CGMS 723 Quiz 1 Questions and
Verified Responses
Domestic Market - CORRECT RESPONSE -The market which the company's headquarters is
located and that it continues to serve with its products and services.
International Market - CORRECT RESPONSE -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 RESPONSE -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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- an exchange of capital, goods and/or services
across international borders or territories.
- represent a significant portion of GDP
International Trade & Globalization - CORRECT RESPONSE -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 RESPONSE -states that countries should only trade in goods or
services that they can produce more of using the same resources as other countries.
Verified Responses
Domestic Market - CORRECT RESPONSE -The market which the company's headquarters is
located and that it continues to serve with its products and services.
International Market - CORRECT RESPONSE -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 RESPONSE -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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- 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 RESPONSE -- an exchange of capital, goods and/or services
across international borders or territories.
- represent a significant portion of GDP
International Trade & Globalization - CORRECT RESPONSE -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 RESPONSE -states that countries should only trade in goods or
services that they can produce more of using the same resources as other countries.
