CHAPTER 3

ANSWERS TO QUESTIONS FOR DISCUSSION

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

These schemes should not be used as a primary basis for market entry decisions. At best they indicate
which markets are likely to be worth further investigation. They must be combined with socioeconomic,
cultural, demographic, and structural data if one is to assess the market potential for a given product or
products.

3.2 Explain the meaning of cultural universals. Do these provide universal guides to behavior in
all societies? How can the international marketer use these universals? Do values fit within
cultural universals. Explain.

Cultural universals are factors that are found in all cultures, such as the presence in all cultures of food
taboos. However, they do not give us universal guides to behavior in all societies. Some societies
proscribe the eating of pork, others the eating of beef, others both pork and beef, and others neither pork
nor beef. The cultural universals simply give us a list of elements about which every society has some
restrictions or conventions, but do not tell us what those specific conventions or prohibitions are.

The international marketer could possibly use a list of cultural universals as a guide to some areas where
cultural differences might affect values and actions. Status structures are a cultural universal, and
different societies may have different values within the overall universal.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regional economic integration refers to arrangements that combine separate individual economies into a
larger economy. One objective is to increase standards of living for consumers. It has the potential to
result in a greater trade, a better allocation of resources, a more efficient production through economies of
scale, and a greater investment and technological progress. It may impede worldwide integration and thus
suboptimize.
The potential impact on individual exporters depends upon whether an exporter is located inside the area
or outside. In general, however, individual companies are affected by a preference effect and a growth
effect. These are discussed on pages 139 and 140 of the text. More efficient producers tend to benefit
and less efficient producers tend to decline or go out of business.

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

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

3.12 Can the European Union become too big? Is there a point of diminishing returns for a
regional economy? Explain.

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

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

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

ANSWERS TO CASE QUESTIONS

3.1 Supreme Canning Company

1. Was the chairman of the American company wrong for not having found out in advance about
Japanese business practice?

The chairman was wrong for not having found out in advance about Japanese business practice because
it cost his company a potentially very valuable customer. The normal assumption in the US is that
companies should try to maximize profits within the constraints of law and social responsibility. The
chairman had ultimate responsibility for the profitability of the company, and his failure to find out about
the Japanese or to get a competent consultant cost his company money.

2. Were the Japanese wrong for not having found out about American business practice before
they initiated contacts?

From an economic standpoint, the Japanese were wrong for not having found out about American
business practices before initiating contacts. However, even knowing American customs (which they may
actually have known), the Japanese have such a strong aversion to doing business with people they do
not know, do not trust, find abrasive, or feel will not meet their needs, that they are willing to sacrifice
short-term profits to avoid potential long-term problems. The number of potential suppliers of processed
tomato products from the US is larger than the number of potential large-scale Japanese importers. The
Japanese president has more options than does the American president.
3. What should the president of the American company do now?

The president of the American company probably needs the authority of his chairman before taking the
steps which would be necessary to reestablish contacts. If he receives approval, the president should hire
a competent consultant (or consulting firm) who can find or act as a go-between between the two
companies. The characteristics of this go-between would be such that he/she has high-level corporate or
governmental contacts in Japan through whom he/she may arrange meetings and discussions. While this
may seem a bit strange to Americans who like direct and frank approaches, it is the only approach that is
likely to be successful in Japan at this point.

3.2 Ford Motor Company

1. Are Fords report and comments:
(a) an exceptionally honest recognition of the conflicting demands placed upon the
international corporation by its various stakeholders (society, customers, employees, and
stockholders);
(b) an admission that corporate interests may be in conflict with social responsibility; or
(c) a foundation for building an approach to research and development that will attempt to
reconcile the conflicting demands?

All of these are probably correct to some degree. Students can be expected to take varying views. As
they go through the additional questions below, they may begin to revise (or to confirm) their original
opinions.

2. Is Ford behaving in a socially responsible manner when it continues to make SUVs? Discuss.

Students viewpoints can be expected to vary, with more diverse groups likely to come up with a greater
variety of viewpoints. However, the discussion should cover the main points discussed in the case above:

a Should the companys primary responsibility be to its stockholder, customers, or society as a whole?

b What would the result likely be if Ford were to stop making SUVs?

c Is undertaking socially desirable activities justifiable if it reduces profits or reduces employment?

d Can a company survive in the long run if it fails to be actively socially responsible, that is, do more than
is legally required?

e Is the company justified in undertaking activities that it considers beneficial for society as a whole if
the activities reduce profit or employment?
3. Should the government be more aggressive in setting safety standards? Why and why not?

Again, students viewpoints will vary.

a One major argument may revolve around the costs of governmental requirements versus benefits
received.

b Another argument may center on who has better information available about what is desirable:
customers, the company, consumer groups, or the government.

c Another argument may concern the overall issue of freedom versus protection by society.

4. Should the government ban vehicle types that it considers unsafe or not socially
responsible?

This is a difficult question. Of course, vehicles must meet the safety/technical requirements set by the
government. The US is still primarily a market economy, rather than a command economy, but the
government is increasingly active in placing requirements and restrictions on the production and
distribution of products which may be unsafe (toys, food, drugs, etc.). The limits on governments action
are mainly what the public is willing to accept with respect to their freedom of choice.

The arguments made with respect to question 3 above are also relevant here.

5. Should Ford oppose or support tighter environmental standards that would apply equally to all
vehicle manufacturers? How should Ford react to varying environmental standards in different
countries?

Considerations may include:

a The company may view some tighter environmental standards as being technically infeasible, too
expensive for customers, and/or as having a negative impact on sales and profit.

b Some students may feel that the American automobile manufacturers expend too much effort in
fighting proposed requirements and too little effort in working toward meeting tighter requirements.

c Ford must at least meet the minimum requirements in each country in which it sells vehicles. Some
students may feel it should provide the most environmentally advanced vehicles everywhere, but the
additional costs might make it noncompetitive in some nations.

6. Is spending corporate funds on nonrequired socially responsible activities an unjustified

expenditure or a recognition that in the long run companies must exercise social
responsibility in order to avoid societal or government actions that will damage them?

This has been a long-standing argument that will not be resolved here, but the value lies in thinking about
and discussing the problem.
3.3 Avon Products, Inc.
1. In what ways does Avon follow a global strategy? Does this experience indicate that it should
pursue a different strategy?

The company does follow a global strategy, with adjustments as necessary to meet local requirements.
The companys vision statement indicates that it has a global strategy, the divisions are linked together by
the Global Business Council, Avon sells in 135 countries, and 65% of its earnings come from overseas
operations. It targets the same market segments worldwide and, until the events depicted in the case,
used the same direct marketing approach in all of the 45 countries in which it has subsidiaries (its major
markets). It has developed eight global product lines. The company has manufacturing facilities in 45
countries, indicating that it is doing its sourcing on a worldwide basis.

This experience indicates that Avon will have to pursue a different marketing strategy in response to the
actions of the Chinese government. It does not indicate that there was anything wrong with its original
strategy under the previous circumstances. With the new marketing strategy it is being forced to follow in
China, the company is experimenting with applying the knowledge it is gaining there to operations in
selected other markets.

2. What options did Avon have in responding to Chinas ban on direct selling?

Avon had at least five main options (and also combinations of these):

a Cease direct selling immediately, and begin to develop their own sales organization with retail
facilities. (They chose this course, invested in additional facilities and developed a distribution system
of their own that included retail outlets.)

b Cease direct selling immediately and seek to sell through established retailers.

c Continue direct selling up until the absolute deadline and then make required adjustments.

d Try to convince the Chinese government, directly or through the US government, to revoke the ban
on direct selling.

e Cease attempting to sell in China and possibly close production facilities there.

Avon actually chose a combination of (a) and (d).

3. What effects will the use of traditional retailing in China have on Avons overall marketing
strategy?

Avon could treat the new methods in China simply as an aberration required by local laws, and continue
to use only its direct marketing approach everywhere else (that is, use a multinational rather than a global
approach). Or it could try to determine if the knowledge and skills being developed in China could be
applied successfully in some other markets, perhaps in parallel with its traditional direct selling method.
(Note to instructors: Case 6.3 in Chapter 6 discusses what the company has done since in China and its
other markets.)

4. What actions and organizational changes are required by Avons new marketing strategy in
China?

The company will need to decide upon the types of stores through which it will sell: convenience stores,
supermarkets, department stores with counter services and sales representatives, independent and
exclusive salons, franchised stores, and/or Avons own retail stores. Since Avons strength is in personal
service, selecting a channel or channels that can capitalize on this strength would benefit Avon.
Since it does not presently have in-store counter displays, it needs to develop a specific counter design
that customers can identify with and relate to. This presents an opportunity for Avon in China to create a
new identity. Some of its important elements should include contemporary and modern styling,
sophistication, practical and functional orientation, value, quality, and technology.

As it establishes its own retail stores, and/or arrives at agreements with existing Chinese retail outlets to
handle their products, it will require changes in manufacturing and logistics management. This will require
the hiring and extensive training of additional personnel for marketing and distribution. Many of these
people will probably have to be full-time workers who may have different objectives than the majority of
Avons previous direct sales ladies.

5. What are some other tactics and strategies that Avon could pursue in China?

It is very important for Avon to reestablish its image as a good corporate citizen among the Chinese
people. Because the action of the Chinese government tarnished the image of direct selling companies,
the face conscious Chinese may find it shameful to associate with what might be regarded as an
immoral company that is not respected. Avon needs to build its image as a legitimate, world class
company.

It is also critical for Avon to enhance its image with the government, with careful use of present and
possible additional contacts in the government. Emphasis should be placed on Avons contribution to the
PRC and the Chinese people, through manufacturing, exports, employment, and taxes. The company
should also emphasize its reputation, years of experience, and the non-pyramid direct selling structure it
has used.

It would also be helpful if Avon could continue to develop more manufacturing operations in China,
demonstrating both its value and its commitment to the country.

6. What cultural dimensions of the Chinese people can be expected to affect the future success
of Avon in China?

Avon should be concerned primarily with the cultural dimensions of middle and upper class urban women,
who are both more modern and have higher discretionary incomes. They have become increasingly
interested in their appearances, tend to be both skeptical and value conscious, and like bargains. They
will respond favorable to products that are perceived as: having higher quality, and have a smart,
successful, and feminine image. They respond favorably to the use of celebrities, including movie stars,
successful women, and beauty care authorities, in advertising on TV (and possibly on radio).

TEST BANK
1 Major components of the foreign environment that the international marketing company faces
include:
(a) political/legal forces
(b) socio-cultural forces
(c) competition
(d) All of the above
(e) None of the above
2. Terrorism has expanded to a worldwide phenomenon affecting individuals and businesses in many
countries.
(a) True
(b) False

3. Because of Chinas restrictive government policies, the countrys rapid growth as a manufacturer has
not yet led to many opportunities for foreign marketers.
(a) True
(b) False

4. Culture affects:
(a) types, designs, styles, and colors of products.
(b) methods of negotiation.
(c) themes and presentation of advertisement.
(d) All of the above.
(e) None of the above.

5. Regarding culture:
(a) there are no cultural universals.
(b) culture frequently changes very rapidly over time.
(c) culture is the sum of a groups learned behavior patterns, attitudes, and material things.
(d) All of the above.
(e) None of the above.

6. In communicating across cultural boundaries, it is important to understand that:

(a) accurate translation of the spoken words is the most important aspect of negotiations.
(b) behavior itself is a form of communication.
(c) in high context cultures, the precise meaning of words must be known.
(d) All of the above.
(e) None of the above.

7. In communications in high context culture societies like Japan, the situation, relationships, and
unspoken understandings may carry more meaning and importance than the words themselves.
(a) True
(b) False

8. Governments intervene in a countrys and the worlds economy by:

(a) being a participator, planner, controller, or stimulator.

(b) by promoting international export marketing transactions.

 (c) by impeding and competing in international export marketing transactions.
(d) All of the above.
(e) None of the above.

9. With the decline of Communism, government organizations no longer compete with private
companies in the international marketplace.
(a) True
(b) False

10. With regard to government controls:

(a) revenue tariffs are often quite low.
(b) voluntary restraint agreements are always opposed by exporters.
(c) dumping is selling in foreign markets at a very high price.
(d) All of the above.
(e) None of the above.

11. General classifications regarding the level of economic development of various countries into
developed, developing, and newly industrialized can be used as the primary basis for any company to
decide whether or not to enter a given market.
(a) True
(b) False

12. The self-reference criterion (SRC) indicates that if you really understand your own motives, you will
be able to solve problems that arise in international activities.
(a) True
(b) False

13. Political philosophy and beliefs that might affect behavior of business firms might not be a part of
formal government policy.
(a) True
(b) False

14. When all of the laws planned under Europe 92 are finally passed, the international marketers will be
able to view the EU as a single market.
(a) True
(b) False

15. The World Trade Organization (WTO):

(a) is a part of GATT.
(b) can levy fines against countries that violate its rules.
(c) provides a dispute resolution mechanism.
(d) All of the above.
(e) None of the above.
16. Quotas are classified as:
(a) absolute quotas.
(b) tariff quotas.
(c) voluntary quotas.
(d) All of the above.
(e) None of the above.

17. National governments are often a source of valuable basic information upon which marketing
decisions are based.
(a) True
(b) False

18. In the process of economic integration, all companies in the integrated area will benefit from:
(a) the growth effect.
(b) the preference effect.
(c) trade diversion.
(d) All of the above.
(e) None of the above.

19. Many companies attempt to distinguish their products from those of competitors in order to avoid the
problem that producers of homogeneous products have in increasing profit margins.
(a) True
(b) False

Answers to Test Bank Questions

1. (d) 2. (a) 3. (b) 4. (d) 5. (c) 6. (b) 7. (a) 8. (d) 9. (b) 10. (a)
11. (b) 12. (b) 13. (a) 14. (b) 15. (c) 16. (d) 17. (a) 18. (e) 19. (a)