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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?
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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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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?
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What describes the focus of domestic marketing?
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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?
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Which participation stage indicates an experienced exporter with sales in multiple countries?
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What defines an economic union?
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What is a significant impact of the Internet on pricing strategies?
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Which factor does NOT contribute to international market instability?
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What is nationalism?
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What differentiates expropriation from confiscation?
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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?
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How have NGOs impacted government policy?
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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?
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What does the business cycle consist of?
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What is the definition of inflation?
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Which of the following describes labor costs?
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What characterizes a Free Trade Area like the USMCA?
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How does currency exchange rates impact international business?
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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?
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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.
