Global Marketing Chapter 18

Select the criteria under which companies may make sales on open accounts. (Check all that apply.)

- For subsidiaries of the seller - For customers with exceptional credit standings

Identify an accurate statement about using variable costs in pricing.

Companies view any foreign sales as bonus sales.

If long-term contracts do not carefully consider exchange rates, then companies provide ______.

unintentional discounts

Identify the reasons why many producers don't know the final price of a product. (Check all that apply.)

- Lack of standardized middlemen profits - Diverse channels

Countertrades are also called _____.

barters

Crimson is a high-end brand of leather products. It encourages its retailers to provide personalized services to their customers. It also ensures that they stock a variety of products in their stores and that each product is unique. In this scenario, Crimson is implementing _____.

exclusive distribution

The advantage of dollar drafts for a seller is that they _____.

can be discounted for instant payment at a bank

A(n) ______ is involved in setting prices of its members' common products, distributing profits and assigning market territories.

cartel

The Internet is expected to enable an online electronic barter economy by _____.

complementing and expanding real-world barter exchanges

A practice that can encourage parallel importing is _____.

exclusive distribution

The approach a company uses when it has high variable costs in comparison to its fixed costs is called _____.

full-cost pricing

Transportation and related additional costs lead to price escalation because

import duties in various countries are dependent on the landed cost of goods.

Two challenges that can lead to the failure of a business if the seller is unable to offer long-term financing options to customers are _____.

inconvertible currencies and cash-short customers

Price escalation is a tricky situation because _____.

it can rocket upward once it begins

Barter is an important part of trading because _____.

many countries do not have hard currency at hand

A countervailing duty is also known as _____.

minimum access volume

The _____ assumes all the risk of receiving the payment with bills of exchange.

seller

A disadvantage of discount drafts is that if a buyer does not accept the draft, the _____.

seller must pay the amount due

When the value of a seller's currency is weak compared to the buyer's currency, companies usually use ______.

cost-plus pricing

A pricing tool that international marketers can use to create a competitive advantage is ______.

countertrading

Cartel members' greed leads to _____.

limited control of the industry in the long run

Factors that increase risk for leasing companies are

currency devaluation and expropriation.

Identify a solution to the primary problems faced by countertraders.

Initial market research

An increase in forward hedging during international trade can be attributed to the absence of ______.

a relatively stable currency

Which of the following methods allow manufacturers reduce the cost of production? (Select all that apply.)

- Manufacturing goods in a country that supplies cheap skilled labor - Eliminating expensive functional features

A company takes a partial payment in advance from a buyer when the nature of a product can result in the _____.

contract being unfinished, leading to major loss for the company

___________ are discounted at banks only with recourse.

Dollar drafts

Identify an accurate statement about leasing in international markets.

It is an important approach to selling capital equipment in foreign markets.

Manufacturers can minimize price escalation by

reducing the general quality of the product.

Manufactures can negate price escalation by lowering tariffs through ______.

repackaging

Uncontrolled causes of the escalated price of exported goods confine the sale of a product to _____.

wealthy customers, who are insensitive to the price of a product

Identify a factor that contributes to the invocation of countervailing duties

Direct harm to producers in the importing country due to dumping

To reduce price escalation, manufacturers can _____.

alter goods to qualify for a lower tariff rate

Institutions or organizations that are involved in trade of goods acquired through countertrade are called _____.

barter houses

One technique that companies use to recoup from inflation pressure and price controls is to _____.

charge for additional services

All types of import taxes and tariffs function to

discriminate against all overseas goods.

Select the two ways of viewing pricing.

- As a static element in a business decision - As an active instrument of accomplishing marketing objectives

Identify the ways in which governments control pricing in their countries. (Check all that apply.)

- By setting price ceilings and floors - By establishing margins - By granting subsidies

Select the debatable arguments of those in favor of cartel associations.

- Cartels eliminate unprincipled competition. - Cartels permit greater progress of technology.

Which of the following statements is true about electronic currencies?

Electronic currencies are expected to replace existing hard national currencies.

Unlike letters of credit, dollar drafts _____.

are drawn by a seller on a buyer and presented to the seller's bank

The form of payment that places an unwanted burden on the customer is a(n) _____ arrangement.

cash in advance

True or false: Exporters always rely on standardized middleman profit margins to mark up the prices of exported commodities.

Reason: This statement is false. Exporters must rely on experience and marketing research to ascertain middleman costs to effectively mark up prices of exported commodities.

One way a government can control prices is to _____.

act as a selling monopoly

Pricing that can be determined through cooperation of competitors; through national, state or local governments; or by international agreement is called _____ pricing.

administered

Cartel associations _____.

are unable to maintain control for long periods

In countertrading negotiation, one major problem is _____.

ascertaining the value of goods being offered as payment

Torque Corp., a multinational hardware manufacturer, must deliver a shipment of ATV parts to an importer. However, due to the expensive nature of goods being transported, Torque demands a payment of 30 percent in ready money before delivery of the goods. The type of payment method required by Torque Corp., is _____.

cash in advance

The idea behind exporting companies restricting the supply of products to meet only local requirements is that

countries should just be able to match their citizens' demand with supply.

Companies in European countries sometimes compete with imports of their own products at lower prices because of _____.

different taxes and competitive price structures

Free trade zones (FTZs) enable price control by _____.

exempting duty on overhead costs

To be successful in a deflationary market, an exporter must _____.

increase brand value while keeping prices low

The _______ is an important selling technique to reduce high prices and capital shortages for capital equipment or high-priced durable goods.

leasing system

When price differences are greater than the cost of transportation between two markets, the possibility of a _________ occurs

parallel or gray market

A policy used to stimulate market and sales growth by intentionally offering products at low prices is called a ______ policy.

penetration pricing

The additional costs incurred due to exporting products from one country to another are known as _____.

price escalation

The price quotation and contract should define _____.

quality and quantity

Companies exporting goods attempt to lower tariffs on their goods by _____.

reclassifying them under categories that charge lower duties

Exporting companies may inflate selling prices of exported products because _____.

the companies are affected by inflation and price regulations that are not under its control

pricing as a static element

the company places a low priority on foreign business, exports only excess inventory, and does not view its export sales as active contributions to sales volume the company places a low priority on foreign business, exports only excess inventory, and does not view its export sales as active contributions to sales volume

Exports accelerate when

the currency of the exporting country is weaker than the currency of an importing country.

A disadvantage of seeking aid from barter houses is that

the time required puts financial stress on the company seeking aid.

A practical approach to pricing when a company has unused production capacity and high fixed costs is _____.

variable-cost pricing

A financing technique for situations in which a company lacks large cash reserves to finance its customers is _____.

forfaiting

In _____, a seller makes a one-time arrangement with a bank to collect a client's impending payment, whereas in _____, the seller and the bank have an ongoing relationship.

forfaiting, factoring

Sophie wants to buy medicines from her own country. However, the medicines are very expensive in her country. She decides to buy them over the Internet from another country at a cheaper price, although doing so is illegal. In this scenario, the medicines are considered to be _____.

gray market products

Which of the following are problems associated with countertrading?

- uncertain potential demand for goods offered in payment - insufficient time to carry out market analysis

Penetration pricing policy is most commonly used as a competitive strategy to

obtain and hold foreign market share.

When companies employ the variable-cost approach to pricing, they are able to _____.

set competitive prices for their products in foreign markets

A company that follows the full-cost pricing approach prices its products based on the product's _____.

total fixed cost and the variable cost

Identify typical reasons why marketers can lower their costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country. (Select all that apply.)

- Lower tariffs on unassembled goods - Lower labor costs in the importing country

After cash in advance, _____ provide the most protection for a seller because they guarantee the payment of dollars to the seller on presenting appropriate shipping documents.

letters of credit

True or false: Price escalation is the result of excess profits that exist in international markets.

Reason: This statement is false. While excess profits exist in some international markets, the reason for price escalation is the cost of exporting products from one country to another.

Anne's Diadem is a multinational jewelry giant that exports its goods to the country of Elwonia. The economy in Elwonia is undergoing a deflationary spell. To prosper during deflation, Anne's Diadem must _____.

discount its prices to gain more customers

If products are sold below their cost of production, those products are ______ on foreign markets.

dumped

A disadvantage of leasing is that contracts that include maintenance and supply of parts for capital equipment may incur ______.

heavy losses

Dollar drafts can be discounted for immediate payment at a bank only after they are _____.

accepted by the buyer

Price escalation refers to the _____.

disproportionate price difference in two countries engaged in trade with each other

Which of the following occurs when a company sells goods in a foreign market below the price of the same goods in the domestic market?

dumping

Unlike forfaiting, in _____ a bank repeatedly buys short-term accounts receivable at a discount from the exporting company.

factoring

The types of documentation required for a sale, the currency to be utilized, and the credit terms are specified in _____.

price quotations

A countervailing duty may be invoked when __________.

prices are lower in the importing country than the exporting country

True or false: Transportation costs decrease the final cost of a product..

Reason: This statement is false. Transportation costs increase the final price of the product.

True or false: Classification criteria vary across countries; therefore, a thorough investigation of tariff schedules and classification criteria often results in lower tariffs

Reason: This statement is true. Classification criteria vary across countries. Therefore, a thorough investigation of tariff schedules and classification criteria can result in lower tariffs.

Proponents of cartel organizations argue that cartels

promote lower prices to customers.

Which of the following pricing approaches allows companies to reach a market segment that is relatively price insensitive and willing to pay a premium price for the value received?

Skimming

Panara and Durang are two countries that import corn seeds from Cormallen Inc., a multinational agricultural company. Cormallen exports these seeds to Durang at a higher cost than to Panara. As a result, retailers in Durang import these corn seeds from Panara, giving competition to Cormallen's original product. In Durang, these seeds are ______.

gray market products

Open account transactions tend to be rare in foreign trade because _____.

they are disadvantageous to sellers

When several companies manufacturing similar goods cooperate to control the markets for their products, they have formed a(n)

cartel

Companies that use variable-cost pricing may be subject to charges of dumping because _____.

net sales prices overseas are lower than domestic net sales prices

After their initial efforts were halted by European authorities, some industries now try to curb parallel trade by _____.

restricting the supply of products to meet the local requirements

Letters of credit are advantageous for a seller because they _____.

shift the risk of a buyer's payment to a bank that issues them

Identify the circumstances under which an exporting company would deny sale of products to its customers on credit. (Check all that apply.)

- Exporter chooses not to sell the products on credit terms - Restrictions within a buyer's country delaying payment indefinitely

Match the type of tariff with the correct description

- Specific duty matches: imported A flat charge per physical unit imported - Ad valorem: Choice, Levied as a percentage of the value of the imported goods Levied as a percentage of the value of the imported goods - Compound duty: Choice, Levied as a sum of a flat charge per physical unit and a percentage of the imported good's value Levied as a sum of a flat charge per physical unit and a percentage of the imported good's value

Identify an accurate statement about administered pricing.

Its legality varies among countries.

A _____ restricts the amount a country will import and may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation.

countervailing duty

Reducing or eliminating middleman mark-ups can lower distribution costs due to ______.

shorter channels

Cumulative value-added taxes provide incentives for ______.

shorter distribution channels

When a company's objective is to reach the part of the market that is somewhat price insensitive and willing to pay a premium, it uses _____.

skimming

pricing as an active instrument

the company sets prices to achieve specific goals, including targeted returns on profit and targeted sales volumes

True or false: Assessing which markets will require countertrades will on its own enhance a marketer's competitive position.

Reason: This statement is false.Assessing which markets will require countertrades as well as other markets factors such as social customs and legal requirements, will enhance a marketer's competitive position.

True or false: For a company trading with developing countries, some background on handling countertrades should be a part of every pricing toolkit.

Reason: This statement is true. For a company trading with developing countries, some background on handling countertrades should be a part of every pricing toolkit.