Chapter 18

Question 1

What is the title of Chapter 18?

Answer 1

pricing for International Markets

Question 2

Administered pricing

Answer 2

The attempt to establish prices for an entire market though the cooperation of competitors; through national, state, or local governments; or by international agreement. Its legality differs from country to country and from time to time.

Question 3

Barter

Answer 3

The direct exchange of goods between two parties in a transaction

Question 4

Bills of exchange

Answer 4

A form of international commercial payment drawn by sellers on foreign buyers; in transactions based bills of exchange, the seller assumes all risk until the actual dollars are received, making them riskier for the seller than letters of credit.

Question 5

Cartel

Answer 5

An agreement in which various companies producing similar products or services work together to control markets for the goods and services they produce. The Organization of Petroleum Exporting Countries (OPEC) best-known international cartel.

Question 6

Countertrade

Answer 6

A type of transaction in which goods are imported in exchange for the right or ability to manufacture and/or sell goods in that country. It can substitute for cash entirely or partially and is used extensively in trade between U.S. firms and the former Soviet bloc, along with other emerging markets.

Question 7

Countervailing duty

Answer 7

A fee that, under WTO rules, may be imposed on foreign goods benefiting from subsides, whether in production, export, or transportation; may be applied in conjunction with minimum access volume, which restricts the amount of goods a country will import.

Question 8

Dumping

Answer 8

An export practice, generally prohibited by laws and subject to penalties, is defined by some as the selling of products in foreign markets below the cost of production and by others as the selling of products below the prices of the same goods in the home market.

Question 9

Exclusive distribution

Answer 9

A practice when a company restricts which retailers can carry its product; often it’s to maintain high retail margins, exclusive image, and encourage retailers to provide extra service to customers.

Question 10

Forfaiting

Answer 10

A financing technique that can be used in an international transaction in which the seller makes a one-time arrangement with a bank or other financial institution to take over responsibility for collecting the account receivable

Question 11

Full-cost pricing

Answer 11

A method of pricing based on the view that no unit of a similar product is different from any other unit of a similar product and that each must bear its full share of the total fixed variable cost, whether sold in the home market or abroad

Question 12

Parallel market / Gray market

Answer 12

When products intended to be sold in one market, exclusively at a particular low price (often a government-controlled low price), are sold market (usually illegally) where market prices are higher.

Question 13

Letters of credit

Answer 13

Financing devices that, when opened by the buyer of goods, allow the seller to draw a draft against the bank issuing the credit and receive dollars by presenting proper shipping documents.

• Except for cash in advance. it affords the seller a great deal of protection.

Question 14

Penetration pricing policy

Answer 14

Low-priced policy directed at gaining market share from competitors

Question 15

Price escalation

Answer 15

the pricing disparity in which goods are priced higher in the foreign market than in the home market

• caused by the added costs involved in exporting products from one country to another

Question 16

Skimming

Answer 16

A method of pricing, generally used for foreign markets, in which a company seeks to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium for value.

• May be used to sell a new or innovative product to maximize profits until a competitor forces a lower price

Question 17

Variable-cost pricing

Answer 17

A method of pricing goods in foreign markets in which a company is concerned only with the marginal or incremental costs of producing goods for sales in those markets.

• Firms using this take the view that foreign sales are bonus sales

Question 18

An example of a grey market

Answer 18

Pharmaceuticals available in Canada at a regulated low price are shipped to customers in the United States by Canadian exporters, at prices lower than those set by the companies in the United, which reflect the higher costs of FDA approval in the United States