Final Exam

Which of the following offers a company the best assurance of being paid for exported goods? A) a letter of credit B) a "piggyback" arrangement C) a swap D) an in-house export organization E) a certified check

A) a letter of credit

Some of Body Shop's recent advertising has emphasized the difference between the company's principles and those of "mainstream" cosmetics companies on such issues as animal testing. As described here, Body Shop's ads illustrate positioning by: A) competition. B) niche. C) quality/price. D) attribute/benefit. E) culture.

A) competition.

Consumers shopping for high-touch products, such as fine perfume, are generally energized by ________ motives. A) emotional B) rational C) both emotional and rational D) neither emotional nor rational E) high-tech

A) emotional

Which of the following correctly states the role of banks in import/export transactions involving a letter of credit (L/C)? A) The importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing bank. B) The exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing bank. C) The exporter's bank is the advising, confirming, and issuing bank. D) The importer's bank is the advising, confirming, and issuing bank. E) none of the above

B) The exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing bank.

For years, ads for Volvo automobiles stressed safety features and protection in the event of a crash. Thus, Volvo automobiles developed a reputation based on which positioning strategy?

B) attribute/benefit

An irrevocable letter of credit transfers the payment obligation for an export deal from the buyer to the buyer's _______: A) in-house export organization B) bank C) freight forwarder D) credit union E) checking account

B) bank

Which of the following methods of payment is also known as a "draft"? A) letter of credit B) documentary collection C) cash in advance D) sales on open account E) L/C

B) documentary collection

In which of the following forms of export financing does a bank assume a financial obligation? A) with an L/C but not a documentary collection. B) with a documentary collection but not an L/C. C) neither an L/C nor a documentary collection requires a bank to assume financial obligation. D) with either an L/C or a collection letter E) with both an L/C and a documentary collection.

B) with a documentary collection but not an L/C.

Ads by BMW advertise it as the "ultimate driving machine" which is described as positioning based on: A) high touch. B) use/user. C) attribute/benefit. D) competition. E) quality/price.

C) attribute/benefit.

Which of the following completely eliminates the risk of nonpayment by an importer or a bank in an international transaction? A) documentary credit (letter of credit) B) documentary collection C) cash in advance D) sales on open account E) draft

C) cash in advance

Positioning refers to the act of: A) determining on what points on the globe to target. B) ensuring a choice retail shelf location. C) differentiating a brand in customer's mind. D) formulating a private label strategy. E) formulating a companion product.

C) differentiating a brand in customer's mind.

Which of the following financing methods would be used by an exporter that enjoys good relations with a buyer in a well-established market? A) letter of credit B) cash in advance C) sales on open account D) barter E) arrival draft

C) sales on open account

Which of the following arranges export financing payment methods in descending order starting with the most secure/reliable and ending with the least secure/reliable: A) sales on open account→cash in advance→documentary credit (L/C) →documentary collection (draft) B) documentary credit (L/C)→sales on open account→documentary collection (draft)→cash in advance C) documentary collection (draft)→documentary credit (L/C)→cash in advance→sales on open account D) cash in advance→documentary credit (L/C)→documentary collection (draft)→sales on open account E) none of the above

D) cash in advance→documentary credit (L/C)→documentary collection (draft)→sales on open account

Which of the following methods of financing would be used if the exporting and importing parties had a strong, long-standing relationship? A) documentary credit (letter of credit) B) documentary collection C) cash in advance D) sales on open account E) bank draft

D) sales on open account

T/F: A market penetration pricing strategy calls for setting price levels that are high enough to quickly build market share.

FALSE

T/F: "Market skimming" is a strategy that uses low prices as a competitive weapon to gain market position.

False

T/F: A global company that uses market skimming as a pricing strategy is likely to invite charges of "dumping" by competitors in host-country markets.

False

T/F: Goods that are sold on open account are paid for before delivery.

False

T/F: IKEA, the home furnishings retailer based in Sweden, wraps itself in the Swedish flag — literally since inside and out, their stores are decorated in the national colors of blue and yellow. This is an example of local consumer culture positioning.

False

T/F: The skimming pricing strategy is appropriate in the mature phase of the product life cycle.

False

T/F: Transfer pricing is a term that applies to transactions between different divisions or units of the same company.

TRUE

T/F: When Apple introduced the iPhone in the United States in the summer of 2007 with a sale price of $ 599 it used a skimming pricing strategy.

TRUE

T/F: BMW's slogan "the ultimate driving machine," is an example of an attribute or benefit which has proven successful in their positioning strategy.

True

T/F: Benetton uses the slogan "United Colors of Benetton" to position itself as a brand concerned with the unity of humankind. This type of strategy is referred to as GCCP (global consumer culture positioning).

True

T/F: In an export/import transaction requiring a letter of credit (L/C), the exporter's (seller's) bank can be known as the "advising" bank, the "confirming" bank, or both.

True

T/F: Penetration prices often mean that the product may be sold at a loss for a certain period of time.

True

T/F: Sony used penetration pricing when it launched the Walkman personal stereo in 1979.

True

T/F: The market skimming pricing strategy is a part of a deliberate attempt to reach a market segment that is willing to pay a premium price for a particular brand or for a specialized or unique product.

True

T/F: When a letter of credit is used in an import/export transaction, the payment obligation lies with the importer's bank rather than the importer itself.

True

In July 2001, the euro's value relative to the dollar was about €1.00 = $0.85. By November 2007 the euro had strengthened to €1.00 = $1.47. All other things being equal, if a European-based global company wants to preserve margins for goods exported to the U.S. market, the company should: a. raise prices in dollars b. switch to cost-based pricing c. adopt a policy of market penetration pricing d. reduce prices in dollars e. use skimming pricing

a. raise prices in dollars

Excelsior Corp. launches a new hand-held personal digital assistant (PDA) for busy corporate executives. The initial retail price is set at $699. One year later, in an effort to reach a broader market, the price is lowered to $299. Which of the following describes the pricing strategies used by Excelsior Corp: a. skimming strategy followed by penetration strategy b. penetration strategy followed by cost based strategy c. penetration strategy followed by skimming strategy d. penetration strategy only e. skimming strategy only

a. skimming strategy followed by penetration strategy

If the manufacturer of a sophisticated new consumer electronics product determines that many target consumers qualify as "innovators" and "early adopters" with relatively inelastic demand curves, the company should use the ______________ pricing strategy: a. gray market b. skimming c. penetration d. market holding e. cost based

b. skimming

Which pricing strategy would be most appropriate for a marketer of luxury designer brands: a. gray market b. skimming c. penetration d. market holding e. cost based

b. skimming

Which of the following does not contribute to price escalation in global marketing: a. shipping and insurance charges b. value added taxes (VAT) c. different Incoterms as incentives d. duties and tariffs e. fluctuating exchange rates

c. different Incoterms as incentives

A manufacturer attempting to set prices for its products in export markets must realize that CAF, VAT, duties, and distributor margins all lead to: a. currency devaluations b. dumping charges c. market skimming d. price escalation e. market penetration

d. price escalation

Which pricing strategy has the advantage of being simple to calculate but the disadvantage of ignoring demand and competitive conditions: a. gray marketing b. skimming c. penetration d. market holding e. cost based

e. cost based