International Marketing, 18e (Cateora)
Chapter 18 Pricing for International Markets
1) Setting the right price for a product can be the key to success or failure in international
markets.
2) Companies that use pricing to achieve marketing objectives use pricing as a static element.
3) A product sold in one country may be exported to another and undercut the prices charged in
that country.
4) The possibility of a parallel market occurs when price differences are less than the cost of
transportation between two markets.
5) To restrict the gray market, companies must establish and monitor controls that effectively
police sales channels.
6) Companies should use the full-cost pricing approach when it has high fixed costs relative to its
variable costs.
7) In countries where large shares of the population are moving into middle-income classes,
penetration pricing will depress market growth.
8) Deflation results in ever-decreasing prices, creating a positive result for consumers, but
putting pressure on everyone in the supply chain to lower costs.
9) With deflation, consumers face ever-rising prices that eventually exclude many of them from
the market.
10) When the U.S. dollar strengthens, U.S. exports will decrease.
11) Price escalation could lead to the sales of exported goods being confined to a limited
segment of wealthy, price-insensitive customers.
12) The international marketer must rely on experience and marketing research to determine
middleman costs because no convenient source of data on middleman costs is available.
13) Eliminating costly functional features of a product or lowering overall product quality can
reduce price escalation.
14) Longer channels of distribution are more useful for keeping prices under control than shorter
channels of distribution.
15) Involving fewer middlemen in distribution means higher overall taxes.
16) In a free trade zone, payment of import duties is postponed until the product leaves the free
trade zone and enters the country.
17) For countervailing duties to be invoked, it must be shown that prices are higher in the
importing country than in the exporting country.
18) Gerard was concerned that he would not be able to get maintenance and servicing on
equipment used in his overseas operation. Leasing the equipment would be the best option for
Gerard.
19) Countertrading does not benefit countries that face a shortage of hard currencies with which
to trade.
20) Barter houses help countries negotiate prices for imports and exports and also provide
facilities for cash payments and receipts.
21) Administered pricing is an attempt to establish prices for an entire market.
22) Paul’s oil delivery company was struggling to make ends meet, so it conspired with the other
oil delivery companies in the area to set prices, allocate market territories, and redistribute
profits. By controlling the market in this way, the companies created a cartel.
23) Cartels have the ability to maintain control of markets for indefinite periods.
24) Domestic cartelization is legal in the United States.
25) Letters of credit shift the buyer’s credit risk to the bank issuing the letter of credit.
26) 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.
27) Except for cash in advance, letters of credit afford the greatest degree of protection for the
seller.
28) The portion of international business handled on a cash-in-advance basis is not large and this
is typically used when credit is doubtful.
29) In bills of exchange, the buyer assumes all the risk until the payment is made.
30) Sales on open accounts are recommended when shipping is hazardous.
31) Assuming that an international marketer has produced the right product, used the proper
channel of distribution, and promoted the goods correctly, the effort will fail if the international
marketer fails to
A) inform the host government about all its marketing objectives.
B) set the right price for the goods or services.
C) set the import tariff for the goods or services.
D) form a joint venture in order to sell the product.
E) work on a franchise basis in the country.
32) In general, price decisions are viewed in two ways: pricing as a static element in a business
decision, and pricing
A) that depends on factors that are often beyond the control of a company.
B) as more a phenomenon of luck than planning.
C) as an active instrument of accomplishing marketing objectives.
D) that is determined by local sales managers.
E) that is static no matter the market.
33) What is most likely to be true of a company that views prices as an active instrument of
accomplishing marketing objectives?
A) The company sets prices to achieve specific objectives.
B) The company follows market prices to achieve specific objectives.
C) The company exports only excess inventory.
D) The company views its export sales as an insignificant source of revenue.
E) The company places a low priority on foreign business.
34) A company that views pricing as a static element in a business decision most probably
A) places a high priority on foreign business.
B) sets prices to achieve specific objectives such as targeted return on profit.
C) views export sales as active contributions to sales volume.
D) views domestic sales as an insignificant source of revenue.
E) places a low priority on foreign business.
35) Gift Group Inc., an importing organization in New York, buys perfume from a company in
France for $13 a unit. Unknown to the French company, Gift Group sells this product in the
United States for $19 a unit. This leads to a loss of revenue for the French company as it also
sells its perfume in the United States but for a higher price of $22. What concept does this
demonstrate??
A) black-listed importing
B) indirect importing
C) circular importing
D) co-mingled importing
E) parallel importing
36) ________ distribution, a practice often used by companies to maintain high retail margins to
encourage retailers to maintain the exclusive-quality image of a product, can create a favorable
condition for parallel importing.
A) Exclusive
B) Speculative
C) Intensive
D) Lateral
E) Dual
37) Firms that are unfamiliar with overseas marketing and firms that produce industrial goods
orient their pricing solely on the basis of
A) cultural differences in perceptions of pricing.
B) market segmentation from market to market.
C) the costs of production of the goods.
D) market segmentation from country to country.
E) competitive pricing in the market.
38) In ________ pricing, a firm is concerned only with the marginal or incremental cost of
producing goods to be sold in overseas markets.
A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium
39) Marianne’s Chocolates sell well in the U.S. at a price of $24 per pound, and she has
overproduced one kind of chocolate bar. Marianne has decided to see if she can sell them in
Mexico, so she sets a price that is just over her cost. She figures if she makes even a little money,
it would be worth it. Marianne is using ________ pricing.
A) full-cost
B) fixed-cost
C) variable-cost
D) demand-based
E) premium
40) What characterizes the variable-cost pricing approach?
A) Prices are often set on a cost-plus basis, that is, total costs plus a profit margin.
B) No unit of a similar product is different from any other unit in terms of cost.
C) Each unit must bear its full share of the total fixed and variable cost.
D) This approach is suitable when a company has high variable costs relative to its fixed costs.
E) Any contribution to fixed cost after variable costs are covered is profit to the company.
41) ________ pricing is a practical approach to use when a company has high fixed costs and
unused production capacity.
A) Full-cost
B) Cost-plus
C) Marginal-cost
D) Demand-based
E) Premium
42) Companies that use ________ pricing insist 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
B) fixed-cost
C) variable-cost
D) demand-based
E) premium
43) Which approach to pricing is most suitable when a company has high variable costs relative
to its fixed costs?
A) full-cost pricing
B) marginal-cost pricing
C) static-cost pricing
D) demand-based pricing
E) premium pricing
44) 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.
A) penetration pricing
B) everyday low pricing
C) predatory pricing
D) price skimming
E) psychological pricing
45) If the supply of a product in a market is limited, a company may follow a ________
approach to maximize revenue and to match demand to supply.
A) penetration
B) psychological pricing
C) variable-cost pricing
D) predatory pricing
E) price skimming
46) A ________ policy is used to stimulate market and sales growth by deliberately offering
products at low prices.
A) penetration pricing
B) variable-cost pricing
C) premium pricing
D) price skimming
E) full-cost pricing
47) Cosmeticon, a U.S.-based firm, has recently started exporting cosmetics to India.
Cosmeticon has introduced a new range of mineral-based makeup products for the first time in
the Indian market. As Cosmeticon has no competitors in this segment of the Indian cosmetics
market, it has set a very high price for its products in order to reach the premium, price
insensitive segment of the market. This is an example of
A) penetration pricing policy.
B) psychological pricing policy.
C) bundling.
D) price skimming.
E) cost-based pricing policy.
48) In most cases, the reason products cost relatively little in one country and cost more in
another is the
A) profiteering measures taken by exporting companies.
B) consistency in perception of quality in all countries.
C) inelastic demand of most consumer goods.
D) requirement that all export goods must use set skimmed price.
E) higher costs of exporting.
49) What results from the added costs incurred as a result of exporting products from one
country to another?
A) price deflation
B) penetration pricing
C) price escalation
D) price gouging
E) predatory pricing
50) A(n) ________ duty is a flat charge per physical unit imported.
A) ad valorem
B) compound
C) prohibitive
D) alternative
E) specific