IMANET IMANET Certifications IMANET-CMA Questions & Answers

• Question 1091:

  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 its 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, 1cultural differences may require extensive customization to appeal to markets in different countries

• Question 1092:

  A firm sold the same product in many foreign countries but changed the ad copy to allow for language and cultural differences. According to Keegan'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 1another option is to develop promotion campaigns locally,

• Question 1093:

  A firm sells its product in a foreign market for a much higher price than in its 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 1094:

  A firm ships its product to a foreign subsidiary and charges a price that may increase import duties but lower the income taxes paid by the subsidiary. The most like' reason for these effects is that the

  A. Price is an arm's-length price.

  B. Price is a cost-plus price.

  C. Transfer price is too low.

  D. Transfer price is too high.

  Correct Answer: D

  A transfer price is the price charged by one subunit of a firm to another, When the subsidiary buyer is in a foreign country, the higher the transfer, the higher the potential tariffs. However, the tax levied on a subsequent sale by the subsidiary will be lower because of its higher acquisition cost.

• Question 1095:

  A firm buys like-new computer equipment from bankrupt companies and resells it in foreign markets at prices significantly below those charged by competitors. The firm is

  A. Engaged in dumping.

  B. Engaged in price discrimination.

  C. Operating in a gray market.

  D. Operating in a black market.

  Correct Answer: C

  In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries, In essence, the seller firm in this case was exploiting a price difference between markets.

• Question 1096:

  Gray market activity is in essence a form of arbitrage. To prevent this activity by their distributors, multinational firms

  I. Raise prices charged to lower-cost distributors.

  II.

  Police their distributors Ill. Change the product.

  A.

  I only

  B.

  I and II only

  C.

  II and Ill only

  D.

  I, II and Ill

  Correct Answer: D

  In a gray market, products imported from one country to another are sold by persons trying to make a profit from the difference in retail prices between the two countries. These activities clearly lower the profits in some markets of the multinational firm that was the initial seller. One response is to monitor the practices of distributors and retaliate if necessary. A second response is to charge higher prices to the low-cost distributors to reduce their incentives to participate in a gray market. A third response is to differentiate products sold in different countries, e.g., by adapting the product or offering distinct service features.

• Question 1097:

  A firm that manufactures refrigerators sold ice boxes in urban areas of less developed countries. Many residents lacked electricity to power refrigerators but could purchase blocks of ice from local vendors for use in ice boxes. According to Keegan's model of adaptation strategies, this firm adopted a strategy of

  A. Product adaptation.

  B. Dual adaptation.

  C. Backward invention.

  D. Forward invention.

  Correct Answer: C

  Using a product invention strategy, a new product is created specifically for a certain country or regional market. A product may either include advancements for developed countries or have certain elements removed in places where a lower cost is a key selling point. Thus, an ice box, a precursor of the modern refrigerator, is a backward invention.

• Question 1098:

  A firm wishing to sell its well-known brand of men's clothing in a certain foreign country redesigned the products because of the greater average size of consumers in that country. However, the firm retained the same basic advertising campaign. According to Keegan's model of adaptation strategies, this firm has adopted a strategy of

  A. Straight extension.

  B. Product adaptation.

  C. Forward invention.

  D. Backward invention.

  Correct Answer: B

  Using a product adaptation strategy, a firm makes changes to the product for each market but not its promotion. This can reduce profit potential but may also provide a marketing advantage by taking into account local wants and needs.

• Question 1099:

  A firm sells the same product in different countries and uses the same promotion methods. According to Keegan's model of adaptation strategies, this firm has adopted a strategy of

  A. Straight extension.

  B. Product adaptation

  C. Product invention.

  D. Dual adaptation

  Correct Answer: A

  Using a straight extension strategy, a higher profit potential exists because virtually no changes are made in the products or its promotion. There is a downside potential if foreign consumers are not familiar with this type of product or do not readily accept it.

• Question 1100:

  Firms that sell products worldwide are most likely to have the lowest costs with a marketing mix that is

  A. Adapted to each market.

  B. Standardized for all markets.

  C. A combination of new and adapted products in each market

  D. A combination of standardized products and adapted promotions.

  Correct Answer: B

  Firms that operate globally must choose a marketing program after considering the need for adaptation to local circumstances. The possibilities lie on a continuum from a purely standardized marketing mix to a purely adapted marketing mix. The former chooses to standardize products, promotion, and distribution. The latter adapts the elements of the mix to each local market. Worldwide standardization of all elements should be the lowest cost marketing strategy. However, even well-established global brands ordinarily undergo some adaptation to local markets.