IIA IIA Certifications IIA-CIA-PART3 Questions & Answers

• Question 911:

  A firm wishing to sell its well-known brand of men's clothing in a certain foreign country redesigned the products because of the greater average size of consumers in that country. However, the firm retained the same basic advertising campaign. According to Keegan's model of adaptation strategies, this firm has adopted a strategy of

  A. Straight extension.

  B. Product adaptation.

  C. Forward invention.

  D. Backward invention.

  Correct Answer: B

  Using a product adaptation strategy, a firm makes changes to the product for each market but not its promotion. This can reduce profit potential but may also provide a marketing advantage by taking into account local wants and needs.

• Question 912:

  A firm sells the same product in different countries and uses the same promotion methods. According to keegan's model of adaptation strategies, this firm has adopted a strategy of

  A. Straight extension.

  B. Product adaptation.

  C. Product invention.

  D. Dual adaptation.

  Correct Answer: A

  Using a straight extension strategy, a higher profit potential exists because virtually no changes are made in the products or its promotion. There is a downside potential if foreign consumers are not familiar with this type of product or do not readily accept it.

• Question 913:

  Firms that sell products worldwide are most likely to have the lowest costs with a marketing mix that is

  A. Adapted to each market.

  B. Standardized for all markets.

  C. A combination of new and adapted products in each market.

  D. A combination of standardized products and adapted promotions.

  Correct Answer: B

  Firms that operate globally must choose a marketing program after considering the need for adaptation to local circumstances. The possibilities lie on a continuum from a purely standardized marketing mix to a purely adapted marketing mix. The former chooses to standardize products, promotion, and distribution. The latter adapts the elements of the mix to each local market. Worldwide standardization of all elements should be the lowest cost marketing strategy. However, even well established global brands ordinarily undergo some adaptation to local markets.

• Question 914:

  U.S

  firm most likely may decide to enter the Australian market because of

  A.

  Geography.

  B.

  The unmet needs of an undeveloped country.

  C.

  Psychic proximity.

  D.

  Population.

  Correct Answer: C

  Attractiveness of a foreign market is a function of such factors as geography, income, climate, population, and the product. Another major factor is the unmet needs of a developing nation, for example, China or India. Entry into a market abroad may be based on many factors, for example, psychic proximity. Thus, a first-time venture abroad might be in a market with a related culture, language, or laws.

• Question 915:

  Michael E Porter developed what is popularly known as the diamond model for determining national advantages in the global business environment. According to this model.

  A. Factor conditions are production advantages that are nature-made or inherited.

  B. Foreign markets exert less influence than home markets on a firm's ability to detect demand trends.

  C. Reliance on related and supporting industries in the home country weakens a firm's international competitiveness.

  D. Cooperation with domestic competitors clearly aids international competitiveness.

  Correct Answer: B

  Home demand conditions determine the inherent demand for goods or services that originate within the home country. Porter believes that home markets exert a much higher influence on a firm's ability to recognize consumer trends than those in a foreign market. Moreover, home demand offsets innovation and product development. Home demand is a function of

  (1)

  the mixture of customer needs and wants,

  (2)

  their scope and growth rate,

  (3)

  the means by which domestic preferences are communicated to international markets. Moreover, a national advantage is achieved when home demand provides more timely and clear trend indicators to domestic firms than to foreign firms.

• Question 916:

  A country has a comparative advantage in international trade when

  A. Firms in the country have a lower cost of production because of natural resources.

  B. It has an absolute advantage with respect to at least one input to production.

  C. Firms in the country have a lower cost of production because of transportation and other geographic factors.

  D. It produces whatever it can produce most efficiently.

  Correct Answer: D

  A country has a comparative advantage when it can achieve a lower cost of production due to a focus on and a cooperative specialization in a particular product. The greatest advantage from trade is obtained when each nation specializes in producing what it can produce most efficiently. If nations specialize and then exchange with others, more is produced and consumed than if each nation tries to be self-sufficient. Specialization of labor is beneficial for individuals; the same principle applies to nations.

• Question 917:

  Which of the following is a regional free-trade zone currently limited to South American nations?

  A. APEC

  B. Mercosul.

  C. The Triad Market.

  D. NAFTA.

  Correct Answer: B

  Mercosul is a free-trade agreement among South American nations. They include Argentina, Brazil, Uruguay, and Paraguay. Chile and Bolivia are associate members.

• Question 918:

  Which strategy for a global marketing organization emphasizes relatively strong central control?

  A. Global.

  B. Multinational.

  C. Creation of an international division.

  D. Global

  Correct Answer: A

  A global strategy regards the world as one market. The product is essentially the same in all countries. Central control of the production process is relatively strong. Faster product development and lower production cost are typical.

• Question 919:

  Which method of expanding into international markets is most likely the riskiest?

  A. A local storage and sale arrangement.

  B. Local component assembly.

  C. Direct investment.

  D. Joint venture.

  Correct Answer: C

  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.

• Question 920:

  The three major factors favoring globalization are

  A. Cultural, commercial, and technical.

  B. Flexibility, proximity, and adaptability.

  C. Political, technological, and social.

  D. Ambition, positioning, and organization.

  Correct Answer: C

  The new economy is driven by the digital revolution that facilitates international commerce by providing capabilities that did not exist a relatively few years ago. It is also driven by such political events as the fall of the Soviet Union, the participation of China in the world economic system, the emergence of the European Union, and the creation of other regional free trade zones. These technological and political factors are intertwined with social changes, for example, greater concern for the rights of women and minorities; the advance of multilingualism; and the convergence of tastes in fashion, music, and certain other cultural factors. Accordingly, these factors favor globalization by reducing trade barriers, reducing cost of coordination, increasing economies of scale, and encouraging standardization and global branding.