Chapter 18: Pricing for International Market

Question 1

4 different pricing policies

Answer 1

1. Full cost Pricing
2. Variable Cost Pricing
3. Skimming Pricing
4. Penetration Pricing

Question 2

Full Cost Pricing

Answer 2

No unit of one product is different from any other unit in terms of full cost, which must bare its full share of the total fixed and variable costs

Question 3

When to use full costs

Answer 3

When company has higher variable costs relative to fixed costs

Question 4

Variable Cost Pricing

Answer 4

Firms are concerned with the marginal or incremental difference in pricing.

Question 5

2 situations When to use Variable cost pricing

Answer 5

1. When firm regards international sales as bonus and

2. When Company has high Fixed cost

Question 6

Skimming Pricing

Answer 6

Used to reach a segment of the population that is relatively price insensitive hence willing to pay premium for product with high perceived value

Question 7

Penetration Pricing

Answer 7

Pricing used in order to reach larger segment of people within said demographic

Question 8

Price Escalation

Answer 8

The added costs incurred as a result of exporting goods from one country to the other

Question 9

6 Price escalation factors

Answer 9

1. Cost of Exporting
2. Administrative taxes
3. Inflation
4. Middleman and transportation costs
5. Deflation
6. Exchange Rate fluctuations

Question 10

Cost of exporting

Answer 10

Situations in which prices are raised due to shipping costs, tariffs, longer channels of distribution

Question 11

Administrative Taxes

Answer 11

Mandatory taxes for conducting business in foreign country

Question 12

Inflation

Answer 12

Causes prices to increase and burden on consumers leading to exclusion of many buyers from segment

Question 13

Middleman and transportation costs

Answer 13

Increased with longer channels of distribution

Question 14

Deflation

Answer 14

results in ever decreasing prices crating a positive result for consumers but put pressure to lower costs on everyone in the supply chain

Question 15

Exchange rate fluctuations

Answer 15

Currency values swinging vis a vis other currencies on a daily basis

Question 16

5 Approaches to reducing price escalation

Answer 16

1. Lowering costs of goods
2. Lowering Tariffs
3. Lowering distribution costs
4. Using free trade zones
5. Dumping

Question 17

Lowering costs of goods

Answer 17

Lower costs by eliminating costly features

Question 18

Lowering tarrifs

Answer 18

Lower tariffs by categorizing items in sections where tarrifs are lower

Question 19

Lowering distribution costs

Answer 19

Design shorter channels with fewer middlemen

Question 20

Using Free trade zones

Answer 20

Manufacture products in free trade zone where incentives are offered to eliminate tariffs and keep prices low.

Question 21

Dumping

Answer 21

1. Selling international products below costs of production

2. Selling goods internationally at a lower cost than domestically