Question 1

When Renault Motor Co. builds a new production facility in Venezuela and it is the sole owner of the facility, this is an example of a(n) _________ investment approach.
A) indirect
B) management contracting
C) joint venture
D) licensing
E) direct

Accepted Answer

Direct investment means that a parent firm has a division (or owns a separate subsidiary firm) in a foreign market.

Question 2

Oceanside Tools, Inc. of Newport, Rhode Island has agreed to work with a Thai company to produce and sell chemicals in Thailand. The U.S. firm will provide technical and marketing know-how, while its Thai partner will provide knowledge of Thai markets and political connections. The partners will share the costs and profits 50/50. This type of international involvement is called:
A) direct investment.
B) management contracting.
C) licensing.
D) multinational marketing.
E) joint venturing.

Accepted Answer

In a joint venture a domestic firm enters into a partnership with a foreign firm.

Question 3

If a firm's involvement in international marketing is limited to managing others' production facilities, it is using:
A) exporting.
B) licensing.
C) direct investment.
D) joint venturing.
E) management contracting.

Accepted Answer

Management contracting means that the seller provides only management and marketing skills.

Question 4

If a producer agrees to enter into a management contracting arrangement with a zinc mining operation in Chile,
A) the company should be prepared to invest large amounts in mining facilities.
B) the company should be prepared to send people to Chile.
C) success will depend on how well the Chilean managers know what needs to be done.
D) the company must assume no political problems will arise, otherwise the risk is very high.
E) None of these alternatives is true.

Accepted Answer

In a management contracting arrangement the seller provides management and marketing skills which would require it to send people to foreign countries.

Question 5

Using the ______ approach to entering international markets gives a firm complete control of marketing strategy planning in the foreign market.
A) joint venture
B) management contracting
C) direct investment
D) licensing
E) exporting

Accepted Answer

Direct investment gives the parent firm complete control of marketing strategy planning.

Question 6

Midwest Tools, Inc. of Indianapolis, Indiana owns a plant in Poland for manufacturing and selling machine tools in Europe. This type of international involvement is called:
A) management contracting.
B) licensing.
C) a joint venture.
D) a direct investment.
E) multichanneling.

Accepted Answer

Direct investment means that a parent firm has a division (or owns a separate subsidiary firm) in a foreign market.

Question 7

Use this information for question that refer to the World Tennis Ball (WTB) Company case. World Tennis Ball Co. (WTB) makes tennis balls and sells them only in the U.S. Raul Fernandez, the firm's marketing manager, is comparing his firm's distribution with two major competitors.
1) WTB sells its products through four regional distributors who then sell to 22 sporting goods wholesalers. The wholesalers sell to a total of 7,000 retail outlets. From its website, WTB also sells directly to any customer who will purchase a minimum quantity of 24 tennis balls. WTB cooperates with members of its channel, but maintains some control through its economic power and leadership. It helps to direct the activities of the whole channel and tries to avoid or resolve channel conflicts.
2) American Tennis Ball (ATB) is a competitor that sells through two distributors--each with half the country. The distributors then sell through 6 sporting goods wholesalers, and they, in turn, sell to 1,000 retail outlets (split between two national sporting goods chains and two general merchandise stores). ATB and its channel make little effort to work together. However, because of a relatively low level of competition between the distributors, the wholesalers, or the retail stores, each member of the channel gives the product special attention.
3) National Tennis Ball (NTB) sells its products through only three tennis specialty wholesalers that sell only to tennis clubs. NTB actually owns the wholesale firms that handle its products. NTB's balls are only available at certain tennis clubs and NTB limits coverage to only one club in a particular geographic area.
Which of the following appears to best describe ATB's channel arrangements?
A) Intensive distribution
B) Exclusive distribution
C) Selective distribution
D) Global distribution
E) Direct distribution

Accepted Answer

Selective distribution is selling through only those intermediaries who will give the product special attention.

Question 8

Sunkist sells foreign companies the right to use the Sunkist brand on soft drinks and citrus juices sold outside the United States. Sunkist gets both an initial fee and a royalty on the sale of goods bearing its brand name. Sunkist is engaged in:
A) Exporting.
B) Management contracting.
C) Licensing.
D) Joint venturing.
E) None of these is a good answer.

Accepted Answer

Licensing means selling the right to use some process, trademark, patent, or other right for a fee or royalty.

Question 9

Licensing, in international marketing,
A) refers to foreign intermediaries agreeing to sell products produced in this country.
B) requires a producer to pay a licensing fee to the country where it wants to sell its products.
C) increases the risk that a company's production facilities will be taken over by the foreign country.
D) means a company selling the right to use a process, trademark, patent, or other right for a fee or royalty.
E) None of these alternatives is correct.

Accepted Answer

Licensing means selling the right to use some process, trademark, patent, or other right for a fee or royalty.

Question 10

______________ (as a way to enter foreign markets) means selling the right to use some process, trademark, patent, or other right for a fee.
A) Licensing
B) Management contracting
C) Direct investment
D) Joint venturing
E) Exporting

Accepted Answer

Licensing means selling the right to use some process, trademark, patent, or other right for a fee or royalty.

Question 11

In international markets, a firm can sell its management and marketing know-how while letting locals own the production and distribution facilities by using
A) licensing.
B) exporting.
C) joint venturing.
D) management contracting.
E) direct investment.

Accepted Answer

Management contracting means that the seller provides only management and marketing skills, while others own the production and distribution facilities.

Question 12

A producer that enters into a licensing agreement with a foreign company to better reach foreign customers is MOST likely selling the rights to use its:
A) production facilities.
B) brand name.
C) channels of distribution.
D) sales force.
E) Any of these are equally likely.

Accepted Answer

Licensing means selling the right to use some process, trademark, patent, or other right for a fee or royalty.

Question 13

Worldwide Drilling, Inc. of Fort Worth, Texas, operates an oil well in Russia for its owners. Worldwide is involved in:
A) management contracting.
B) exporting.
C) a direct investment.
D) a joint venture.
E) licensing.

Accepted Answer

Management contracting means that the seller provides only management and marketing skills, while others own the production and distribution facilities.

Question 14

A joint venture is:
A) a firm that provides only management skills, while others own the production and distribution facilities.
B) a firm selling the right to use some process, trademark, or other right for a fee.
C) a separate firm owned by a parent company.
D) a domestic firm entering into a partnership with a foreign firm.
E) a firm getting rid of surplus inventory.

Accepted Answer

In a joint venture a domestic firm enters into a partnership with a foreign firm.

Question 15

In a licensing agreement, the licensee
A) makes no initial investment to get started.
B) does most of the marketing strategy planning for the markets it is licensed to serve.
C) has more control over marketing than other approaches for entering international markets.
D) assumes almost no risk in a foreign market.
E) does not pay any fee or royalties to the licensor.

Accepted Answer

The licensee does most of the marketing strategy planning for the markets it is licensed to serve.

Question 16

Use this information for question that refer to the World Tennis Ball (WTB) Company case. World Tennis Ball Co. (WTB) makes tennis balls and sells them only in the U.S. Raul Fernandez, the firm's marketing manager, is comparing his firm's distribution with two major competitors.
1) WTB sells its products through four regional distributors who then sell to 22 sporting goods wholesalers. The wholesalers sell to a total of 7,000 retail outlets. From its website, WTB also sells directly to any customer who will purchase a minimum quantity of 24 tennis balls. WTB cooperates with members of its channel, but maintains some control through its economic power and leadership. It helps to direct the activities of the whole channel and tries to avoid or resolve channel conflicts.
2) American Tennis Ball (ATB) is a competitor that sells through two distributors--each with half the country. The distributors then sell through 6 sporting goods wholesalers, and they, in turn, sell to 1,000 retail outlets (split between two national sporting goods chains and two general merchandise stores). ATB and its channel make little effort to work together. However, because of a relatively low level of competition between the distributors, the wholesalers, or the retail stores, each member of the channel gives the product special attention.
3) National Tennis Ball (NTB) sells its products through only three tennis specialty wholesalers that sell only to tennis clubs. NTB actually owns the wholesale firms that handle its products. NTB's balls are only available at certain tennis clubs and NTB limits coverage to only one club in a particular geographic area.
Which of the following describes WTB's channel arrangements?
A) Intensive distribution
B) Corporate channel system
C) Exclusive distribution
D) Traditional channel system
E) Reverse channels

Accepted Answer

Intensive distribution is selling a product through all responsible and suitable wholesalers or retailers who will stock or sell the product.

Question 17

To minimize its own risks, the Boomtown Petroleum Corp. of Houston, Texas, operates a South American oil refinery that is owned by residents of that country. Boomtown is engaged in an activity known as:
A) management contracting.
B) a joint venture.
C) exporting.
D) licensing.
E) direct investment.

Accepted Answer

Management contracting means that the seller provides only management and marketing skills, while others own the production and distribution facilities.

Question 18

If Wilkinson were to sell Norelco the exclusive rights to produce and sell its brand of shavers in Japan for a 5 percent royalty on all sales, it would be using:
A) licensing.
B) joint venturing.
C) management contracting.
D) exporting.
E) direct investment.

Accepted Answer

Licensing means selling the right to use some process, trademark, patent, or other right for a fee or royalty.

Question 19

Which of the following is the easiest way for a firm to enter foreign markets?
A) joint ventures
B) licensing
C) multinational bargaining
D) direct investment
E) management contracting

Accepted Answer

Since the licensee in the foreign market takes most of the risk, licensing is often an easy way to enter international markets.

Question 20

When the Rosco International chain of restaurants enters foreign markets, locals own the restaurant facilities, but look to Rosco to provide expertise in management and marketing. Rosco uses the _______ approach to enter international markets.
A) management contracting
B) direct investment
C) exporting
D) joint venture
E) licensing

Accepted Answer

Management contracting means that the seller provides only management and marketing skills, while others own the production and distribution facilities.

Quiz 10: Place and Development of Channel Systems

When Renault Motor Co. builds a new production facility in Venezuela and it is the sole owner of the facility, this is an example of a(n) _________ investment approach.

If a firm's involvement in international marketing is limited to managing others' production facilities, it is using:

If a producer agrees to enter into a management contracting arrangement with a zinc mining operation in Chile,

Using the ______ approach to entering international markets gives a firm complete control of marketing strategy planning in the foreign market.

Midwest Tools, Inc. of Indianapolis, Indiana owns a plant in Poland for manufacturing and selling machine tools in Europe. This type of international involvement is called:

Sunkist sells foreign companies the right to use the Sunkist brand on soft drinks and citrus juices sold outside the United States. Sunkist gets both an initial fee and a royalty on the sale of goods bearing its brand name. Sunkist is engaged in:

Licensing, in international marketing,

______________ (as a way to enter foreign markets) means selling the right to use some process, trademark, patent, or other right for a fee.

In international markets, a firm can sell its management and marketing know-how while letting locals own the production and distribution facilities by using

A producer that enters into a licensing agreement with a foreign company to better reach foreign customers is MOST likely selling the rights to use its:

Worldwide Drilling, Inc. of Fort Worth, Texas, operates an oil well in Russia for its owners. Worldwide is involved in:

A joint venture is:

In a licensing agreement, the licensee

To minimize its own risks, the Boomtown Petroleum Corp. of Houston, Texas, operates a South American oil refinery that is owned by residents of that country. Boomtown is engaged in an activity known as:

If Wilkinson were to sell Norelco the exclusive rights to produce and sell its brand of shavers in Japan for a 5 percent royalty on all sales, it would be using:

Which of the following is the easiest way for a firm to enter foreign markets?

When the Rosco International chain of restaurants enters foreign markets, locals own the restaurant facilities, but look to Rosco to provide expertise in management and marketing. Rosco uses the _______ approach to enter international markets.