Chapter 18 – Pricing for International Markets
Discussion Questions
1. Define:
Dumping Skimming
2. Discuss the causes and solutions of parallel imports and their effect on price.
Parallel imports develop when importers buy products from distributors in one country and sell them
in another to distributors who are not part of the manufacturer’s regular distribution system. This
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Chapter 18 – Pricing for International Markets
To prevent parallel markets from developing when such marketing and pricing strategies are used,
companies must maintain strong control systems. These control systems are difficult to maintain and
there remains the suspicion that some companies are less concerned with controlling gray markets
than they claim.
3. Why is it so difficult to control consumer prices when selling overseas?
There are many variables which must be considered when attempting to control consumer prices
overseas. Among these are: tariffs on imports, “dumping” tariffs, sales taxes, distributive channel
4. Explain the concept of “price escalation” and tell why it can mislead an international marketer.
5. What are the causes of price escalation? Do they differ for exports and goods produced and sold in a
foreign country?
Some of the causes of price escalation are:
a. profiteering
Exports may be subject to all of the above, but many times goods produced and sold in a foreign
country may have reduced shipping costs, lower tariffs, and are subject to fewer special taxes.
6. Why is it seldom feasible for a company to absorb the high cost of international transportation and
reduce the net price received?
7. Price escalation is a major pricing problem for the international marketer. How can this problem be
counteracted? Discuss.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
8. Changing currency values have an impact on export strategies. Discuss.
9. “Regardless of the strategic factors involved and the company’s orientation to market pricing, every
price must be set with cost considerations in mind.” Discuss.
10. “Price fixing by business is not generally viewed as an acceptable procedure (at least in the domestic
market); but when governments enter the field of price administration, they presume to do it for the
general welfare to lessen the effects of `destructive’ competition.” Discuss.
11. Do value added taxes discriminate against imported goods?
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
12. Explain specific tariffs, ad valorem tariffs, and combination tariffs.
13. Suggest an approach a marketer may follow in adjusting prices to accommodate exchange-rate
fluctuations.
14. Explain the effects of indirect competition and how it may be overcome.
15. Why has dumping become such an issue in recent years?
16. Cartels seem to rise phoenix-like after they have been destroyed. Why are they so appealing to
business?
17. Discuss the different pricing problems that result from inflation versus deflation in a county.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
18. Discuss the various ways in which governments set prices. Why do they engage in such activities?
Governments set prices in various ways:
a. By requiring middlemen to mark up their goods by a governmentally dictated margin. Some
manufacturers may have margins governmentally controlled.
b. Setting price limits (floor and ceiling) on actual prices.
1 Brian Bremner and Irene M. Kunii, “Deflation Nation,” BusinessWeek, May 26, 2003, . 22.
2 Kenichi Murakami, “Nippon Lever Gains Ground Through Focus On Strong Brands,” Nikkei Report April 15, 2003.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
19. Why are costs so difficult to assess in marketing internationally?
Elements complicating international cost assessment:
20. Discuss the major problems facing a company that is countertrading.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
21. If a country you are trading with has a shortage of hard currency, how should you prepare to negotiate
price?
22. Of the four types of countertrade discussed in the text, which is the most beneficial to the seller?
Explain.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
23. Discuss how FTZ’s can be used to help reduce price escalation.
A common use for foreign trade zone or free trade zone is to reduce price escalation. A foreign trade
zone allows a marketer to store products in quantity for later distribution and forgo import taxes while
24. One free trade zone is in Turkey. Visit www.esbas.com.tr and discuss how it might be used to help
solve the price escalation problem of a product being expoerted from the U.S. to Turkey.
From the Website: An Export Processing Zone (EPZ) is an Industrial Park where most trade barriers,
e.g., tariffs, duties and quotas are eliminated; government red-tape is minimized; and attractive
26. Visit Global Trading, Inc. (a division of Minnesota Mining and Manufacturing Company) at
http://solutions.3m.com/wps/portal/3M/en_US/GlobalTrading/Inc/ and select “who are we,” and
write a short report on how Global Trading, Inc. could assist a small company that anticipates having
merchandise from a countertrade.
The following was excerpted from the 3M Web site. The competitive Edge:
Companies of every size are looking for ways to capitalize on opportunities in international trade and
expand their business across borders.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
If these are your company’s objectives, then 3M Global Trading offers the solutions to your needs. As
an international trading company backed by 3M’s financial strength and worldwide business
3M Global Trading offers the following advantages to meet your company’s business needs and
sharpen your competitive edge.
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.
Chapter 18 – Pricing for International Markets
We offer you:
Global Strength and Expertise: A Full Range of Services
If you’re looking for a reliable business partner with extensive international expertise who can offer a
broad range of services, look to 3M Global Trading.
Services
As an international trading company backed by 3M’s financial strength and worldwide business
expertise, 3M Global Trading, Inc. offers importers a broad range of sourcing and financial services.
Our programs are flexible and custom-designed to meet your specific requirements. We offer the
following services:
Credit Services
Customs Clearance
Financing for Buyers
We will work with you to develop the best financing program for your company. For creditworthy
buyers, we offer payment terms of 30 days up to 120 days.
Financing for Suppliers
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authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
forwarded, distributed, or posted on a website, in whole or part.