Deck 18: Pricing for International Markets

Question 1

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.

Answer 1

True

Question 2

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.

Answer 2

True
Explanation: Excess profits exist in some international markets, but generally the cause of the disproportionate difference in price between the exporting country and the importing country, here termed price escalation, is the added costs incurred as a result of exporting products from one country to another.

Question 3

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

Answer 3

False
Explanation: Various economists define dumping differently. One approach classifies international shipments as dumped if the products are sold below their cost of production. Another approach characterizes dumping as selling goods in a foreign market below the price of the same goods in the home market.

Question 4

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

Question 5

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 6

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

Question 7

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

Question 8

Eliminating costly functional features or lowering overall product quality is a method of minimizing price escalation.

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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

Question 16

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 17

Deflation causes consumer prices to escalate, and consumers face ever-rising prices that eventually exclude many of them from the market.

Question 18

Price skimming is a more profitable strategy than penetration pricing if it maximizes revenues as a base for fighting the competition that is sure to come.

Question 19

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

Question 20

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

Question 21

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 22

The possibility of a _____ market occurs whenever price differences are greater than the cost of transportation between two markets.

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

Question 23

Traditionally, the decision of which pricing policy firms should follow depends on all of the following EXCEPT:

A) the level of competition.
B) environmental changes.
C) the innovativeness of the product.
D) market characteristics.
E) company characteristics.

Question 24

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 25

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 26

Sales on open accounts are generally recommended when the country of the importer imposes difficult exchange restrictions.

Question 27

_____ pricing is a practical approach to pricing when a company has high fixed costs and unused production capacity.

A) Full-cost
B) Cost-plus
C) Marginal-cost
D) Demand-based
E) Supply-based

Question 28

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

Question 29

The Floral 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 Floral 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 30

The company that follows the approach of pricing as a static element:

A) views its export sales as proactive contributions to sales volume.
B) sets prices to a specific objective such as targeted market shares.
C) places a low priority on foreign business.
D) sets prices to achieve a specific objective.
E) does not export any excess inventory.

Question 31

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 32

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 33

Domestic cartelization is legal in the United States.

Question 34

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

Question 35

Except for cash in advance, letters of credit afford the least degree of protection for the seller.

Question 36

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 37

Firms unfamiliar with overseas marketing and firms producing industrial goods orient their pricing solely on:

A) cultural differences in perceptions of pricing.
B) market segmentation from market to market.
C) a cost basis.
D) market segmentation from country to country.
E) competitive pricing in the marketplace.

Question 38

This approach to pricing is suitable when a company has high variable costs relative to its fixed costs.

A) Full-cost
B) Marginal-cost
C) Cost-plus
D) Demand-based
E) Supply-based

Question 39

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

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 40

The company that follows the approach of viewing prices as an active instrument:

A) views its export sales as passive contributions to sales volume.
B) sets prices to achieve targeted returns on profit.
C) places a low priority on foreign business.
D) follows market prices.
E) probably exports only excess inventory.

Question 41

A(n) _____ duty is a flat charge per physical unit imported, such as 15 cents per bushel of rye.

A) ad valorem
B) compound
C) prohibitive
D) alternative
E) specific

Question 42

If limited supply exists, a company may follow a _____ approach to maximize revenue and to match demand to supply.

A) penetration pricing
B) psychological pricing
C) predatory pricing
D) premium pricing
E) skimming

Question 43

_____ are the primary discriminatory tax that must be taken into account in reckoning with foreign competition.

A) Transfer taxes
B) Tariffs
C) Tolls
D) Excises
E) Inflation taxes

Question 44

China is emerging as a global manufacturing powerhouse backed by all of the following EXCEPT:

A) an inexpensive labor force.
B) rapidly improving production quality.
C) new sources of capital.
D) a deliberately overvalued currency.
E) a more dynamic private sector.

Question 45

In most countries, channels are _____ and middleman margins _____ than is customary in the United States.

A) longer; higher
B) shorter; higher
C) longer; lower
D) shorter; lower
E) bigger; smaller

Question 46

_____ pricing most often is used to acquire and hold share of market as a competitive maneuver.

A) Penetration
B) Psychological
C) Bundle
D) Skimming
E) Premium

Question 47

_____ duties are levied as a percentage of the value of the goods imported, such as 20 percent of the value of imported watches.

A) Specific
B) Protective
C) Prohibitive
D) Ad valorem
E) Compound

Question 48

Currency exchange rate swings are considered by many global companies to be a(n):

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

Question 49

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 50

Lowering manufacturing costs can often have a double benefit: The lower price to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) _____ basis.

A) specific
B) alternative
C) prohibitive
D) compound
E) ad valorem

Question 51

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 52

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 53

One important reason for manufacturing in a third country is an attempt to _____ and thus price escalation.

A) increase the number of successful product introductions
B) deliver products to market in half the time
C) continue to increase margins annually
D) improve reliability
E) reduce manufacturing costs

Question 54

What is the best way to describe the relationship of international currencies 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 UN mandates currency valuation.
E) The World Bank mandates currency valuation.

Question 55

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 56

Drew'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 57

In a(n) _____ market, it is essential for a company to keep prices low and raise brand value to win the trust of consumers.

A) stagflationary
B) inflationary
C) hyperinflationary
D) deflationary
E) devaluationary

Question 58

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 59

Sales at discount stores grew by 78 percent in the late 1990s 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 60

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

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

Question 61

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 62

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) package its Russian products in red rather than blue packages.
C) exchange Pepsi syrup for Russian vodka.
D) pressurize the U.S. government into giving PepsiCo an exclusive contract with Russia.
E) merge with KFC and Taco Bell.

Question 63

Identify a way by which 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 64

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 65

What do barter houses do?

A) Specialize in trading goods acquired through barter arrangements
B) Buy goods from producers through barter arrangements
C) Buy and hold bartered goods for resellers
D) Insure any barter goods
E) Auction goods for sellers

Question 66

Which of the following is true about free trade zones (FTZs)?

A) In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the country.
B) More than 500 FTZs operate throughout the world, processing imported goods.
C) An FTZ is, in essence, a taxable enclave and considered part of the country as far as import regulations are concerned.
D) When an item leaves an FTZ and is imported officially into the home country of the FTZ, all duties and regulations are imposed.
E) Utilizing FTZs typically control price escalation resulting from the layers of taxes, duties, surcharges, and freight charges.

Question 67

What is the function of a countervailing duty?

A) To balance revenues against costs.
B) To restrict the amount a country will import.
C) To provide revenues for someone who uses parallel imports as a growth strategy.
D) To expand the amount a country will import.
E) To permit the use of foreign currency within the country.

Question 68

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 69

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 70

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) antidumping
B) screwdriver
C) importing
D) exporting
E) free labor

Question 71

In general, the end goal of all _____ pricing activities is to reduce the impact of price competition or eliminate it.

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

Question 72

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 73

_____ are the primary outside source of aid for companies beset by the uncertainty of a countertrade.

A) Auction quarters
B) Barter houses
C) Trade camps
D) Swap centers
E) Switch hubs

Question 74

A company can lower costs by shipping unassembled goods to an FTZ in an importing country through which of the following ways?

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 75

A ____, which restricts the amount a country will import, may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.

A) trigger volume
B) trigger price
C) minimum access volume
D) market access opportunity
E) substantial cause

Question 76

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 77

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 78

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) greater loss of revenue.
E) poor reputation for nonethical activity.

Question 79

The United States and _____ have been the most ardent users of antidumping duties.

A) Mercosur
B) China
C) European Union
D) Canada
E) ASEAN

Question 80

In a classic case of dumping, prices are _____ in the home-country market and _____ in foreign markets.

A) increased; sustained
B) sustained; increased
C) maintained; reduced
D) increased; reduced
E) reduced; increased