Global Marketing Management, 8/E Keegan instructor manual and test bank
Global Marketing Management, 8e (Keegan)
Chapter 2 The Global Economic Environment
1) The macro dimensions of the environment are economic, social and cultural, political and legal, and technological.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
2) Economic growth remains concentrated at the high-income countries.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
3) The more developed a country is, the scarcer the availability of economic data.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
4) Technology as a factor has contributed to the flattening of the world economy.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
5) Countries in emerging markets have sustained high rates of growth by taking advantage of high labor costs.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
6) Global companies entering new markets will need to adapt their offerings, distribution systems, and operations to local demand and custom.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
7) Most countries of the world have a mixed system of allocation.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
8) There are no pure market or command allocation systems today.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
9) According to the Heritage Foundation, the country with the highest degree of economic freedom is the United States.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
10) Low-income countries are typically referred to as industrialized nations.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
11) High-income countries are referred to as emerging markets.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
12) Low-income countries typically have low birth rates and high literacy rates.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
13) Another name for lower-middle income countries is industrializing countries.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
14) The nations of the G20 are among the most powerful nations of the postindustrial societies.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
15) A market can be defined as a group of people willing and able to buy a particular product or service.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
16) Location is the single most valuable economic indicator of potential for industrial products.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
17) Agricultural output and services, in particular, are often priced higher in relation to industrial output in developing countries than in industrial countries.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Moderate
18) Purchasing power differences can account for differential in demand of products and services, and also provide an indication on differences in costs.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
19) Purchasing power parity measures an economy's output in terms of demand and supply.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
20) The current account is a record of all long-term direct investment, portfolio investment, and other short- and long-term capital flows.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
21) In general, a country accumulates reserves when the net of its current and capital account transactions shows a deficit.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
22) Devaluation means that more of the home-country's currency is now needed to buy the same amount of a foreign currency.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Moderate
23) In a fixed exchange-rate system, the currency value is determined by demand and supply.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
24) The United States is an example of a country that follows a fixed exchange-rate system.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
25) The members of a customs union agree to the establishment of individual external trade barriers.
Answer: FALSE
AACSB: Analytical thinking
Difficulty: Easy
26) The Euro is a common currency adopted by the members of the European Union.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
27) The member states of the Commonwealth of Independent States (CIS) have signed agreements addressing issues of integration and cooperation with respect to economics, defense, and foreign policy.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
28) A common market goes beyond the removal of internal barriers to trade and the establishment of common external barriers to the important next stage of eliminating the barriers to the flow of factors (labor and capital) within the market.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
29) Member states of the North American Free Trade Agreement (NAFTA) are allowed to make separate bilateral treaties with nonmember states.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
30) The ASEAN Free Trade Area, or AFTA, was created in 1992 with the aim of promoting the region's competitive advantage as a single production area with the elimination of tariff and nontariff barriers among the member countries.
Answer: TRUE
AACSB: Analytical thinking
Difficulty: Easy
31) Which of the following statements is true about world economy?
A) Countries in emerging markets have sustained low rates of growth.
B) Global competitors are deprived of new opportunities.
C) The emergence of global markets has displaced local ones.
D) The integration between all world regions has steadily decreased.
Answer: C
AACSB: Analytical thinking
Difficulty: Moderate
32) Which of the following statements is true about the trends in world economy?
A) Global economic activity will shift from the East to the West.
B) The demand for natural resources will continue to grow.
C) Shifts in consumer segments will not affect the consumer marketplace.
D) An aging worldwide population will demand decreasing levels of productivity.
Answer: B
AACSB: Analytical thinking
Difficulty: Easy
33) Which of the following is characteristic of a pure market allocation system?
A) The consumers decide what goods will be produced and by whom.
B) The state determines the goods that consumers should use.
C) It has limited economic integration with the rest of the world regions.
D) It fails to utilize the market mix elements when demand exceeds supply.
Answer: A
AACSB: Analytical thinking
Difficulty: Easy
34) Which of the following is characteristic of a command allocation system?
A) The government's role is to ensure the protection of consumer rights.
B) Product distribution is handled by a large number of intermediaries.
C) The state makes decisions on what consumers should purchase.
D) Consumers allocate resources to the system.
Answer: C
AACSB: Analytical thinking
Difficulty: Easy
35) Which of the following is used to indicate the relative wealth of a country's citizenry?
A) Gross National Product
B) Gross Output
C) Gross Domestic Product
D) Gross Value Added
Answer: A
Difficulty: Easy
36) With regard to Gross National Product per capita, which of the following categories of countries is considered to be developed?
A) lower-middle income
B) high-income
C) low-income
D) upper-middle income
Answer: B
Difficulty: Easy
37) Which of the following is characteristic of low-income countries?
A) sustained economic growth
B) low engagement in agriculture
C) high degree of urbanization
D) heavy reliance on foreign aid
Answer: D
AACSB: Analytical thinking
Difficulty: Easy
38) Which of the following categories of countries is referred to as a postindustrial country?
A) low-income
B) upper-middle income
C) lower-middle income
D) high-income
Answer: D
Difficulty: Easy
39) Which of the following is the most valuable economic variable used to chart strategic plans for global market expansion of commercial products?
A) regulations
B) competitors
C) income
D) location
Answer: C
Difficulty: Easy
40) ________ accounts for the largest share of output in less developed countries.
A) Education
B) Agriculture
C) Consumer goods
D) Heavy industries
Answer: B
Difficulty: Easy
41) ________ provides the best comparison of the standards of living in the countries of the world.
A) Purchasing power parity
B) Exchange rate
C) Gross National Product per capita
D) Gross National Income
Answer: A
Difficulty: Easy
42) Which of the following is the primary output of the World Bank's International Comparison Program?
A) purchasing power parities
B) currency fluctuations
C) market demand and supply
D) production costs
Answer: A
Difficulty: Easy
43) Which of the following can be perceived from measuring actual individual consumption across global markets?
A) Developed countries are likely to benefit more from full integration than developing countries.
B) Purchasing power differences do not account for differences in demand of products and services.
C) The living standards of high-income countries differ from low-income countries.
D) A vast majority of the world's income is concentrated in the lower-middle or upper-middle income countries.
Answer: C
AACSB: Analytical thinking
Difficulty: Moderate
44) Which of the following is the most important variable considered for identifying opportunities in the global economy to sell low-priced products?
A) middle-class income
B) location of population
C) demand in products
D) cost of products
Answer: B
AACSB: Analytical thinking
Difficulty: Easy
45) Which of the following portrays all the economic transactions of a country with the rest of the world?
A) balance of payments
B) International Comparison Program
C) purchasing power parity
D) Gross National Product per capita
Answer: A
AACSB: Analytical thinking
Difficulty: Easy
46) Which of the following statements is true of global trade patterns?
A) The annual rate of output is less than the total merchandise trade.
B) In most countries, the share of trade as a percentage of the national economy has reduced.
C) Import and export growth has outpaced the rate of increase in GNP.
D) The share of agriculture in exports has increased over the past decade.
Answer: C
AACSB: Analytical thinking
Difficulty: Moderate
47) ________ refers to the price of one currency in terms of another.
A) Tariff
B) Exchange rate
C) Duty
D) National income
Answer: B
Difficulty: Easy
48) Which of the following is a characteristic of countries in a free trade area?
A) abolition of internal tariffs and quotas
B) establishment of common external barriers
C) removal of restriction on factor movements
D) harmonization of economic, social, and regulatory policies
Answer: A
AACSB: Analytical thinking
Difficulty: Moderate
49) Which of the following eliminates trade barriers to allow the harmonization of economic, social, and regulatory policies?
A) a customs union
B) a common market
C) a free trade area
D) an economic union
Answer: D
Difficulty: Easy
50) Which of the following is a trade block created between Canada, Mexico, and the United States?
A) NAFTA
B) SCCM
C) CIS
D) APEC
Answer: A
Difficulty: Easy
51) Which of the following is an example of a customs union?
A) CSME
B) European Economic Area
C) NAFTA
D) Mercosur
Answer: D
AACSB: Analytical thinking
Difficulty: Easy
52) What are the characteristics of a low-income country?
Answer: Low-income countries share the following characteristics:
1. Limited industrialization and a high percentage of the population engaged in agriculture and subsistence farming
2. High birth rates and low literacy rates, especially among women and girls
3. Heavy reliance on foreign aid
4. High levels of poverty
5. Inequality of income distribution
6. Political instability and unrest due at least in part to disenfranchised social groups
AACSB: Analytical thinking
Difficulty: Easy
53) What are exchange rates? How do they affect the global economy?
Answer: Exchange rates are the price of one currency in terms of another. If exchange rates change, so do the prices of exports and imports. Countries whose exchange rates are depreciating will find their exports becoming more price competitive and their imports relatively more expensive. If a seller of products or services expects payment for exports in any denomination other than their home currency, the total home-country receipts will change depending on the exchange rate at the time payment is made. Because exchange rates can give a price advantage to producers, governments seek to manage exchange rates. This is done by using reserves to buy or sell foreign currencies. If reserves are not used, market supply and demand will decide the value of the currency. Countries can choose to devalue their currency purposefully to stimulate their economy's exports and limit imports.
AACSB: Analytical thinking
Difficulty: Moderate
Chapter 2: The Global Economic Environment
Learning Objectives
• Summarize significant historical changes in the global economic environment
• Identify trends in the world economy that affect global marketing decisions
• Describe how economic measures of freedom help drive or hinder global business expansion and growth
• Describe the stages of market development
• Explain how global income distribution and population patters affect marketing decisions
• Discuss the balance of payments and global trade patterns
Chapter Overview
The economic environment is a major determinant of global market potential and opportunity. Global marketers should factor into their marketing strategies the profound changes in the world economy and understand that global competition is now a feature of almost every national market. Centers of economic activity are shifting dramatically across the globe and across regions due to demographic changes, economic liberation, technological developments, and, over the next decade, an estimated one billion new consumers in emerging markets demanding products and services. Today, with the exception of North Korea, almost all countries have mixed economic systems with a major reliance on market allocation.
Lecture Outline
I. The World Economy – An Overview (p. 38)
II. The World Economy: Important Trends (p. 39)
a. Economic Activity Will Shift From West to East
b. Aging Worldwide Population Will Demand Increasing Levels of Productivity and Efficiency
c. Changing Industry Structures and Emerging New Models of Corporate Organization Will be Characteristic of Growing Global Competition
d. The Demand for Natural Resources Will Continue to Grow, Resulting in Growing Pressure on an Already Strained Global, Natural Environment
e. Scrutiny of Global Firms’ Worldwide Practices Will Increase as the Reach and Scale of Global Firms Expand; Increasing Regulation Will Shape the Structure and Conduct of Whole Industries
f. The Economics of Information Will be Transformed as the Ubiquitous Nature of Information Expands
g. Talent Pools Have Become Global in Nature; Assimilating Talent into the Leadership Structure of a Global Company Will be a Competitive Advantage
III. The Market State: Varying Degrees of Economic Freedom (p. 46)
IV. Stages of Market Development (p. 49)
a. Low-Income Countries
b. Lower-Middle-Income Countries
c. Upper-Middle-Income Countries
d. High-Income Countries
V. Income and Purchasing Power Parity Around the Globe (p. 57)
VI. International Comparison Program (ICP) of the World Bank (p. 61)
VII. Actual Individual Consumption (p. 62)
VIII. The Location of Population (p. 63)
IX. Global Trade and Investment (p. 64)
a. The Balance of Payments
X. Global Trade Patterns (p. 65)
XI. Exchange Rates (p. 67)
XII. Degrees of Economic Cooperation (p. 69)
a. Free Trade Area
b. Customs Union
c. Common Market
d. EU (European Union)
e. Asia-Pacific Economic Cooperation (APEC)
f. Commonwealth of Independent States (CIS)
g. MERCOSUR (SCCM)
h. North American Free Trade Agreement (NAFTA)
i. Association of Southeast Asian Nations (ASEAN)
XIII. Summary
Tables and Figures
Table 2-1 Index of Economic Freedom World Rankings (p. 48)
Table 2-2 World Bank List of Country Income Groups (p. 50)
Table 2-3 Countries Classified by Income – 2011 (p. 51)
Table 2-4 Stages of Economic Development (p. 59)
Table 2-5 GNP and PPP Per Capita, Top 10 Countries (p. 60)
Table 2-6 Richest Countries in the World GDP (PPP) (p. 60)
Figure 2-1 Rank Shift in GDP 2010 vs. 2020 (p. 61)
Table 2-7 Actual Individual Consumption per Capita (p. 62)
Table 2-8 Top 10 Highest Populated Countries (p. 63)
Table 2-9 Estimated 2010 Current Account Balances (p. 64)
Figure 2-2 Average PPP Consumption Across 146 Countries (p. 66)
Figure 2-3 Growth in Volume of World Merchandise Trade and GDP (p. 66)
Figure 2-4 GDP and Merchandise Trade by Region (p. 67)
Figure 2-5 Big Mac Index (p. 68)
Table 2-10 Degrees of International Economic Integration (p. 69)
Sidebars
Sidebar 1 20 Major Economies of the G20 (p. 58)
Sidebar 2 Bunfight (p. 68)
Suggested Answers to Discussion Questions
1. What are the stages of national market development, and what percentage of world income is found in each of the stages? Why is this information important to global marketers?
The stages of development include low-income countries (<$1025 GNP per capita; 36 countries); lower-middle-income countries ($1036-$4035; 54 countries); upper-middle- income countries ($4036-$12,475; 54 countries); and high-income countries (GNP per capita >$12,475; 70 countries). While it is not necessary for students to memorize the income level and stage of market development for every country, they should have a general fell for which countries fall into which category. This information helps a marketer to define their target markets.
2. What are the major trends in the world economy in the first two decades of the 21st century? How do these trends impact global marketing decisions? Cite several subtrends that relate, in your opinion, to these major trends.
a. Economic Activity Will Shift From West to East
b. Aging Worldwide Population Will Demand Increasing Levels of Productivity and Efficiency
c. Changing Industry Structures and Emerging New Models of Corporate Organization Will be Characteristic of Growing Global Competition
d. The Demand for Natural Resources Will Continue to Grow, Resulting in Growing Pressure on an Already Strained Global, Natural Environment
e. Scrutiny of Global Firms’ Worldwide Practices Will Increase as the Reach and Scale of Global Firms Expand; Increasing Regulation Will Shape the Structure and Conduct of Whole Industries
f. The Economics of Information Will be Transformed as the Ubiquitous Nature of Information Expands
g. Talent Pools Have Become Global in Nature; Assimilating Talent into the Leadership Structure of a Global Company Will be a Competitive Advantage
A business leader’s ability to assess trends in a rapidly changing competitive marketplace, and use these to appropriately gauge their impact on profitability of the firm, is a critical competence. Subtrends could include 1. A growing world-wide middle class demand for goods and service and 2. Increased demand from this expanding consumer base will place increasing stress on already constrained resources and create unsustainable environmental degradation.
- What is the pattern of income distribution in the world today? How is it different than even 10 years ago? What are the implications of these patterns of income distribution across the globe for the strategic marketer?
As indicated in Table 2-2, p. 50, the high-income countries are those with a per capita of greater than $12,475. The 70 countries that qualify as high-income account for approximately 32% of countries. Generally speaking, income distribution has become more equalized across the world’s population base. Today, approximately 50% of the world’s population can be categorized as living in upper- or lower-middle income countries (108 upper- and middle-income countries/214 total countries). The number of countries qualifying as high-income has risen dramatically over the past years. The share of the population in the developing world has been halved from 52% to 25%. Global extreme poverty is projected to drop to about 15% of global population by 2015. As the overall living standards of the world continue to increase, new and expanding markets for consumer goods are opening.
- A manufacturer of online gaming devices is assessing the world market potential for her products. She asks you if she should consider emerging countries as potential markets. How would you advise her?
Emerging countries should indeed prove attractive. Although the per capita income in emerging countries is low, in many instances it is rapidly growing. Consider Indonesia (per capita income has risen from $250 (in 1985) to $2,050 (in 2009). Residents are experiencing increases in discretionary (disposable) income. As a result, domestic consumer markets are expanding. These consumers are no longer just living day-to-day, but are earning relatively substantial incomes, not all of which is needed to survive.
- Are income and standard of living the same thing? What is meant by the term standard of living; how is it best measured and why?
Income reported in dollars measure the total value of all goods and services produced in an economy at a given rate of exchange. However, standard of living reflects what products and services are available to a nation’s people and how much their incomes will buy. Income figures that have been adjusted to indicate purchasing power parity are a better way to compare standard of living. Of course, upper-income segments may enjoy a higher standard of living than other segments. Also, as noted in the text, a low-income country’s standard of living may be higher than income figures suggest if the government, for little or no cost, provides education, health care, and housing.
- Describe the importance of international trade alliances and economic cooperation agreements. In your view, are these beneficial to the global marketer? If so, why? If not, why not?
Most of the forms of economic integration discussed eliminate tariffs and quotas among member nations. As free trade agreements and foreign-trade zones develop as an important indicator of globalization and the economic interdependence between countries and across regions, global firms increasingly face decisions about where best to source and establish manufacturing. Companies need to optimize their understanding and knowledge of how best to utilize if not exploit FTAs and their regulatory, administrative, legal, and often judicial strategies for regional competitiveness in the global marketplace.
- Interview several local business owners to determine their attitude toward world trade. Why, in your opinion, do they hold these attitudes and on what factual information or experience are they based?
Answers to this assignment will vary dramatically based on the student and their access to local business owners. It is important here to encourage the students to delve deeply into the possible attitudes that may be driving the owners’ opinions and to seek out the information on which their opinions/attitudes are based.
No comments:
Post a Comment