IIA Certified Internal IIA-CIA-PART4 Questions & Answers

• Question 501:

  Managerial attitudes toward global operations are viewed by researcher HowardPerl mutteras a key to understanding multinational firms. An ethnocentric attitude is indicated by:

  A. An identification with the nationality of the host country.

  B. Collaboration between the firm's subsidiaries and the firm's central administration.

  C. A high volume of information flow in the form of orders and advice to subsidiaries.

  D. A staffing emphasis on finding and developing the best people in the world for key positions anywhere in the firm.

  Correct Answer: C

  An ethnocentric attitude assumes that the home country's people, practices, and ideas are superior to all others. Thus, the firm's identification is with the owner's nationality. Authority and decision making are centralized, so communication is likely to involve a high volume of information flow in the form of orders and advice to subsidiaries. Moreover, home-country standards are apt to be used for performance evaluation of entities and individuals. Also, this ethnocentric attitude is perpetuated by recruiting and developing home-country individuals for key posts throughout the firm. The advantages of an ethnocentric attitude are simplicity and close control. The disadvantages are social and political problems in foreign countries, poor feedback, ineffective planning, lack of flexibility and innovative thinking, and higher turnover of managers in foreign subsidiaries.

• Question 502:

  Distribution channels ensure that goods in international trade are transferred successfully to end users. Where are intermediaries, such as trading companies, most likely selected?

  A. Channels within nations.

  B. Export department of the seller.

  C. International division of the seller.

  D. Channels between nations.

  Correct Answer: D

  Channels between nations carry goods to foreign borders. They include air, land, sea, or rail transportation channels. At this stage, in addition to transportation methods, intermediaries are selected (e.g., agents or trading companies), and financing and risk management decisions are reached.

• Question 503:

  According to keegan's model of adaptation strategies, a firm that decides to operate globally by changing its product and its promotion methods has chosen

  A. A dual adaptation strategy.

  B. The backward variant of a product invention strategy.

  C. The forward variant of a product invention strategy.

  D. A straight extension strategy.

  Correct Answer: A

  Communication adaptation is a strategy that does not change the products, but advertising and marketing campaigns are changed to reflect the local culture and beliefs. In contrast, a dual adaptation strategy changes both the product and the promotion to provide the best chance of acceptance in a foreign market.

• Question 504:

  Developing brand equity in a foreign market may be desirable but is subject to considerable risk. A global firm launching a new product in a new market most likely should

  A. Initially place most of the firm's emphasis on advertising geared to the local culture.

  B. Fully decentralize control of the marketing process.

  C. Avoid creating partnerships with local distribution channels to avoid dilution of the brand.

  D. Balance standardization and customization of the product.

  Correct Answer: D

  The firm should determine the ratio of standardization and customization. Products that can be sold virtually unchanged throughout several markets provide a greater profit opportunity for a global firm. However, cultural differences may require extensive customization to appeal to markets in different countries.

• Question 505:

  A firm considering entry into a market abroad may make the selection based on many criteria.

  For example, a Portuguese firm applying a psychic proximity criterion will most likely choose to enter which market?

  A. Afghanistan.

  B. China.

  C. India.

  D. Brazil.

  Correct Answer: D

  Psychic proximity means the nearness of the market's culture, language, and laws to those of the firm's home country. For example, Portuguese is spoken in Brazil.

• Question 506:

  The inherent attractiveness of a national market is most likely increased by which factor?

  A. The firm's strategic position.

  B. The market's exclusion from a regional free trade zone.

  C. Unmet needs of a developing nation.

  D. Product adaptation is costly.

  Correct Answer: C

  Attractiveness is a function of such factors as geography, income, climate, population, and the product. Another major factor is the unmet needs of a developing nation, for example, China or India.

• Question 507:

  A firm that sells in foreign markets should consider all aspects of how products move from the firm to ultimate users. Where in the whole channel are marketing mix decisions most likely made?

  A. Export department of the seller firm.

  B. Import department of the buyer firm.

  C. Channels within nations.

  D. Channels between nations.

  Correct Answer: A

  Distribution channels are a necessity to ensure that goods are successfully transferred from the production facility to end users. These channels include three distinct links that must work smoothly together.

  1.

  The international marketing headquarters (export department of international division) is where decisions are made with regard to the subsequent channels and other aspects of the marketing mix.

  2.

  Channels between nations carry goods to foreign borders. They include air, land, sea, or rail transportation channels. At this stage, in addition to transportation methods, intermediaries are selected (e.g., agents or trading companies) and financing and risk management decisions are reached.

  3.

  Channels within nations take the goods from the border or entry point to the ultimate users of the products. Among nations, the number of levels of distribution, the types of channels, and the size of retailers vary substantially.

• Question 508:

  A firm sold the same product in many foreign countries but changed the ad copy to allow for language and cultural differences. According to teegan's model of adaptation strategies, the firm adopted a strategy of:

  A. Product adaptation.

  B. Communication adaptation.

  C. Dual adaptation.

  D. Straight extension.

  Correct Answer: B

  Communication adaptation is a strategy that does not change the products, but advertising and marketing campaigns are changed to reflect the local culture and beliefs. For example, a firm may use one message but with changes in language, name, and colors. It may use a consistent theme but change the ad copy in each market. Another option is for a firm to devise a group of ads from which each market may choose the most effective. Still another option is to develop promotion campaigns locally.

• Question 509:

  A firm sells its product in a foreign market for a much higher price than in the firm's home market. The reason is most likely:

  A. Price elasticity of demand.

  B. Dumping.

  C. Gray market activity.

  D. Price escalation.

  Correct Answer: D

  Price escalation is caused by an accumulation of additional costs, e.g., currency fluctuations; transportation expenses; profits earned by importers, wholesalers, and retailers; and import duties.

• Question 510:

  A global firm establishes a cost-based price for the firm's product in each country. The most likely negative outcome is that this pricing strategy will

  A. Set too high a price in countries where the firm's costs are high.

  B. Overprice the product in some markets and underprice the product in others.

  C. Create a gray market.

  D. Result in dumping.

  Correct Answer: A

  A firm may set a cost-based price in each market with a standard markup. In a region or country where costs are high, this strategy may result in prices that are too high to be competitive within the local market.