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Free IIA IIA-CIA-PART4 Exam Questions (page: 3)

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PDF with 535 Questions

The least risky method of entering a market in a foreign country is by

  1. Indirect exports.
  2. Licensing.
  3. Direct exports.
  4. Direct investments.

Answer(s): A

Explanation:

An indirect export strategy operates through intermediaries, such as home-country merchants who buy and resell the product, home-country agents who negotiate transactions with foreign buyers fora commission, cooperatives that represent groups of sellers, and export-management firms that receive fees for administering the firm's export efforts. Indirect export requires lower investment than direct export and is less risky because of the intermediaries' expertise.



An advantage of a direct investment strategy when entering a foreign market is

  1. Reduction in the capital at risk.
  2. Shared control and responsibility.
  3. Assurance of access when the foreign country imposes domestic content rules.
  4. Avoidance of interaction with the local bureaucracy.

Answer(s): C

Explanation:

Direct investment has many advantages:
(1) cheaper materials or labor,
(2) receipt of investment incentives from the host government,
(3) a strong relationship with interested parties in the host country,
(4) control of the investment,
(5) a better image in the host country,
(6) market access when domestic contest rules are in effect. However, direct investment is risky because of exposure to currency fluctuations, expropriation, potentially high exit barriers, and restraints on sending profits out of the country.



A firm that moves from not exporting on a regular basis to establishing plants in foreign countries has

  1. Globalized.
  2. Nationalized.
  3. Glocalized.
  4. Internationalized.

Answer(s): D

Explanation:

The internationalization process is of crucial interest to nations that wish to encourage local firms to grow and to operate globally. According to Swedish researchers, it involves the following steps:
(1) Lack of regular exports;
(2) export via independent agents with a few markets, with later expansion to more countries;
(3) creation of sales subsidiaries in larger markets;
(4) establishment of plants in foreign countries.



Which strategy for a global marketing organization is based on a portfolio of national markets?

  1. reaction of a division to manage international marketing.
  2. A multinational strategy.
  3. A global strategy.
  4. Creation of an export department

Answer(s): B

Explanation:

International marketing efforts take three basic forms:creation of an export department, creation of a division to manage international marketing, or global organization. The latter encompasses genuinely worldwide functions, e.g., manufacturing, marketing, finance, and logistics. Thus, worldwide operations are the organization's focus, not merely that of a department or division of a national firm. A global organization may follow a multinational, global, or glocal strategy. A multinational strategy adopts a portfolio approach. Its emphasis is on national markets because the need for global integration is not strong. The product is customized for each market and therefore incurs higher production costs. Decision making is primarily local with a minimum of central control. This strategy is most effective given large differences between countries. Also, exchange rate risk is reduced when conducting business in this manner.



Which strategy for a global marketing organization balances local responsiveness and global integration?

  1. Global.
  2. Multinational.
  3. Glocal.
  4. Transnational.

Answer(s): C

Explanation:

A glocal strategy combines some elements of local responsiveness or adaptation with some elements of global integration. Successful telecommunications firms are examples of balancing these elements. Local responsiveness is indicated when local product tastes and preferences, regulations, and barriers are significant. Global integration is indicated when demand is homogeneous and economies of productive scale are large.



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