MKTG 4352 - Ch 18 Questions

If a company is engaged in transfer pricing, it can avoid penalties imposed by the IRS if it will enter into an agreement with the IRS called a(n):

Advanced Pricing Agreement

An Advanced Pricing Agreement is a requirement with the IRS and a taxpayer on transfer pricing methods that will be applied to the taxpayer's transactions with an affiliate.

True

Barter may be used to reduce a country's foreign debt.

True

If a U.S. firm sells Vietnamese producer equipment that is then used to make clothing that the United States agrees to buy back from Vietnam, the two companies most likely have entered into a countertrade arrangement called a product buy-back agreement.

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

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

True

Leasing helps to guarantee better maintenance and service on overseas equipment.

True

Many global companies consider currency exchange rate swings to be a major pricing problem.

True

One of the important reasons for manufacturing/assembling in a country's FTZ (free trade zone) is an attempt to reduce price escalation.

True

One of the necessary ingredients in a parallel importing scheme is to have a freight forwarder who is willing to provide fake bills of lading to the original manufacturer.

True

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

True

One of the types of countertrade is barter.

True

Prices of goods transferred from a company's operations or sales units in one country to its units elsewhere may be adjusted to enhance the ultimate profit of the company as a whole. This is called intracompany pricing.

True

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

True

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

variable-cost

When a firm is only concerned with marginal or incremental cost of producing goods to be sold in overseas markets, it will most likely use _____________ pricing.

variable-cost

Which of the following, because it encourages retailers to stock large assortments, often creates a favorable condition for parallel importing?

Exclusive distribution

Tariffs are postponed while goods are in a ________________.

FTZ (foreign trade zone)

A countervailing duty restricts the amount a country will import by declaring imports to not be in the best interest of the country that is importing.

False

As a form of countertrade, a compensation deal involves trading one set of goods for another.

False

Barter houses, which assist in some forms of countertrade, are found mostly in the United States.

False

By shipping unassembled goods to a free trade zone in an importing country, a marketer can lower costs in a variety of ways. One of these ways is that import taxes are completely skipped by following such a practice.

False

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

False

Countertrade includes for distinct transactions: retail, wholesale, producer, and government.

False

Exclusive distribution is often used to offset the effects of parallel importing.

False

Full-cost pricing is a philosophy that insists one unit of a product is different from ensuing units and must, therefore, be priced differently.

False

One of the export strategies that can be tried when the domestic currency is weak is to improve productivity and engage in vigorous cost reduction.

False

One way to define the concept of dumping is to say that excess capacity has been cleared from the books of a manufacturer.

False

Parallel imports develop when importers buy products from more than one country.

False

______________ imports develop when importers buy products from distributors in one country and sell them in another country to distributors who are not part of the manufacturer's regular distribution system.

Parallel

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

Properly price the goods or services.

A good way to describe price escalation is to define the term as being the added costs incurred as a result of exporting products from one country to another.

True

Administered pricing is an attempt to establish pricing for an entire market.

True

A company uses skimming pricing as an objective when it desires to reach a market segment that is relatively price insensitive and thus willing to pay a premium price for the value received.

True

Currency exchange rate swings are considered by many global companies to be __________.

a major pricing problem

Which of the following pricing formats is considered to be an attempt to establish prices for an entire market?

administered pricing

What is the best way to describe international currencies relationship to one another?

all major currencies are free floating relative to one another

In Russia, Johnson & Johnson's 2-in-1 Shower Gel is considered to be a cosmetic (20 percent tariff). J&J would like it to be considered as a soap substitute (15 percent tariff). This points out which of the following strategies that companies generally prefer in foreign markets with respect to tariffs?

ask for reclassification of the product to a lower customs classification

A direct exchange of goods between two parties in a transaction is called:

barter

_________ is a direct exchange of goods between two parties in a transaction.

barter

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 arena:

below the cost of production

Michael McDonald has sold machine lathes to a company in Mexico. In order to make his sale, Mr. McDonald has agreed to accept 30 percent of the amount owed in finished goods made by the plant that bought the machine lathes. Which of the following countertrade options is Mr. McDonald using?

buy-back

United Wheat Growers has agreed to accept 30 percent of the amount owed for a shipment of disease-resistant wheat from a Russian consortium in Russian bakery flour. The only problem is that UWG also produces bakery flour from its wheat. Therefore, UWG has just accepted a competing item as partial payment for something it has sold. This problem often occurs in which of the following forms of countertrade?

buy-back

When several Middle-Eastern oil companies worked together to form OPEC to control oil sales, production, and revenues for all oil products coming out of the region, the group was called a:

cartel

A _________ involves payment in goods and cash.

compensation deal

If a company is willing to accept countertrade in a foreign market, it often gives the company a:

competitive advantage

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

cost-plus pricing

Another term for _____________ is an offset trade

counterpurchase

If a company is engaging in what is called offset trading, it is using a pricing strategy called __________.

counterpurchase

Which of the following is probably the most frequently used form of countertrade?

counterpurchase

Countertrade includes barter, compensation deals, ____________ and __________.

counterpurchase; buy-back

If a company accepts barter as a form of trade, it is engaging in a general trade pricing strategy called ___________.

countertrade

When PepsiCo first began to market Pepsi Cola in Russia, it was asked to accept an equal amount of Russian vodka as payment in return for permission to sell Pepsi Cola. The formal name for this trading strategy is called:

countertrade

For ___________ duties to be invoked, 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 the dumping.

countervailing

Sales at discount stores grew by 78 percent from 1995 to 2000 in Japan. The reason for this remarkable increase was the ___________ that Japan experienced in that time period.

deflation

Honda was accused of ____________ when it sold motorcycles in the United States below the price of those same motorcycles sold in Japan.

dumping

If a company is selling its products in a foreign market below the cost of production, it will probably be accused of ____________.

dumping

A seller delivers irrigation motors to a buyer in Mexico and receives 70 percent payment in pesos and 30 percent in agricultural crops grown on Mexican farmland. This would be an example of which of the following?

example of compensation deal

Countertrade is often used by international marketers to gain entry into a country. PepsiCo used this strategy when it agreed to:

exchange Pepsi syrup for Russian vodka.

If a company wished to maintain the high-quality image of a product, it would use _____________ distribution to ensure that the objective was maintained.

exclusive

What do barter houses do?

find markets for bater goods

Barter may be used to reduce a country's __________.

foreign debt

An accountant for Trans Star Production has chosen to use ___________ pricing because the comptroller's office maintains 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 total fixed and variable cost.

full-cost

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.

full-cost

Parallel importing has also been called __________ marketing.

gray

Another term for parallel importing is:

gray-market goods

Q2 Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

if labor costs are lower in the importing country, substantial savings may be realized in the final product cost.

Another term for transfer pricing is:

intracompany pricing

What is the function of a countervailing duty?

its function is to restrict the amount a country will import

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

leasing

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

leasing helps guarantee better maintenance and service on overseas equipment

Another term for a countervailing duty is _______________.

minimum access volume (MAV)

Fiona's company imports materials and parts into an FTZ within the United States and then exports finished products to other countries. Her company will have to pay:

no tariffs

Q3 Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

ocean transportation rates are affected by weight and volume; unassembled goods may qualify for lower freight rates.

Restrictions on imports and high tariffs can lead to _________ imports

parallel

The Ryan 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 Ryan 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?

parallel importing

_____________ pricing is most often used to acquire and hold share of market as a competitive maneuver.

penetration

If a company has as its objective to stimulate market growth and capture market share by deliberately offering products at low prices, it will most likely use a pricing strategy called:

penetration pricing

The crucial problem confronting a seller in a countertrade negotiation is determining the value of and ___________ for the goods offered.

potential demand

A foreign trade zone is an important method for controlling which of the following?

price escalation

The added costs incurred as a result of exporting products from one country to another are called:

price escalation

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

price escalation

Currency exchange rate swings are considered by many global companies to be a major __________ problem.

pricing

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

pricing is an active instrument of accomplishing marketing objectives

Will's company uses countertrade as a marketing and pricing tool. His company has a _______ countertrade strategy.

proactive

Kyle's company uses countertrade when they believe it is the only way to make a deal. His company has a ___________ strategy with respect to countertrade.

reactive

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

screwdriver

One of the unscrupulous practices that allows parallel importing to function is when freight forwarders:

send fake paperwork to manufacturers about the final destination of products they handle.

___________ channels of distribution can help keep prices under control.

shorter

Often when a new technology is introduced, marketers keep the price high, selling to only those consumers who most want the technology. These marketers are using a _____________ pricing for their products.

skimming

If a company has as its objective to reach a market segment that is relatively price insensitive and thus willing to pay a premium price for the value received, it will most likely use a pricing strategy called:

skimming pricing

All of the following are considered to be forms of countertrade EXCEPT:

subornation

Q1 Which of the following is a way that a company can lower costs by shipping unassembled goods to an FTZ in an importing country?

tariffs may be lower because duties are typically assessed at a lower rate for unassembled versus assembled goods.

Which of the following generally bears the burden for (pays for) taxes and tariffs associated with importing goods from another country?

the consumer that buys the goods

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

the high costs of exporting

Which of the following has become the most popular venue for countertrade activities?

the internet

____________ pricing occurs when the prices of goods from a company's operations or sales units in one country are transferred to its units elsewhere.

transfer

Which of the following pricing strategies led to what called a "tax war" between the U.S. and Japan?

transfer pricing

The Trans-Atlantic Conference Agreement is a cartel among the world's shipping companies.

true