Deck 12: Pricing in international markets

Question 1

Exterms are the internationally accepted standard definitions for terms of sale.

Answer 1

False

Question 2

Financing arrangements for export transactions are critical to secure sales and to combat various types of risk.

Answer 2

True

Question 3

Because international currency is fluid, neither party will get harmed if the exchange rate is different in one country versus another.

Answer 3

False

Question 4

The most favourable term to the importer is consignment selling, which allows the importer to defer payment until the goods are actually sold.

Question 5

A status-conscious market that insists on products with established reputations will be inelastic, allowing for far more pricing freedom than a market where price-consciousness drives demand.

Question 6

Prices quoted CFR apply only at the point of origin, and the seller agrees to place the goods at the disposal of the buyer at the specified place on the date or within the fixed period.

Question 7

Price escalation is often compounded by environmental constraints imposed by government regulations or the demands of ever more environmentally conscious consumers.

Question 8

Factoring houses may purchase an exporter's receivables for a discounted price.

Question 9

The currency futures market is conceptually similar to the forward market; that is, to buy futures on the British pound sterling implies an obligation to buy in the future at a pre-specified price.

Question 10

Factoring houses are places that afford reliable accounting of the dollar increment of actual purchasing power.

Question 11

The final customer price is determined based on competitive prices, and then both production and marketing must be adjusted to the price.

Question 12

An exporter can use a penetration pricing approach if the product is unique and some segments of the market are willing to pay the high price.

Question 13

Export financing terms can significantly affect the final price paid by sellers.

Question 14

Financing assistance for exporters is only available from the public sector.

Question 15

The ability to offer financing or credit terms is often critical in competing for, and winning, export contracts.

Question 16

Some exporters prefer price stability to the greatest possible degree and allow mark-ups to vary in maintaining stable local currency prices.

Question 17

Overall, exporters see the pricing decision as a critical one, which means that it is typically taken centrally under the supervision of top-level management.

Question 18

A letter of credit is an instrument issued by a bank at the request of a buyer.

Question 19

A dual pricing strategy is based on demand orientation.

Question 20

The marginal cost method considers the direct costs of producing and selling products for export as the floor beneath which prices cannot be set.

Question 21

________________ is the price that unrelated parties would have reached on the same transaction.

A)Cost-based price
B)Market-based price
C)Arm's-length price
D)Yield based price

Question 22

Which of the following is not a general price-setting strategy in international marketing?

A)Base plus cost margin
B)Standard worldwide price
C)Dual pricing
D)Market-differentiated pricing

Question 23

In the cost-plus method of pricing, there is one major drawback that sometimes precludes exports from using it.What is this drawback?

A)The final price may be so high that the firm's competitiveness is compromised.
B)It is so variable that the actual price cannot be substantiated.
C)There is high turnover of product resulting in unacceptable costing fluctuations.
D)Each of the elements has to be examined individually, using complex structure grids.

Question 24

Which of the following is an example of a leasing transaction?

A)Thales Underwater Systems Pty Ltd contracted two of its newest solid seismic Guardian streamers to Veritas DGC Inc.EFIC structured the leasing transaction where it provided two export finance guarantees to ANZ Bank in respect of rental payments made by Veritas.ANZ Bank acted as the lessor, purchasing the equipment and then leasing it to Veritas.
B)EFIC provided a direct loan for the sale of a catamaran from Incat Tasmania Pty Ltd to a buyer in the UK.
C)EFIC provided Sydney-based Viocorp with a working capital guarantee, allowing their bank ANZ to provide them with the working capital they needed to undertake a major communications contract in Malaysia.
D)All of these choices.

Question 25

Which of the following is not a general alternative pricing mechanism?

A)Posting
B)Skimming
C)Market pricing
D)Penetration

Question 26

_______ serves as a means of communication with the buyer by providing a basis for judging the attractiveness of the offer.

A)Price
B)Packaging
C)Colours
D)Advertising

Question 27

Free on board (FOB)applies to _________ shipments.

A)vessel
B)air
C)train
D)vessel, air and train

Question 28

Market-differentiated pricing calls for export pricing according to the dynamic conditions of the marketplace.What changes might affect this type of pricing?

A)Pre-, present- and post-sale fluctuations
B)Changes in competition and exchange rates
C)Space, time and utility costs
D)Money cost and markets

Question 29

The combined effect of both clear-cut and hidden costs results in export prices that far exceed domestic prices.This cause is known as:

A)export pricing escalation.
B)stepped escalation.
C)domestic export differentiation.
D)price escalation.

Question 30

Which of the following is not a factor contributing to the setting of export price?

A)Increased distance from the markets
B)Currency fluctuations
C)Different marketing communications
D)Governmental policies

Question 31

The marginal cost method of pricing considers the direct costs of producing and selling products for export.What costs are disregarded in this method?

A)Currency fluctuations
B)Potential government regulations in future legislative sessions
C)Fixed costs, R&D and domestic overheads
D)Weather forecasts, especially in regards to El Nino

Question 32

Which of the following is considered an external factor in setting an export price?

A)Specific target market customers
B)Cost of developing the product
C)Cost of producing the product
D)Cost of marketing the product

Question 33

The forward exchange market is:

A)conceptually similar to the futures market.
B)a market for forward contracts.
C)useful for foreign currency hedging.
D)All of these choices

Question 34

The objective of _______ is to achieve the highest possible contribution in a short time.

A)following the market price
B)skimming
C)penetration pricing
D)prestige pricing

Question 35

What is not an objective when establishing transfer prices?

A)Reduction of taxes and tariffs
B)Avoidance of conflicts with home and host governments
C)Goal congruence and motivation of subsidiary managers
D)Reduction of taxes and tariffs; avoidance with conflicts with home and host governments; and goal congruence and motivation of subsidiary managers.

Question 36

Which of the factors is not considered when establishing the basic premise for pricing?

A)The importance of price in customer decision making
B)The strength of perceived price-quality relationships
C)Customer, regulatory, competitive and financial characteristics
D)Potential reactions to marketing-mix manipulation by marketers

Question 37

For what would a distributor in certain markets forgo profit margins?

A)Competition
B)Trade
C)Tax deferment
D)Exclusivity

Question 38

___________ provides the exporter with cash at the time of the shipment.The importer pays the exporter with bills of exchange or promissory notes guaranteed by a leading bank in the importer's country.

A)Official trade finance
B)Bank
C)Factoring
D)Forfaiting

Question 39

______________ refers to a tactic whereby a foreign firm intentionally sells at a loss in another country in order to increase its market share at the expense of domestic producers, which amounts to an international price war.____________ is the result of time lags between the dates of sales transaction, shipment and arrival.Prices, including exchange rates, can change in such a way that the final sales price turns out to be below the cost of production or below the price prevailing in the exporter's home market.

A)Predatory dumping; Unintentional dumping
B)Dumping; Anti-dumping C Predatory dumping; Intentional dumping
D)Dumping; Unintentional price

Question 40

Which price system differentiates between domestic and export prices, where two approaches to pricing products for exports are available (cost-driven and market-driven)?

A)Dual pricing
B)Bi-market pricing
C)Two-tiered pricing
D)Export secondary pricing

Question 41

For new products and technologies, firms will increasingly be forced to engage in ___________ by distributing development costs over the anticipated volume of sales.

A)Forward pricing
B)Fair pricing
C)Strategic pricing
D)Backward pricing

Question 42

Explain the four categories of the Incoterms.

Question 43

Prices quoted ex-works (EXW)are when the seller agrees to place the goods at the disposal of the buyer at the specified place on the date or within the fixed period.At which point do these prices apply?

A)At the end of the contract
B)Only at the point of origin
C)Throughout the entire process
D)Before, during and after the process

Question 44

What is a Letter of Credit?

A)Where the bank promises to pay a specified amount of money on presentation
B)A way for a bank to establish and maintain a credit card account on behalf of an exporter
C)A letter given to large shipping companies by a bank or trading company when credit terms are negotiated
D)An instrument of currency issued by a foreign government to an exporter of services

Question 45

What is the process of setting an export price?

Question 46

Which of the following is not included in export-related costs?

A)The cost of modifying the product for foreign markets
B)Operational costs of the export operation
C)Costs incurred in entering the foreign market
D)The cost of modifying marketing communications

Question 47

_______ calls for export pricing according to the dynamic conditions of the marketplace.

A)Skimming
B)Follow the market pricing
C)Penetration pricing
D)Market-differentiated pricing

Question 48

Which of the following does not apply to freight forwarders?

A)They can take care of the marketer's duty drawback receivables.
B)Rates for freight and insurance may be far more economical compared with an individual exporter.
C)They pay for the shipping and absorb the costs.
D)They are useful facilitators and advisors.

Question 49

What is not a reason for countertrade?

A)The world debt crisis and exchange rate volatility have made ordinary trade financing very risky.
B)The use of countertrade permits the covert reduction of prices and therefore allows firms and governments to circumvent price and exchange controls.
C)Many countries in the developing world cannot obtain the trade credit or financial assistance necessary to afford desired imports.
D)Countertrade is often viewed by firms as an excellent mechanism to exit markets.

Question 50

The International Chamber of Commerce accepted standard definition for terms of sale in 1936 and revised them in 2000 to assist buyers and sellers in the international marketplace.What are these standard definitions called?

A)Encoterm
B)Inchaco terms
C)ICC terms
D)Incoterms

Question 51

Which of the following is not considered in negotiating terms of payment?

A)The amount of payment and the need for protection
B)The capacity for financing international transactions
C)Practices in the country
D)The relative strength of the parties involved.

Question 52

___________ pricing, or intracorporate pricing, is the pricing of sales to members of the extended corporate family.

A)Moving
B)Transaction
C)Transfer
D)Intrafamily

Question 53

The most favourable term to the exporter is

A)freight on board.
B)shipment in process.
C)cash in advance.
D)credit with duty.

Question 54

Which one of the following is not descriptive of letters of credit?

A)Irrevocable versus revocable
B)Instant versus prolonged
C)Confirmed versus unconfirmed
D)Frequently used

Question 55

A more refined form of barter, aimed at reducing the effect of the immediacy of the transaction, is called:

A)switch trading.
B)buyback.
C)clearing arrangements.
D)complex barter.

Question 56

Destination-specific adjustment of mark-ups in response to exchange-rate changes are referred to as:

A)absorption approach.
B)mark-up via commercialisation.
C)prime manipulation.
D)pricing-to-market.

Question 57

What factors should be considered when assessing a foreign private buyer?

Question 58

Which of the following is not a typical method focusing on cost cutting?

A)Reorganising the channel of distribution and thereby shortening the channel and adapting the product
B)Reformulating the product by including less expensive ingredients or unbundling costly features
C)Assembling or producing overseas
D)Outsourcing R&D capabilities