Onkvisit S., Shaw J. International Marketing: Analysis and Strategy

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A new EU law has taken effect, and it prohibits

brewers dominant in their home markets from

owning restaurants or cafés.

The EU has begun to aggressively pursue

antitrust cases. European car makers have long kept

domestic prices 30 percent or more higher than

they are abroad.When Volkswagen tried in 1998 to

prevent German dealers from importing cheaper

cars from Italy, the European Commission ﬁned it

more than $100 million. In addition, ﬁfteen ship-

pers, including Britain’s P&O Nedlloyd, Denmark’s

Maersk Line, and the US’s Sea-Land Service, were

ﬁned a record $314 million. Furthermore, eight

steel producers were ﬁned $95 million for conspir-

ing to ﬁx prices of seamless steel tubes.

Many former communist and socialist countries

have now moved in the direction of market-oriented

prices. Since the start of the reforms in 1992, Russia

has lifted price controls on more than 90 percent of

wholesale and retail goods and has privatized most

state-owned enterprises to varying degrees.

Table 16.1 shows how prices in general differ

greatly from country to country. Table 16.2, in

contrast, shows prices of automobiles in particular.

INFLATION

Once the price is set, it must still be adjusted peri-

odically because of the impact of inﬂation. During

1985, the runaway inﬂation in Argentina made it

easy to see that prices had to be adjusted upward on

a sharp and continuous basis. Supermarkets there

adjusted prices twice each day, and restaurants

marked their prices in pencil to make easy daily

changes. Argentine consumers rushed out to pur-

chase goods as soon as they were paid, as a one-day

delay could cost them dearly in terms of higher

prices.

An inﬂationary environment creates numerous

problems. A ﬁrm’s price may be constrained by

government price controls. It is also difﬁcult

to guarantee prices over an extended period of

time. Catalog houses, for example, face a dilemma

because they can neither maintain the prices

printed in their catalogs nor print new catalogs

frequently. Any installment payment plan adds to

the complexity.

Domestically and internationally,marketers must

take time lag in receiving payment into account. A

country’s inefﬁcient banking system may be a cause

of the delay. For example, Gosbank was once the

central bank for all the states within the Soviet

Union. The bank’s dissolution drastically reduced

the efﬁciency of the interstate banking system.

Exporters and importers had to wait two or three

months to clear payment orders, and the risk was

too great at the time when inﬂation was high.

When a marketer operates within a highly inﬂa-

tionary environment, it must think like its cus-

tomers in order to protect itself. There are several

strategies that may be devised for this purpose.

First, merchants must collect their accounts receiv-

able quickly. To protect itself, American Express

requires its Argentine cardholders to pay their

charge account purchases even before the bills are

sent. Second, a product may be modiﬁed by reduc-

ing the quantity or eliminating extra frills so that an

affordable price can be achieved.Third, sometimes

it may be better not to make a sale. Some Argentine

retailers and distributors felt that they would come

out ahead by closing their stores for a month instead

of making sales because their inventories would

greatly appreciate in value over the interval. Fourth,

the marketer can insulate itself against the declining

value of a depreciating local currency by posting its

prices in terms of an appreciating hard currency.

Another means of protection is through the

accounting system. A company has the option of

valuing its inventory and costs of goods sold based

on either the FIFO (ﬁrst in, ﬁrst out) or LIFO (last

in, ﬁrst out) basis. During a period of stable prices,

it may not matter very much which method is used,

but in a country experiencing high inﬂation, it may

turn out to be a matter of survival for a marginal

company as to which accounting inventory valuation

method is used.

The FIFO method will understate the cost of

goods sold during a period of high inﬂation, and this

will result in excessive paper proﬁts that are subject

to the payment of higher taxes and dividends. The

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problem is made more difﬁcult because there is less

cash available for the replenishment of inventory,

which when purchased is acquired at much higher

prices. Thus, a ﬁrm is wise to adopt the LIFO

system, which will improve the amount of cash ﬂow.

By assuming that the last item bought at a higher

price will be the ﬁrst item to be sold, the cost of

goods sold is overstated, resulting in less proﬁt

being generated.Subsequently, less tax and dividend

will be paid, and there are more funds remaining for

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Table 16.1 Prices around the globe

Excl. rent Incl. rent Excl. rent Incl. rent

City Zurich = 100 Zurich = 100 City Zurich = 100 Zurich = 100

Oslo 117.8 111.3

Hong Kong 108.1 122.5

Tokyo 106.7 110.3

New York 104.5 120.2

Zurich 100.0 100.0

Copenhagen 98.9 97.9

London 97.6 111.4

Basel 97.5 92.6

Chicago 97.2 101.4

Geneva 95.6 98.3

Lugano 93.9 90.2

Stockholm 91.1 88.1

Paris 89.3 92.4

Helsinki 86.1 84.5

Los Angeles 84.3 87.5

Vienna 84.2 85.2

Dublin 82.8 89.2

Brussels 79.2 75.7

Frankfurt 78.5 78.0

Amsterdam 77.3 81.0

Seoul 76.5 77.6

Berlin 75.4 71.9

Miami 74.6 74.2

Milan 74.4 82.9

Athens 73.8 72.0

Rome 73.4 79.7

Taipei 73.1 84.3

Singapore 72.1 79.1

Tel Aviv 70.2 70.3

Shanghai 69.7 71.9

Madrid 68.4 67.5

Toronto 66.6 67.9

Manama 66.1 68.3

Sydney 66.1 68.3

Montreal 65.6 60.7

Source: Prices and Earnings

(Zurich: UBS AG, 2003), 6.

Lisbon 65.1 68.5

Dubai 65.1 73.6

Barcelona 63.0 61.8

Auckland 62.1 63.9

Mexico City 61.1 62.5

Lagos 59.4 50.9

Budapest 55.9 57.3

Ljubljana 55.0 59.1

Istanbul 54.9 65.6

Moscow 53.6 56.2

Nairobi 53.6 51.8

Warsaw 50.7 51.8

Jakarta 50.4 59.7

Tallinn 50.0 46.1

Vilnius 48.8 46.1

Caracas 47.6 57.8

Bangkok 45.8 44.3

Lima 45.4 48.8

Johannesburg 44.9 48.3

Riga 43.4 39.9

Kuala Lumpur 42.9 42.5

São Paulo 41.7 41.5

Santiago de Chile 41.5 42.2

Prague 40.5 41.8

Bratislava 38.3 38.9

Rio de Janeiro 38.2 38.4

Bogotá 38.0 34.4

Manila 36.8 42.6

Soﬁa 35.4 33.3

Bucharest 33.2 29.9

Karachi 32.7 33.3

Kiev 32.5 34.3

Buenos Aires 30.6 27.8

Mumbai 28.7 28.3

the purchase of new inventory. Anderson Clayton,

for example,uses the LIFO method to reduce its tax

liability in Mexico. The improvement in cash ﬂow

reduces the need to borrow funds in that uncertain

monetary environment.

After World War I, several European economies

experienced hyperinﬂation. Unbelievably, Germany

recorded an astronomical 3.25 million percent in a

single month in 1923. Thus modern hyperinﬂation

is quite mild by comparison.The recent episodes of

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Table 16.2 Car prices and maintenance costs

City Mid-price car Price USD City Mid-price car Price USD

Amsterdam Peugeot 307 23,500

Athens Peugeot 607 37,300

Auckland Holden Astra City Sedan 1.8 17,400

Bangkok Toyota Alﬁs 1.8 18,700

Barcelona Citroën Xsara 1.6i 16,500

Basel VW Golf 2.0 22,300

Berlin VW Golf IV 20,300

Bogotá Peugeot 306 11,900

Bratislava Skoda Octavia Classic 11,900

Brussels VW Golf 2.0 Highline 23,300

Bucharest Dacia 1310 25,800

Budapest Ford Mondeo Ambiente 2.0TDC 8,800

Buenos Aires Peugeot 206 4,000

Caracas Chevrolet Astra 1.9 18,200

Chicago Nissan Maxima 2.0 29,400

Copenhagen Peugeot 307 2.0 SE 13,100

Dubai Mitsubishi Galant 2.0 31,500

Dublin VW Passat SAL 1.8T 19,800

Frankfurt VW Golf 1.8 23,800

Geneva Opel Zaﬁra 1.8i 25,700

Helsinki Toyota Avensis 1.8 VTTi 24,200

Hong Kong Nissan Primera 2.0 27,400

Istanbul VW Passat 1.8 26,600

Jakarta Toyota Corolla Altis 19,100

Johannesburg Toyota Corolla 160i 11,300

Karachi Suzuki Baleno 2003 6,900

Kiev VAZ-21102 1.5 37,700

Kuala Lumpur Proton Wira 1.8 17,000

Lagos Peugeot 505 23,300

Lima Toyota Yaris 1.5 13,500

Lisbon VW Golf 1.9 TDI 29,100

Ljubljana VW Golf IV 1.9 SDI 15,900

London Vauxhall Astra GSI 2.0i 26,400

Los Angeles Honda Civic DX 15,500

Lugano Honda CR-V 2.0 26,300

Luxembourg VW Golf 1.9 TDI 20,400

Source: Prices and Earnings

(Zurich: UBS AG, 2003), 17.

Madrid Ibiza 1.9 SDI Stella 13,300

Manama Toyota Corolla 1.8 27,300

Manila Toyota Corolla GLi 1.6 14,600

Mexico City VW Jetta Europe Austero 13,000

Miami Hyundai Sonata 2002 14,200

Milan VW Golf 1.8 GTi 18,000

Montreal Mazda Protegé E5 15,900

Moscow Vaz 2112 1.5 6,000

Mumbai Maruti Zen LX 7,900

Nairobi Toyota Corolla 1.8 26,000

New York Ford Taurus 23,900

Oslo Toyota rav4 39,200

Paris Renault Laguna 1.8 23,200

Prague Skoda Octavia 1.9 14,700

Riga Ford Mondeo 1.8i 16,700

Rio de Janeiro VW Golf City 1.6 5,800

Rome Fiat Punto 1.9 16,300

Santiago de Toyota Yaris 8,100

Chile

São Paulo Opel Vectra 2.2 10,200

Seoul Hyundai New EF Sonanta 2.0 36,200

Shanghai Buick 25G 14,100

Singapore Korea Optima 2.0 DOHC 44,900

Soﬁa Seat Cordoba 1.4 10,500

Stockholm Volvo V70 29,200

Sydney Holden Commodore 16,600

Taipei Honda 2000C 18,100

Tallinn Mazda 6 2.0 18,600

Tel Aviv Mazda 6 2.0 28,500

Tokyo Honda Accord 2.0E 17,600

Toronto Toyota Corolla CE 14,800

Vienna VW Golf TDi 19,000

Vilnius Mazda 6 15,100

Warsaw Toyota Corolla Sedan 2.0f 24,500

Zurich Ford Focus 2.0 20,100

modern hyperinﬂation include Argentina (with a

peak twelve-month inﬂation rate of 20,266 percent

in 1990), Bolivia (23,447 percent in 1985), Brazil

(6821 percent in 1990), Peru (12,378 percent in

1990), and Ukraine (10,155 percent in 1993).

TRANSFER PRICING

A common practice is for an MNC’s many sub-

sidiaries to trade among themselves or with the

parent ﬁrm. For example,almost one-third of all US

exports go to US subsidiaries and business afﬁliates

overseas. According to the United Nations World

Investment Report, intraﬁrm trading of goods

and services among multinational corporations has

soared, amounting to about one-third of total world

trade.

Initially, it may seem that any price charged

should be acceptable because the sales are among

subsidiaries. If the selling price is relatively low, the

proﬁt is made by the buying unit. If the price is

relatively high, the proﬁt is made by the selling sub-

sidiary. In the ﬁnal analysis, the same amount of

proﬁt is still made by the parent ﬁrm which ever is

the case.This situation, however, is complicated by

taxation. The transfer prices used, therefore, must

be carefully considered (see Figure 16.1).To comply

with the complicated tax laws, the 500 biggest US

companies spend more than $1 billion a year, with

half of the cost attributed to international tax

rules.

There are four basic methods used to determine

transfer prices. The ﬁrst method involves transfers

at direct manufacturing costs. The problem with this

method is that when a buying subsidiary acquires

merchandise at a very low price it has no incentive

to hold down expenses or to maximize proﬁts.The

selling unit is also likely to be unhappy for not

showing proﬁt, feeling that it is subsidizing an afﬁl-

iate of the ﬁrm’s operations.

The second technique involves a transfer at direct

manufacturing cost plus a predetermined markup to cover

additional expenses. Proﬁt is produced and added at

every stage.The disadvantage of this method is that

the price generated may be too high because market

conditions are given secondary consideration to the

markups taken.

The third course of action involves the use of a

market-based transfer price. The price, though com-

petitive, may end up being too low for the selling

subsidiary because production cost may not be

considered.

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Table 16.3 Stabilization programs and inﬂation

performance, 1989–99

Maximum Year in which

annual inﬂation was

inﬂation highest

(%)

Albania 237 1992

Armenia 10896 1993

Azerbaijan 1787 1994

Belarus 1997 1993

Bulgaria 579 1997

Croatia 2585 1989

Czech Republic 52 1991

Estonia 947 1992

Georgia 7486 1993

Hungary 35 1990

Kazakhstan 2961 1992

Kyrgvz Republic 958 1992

Latvia 1162 1992

Lithuania 1162 1992

Macedonia, former

Yugoslav Republic of 1780 1992

Moldova 2198 1992

Poland 640 1989

Romania 295 1993

Russia 2510 1992

Slovak Republic 58 1991

Slovenia 247 1991

Tajikistan 7344 1993

Turkmenistan 9743 1993

Ukraine 10155 1993

Uzbekistan 1281 1994

CEE 651 1991

Baltics 1091 1992

Other former Soviet Union 4943 1993

Source:

Adapted from

Finance & Development

, September

2000, 4.

The fourth and ﬁnal process employs an arm’s

length price as a basis for determining transfer price.

This price would be the price that unafﬁliated

traders would agree on for a particular transaction.

The problem with using this method occurs when

the product has no external buyers or is sold at

different prices in different markets.

Cost-plus and market-based pricing were the

most popular methods used both in more developed

and less developed countries.The ﬁndings show that

size and legal considerations (e.g., compliance

with tax and custom regulations, antidumping and

antitrust legislations, and ﬁnancial reporting rules of

host countries) are inﬂuential in the use of market-

based transfer pricing. However, the extent of eco-

nomic development in host countries and economic

restrictions (e.g., exchange controls, price controls,

restrictions on imports, and political and social

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Figure 16.1 Tax laws

and transfer pricing

conditions) are either unimportant or secondary

determinants of a market-based transfer pricing

strategy. US Treasury Regulation 1.482 prescribes

the following transfer pricing methods: the uncon-

trolled price method, the resale method, the cost-

plus method, and some other appropriate method

when none of the methods described above is

applicable.

Ordinarily, the parent ﬁrm should attempt to

maximize its income in low-tax countries and min-

imize proﬁt in high-tax markets. To minimize the

income of a buying subsidiary in a high-tax country,

use of the arm’s length price is appropriate. In fact,

any permissible costs should be added so that the

price charged will be so high that it leaves the buyer

with only a small proﬁt subject to tax.

On the other hand, if the buying subsidiary

is located in a low-tax country, its income should

be maximized. This may be achieved by using a

transfer price based on only direct production

costs.In this case, the buyer will acquire the product

for resale or use at a very low price. Its high proﬁt

is, however, subject only to low tax rates in this

market. Although Cartier’s corporate home is in

low-tax Luxembourg, it wisely prices its watches so

that most of the markup is collected by its lower

taxed Swiss subsidiary.

Section 482 of the US Internal Revenue Code

requires arm’s length dealing between related par-

ties.An arm’s length price or charge is deﬁned as the

amount or price that would be charged or would

have been charged for the same product or service if

independent transactions with unrelated parties

under similar conditions were carried out. This

requirement applies to (1) loans;(2) both goods and

services (e.g., performance of marketing, manager-

ial, technical, or other services for an afﬁliated

party); and (3) possession, use, occupancy, loan, and

assignment of tangible and intangible property.

If the IRS ﬁnds that adjustments are needed to

correctly reﬂect a company’s income, it is empow-

ered to distribute, allocate, or apportion gross

income, deductions, credits, or allowances among

related organizations regardless of whether they are

organized in the USA. The purpose of the Internal

Revenue code is to prevent a low intercompany

transfer price that shifts income away from the

USA. At the same time, the application of the code

is intended to ensure that the transfer price of a sale

from a foreign company to a related US company is

not so high as to result in a small income being real-

ized in the USA.The US Customs Service, however,

has a different perspective – it keeps an eye out for

low transfer prices, which in turn reduce customs

duties and which may result in dumping.

The IRS employs several methods to determine

an arm’s length price. When available, comparable

uncontrolled sales must be used. When such sales

do not exist, the resale price method is the next

alternative to be used.When the ﬁrst two methods

are not applicable, it is permissible to use the cost-

plus method.Any other appropriate pricing method

may be used only when it is reasonable to do so and

when the ﬁrst three methods are not relevant.

In general, US ﬁrms with foreign subsidiaries can

minimize their US taxes by overpaying the foreign

subsidiaries for goods and services received or

undercharging them for goods and services ren-

dered. In the case of DHL Corp., the world’s largest

international air express network which links more

than 80,000 cities in more than 200 countries, it

was ordered by the IRS to pay $194 million in back

income taxes and $75 million in penalties.The IRS

determined that DHL and its subsidiaries shifted

taxable income to a Hong Kong subsidiary.

The

IRS has also determined that, between 1966 and

1988, the various Hyatt companies under-reported

income by $100 million because they paid too little

for the Hyatt brand and other services provided by

the US parent. A 1999 ruling has determined that

the $10,000 one-time fee that Hyatt International

paid for each hotel bearing the Hyatt name was

much too low.

According to President Clinton, the USA could

bring in $45 billion in four years by taking care of

the transfer pricing problem. The new US regula-

tions allow companies to use greater ﬂexibility,

judgment, and subjectivity in determining what

they charge foreign operations for certain services.

At ﬁrst, it seems that the new regulations may

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encourage ﬁrms to be even more aggressive in their

transfer pricing schemes to maximize proﬁts. The

IRS, however, feels that ﬁrms will have to be more

careful because the “best method rule” requires

them to identify the best way to determine the

prices that they charge their other operations.

When possible and applicable, a US company

should try to maximize foreign tax credits since they

may be used to reduce US income tax. Moreover, it

should consider locating a tax haven to shelter and

maximize its income by using the tax haven to

collect royalties, fees, dividends, and so on.

The OECD has published guidelines on transfer

pricing. Most countries use the OECD guidelines to

determine an arm’s length price.

CONCLUSION

To set price, the concerns of all affected parties

must be addressed. A manufacturer needs to make

a proﬁt. So do resellers, who demand adequate

margins for their services. Moreover, competitors’

reactions in terms of their price responses must be

anticipated. Finally, it is necessary to take into

account both consumers and the value they place on

the product.

Several factors must be taken into consideration

in setting price, including cost, elasticity of demand,

supply, product image (prestige), turnover, market

share/volume, product life cycle, and the number

of products involved. The optimum mix of these

ingredients varies by product, market, and corpo-

rate objectives.

Price setting in the international context is com-

plicated further by such factors as foreign exchange

rates, relative labor costs, and relative inﬂation

rates in various countries. Other important consid-

erations are export packing costs and charges,

transportation costs, tariffs, tax laws, and proﬁt

remittance restrictions.

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CASE 16.1 BLOOD DIAMONDS

De Beers maintains its power by using a system that sells exclusively to 125 “sightholders” (diamond merchants

from the world’s leading diamond-cutting centers). These sightholders gather ten times a year in London to buy

stones from De Beers’ exclusive sales unit, the Central Selling Organization.They are a crucial link in the supply

chain of brokers, cutters, and wholesalers that produces engagement rings and other jewelry of the world’s frag-

mented $56 billion diamond retail trade. Sightholders do not have to buy what DeBeers offers, but they will not

be invited back for another “sight.”

De Beers has two big problems. On the one hand, human rights groups accuse it of buying illicit (blood or con-

ﬂict) diamonds from African rebels and rulers who use the proceeds to ﬁnance their wars. On the other hand, the

company’s usual strategy of hoarding diamonds is becoming more and more expensive. For a very long time, De

Beers has accumulated raw gems so as to control the supply made available to the world as well as to control

the world diamond prices. However, the strategy has become an expensive proposition since there are so many

diamond producers, making it difﬁcult for the company to keep absorbing the ever-increasing supply on its own.

De Beers has found a way to kill two birds with one stone. It uses the social problem (the controversy over

blood diamonds) to address its commercial problems.The company has suspended all buying of diamonds outside

of its own proprietary stones and its contractual purchases. It has announced plans to certify all diamonds sold

to sightholders as nonconﬂict stones. It has told 125 sightholders that they will lose access to De Beers stones if

they deal in blood diamonds.

The plan is to use its refusal to handle conﬂict diamonds to re-invent De Beers as a socially responsible cru-

sader.To improve its image, De Beers has positioned itself as a “supplier of choice.” While still wanting to main-

tain its global leadership for uncut diamonds worth $7 billion to $8 billion a year, it aims to become a branded,

high-value diamond trader.

De Beers, also known as the syndicate, has another motive. It wants the world in general and the US govern-

ment in particular to forgive and forget its monopoly or cartel status. It is hopeful that the new image will help

to convince American antitrust regulators that it is no longer a monopolist that ﬁxes prices of industrial dia-

monds. With the antitrust problems being unresolved, De Beers cannot set up operations in the USA which is the

world’s largest retail market for polished stones. Half of the world’s retail sales takes place in American jewelry

stores. As part of its rebranding campaign, the Central Selling Organization has become the Diamond Trading Co.

Diamonds have traditionally been graded and valued based on the four Cs – cut, color, clarity, and carat. Is it

possible to make “country of origin” the ﬁfth C in the grading system? Canada is doing just that by touting its

diamonds as politically correct.

Skeptics dismiss the idea as a gimmick. Some players, however, are counting on it, claiming that the ﬁfth C is

not any country of origin but Canada. Boasting Canada’s reputation as a peaceful, socially progressive country,

and stressing that Canadian diamonds are mined under ethical, environmentally friendly conditions, these orga-

nizations are striving to distinguish Canadian diamonds from blood diamonds. Since country of origin has always

played a part in deﬁning the quality of a product (e.g., Swiss watches, Italian leather, French wines), it is

conceivable that it may work for Canadian diamonds.

Sirius Diamonds Inc. laser-engraves a polar bear on its Canadian stones. Henry Birks & Sons Inc. engraves

its Canadian diamonds with a maple leaf and serial number.The government of the Northwest Territories provides

a certiﬁcate for each diamond that is mined, cut, and polished there. Each certiﬁcate has a serial number that is

engraved by laser on to the diamond, but some retailers complain that wholesalers are charging as much as 20

percent more for Canadian diamonds.

Points to consider

1 Evaluate DeBeers’ pricing practice.

2 Evaluate DeBeers’ attempt to promote a new image.

3 Will consumers care where a diamond comes from?

Sources:

“Why De Beers Washed Its Hands of Blood Diamonds,”

San José Mercury News

, August 27, 2000; “Political

Correctness by the Carat,”

Wall Street Journal

, April 17, 20, 2003.

QUESTIONS

1 Explain how exchange rate and inﬂation affect the way you price your product.

2 What is dumping? When does it become illegal? What can a seller do to circumvent antidumping regula-

tions?

3 What methods can be used to compute a transfer price (for transactions between afﬁliated companies)?

DISCUSSION ASSIGNMENTS AND MINICASES

1 How should US farmers price their products?

2 To protect itself, how should a marketer price its product in a country with high inﬂation?

3 Price haggling is an art. Discuss how you can haggle effectively.

4 Explain why US car makers prefer to use the “unbundling” approach in pricing their cars while their foreign

competitors tend to use the “bundling” pricing approach.

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NOTES

1 Matthew B. Myers, S.Tamer Cavusgil, and Adamantios Diamantopoulos,“Antecedents and Actions of Export

Pricing Strategy: A Conceptual Framework and Research Propositions,”

European Journal of Marketing

(No. 1, 2002): 159–88.

2 Robert Grosse and Walter Zinn, “Standardization in International Marketing: The Latin American Case,”

Journal of Global Marketing

4 (No. 1, 1990): 53–78.

3 A. Coskun Samli and Laurence Jacobs,“Pricing Practices of American Multinational Firms: Standardization

vs. Localization Dichotomy,”

Journal of Global Marketing

8 (No. 2, 1994): 51–73.

4 Ivy S.N. Chen and Veronica Wong, “Successful Strategies of Newly Industrialised East Asian Firms in

Europe,”

European Journal of Marketing

37 (No. 1, 2003): 275–97.

5 “Nintendo Fined $147 Million in Europe,”

San José Mercury News

, October 31, 2002.

Business Week

, November 5, 2001, 55.

7 “Nissan Motor Co. to Accelerate Plan for Cutting Costs,”

Wall Street Journal

, June 28, 1994.

8 “Japanese Firms Struggle to Survive the Weak Dollar,”

San José Mercury News

, April 9, 1995.

9 Jack L. Hervey, “Dollar Drop Helps Those Who Help Themselves,”

Chicago Fed Letter

(March 1988).

10 “Legal Charges Keep Electric Golf Cart Going – to Court,”

Wall Street Journal

, May 24, 1995.

11 Michael Leidy, “Antidumping: Unfair Trade or Unfair Remedy?”

Finance & Development

(March 1995):

27–9.

12 “Micron Loses Ruling on Taiwan Chip Sales,”

San José Mercury News

, November 20, 1999.

13 “Import Administration,”

Export America

(August 2001): 10–12.

14 “WTO Panel Dumps on the US,”

Business Week

, September 11, 2000, 53.

15 Hans Peter Lankes, “Market Access for Developing Countries,”

Finance & Development

(September 2002):

8–13.

16 “A US Trade Ploy That Is Starting to Boomerang,”

Business Week

, July 29, 2002, 64–5.

17 “EU Launches DVD Price Probe,”

The Nation

, June 13, 2001.

18 “Invasion of the Cartel Cops,”

Business Week

, May 8, 2000, 130.

19 “Cartel Cops.”

20 Harry G. Broadman, “Competition and Business Entry in Russia,”

Finance & Development

(June 2001):

22–5.

21 Carmen M. Reinhart and Miguel A. Savastano, “The Realities of Modern Hyperinﬂation,”

Finance &

Development

(June 2003): 20–1.

22 “Taxing Multinationals: The Donnybrook Ahead,”

Business Week

, September 9, 2002, 86–7.

23 Mohammad F. Al-Eryani, Pervaiz Alam, and Syed H. Akhter, “Transfer Pricing Determinants of US

Multinationals,”

Journal of International Business Studies

21 (No. 3, 1990): 490.

24 “DHL Owes $269 Million, IRS Claims,”

San José Mercury News

, October 12, 1995.

Business Week

, March 31, 2003, 81–2.

26 “New Tax Rules Expand Multinationals’ Flexibility in Dealings with US Units,”

Wall Street Journal

, July 6,

1994.

494

PRICING STRATEGIES

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20111

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495

Money often costs too much.

Ralph Waldo Emerson

CHAPTER OUTLINE

■ Countertrade

 Types of countertrade

 Problems and opportunities

■ Price quotation

■ Terms of sale

 Trade terms

 Quotation guidelines

■ Methods of ﬁnancing and means of payment

 Consignment

 Open account

 Cash in advance

 Bill of exchange (draft)

 Bankers’ acceptance

 Letter of credit (L/C)

■ Conclusion

■ Case 17.1 Countertrade: counterproductive?

Pricing strategies

Countertrade and terms of sale/payment

Chapter 17