CREDIT BUSINESS ASSOCIATE CBA EXAM NEWEST UPLOAD UPDATED QUESTIONS AND 100% CORRECT ANSWERS GRADED A+ 2026

CREDIT BUSINESS ASSOCIATE CBA EXAM NEWEST UPLOAD UPDATED QUESTIONS AND 100% CORRECT ANSWERS GRADED A+ 2026 Identify the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements. Free trade areas Customs unions Common markets Economic unions - ANSWER-Free trade areas A(n) _____ has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members. economic union common market customs union full political union - ANSWER-common market Which feature of a customs union differentiates it from a free trade area? Harmonization of members' tax rates A common currency A common external trade policy toward nonmembers Ability of factors of production to move freely between members - ANSWER-A common external trade policy toward nonmembers CBA CBA A _____ eliminates trade barriers between member countries and adopts a common external trade policy, but does not allow free movement of factors of production between member nations. common market customs union free trade area political union - ANSWER-customs union A(n) _____ involves the free flow of products and factors of production between member countries, the adoption of a common external trade policy, a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. common market customs union free trade area economic union - ANSWER-economic union _____ is an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements. Foreign direct investment Government intervention Regional economic integration Unrestricted trade - ANSWER-Regional economic integration Which of the following is a reason why Turkey is not yet a member of the EU? There are concerns over human rights issues in the country. Only about 10 percent of Turkey's international trade is with the EU. The country has yet to form a customs union with the EU. Turkey has a weak economy. - ANSWER-There are concerns over human rights issues in the country. CBA CBA CBA ________ is similar to the Federal Trade Commission and the Department of Justice, antitrust authorities in the US Council of the European Union Court of Justice European Parliament European Commission - ANSWER-European Commission In a free trade area, countries are not allowed to determine their own trade policies with nonmembers. True False - ANSWER-False The emergence of single markets will make the business environment within each grouping less competitive. True False - ANSWER-False A jacket costs £50 in Britain. An identical jacket costs $70 in the U.S. when the exchange rate is £1 = $1.50. Which of the following is correct? A trader can make money by buying the jacket in Britain and selling it in the U.S. at $70. The deal is the same in both countries. Britain offers a better deal. The U.S. offers a better deal. - ANSWER-The U.S. offers a better deal. A Japanese tourist in New York goes to a bank to convert his yens into dollars. The exchange rate that will be used for conversion will be the _____. futures exchange rate forward exchange rate spot exchange rate historical exchange rate - ANSWER-spot exchange rate CBA CBA If lots of people want euros and euros are in short supply, and a few people want Japanese yen and yen are in plentiful supply, the yen is likely to _____ against the euro. depreciate appreciate strengthen remain stable - ANSWER-depreciate Assuming the 60-day forward exchange rate was $1 = ¥110 and the spot exchange rate was $1 = ¥120, the dollar is selling at a(n) _____ on the 60-day forward market. premium margin discount increment - ANSWER-discount The _____ suggests that given relatively efficient markets, the price of a basket of goods should be roughly equivalent in each country. random walk theory theory of competitive advantage theory of price inflation purchasing power parity theory - ANSWER-purchasing power parity theory When is a currency said to be externally convertible? When both residents and nonresidents can purchase unlimited amounts of a foreign currency with it. When only nonresidents can convert it into a foreign currency without limitations. When neither residents nor nonresidents are allowed to convert it into a foreign currency. When only residents can convert it into a foreign currency. - ANSWER-When only nonresidents can convert it into a foreign currency without limitations. CBA CBA When a firm insures itself against foreign exchange risk, it is employing a lag strategy. engaging in currency speculation. employing a lead strategy. engaging in hedging. - ANSWER-engaging in hedging. The PPP theory tells us that a country with a high inflation rate will see an appreciation in its currency exchange rate. True False - ANSWER-False A _____ rate means the value of the currency is fixed relative to a reference currency and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate. pegged exchange currency board fixed exchange floating exchange - ANSWER-pegged exchange The Bretton Woods agreement implemented a system of _____ exchange rates. currency board fixed floating managed floating - ANSWER-fixed The International Monetary Fund was established at the Bretton Woods conference to promote general economic development in the world. establish gold standards across the world. CBA CBA fund the initiatives of the United Nations. maintain order in the international monetary system. - ANSWER-maintain order in the international monetary system. Which of the following elements supports the argument for floating exchange rates? Ease of business planning Reduced trade surplus Crisis recovery Increased return on foreign investment - ANSWER-Crisis recovery A managed float is the exchange rate policy where the government forms an agreement with other countries to fix the exchange rate. intervenes in the exchange rate system only in a limited way. does not intervene in the country's exchange rate system. decides the exchange rate at which a country's currency is traded. - ANSWER intervenes in the exchange rate system only in a limited way. A(n) _____ occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves to defend the prevailing exchange rate. domestic debt crisis banking crisis currency crisis crisis of the World Bank - ANSWER-currency crisis The international monetary system refers to the institutional arrangements that govern exchange rates. True False - ANSWER-True CBA CBA The agreement reached at Bretton Woods established the International Monetary Fund (IMF) and the World Bank. True False - ANSWER-True World Bank offers low-interest loans to risky customers whose credit rating is often poor. True False - ANSWER-True _____ exists when the tastes and preferences of consumers in different nations are similar if not identical. Universal needs Hedonic needs Social needs Bundled needs - ANSWER-Universal needs A firm's strategy is defined as the actions managers take to attain the goals of the firm. True False - ANSWER-True Which of the following is less likely to add to the pressure for a firm to be locally responsive? Host-government demands Switching costs for consumers Differences in infrastructure and traditional practices CBA National differences in consumer tastes and preferences - ANSWER-Switching costs for consumers A localization strategy focuses on increasing profitability by using cost advantage to support aggressive pricing in world markets. offering standardized goods and services. customizing the firm's goods or services to local conditions. capturing the cost reductions associated with mass-production. - ANSWER-customizing the firm's goods or services to local conditions. Responding to pressures to be locally responsive requires a firm to standardize its products. True False - ANSWER-False Unlike firms pursuing a global standardization strategy, firms pursuing an international strategy face significant competition. pursue a low-cost strategy on a global scale. increase profitability by customizing goods or services to local needs. are not confronted with pressures to reduce their cost structure. - ANSWER-are not confronted with pressures to reduce their cost structure. Profitability is calculated by dividing the total sales of the firm by total invested capital. True False - ANSWER-False CBA CBA Which strategy makes most sense when there are strong pressures for cost reductions and minimal demands for local responsiveness? Global standardization strategy Transnational strategy Localization strategy International strategy - ANSWER-Global standardization strategy Multipoint pricing is an issue when two or more international businesses compete against each other in two or more national markets. True False - ANSWER-True Which one is a main difference between a concentrated retail system and a fragmented retail system? A concentrated retail system is common in underdeveloped countries Large retail establishments prefer a fragmented system A few retailers supply most of the market in a concentrated system Market share is indistinct in a concentrated retail system - ANSWER-A few retailers supply most of the market in a concentrated system If a marketer is asking "Where is the product typically bought by customers in the international market segments?" what element of the marketing mix is she addressing? Product strategy. Distribution strategy Communication strategy CBA CBA Pricing strategy - ANSWER-Distribution strategy The marketing mix is comprised of product attributes, distribution strategy, communication strategy, and pricing strategy. True False - ANSWER-True Demand is said to be elastic when a small change in price produces a large change in demand. it is independent of the price and quality of a product. a product is considered as a necessary commodity. the demand for a product is independent of other goods or services. - ANSWER-a small change in price produces a large change in demand. The distribution channel is very short when a producer sells directly to the consumer. True False - ANSWER-True the _____ shows all of the different positions a firm can adopt with regard to product cost and value assuming the firm's internal operations are configured efficiently to support a particular position - ANSWER-efficiency frontier the extent to which a firm's future international earning power is affected by changes in exchange rates in the long-run is known as _____. - ANSWER-Economic exposure when a firm creates a global web of value creation activities, the company disperses different stages of the value chain to those locations in the world where perceived value is maximized or where the costs of value creation are minimized True False - ANSWER-True CBA CBA CBA the concept of _____ involves borrowing money in one currency where interest rates are low and then using the proceeds to invest in other currency where interest rates are high - ANSWER-Carry Trade a _____ involves delaying collection of foreign currency receivables if that currency is expected to appreciate and delaying payables if the currency is expected to depreciate - ANSWER-Lag Strategy _____ refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways - ANSWER-market segmentation the marketing mix is the set of choice the firm offers to its targeted markets to implement marketing strategy True False - ANSWER-true in a fragmented retail system, there are few retailers with one owning a major share of the market True False - ANSWER-False Increasingly, the International Monetary Fund (IMF) has been acting as the macroeconomic police of the world economy by - ANSWER-insisting that countries seeking significant borrowings adopt IMF-mandated macroeconomic policies Regional Economic Integration - ANSWER-Agreements among countries in a geographic region to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other Free Trade Area - ANSWER-A zone in which there are no tariffs or other restrictions on the movement of goods and services across borders (Ex. NAFTA) Customs Union (CU) - ANSWER-An agreement among several countries to eliminate internal barriers to trade and to erect common barriers against nonmember countries (Ex: Andean community: Bolivia, Columbia, Ecuador, Peru) Common Market - ANSWER-a group of countries that acts as a single market, without trade barriers between member countries and free movement of the factors of production (labor and capitol) Ex: Mercosur: Brazil, Argentina, Paraguay, Uruguay) CBA CBA Economic Union (EU) - ANSWER-a common external trade policy, free flow of products and factors of production, a common currency, a harmonized tax rate, and a common monetary and fiscal policy. (Ex: European Union and the Euro) Why is the EU an imperfect Economic Union? - ANSWER--not all members have adopted the euro -differences in tax rates and regulations -some markets are still not fully deregulated Political Union - ANSWER-a central political apparatus coordinates economic, social, and foreign policy Which countries are not part of the EU? - ANSWER-Iceland, Liechtenstein, Norway, Switzerland What are the costs of the UK staying in the EU? - ANSWER--loss of national sovereignty -large number of immigrants what are the consequences of the UK leaving the EU? - ANSWER--less likely to attract investment from foreign multinationals -some multinationals may move to EU to maintain single market -exports to EU may fall -potential scottish independence European Commission (EC) - ANSWER-similar to the Federal Trade Commission and the Department of Justice, antitrust authorities in the US. Ex: blocked merger between Time Warner and EMI, and WorldCom and Sprint due to concerns European Commission and Intel - ANSWER--The EC fined Intel for illegally using its market power to put AMD at a disadvantage -Intel paid manufacturers to purchase their supplies and restrict the distribution of AMD products European Commission and Google - ANSWER-The EC fined Google for discriminated rival comparison-shopping sites in search rankings The Euro - ANSWER--created by the Maastricht Treaty in 1992 -used by 19 of the 28 member states (the eurozone) benefits of the euro - ANSWER--savings from having to handle one currency, rather than many CBA CBA -it is easier to compare prices across Europe, so firms are forced to be more competitive -gives a strong boost to the development of highly liquid pan-European capital market -increases the range of investment options open both to individuals and institutions costs of the euro - ANSWER--loss of control over national monetary policy (European Central Bank manages monetary policy) -EU is not an optimal currency area (countries in the eurozone are dissimilar and its difficult to limit extravagant spending by other nations) Greek Sovereign Debt Crisis - ANSWER-a high level of debt to finance extensive spending in the public sector Transatlantic Trade and Investment Partnership (TTIP) - ANSWER--a free trade deal between the US and EU -nontariff barriers (must adhere to safety standards in both places) Trans-Pacific Partnership (TPP) - ANSWER--A trade agreement among 12 Pacific Rim countries -President Trump withdrew North American Free Trade Agreement (NAFTA) - ANSWER-trade agreement between US, Canada, and Mexico -abolish tariffs, remove barriers, protect intellectual property rights how are laws made? - ANSWER--by legislation (congress) -by judge (common law, constitutional law) -by President (executive orders) office of trade and manufacturing policy - ANSWER-executive order to renegotiate NAFTA and help implement the "Buy American, Hire American" order tomato wars - ANSWER--reduced tariffs on tomatoes increased Mexican tomato imports and decreased Florida tomato production -Florida wants to scrap floor price agreement so they can file an antidumping case CBA CBA NAFTA in US - ANSWER--does not contribute to manufacturing decline -trade deals help other sectors of American economy Mexican auto industry - ANSWER--Toyota, Mercedes, Hyundai, BMW and Volkswagen announced new factories in Mexico -2/3 of Mexico's auto exports are to the US (duty free access) Foreign Exchange Market - ANSWER-A market for converting the currency of one country into that of another country -most important trading centers: London (37%), New York (18%), then Zurich, Tokyo and Singapore Role of the dollar - ANSWER--a dealer wishing to sell Korean won for Brazilian real will usually sell the won for dollars and use the dollars to buy real -87% of foreign exchange transactions involved dollars on one side of the transaction (then the euro, yen and british pound) spot exchange rate - ANSWER-two parties agree to exchange currency immediately but it changes continually so it can be problematic for international businesses How are exchange rates determined? - ANSWER--Exchange rates are determined by the demand and supply for different currencies -impacted by: price inflation, interest rate and market psychology law of one price - ANSWER-identical products must sell for the same price in competitive markets, otherwise there is arbitrage Ex: an $80 jacket in NY should sell for £40 in London. if not, traders will buy jackets in London and sell them in NY. arbitrage - ANSWER-the process of buying a security, currency, or commodity low and selling it high Big Mac Index - ANSWER-Tool for calculating purchasing power parity that compares prices of a Big Mac throughout the world. Purchasing Power Parity (PPP) - ANSWER-given relatively efficient markets, the price of a "basket of goods" should be roughly equivalent in each country. Ex: if a basket of goods costs $200 in the US and ¥20,000 in Japan, PPP theory predicts that the exchange rate should be $200/¥20,000 (i.e., $1 = ¥100) CBA CBA hyperinflation in Germany - ANSWER-Germany printed money to pay for war. As a result prices increased exponentially and people questioned the gov't even more. hyperinflation in Zimbabwe - ANSWER-Zimbabwe printed money after Mugabe destroyed the economy. eventually suspended the Zimbabwe dollar and adopted the US dollar Ex: you have to pay for the coffee before you drank hyperinflation in Bolivia - ANSWER-the exchange rate is the "black market" exchange rate. Money supply increased and prices increased. -got inflation rate down by cutting government spending, scrape price control and cutting import tariffs PPP and inflation - ANSWER-PPP theory says that a country with a high inflation rate should see its currency depreciate Ex: 10% inflation rate will depreciate the currency by 10% Currency Convertibility - ANSWER-the ability for a currency to become freely exchangeable for foreign currencies Freely Convertible Currency - ANSWER-A country's currency is freely convertible when both residents and non-residents can purchase unlimited amounts of foreign currency Externally Convertible Currency - ANSWER--only non-residents can convert their holdings of domestic currency into a foreign currency -limit domestic companies' ability to invest abroad nonconvertible currency - ANSWER-A currency is not convertible when both residents and nonresidents are prohibited from converting their holdings of that currency into another currency. EX: soviet union and Russia currency control in Venezuela - ANSWER-Venezuela's economy is dependent on oil (50% of gov revenue and nearly all exports) they have been in economic crisis due to cheap oil prices -massive currency control has caused a shortage of foreign currency Bloomberg Cafe Con Leche Index - ANSWER-gauges Venezuela's inflation through the price of a cup of coffee CBA CBA countertrade - ANSWER-barter like agreements by which goods and services can be traded for other goods and services to deal with the nonconvertibility problem EX: Venezuelan gov trades iron ore for Caterpillar heavy construction equipment The Soviet Union paid Pepsi in Warships - ANSWER-Soviet rubles were worthless so Pepsi resorted to barter. first traded vodka but after an American boycott, Pepsi received submarines and warships that were sold for scrap Transaction Exposure - ANSWER-income from individual transactions is affected by fluctuations in foreign exchange values Translation Exposure - ANSWER-the impact of currency exchange rate changes on the reported financial statements of a company. (not real losses, just accounting losses, but still effects the companies operations) reducing exchange rate risk - ANSWER--forward exchange rate contracts -distribute productive assets to various locations -in house foreign exchange centers to set guidelines for the firm's subsidiaries Managing Exchange Rate Risk - ANSWER--flexible sourcing (manufacturing in multiple locations) -run factories at 80% capacity to switch rapidly from one product to another in response to foreign exchange movements international monetary system - ANSWER-institutional arrangements countries adopt to govern exchange rates Exchange rate regimes today - ANSWER--free float 21% -managed float 23% -fixed peg 43% -adjustable peg 8% -no domestic legal tender 5% no domestic legal tender - ANSWER--adopt a foreign currency as legal tender -US dollar: Ecuador, East Timor, El Salvador, Marshall Islands, Micronesia, Palau, Turks and Caicos, British Virgin Islands, Zimbabwe CBA CBA -Euro: Andorra, Kosovo, Monaco, Montenegro, San Marino, Vatican City floating exchange rate - ANSWER-foreign exchange market determines the relative value of a currency. it fluctuates day to day. EX: US dollar, euro, Japanese yen, British Pound pegged exchange rate - ANSWER--Fixed peg or Adjustable peg -popular among smaller nations -imposes monetary discipline and leads to low inflation Fixed Peg - ANSWER-fixes a currency to a reference currency such as the US dollar, the euro or a basket of currencies adjustable peg - ANSWER-exchange rate is allowed to fluctuate within a range countries pegged to the US dollar - ANSWER--Belize pegs to the US dollar. Malawi, Thailand and Malaysia used to -must maintain inflation rate similar to that in the US. a greater than US inflation will devalue the other dollar Dirty (managed) float - ANSWER--hold its currency value within some range of a reference currency -determined by market forces but bank will intervene -Chinese Yuan was pegged but switched to managed float (varies against a basket of currencies) Fixed Exchange rate - ANSWER-An exchange rate policy under which a government commits itself to keep its currency at or around a specific value in terms of another currency or a commodity, such as gold. EX: fixed exchange system after WWII among industrial nations Gold standard - ANSWER-countries peg currencies to gold at a fixed rate and guarantee their convertibility. -Gold standard died in 1939 because the competitive devaluations shattered confidence Bretton Woods System - ANSWER--44 countries met at Bretton Woods to design a new international monetary system CBA -created the World Bank and the International Monetary Fund -established fixed exchange system. all currencies fixed to gold, US dollar directly convertible to gold International Monetary Fund (IMF) - ANSWER-established to maintain order in the international monetary system (limit price inflation and stop competitive devaluations) -LENDOR OF LAST RESORT. not aid money. World Bank (IBRD) - ANSWER--international bank for reconstruction and development (IBRD) -initial mission was to help finance the building of Europe's economy -third-world underdeveloped nations receive low interest loans and grants Collapse of the Fixed Exchange Rate System - ANSWER--welfare programs and vietnam war were financed by increasing the money supply, causing inflation to go up. Jamaica Agreement - ANSWER--the 1976 international monetary order that allowed countries to adopt different exchange rate systems including floating their currencies in world markets -gold abandoned as a reserve asset Plaza Accord - ANSWER--agreement made in 1985 among central bankers to allow the U.S. dollar to fall in value types of financial crises - ANSWER--currency crisis -banking crisis -Foreign debt crisis Currency Crisis - ANSWER-speculative attack on the exchange value of a currency results in a sharp depreciation ex: mexico and brazil Banking crisis - ANSWER-a loss of confidence in the banking system that leads to a run on banks ex: iceland CBA CBA CBA Foreign debt crisis - ANSWER-a country cannot service its foreign debt ex: greece, ireland and portugal 1997 Asian crisis - ANSWER--Thailand Baht was pegged to USD. financial market started short selling Baht. -Thailand received emerency loan from IMF. the US refused to help thinking it would not spread -eventually spread to malaysia, indonesia, south Korea, Russia and the US Federal Deposit Insurance Corporation (FDIC) - ANSWER-the government agency that insures customer deposits if a bank fails -standard insurance is $250,000 per depositor, per insured bank, for each account ownership category -insures deposits only not securities or mutual funds Iceland and the 2008 Global Financial Crisis - ANSWER-Iceland privatized the banking sector but was too small. the three largest banks held debts 6x the GDP and could not refinance their debt -Iceland could not bail out the banks and let them go under, causing unemployment and inflation to go up, stock market tankedAir Financial crises and exchange rate system - ANSWER--exchange rate adjustments can help recover from economic crises ex: South Korean won plunged, increasing exports. Airbus and the Euro - ANSWER--airbus is based in France. half their costs are in euros but they price their planes in dollars. -when the dollar dropped by 50%, Airbus costs rose and sales translated in euro decreased increased risk under floating exchange rates - ANSWER--the unpredictability of exchange rate movements -the forward market tends to offer coverage for exchange rate changes a few months ahead -increase strategic flexibility in the face of unpredictable exchange rate movements to reduce the economic exposure (disperse production to different locations CBA CBA Determinants of Enterprise Value - ANSWER-- Profitability (Reduce costs & Add value and raise prices) - Profit growth (Sell more in existing markets & Enter new markets) strategy - ANSWER--the actions that managers take to attain the goals of the firm -strategies that increase profitability (net profits and total invested capital) and Profit growth (percentage increase in net profits over time) -expanding internationally can help boost the profitability and increase profit growth rate over time Value Creation - ANSWER-Performing activities that increase the value of goods or services to consumers a company can increase V-C by: 1. lowering C (low cost strategy) 2. increasing V (differentiation strategy) Revenue vs Value - ANSWER-the most valuable companies have the most profits, not the most revenue Ex: walmart profit is small even though their revenue is large. Apple revenue is small but they have large profit Smartphone Market - ANSWER-mobile device market generated $21 billion in profits cost vs price - ANSWER-cost is not pricing! a segment of customers might be MORE or LESS sensitive to price EX: $30-40 cost differential relates to $100 higher price scope and source of competitive strategy - ANSWER-scope: broad target vs narrow target source: low cost vs product differentiation cost leadership (amazon, walmart) - ANSWER--Broad Target, Lower Cost -keep cost lower than competitors by offering standardized products -strategy: low-cost inputs, offshoring, economies of scale, minimize overhead cost focus (aldi) - ANSWER--Narrow Target, Lower Cost CBA -keep cost lower than competitors in a narrow segment ex: aldi targets extremely price sensitive customers overall differentiation (apple, harley davidson) - ANSWER--broad target, product differentiation -generate rents from higher consumer willingness-to-pay (unique features) -strategy: brand equity/loyalty, innovation, human resources differentiation focus- niche (ferrari, Tiffanys) - ANSWER--narrow target, product differentiation -generating rents from higher consumer willingness-to-pay by targeting a small premium segment of the market what is Aldi's strategy - ANSWER--fewer choices (faster turnover, smaller stores, less rent, fewer staff) -carry items that are offered at large discount -locate close to supermarket so customers can buy other items the jam experiment - ANSWER-6 vs 24 jams on display, shoppers were rewarded with a voucher to buy any jam 30% of those at the 6jam table purchased a pot 3% of those at the 24 jam table purchased a pot conspicuous consumption - ANSWER--Buying and using products because of the "statement" they make about social position "keeping up with the joneses" -social status and exclusivity strategic positioning - ANSWER-pick a position on the efficiency frontier -configure internal operations to support the position -has the right organization structure to execute its strategy -strategy, operations, and organization must be consistent with each other to attain a competitive advantage CBA CBA CBA global standardization strategy - ANSWER--low pressure for local responsiveness, high pressure for cost reductions -low cost strategy on global scale -industrial goods industries Localization Strategy - ANSWER--High pressure for local responsiveness, low pressure for cost reductions -customize products to match preferences in different nations -higher costs differences in customer preferences - ANSWER-auto companies moved towards "world cars" selling the same cars all over the world BUT different markets have different tastes Ex: US consumers like pickup trucks, Europeans & Japanese like small fuel efficient cars supersized mcdonalds menu - ANSWER-mcdonalds added oatmeal, snack wraps and lattes to appeal to a wider range of customers but they risk undercutting "speedy service" transnational strategy - ANSWER--high pressure for local responsiveness, high pressure for cost reduction -differentiate products across geographic markets, achieve low costs through location economies -transnational strategy is complex and challenging transnational strategy at caterpiller - ANSWER--redesigned products to use identical components -assembly plants in each major global markets to tailor the finished product to local needs nokias advertising strategy - ANSWER-to reduce advertising costs and establish a consistent global brand, Nokia tweaked the ads for different cultures (used actors from different regions, modified local settings) international strategy - ANSWER--Low pressure for local responsiveness, low pressure for cost reductions CBA CBA -universal needs with little competition -centralize product development (R&D) at home -limited local customization and marketing strategy Evolution of Strategy - ANSWER-As competition increases, international and localization strategies become less viable To survive, firms may need to shift to a global standardization strategy or a transnational strategy in advance of competitors Marketing Mix (4 P's) - ANSWER-Product, Price, Place, Promotion Product Strategy - ANSWER--managing existing and developing new products -strategic decisions about a product line, packaging and branding Pricing strategy - ANSWER-determine an optimal price place (distribution) strategy - ANSWER--channel management: transfer products to customers -logistics management: physical movement of a product promotion strategy - ANSWER-coordinating communications and marketing messages between different media marketing mix of international businesses - ANSWER-firms vary their marketing mix from country to country based on differences in national culture, economic development, product standards, distribution channels marketing research - ANSWER--to understand the needs of customers -to formulate marketing strategy -to evaluate marketing performance do people know what they want? - ANSWER-steve jobs says he did no marketing testing for iPad "our job is to figure out what they want before they do" "people don't know what they want until you show it to them" getting the right information - ANSWER--good understanding of consumer behavior CBA CBA -using the right research method stated preference vs revealed preference - ANSWER-stated preference: from survey and focus group, choices in a hypothetical situation revealed preference (inferred): from observation or secondary data such as purchase record why stated and revealed preferences might differ - ANSWER--consumers may be unwilling to provide the desired information (provide answers that make them look good) -consumers may be unable to provide the desired information (sometimes dont know what they want and what influences them) washing hands in public restroom - ANSWER-92% say they do, only 77% actually do it three stages of Rapaille's psychic journey - ANSWER-1. reason (cortex) 2. emotion 3. primal core (instinct) what is the reptilian hot button - ANSWER-the primal urges that compel people to action reptilian brain - ANSWER-the brain stem is the oldest and smallest region, similar to reptiles. concerned with fundamental needs like survival, hoarding, dominance and mating Clotaire Rapaille video clip - ANSWER-Redefined coffee adv to go back to smell imprinting to remind people of childhood memories getting the Japanese to switch from tea to coffee - ANSWER-tea is important in Japan, there is no "first imprint" of coffee. Nestle created it by selling coffee through dessert. now there is a market for coffee in Japan pizza hut china - ANSWER-pizza hut casual dining, offers ribs, spaghetti and steak in full service setting domino's worldwide - ANSWER--US is fast food saturated so it is beneficial to open overseas. -pizza is viewed as casual food in US but it is upscale in Japan -dominos in India is mostly vegetarian and has curried toppings, delivered by mopeds CBA CBA Gray-Market Merchandise (parallel imports) - ANSWER-possesses a valid trademark and is made by a foreign manufacturer, but imported into the US without permission (legal, not counterfeit) EX: international edition of textbooks international price discrimination - ANSWER--firms charge different prices for same product in different countries two conditions: 1. firm must keep national markets separate to prevent arbitrage 2. countries have different price elasticity of demand (PCS in india more expensive than US-luxury vs necessity) multipoint pricing - ANSWER-a firm's pricing strategy in one market may have an impact on a rival's pricing strategy in another market ex: Kodak and Fujifilm, didn't want price war so kodak cut prices in Japan (Fujis largest market) communication strategy - ANSWER-Communicating product attributes to prospective customers cultural barriers to international communication - ANSWER--a message can mean different things in different countries -develop cross-cultural literacy -use local input and local sales force hong kong disney - ANSWER-struggled to connect with consumers disney ad featured two kids, but china had limit on one kid taste perception of beer brands - ANSWER-when the drinker knows what they're drinking, they all taste different when the drinker does not know what they're drinking, they all taste the same source effects in international communication - ANSWER--evaluates the message based on status or image of the sender -country of origin effects product evaluations (ex: french wine, italian clothes) Haagen-daz country of origin - ANSWER-US. given a Danish sounding name to tribute Denmark's treatment of the Jews in the war CBA CBA country image effect - ANSWER-as a country brand, france is associated with high quality fashion and perfumes ex: Chanel prominently displays paris on their packaging (which wouldnt work with electronics) ex: Harley "an american legand" Market Segmentation - ANSWER-Dividing a market into distinct groups of buyers who have different needs, characteristics, or behaviors, and who might require separate products or marketing programs Intermarket (cross-market) segmentation - ANSWER-forming segments of consumers who have similar needs and buying behaviors even though they are located in different countries marketing to Afro-brazilians - ANSWER-the african brazilian market segment in brazil is different than in US because US had civil rights movement, black awareness etc that produced an identifiable subculture EX: vaseline intensive care lotion for black consumers. said "tan and black" instead to not exclude white women why did VW profits fell by 95% - ANSWER-VW exported cars from German to US but the value of the euro rose (earnings in US dollars worth less when converted to euros back in Germany) VW only hedged 30% instead of 70% (did not anticipate the increase in euro value) appreciation of the Real, good or bad? - ANSWER-embraer (aerospace co) purchased parts from US, as real appreciated, the parts were less expensive embraer priced its jets in dollars, as the real appreciated, lost revenue when exchanged back into real what did embraer do to reduce the risks? - ANSWER--to protect from future appreciation, Embraer bought forward contracts BUT the real ended up depreciating and Embraer lost due to being locked into a higher interest rate why has subaru concentrated its manufacturing in Japan? - ANSWER-so they can create economies of scale (lower cost per unit) then the company can export to US CBA CBA what was the impact of the depreciation of the yen on Subarus profits? - ANSWER interest rates fell because the value of the yen fell. this gave them a pricing advantage what did you learn about hedging foreign exchange rate risk? - ANSWER--currency markets are difficult to predict -the importance of hedging -reduce economic exposure by locating manufacturing in other countries why did Wal-mart fail in Korea? LOCATION - ANSWER--located out of cities (koreans expect easy accessibility) -small presence (most koreans have never heard of walmart, only 16 stores) why did Wal-mart fail in Korea? STORE DESIGN - ANSWER--the racks were too tall (need lower shelves) -utilitarian design (prefer decoration) -warehouse style (prefer sophisticated) why did Wal-mart fail in Korea? MERCHANDISE ASSORTMENT - ANSWER--focussed on dry goods (electronics and clothing) locals like fresh food -selling in bulk (prefer going to multiple stores, when they need something) other Wal-mart failures - ANSWER-Germany: hired American CEO who didnt speak German and tried to sell packaged meat, Germans like butcher Brazil: golf clubs Mexico: ice skates why did Wal-mart fail to implement localization strategy? - ANSWER--"headquarters knows best" copy and paste store format merchandising and operations because they served the US well -US style retailing doesn't translate everywhere what are IKEAs global standardization strategy examples - ANSWER--similar layout in each location -walk through every department then pick up items -furniture is flat-packed for ease of transportation, assembled by customer CBA -segmentation: young upwardly mobile people looking for tasteful yet inexpensive furniture -design differentiation what are IKEAS localization strategy examples? - ANSWER-US: needed everything bigger China: needed to put stores near public transit and offer delivery/ assembly Japan: FAILED. furniture not small enough, did not like to assemble. REOPENED what did you learn about globalization vs localization strategy? - ANSWER-Global strategy: standardized approach. attain low cost position through economies of scale Localization strategy: better match the tastes of local consumers. difficult to attain scale economies, higher costs CBA