18 Questions
Which costing methodology is more likely to be used by fully involved global players to ensure long-term corporate viability?
Full costing
What is the purpose of establishing freight terms (INCO terms) when developing a pricing structure?
To identify which costs the manufacturer/exporter will pay and which costs the foreign buyer will pay
Which factor is most important for a product to compete effectively in a foreign market?
All of the above
Which type of company is more likely to use variable costing when developing a pricing structure for international markets?
Smaller companies in the early stages of international expansion
What is the primary purpose of considering market conditions when developing a pricing structure for international markets?
To evaluate the options and pros/cons of different pricing strategies
What is the primary reason for maintaining consistent pricing between international markets?
To avoid confusion and maintain brand image
Which of the following is generally preferred in theory?
Standardized product strategy
What is one of the reasons mentioned in the text for why product adaptation is often necessary in practice?
To cater to different consumer preferences across markets
Which of the following is listed as a pressure to adapt products or services?
Differences in technical standards
What is one of the questions posed in the text regarding product adaptation?
Should a company always adapt products and services?
Which measurement system is mentioned in the text as a potential difference that may require product adaptation?
Imperial vs. Metric
Based on the text, what is one of the benefits of a standardized product strategy?
Reduced marketing, sales, and distribution expenses
Which of the following is NOT a short-term solution for dealing with international pricing challenges?
Increasing overhead costs
What is the main idea behind the Variable Pricing/Costing method (also known as the Marginal Cost Method)?
Achieving profit maximization by increasing output until marginal revenue equals marginal cost
Which of the following is NOT a component of the Full Absorption Costing (Cost Plus) method?
Variable overhead
Which pricing method is best suited for funding corporate overhead and covering indirect costs in the long run?
Full Absorption Pricing/Costing (Cost Plus Method)
Which of the following is a strategy for dealing with international pricing challenges?
Choosing representation based on their pricing structure
What is the key difference between the Full Absorption Costing (Cost Plus) method and the Variable Pricing/Costing (Marginal Cost) method?
Full Absorption Costing allocates all costs, while Variable Pricing only allocates direct costs
Study Notes
International Product and Pricing Strategies
- A fully involved global player may use full costing methodology to ensure long-term corporate viability, while smaller companies in early stages of international expansion may use variable costing.
Developing a Pricing Structure
- Identifying who pays what (manufacturer/exporter and foreign buyer) is crucial, and establishing freight terms using INCO Terms can help clarify this.
- Larger exporters may build international freight/logistics costs into price quotations to lower overall costs.
- Market conditions, including distribution ability, consumers' ability to buy, expectations, regulatory and political environments, industry structure, and competitive position, influence pricing.
Product Strategies: Standardization vs. Adaptation
- Standardized product strategy is preferred in theory to maximize economies of scale and reduce marketing, sales, and distribution expenses.
- However, adaptation is often necessary due to local consumer demands for products that meet specific needs and wants.
Pressures to Adapt Products or Services
- Differences in technical standards, including testing, metric vs. U.S. components, and licensing or trademark issues, may require adaptation.
- Adapting products or services can be risky and expensive.
Dealing with International Pricing Challenges
- Short-term solutions include product differentiation, lower pricing, innovative pricing structures, discounts, and promotions.
- Choosing representation based on pricing structure, challenging distribution rules, and using multiple distributors or a distributor and agent in the same market can help overcome challenges.
Full Absorption Pricing/Costing vs. Variable Pricing/Costing
- Full Absorption Pricing/Costing (Cost Plus Method) allocates all manufacturing and non-manufacturing costs for long-term corporate viability.
- Variable Pricing/Costing (Marginal Cost Method) only allocates costs directly related to production or sales of a product, aiming for profit maximization.
Test your knowledge on international product and pricing strategies with a focus on developing a pricing structure. Learn about the differences in costing methodologies between fully involved global players and smaller companies in early stages of international expansion.
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