive
approaches.
(a) True
(b) False
13. Accurate political risk assessment has been made easy by the availability of the Business
Environment Risk Index (BERI) that makes further risk analysis unnecessary.
(a) True
(b) False
14. The critical mass is the threshold at which small increases in time and resources can be
expected to result in significant gains in volume and profit.
(a) True
(b) False
15. Market portfolio analysis is a tool that provides a total export marketing picture so other
tools are not needed.
(a) True
(b) False

Gerald Albaum and Edwin Duerr, International Marketing and Export Management, 7e, Instructor’s Manual
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© Gerald Albaum, Edwin Duerr and Jesper Strandskov 2012
ANSWERS TO TEST BANK QUESTIONS, Chapter 5
1. (d) 2. (b) 3. (b) 4. (a) 5. (b) 6. (c) 7. (c) 8. (b) 9. (c) 10. (a)
11. (a) 12. (a) 13. (b) 14. (a) 15. (b)

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