GMS 522 LATEST EXAMS EVALUATION QUESTIONS
AND ANSWERS SURE A+
✔✔Penetration pricing - ✔✔firms enter the international market with an extremely low
price with the objective of capturing a large share of the market
✔✔Market pricing - ✔✔firm launches the product on the international market at a price
that is on a par with what competitors are charging
✔✔Cost-plus pricing - ✔✔firm establishes a price that takes into account all of the fixed
and variable costs associated with getting the product into the hands of its foreign
customers
✔✔Demand oriented pricing - ✔✔firm estimates the sales volumes at different levels in
order to determine the price that maximizes over
✔✔Subsidiary Pricing Strategies - ✔✔-polycentric pricing strategy
-geocentric pricing strategy
-ethnocentric pricing strategy
✔✔Polycentric pricing strategy - ✔✔subsidiaries have full control over their pricing
decision and there is little or o head-office involvement
, ✔✔Geocentric Pricing Strategy - ✔✔parent company establishes a floor price below
which subsidiaries are not allowed to sell the product
✔✔Ethnocentric pricing strategy - ✔✔parent company sets one worldwide price which
all subsidiary
✔✔Transfer Pricing - ✔✔the pricing of products sold to members of the same corporate
family
✔✔Implications of Transfer pricing - ✔✔-global taxation
-competitiveness
-motivation of subsidiary managers
✔✔Methods of Calculating transfer prices - ✔✔-cost based approach
-cost plus method
-negotiated
-arms length
✔✔Cost based approach - ✔✔input is transferred from parent to subsidiary at a price
that equals the parent's cost of acquisition
✔✔Cost plus method - ✔✔supply unit is allowed to add a % mark up to the price at
which the product is transferred
✔✔negotiated - ✔✔supplying unit and purchasing unit arrive at a mutually agreeable
transfer price through internal negotiations
✔✔arms length - ✔✔firm transfers the input to its subsidiary at the same price that it
would have charged an unrelated third party
✔✔Incoterms - ✔✔set of standardized terms of sale which establish the responsibilities
of both the exporter and the importer and where in the process title changes hand
✔✔Rules for any mode or modes of transport - ✔✔-EXW Ex works
-FCA Free Carrier
-CPT Carriage Paid To
-CIP Carriage and Insurance Paid To
-DAT Delivered at Terminal
-DAP Delivered at Place
-DDP Delivered Duty Paid
✔✔Rules for Sea and Inland water Transport - ✔✔-FAS Free Alongside ship
-FOB Free on Board
-CFR Cost & Frieght
-CIF Cost, Insurance, & Freight
AND ANSWERS SURE A+
✔✔Penetration pricing - ✔✔firms enter the international market with an extremely low
price with the objective of capturing a large share of the market
✔✔Market pricing - ✔✔firm launches the product on the international market at a price
that is on a par with what competitors are charging
✔✔Cost-plus pricing - ✔✔firm establishes a price that takes into account all of the fixed
and variable costs associated with getting the product into the hands of its foreign
customers
✔✔Demand oriented pricing - ✔✔firm estimates the sales volumes at different levels in
order to determine the price that maximizes over
✔✔Subsidiary Pricing Strategies - ✔✔-polycentric pricing strategy
-geocentric pricing strategy
-ethnocentric pricing strategy
✔✔Polycentric pricing strategy - ✔✔subsidiaries have full control over their pricing
decision and there is little or o head-office involvement
, ✔✔Geocentric Pricing Strategy - ✔✔parent company establishes a floor price below
which subsidiaries are not allowed to sell the product
✔✔Ethnocentric pricing strategy - ✔✔parent company sets one worldwide price which
all subsidiary
✔✔Transfer Pricing - ✔✔the pricing of products sold to members of the same corporate
family
✔✔Implications of Transfer pricing - ✔✔-global taxation
-competitiveness
-motivation of subsidiary managers
✔✔Methods of Calculating transfer prices - ✔✔-cost based approach
-cost plus method
-negotiated
-arms length
✔✔Cost based approach - ✔✔input is transferred from parent to subsidiary at a price
that equals the parent's cost of acquisition
✔✔Cost plus method - ✔✔supply unit is allowed to add a % mark up to the price at
which the product is transferred
✔✔negotiated - ✔✔supplying unit and purchasing unit arrive at a mutually agreeable
transfer price through internal negotiations
✔✔arms length - ✔✔firm transfers the input to its subsidiary at the same price that it
would have charged an unrelated third party
✔✔Incoterms - ✔✔set of standardized terms of sale which establish the responsibilities
of both the exporter and the importer and where in the process title changes hand
✔✔Rules for any mode or modes of transport - ✔✔-EXW Ex works
-FCA Free Carrier
-CPT Carriage Paid To
-CIP Carriage and Insurance Paid To
-DAT Delivered at Terminal
-DAP Delivered at Place
-DDP Delivered Duty Paid
✔✔Rules for Sea and Inland water Transport - ✔✔-FAS Free Alongside ship
-FOB Free on Board
-CFR Cost & Frieght
-CIF Cost, Insurance, & Freight
