Chapter 18 – Pricing for International Markets Flashcards
What is gray marketing (Parallel Importation) ?
Gray Marketing is when a non-authorized distributor is selling products in the territory of an authorized distributor
What factors contribute to gray marketing ?
ASK
What is full-cost pricing?
no unit of a similar product is different from any other unit in terms of cost, which must bear its full share of the total fixed and variable cost.
Prices are often set on a cost-plus basis, i.e., total costs plus a profit margin
How does full-cost pricing differ from variable-cost pricing?
firms regard foreign sales as bonus sales and assume that any return over their variable cost contributes to net profit
This is a practical approach to pricing when a company has high fixed costs and unused production capacity
What is skimming pricing and what is its objective?
This is used to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for a product (for high profit) -> high price for high profit
Its objective is high price for high profits
What is penetration pricing and what is its objective?
This is used to stimulate market growth and capture market share by deliberately offering products at low prices
It is used to acquire and hold share of market and for penetration
Its objective is low price for market share **
What are some of the factors that lead to price escalation in foreign markets?
Cost of Exporting
Cost of Warehousing
Cost of Distributing
Cost of Advertising
What is dumping and how does the WTO punish it?
Dumping is when international shipments are sold below their cost of production and is viewed as unfair competition by the WTO
Punished through anti-dumping duties
What is a subsidy and how does the WTO punish it?
When the government helps to pay for the cost of exporting a product
Punished through countervailing duties
What are some of the ways that exporters can
What is countertrade?
Doing trade without involving currency
Ex: Bartering
What are the 4 different types of countertrade transactions?
1) Barter
2) Compensation Deals
3) Counter purchase or Offset Trade
4) Buybacks
What is transfer pricing?
Pricing between two branches of a company overseas
Name 3 benefits of transfer pricing to a company.
Lowering duty costs by shipping goods into high tariff countries at minimal transfer prices
Reduces income taxes in high tax countries
Facilitating dividend repatriation when dividend repatriation is curtailed by government policy by inflating prices of goods transferred
