International Business
International Business
International Business
Set of flashcards Details
| Flashcards | 172 |
|---|---|
| Students | 15 |
| Language | Deutsch |
| Category | Micro-Economics |
| Level | University |
| Created / Updated | 18.06.2016 / 22.01.2023 |
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About what should think about regarding international pricing?
- At what price should the firm sell its product in the foreign market?
- What type of market positioning does the company want to convey from its pricing structure?
- Does the export price reflect the product quality?
- Is the price competitive?
- Should the firm pursue market penetration or skimming pricing objectives abroad?
- What type of disount and allowances (advertising) should the firm offer its foreign customers?
- Should prices differ by market segment?
- What should the firm do about product line pricing?
- What pricing options are available if the firms cost increase or decrease? Is the demand in the product elastic or inelastic?
- Are the prices going to be viewed by the foreign government as reasonable or exploitative?
- Do the foreign country's antidumping laws pose a problem?
- How to deal with fluctuating exchange rates?
What is grey market activity?
- Given the lower income in much of the world, firms often feel the pressure to lower prices or reduce sizes/volumes
- Conversely prices tend to escalate because of tariffs, taxes and higher markups by foreign intermediaries
- Price variations among different markets can lead to grey market activity: legal importation of genuine products into a country by intermediaries other than authorized distributors (also known as parallel imports)
- The root cause of grey market activity is a large enough difference in price of the same product between two countries
Grey market activities can lead to what?
- A tarnished brand image
- Strained (angespannt) manufacturer-distributor relations
- Disruptions in company planning
How can managers cope with grey market imports?
1. Aggressively cutting prices in countries targeted by grey markets
2. Reducing the amount of shipment to the country where grey market brokers purchase the product
3. Designing products with exclusive features that strongly appeal to customers in that market
4. Publicizing the limitations of grey market channels. Trademark owners publicize the disadvantage of buying grey market goods to potential buyers
What kind of pricing strategies are there?
Rigid cost-plus pricing: (Set a fixed price for all exports markets by adding a flat percentage to the domestic price to compensate for the added costs of doing business abroad
Flexible cost-plus pricing: Set price to accommodate local market conditions, such as customer purchasing power, demand and competitors prices
Incremental pricing: Set price to cover only variable costs, not fixed costs. This assumes that fixed costs are already paid from sales in the home or other countries
What's the problem with multilayered distribution?
It leads to high prices because every intermediary has its margin
What are possible strategies against international price escalation?
- Shorten the distribution channel
- Redesign product to remove costly features
- Ship products unassembled (in Einzelteilen), as parts and components, to qualify for lower import tariffs
- Have product reclassified using a different tariff classification to qualify for lower tariffs
- Move production or sourcing to another country
What is transfer pricing?
- Transfer pricing is also known as intra-corporate pricing, or the pricing of intermediate or finished products exchanged among subsidairies of the same corporation located in different countries
- May be used to repatriate (zurückführen) profits from countries that restrict MNEs from taking their earnings out of the country
-May be used to shift profits out of high corporate tax country into a low corporate tax one, thereby increasing company-wide profits
What kind of subsidiary should receive these transfer prices
- Lower corporate income tax rate
- High tariffs for the product in question
- Favourable accountin rules for calculating corporate income
- Political stability
- Little or no restriction on profit repatriation
- Strategic importance to the MNE
What choices are there regarding advertising agency?
- Home country based agency with international expertise
- Local agency based in the target market
- Global advertising agency that has offices in the target market
Are promotions aloud in every country?
No they are forbidden in some (Spain) or restricted (Switzerland). Giveaways can be considered unethical in some cultures.
What does global account management means?
Serving a key customer in a consistent and standardized manner. For example walmart is a key customer for P&G
