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Questions and Answers
Which of the following is NOT a reactive reason for a company to go international?
Which of the following is NOT a reactive reason for a company to go international?
What is a common obstacle for companies trying to go international?
What is a common obstacle for companies trying to go international?
Which of the following represents a proactive reason for going international?
Which of the following represents a proactive reason for going international?
Which of the following terms describes explicit limits on the quantity of goods that can be imported or exported?
Which of the following terms describes explicit limits on the quantity of goods that can be imported or exported?
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Which factor does NOT contribute to the necessity of a company to go international?
Which factor does NOT contribute to the necessity of a company to go international?
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What impact do currency fluctuations have on international trade?
What impact do currency fluctuations have on international trade?
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What is one potential benefit of going international for a company?
What is one potential benefit of going international for a company?
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Which of the following would be considered an administrative barrier in international business?
Which of the following would be considered an administrative barrier in international business?
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What is the primary goal of a strategic alliance?
What is the primary goal of a strategic alliance?
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Which of the following is a characteristic of international marketing compared to domestic marketing?
Which of the following is a characteristic of international marketing compared to domestic marketing?
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What is a major challenge faced in international marketing related to politics?
What is a major challenge faced in international marketing related to politics?
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Which benefit is associated with a concentration strategy in international marketing?
Which benefit is associated with a concentration strategy in international marketing?
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What can be a consequence of a diversification strategy in international marketing?
What can be a consequence of a diversification strategy in international marketing?
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What typically makes data collection more challenging in international marketing?
What typically makes data collection more challenging in international marketing?
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Which of the following is a key factor that influences government regulation in international marketing?
Which of the following is a key factor that influences government regulation in international marketing?
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What is one primary advantage of offering a differentiated product in a concentrated international marketing strategy?
What is one primary advantage of offering a differentiated product in a concentrated international marketing strategy?
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What is a consequence of exchange rate volatility on businesses?
What is a consequence of exchange rate volatility on businesses?
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In which stage of internationalization is a business likely exploring the possibility of exporting?
In which stage of internationalization is a business likely exploring the possibility of exporting?
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What type of market entry strategy involves independent intermediaries?
What type of market entry strategy involves independent intermediaries?
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Which strategy describes a business executing long-term commitment to foreign markets?
Which strategy describes a business executing long-term commitment to foreign markets?
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What describes the focus of domestic marketing?
What describes the focus of domestic marketing?
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What best describes the approach of global participation in internationalization?
What best describes the approach of global participation in internationalization?
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What type of market entry strategy involves collaboration with other firms?
What type of market entry strategy involves collaboration with other firms?
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Which participation stage indicates an experienced exporter with sales in multiple countries?
Which participation stage indicates an experienced exporter with sales in multiple countries?
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What defines an economic union?
What defines an economic union?
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What is a significant impact of the Internet on pricing strategies?
What is a significant impact of the Internet on pricing strategies?
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Which factor does NOT contribute to international market instability?
Which factor does NOT contribute to international market instability?
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What is nationalism?
What is nationalism?
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What differentiates expropriation from confiscation?
What differentiates expropriation from confiscation?
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What is a role of Political and Social Activists (PSAs)?
What is a role of Political and Social Activists (PSAs)?
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Which of the following is NOT a method governments use to address nationalistic fears?
Which of the following is NOT a method governments use to address nationalistic fears?
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How have NGOs impacted government policy?
How have NGOs impacted government policy?
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What represents the greatest threat to peace and commerce in the 21st century?
What represents the greatest threat to peace and commerce in the 21st century?
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What has NOT been significantly affected by terrorism?
What has NOT been significantly affected by terrorism?
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What does the business cycle consist of?
What does the business cycle consist of?
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What is the definition of inflation?
What is the definition of inflation?
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Which of the following describes labor costs?
Which of the following describes labor costs?
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What characterizes a Free Trade Area like the USMCA?
What characterizes a Free Trade Area like the USMCA?
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How does currency exchange rates impact international business?
How does currency exchange rates impact international business?
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What is a characteristic of a Customs Union like WAEMU?
What is a characteristic of a Customs Union like WAEMU?
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Under the scenario of increasing unemployment rates, which of the following is true?
Under the scenario of increasing unemployment rates, which of the following is true?
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What is the purpose of considering market size in global marketing strategies?
What is the purpose of considering market size in global marketing strategies?
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Study Notes
Reasons for Internationalization
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Reactive reasons for going international are often driven by a need to adapt to changing circumstances.
- Survival: Businesses may go international to remain competitive in a globalized market.
- Overproduction: Excess inventory can be alleviated by selling products abroad.
- Economic Environment Changes: Fluctuations in currency or economic policies can encourage companies to reach new markets.
- Political Environment Changes: Regulations or barriers imposed by governments may lead companies to seek opportunities in other countries.
- Competitive Environment: Increased competition in domestic markets can push companies to expand their operations globally.
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Proactive reasons for going international are often driven by a desire to grow and expand.
- Increased Sales and Profits: New markets can provide new opportunities for revenue generation.
- Diversification: Companies can reduce risk by spreading operations across multiple markets.
- Unique product or Technological Breakthrough: These factors can create opportunities for international market expansion.
- Exclusive Market Information: Companies with access to unique knowledge about specific markets can leverage this advantage.
- Economies of Scale and Learning Process: Operating in multiple countries can reduce costs and facilitate continuous improvement.
- Sustainable Growth: International expansion can support long-term growth and stability.
- Extending Product Life Cycle: Companies can extend the life of products by selling them in new markets where demand may still be high.
- R&D: International operations can provide access to new research and development opportunities.
- Risk Diversification: Operating in multiple countries can reduce reliance on any one market, minimizing risk.
Stages of Internationalization
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Obstacles to internationalization include:
- Import Tariffs: Duties or taxes imposed on goods as they enter a country, often to protect domestic industries or generate revenue.
- Administrative Barriers: Rules and regulations designed to restrict imports from foreign companies.
- Customs Procedures: Management and operations involved in importing and exporting goods, which can be complex and time-consuming.
- Subsidies: Government payments or benefits provided to domestic producers or exporters, potentially disadvantaging foreign competitors.
- Trade Quotas: Explicit limits on the quantity of goods that can be imported or exported, restricting market access.
- Currency Fluctuations and Payment Risks: Volatility in exchange rates can significantly impact the cost of goods and profitability.
- Standards and Packaging Specifications: Packaging requirements may differ from country to country, posing challenges for manufacturers.
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Stages of the Internationalization Process:
- Domestic Marketing: Focuses solely on the domestic market.
- Experimental Participation: Companies explore the possibility of exporting, often responding to unsolicited orders from abroad.
- Active Participation: Companies engage in systematic exploration and planning for exports, often expanding to nearby or related markets.
- Committed Participation: Companies become experienced exporters with a presence in multiple countries, potentially establishing production facilities abroad.
- Global Participation: Companies adopt a globalized approach, targeting specific segments and pursuing a global competitive advantage.
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Foreign Market Entry Strategies:
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Indirect Exporting: Utilizing independent intermediaries or cooperative export groups to manage international sales.
- Independent Intermediaries: Companies that facilitate trade between parties who are not able or willing to deal directly with each other.
- Cooperative Export: Collaboration with other firms to share the responsibilities and risks of exporting.
- Direct Exporting: Companies manage their own export operations, potentially setting up subsidiaries or sales offices in foreign markets.
- Joint Venture: Collaboration with a local partner to establish a new business entity in a foreign market.
- Foreign Direct Investment: Establishing full ownership and control over operations in a foreign market, either through acquisition or greenfield investment.
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Indirect Exporting: Utilizing independent intermediaries or cooperative export groups to manage international sales.
10 Differences between International and Domestic Marketing
- Culture: International markets are often diverse and multicultural, requiring companies to adapt their marketing strategies to different cultural contexts.
- Markets: International markets are typically more geographically widespread and sometimes fragmented, requiring targeted marketing approaches.
- Data: Gathering reliable data in international markets is often more challenging and expensive.
- Politics: Political regimes vary in stability, creating political risk for companies operating internationally.
- Government: Governments can exert a strong influence on import regulations and foreign business ventures.
- Economies: Economies vary in levels of development and currency stability, impacting business operations.
- Finance: International finance involves varying systems and regulations, potentially affecting the cost and availability of capital.
- Stakeholders: Companies operating internationally need to consider the interests of various stakeholders, including commercial partners, home country governments, and host country governments.
- Business: Differences in legal practices, accounting standards, and cultural norms affect business operations.
- Control: Managing and coordinating operations across multiple countries presents challenges for companies.
Concentration vs. Diversification in International Marketing
- Concentration: Focusing on a limited number of selected markets, allowing for deeper market knowledge, customized product offerings, and reduced costs.
- Diversification: Expanding into multiple markets, enabling access to a wider range of opportunities, reducing dependence on any single market, and potentially mitigating risks.
Global Marketing
- Companies pursue a geocentric perspective, focusing on segments rather than countries or regions.
- They aim to achieve a global competitive advantage by leveraging resources and opportunities across the globe.
International Economic Factors
- Business Cycle: The cyclical pattern of economic growth and decline, consisting of peak/boom, contraction, recession, and expansion.
- Unemployment Rates: The percentage of the labor force that is unemployed but actively seeking work.
- Inflation Rates: A sustained increase in the general price level of goods and services, eroding the purchasing power of money.
- Labor Costs: The sum of all wages, benefits, and payroll taxes incurred by an employer.
- Currency Exchange Rates: The values of currencies fluctuate relative to each other, impacting businesses involved in international trade.
- Market Size: The overall size and potential of a market, influencing investment decisions and growth potential.
Economic Integration
- Free Trade Area: Elimination of tariffs between member countries, while each country retains control over its own trade policies.
- Customs Union: Implementation of a common customs tariff with respect to non-member countries, while also removing tariffs between members.
- Common Market: Eliminates barriers to trade, including tariffs and non-tariff barriers, allowing for free movement of goods, services, capital, and labor.
- Economic Union: Coordinates social and financial policies across member states, creating a unified market.
Technological Environment
- Intensified Rivalry: Increased competition due to reduced barriers to entry.
- Low Barriers to Entry: Technology can facilitate entry into new markets, intensifying rivalry.
- High Threat of Substitutes: Technology enables the creation of new substitutes for existing products.
- Low Bargaining Power of Suppliers: Technology can empower buyers and reduce the bargaining power of suppliers.
- High Bargaining Power of Buyers: Buyers may have access to more information and choices, increasing their bargaining power.
Impact of the Internet on the Marketing Mix
- Product: Technology enables new products and digital delivery mechanisms.
- Price: Dynamic pricing models, comparison tools, and online marketplaces alter pricing practices.
- Place: Direct digital distribution, supply chain management improvements, and channel integration facilitated by technology.
- Promotion: New communication media, advertising opportunities, and targeted marketing strategies enabled by online platforms.
Political Environment
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Causes of International Market Instability:
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Political Instability:
- Government instability: Changes in political parties can affect trade conditions.
- Nationalism: The promotion of national interests may lead to restrictive policies or protectionist measures.
- Animosity toward specific countries: International relations may lead to sanctions or trade disputes.
- Trade disputes can disrupt trade flows and businesses.
- Types of Governments: Governments vary in their policies, regulations, and attitudes towards foreign investment, influencing business risks.
- Nationalism: The promotion of national interests may lead to restrictive policies or protectionist measures that impact multinational companies.
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Political Instability:
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Responses to Nationalistic Fears:
- Direct Economic Sanctions: Governments may implement economic measures to control foreign investment, such as exchange controls, import restrictions, and tax controls.
- Confiscation: Government seizure of a company's assets without compensation.
- Expropriation: Government seizure of an investment with some reimbursement.
- Domestication: A gradual transfer of foreign investments to national control and ownership.
- Nationalization: Government takeover of a previously privately owned company, becoming a government-run entity.
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Animosity Targeted toward Specific Countries:
- Direct Political Sanctions: Countries may implement sanctions against other countries to discourage certain behaviors or policies.
- Issue of Foreign Direct Investment: Thorough risk analysis is essential to assess the political risks associated with foreign investment.
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Political and Social Activists (PSAs):
- Influence on Trade Flows: PSAs can disrupt trade through protests and other actions.
- Use of Internet and Social Networks: These platforms allow for the spread of PSA messaging.
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Nongovernmental Organizations (NGOs):
- Policy Influence: NGOs play a significant role in shaping government policies by lobbying and collaborating with government organizations.
- Humanitarian Work: Many NGOs focus on addressing humanitarian issues and advocating for social justice.
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Violence and Terrorism:
- Impact on International Business: Terrorism can disrupt travel, commerce, and international business operations.
- Industries Affected: Tourism and international education have been significantly impacted by terrorism.
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Description
This quiz explores the various reactive and proactive reasons businesses choose to internationalize. Understanding these motivations is crucial in a global market where companies must adapt to survive and thrive. Test your knowledge on the factors influencing international expansion.
