Deck 11: Global Pricing Strategies

Question 1

From the standpoint of an importer the most advantageous form of payment is a(n):
(a) Open account transaction
(b) Confirmed letter of credit
(c) Consignment sale
(d) Irrevocable letter of credit

Answer 1

C

Question 2

What is price escalation? Outline three strategies that manufacturers can use to reduce the impact of price escalation on consumers.

Answer 2

Not Answer

Question 3

With a geocentric pricing strategy the firm sets one worldwide price and country managers have no latitude to change it.

Answer 3

False

Question 4

Which of the following is a basis for transfer pricing favored by governments to discourage companies from shifting income to foreign subsidiaries in low- or no-tax jurisdictions?
(a) Cost-based approach
(b) Negotiated policy
(c) The arm's length standard
(d) Cost-plus approach

Question 5

In forfait transactions the exporter cannot be held responsible if the importer does not pay, i.e. these transactions are without recourse to the exporter.

Question 6

Which of the following approaches may be used by multinational companies to deal with the problem of price escalation?
(a) Disintermediation
(b) Manufacture the product in the foreign country
(c) Backward innovation
(d) All of the above
(e) (a) and (b) only

Question 7

In an EXW transaction the exporter and importer are required to agree on a mutually acceptable time/date for delivery. At which point does responsibility pass from exporter to importer?
(a) Once the shipment is at the destination
(b) At the point of origin.
(c) Once the shipment is in international waters
(d) As soon as import clearance is complete

Question 8

What is dumping? Distinguish between predatory and unintentional dumping.

Question 9

The internationally accepted standard definitions for terms of sale set by the International Chamber of Commerce (ICC) which set out the responsibilities of the buyer and the seller in export transactions and identifies when ownership of goods passes from seller to buyer are called:
(a) INCOTERMS
(b) G-TERMS
(c) ICC-TERMS
(d) EX-TERMS
(e) O-TERMS

Question 10

Mary knew that her firm would have to change its pricing strategy in the Asian market. Her company's line of high end cosmetics was the subject of price arbitrage. Mary believed that the problem stemmed from the degree of autonomy granted to the country managers in the region. Mary's firm is following a(n):
(a) Geocentric pricing strategy
(b) Transfer pricing strategy
(c) Ethnocentric pricing strategy
(d) Localized pricing strategy

Question 11

Barter and buybacks are both non-price options available to the firm. What is the difference between these two options?

Question 12

Distinguish between a polycentric and geocentric pricing strategy.

Question 13

What is transfer pricing? Describe two approaches to the calculation of transfer prices.

Question 14

___________________ involves firms colluding on the price that their customers should be charged and is illegal.
(a) Dumping
(b) Price fixing
(c) Predatory dumping
(d) Price escalation

Question 15

The global marketing manager can mitigate foreign exchange risk by the use of:
(a) Forward contracts
(b) Currency options
(c) Futures contracts
(d) All of the above
(e) (a) and (c) only