International Marketing - Exam 2

Chapters 8-12

_______ is the increase in the final selling price of goods traded across borders.

Export price escalation

Cost of ______ is when prices are raised by shipping costs, insurance, packing, tariffs, longer channels of distribution, larger middlemen margins, special taxes, administrative costs, and exchange rate fluctuations

Exporting

These costs result in higher prices (generally passed on to the buyer of the product)

taxes, tariffs, and administrative costs

_________: Longer channel length, performance of marketing functions and higher margins may make it necessary to increase prices

Middleman and Transporation costs

_______ causes consumer prices to escalate and the consumer is faced with rising prices that eventually exclude many consumers from the market

Inflation

______ is based on an analysis of internal and external cost

Cost-plus pricing

Firms using western cost accounting principles use the _______

Full absorption cost method

What is the full absorption cost method

Per-unit product costs are the sum of all past or current direct and indirect costs (manufacturing and overhead) and must include additional costs & expenses when goods cross boarders

Charging a premium price, usually at the introduction stage of the product life cycle, luxury goods marketers use price to differentiate products… What is this called?

Market skimming

Charging a lower price, try to saturate market prior to imitation by competitors, products that don’t merit patents…. What is this called

penetration pricing

Price floor is the _____ price

minimum

price ceiling is the ______ price

maximum

optimum price is the

function of demand

all customers in the market get the best product for the best price… this is called

law of one price

_______ is used by Japanese companies to control costs, save on production expense, and create competitively price global products

Target costing (also called design to cost)

T/F: Target Costing process is the same as cost plus pricing.

False (it is the opposite process)

Trademarked products are exported from one country to another where they are sold by unauthorized persons, stores, organizations… This is called

gray market goods

In what scenarios do Gray Market Goods occur

when product is in short supply, producers use skimming strategies, or products are not from company approved stores

Sale of an imported product at a price lower than that normally charged in a domestic marketing or country of origin… what is this called?

Dumping

Which U.S. law provides payment to companies harmed by dumping?

Byrd Amendment

Representatives of two or more companies secretly set similar prices for their products. What is this called?

Price fixing

T/F: Price fixing is illegal

True (anticompetitive)

What is the difference between horizontal and vertical price fixing? Who conspires with who?

Horizontal = competitors within the same industry and make and market the same product conspire, Vertical = when a manufacturer conspires with a wholesaler/retailer

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction. What is this called?

Transfer pricing

What are the different types of transfer pricing?

Cost-based, market-based, and negotiated

_______ occurs when payment is made in some form other than money.

Countertrade

The direct exchange of goods between two parties in a transaction… What is this called?

barter

two parties buy from each other, at different times… what is this called?

counterpurchase or parallel trading

How do governments usually feel about exporting?

They encourage exporting because it increases company profits, production, jobs, wages, and benefits the economy.

How do governments usually feel about importing?

They discourage importing because it reduces sales for local companies, leading to fewer jobs, lower wages, and can hurt the economy.

What happens to a company when it exports more goods?

The company produces more, hires more people, and increases profits.

What happens to jobs and wages when a country imports a lot?

Jobs and wages decrease because local companies sell less and hire fewer people.

Why are both exporting and importing necessary?

Countries need both to thrive: they export to earn money and import goods they don’t produce.

When exporting, companies must understand the ________ and ________.

target market and customer environment

Who helps a company sell products to foreign buyers?

Foreign purchasing agents (buy for foreign buyers), Export brokers (match buyers and sellers), Export merchants (buy goods and sell abroad)

Who helps a company manage exporting?

Export management companies (handle all export tasks for a company), Manufacturer’s export agent (represents a manufacturer abroad), Export commission representatives (sell products abroad for commission)

Who helps with logistics and shipping?

freight forwarders (coordinate shipping, paperwork, and transport), and cooperative exporters (group of companies that export together to save costs)

Most nations ______ exports and ______ imports

encourage, restrict

Exporting more than importing is a trade ______

surplus

Exporting less than importing is a trade ______

deficit

What are some government programs that support exports?

tax incentives, subsidies, governmental assistance, education, information, free trade zones

Government actions to discourage imports and block market access

tariffs, import controls, nontariff barriers (hidden)

What are the 3 Rs of tariffs

rules, rate schedules, and regulations

What are some examples of nontariff barriers?

quotas, discriminatory procurement policies, restrictive customs procedures, arbitrary monetary policies, restrictive administrative and technical regulations

_____ tariff system was developed by the World Customs Organization in 1989 and adopted by most trading nations

Harmonized

What is the main purpose of the Harmonized Tariff System?

To simplify tariff procedures by giving every product a classification number for imports and exports

What is a single-column tariff?

The simplest type of tariff where the same duty rate applies to imports from all countries.

What is a two-column tariff?

A tariff with two rates: general duties and special duties for certain countries.

What does NTR stand for in tariffs?

Normal Trade Relations (determines rate applied in a two-column system)

Which market entry strategy involves low risk, low involvement, low cost, and low reward?

exporting

Which market entry strategy falls in the middle level of involvement and risk?

Contract manufacturing/franchising

Which market entry strategies require high involvement, high cost, high control, and high reward?

Joint ventures and equity stake/ acquisition

How does risk and reward change as a company moves from exporting to equity stake/acquisition?

Both risk and reward increase as involvement and cost increase.

Which market entry strategy gives a company the most control over foreign?

Equity stake or acquisition

Which market entry strategy allows a company to enter a market with minimal cost and minimal control?

licensing

What’s the main trade-off in choosing a market entry strategy?

Higher involvement and cost usually lead to higher control and higher reward, but also higher risk.

What is the order of the market entry strategies (from low risk/reward/control/cost/involvement to high)

Exporting, licensing, franchising/contract manufacturing, joint venture, equity stake/acquisition

A contractual agreement whereby one company makes an asset available to another company in exchange for royalties, fees, or some other form of compensation

Licensing

What are some types/examples of licensing?

patent, trade secret, brand name, product formulations, copyright

Who is the world’s top licensor?

Disney

T/F: Licensing allows a company to enter a market with low initial investment and minimal implementation costs.

True

T/F: Licensees are not allowed to adapt products to local tastes under a licensing agreement.

False

T/F: Licensing always gives a company complete control over its foreign operations.

False

T/F: One risk of licensing is that the licensee could eventually become a competitor.

True

T/F: Licensing agreements are typically long-term and secure, so companies rarely worry about losing returns.

False

T/F: Licensing can help avoid some tariffs, quotas, and other trade barriers in certain countries.

True

_______ are an entry strategy for a single target country in which the partners share ownership of a newly-created business entity

Joint Ventures

Joint ventures typically build upon each other’s ______

strengths

T/F: A joint venture allows partners to share both financial and political risks.

True

T/F: Joint ventures provide a chance to learn about a new market environment and combine strengths of partners for synergy.

True

T/F: Compared to licensing, joint ventures usually require less investment and fewer resources.

False

T/F: Joint ventures require strong coordination and there is potential for conflict among partners.

True

In a global strategic partnership, do participants remain independent after forming the alliance?

Yes

T/F: Participants in a global strategic partnership share benefits and control over the performance of assigned tasks, and contribute ongoing resources like technology and products.

True

What does “mission” refer to in successful global strategic partnerships (GSPs)?

Creating win-win situations where participants pursue objectives based on mutual need or advantage.