CHAPTER 1

ANSWERS TO QUESTIONS FOR DISCUSSION

1.1 Why has there been such an increase in interest by business firms in international and export
marketing? Will this interest continue to increase? Why or why not?

You may approach this question in several ways.

Companies are increasingly selling to, buying from, and competing with products from companies and
individuals in other nations. International sales may provide additional profits, or even the major source of
profits (Swiss pharmaceutical companies; Coca-Cola). Therefore, most companies must be interested in
international marketing.

The increased interest is partly the result of the growth of international markets. This growth is due to
many factors including: lowering barriers to trade and investment; improvements in transportation,
logistics, and communications; new products with international appeal; increased linking of companies,
markets, and financing; and rapid expansion of world trade.

It is also due to: productive capacity exceeding domestic demand in many industries; increasing foreign
and domestic competition in many domestic markets; and the growth of overseas markets as standards of
living increase in many nations.

The interest will continue to increase as globalization progresses, world trade increases faster than world
GDP, Foreign Direct Investment continues to increase, and the transportation, communication, cultural,
and governmental barriers to trade are reduced.

The growth in international trade and marketing has presented both new opportunities and new threats.
Neither can be ignored safely. You may come up with a number of additional reasons for the continuing
increase in international marketing. These specific reasons may be drawn from the Sections ‘The growing
importance of international marketing’ and ‘Reasons for the rapid growth in international business’;
elsewhere in the chapter; or knowledge from outside.

1.2 What is meant by internationalization and how does this relate to the global marketer?

（Internationalization is the process whereby a firm becomes increasingly committed to and involved in
international business operations through specific products in specific markets.）

（ The global marketer views major regions of the world as a simple or uniform market in which it
markets a standardized product in a standardized way in order to achieve low relative costs. ） （ The
traditional multinational company often adapts/individualizes products and practices to specific
nations/regions to increase local acceptability but at an increased cost.）

1.3 Is taking a global view limited to companies that view themselves as global companies?
Explain.

Taking a global view is not limited to companies that view themselves as global. The automotive division
of Rolls Royce (before the sale to Volkswagen) might not have considered itself a global company since
production, development of marketing policies, and administration were all concentrated in the UK. It
could still have a global view, marketing the same product in the same way to the same market segment
everywhere in the world (with only modular changes, such as right-hand or left-hand placement of
steering wheels, to accommodate to local requirements).
1.4 Is it meaningful to attempt to measure the degree (or amount) of internationalization of a
firm? Explain.

It is useful for a firm to measure its degree (or amount) of internationalization as the first step in a gap
analysis: assessing where the company is now with respect to international sales; how international the
company could be; and how international it wants to be. The resulting analysis will enable the company to
identify actions and resources needed to move from where it is now to where it wants to be.
1.5 What does it mean for a company to be ‘market driven’? Is this really important in today’s
environment or can a company be successful without being so driven? Explain.

It means that the product and the marketing program are developed with the needs and interests of the
consumer in mind. It is of critical importance to consider the consumer in every step of the marketing
process from the analysis of markets and development of products through the after-sale service. In
today's increasingly competitive market, if you do not provide exactly what the consumer wants, someone
else will.

1.6 Explain the meaning of the following statement: ‘If a company is to be successful in foreign
markets, its management must have a good understanding of all aspects of the environment
within which it will be operating.’

Such a statement gets to the heart of the meaning of applied marketing and the viewing of a marketing
program as a system. The system consists of the set of marketing activities (endogenous) that are
controllable by a firm and the set of environmental characteristics that are outside the firm’s control
(exogenous). Endogenous activities are used to adapt to the exogenous environment. Thus, if a company
is to successfully adapt it must know all it can about that economic, socio-cultural, competitive, political,
etc. dimensions of the environment within which it operates. This relationship and the specific
dimensions/activities involved are shown in power point slide 4 of chapter 1.

1.7 Give two or more examples of how external factors (exogenous variables) in the international
environment make export marketing more complex than domestic marketing.

Some examples are:

(a) laws and regulations differ from country to country, and cover a multitude of factors including
packaging and labeling requirements, health and safety requirements, etc.;

(b) taxes, tariffs, quotas, and other restrictions may limit what you can sell, how much you can sell,
and/or the costs involved;

(c) cultural or social differences may prevent the sale of certain products, or require modifications to the
products or distribution systems;

(d) economic levels may limit markets;

(e) geographic or infrastructure constraints may limit distribution channels; and

(f) the extent and effectiveness of competition may be quite different.

1.8 What is the relationship between importing and exporting for an individual company?

A company may import goods or services primarily for sale in its home or other markets. Many
companies, however, import/obtain goods, services, licenses, and/or technology for use in making
products for export. Machine tools may be imported in order to manufacture components or products
domestically. Increasingly, companies are sourcing components worldwide for use in making final
products to be sold both domestically and to other countries. From an individual company’s perspective,
the knowledge, contacts, products, and services gained through inward internationalization may influence
the development of market entry and marketing activities used in outward internationalization.

1.9 What are the three distinct components of export planning and strategy development and how
are they related?

The three distinct components of export planning and strategy are:

(g) goals (objectives to be achieved);

(h) program (development of the marketing mix);

(i) organization (what resources will be used and how they will be put together).

The relationship among these components represents a ‘closed system’. That is, a company
will start with some goal, then develop a program to achieve the goal, and must have an organization to
implement the program. If, for example, the organization is not suited to
the marketing program and the organization cannot be changed, the company must see if the program
can be altered. If this is not possible, then the objectives must be changed to fit the organization and the
marketing program capabilities.

1.10 Identify the potential barriers (or obstacles) that face companies considering – or expanding
– international marketing operations. Which are most important and which are less
important? Explain.

Your answers may vary, but should include at least some of the following. There are several types of
potential barriers faced by companies considering beginning or expanding international operations.
Internal to the company might be a lack of knowledge of markets, exporting procedures, methods for
evaluating risk, and costs; concern over communications, after-sale service, and the maintenance of
control; and lack of qualified personnel and/or lack of support by top management. External to the
company may be domestic export controls, foreign trade barriers, and foreign attitudes and requirements.
Which are most important depends upon a combination of the specific case and the perceptions of the
management of the potential exporter.

1.11 Is the role of the international marketer only to attempt to increase sales? Explain.

The role of the international marketer is no longer simply to attempt to increase sales. While this may be
of paramount importance in some cases, in other cases the marketer will need to be concerned with
controlling demand. Examples of situations in which demand must be controlled include cases in which:
(a) demand exceeds supply, either on a medium-term or long-term basis, as with some energy sources;
(b) products or services must be allocated to various customers when there are temporary shortages of
product, as with newly introduced products; (c) demand must be shifted from high-usage to low-usage
periods, as in power generation; (d) specific products or services must be made available but for which
full costs cannot be recovered, as in some medical services; or (e) demand should be shifted from an
environmentally undesirable product to one more environmentally sound, as moving from gasoline-
powered automobiles to hybrid cars or public transportation.

1.12 Is use of the World Wide Web appropriate only for large companies? Explain.

The World Wide Web can be of use to companies of all sizes. It allows even very small firms to advertise
and provide other information to potential customers and suppliers. The Websites of other organizations
may provide information useful in determining whether they may be potential suppliers, customers, or
partners in cooperative ventures.
On the World Wide Web, a company’s size and physical facilities become less important than its ability to
reach and attract others, and its ability to show that it can do or provide what is desired.

1.13 What is ‘e-business’?

E-business (electronic business) is the sale, purchase, or exchange of goods, services, or information
over the Internet or other telecommunications networks. It includes business-to-consumer sales (B2C),
business-to-business transactions (B2B), and also transactions among government organizations and
consumers or businesses. It can also include a wide range of facilitating and supporting services and
information such as scheduling and coordination, supply chain management, distribution chain
management, customer relations management, etc.

1.14 Are online market places useful only to businesses? Explain.

Online market places are being used by companies of all sizes. However, they are also useful to
individuals interested in exchanging goods or services (Ebay, for example), to handicrafts producers
looking for wider markets (through Novica, for example), and for governmental organizations.

1.15 Does e-business present a threat or an opportunity to traditional stores and wholesalers?
Explain.

It presents both a threat and an opportunity. 1 It provides opportunities for existing companies to promote
their present or new products more effectively, 2 to gain additional sales to present customers, 3 to gain
additional customers who may not normally visit their existing facilities, 4 and to expand to new market
segments or new markets which can now be more easily reached. It allows new companies to enter
existing markets.

The threat arises from the fact that existing competitors may use e-business to attract customers away
from you, and new competitors may find it easier to enter your market.

1.16 What factors have resulted in the rapid rise in outsourcing of jobs overseas?

Improvements in communications technologies and capacities have made it possible for workers in one
country (India, for example) to provide real-time, online information to users in another country (the US,
for example). The wage differentials for well-educated people in India and the US, combined with
decreases in communications costs, make the outsourcing of such work economically feasible.

1.17 Give an example of a ‘business model’ and how it can give rise to an opportunity to enter
markets overseas.

You may select from a number of examples. Wal-Mart has used its unique expertise in organizing its
supply and distribution systems in its penetration of foreign markets. Examples of six other companies
that have used their business models to expand internationally are given in Exhibit 1.13.

CHAPTER 2

2.1 What are the benefits arising from international trade? Are they the same for industrial goods
as for consumer goods? What costs to consumers arise from international trade?

The major potential benefits are lower prices and an increased variety and supply of goods from which to
choose. For the most part, these benefits are the same for industrial goods as they are for consumer
goods. The import of consumer goods has a direct effect; the import of industrial goods results in lower
domestic production costs and/or better products and/or the acquisition of new technology thereby
benefiting the consumer indirectly. Consumers in the country of export may also benefit to the extent that
domestic firms that export can generate economies of scale in production, which can then be passed on
to domestic buyers in the form of lower prices.

If exported products are in short supply relative to demand, then market prices in the producing country
may be driven higher.

2.2 Discuss how exports and imports help to increase productivity and efficiency.

Briefly, exports and imports lead to increased international specialization, with the most efficient industries
in each country tending to increase their output, thereby gaining economies of scale. The transfer of
technology, including the importation of new equipment and systems, also leads to improved productivity.

2.3 The productivities of factor inputs with respect to different products are determined by a
combination of natural and acquired advantages. Is the productivity of the Japanese due
primarily to natural or acquired advantages? How about the French or the Chinese? Explain.

Japan is not exceptionally well endowed with the natural resources of mineral wealth, soil, and climate.
Until recently, it was also short of capital. The high level of productivity of the Japanese, therefore, must
be due to the acquired advantages of knowledge, skills and techniques. France is better endowed with
the factors of production so some advantages have been natural. However, there has also been
substantial acquisition in the form of learning of how to use the factors available and in developing
products that are less natural-resource-dependent. China has extensive natural resources but is less rich
in most of these, on a per capita basis, than France. In its current economic development efforts, it is
relying heavily on improving the skills and motivation of its people and on the acquisition of technology. In
the end, all advantages due to managerial know-how and overall human resources are, in fact, acquired
advantages.

2.4 (a) Briefly explain the different types of economic advantage for two countries, A and B, each
able to produce two products, X and Y, and discuss the conditions for trade to be
advantageous (assuming no transaction costs). (b) How is it possible for an individual
business firm to have a comparative advantage?

(a) If A can produce X more cheaply than B can produce X, and B can produce Y more cheaply than A
can produce Y, we have a case of absolute advantage.

If A can produce both X and Y more cheaply than B can produce X and Y, but A has a proportionally
greater cost advantage over B in producing X, it is a case of comparative advantage.

If A can produce both X and Y more cheaply than B can produce X and Y, and the ratios of A’s
advantages are the same for both products (say, for example, A can produce each of the products at
exactly half of the cost that B can produce them), it is a case of equal advantage or equal differences.

Trade is advantageous under conditions of absolute and comparative advantage, but not under
conditions of equal advantage/differences.

(b) An individual business firm can have a comparative advantage in much the same way as a nation.
But, this would apply to a multi-product company. If at least two of the products of this company were
in demand at home and in a foreign country, and there was a company in the other country making
the same products, relative cost differences could lead to a situation of comparative advantage. This
could lead to a potential trading relationship if the products were relatively homogeneous and
branding was not an important attribute.

2.5 Find an example of a country that is exporting a product for which it has an absolute
disadvantage with a trading partner but where there is a comparative advantage. Explain the
nature of this relationship.
Your answers will vary. One example the instructor could use would be the export of machine tools from
China to the United States. In labor hours per unit of production of both standard machine tools and
technically advanced machine tools, production in China is more costly. But the difference in the cost of
producing technically advanced machine tools in China is relatively much higher than the cost of
producing standard machine tools. Since the overall low level of productivity in China results in low wages
relative to the US, China is able to export standard machine tools to the US while importing technically
advanced machine tools from the US.

2.6 Explain the ‘product life-cycle’ concept as it relates to international trade and investment.
What does the concept mean to the individual firm?

As a product goes through its life cycle of introduction, growth, maturity, and decline, the location where it
is most advantageous to produce the product tends to shift. In the introductory phase, the advantage is in
the country of introduction (usually an economically developed nation), with rapid change and market
uncertainties allowing high profit margins and dictating small-scale production. As output grows, exporting
becomes possible. As the life cycle changes from growth to maturity, lower costs become a greater
concern and production tends to shift to other consuming nations and/or lower labor-cost areas.
Eventually, the country of origin may even import the product from a low labor-cost area.

It is sufficient to say that a company’s product (i.e., its brand of the product) goes through such a cycle
over time. Moreover, the product itself may be in different stages in different foreign markets. A company
will find it difficult to manage a product in different stages of the cycle. Thus, the stage of a product in a
foreign market may influence a company's decision to market it in that country.

2.7 Export motives may be classified as internal or external, and reactive or proactive. What is
meant by these terms with respect to export marketing? Give examples of each of the
combinations of export motives.

Internal motives are those that arise from stimuli within the firm, while external motives are those that
arise from stimuli outside the firm. Reactive motives are those that arise simply in response to some
occurrence in the environment, while proactive motives arise from the executives actively seeking new
opportunities.

A decision to actively seek economies of scale by opening new markets overseas would represent
proactive motives generated internally. A decision to undertake additional foreign marketing activities as a
result of opportunities coming to their attention from outside would be classed as proactive, external. A
decision to undertake activities in order to avoid risks in marketing only domestically would be classed as
reactive, internal. Simply responding to unsolicited orders from overseas would be reactive, external.

Depending upon the circumstances, a particular action may be motivated by differing combinations, but
understanding the classification scheme helps one understand how a particular company is motivated.

Your examples will differ.

2.8 Why might some companies be willing to undertake new or additional international and
export marketing even though it apparently offers only similar (or even lower) levels of
profitability?

The companies see offsetting advantages in increased stability of sales and/or profits, diversification of
risk, greater growth opportunities, outlets for excess production, or the need to protect existing overseas
markets from new government restrictions.

2.9 What is meant by a ‘change agent’ in export marketing? Give examples of each type of
change agent.

A change agent in export marketing is some organization external to the company that encourages and
assists the company in starting or expanding international marketing activities. Government agencies,
trade associations, etc., may be active in this area. Other companies, such as export agents and foreign
importers, may also do this.

Examples of change agents will vary.

2.10 How can a company determine how internationalized it is? Explain.

A company may gain some evaluation of how internationalized it is through use of a number of different
measures.

Quantitative measures include the number of countries in which a company is doing business; foreign
assets, sales, or profits; the number of employees overseas; etc. These may be stated either in absolute
terms, or as percentages of the same factors for domestic operations.

Qualitative measures that are very difficult to measure might include top management’s international
orientation and its commitment to international marketing, or how decisions are made regarding sourcing
and market penetration.

2.11 Find an example of a company that has expanded its export/international marketing activity,
or started such activity, and determine the company’s objectives for doing so and the results
achieved.

If you do not have personal knowledge of any such company, he or she can find examples in business
periodicals. You may draw examples from Case 1.4, DaimlerChrysler. Toyota undertook exporting
because the Japanese market was too small to provide the level of sales and profits they wanted. They
began manufacturing overseas because of trade barriers in the US and European markets. They have
succeeded very well, now earning the greatest profits of any Japanese company. The actions of
Mercedes-Benz, its reasons for acquiring Chrysler, and the resulting problems are discussed at some
length in the case.

2.12 How can a company make operational use of the network model and relationship marketing
in planning and implementing international marketing programs?

Selecting suppliers and distributors is a part of planning and implementing marketing programs.
Relationship marketing emphasizes the building of lasting relationships or informal partnerships, often
with substantial sharing of information, with suppliers and distributors. The objectives are to reduce
transaction costs, and to work cooperatively with others in the value chain to improve quality and
responsiveness and lower costs. An assumption is that the value of such cooperation will more than offset
the advantages of short- term competition over cost and quality between possible suppliers.

The network model portrays the relationships between the various partners as a set of networks that may
be global in nature, and may be grouped by geographical areas, products, techniques, etc.

When a company recognizes the existence and importance of networks of business relationships in
particular industries and regions, it is in a position to identify and expand its own position and
relationships through international expansion into nets new to the firm, penetration by developing existing
positions, and international integration by increasing coordination between its positions in different
national nets. Increased and improved relationships facilitate the gathering of information, the
development of useful contacts with others that control or can facilitate access to needed resources
(including, for example, marketing channels and government approval agencies), and the building of
personal confidence.

2.13 There are many who believe that ‘whatever is legal is ethical.’ Do you agree with this belief as
it might apply to the international marketer? Explain your position and give examples of
behavior in the global marketplace that would support your position.
The position that what is legal may not be ethical is probably easier to defend. Nestle’s promotion of baby
formula in areas where it was not properly used was legal but considered unethical by many people.
Activities resulting in serious contamination of the environment are legal in a number of countries, both
less economically developed and more developed, but is considered unethical by many people. High-
pressure tactics to sell unneeded or harmful products to children or the aged may be legal in some
countries but are still viewed as unethical by many people even in those countries.

2.14 Is being ‘right’ or ‘wrong’ about moral issues in international marketing activities an absolute
or is it relative? Explain.

It is relative; that is, deciding whether some action is ‘right’ or ‘wrong’ depends upon the individual
marketer, the host society, and the marketer’s home society. Small (or even large) bribes are considered
right (or even required) in some societies, while considered morally wrong by some people and perhaps
illegal under home country laws. Attempting to provide equal employment opportunity to women is some
countries would be both wrong and illegal to the host society but perhaps considered morally right by a
marketer from another society.

2.15 With what particular issues must international marketers be concerned? Explain.

The ethical and moral issues with which international marketers must be concerned include the following:
safety and effectiveness of the product; market entry and expansion methods should conform to local and
home country values; advertising and promotion should be honest and activities of sales personnel
monitored; prices should be set at a level viewed as fair; and customers, employees, and suppliers should
all be treated in a manner that is viewed as fair.

2.16 Are traditional views about the goals of business the same in Britain, the United States, and
the continental western European countries? If not, how do they differ?

They differ. Traditional British and the US views held that the primary goal of business organizations was
to maximize profits/returns to the stockholders/owners. In much of continental Europe, business was
believed to have much broader obligations including responsibilities toward customers, employees,
suppliers, and society as a whole. In the US a more broad view of corporate responsibility is developing
but it is still far from many of the views in Europe.

2.17 In general, are businesses becoming more or less sensitive to social responsibility issues?
Why?

Businesses are becoming more sensitive to social responsibility issues because of growing awareness of
environmental and product problems, activities of public interest groups, lawsuits (particularly in the US),
some proactive companies, and the possibility that issues related to apparent failures of businesses to
meet social responsibility needs may result in additional laws or regulations affecting business.

CHAPTER 3

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 you.

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 another’s 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 society’s 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.

Your 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.
CHAPTER 4

4.1 Strategic export planning requires the development of an effective marketing strategy,
including market selection and direction (development). What major implications does this
have for the company’s export manager?

The implications are:

(j) The export marketer must consider the role of each market and product within the corporate portfolio.

(k) Market selection must focus on broader strategic issues as well as on issues of segmentation and
differentiation.

(l) The export marketer needs to contribute to strategic planning, providing detailed views of foreign
markets without neglecting the overall or aggregate picture.

4.2 Explain the difference between export market selection and export market direction.

Market selection is the process of evaluating opportunities, relative to a company’s abilities, in order to
select markets to enter. Market direction is the related process of determining whether to build, hold,
divest, or abandon its position in a given foreign market.

4.3 What is market segmentation, and why is it more complex for foreign markets than it is for
domestic markets?

Market segmentation means the breaking down of all overall market for a particular product or service into
sets of customers who respond differently to marketing strategies. It is more complex in export markets
because of the diverse economic, cultural and political environments encountered.

4.4 What is the best way for segmenting export markets? Explain.

There are many ways for segmenting export markets, and no single ‘best way.’ There are general market
indicators and specific product indicators that may be applied at the country market or customer market
level.

The desirability of any particular way of segmenting depends upon the results of an evaluation of the
following factors: (a) measurability, (b) accessibility, (c) profitability, and (d) actionability.

4.5 Give examples of global market segments and companies that are marketing on that basis.
Can small and medium-sized enterprises market successfully to such segments? Explain.

You may come up with a number of different segments and companies. One segment would be the very
wealthy and prestige-conscious individuals globally to which Rolls Royce sold its automobiles (before the
company was sold). Another would be the large segment of people who want soft drinks, to which Coca
Cola has marketed so successfully.
Small and medium-sized companies can market successfully to such segments in a wide range of
markets from clothing through specialized industrial products to professional services. The World Wide
Web has made such marketing easier.

4.6 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.

4.7 What is psychic distance? How useful is it to a manager to be able to measure (by index or
scales) such distance between countries? Explain.

Psychic distance is a measure of the differences between countries in many areas including culture,
history, and economic and industrial development. A manager may find it useful, when considering
entering new primary or secondary markets, to have some knowledge of the relative differences between
the domestic market and foreign markets under consideration. The index or scales provide indicators of
the uncertainties involved in entering specific foreign markets and the resulting breadth and depth of
information that must be developed in order to successfully enter the particular markets.

4.8 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.

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.

4.9 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.
4.10 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.

4.11 Using the variables shown in Table 4.5 develop operational measures of each, specify
differential weights you feel are realistic, and apply these for a matrix analysis (such as
shown in Figure 4.5) of the EU countries and ASEAN countries, using a consumer durable
product of your choice.

Answers will vary, but each of you should have followed a similar approach. Choose a particular product
(a Whirlpool TM clothes washing machine for example). The country attractiveness for each country must
be determined. First assign a weight to each of the six items in the first column of Table 4.5. Then, for
each country, indicate how it ranks on a scale of l to 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.

4.12 Repeat the exercise stated in question 4.11 for an industrial product. Explain any difference in
the resulting matrix from that derived in 4.11.

Question 4.12 will be answered using the same general method that was used in question 4.11. 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.

4.13 What changes would you make in the variables used in Table 4.5 to measure country
attractiveness and competitive strength? Explain why you have added or deleted variables to
those shown.

Your answers will vary.

CHAPTER 5

5.1 How would you respond to a person making the following statement: ‘As a general rule, the
export market manager has few sources of information available for use in market selection.’

This is not an accurate statement. To the contrary, the sources of international and product information
are usually overwhelming, and the problem is to identify the relevant data. The Internet and World Wide
Web, indexes and guides, and other publications provide a wealth of information.

In any given situation, certain specific information desired by the export market manager may not be
available, so market research may have to be undertaken.
Even though there are usually many sources of market-related information, there still remain problems
regarding the age of the data, its accuracy, and its relevance for the decision to be made.

5.2 For three different products that are being exported, or are exportable, list the major sources
of information on competitors’ activities.

Specific answers to this question will vary. General sources of such information include: trade
publications, competitors’ house organs and annual reports, a company’s salespersons, employees of
other companies, competitors’ advertising and product introduction/ improvement notices, competitors’
web listings on the Internet, and other sources.
5.3 Select two foreign markets – one a developed country and one a developing country – and
develop a list of sources of information which might be helpful to you in assessing the
probable market for an exportable product from your country (specify your product and the
country). Are web-based or nonweb-based sources preferable? Discuss.

Answers will vary. Selections from the many sources listed in the text and Appendix of Chapter 5 should
provide a good start.

The use of a combination of web-based and nonweb-based sources will provide the best/most complete
results. For many countries, using web-based sources will be the easiest and fastest place to start, but
will not generally provide all the information required.

5.4 What is the market research process that the international/export marketer uses and what are
the major issues that can arise to provide ‘complications? ’

The international market research process involves problem formulation (determining what management
needs to know), research method and design, data collection, analysis, and interpretation, and the
reporting of results.

Complications may arise due to incomparability of data: different definitions or methods of collection, and
different uses of products. Other problems may include complexity of research design, lack of accurate
secondary sources, and high costs of collecting primary data.

5.5 ‘Marketing research is beyond the capabilities and needs of the small exporter. Only larger
companies doing business in many countries have need for research services.’ Discuss.

This is not true. Small exporters face the same risks and problems as larger companies with respect to
potential market acceptance of the product, size of the market etc. The limited resources of the smaller
exporters may restrict the methods used and extent of marketing research conducted, but the basic
needs for information are the same. The Internet and web have made it easier and less costly for small
exporters (as well as large exporters) to do marketing research.

5.6 What is the nature of the equivalence ‘problem’ in doing research in multiple foreign markets,
and how can it be resolved?

The equivalence ‘problem’ is the difficulty in establishing comparability and equivalence of data and
research conducted in different countries with differing cultures, languages, measuring systems, etc.
People in different countries often: (a) place different interpretations or meanings on similar
objects/stimuli/behavior; (b) categorize objects/stimuli/behaviors differently; and/or
(c) have different roles or functions for concepts/objects/behaviors. These result in problems in translation,
calibration, and metrics. Making a valid comparison is difficult in these circumstances and requires that the
researchers and users of data understand the differences, make adjustments for the differences insofar
as is possible, and recognize that achieving absolute equivalence may not be possible.

5.7 Explain how the Internet may be a valuable source for information, for even the smallest-
sized exporter.

The Internet can be a valuable source of information, especially for the smallest-sized exporter, because
a wealth of information is available for a minimum of effort. Up-to-date information is now available on the
Internet which previously was not available, was difficult to locate, or would have required visits to offices
of banks, governments, or other organizations.

5.8 How can the international marketer overcome the incompatibility of research methods usable
in different countries when doing a comparative study?
The international marketer doing a comparative study covering a number of countries can partially
overcome the incompatibility of usable research methods by:

(1) determining the questions/approaches which can be used in each country/area;

(2) clearly indicating/stating the differences in collection and reporting of results; and

(3) indicating limitations in the interpretation and use of noncompatible data.

Most of you are likely to approach this question from differing perspectives, but should cover in some
manner the requirements listed above.

5.9 If a company cannot use the same methods of data collection for the same study in its
different markets, how can a valid comparison be made? Discuss.

Making a completely valid/accurate comparison may not be possible, but a satisfactory comparison may
be made by recognizing the possible differences in the meanings derived from the data and then
adjusting for them.
CHAPTER 6

6.1 Explain how the flow of transactions and the flow of the physical product relate to the foreign
market entry mode.

Transaction flow is the path of ownership transfers between the producer and the final buyer. Physical
flow is the path of physical possession of the product between the producer and the final buyer. Together
they form the export marketing channel of distribution or foreign market entry mode.

Transactions may be facilitated by nonmembers who do not take title themselves (brokers), but arrange
or assist in the transaction flow.

6.2 Why is the decision regarding foreign market entry mode a particularly important decision for
international marketing managers to make.

The decision regarding foreign market entry mode is important for several reasons as given below.

(m) It can affect the final price that consumers will pay for the product. This is not only because each
participant requires a profit margin that is added to the price but also because efficiencies can be
created or destroyed.

(n) A proper channel can help reduce fluctuations in production demand. This can reduce problems
related to inventory cost and control and unstable employment.

(o) A channel can be slow and expensive to set up. This may hinder the profitability of foreign market
entry by reducing margins or missing opportunity windows.

(p) The entry mode decision may affect the other factors in the marketing mix. These include the final
price, the attributes, and the promotion of the product.

(q) Poor relations between producers and channel members can cause problems that may reduce the
effectiveness of the system.

6.3 Discuss the nature of the ‘whole channel concept.’

The ‘whole channel concept’ views the entire channel of distribution as one integrated system with the
producer on one end and the final consumer or industrial user on the other. The significance of this is that
the system is only as strong as its weakest link. Therefore, great care should be given to the selection of
all channel members. The channel members and the producer can have a great effect on each other's
operations and profitability in the future.

You are be expected to discuss the roles of the headquarters’ organization, the channels between nations
and the channels within nations – the three components of the integrated system.

6.4 Evaluate the use of the Internet for export and other international marketing entry modes.

The Internet has become an important means of informing potential customers and potential marketing
channel participants about a company’s products/services and its competitive strength. It is open to all
types of companies – manufacturers, retailers, and service companies. It is also being used increasingly
for direct sales to businesses and consumers. Its use in B2C (business to consumer) marketing activities
is growing, but is much smaller in size than B2B (business to business) activities in sales, procurement,
and overall supply chain management. It facilitates both intra- and intercompany information exchange
and control of operations.

Notes to instructors:

(r) Through the use of the Internet a small company that designs customized automated production
systems for special applications was able to publicize its service and receive invitations to bid on
projects from foreign companies it had no other effective way of contacting.

(s) Chapter 7 provides additional information about the Internet and international marketing entry modes.

6.5 Government regulations can affect the viability and effectiveness of a company using the
Internet as a foreign market entry mode. Contrast the government regulations governing e-
commerce in the United States, a European Union country (e.g., the United Kingdom or
Germany), and an Australasian country. Is the Internet easier to use – regulation-wise – in
one of the countries? Explain.

Governmental regulations can impede the use of the Internet as a foreign entry mode by regulations and
restrictions, taxes, costs of service, and by any uncertainty regarding regulations or taxes.

In the US, the major regulations affecting activities on the Internet are primarily those related to all types
of commerce and competition. Connection costs are low. Sales taxes on Internet purchases are
prohibited by federal (national) law (as of September 2001), but this prohibition may elapse. Then state
and local governments would be free to pass a patchwork of state and local taxes on Internet purchases.

In Germany, privacy laws are very strong/restrictive, there are greater restrictions on advertising and
more strict limitations on what can be sold (e.g., Nazi-related items prohibited). There are many and
sometimes conflicting regulations of the other governments in Europe.

China has many rules restricting what companies can do and say on the Internet, and exercises
censorship. Internet access charges are comparatively higher than in the US

The use of the Internet is less restricted in the US than in Germany and China.

(Note to instructors: additional information on restrictions on the Internet can be found in Chapter 7.)

6.6 A number of alternative entry modes were identified in the chapter. Locate a company that
uses export and one using overseas production or a strategic alliance. Describe their market
entry strategies and determine why the companies differ in the entry mode being used.

Answers to this question will vary, but should include an analysis or evaluation of why each company
used the entry mode it did, and whether their choice appears to be appropriate. The analysis/evaluation
should be based on the advantages and disadvantages of the different methods, as discussed in the text.
6.7 Identify the major factors that have a bearing on the type of market entry mode that an export
marketer might select. Is there any one or more that are more important than others? Explain
fully.

The first major factor that influences the market entry mode is the characteristics of the target market. If
the target market is diverse in nature, spread out geographically or buys often but in small quantities, the
system must provide ready access through a variety of sources. It will also tend to be longer and more
complex. Target market preferences should also be considered. Products must be available where
potential customers expect and want them to be. The level of economic development of the target market
is another factor. It affects the type of channels available. The degree of political stability and existence of
legal barriers in the target market are also factors. Levels of risk and complexity are affected and must be
considered when selecting a mode.

The next major factor is the product itself. Many of its attributes may affect the entry mode decision. Unit
value, weight and bulk, technical complexity, and perishability may all have an effect. The familiarity of the
market with the product is also a factor.
The availability and competence of potential channel members both in the home country and foreign
markets may also affect the mode decision. Lack of these may force a producer to consider more direct
forms of exporting or even not entering the market.

Company-related factors include marketing management capability and know-how, newness of the
company to export marketing activities, size of the company and width of its product line, financial
strength and ability to generate capital, management preferences, and extent of control desired. Any of
these can influence the entry mode decision.

Government policies can also be a factor. Regulatory activities and import licensing may affect the access
to markets. Foreign exchange regulations may limit the local importer’s ability to buy goods. Policies such
as export promotion and local ordinances may serve to predetermine the channel choice.

There is no one factor that is most important under any condition. That is, importance is situation specific.

6.8 Under what conditions would a strategy of multiple entry modes be most appropriate and
under what conditions would it be inappropriate? Discuss.

A strategy of multiple entry modes might be most appropriate: (a) in different countries where the largest
markets have different characteristics (size of market, market structure, and government regulations) or
(b) in a single country where the various products to be sold are expected to have different markets,
market structure, etc. A strategy of multiple entry modes might be inappropriate for companies with only
one product line or one or more similar product lines entering one or more similar foreign markets.

6.9 Why should a company make a specific channel decision for each product going to each
overseas market?

The best (most efficient or most effective) channel is determined by a combination of the characteristics of
the product itself and the characteristics of the market, the structure of distribution for each particular
country, and other considerations such as governmental requirements.

6.10 Select an industrially developed country (perhaps Japan or a European country) and a
relatively less developed country (perhaps a Latin American or African country). Contrast the
relative importance of the factors that should be taken into consideration by a foreign based
manufacturer of a low-unit priced packaged good selling in both markets, when determining
policy on selecting appropriate channels of distribution in those markets. In which case is the
managerial decision easier to make? Discuss.
Answers will differ among you. The answers should include comparisons of the size of the market, the
requirements of the customers, physical requirements for distribution, availability and capabilities of
marketing organizations, and government regulations.

6.11 How can a company possibly satisfy all five stakeholder groups so each maximizes what it is
trying to maximize. Explain.

Any time an organization (or individual) has more than one stakeholder (or one goal), it is not possible to
completely satisfy (maximize) all stakeholders if any of their objectives are in partial conflict. The
organization has to decide/plan/work to maximize one goal within the constraints of satisfying (to some
acceptable level) the goals of the others.
6.12 Contrast the naive, pragmatic, and strategy approaches to choice of export market entry
mode.

Under the naive rule only one form of foreign market entry is considered. This ignores the differences of
markets and often results in one of two situations. First, entry may be attempted into market for which the
‘only entry’ mode is not appropriate or second, a market will be entered with an inappropriate mode.
Either situation produces less than optimal returns.

Under the pragmatic rule, the company enters a market with a low-risk entry mode and only searches for
a new one if it turns out to be not feasible or unprofitable. The advantages are that risk is minimized and
costs of investigating mode alternatives are reduced. This cost reduction results from ending the search
as soon as a workable mode is identified. The cost is the opportunity loss if a less than optimal mode is
chosen.

Under the strategy rule, the company investigates all viable alternative modes. This may result in a trade-
off between market objectives and higher costs. However, the chances of choosing the optimal mode are
maximized.
CHAPTER 7

7.1 When exporting indirectly, is it better to use a merchant or an agent in the export marketing
channel? Explain.

When exporting indirectly, whether it is better to use a merchant or an agent when exporting depends on
the objectives and needs of the exporter. A merchant takes title to the goods and assumes most of the
risk. In return for this, the merchant consumes a greater share of the return, receiving a greater share of
the producer’s profit margin. This can be justified for a producer who has little foreign market and export
knowledge or is very risk adverse.

An agent does not take title to the goods and so most of the risk remains with the producer. Agents act by
bringing buyers and sellers together without assuming the role of either. For this they generally consume
a smaller portion of the profit margin. A producer who is willing to assume more financial risk may prefer
this type of channel.

7.2 Under what conditions is it best that an exporter use an export management company and
when is the manufacturer’s export agent a better choice?

An export management company (EMC) is most commonly used in situations where the manufacturer
either cannot afford or does not desire to get involved with export marketing. EMCs are experts at this
and handle several related, but noncompeting products. This serves to share the expenses of export
promotion between several producers. They often assist clients in setting up their own export department
or begin direct exporting once established.

The manufacturer’s export agent functions much in line with an EMC, but does not provide advertising
and financial assistance. They are used most effectively when a firm wants to sell small orders to
overseas buyers, enter a new overseas market, or sell a product which is new to consumers in overseas
markets. These agents prefer to retain more of their own identity and remain as the foreign sales
representative on a permanent basis.

In general, a major difference between the EMC and the manufacturer’s export agent is that the EMC
serves as the export department for a manufacturer while the export agent serves as a salesperson.

7.3 For a small manufacturer, is it better to engage in piggyback marketing or join an exporting
combination? Why is this so?
For a small manufacturer, piggybacking can offer the advantage of relying on the already established
export capabilities of a larger company. It is a low risk way to begin export marketing for companies too
small or unwilling to invest in it themselves. The drawback is a loss of control over marketing activities.

Export combinations work well in situations involving undifferentiated goods produced by more than one
firm. Under this type of arrangement, the producers work together in export activities and can control a
market through price-fixing, restriction of supply, division of marketing territory, centralization of sales, or
pooling of profits.

7.4 ‘Cooperative exporting organizations are most suited for small- and medium-sized
organizations.’ Discuss.

Cooperative organizations are currently used by large organizations to form export cartels, often with
special legal status. Small- and medium-sized producers of similar, undifferentiated products may form a
cooperative exporting organization. Problems are most likely when differentiated products are being
handled through the cooperative organization. The dangers of entering any type of cooperative exporting
organization include lack of agreement between members on key issues, loss of corporate and brand
identity, and lack of representation of individual interests.

7.5 What types of channel conflict may arise in indirect exporting? Because of such conflict is it
not better for the exporter to do it directly?

The types of channel conflicts which might arise in indirect exporting include transfer pricing and
decisions on marketing activities. In transfer pricing all parties want to obtain the highest level of profit
margin they can. Marketing activity decisions include channel selection and levels of sales and
promotional activities.

Direct exporting prevents these conflicts from arising, but for the small or inexperienced exporter the risk
and investment levels involved may be prohibitive. Therefore, indirect exporting may provide the best
alternative. Furthermore, there may be some economies of scale available through indirect exporting
which make it the best choice.

7.6 What impact does the nature of the foreign market area to be served have on the exporter’s
choice of type of channel?

The impact the nature of a foreign market has on channel type choice stems mainly from the demands it
puts on marketing activities required. When a foreign market is very similar in consumer tastes and habits
and in distribution structure to the domestic market, a manufacturer is able to handle more of the export
marketing responsibilities itself. This would suggest employing the services of an agent rather than a
merchant or even turning to direct export. If it is very different in these areas, the services of a specialist
such as a merchant may be required.
Another factor is the level of risk associated with a market. If it is high, a merchant may be a good
alternative. They are experts in the foreign market and are highly paid to assume the risk.

7.7 Distinguish among the built-in, separate, and sales subsidiaries as forms of export
departments.

The built-in export department is the simplest- and easiest-to-establish form of home-country-based
export department. It consists of an export sales manager and some clerical help. The manager is
responsible for coordinating all export sales activities. This is suited for situations where the company is
small in size, relatively new to export marketing, expects moderate to small overseas sales volume,
management philosophy is not oriented toward growth of foreign business, existing marketing resources
are not fully utilized in the domestic market, or the company is unable to find resources, or, if able to do
so, key resources are not available.
The separate export department is larger and more self-contained and self-sufficient. It may be structured
on a basis of function, geographic region, product, customer, or some combination of these. It is formed
as export activities increase and helps resolve problems inherent in the built-in department.

An export sales subsidiary is created in an attempt to completely divorce export sales activities from
domestic operations. It allows for unified control of export activities, control and accountability for costs
and profits, placing of orders with the most suitable plant, easy access to sources of finance for export
activities due to separate financial position, handling a more complete line of products due to its ability to
carry those from outside sources, and exploitation of some tax advantages. The largest concern it can
create, aside from its cost, is in the question of setting a transfer price.

7.8 ‘The decision facing the export marketer concerning establishing a foreign-based sales
subsidiary is a difficult and complex one to make.’ Discuss.

A foreign sales subsidiary is a separate entity incorporated in another country. As such it is subject to the
laws, regulations, business practices, and customs of the country where it is formed. One of the common
reasons for establishing it is potential tax benefits. Therefore, all these factors must be considered when
deciding to open one. Then, once that decision has been made, the firm must decide where to open it. All
these factors must again be considered to choose the place that offers the best opportunity.

Also, because the foreign sales subsidiary acts as a separate entity, transfer prices must be established.
This can be difficult due to conflicts of interest between the managements of the two organizations.

7.9 Is there one best way to export directly? Defend your answer.

There is no one best way to export directly. Which method is best depends on the situation. When a
company is new at exporting and needs help in establishing foreign markets, a foreign-based distributor
or agent may be best. The drawback is that profit share and much control are given up. Once sales grow
and experience is gained, the company may want to establish their own organization.

If a foreign presence is not required for foreign sales, a home-country-based department may be
adequate. In situations where a foreign presence is needed, but constant contract is not necessary, a
traveling salesperson may be appropriate. The main consideration is that travel expenses can be quite
high, so the sales potential must be large enough to justify them. If more constant contact is necessary, a
foreign sales branch may be needed. This also allows for a service center to be operated. In some
situations a foreign sales subsidiary may be required in order to take advantage of potential tax benefits,
conform to local business practices or fulfill requirements of local law. If a large supply of product is
needed, a storage or warehouse facility can be operated in conjunction with any of the methods
mentioned.

7.10 Why is it important that the exporter be very careful in the selection of foreign-based
distributors and agents?

The reason an exporter must be very careful in the selection of a foreign-based distributor or agent is that
the exporter’s success in the foreign market is dependent on the action of the distributor or agent chosen.
Both distributors and agents assume much control over the marketing activities in the foreign market.
Poor performance by them can result in unsuccessful foreign market activities for the exporter.

Another reason for careful selection is that it may be difficult and/or very costly to drop an agent (and in
some cases distributors as well) in some countries. Many countries have laws regulating this, even when
there is ‘just cause’ for taking such action. Up to a year’s notice and additional compensation may be
mandated.
7.11 Is e-commerce (or Internet marketing) eventually going to replace traditional approaches to
export? If so, which approach(es) is/are to be replaced and why is this so? If not, why?
Discuss.

Internet marketing can be expected to provide additional competition to traditional approaches to export,
but will not completely replace them. Advantages to Internet marketing that will continue to drive its
expansion include reducing costs, expanding reach, and providing instant information and continued
information flows. Traditional approaches will continue to be used because of customers’ desires and
economic considerations regarding certain goods. Some/many customers will want to: actually see or
touch what they may be buying; try on clothes or test golf clubs; compare items side-by-side by tests,
prices, appearance, or other criteria; talk face to face with a knowledgeable person about the operation,
service, or other requirements for a piece of equipment; walk out of the store with the purchase etc.
Shipping costs for sending some types of goods to individuals may be more costly than using traditional
marketing channels with larger shipments via ocean containers; this would be the case, for example, with
many consumer durables such as refrigerators.

7.12 Why should an exporter worry about gray market distribution of its products in foreign
market? What can be done to protect against this practice?

The gray market or parallel distributors: (1) provide competition for the authorized distributor(s); (2) may
offer prices so low as to reduce the conspicuous consumption attraction of certain luxury goods; and (3)
may not provide the level of service desired by the exporter.

A key to protecting against gray market distribution is better management of global marketing policies. A
company that carefully controls differences in distribution margins between different market areas
reduces the opportunities for unauthorized distributors to make money from the gray market.

7.13 Trust has been described as a key element of any relationship between exporter and
importer. How does trust affect relationships, and how does an exporter adapt when cultures
differ in their views of trust?

The development of trust is even more important in international activities than in domestic activities
because: (1) misunderstandings/problems are more likely to arise when different business cultures are
involved; (2) it is more difficult to resolve differences/disputes when different viewpoints and laws are
involved; (3) while resorting to legal action might be acceptable in some societies, it may totally destroy
relationships in others; and (4) in any event, legal action across borders tends to be expensive and
difficult.
The first step in avoiding problems is for the exporter (and importer) to study the values and ways of doing
business in the other’s country. They should attempt to ensure that their own conduct will not turn a
difference/disagreement into a breakdown in trust.
CHAPTER 8

8.1 What are the major nonexport modes of entry into foreign markets? How does strategic focus
relate to such market entry modes?

The major nonexport modes of entry are (1) establishing a manufacturing plan, (2) setting up of assembly
operations, and (3) forming a strategic alliance with one or more other companies.

The strategic focus of the company, including its relative emphasis on profitability, productivity, volume,
risk, and control, will be factors in determining the appropriate entry mode.

8.2 What are the major considerations taken into account by the international marketer in a
decision to engage in some form of foreign area production?
The major considerations are the size of the market which can be served, and opportunities to expand
that market, costs of production, government barriers to continued imports, government incentives or
barriers to manufacturing there, and control.

8.3 If a company were contemplating establishing a manufacturing facility in a foreign market,

why might it decide to wholly own the facility rather than partially own it? Similarly, why
might it prefer partial ownership?

While establishing a wholly owned facility generally requires a greater commitment of capital, it provides
greater control. Partial ownership may result in better government and business relations in the foreign
market if the partner is well connected/has a good reputation.

8.4 When developing manufacturing operations in foreign markets is it better for the international
marketer to seek out merger/acquisition possibilities or start from scratch (a greenfield
investment)? Explain.

Which approach is better depends upon the situation. A greenfield investment usually is more time
consuming and involves problems in facility setup, recruiting and training labor, setting up the
management team, and usually large capital commitment. An acquisition usually allows a faster start-up,
and provides existing management, labor, facilities, and marketing organization with all their strengths
and weaknesses. Acquisitions often result in some problems in establishing or merging differing
managerial approaches. Local participation in ownership may be required by some governments.

8.5 Why might an international marketer who is involved in foreign production still have
problems concerning channel control and cooperation? Would such a marketer handle
channel conflict differently than the international marketer who exports?

The international marketer with foreign production may still have problems in gaining cooperation and
control. There may be problems in developing modified managerial approaches and operating methods
that work well in the foreign country. Securing cooperation from other companies in the distribution chain
may also be a problem. The producer will generally have both greater knowledge of local requirements
and a greater ability to rapidly respond to those requirements than will an exporter.
8.6 What is a strategic alliance? Why are these alliances so popular and who benefits?

Strategic alliances are cooperative ventures between two or more companies designed to exploit some
marketing, manufacturing, or R&D opportunity. They are increasingly popular because, if properly set up
and operated, they enable the participants to use the strengths of each to achieve more jointly than they
could individually. All participants must benefit or the alliance will not last.

8.7 What are the key essentials for a strategic alliance to be a success?

Goal compatibility among the participants, strategic advantage for each, interdependence, commitment,
communication and conflict resolution, and effective planning and coordination.

8.8 ‘Licensing seems to be a fairly safe way for a manufacturer to produce in a foreign market for
the first time.’ Comment.

Licensing is a relatively easy and low-cost method of entering a foreign market. It may not always be safe,
however. See the answer to Question 8.9.

8.9 Although licensing and contracting may appear to be desirable, they have drawbacks. What are
the drawbacks?

The licensor or contractor may gain enough knowledge to become a competitor, lack of control over
production that may lead to quality problems, lack of control over marketing that may lead to inadequate
market exploitation, and it may be difficult to coordinate the activities of a licensee with other entities in
the worldwide marketing plan.

8.10 Why might a company not choose outsourcing even when production costs are sufficiently
lower?

A company might be concerned with training a potential competitor, loss of intellectual property, problems
in finding a satisfactory manufacturer, loss of control in manufacturing, possibility that it will be accused of
‘exporting jobs,’ or exploiting or mistreating foreign workers.

8.11 Why might an international marketer prefer a joint venture to a licensing arrangement?

Joint ventures may be encouraged or required by certain host governments. They may be preferred
because joint ownership encourages each partner to contribute in areas where he/she is strong, provides
a feeling of cooperative effort, and when successful accomplishes more at lower risk and cost than could
be achieved by the partners working independently.

8.12 ‘In running a jointly owned facility in a foreign market (including a joint venture), it is not
necessary to own more than 50% to maintain operational and management control.’ Discuss.

The percentage of equity required for control depends upon the circumstances. Control with less than
50% equity may be possible if the remaining equity is divided among two or more other companies, or if
the outside investor controls essential resources required by the jointly owned facility. If the local
company controls essential resources, or has governmental support, the outside investor may not have
effective control even with more than 50% equity. Exactly 50% equity for each of two partners may just
lead to stalemate.

8.13 Why are management styles, and any cultural difference that exist in styles, important in all
types of market entry modes involving partners?

Management styles affect many aspects of operations and relationships. For example:

(t) differences in communications styles may lead to misunderstandings and conflict;

(u) the ways in which decisions are made may result in conflict if one partner prefers consultation with
the reaching of consensus desired/required, and the other prefers less input and top-down decisions;

(v) junior managers and other employees may respond in unexpected/undesired ways to directions and
orders that are given in a way (management style) to which they are not accustomed; and

(w) misunderstandings and conflicts may occur when partners have different modes of personal
interaction.

8.14 Select a company that has chosen direct investment in a foreign market and a company that
has established a strategic alliance abroad. Analyze why each company made the decision it
did. Explain why you would or would not agree with that decision.

Your answers will vary. Some you will note that many international marketers use more than one form of
envy mode for different products and/or countries.

(The instructor may wish to use an example like that of Nissan’s and Toyota’s approaches to beginning
manufacturing in the United States. Nissan entered with a wholly owned plant in Tennessee. Toyota,
which was concerned about how to deal with unionized American labor and with American suppliers,
entered a joint venture with General Motors in Fremont, California. Toyota followed up this successful
learning experience with the building of a wholly owned plant in Kentucky.)
8.15 Choose a company that has made both a direct investment in a foreign country and has
become part of a strategic alliance in that same or another country and analyze why the
company chose those particular forms of entry.

Your answers will vary, but should include consideration of some of the factors of risk, cost, control,
access to technology, or others discussed in the text. (See the Toyota example above.)

CHAPTER 12

12.1 What is your interpretation of the term ‘climate for advertising’? What factors cause the
climate for advertising to differ among countries? Select one foreign country and explain
how the climate for advertising in that country is important to an exporter.

‘Climate for advertising’ is the local value system that determines the potential viability and effectiveness
of export advertising. It is the result of the socioeconomic and cultural system and evaluates the message
as either desirable or undesirable. The reactions of the audience are usually in accordance with this
evaluation. In addition, the climate both affects and is affected by the legal/political situation.

The factors that cause the climate for advertising are:

 Economic system

 Social structure

 Cultural background

 Religious climate

 State monopoly

 Censorship

 Restrictions on advertising.

Answers to the last part of this question will vary depending on the country chosen, but should be based
on the chapter material.

12.2 From an exporter’s standpoint, what kinds of objectives should promotional ‘messages’ be
designed to accomplish?

The objectives that a promotional ‘message’ should be designed to accomplish are:

 Reaching the intended recipient

 Being understood in the way intended by the sender

 Inducing the recipient to take the action desired by the sender.

12.3 It can be argued that sometimes export marketing promotion activities appropriate for one
foreign market are also appropriate in other foreign markets. Do you agree or disagree?
Explain.
While it is possible that export marketing promotions which are appropriate for one foreign market may
also be appropriate for other foreign markets, it is highly unlikely that this will be so without some
modification. Even the two common forms of standardization, prototype and pattern, involve some
modification. In prototype standardization, there may be language translation or idiomatic changes. In
pattern standardization, the overall theme is the same, but the details can be changed.

12.4 Which type of media can be most effective: international or foreign? Explain.

Whether international or foreign media are most effective depends on who the target audience is and the
type of message to be communicated.

International media audiences are often relatively influential, either as members or the middle and upper
socioeconomic groups or as specialized professionals in a general industry. It is useful in communicating
corporate image, messages aimed at audiences not well served by local foreign media, or a uniform
message in a number of relevant foreign markets. Foreign media are better suited for more specific
messages aimed at more specific audiences.

12.5 Explain why individual sales promotion activities might be more effective in some markets
than in others.

The effectiveness of sales promotion, defined as all sales activities that supplement and strengthen
personal selling and advertising (subsection ‘Sales promotion’ of the text), differ from market to market.
Laws or customs may restrict the use of promotions such as cashbacks, free drawings, lotteries, and in-
pack premiums. The use of samples depends upon the law and the ease or difficulty of reaching potential
customers. Literacy rates and the availability, coverage, and cost of TV, radio, and newspapers, as well
as the percentage of the target customers on the Internet, affect their use. Trade fairs and exhibitions may
be more available and/or more useful in some markets than in others.

12.6 In what ways does culture affect export marketing promotion and communications?

Culture affects export marketing promotion and communication by influencing many of the factors that
must be considered when developing these programs. One of the biggest factors involved is the value
system of the society. This serves to help determine how a product, activity or message will be judged
and, therefore, if it will be purchased or not. Culture also affects what media will be effective in reaching a
particular audience.

12.7 As an export marketer becomes more or less ‘permanent’ in doing business in multiforeign
markets, it almost inevitably faces the issue of standardization versus adaptation of its
advertising program. Discuss what you consider to be the best approach for an exporter to
use.

The best approach for an exporter to follow, when deciding whether to standardize or adapt its advertising
program, must be viewed as a cost/benefit evaluation. Standardization results in lower costs in creating
the advertising program and consistency in the messages delivered. However, not all markets will
respond in the same way to the same message. Adaptation allows for different messages to be delivered
to different markets in an attempt to elicit the desired response in each. Therefore, an evaluation must be
performed to weigh the benefits and costs of each in an attempt to find the program which will produce
the best results. That program will often be a mix of the two approaches and may be different for different
markets.

Given these factors, your answers can be expected to vary.

12.8 Discuss the main issues involved in deciding whether to centralize or decentralize the
planning, developing, implementing, and controlling of export promotion strategy and
tactics.
The main issues involved are the following.
Objectives of the promotional activity: if the objectives are company-based in nature, rather than local, the
control is likely to be centralized.

The availability of information on the relevant possible promotion form: if such information is available only
at the local level, decisions are likely to be made there.

The knowledge and experience of company personnel: control should be located where these factors
exist in greater supply.

The degree to which promotion, particularly advertising, must be supervised locally to ensure proper
performance: the greater this degree, the more decentralized the control should be.

12.10 What do you see as the ‘future’ for the Internet as a basic advertising medium and/or as a
means for implementing sales promotion in foreign markets?

The Internet can be expected to continue to grow in importance as an advertising medium and as a
means of implementing sales promotion in foreign markets. Use of the Internet is increasing rapidly,
though at widely differing rates, in various countries. The technological capabilities for sending information
and pictures are being improved. The extent of use for particular products in particular markets will
depend upon the extent of use of Internet services in the particular market and the type of product.
CHAPTER 13

13.1 What are the main issues that are of concern to the exporter regarding inquiries and
orders?

The main issue involved with an inquiry is that every one ‘should be handled seriously with the
expectation that it may lead to a profitable sale.’ It ‘should be in polite, business-like letter format’ and
include any information necessary to open negotiations.

Orders may come directly from the prospective importer or from a branch or representative overseas.
There is no standard order form, but all should ‘contain the essential facts concerning the desired
merchandise and how it is to be shipped.’ A confirmation of receipt is then sent by the exporter to the
importer. Once both parties agree to all the details, a contract is created. A pro forma invoice showing the
terms of the sale may also be used by the exporter to create a contract.

Performance of an export contract is often hard to enforce. Litigation is very expensive. Therefore, if no
monetary obligations or damages have been created, both parties are likely to disregard a contract if
disputes arise. Honor is relied upon to enforce performance. Arbitration is the usual method of settling
disputes which must be addressed.

13.2 Why might the cheapest form of transportation not be the most economical?

There are many opportunities during the exporting process for things to go wrong, which may jeopardize
safe and timely arrival of the goods. Some of these, such as damage to the goods or late arrival, involve
the transportation of the goods. The cheapest form of transportation may increase the risk of such
problems and therefore be less economical in the long run. Higher costs of insurance and money tied up
in goods being transported are also factors.

13.3 Discuss the various ways in which a company might minimize its export marketing costs by
paying proper attention to physical distribution matters.

There are two types of physical distribution costs. The first are direct costs. These include transportation,
warehousing, carrying inventory, packing, packaging, insurance, and so on. Export marketing costs may
be minimized by seeking the most economical sources for each of these.
The second type of physical distribution cost is hidden or distribution-related costs. These include lost
sales, distributor/customer dissatisfactions, cost of time in transit, inventory loses, foreign warehousing,
and losses from not being fully insured.

By using as criteria the total of indirect and direct costs, the total physical distribution costs may be
minimized.

13.4 Explain the meaning of the ‘total-cost concept,’ and illustrate how break-even analysis
might be used to solve an export physical distribution analysis problem.

The ‘the total-cost concept’ is based on the fact that the various aspects of physical distribution are inter-
related. In order to optimize the '‘cost–profit relationship of the various alternatives’ the total cost of all
distribution activities must be considered, not the costs of the individual activities.

Break-even analysis is designed to show which of any of two or more alternative systems gives the lowest
total cost for any given or expected volume of service (or production). It involves calculating the sum of
fixed costs plus variable costs for each of the alternative systems. The fixed cost of any alternative is
shown where the total cost line intersects the Y axis, and the variable costs are shown by the slope of the
total cost line. As an example, Figure 13.4 on page 617 of the text shows four different distribution
systems that could be used in a particular (hypothetical) case. Alternative I has the lowest fixed costs
while Alternative IV has the highest fixed costs. But Alternative I has higher variable costs than
Alternative IV. Thus the total cost lines for the two alternatives have different beginning points on the Y
axis of the graph, and different slopes. The breakeven point for any pair of alternatives is where their
respective total cost lines cross (about 4000 units in this case). Below that point, Alternative I has lower
total costs and above that point, Alternative IV has lower total costs. Thus, with this data, a company can
determine which system is preferable (if the total cost lines are correct and the expected volume can be
forecast with adequate accuracy). For any given company, the costs may be hard to determine with
accuracy, and volume may be hard to predict and to change over time. But this type of analysis often
gives a useful model for determining what alternative may be most cost-effective.

13.5 Why does an exporter often need the services of a foreign freight forwarder?

The foreign freight forwarder is often needed because of the difficulty of arranging and documenting
export shipment. The foreign freight forwarder has a detailed knowledge of the required procedures, and
contacts with the organizations involved, and can therefore assist the exporter in effectively and efficiently
completing documentation and transportation arrangements. A wide variety of other services also may be
provided, from arranging information to providing useful business contacts at home and abroad. The
complexity of the exporting requirements makes it uneconomical for most exporters to develop the
required expertise themselves. The foreign freight forwarder handles so many transactions for so many
exporters that she/he can do so more accurately and at lower cost per shipment than the individual
exporter.

13.6 A typical export shipment requires many documents. Identify those that are generally
required for all shipments and those that may be required only for specific shipments.

Documents generally required for all shipments include:

 Bill of lading: carries title to the shipment and authorizes acceptance of delivery.

 Commercial invoice: describes the merchandise, particulars of the shipment, and terms of the
agreement.

 Packing list: lists the contents of the cases or containers.

Documents required for some shipments include:

  Export license: used by some countries to regulate their trading relationships.

 Export declaration: used by most countries to collect statistical data on exports.

 Consular invoice/special Customs invoice/factura: ensures that fair market value is listed on the
invoice.

 Certificate of origin: certifies the place of origin of the merchandise.

 Special certificates: certify purity and absence of disease, and are issued to cover food products,
plants, seeds, and live animals.

13.7 Why is the bill of lading an important document in an export transaction?

The ocean bill of lading is an important document because: (1) it is the contract of carriage between the
shipper and the transportation company; (2) it is a receipt for the goods issued by the steamship
company; and (3) it is evidence of title to the merchandise.

13.8 Distinguish between the alternative types of free areas that are potentially available for use
by an exporter and/or importer. Is any one type better than the others? Explain.

The alternative types of free areas that are potentially available for use by an importer and/or exporter
are:

(1) The free trade zone, an enclosed area without resident population into which foreign goods can be
brought without formal customs entry. Duty is deferred on the goods until they are brought into the
host country, and then charged only on the amount and under the classification they have at the time
of entry. If the goods are sent to another country without entering the host country, duty is not
charged on the goods by the host country.

(2) The free port (or free perimeter) encompasses a port, an entire city, or some other specific area
isolated from the rest of the country for customs purposes. Duty is treated in the same manner as in
a free trade zone.

(3) An export processing zone is an area in which foreign manufacturers receive favored treatment on
imports, in industrial regulations applied, etc., when the final products are to be exported.

In the typical free zone, goods can be stored, repacked, transformed/manufactured into final products,
and in some cases displayed before being reexported or sold into the host economy.

Which type is better depends upon the company’s purpose (reexport or eventual sale in some form in the
host country), the nationality of the company (domestic or foreign to the host country), and the location of
the zone relative to where the company wants to carry out the particular functions.

13.9 How has the rapidly changing technology of the late 1990s and the early 2000s affected the
physical distribution of products from one country to another?

Improved communications, particularly through the Internet and World Wide Web, has enabled greater
interaction and real-time information exchanges between suppliers, shipping companies, and users of
products. Tracking of shipments has become much easier. Overall supply chain management has been
facilitated by both software and hardware. Advances have been made in the physical handling of air,
ocean, and surface shipments. Together, these factors have enabled suppliers to provide more rapid
response to user needs, and made it feasible to carry smaller inventories.

Internet technology has made it easier for smaller exporters and potential exporters to find potential
importers, and to determine the most cost-effective means of transportation.
13.10 How have security concerns affected physical distribution?

Security concerns have both raised costs and caused delays in moving goods. Additional inspections in
the countries of export and additional inspections in countries of import have required the hiring of
additional personnel and the development and purchase of additional detection and tracking equipment,
thereby raising costs. The more thorough inspections required, and the lack of adequate personnel and
equipment capacity has resulted in delays at some ports.

In the long run, the accelerated development of more advanced tracking and monitoring systems and
equipment can be expected to result in improvements in distribution management. This should provide
some savings to at least partially offset the additional costs of inspections and delays.
CHAPTER 14

14.1 What kinds of variables influence how line operations should be subdivided into
organizational units?

Organization is influenced by: (1) Internal variables such as strategy, goals, key functions, diversity, and
size and (2) external variables such as environment and the industry, including rate of technological
change, competition, customs, etc.

Issues include: definition of organizational units; centralization versus decentralization; and assignment of
reporting and control system.

14.2 Define the concept of centralization and discuss the conditions favoring the centralization
of a company’s international operations.

The concept of centralization–decentralization applies to the amount of decision making delegated to

local management. Centralized organizations reserve greater amounts of decision making for the
central/home office while decentralized organizations delegate more.

Centralization with attendant concentration of R&D and standardization tends to support more rapid major
technological change and more efficient production. It is beneficial when products are highly standardized
in design, usage, buying behavior, and distribution outlets.

Decentralization provides the potential for greater responsiveness to local needs.

14.3 Discuss the advantages and disadvantages of a centralized organizational structure.

Advantages: uniformity in policies; efficiency in R&D; and efficiency in production through economies of
scale.

Disadvantages: lack of flexibility and responsiveness to local requirements.

14.4 Explain why a company in the early stage of internationalization often uses a functional
export department.

The functional export market department allows the company to build up an in-house expertise in export
selling and marketing with a relatively small investment. It provides a focus and center of interest for
export marketing while being easy to manage.

14.5 Why do companies choose an international organization structure based on product lines?
Explain.
An international organization structure based on product lines is used where there are dissimilar product
lines or business areas which require different production and marketing approaches. Such a structure
allows each division to concentrate on one product line and realize economies of scale in production and
distribution of that product line.

14.6 Give examples of product types or lines where a company must expect to choose a
geographic area division of international structure.

The geographic area structure might be used for automobiles (Many of you will have various product
types or lines). Such a structure is useful where regions are fairly self-contained and possess their own
functional infrastructure in marketing planning and research. It enables each subunit to respond easily to
regional environmental and market demands.

14.7 ‘The matrix structure is the best way to organize an international company operating in
turbulent and diverse environments.’ Discuss.

The matrix structure may be appropriate where there at least two different dimensions of organizational
needs that must be met (for example, two or more major product lines and two or more major markets,
with some product lines sold in two or more markets and some markets handling more than one product
line; see Figure 14.4). The advantage of the matrix organization is that more than one of the major
dimensions (geographical knowledge, product knowledge, functional competence, and/or customers) can
be emphasized. This advantage must be balanced against the problems of the unclear decision-marking
structure, possible slowness of decision making, and potential for conflict. No one structure is best for all
organizations, even in a turbulent and diverse environment.

14.8 Is there a ‘best way’ for a company to bring together its international operations to structure
an integrated global enterprise? Explain.

There is no single ‘best way’ for a company to bring together its international operations to structure an
integrated global enterprise. The type(s) of products, the breadth of the product line, the variations in
products and marketing required by different geographical areas, and the number of internal and external
needs that must be met by the organizational structure interact to determine which structure appears to
be the most appropriate for a particular organization at a given time. A heterarchichal structure, with
headquarters for various functions located in different countries, may be more appropriate than the
traditional hierarchical approach for some large global enterprises.

14.9 Is it wise for a company to drastically change its international organization at a time when
the world economy is in a downturn? Explain.

Arguments can be made both for and against such an action. Factors indicating that it may not be a good
idea to do so include the following: (1) it may confuse customers used to their former contacts and ways
of doing things; (2) it may create additional concern and discouragement among employees already
worried about the downturn; and (3) the problems in lowered earnings and possible loss of jobs caused
by the downturn may be attributed in part (or whole) to the organizational changes.

On the other hand, organizational changes may be necessary in the event of sharp downturns – rapid growth,
marketplace changes, or changes in communications technology (which permit new approaches and/or
shift the locus of information availability).