MKTG 445- EXAM 3 UPDATED ACTUAL QUESTIONS AND
CORRECT ANSWERS
Question:
1. What is the law of one price?
Answer:
It suggests that all customers should access the best product at the best price in a global market.
Question:
2. How does international trade affect prices?
Answer:
It generally leads to lower prices, helping to control a country's inflation rate.
Question:
3. What factors cause price variation in national markets?
Answer:
Costs, regulations, and competition intensity.
Question:
4. Why is the beer market considered highly fragmented?
Answer:
Due to significant price variations across different countries influenced by local competition.
Question:
5. What must global marketers consider when developing pricing systems?
Answer:
Price floors, ceilings, optimum prices, and alignment with global opportunities and constraints.
Question:
6. What is cross-border price transparency?
Answer:
Awareness of pricing differences across borders, especially in the eurozone and via the internet.
Question:
7. Who are the stakeholders involved in pricing decisions?
Answer:
Divisional vice presidents, regional executives, country managers, sales staff, product managers, and
corporate leaders.
Question:
8. What is the impact of product life-cycle on pricing objectives?
Answer:
Pricing objectives may change based on the product's life-cycle stage and competitive environment.
,Question:
9. What is market skimming strategy?
Answer:
Setting high prices to target market segments willing to pay a premium for unique products.
Question:
10. Give an example of market skimming.
Answer:
Reebok in India uses high pricing to position itself as a prestigious brand.
Question:
11. How does penetration pricing work?
Answer:
It involves setting low price levels to quickly build market share.
Question:
12. What challenges do first-time exporters face with penetration pricing?
Answer:
They may sell at a loss initially, which is difficult without resources to absorb such losses.
Question:
13. What is the freemium model?
Answer:
Offering a free ad-supported tier alongside paid options, as seen with Pandora.
Question:
14. What is companion products pricing strategy?
Answer:
Selling hardware at a loss to drive sales of companion products that generate profits.
Question:
15. How do mobile phone companies recoup costs from subsidized handsets?
Answer:
Through additional service fees from long-term contracts.
Question:
16. What is target costing?
Answer:
A pricing strategy where companies ensure products are profitable and meet quality standards by reasoning
backward from customer needs.
Question:
17. What is the cardinal rule of target costing?
Answer:
If the design team cannot meet the target costs, the product should not be launched.
, Question:
18. What role does external considerations play in global pricing decisions?
Answer:
They must account for additional costs like shipping goods across national boundaries.
Question:
19. How do Japanese companies like Toyota use target costing?
Answer:
To ensure products meet profitability and quality standards while being appropriately priced.
Question:
20. What is the influence of competition on pricing strategies?
Answer:
Pricing strategies may need to adapt based on the competitive environment in each country.
Question:
21. What is the significance of product positioning in pricing?
Answer:
A product may be positioned as low-priced in one country and premium-priced in another.
Question:
22. How did Sony's pricing strategy for the Walkman contribute to its success?
Answer:
By setting a lower price to attract the youth market, leading to eventual success despite initial losses.
Question:
23. What is the effect of the product life cycle on pricing?
Answer:
Skimming is effective in the introductory phase, targeting innovators and early adopters.
Question:
24. How do streaming platforms utilize penetration pricing?
Answer:
By offering low-cost or free ad-supported tiers to attract budget-conscious consumers.
Question:
25. What challenges do manufacturers face with commoditization?
Answer:
Preventing further commoditization as competition increases and prices drop.
Question:
26. What is the impact of shipping costs on global pricing?
Answer:
Shipping costs can significantly affect the final price of products in international markets.
CORRECT ANSWERS
Question:
1. What is the law of one price?
Answer:
It suggests that all customers should access the best product at the best price in a global market.
Question:
2. How does international trade affect prices?
Answer:
It generally leads to lower prices, helping to control a country's inflation rate.
Question:
3. What factors cause price variation in national markets?
Answer:
Costs, regulations, and competition intensity.
Question:
4. Why is the beer market considered highly fragmented?
Answer:
Due to significant price variations across different countries influenced by local competition.
Question:
5. What must global marketers consider when developing pricing systems?
Answer:
Price floors, ceilings, optimum prices, and alignment with global opportunities and constraints.
Question:
6. What is cross-border price transparency?
Answer:
Awareness of pricing differences across borders, especially in the eurozone and via the internet.
Question:
7. Who are the stakeholders involved in pricing decisions?
Answer:
Divisional vice presidents, regional executives, country managers, sales staff, product managers, and
corporate leaders.
Question:
8. What is the impact of product life-cycle on pricing objectives?
Answer:
Pricing objectives may change based on the product's life-cycle stage and competitive environment.
,Question:
9. What is market skimming strategy?
Answer:
Setting high prices to target market segments willing to pay a premium for unique products.
Question:
10. Give an example of market skimming.
Answer:
Reebok in India uses high pricing to position itself as a prestigious brand.
Question:
11. How does penetration pricing work?
Answer:
It involves setting low price levels to quickly build market share.
Question:
12. What challenges do first-time exporters face with penetration pricing?
Answer:
They may sell at a loss initially, which is difficult without resources to absorb such losses.
Question:
13. What is the freemium model?
Answer:
Offering a free ad-supported tier alongside paid options, as seen with Pandora.
Question:
14. What is companion products pricing strategy?
Answer:
Selling hardware at a loss to drive sales of companion products that generate profits.
Question:
15. How do mobile phone companies recoup costs from subsidized handsets?
Answer:
Through additional service fees from long-term contracts.
Question:
16. What is target costing?
Answer:
A pricing strategy where companies ensure products are profitable and meet quality standards by reasoning
backward from customer needs.
Question:
17. What is the cardinal rule of target costing?
Answer:
If the design team cannot meet the target costs, the product should not be launched.
, Question:
18. What role does external considerations play in global pricing decisions?
Answer:
They must account for additional costs like shipping goods across national boundaries.
Question:
19. How do Japanese companies like Toyota use target costing?
Answer:
To ensure products meet profitability and quality standards while being appropriately priced.
Question:
20. What is the influence of competition on pricing strategies?
Answer:
Pricing strategies may need to adapt based on the competitive environment in each country.
Question:
21. What is the significance of product positioning in pricing?
Answer:
A product may be positioned as low-priced in one country and premium-priced in another.
Question:
22. How did Sony's pricing strategy for the Walkman contribute to its success?
Answer:
By setting a lower price to attract the youth market, leading to eventual success despite initial losses.
Question:
23. What is the effect of the product life cycle on pricing?
Answer:
Skimming is effective in the introductory phase, targeting innovators and early adopters.
Question:
24. How do streaming platforms utilize penetration pricing?
Answer:
By offering low-cost or free ad-supported tiers to attract budget-conscious consumers.
Question:
25. What challenges do manufacturers face with commoditization?
Answer:
Preventing further commoditization as competition increases and prices drop.
Question:
26. What is the impact of shipping costs on global pricing?
Answer:
Shipping costs can significantly affect the final price of products in international markets.
