Deck 12: Global Pricing

Question 1

According to a recent research, all of the following are examples of important pricing objectives EXCEPT:

A) drive competition out of business.
B) to achieve a satisfactory return on investment.
C) maintain market share.
D) expand market share.
E) to meet a specified profit goal.

Answer 1

A

Question 2

Countries with low per-capita income are more __________________ than in developed countries.

A) promotion sensitive
B) price sensitive
C) need sensitive
D) demand sensitive
E) service sensitive

Answer 2

B

Question 3

_________________ costs do not vary with sales volume changes.

A) Demand
B) Supply
C) Derived
D) Fixed
E) Variable

Answer 3

D

Question 4

When developing a pricing strategy for its global markets, one of the first steps that a company must go through is to decide:

A) what the actual price should be.
B) how high or low to price.
C) how much money will the price bring in.
D) what it wants to accomplish with its strategy.
E) what form of controls will regulate price.

Question 5

______________ costs change with sales volume.

A) Demand
B) Supply
C) Derived
D) Fixed
E) Variable

Question 6

In the international marketplace, ________________ pricing arrives at a price after removing domestic fixed costs. Only variable export costs generated by the exporting
Effort and a portion of the overhead load should be recuperated by the pricing effort
(according to this method).

A) dynamic incremental pricing
B) export price
C) import price
D) cost-plus price
E) target-return price

Question 7

In many countries, multinationals' pricing decisions are impacted by:

A) break-even analysis
B) regression functions
C) supply and service curves
D) government policies
E) business ethics

Question 8

A company's pricing policy is a highly ____________________ process based on inputs from various departments.

A) under-functional
B) low-functional
C) geo-functional
D) bi-functional
E) cross-functional

Question 9

In the international marketplace, _________________ pricing adds international costs and a mark-up to the domestic manufacturing cost.

A) dynamic incremental pricing
B) export price
C) import price
D) cost-plus price
E) target-return price

Question 10

When making pricing decisions, ______________ set(s) the floor.

A) profits
B) costs
C) demand
D) supply
E) service

Question 11

When demand is highly price sensitive, the company needs to consider how it can _________________ from a global perspective.

A) raise prices
B) lower prices
C) lower service
D) raise quality
E) reduce costs

Question 12

________________ is the only marketing mix instrument that creates revenues.

A) Product
B) Price
C) Place
D) Promotion
E) People

Question 13

Examples of exporting-related ____________________ include manufacturing costs, shipping expenses, insurance, and overseas promotional costs.

A) incremental costs
B) demand costs
C) fixed costs
D) target costs
E) service costs

Question 14

One of the risks of dynamic incremental pricing (in the case where the export list price is far below the domestic price) that ______________ can be triggered in the
Export market.

A) high profit potential
B) dumping charges or accusations
C) falling profits
D) falling quality
E) falling service

Question 15

Customers' _________________ is a key consideration in pricing decisions.

A) location
B) buying power
C) decision power
D) thinking power
E) none of the above

Question 16

All of the following are drivers that govern global pricing decisions EXCEPT:

A) company
B) customers
C) controls
D) competition
E) channels

Question 17

According to textbook, ________________ by and large charges the same price worldwide.

A) Starbucks
B) IBM
C) Coca-Cola
D) Toyota
E) BMW

Question 18

One alternative for successful marketing to the price sensitive low per-capita income market is to produce a ________________ product or lower product quality.

A) downsized
B) upgraded
C) synthetic
D) copy
E) parallel

Question 19

When New Balance, the U.S.-based maker of high-tech running shoes, sells its shoes in France as haute couture items rather than simply athletic shoes, this is an
Example of:

A) country objectives.
B) company objectives.
C) consumer objectives.
D) monopoly objectives.
E) none of the above.

Question 20

The most important pricing objectives of companies doing business in the United States (including foreign-based firms) are(is) to:

A) achieve a satisfactory return on investment.
B) maintain market share.
C) meet a specified profit goal.
D) all of the above.
E) none of the above.

Question 21

Once brand loyalty has been established, price will play less of a role as a purchase criterion, and the firm may be able to institute a ________________
Strategy.

A) demand-based
B) premium pricing
C) elastic pricing
D) promotion-related pricing
E) sensitivity-based

Question 22

LEGO, the Danish toymaker, rather than worrying about finding ways to lower the price of its product in foreign markets has chosen (most LEGO sets are sold from
$6-$223) to adopt a __________________ strategy position.

A) demand-based
B) premium pricing
C) elastic pricing
D) promotion-related pricing
E) sensitivity-based

Question 23

According to the text, once brand loyalty has been established, _____________ will play less of a role as a purchase criterion.

A) promotion
B) service
C) product
D) price
E) place

Question 24

Huge government deficits are examples of a(n) ________________ impact on pricing decisions.

A) direct
B) indirect
C) artificial
D) planned
E) uncontrollable

Question 25

Inflation in an economy is an example of a(n) ________________ impact on pricing decisions.

A) direct
B) indirect
C) artificial
D) planned
E) uncontrollable

Question 26

Large cross-country price gaps open up arbitrage opportunities that lead to _________________ imports from low-price countries to high-price ones.

A) black market
B) white market
C) zero market
D) smuggled
E) parallel

Question 27

There are two ways to deal with the price escalation phenomenon. One of these methods is to cut the export price. The other is to:

A) change the promotion strategy.
B) position the product as a (super) premium brand.
C) position the product as a lower quality brand.
D) reduce retailer margins.
E) reduce distances that the good must be shipped.

Question 28

Which of the following would be a good option to follow if lowering the export price were the firm's objective?

A) rearrange the distribution channel.
B) change the promotion.
C) change the warranty provisions.
D) give more of the product in the package as an incentive to purchase.
E) study the demand curve.

Question 29

All of the following are reasons that competitive situations vary from country to country (with respect to the competitive environment) EXCEPT:

A) the number of competitors varies from country to country.
B) the nature of competition changes.
C) the presence of counterfeit products.
D) the presence of gray markets.
E) the competitive position of a firm changes from one country to another.

Question 30

All of the alternatives listed below are ways to safeguard against inflation EXCEPT:

A) modify components, ingredients, parts and/or packaging materials.
B) source materials from low-cost suppliers.
C) lengthen credit terms.
D) include escalator clauses in long-term contracts.
E) quote prices in a stable currency.

Question 31

When McDonald's first opened their restaurants in Russia in 1990, the Big Mac meal cost 6 rubles. Three years later, the same meal cost 1,100 rubles. This would be an
Example of how:

A) demand can change.
B) how premium pricing can damage a product.
C) price elasticity works.
D) inflation can damage a market.
E) service is what matter the most to the average customer.

Question 32

An example of nonprice competition that is faced in some markets is:

A) retailer sales.
B) discounts.
C) coupons.
D) advertising.
E) cents-off deals.

Question 33

___________ inflation also mandates rapid inventory turnarounds.

A) High
B) Low
C) Visible
D) Hyper
E) Slow

Question 34

If a firm decide to penetrate the Japanese consumer market through direct marketing (such as catalog or telemarketing sales). Which of the following strategies best
Describes this option for lowering the price of an exported product?

A) rearrange the distribution channel.
B) eliminate costly features (or make them optional).
C) downsize the product.
D) expand the warranty categories to give incentive for higher quality.
E) assemble or manufacture the product in foreign markets.

Question 35

To cover the incremental costs (such as shipping), the final foreign retail price will often be much higher than the domestic retail price. This phenomenon is known as
______________________.

A) inflation.
B) the price deflator.
C) price escalation.
D) price sensitivity.
E) global arbitrage.

Question 36

Sales tax rates, tariffs, and price controls are all examples of _______________ that can have a direct or indirect impact on the pricing policies of a firm in the
International marketplace.

A) sales volume policies
B) price policies
C) government policies
D) restrictions
E) punishments

Question 37

When the U.S. levied a 10 percent tax on plus-$30,000 luxury cars, Land Rover changed the weight of Range Rover models so they could be classed as a truck and
Thereby avoid the luxury status, the company was attempting to follow which of the
Price strategies listed below for lowering the price of an exported product?

A) rearrange the distribution channel.
B) eliminate costly features (or make them optional).
C) downsize the product.
D) adapt the product to escape tariffs or tax levies.
E) assemble or manufacture the product in foreign markets.

Question 38

Differences in the competitive situation across countries will usually lead to:

A) cross-border price differentials.
B) local price differentials.
C) domestic price differentials.
D) intra-company price differentials.
E) company-based price differentials.

Question 39

All of the following are options that might be followed if the firm wished to lower its export price on a product EXCEPT:

A) rearrange the distribution channel.
B) eliminate costly features (or make them optional).
C) downsize the product.
D) expand the warranty categories to give incentive for higher quality.
E) assemble or manufacture the product in foreign markets.

Question 40

Wide gaps in the price sensitivity between countries for the same product may create conditions that promote _________________ markets.

A) backward
B) gray
C) white
D) demand
E) forward

Question 41

When a manufacturer of breakfast cereals for humans shifts production to a chicken feed product to overcome the effects of price controls, the firm would be
Following which of the strategies outlined below?

A) adapt the product line.
B) shift target segments or market.
C) negotiate with the government.
D) launch a variant of an existing product.
E) predict the incidence of price controls.

Question 42

When an exporter uses the _______________________ method, the effect can be negative. Frequent adjustments of prices in response to currency movements will
Distress local channels and customers.

A) local-currency price stability (LCPS)
B) pricing-to-market (PTM)
C) transfer pricing
D) countertrade pricing
E) demand mark-up pricing

Question 43

Firms faced with price controls can take any of the following strategies EXCEPT:

A) shift the target segment or markets.
B) launch new products or variants of existing products.
C) negotiate with the government.
D) predict the incidence of price controls.
E) have the home government bring pressure on the host government.

Question 44

To combat hyperinflation, many governments occasionally impose ______________ controls.

A) commodity
B) inflation
C) margin
D) discount
E) price

Question 45

One of the ways that a weakening of the U.S. dollar relative to the Japanese yen may not necessarily be a benefit to a U.S. firm is that:

A) the government may not allow the pass through.
B) the government might erect tariff barriers.
C) Japanese parts might become more expensive and when imported for inclusion into an exported product, prices might actually rise.
D) other currencies might be the ones actually traded.
E) costs can be cut in other ways.

Question 46

When exporters lower their mark-ups in a more price-conscious export market than in a price-sensitive market, with respect to exchange rate movements this is called
______________________.

A) local-currency price stability (LCPS)
B) pricing-to-market (PTM)
C) transfer pricing
D) countertrade pricing
E) demand mark-up pricing

Question 47

A strengthening of the U.S. dollar relative to the Japanese yen has the effect of:

A) strengthening the Japanese position in the United States.
B) strengthening the U.S. position in Japan.
C) weakening the dollar in Europe.
D) strengthening the yen in Europe.
E) all positions remain unchanged.

Question 48

Two major issues confronting international marketers result from currency movement. The first of these is in which currency do we quote our prices? The
Second is:

A) how much of the loss or gain (because of pass through) should be passed to consumers?
B) how much should we invest in the local currency?
C) how much should we invest in our own currency?
D) what role should the central bank play in currency movement?
E) should we trust international arbitrage as a means of settling currency value?

Question 49

___________________ reflect how much one currency is worth in terms of another currency.

A) Interest rates
B) Credit rates
C) Bond rates
D) Inflation rates
E) Exchange rates

Question 50

_____________________ is a special form of pricing where mark-ups are adjusted to stabilize prices in the buyer's currency. This method helps to create stability in the
Local currency.

A) Local-currency price stability (LCPS)
B) Pricing-to-market (PTM)
C) Transfer pricing
D) Countertrade pricing
E) Demand mark-up pricing

Question 51

All of the following are considered to be exporter strategies when the domestic currency is strong EXCEPT:

A) conduct conventional cash-for-goods trade.
B) engage in nonprice competition by improving quality, delivery, and aftersale service.
C) improve productivity and engage in vigorous cost reduction.
D) shift sourcing and manufacturing overseas.
E) give priority to exports to relatively strong-currency countries.

Question 52

If a company that is threatened with price controls diversifies into product lines that are relatively free of price controls, the firm would be following which of the
Following strategies?

A) adapt the product line.
B) shift target segments or market.
C) negotiate with the government.
D) launch a variant of an existing product.
E) predict the incidence of price controls.

Question 53

According to lessons learned in Brazil's hyperinflationary economy, McDonald's will deal with Russia's runaway inflation by using all of the following tools
EXCEPT:

A) emphasize cash flow management.
B) control of raw materials.
C) institute sales and price setting strategies.
D) hedge for potentially substantial distortions in the exchange rate.
E) make loans to local franchise investors to bring them past hard times.

Question 54

A weakening of the U.S. dollar relative to the Japanese yen has the effect of:

A) strengthening the Japanese position in the United States.
B) strengthening the U.S. position in Japan.
C) weakening the dollar in Europe.
D) strengthening the yen in Europe.
E) all positions remain unchanged.

Question 55

When considering the currency pass-through phenomenon, all of the following factors give an indication as to the appropriate action EXCEPT:

A) the customer's price sensitivity.
B) government actions.
C) the impact of dollar appreciation on the firm's cost structure.
D) the impact of dollar depreciation on the firm's cost structure.
E) the amount of competition in the export market.

Question 56

All of the following are exporter strategies when the domestic currency is weak EXCEPT:

A) stress price benefits.
B) engage in nonprice competition by improving quality, delivery, and aftersale service.
C) expand the product line and add more.
D) shift sourcing and manufacturing to domestic market.
E) exploit export opportunities in all markets.

Question 57

One of the main reasons for staying in a country that has government-imposed price controls to deal with hyperinflation is:

A) the government might not let you out.
B) when the danger is over you cannot get back in.
C) you gain experience for other markets with similar problems.
D) you do not want to loose face.
E) you do not want to show weakness to your competition.

Question 58

Which of the following are considered to be exporter strategies when the domestic currency is weak?

A) conduct conventional cash-for-goods trade.
B) engage in nonprice competition by improving quality, delivery, and aftersale service.
C) improve productivity and engage in vigorous cost reduction.
D) shift sourcing and manufacturing overseas.
E) give priority to exports to relatively strong-currency countries.

Question 59

The most drastic reaction to government-imposed price controls is to:

A) adapt the product line.
B) shift target segments or market.
C) negotiate with the government.
D) launch a variant of an existing product.
E) leave the country.

Question 60

Which of the following are exporter strategies when the domestic currency is strong?

A) stress price benefits.
B) engage in nonprice competition by improving quality, delivery, and aftersale service.
C) expand the product line and add more.
D) shift sourcing and manufacturing to domestic market.
E) exploit export opportunities in all markets.

Question 61

__________________ (as a form of market-based pricing) basically dictates that the company charges the price that any buyer outside the company would pay (as
If the transaction occurred between two unrelated entities).

A) Local-currency price stability (LCPS) pricing
B) Pricing-to-market (PTM)
C) Arm's length pricing
D) Countertrade pricing
E) Nonmarket-based pricing

Question 62

There are a series of key drivers behind transfer pricing decisions. The most important of these drivers is thought to be:

A) competition in the foreign country.
B) economic conditions in the foreign country.
C) price controls.
D) exchange controls.
E) market conditions in the foreign country.

Question 63

__________________ uses the market mechanism as a cue for setting transfer prices.

A) Local-currency price stability (LCPS) pricing
B) Pricing-to-market (PTM)
C) Market-based pricing
D) Countertrade pricing
E) Nonmarket-based pricing

Question 64

To reduce exposure and risk of antidumping actions, the exporter can follow any of the following marketing strategies EXCEPT:

A) trading-up
B) service enhancement
C) distribution
D) government intervention
E) communications

Question 65

___________________ simply adds a mark-up to the cost of the goods.

A) Demand-based pricing
B) Negotiated pricing
C) Cost-based pricing
D) Markup-based pricing
E) Target return pricing

Question 66

Government policies do not have any impact on pricing decisions.

Question 67

In a(n) _______________, no third party is involved to carry out the transaction.

A) clearing agreement
B) offset
C) buyback arrangement
D) switch trading
E) simple barter

Question 68

According to the textbook, factors that impact global pricing decisions include
company, customers, competition, technology.

Question 69

In international marketing, purchasers often demand _____________________ from their suppliers.

A) uniform-pricing contracts
B) diverse-pricing contracts
C) bilateral-pricing contracts
D) global-pricing contracts
E) local-pricing contracts

Question 70

In the area of price coordination, the following considerations matter EXCEPT:

A) nature of customer.
B) amount of product differentiation.
C) nature of channels.
D) nature of competition.
E) role of the World Bank.

Question 71

Cost differentials do not lead to wide price gaps.

Question 72

Countertrade transactions include the following options EXCEPT:

A) simple barter.
B) switch trading.
C) geo trading.
D) countertrade pricing.
E) clearing agreements.

Question 73

When sales take place between related entities of the same company, ___________ is often used.

A) local-currency price stability (LCPS)
B) pricing-to-market (PTM)
C) transfer pricing
D) countertrade pricing
E) demand mark-up pricing

Question 74

In gray markets, products marketed in low-priced countries are shipped and resold
by unauthorized channels in high-priced markets.

Question 75

___________________ is an umbrella term used to describe unconventional trade- financing transactions that involve some form of noncash compensation.

A) Local-currency price stability (LCPS)
B) Pricing-to-market (PTM)
C) Arm's length pricing
D) Countertrade
E) Nonmarket-based pricing

Question 76

To conduct ________________, conflicts between country affiliates are resolved through mutual discussion of the transfer pricing problems.

A) demand-based pricing
B) negotiated pricing
C) cost-based pricing
D) markup-based pricing
E) target return pricing

Question 77

Transfer pricing decisions in an international context need to balance off the interests of a broad range of stakeholders. All of the following would be examples
Of those stakeholders EXCEPT:

A) the parent company.
B) the competition.
C) local country managers.
D) host government(s).
E) the domestic government.

Question 78

With respect to currency quotation when preparing for buying and selling transactions, buyers and sellers generally prefer to quote in:

A) a world currency.
B) the seller's currency.
C) the buyer's currency.
D) their own currency.
E) the dollar.

Question 79

______________ occurs when imports are being sold at an "unfair" price.

A) Price fixing
B) Dumping
C) Gray marketing
D) Countertrade
E) Predatory pricing

Question 80

In the area of transfer pricing, experts suggest to set transfer prices that are as close as possible to the _________________________________.

A) Balanced Arm's Length Standard
B) Building Arm's Length Standard
C) Best Arm's Length Standard
D) Branding Arm's Length Standard
E) Basic Arm's Length Standard