CGMS 723 QUIZ 1 WITH COMPLETE
SOLUTIONS
Domestic Market - Correct Answers -The market which the company's headquarters is
located and that it continues to serve with its products and services.
International Market - Correct Answers -A Market located outside a company's domestic
market which derives demand form the company's products and services
5 Levels of International Business Transactions - Correct Answers -Level 1- Accidental
Exporting
Level 2- Active Exporting
Level 3 - International Marketing
Level 4 - International Marketing and Limited Operations
Level 5 - Foreign Direct Investment (FDI)
Accidental Exporting - Correct Answers -- First level of International Business
Transactions, lowest level of risk
- act of producing products/services to be sold within domestic market, but demand is
derived in the international market.
Active Exporting - Correct Answers -- Second level of International Business
Transactions
- act of producing product/services to meet demand in 1 or more international markets
- Main activity is to buy product for export market and distribution
- Good knowledge and relationship with custom brokers and host government regulation
International Marketing - Correct Answers -- Third level of International Business
Transactions
- the business activity described in Level 2, as well as the decision by management to
move its international marketing function out of the domestic market and in (or closer to)
the international market it serves through active exporting activities.
- Marketing function will encompass decisions of the marketing mix's "P's" (product,
price, promotion, place, packaging, positioning and people) for marketing and market
entry strategies. These will be dispensed from the international location.
International Marketing and Limited Operations - Correct Answers -- Fourth level of
International Business Transactions
-Includes all activities of level 3, plus limited warehousing/final assembly operations
, In this level, a company is choosing to offer sales support for customers in the
international market or it is producing inventory to meet expected future demand.
This level is best suited for companies who serve markets with predictable seasonal
demand.
Seldom chosen as a means of international business. Most companies shift directly
from level 3-5 (i.e. International marketing to Foreign Direct Investment)
Foreign Direct Investment (FDI) - Correct Answers -- Fifth level of International
Business Transactions (highest risk, highest expected return)
- the investing of people, resources, proprietary tech/processes, money, and assets into
an international market and replication of the corporation's structure in a foreign market
(setting up a foreign division or head office). This is the sole advantage of a
Multinational Enterprise (MNE)
- Companies engaged in this level will have suppliers from around the globe to produce
products/services for the international markets.
International Trade - Correct Answers -- an exchange of capital, goods and/or services
across international borders or territories.
- represent a significant portion of GDP
International Trade & Globalization - Correct Answers -Factors that have major impacts
on the international trade system:
-Industrialization-Advanced
- Transportation
- Globalization
-Multinational Corporation
-Outsourcing
Increasing international trade is crucial. Without, we are limited to product produced in
our borders
Absolute Advantage - Correct Answers -states that countries should only trade in goods
or services that they can produce more of using the same resources as other countries.
eg. For inputs such as labour, China is able to compete in international trade because of
their low labour costs
Comparative Advantage - Correct Answers -When 2 countries enter into trade, they
should trade in goods and services that each countries can product more of using
resources the same resources as the other country
Heckscher-Ohlin Theory - Correct Answers -- economic theory that proposes that
countries export what they can produce efficiently and plentifully
- Countries should import goods that require resources in short supply
- This theory is different from the absolute and comparative advantage theory as it
focuses on the productivity of the production process for a particular good
SOLUTIONS
Domestic Market - Correct Answers -The market which the company's headquarters is
located and that it continues to serve with its products and services.
International Market - Correct Answers -A Market located outside a company's domestic
market which derives demand form the company's products and services
5 Levels of International Business Transactions - Correct Answers -Level 1- Accidental
Exporting
Level 2- Active Exporting
Level 3 - International Marketing
Level 4 - International Marketing and Limited Operations
Level 5 - Foreign Direct Investment (FDI)
Accidental Exporting - Correct Answers -- First level of International Business
Transactions, lowest level of risk
- act of producing products/services to be sold within domestic market, but demand is
derived in the international market.
Active Exporting - Correct Answers -- Second level of International Business
Transactions
- act of producing product/services to meet demand in 1 or more international markets
- Main activity is to buy product for export market and distribution
- Good knowledge and relationship with custom brokers and host government regulation
International Marketing - Correct Answers -- Third level of International Business
Transactions
- the business activity described in Level 2, as well as the decision by management to
move its international marketing function out of the domestic market and in (or closer to)
the international market it serves through active exporting activities.
- Marketing function will encompass decisions of the marketing mix's "P's" (product,
price, promotion, place, packaging, positioning and people) for marketing and market
entry strategies. These will be dispensed from the international location.
International Marketing and Limited Operations - Correct Answers -- Fourth level of
International Business Transactions
-Includes all activities of level 3, plus limited warehousing/final assembly operations
, In this level, a company is choosing to offer sales support for customers in the
international market or it is producing inventory to meet expected future demand.
This level is best suited for companies who serve markets with predictable seasonal
demand.
Seldom chosen as a means of international business. Most companies shift directly
from level 3-5 (i.e. International marketing to Foreign Direct Investment)
Foreign Direct Investment (FDI) - Correct Answers -- Fifth level of International
Business Transactions (highest risk, highest expected return)
- the investing of people, resources, proprietary tech/processes, money, and assets into
an international market and replication of the corporation's structure in a foreign market
(setting up a foreign division or head office). This is the sole advantage of a
Multinational Enterprise (MNE)
- Companies engaged in this level will have suppliers from around the globe to produce
products/services for the international markets.
International Trade - Correct Answers -- an exchange of capital, goods and/or services
across international borders or territories.
- represent a significant portion of GDP
International Trade & Globalization - Correct Answers -Factors that have major impacts
on the international trade system:
-Industrialization-Advanced
- Transportation
- Globalization
-Multinational Corporation
-Outsourcing
Increasing international trade is crucial. Without, we are limited to product produced in
our borders
Absolute Advantage - Correct Answers -states that countries should only trade in goods
or services that they can produce more of using the same resources as other countries.
eg. For inputs such as labour, China is able to compete in international trade because of
their low labour costs
Comparative Advantage - Correct Answers -When 2 countries enter into trade, they
should trade in goods and services that each countries can product more of using
resources the same resources as the other country
Heckscher-Ohlin Theory - Correct Answers -- economic theory that proposes that
countries export what they can produce efficiently and plentifully
- Countries should import goods that require resources in short supply
- This theory is different from the absolute and comparative advantage theory as it
focuses on the productivity of the production process for a particular good
