Deck 18: Pricing for International Markets

Question 1

Barter may be used to reduce a country's foreign debt.

Answer 1

True

Question 2

In variable-cost pricing,the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

Answer 2

True

Question 3

One of the important reasons for manufacturing/assembling in a country's FTZ (free trade zone)is an attempt to reduce price escalation.

Answer 3

True

Question 4

Exclusive distribution is often used to offset the effects of parallel importing.

Question 5

One way to define the concept of dumping is to say that excess capacity has been cleared from the books of a manufacturer.

Question 6

One of the necessary ingredients in a parallel importing scheme is to have a freight forwarder who is willing to provide fake bills of lading to the original manufacturer.

Question 7

One of the export strategies that can be tried when the domestic currency is weak is to improve productivity and engage in vigorous cost reduction.

Question 8

Full-cost pricing is a philosophy that insists one unit of a product is different from ensuing units and must,therefore,be priced differently.

Question 9

Many global companies consider currency exchange rate swings to be a major pricing problem.

Question 10

A good way to describe price escalation is to define the term as being the added costs incurred as a result of exporting products from one country to another.

Question 11

A company uses skimming pricing as an objective when it desires to reach a market segment that is relatively price insensitive and thus willing to pay a premium price for the value received.

Question 12

In a free trade zone,payment of import duties is postponed until the product leaves the free trade zone and enters the country.

Question 13

One of the types of countertrade is barter.

Question 14

A countervailing duty restricts the amount a country will import by declaring imports to not be in the best interest of the country that is importing.

Question 15

Countertrade includes for distinct transactions: retail,wholesale,producer,and government.

Question 16

Companies that use pricing to achieve marketing objectives are engaged in static pricing.

Question 17

Setting the right price for a product can be the key to success or failure in the international marketplace.

Question 18

Leasing helps to guarantee better maintenance and service on overseas equipment.

Question 19

Parallel imports develop when importers buy products from more than one country.

Question 20

By shipping unassembled goods to a free trade zone in an importing country,a marketer can lower costs in a variety of ways.One of these ways is that import taxes are completely skipped by following such a practice.

Question 21

In general,price decisions are viewed in two ways.Which of the following is one of those ways?

A)pricing is often beyond the control of a company
B)pricing is more a phenomenon of luck than planning
C)pricing is an active instrument of accomplishing marketing objectives
D)pricing is a function of product decisions
E)pricing is a function of promotion decisions

Question 22

An Advanced Pricing Agreement is a requirement with the IRS and a taxpayer on transfer pricing methods that will be applied to the taxpayer's transactions with an affiliate.

Question 23

______________ imports develop when importers buy products from distributors in one country and sell them in another country to distributors who are not part of the manufacturer's regular distribution system.

A)Black-listed
B)Direct
C)Circular
D)Co-mingled
E)Parallel

Question 24

In ____________ pricing,the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

A)full-cost
B)fixed-cost
C)variable-cost
D)demand-based
E)supply-based

Question 25

If a U.S.firm sells Vietnamese producer equipment that is then used to make clothing that the United States agrees to buy back from Vietnam,the two companies most likely have entered into a countertrade arrangement called a product buy-back agreement.

Question 26

The Ryan Group,an importing organization in New York,has just bought an excessive amount of perfume from perfume manufacturer in Paris.Unknown to the perfume manufacturer,The Ryan Group has sold 25 percent of its order to distributors in France that have been unable to purchase any products from the perfume manufacturer.Which of the following best describes the transaction that has just taken place?

A)black-listed importing
B)direct importing
C)circular importing
D)co-mingled importing
E)parallel importing

Question 27

One of the unscrupulous practices that allows parallel importing to function is when freight forwarders:

A)buy black-market goods.
B)send fake paperwork to manufacturers about the final destination of products they handle.
C)double the price of goods to retailers.
D)steal portions of a consignment.
E)fail to pay their outstanding invoices in a timely manner.

Question 28

Another term for parallel importing is:

A)the black market.
B)manufacturer black-listing.
C)government piracy.
D)gray-market goods.
E)forwarded market.

Question 29

Which of the following,because it encourages retailers to stock large assortments,often creates a favorable condition for parallel importing?

A)exclusive distribution
B)selective distribution
C)intensive distribution
D)global distribution
E)dual distribution

Question 30

Prices of goods transferred from a company's operations or sales units in one country to its units elsewhere may be adjusted to enhance the ultimate profit of the company as a whole.This is called intracompany pricing.

Question 31

One of the primary functions of a cartel is to control markets for its goods and services.

Question 32

In most cases the reason that products which cost relatively little in one country cost more in another is:

A)profiteering.
B)inadequate demand.
C)inelastic demand.
D)elastic demand.
E)the high costs of exporting.

Question 33

If a company has as its objective to stimulate market growth and capture market share by deliberately offering products at low prices,it will most likely use a pricing strategy called:

A)penetration pricing.
B)escalator pricing.
C)prestige pricing.
D)skimming pricing.
E)oligopolistic pricing.

Question 34

Barter houses,which assist in some forms of countertrade,are found mostly in the United States.

Question 35

The added costs incurred as a result of exporting products from one country to another are called:

A)price deflation.
B)pricing mechanisms.
C)price escalation.
D)price gouging.
E)price translation.

Question 36

Assuming that the international marketer has produced the right product,initiated the proper channel of distribution,and promoted goods and services correctly,the effort can fail badly if the international marketer fails to: (pick the best answer)

A)inform the host government of all its marketing objectives.
B)properly price the goods or services.
C)work through union representatives.
D)consider the environmental impact of its goods or services.
E)deliver the product to the correct place at the correct time.

Question 37

In _____________ pricing,the philosophy is that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

A)full-cost
B)fixed-cost
C)variable-cost
D)demand-based
E)supply-based

Question 38

If a company has as its objective to reach a market segment that is relatively price insensitive and thus willing to pay a premium price for the value received,it will most likely use a pricing strategy called:

A)penetration pricing.
B)everyday low pricing.
C)value-based pricing.
D)skimming pricing.
E)oligopolistic pricing.

Question 39

As a form of countertrade,a compensation deal involves trading one set of goods for another.

Question 40

Administered pricing is an attempt to establish pricing for an entire market.

Question 41

Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges.These assembly plants are known as __________ plants.

A)anti-dumping
B)screwdriver
C)importing
D)exporting
E)free labor

Question 42

In Russia,Johnson & Johnson's 2-in-1 Shower Gel is considered to be a cosmetic (20 percent tariff).J&J would like it to be considered as a soap substitute (15 percent tariff).This points out which of the following strategies that companies generally prefer in foreign markets with respect to tariffs?

A)shift the demand for the high tariff product
B)ask for reclassification of the product to a lower customs classification
C)question the host country's definitions
D)withdraw the product from a country that is obviously ripping-off manufacturers
E)switch to typical generic labeling

Question 43

When the value of the dollar is weak relative to the buyer's currency,companies generally employ __________ pricing.

A)competition-based pricing
B)demand-based pricing
C)supply-based pricing
D)psychological pricing
E)cost-plus pricing

Question 44

Sales at discount stores grew by 78 percent from 1995 to 2000 in Japan.The reason for this remarkable increase was the ___________ that Japan experienced in that time period.

A)deflation
B)inflation
C)economic boom
D)population increase
E)population decrease

Question 45

Currency exchange rate swings are considered by many global companies to be __________.

A)an opportunity for windfall profits
B)an uncontrollable without a strong U.S.dollar
C)a standard seasonal variation
D)cost of doing business
E)a major pricing problem

Question 46

Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

A)have components manufactured in several countries and ship directly to distributor for assembly to lower manufacturing costs.
B)reduce total shipment quantity count by reassembling goods onboard ocean vessel to reduce ocean transportation rates.
C)declare components as obsolete inventory with no market value to lower import duties.
D)tariffs may be lower because duties are typically assessed at a lower rate for unassembled versus assembled goods.
E)ship smaller components by air carrier and larger components by ocean freight to reduce overall transportation costs.

Question 47

Which of the following generally bears the burden for (pays for)taxes and tariffs associated with importing goods from another country?

A)the original manufacturer
B)the wholesaler
C)the retailer
D)the government of the host country
E)the consumer that buys the goods

Question 48

A foreign trade zone is an important method for controlling which of the following?

A)theft.
B)labor problems at home.
C)price escalation.
D)profiteering.
E)deflation.

Question 49

An important selling technique to alleviate high prices and capital shortages for capital equipment is the __________ system.

A)leasing
B)anti-dumping
C)direct buy-back
D)consignment
E)rental

Question 50

Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

A)reduce total shipment quantity count by reassembling goods onboard ocean vessel to reduce ocean transportation rates.
B)declare components as obsolete inventory with no market value to lower import duties.
C)ocean transportation rates are affected by weight and volume;unassembled goods may qualify for lower freight rates.
D)ship smaller components by air carrier and larger components by ocean freight to reduce overall transportation costs.
E)have components manufactured in several countries and ship directly to distributor for assembly to lower manufacturing costs.

Question 51

One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international arena:

A)below the cost of production.
B)to only those that can pay for it.
C)to get rid of excess supply.
D)to get rid of old or useless merchandise.
E)to rid the domestic market of potentially harmful substances and products.

Question 52

For ___________ duties to be invoked,it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by the dumping.

A)countertrade
B)domestic protection
C)countervailing
D)foreign practices
E)import restriction

Question 53

Honda was accused of ____________ when it sold motorcycles in the United States below the price of those same motorcycles sold in Japan.

A)predatory pricing
B)monopolistic pricing
C)dumping
D)piracy
E)stupidity

Question 54

Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

A)ship smaller components by air carrier and larger components by ocean freight to reduce overall transportation costs.
B)if labor costs are lower in the importing country,substantial savings may be realized in the final product cost.
C)have components manufactured in several countries and ship directly to distributor for assembly to lower manufacturing costs.
D)declare components as obsolete inventory with no market value to lower import duties.
E)reduce total shipment quantity count by reassembling goods onboard ocean vessel to reduce ocean transportation rates.

Question 55

When PepsiCo first began to market Pepsi Cola in Russia,it was asked to accept an equal amount of Russian vodka as payment in return for permission to sell Pepsi Cola.The formal name for this trading strategy is called:

A)bargaining.
B)countervailing trade.
C)buy-back.
D)countertrade.
E)bribery.

Question 56

If a company is willing to accept countertrade in a foreign market,it often gives the company a:

A)problem with asset management.
B)competitive advantage.
C)tax problem in its home country.
D)great deal of lost revenue.
E)poor reputation for nonethical activity.

Question 57

Which of the following would be considered to be an advantage of leasing rather than owning?

A)lease revenue tends to fluctuate greatly
B)leased equipment rarely breaks down
C)leasing helps guarantee better maintenance and service on overseas equipment
D)leasing keeps companies from using experimental equipment
E)leasing allows immediate use

Question 58

What is the function of a countervailing duty?

A)Its function is to balance revenues against costs.
B)Its function is to restrict the amount a country will import.
C)Its function is to provide revenues for someone who uses parallel imports as a growth strategy.
D)Its function is to do A,B,and C above.
E)Its function is not revealed by any of the above.

Question 59

What is the best way to describe international currencies relationship to one another?

A)all currencies are related to the dollar for contractual purposes
B)there is a stable standard in the world against which all other currencies are pegged
C)all major currencies are free floating relative to one another
D)the U.N.mandates currency valuation
E)the World Bank mandates currency valuation

Question 60

Fiona's company imports materials and parts into an FTZ within the United States and then exports finished products to other countries.Her company will have to pay:

A)tariffs based on the value of the materials.
B)tariffs based on the value of the parts
C)tariffs based on the value of the parts and materials.
D)tariffs based on the value of the finished products when they leave the country.
E)no tariffs

Question 61

Will's company uses countertrade as a marketing and pricing tool.His company has a _______ countertrade strategy.

A)proactive
B)reactive
C)standard
D)nondescript
E)highly volatile

Question 62

Parallel importing has also been called __________ marketing.

Question 63

Michael McDonald has sold machine lathes to a company in Mexico.In order to make his sale,Mr.McDonald has agreed to accept 30 percent of the amount owed in finished goods made by the plant that bought the machine lathes.Which of the following countertrade options is Mr.McDonald using?

A)barter
B)compensation deal
C)counterpurchase
D)buy-back
E)subornation

Question 64

Which of the following pricing strategies led to what called a "tax war" between the U.S.and Japan?

A)fixed-base pricing.
B)variable-cost pricing.
C)demand-based pricing.
D)premium pricing.
E)transfer pricing.

Question 65

Another term for _____________ is an offset trade.

A)barter
B)a compensation deal
C)counterpurchase
D)buy-back
E)subornation

Question 66

The crucial problem confronting a seller in a countertrade negotiation is determining the value of and ___________ for the goods offered.

A)delivery method
B)warranties
C)insurance
D)potential demand
E)the cost

Question 67

What do barter houses do?

A)find markets for barter goods
B)buy goods from producers
C)buy and hold bartered goods for resellers
D)insure any barter goods
E)auction goods for sellers

Question 68

Kyle's company uses countertrade when they believe it is the only way to make a deal.His company has a ___________ strategy with respect to countertrade.

A)proactive
B)reactive
C)standard
D)nondescript
E)highly volatile

Question 69

Which of the following has become the most popular venue for countertrade activities?

A)barter houses
B)wholesale warehouses
C)the Internet
D)the United Nations commerce division
E)the U.S.Department of Commerce

Question 70

All of the following are considered to be forms of countertrade EXCEPT:

A)barter.
B)compensation deals.
C)counterpurchase.
D)buy-back.
E)subornation.

Question 71

Which of the following pricing formats is considered to be an attempt to establish prices for an entire market?

A)administered pricing
B)reciprocal pricing
C)predatory pricing
D)premium pricing
E)skimming pricing

Question 72

United Wheat Growers has agreed to accept 30 percent of the amount owed for a shipment of disease-resistant wheat from a Russian consortium in Russian bakery flour.The only problem is that UWG also produces bakery flour from its wheat.Therefore,UWG has just accepted a competing item as partial payment for something it has sold.This problem often occurs in which of the following forms of countertrade?

A)barter
B)compensation deal
C)timed purchase
D)buy-back
E)subornation

Question 73

Which of the following is probably the most frequently used form of countertrade?

A)barter
B)compensation deal
C)counterpurchase
D)buy-back
E)subornation

Question 74

A _________ involves payment in goods and cash.

A)barter deal
B)compensation deal
C)counterpurchase
D)buy-back
E)opaque transaction

Question 75

Another term for transfer pricing is:

A)fixed-base pricing.
B)variable-cost pricing.
C)demand-based pricing.
D)premium pricing.
E)intracompany pricing.

Question 76

If a company is engaged in transfer pricing,it can avoid penalties imposed by the IRS if it will enter into an agreement with the IRS called a(n):

A)a buy-back agreement.
B)lend-lease agreement.
C)Advanced Pricing Agreement.
D)Proactive Pricing Agreement.
E)a reciprocal agreement.

Question 77

A seller delivers irrigation motors to a buyer in Mexico and receives 70 percent payment in pesos and 30 percent in agricultural crops grown on Mexican farmland.This would be an example of which of the following?

A)barter
B)compensation deal
C)counterpurchase
D)buy-back
E)opaque transaction

Question 78

Countertrade is often used by international marketers to gain entry into a country.PepsiCo used this strategy when it agreed to:

A)offer a more lucrative contract than rival Coca-Cola.
B)to package its Russian products in red rather than blue packages.
C)exchange Pepsi syrup for Russian vodka.
D)pressures the U.S.government into giving PepsiCo an exclusive contract with Russia.
E)to merge with KFC and Taco Bell.

Question 79

A direct exchange of goods between two parties in a transaction is called:

A)barter.
B)a compensation deal.
C)counterpurchase.
D)buy-back.
E)reciprocity.

Question 80

When several Middle-Eastern oil companies worked together to form OPEC to control oil sales,production,and revenues for all oil products coming out of the region,the group was called a:

A)cabal.
B)monopoly.
C)cartel.
D)production association.
E)vertical combine.