Deck 11: Pricing Decisions

Question 1

Mexican customers generally carry small coins.To keep prices of shampoo and detergent below 11 or 12 pesos,Procter & Gamble is using which method of pricing?

A)price bundling
B)target costing
C)cost-plus approach
D)export price costing
E)cost-based pricing

Answer 1

B

Question 2

The price of a six-pack of Heineken varies in price by as much as 50 percent depending on where it is sold due to all of the factors except:

A)purchasing power parity.
B)transportation costs.
C)transaction costs.
D)promotion.
E)competition.

Answer 2

D

Question 3

All of the following activities must be performed when goods cross international boundaries except:

A)obtaining currency permit,if required.
B)packaging goods for export.
C)using the cost-based pricing method.
D)arranging for ocean freight and preparation.
E)obtaining marine insurance and certificate of the policy.

Answer 3

C

Question 4

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

Question 5

Which pricing strategy has the advantage of being simple to calculate but has the disadvantage of ignoring demand and competitive conditions?

A)gray marketing
B)skimming
C)penetration
D)market holding
E)cost-based

Question 6

India's Tata Motors launched the Nano,a radical new design with a rock-bottom sticker price of $2,500.

Question 7

In India,consumers do not like to be locked in to long-term contracts,and Apple distributes its iPhone exclusively through stores operated by Airtel,an Indian carrier,and Vodaphone.This pricing is an example of:

A)gray market.
B)price bundling.
C)market skimming.
D)razors and blades.
E)cost-based.

Question 8

Historically,many companies that used the ________ for pricing were located in the Pacific Rim.

A)skimming strategy
B)penetration strategy
C)cost-based strategy
D)price ceiling strategy
E)transfer pricing strategy

Question 9

All other things being equal,a Boeing 787 costs the same worldwide.By contrast,beer,compact discs,and many other products that are available around the world are actually offered in markets that are national rather than global in nature.

Question 10

As a starting point,firms that comply with Western cost-accounting principles typically use the pricing method known as:

A)price bundling.
B)target costing.
C)cost-plus pricing.
D)export price costing.
E)full absorption cost.

Question 11

A firm without much export experience uses the rigid cost-based pricing method.Which of the following considerations is the exporter ignoring?

A)Is the price competitive in view of local market conditions?
B)Does the price reflect the product's quality?
C)Will authorities in export markets view the price as reasonable or exploitative?
D)Does the price take antidumping laws into consideration?
E)all of the above

Question 12

Generally speaking,international trade results in:

A)lower prices for goods.
B)higher prices for goods.
C)stabilizing prices.
D)high inflation rate.
E)low inflation rate.

Question 13

All of the following basic consideration questions are important for those whose responsibility includes setting prices on goods that cross borders except:

A)Does the price reflect the product's quality?
B)Is the price competitive given local market conditions?
C)Does the local market use target costing?
D)Should prices differ with market segment?
E)Do the foreign country's dumping laws pose a problem?

Question 14

Two automakers that have joined the race to bring low-cost cars to the emerging Indian market are:

A)Mercedes and Lexus.
B)Toyota and Ford.
C)Tata and Nissan.
D)Tata and Toyota.
E)Nissan and Toyota.

Question 15

Nano's instrument panel is clustered in the middle of the dashboard so that Tata can offer both right- and left-hand drive versions.

Question 16

Pricing objectives in export market may vary depending all of the following factors except:

A)a product's life-cycle stage.
B)the country-specific competitive situation.
C)the added cost associated with shipping goods.
D)the product design process.
E)the stability of prices globally

Question 17

When Sony introduced the first consumer VCRs in the 1970s,the retail price exceeded $1,000.Within a few years,the price dropped well below $500.This is an example of:

A)skimming strategy.
B)penetration strategy.
C)cost-based strategy.
D)price ceiling strategy.
E)transfer pricing strategy.

Question 18

A market ________ pricing strategy calls for setting price levels that are low enough to quickly build market share.

A)gray
B)skimming
C)penetration
D)holding
E)cost-based

Question 19

A manufacturer attempting to set prices for its products in export markets must realize that CIF,VAT,and distributor markup all lead to:

A)currency devaluations.
B)dumping charges.
C)market skimming.
D)price escalation.
E)market penetration.

Question 20

Many companies that are active in the 19 nations of the euro zone are adjusting to the new cross-border transparency of prices.

Question 21

When a seller has agreed to deliver goods to a buyer at a place the buyer names in the country of import,with all costs,including duties paid,it is referred to as:

A)DDP.
B)FCA.
C)FAS.
D)FOB.
E)CIF.

Question 22

"Export price escalation" is the increase in the initial selling price of goods traded across borders.

Question 23

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

Question 24

Companies using "rigid cost-plus pricing" set prices with adjustments to reflect market conditions outside the home country.

Question 25

The skimming pricing strategy is appropriate in the mature phase of the product life cycle.

Question 26

A first-time exporter is likely to use skimming pricing,so that the product may be sold at a profit for a certain length of time.

Question 27

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

Question 28

Every commercial transaction is based on a contract of sale,and the trade terms in that contract specify the exact point at which the ownership of merchandise is transferred from the seller to the buyer and which party in the transactions pays which cost.

Question 29

The basic considerations for setting prices on goods that are traded across borders does not include:

A)Does the price reflect the product's quality?
B)Is the price competitive given the local market conditions?
C)Which type of discount does the firm offer its international customers?
D)Do the foreign country's dumping laws pose a problem?
E)Is it feasible to use home country pricing?

Question 30

Free alongside ship (FAS)named port is the Incoterm for a transaction in which the seller places the shipment alongside the vessel upon which the goods will be transported out of the country.

Question 31

Give an example as to how razors and blades type of pricing will be profitable in global markets.

Question 32

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

Question 33

Canada's Imax Corporation is the world's premier provider of large-format motion picture projection technology.The company has identified 900 potential markets for new Imax theaters;two-thirds of those are global.

Question 34

The following activities must be performed when goods cross international boundaries except:

A)obtaining currency permit.
B)packing goods for export.
C)transporting the goods.
D)preparing a land bill of lading.
E)receiving payments.

Question 35

If a distributor's margins are based on the "landed" price of an import shipment,they will be based on:

A)ex-works price.
B)transportation costs.
C)insurance costs.
D)VAT.
E)all of the above

Question 36

How can price be used as a strategic variable to achieve specific financial goals? Under what conditions should skimming or penetration pricing be adapted as strategy?

Question 37

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

Question 38

All import charges are assessed against the:

A)ex-works price.
B)rigid cost-plus price.
C)estimated future cost price.
D)flexible cost-plus price.
E)landed price.

Question 39

Toyota,Sony,Olympus,and Komatsu are some of the well-known Japanese companies that use target costing,a process which is also known as "design to cost."

Question 40

Which of the following would not be used by an exporter with a weak home-country currency?

A)expand product line and add more costly feature
B)speed repatriation of foreign-earned income
C)buy advertising,insurance,and other services in home-country market
D)shift sourcing outside home-country market
E)exploit marketing opportunities in all markets

Question 41

What kind of price pressures are faced by Levi Strauss & Company in the United States? How does this pressure compare with sales outside of the United States?

Question 42

If the terms of a sale are CFR (cost and freight),the seller is responsible for risk or loss at any point outside the factory.

Question 43

Denmark and Sweden have a VAT of 25 percent,the highest rate in the European Union.Moreover,Sweden taxes luxury goods heavily.

Question 44

In the United States,Levi Strauss & Company has to face competitive behavior since Wrangler and Lee brands are being marketed by VF Corporation.

Question 45

Levi's non-U.S.sales represent about one-third of revenues but more than 50 percent of profits.

Question 46

The country which has the highest rates of value added tax (VAT)in the European Union is:

A)Germany.
B)Italy.
C)France.
D)Denmark.
E)Switzerland.

Question 47

The currency fluctuations in global markets have a big impact on international transactions.What actions can be adapted if the domestic currency is strong?

Question 48

What is the impact of increased tariffs on exports and imports? Give an example in support of your answer.

Question 49

If a company's home currency strengthens,it is:

A)a favorable turn of events for the typical exporter.
B)an unfavorable turn of events for the typical exporter.
C)a favorable turn of events since the revenues increase in home currency.
D)an unfavorable turn of events for exporter's home country.
E)neither favorable nor unfavorable turn of events for the typical exporter.

Question 50

In some instances,deregulation represents a quid pro quo that will allow French companies wider access to other country markets.

Question 51

In July 2001,the euro's value relative to the dollar was about €1.00 = $0.85.By November 2009,the euro had strengthened to €1.00 = $1.48.In February 2012,one euro was equal to $1.33,in August 2015 €1.00 = $0.99 and in September 09,2018 €1.00 = $0.87.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.

Question 52

If company managers decide to set the export price for a particular product at an amount equivalent to the home-country price,they would be using which approach to pricing?

A)ethnocentric
B)polycentric
C)regiocentric
D)geocentric
E)extension pricing

Question 53

Marketers of domestically manufactured finished products may be forced to switch to offshore sourcing of certain components to keep costs and prices competitive.

Question 54

A working knowledge of Incoterms can be a source of competitive advantage to anyone seeking an entry-level job in global marketing.What are "Incoterms," and how are they classified? How are Incoterms applied in global marketing?

Question 55

Suppose a company selling in various country markets makes statements such as "we know what the customer wants,and he or she will have to pay for it." This is an indication of a(n)________ approach to setting prices.

A)ethnocentric
B)polycentric
C)regiocentric
D)geocentric
E)adaptation

Question 56

The U.S.Labor Department filed a complaint against Swatch Group alleging that the Swiss watchmaker improperly used transfer pricing to evade millions of dollars in customs duties and taxes.

Question 57

All of the listed advantages are for "extension or ethnocentric" pricing strategy except:

A)it does not respond to the competitive and market conditions of each national market.
B)it calls for the per-unit price of an item to be the same all over the world.
C)it is extremely simple since it does not require information on market condition.
D)it does not require competitive conditions for implementation.
E)the importer must absorb freight and import duties.

Question 58

What is the difference between "F-Terms" and "C-Terms" category of Incoterms?

Question 59

Since hand carried wine bottles crossing the border from Hong Kong to China are taxed,entrepreneurial individuals hire "mules" to transport wine into the mainland.

Question 60

A strengthening of a home-country currency swings exchange rates in a favorable direction.

Question 61

When disparities in prices between different country markets exceed the transportation and duty costs separating the markets,enterprising individuals can purchase goods in the lower-price country market and then transport them for sale in markets where higher prices prevail.Give examples in support of this statement.

Question 62

When Tag Heuer,a marketer of luxury watches,takes out newspaper ads urging consumers to purchase Tag Heuer products from authorized dealers only,the company is most likely attempting to combat the ________ problem.

A)countertrade
B)market holding
C)price escalation
D)gray market
E)market skimming

Question 63

Apple learned an important lesson about the potential drawbacks of ethnocentric pricing in China.All of the following statements relate to this lesson except:

A)in China,many smartphone apps give users the ability to "tip" each other by sending yuan as an acknowledgment of user-created content.
B)Apple's policy is to take 30 percent of fees generated by apps,and it initially applied this policy in China.
C)in China,"tipping" is considered to be an in-app purchase.
D)Tencent Holding's popular WeChat app in China charges for tipping.
E)in response to complaints about the pricing,Apple changed its policy.

Question 64

Ethnocentric pricing responds to the competitive and market conditions of the national market.

Question 65

The unauthorized distribution of trademarked goods to exploit price differentials in world markets is known as:

A)market skimming.
B)black marketing.
C)gray marketing.
D)dumping.
E)licensing.

Question 66

To provide positive proof that dumping has occurred in the United States,both ________ and injury must be demonstrated.

A)black marketing
B)market skimming
C)gray marketing
D)price discrimination
E)price fixing

Question 67

IKEA takes a polycentric approach to pricing: While it is company policy to have the lowest price on comparable products in every market,managers in each country set their own prices.

Question 68

Which of the following would not be taken into account by a company using an ethnocentric approach to pricing decisions?

A)the possibility of implementing a penetration strategy
B)profitable price points that could be tied to local sourcing as opposed to home-country sourcing
C)integration of price with other marketing mix elements
D)factors unique to individual country markets
E)None of the above would be taken into account by a company using ethnocentric pricing.

Question 69

If a company manufactures a product in the home-country market as well as in foreign markets it is considered black marketing.

Question 70

If a company sells products in export markets at prices that are below fair market value and that can harm producers in the export market,that company may be accused of:

A)market skimming.
B)using offsets.
C)pursuing artificially high margins.
D)dumping.
E)gray marketing.

Question 71

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

Question 72

Gray market goods are trademarked products that are exported from one country to another and sold by authorized persons or organizations.

Question 73

Givenchy and Christian Dior's Dune fragrance are two of the luxury perfume brands that are sometimes diverted from authorized channels for sale at mass-retail outlets.This practice is referred to as:

A)barter.
B)switch trading.
C)gray market.
D)offset.
E)dumping.

Question 74

A company using geocentric pricing neither fixes a single price worldwide,nor allows subsidiaries or local distributors to make independent pricing decisions.

Question 75

If a Lexus car is priced in U.S.dollars and sold at the dollar converted price in Indian rupees,what problems can be expected? What is the difference between ethnocentric,polycentric and geocentric pricing?

Question 76

Parallel importing occurs when companies employ a(n)________ multinational pricing policy that calls for setting different prices in different country markets.

A)ethnocentric
B)polycentric
C)regiocentric
D)geocentric
E)extension

Question 77

Gray markets impose several costs or consequences on global marketers,which does not include:

A)damage to channel relationships.
B)dilution of exclusivity.
C)free riding.
D)reputation and legal liability.
E)increased product demand.

Question 78

According to a recent study of European industrial exporters,companies that utilized independent distributors would be most likely to utilize:

A)ethnocentric pricing.
B)polycentric pricing.
C)regiocentric pricing.
D)geocentric pricing.
E)extension pricing.

Question 79

Suppose that a book publisher sells a textbook for $150 each to its domestic distributor.The same publisher sells the same edition of the textbook to a distributor in Thailand for $85 since the affordable prices by Thai students may be much less than in the domestic market.The textbook finds its way back into the domestic market since the Thai distributor sold it back to another marketer who sells in the domestic market for $85.What is this type of pricing known as,and what are the consequences of such transactions to global marketers,if any?

Question 80

Luxury good marketers found a new way to combat gray market imports into the United States.In March 1995,the U.S.Supreme Court let stand an appeals court ruling prohibiting a discount drugstore chain from selling Givenchy perfume without permission.The distinctive packaging of the perfume is also protected by the U.S.copyright law.The ruling implies that:

A)Givenchy can only be sold in copyrighted packages.
B)Costco and Walmart will no longer be able to sell Givenchy.
C)Costco and Walmart will be able to sell Givenchy with authorization.
D)gray marketers will be able to market with authorization.
E)discount drugstores cannot market a product resembling Givenchy's perfumes.