Int'l Ch. 18

Which of the following is true of a company that views prices as an active instrument of accomplishing marketing objectives?

A. The company sets prices to achieve specific objectives.

The use of countertrade in international trade:

A. allows trade with countries short of hard currency.

One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international market:

A. at a price below the cost of production.

In _____ pricing, the philosophy is that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost.

A. full cost

Which of the following approaches to pricing is suitable when a company has high variable costs relative to its fixed costs?

A. full cost pricing

In general, price decisions are viewed in two ways. Which of the following is one of them?

C. Pricing is an active instrument of accomplishing marketing objectives.

Which of the following is true of open accounts?

C. Sales on open accounts are not generally recommended when there is political unrest in the importer's country.

In _____ pricing, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets.

C. Variable-cost

The creation of a free trade zone leads to

C. reduced price escalation

Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of:

C. the costs of production of the good

The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because:

C. unassembled goods may qualify for lower freight rates.

An irrevocable, confirmed letter of credit means that a U.S. bank accepts responsibility to pay the seller regardless of the financial situation of the buyer or foreign bank.

True

Companies that are serious about restricting the gray market must establish and monitor controls that effectively police distribution channels.

True

Deflation results in ever-decreasing prices, creating a positive result for consumers, but both put pressure to lower costs on everyone in the supply chain.

True

Eliminating costly functional features or lowering overall product quality can minimize price escalation.

True

Except for cash in advance, letters of credit afford the greatest degree of protection for the seller.

True

In a free trade zone, payment of import duties is postponed until the product leaves the free trade zone and enters the country.

True

Leasing helps guarantee better maintenance and service on overseas equipment.

True

Letters of credit shift the buyer's credit risk to the bank issuing the letter of credit.

True

One of the primary functions of a cartel is to control the market for its goods and services.

True

Price escalation could lead to sales of the exported good being confined to a limited segment of wealthy, price-insensitive customers.

True

Setting the right price for a product can be the key to success or failure in the international marketplace.

True

The international marketer must rely on experience and marketing research to ascertain middleman costs because no convenient source of data on middleman costs is available.

True

The portion of international business handled on a cash-in-advance basis is not large and typically is used when credit is doubtful.

True

To remain price competitive when the dollar is strong, export-oriented companies must find ways to offset the higher price caused by currency values.

True

A _____ policy is used to stimulate market and sales growth by deliberately offering products at low prices.

A. Penetration pricing

Which of the following is true of countertrading?

A. Frequently there is inadequate time to conduct a market analysis in a countertrade negotiation.

What do barter houses do?

A. Specialize in trading goods acquired through barter arrangements.

Which of the following is true of free trade zones (FTZs)?

A. In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the country.

An important selling technique to alleviate high prices and capital shortages for capital equipment is the _____ system.

A. Leasing

_____ is a typical payment procedure for established customers where the goods are delivered, and the customer is billed on an end-of-the-month basis.

A. An open account

Since it encourages retailers to stock large assortments of a product, the practice of _____ distribution often creates a favorable condition for parallel importing.

A. Exclusive

In a(n) _____, the seller makes a one-time arrangement with a bank or other financial institution to take over responsibility for collecting the account receivable.

A. Forfaiting transaction

Which of the following is true of the full-cost pricing approach?

C. In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.

Which of the following would be considered an advantage of leasing equipment rather than owning it?

C. Leasing helps guarantee better maintenance on overseas equipment.

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

C. Marginal cost

In general, the end goal of all _____ is to reduce the impact of price competition or eliminate it

B. Administered pricing activities

_____ are the primary outside source of aid for companies beset by the uncertainty of a countertrade.

B. Barter Houses

In _____, a company has an ongoing relationship with a bank that routinely buys its short-term accounts receivable at a discount.

B. Factoring

Which of the following is essential while making price quotations for international sale?

B. Price quotations must specify the currency to be used and the credit terms of the transaction.

Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. These assembly plants are known as _____ plants.

B. Screwdriver

Assuming that the international marketer has produced the right product, used the proper channel of distribution, and promoted the good correctly, the effort can fail badly if the international marketer fails to:

B. Set the right price for the goods or service

_____ are the primary discriminatory tax that must be taken into account in reckoning with foreign competition.

B. Tariffs

What is the function of a countervailing duty?

B. To restrict the amount a country will import.

Dumping in the world markets is likely to increase when:

B. demand in the home country is low.

A(n) _____ means that once the seller has accepted the credit, the buyer cannot alter it in any way without permission of the seller.

B. irrevocable letter of credit

A marketer may face lower costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country because:

B. wages may be lower in the importing country.

A _____ exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce.

C. Cartel

_____ results from the added costs incurred as a result of exporting products from one country to another.

C. Price escalation

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

C. Minimum access volume

For _____ duties to be levied on a good, it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by dumping.

C. Countervalling

With _____, the seller assumes all risk until the actual dollars are received.

C. Dollar Drafts

Which of the following is true of international currencies?

C. All major currencies are free floating relative to one another.

If the supply of a good in a market is limited, a company may follow a _____ approach to maximize revenue and to match demand to supply.

E. Price Skimming

In most cases, the reason that products which cost relatively little in one country cost more in another is:

E. The costs of exporting

When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported parts had to _____ in order to retain their profit margins.

E. Raise the price of PCs

_____ duties are levied as a percentage of the value of the goods imported.

D. Ad valorem

Which of the following is an example of a price-fixing arrangement?

D. Cartels

When Polar Inc., an American fast-food company, wanted to market its burgers and fries in France, it was asked to accept French wine in return. This is an example of:

D. Countertrade

In a _____ market, it is essential for a company to keep prices low and raise brand value to win the trust of consumers.

D. Deflationary

The crucial problem confronting a seller in a countertrade negotiation is determining the _____ for the goods offered as payment.

D. Potential Demand

A company uses _____ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received.

D. Price skimming

Lush Cosmetics, a firm based in the U.S., recently started exporting cosmetics to India. Lush introduced a new range of mineral-based makeup for the first time in the Indian market. It was also priced much higher than the other brands in the market. This is an example of _____.

D. Price skimming

By shipping unassembled goods to a free trade zone (FTZ) in an importing country, a marketer can lower costs because:

D. duties are assessed at lower rates for unassembled goods.

One of the possible reasons for manufacturing in a third country could be an attempt to _____.

E. Reduce manufacturing costs

A(n) _____ duty is a flat charge per physical unit imported.

E. Specific

The Floral Group, an importing organization in New York, has just bought an excessive amount of perfume from perfume manufacturer in Paris. Unknown to the perfume manufacturer, the Floral Group has sold 25 percent of its order to distributors in France that have been unable to purchase any products from the perfume manufacturer. Which of the following best describes the transaction that has just taken place?

E. Parallel importing

Lower prices to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) _____ basis.

E. Ad valorem

When the value of the dollar is weak relative to the buyer's currency, sellers generally employ _____ pricing.

E. Cost plus

A company that views pricing as a static element in a business decision:

E. Exports only excess inventory

Which of the following characterizes the variable-cost pricing approach?

E. In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

The final price of an imported product is likely to be high if:

E. Middleman markups are not standardized

Which of the following leave(s) sellers in a position where most of the problems of international commercial finance work to their disadvantage?

E. Open Accounts

Drew's company imports materials and parts into a free trade zone (FTZ) within the United States and then exports finished products to other countries. Her company will:

E. not have to pay tariffs on the imported materials and parts.

As the prices for the same good are equal in different markets, a product sold in one country may be exported to another and can undercut the prices charged in that country.

False

Barter houses help countries negotiate prices for imports and exports and also provide facilities for cash payments and receipts.

False

Cartels have the ability to maintain control for indefinite periods.

False

Companies that use pricing to achieve marketing objectives are engaged in static pricing.

False

Countertrading does not benefit countries that face a shortage of hard currencies with which to trade.

False

Deflation causes consumer prices to escalate, and consumers face ever-rising prices that eventually exclude many of them from the market.

False

Domestic cartelization is legal in the United States.

False

Fewer middlemen may mean higher overall taxes.

False

For countervailing duties to be invoked, it must be shown that prices are higher in the importing country than in the exporting country.

False

Full-cost pricing is an approach to pricing that emphasizes that one unit of a product be different from the other and must, therefore, be priced differently.

False

In bills of exchange, the credit of one or more banks is involved.

False

In countries where large shares of the population are moving into middle-income classes, penetration pricing becomes irrelevant as a tool to stimulate market growth.

False

Longer channels of distribution help keep prices under control.

False

Sales on open accounts are recommended when shipping is hazardous.

False

The possibility of a parallel market occurs whenever price differences are lesser than the cost of transportation between two markets.

False

Administered pricing attempts to establish pricing for an entire market.

True