NIM : 201710160311131
Kelas : Manajemen 5C
8-1 Question:
Apa yang menentukan permintaan untuk mata uang tertentu dalam pasar valuta asing?
Answer:
Keinginan orang asing untuk membeli barang, jasa, dan aset dari negara yang
megeluarkannya.
8-3 Question:
Bagaimana harga ditetapkan dalam pasar valuta asing?
Answer:
Harga valuta asing- adanya sistem nilai tukar fleksibel-ditetapkan atas dasar
penawaran dan permintaan dalam pasar valuta asing setiap negara.
8-4 Question:
Apa peran bank internasional dalam pasar valuta asing?
Answer:
1. Dapat mempermudah pertukaran mata uang asing serta memindahkan dana
atau daya beli dari suatu negara ke negara lain.
2. Menyediakan fasilitas kredit jajngka pndek pada pelaku sebagi media
transaksi untuk pembayaran dan atau penyerahan barang yang tidak perlu
segera diselasaikan.
3. Menyediakan fasilitas perlindungan untuk pelaku terhadap perubahan kurs
dengan mekanisme hanging.
https://ardra.biz/ekonomi/valuta-asing/pasar-valuta-asing/
8-5 Question:
Jelaskan berbagai teknik yang dapat digunakan perusahaan untuk melindungi diri
peruahaan nilai tukar di masa depan?
Answer:
Dengan menggunakan teknik spot dan forward. Harga forward mewakili prediksi
agregat pasar dari harga spot dari nilai tukar di masa depan. Jadi, harga forward dapat
membantu pelaku bisnis internasional dalam memproyeksikan perubahan nilai tukar
di masa depan. Perubahan ini dapat mempengaruhi komponen impor serta daya saing
dan profitabilitas ekspor perusahaan.
8-6 Question:
Diskusikan jenis-jenis aktivitas arbitrase utama yang memengaruhi pasar valuta asing!
Answer:
1. Arbitrase Barang-Paritas Daya Beli
Gagasan yang mendasari arbitrase : jika harga suatu barang rendah”murah”, dan
menjual kembali di pasar yang menawarkan harga lebih tinggi, atau pasar
“mahal”. Di dalam hukum satu harga, aktivitas arbitrase ini akan berlanjut hingga
harga barang tersebut identic di kedua pasar.
Arbitase barang tingkat perbatasan nasional diwakili oleh theory paritas daya
beli(theory of purchasing power parity-PPP). Teori ini menyatakan bahwa harga
barang yang dapat diperdagangkan, ketika dinyatakan dalam mata uang umum,
akan cenderung menyamakan diri lintas negara sebagai akibat dari nilai tukar.
2. Arbitrase Uang
Pada saat pasar valuta asing tidak berada dalam equilibrium, para professional
dapat mengambil laba melalui arbutrase uang. Beberapa bentuk arbitrase valuta
asing yang di mungkinkan,
a. Arbitrase duo titik atau arbitrase geografis, melibatkan pencarian keuntungan
dari perbedaan harga di dua pasar yang berbeda secara geografis.
b. Arbitrase tiga titik yang menguntungkan, karena dapat membeli dan menjual
tiga mata uang untuk mendapatkan laba tanpa risiko.
c. Arbitrase bunga terlindung merupakan arbitrase yang terjadi ketika perbedaan
antara tingkat bunga dua negara tidak sama dengan diskon/premi forward
pada mata uang mereka
8-7 Question:
Deskripsikan berbagai bentuk dari operasi luar negeri sebuah bank!
Answer:
Operasi perbankan luar negeri dapat dibentuk dalam berbagai cara. Jika bank tersebut
digabungkan secara terpisah dari perusahaan induknya, maka disebut sebagai bank
anak perusahaan (subsidiary bank); jika tidak digabungkan secara terpisah, maka
disebut sebagai bank cabang (branch bank). Terkadang sebuah bank internasional
dapat memilih untuk mendirikan bank afiliasi (affiliated bank), yaitu bank yang
beroprasi di luar negeri tempat mereka mengambil bangian dalam kepemilikan
bersama dengan mitra lokal ataupun asing.
8-8 Question:
Apa itu Eurocurrencies?
Answer:
Eurocurrency adalah mata uang yang disimpan pada deposito di luar pasar dalam
negerinya, yaitu, yang disimpan di bank-bank yang terletak di luar negara yang
mengeluarkan mata uang. Sebagai contoh, deposito dalam denominasi dolar AS di
bank Singapura adalah Eurocurrency, atau lebih tepatnya deposit Eurodollar.
https://en.wikipedia.org/wiki/Eurocurrency
8-9 Question:
Apa saja karakteristik utama dari pusat keuangan lepas pantai?
Answer:
- Berfokus untuk penawaran jasa perbankan dan keuangan lainnya kepada
pelanggan nonpenduduk,
- Banyak berpusat di negara kepulauan
- MNE menggunakan pusat keungan lepas pantai untuk mendapat pinjaman
Eurocurrency berbiaya rendah.
9-1. Question:
Apakah yang dimaksud dengan perdagangan yang adil? Siapa yang diuntungkan
dengan adanya perdagangan yang adil ini?
Answer:
Perdagangan adil, yang terkadang disebut dengan perdagangan terkelola, menyatakan
bahwa pemerintah nasional harus melakukan campur tangan secara aktif untuk
memastikan adanya “bidang permainan yang setara’ yang mana perusahaan asing dan
domestik dapat bersaing dengan persyaratan yang setara. Meskipun terdengar masuk
akal, argument bidang permainan yang setara sering kali digunakan untuk
membenarkan kebijakan yang membatasi kompetisi asing. Hasil dari perdebatan
tersebut sangat penting bagi manajer internasional.
9-2. Question:
Apakah yang dimaksud dengan argumen industri bayi?
Answer:
Argumen industry bayi adalah argument utama yang ditawarkan kepada pemerintah
untuk melakukan intervensi dalam perdagangan internasional.
9-3. Question:
Sebutkan jenis-jenis tarif?
Answer:
1) Tarif ad valorem
2) Tarif spesifik
3) Tarif majemuk
9-4. Question:
Jelaskan manfaat bagi importif untuk mengetahui klasifikasi tarif dari U.S. Customs
Service sejak awal?
Answer:
Kode tarif adalah sesuatu yang kompleks, margin laba yang diperkirakan oleh
importir pada suatu transaksi dapat menyusut atau menghilang jika pejabat bea cukai
mengenakan tarif yang lebih tinggi terhadap barang impor tersebut daripada yang
dapat diperkirakan oleh importir tersebut. Untuk mengurangi risiko ini, importir
Amerika Serikat dapat meminta klasifikasi tarif di awal atas barang yang mungkin
akan diimpor dengan menulis surat kepada U.S. Customs Service.
9-5. Question:
Mengapa suatu negara mengadopsi VER?
Answer:
Agar dapat mengatasi atau menghindari konflik perdagangan dengan mitra dagang
yang sebetulnya bersahabat.
Sumber: http://nickmanurhalisha.blogspot.com/2016/11/bisnis-internasional.html
9-6. Question:
Apa saja bentuk-bentuk utama dari NTB?
Answer:
Standar pengujian dan produk
Pembatasan akses ke jaringan sektor public
Kebijakan pengadaan sektor public
Persyaratan pembelian local
Pembatasan peraturan
Pembatasan mata uang
Pembatasan investasi
Sumber: http://nickmanurhalisha.blogspot.com/2016/11/bisnis-internasional.html
9-7. Question:
Apakah yang dimaksud dengan FTZ?
Answer:
Zona perdagangan asing (foreign trade zone- FTZ) adalah suatu area geografis tempat
barang impor atau ekspor mendapatkan perlakuan tarif secara khusus.
9-8. Question:
Apa saja peran dari Eximbank?
Answer:
Import Bank Amerika Serikat (Eximbank) menyediakan pembiayaan bagi ekspor
Amerika Serikat melalui pinjaman langsung dan jaminan peminjaman.
Sumber: Bisnis International/Ricky W. Griffin, Michael W. Pustay-Jakarta: Salemba
Empat, 2015, Halaman: 251
9-9. Question:
Apa saja tujuan dari CVD?
Answer:
CVD bertujuan untuk melawan dampak dari subsidi asing yang diberlakukan oleh
negara pengimpor. CVD diberlakukan pada produk asing yang diuntungkan dari
adanya subsidi pemerintah yang kemudian mendistorsikan perdagangan internasional.
9-10. Question:
Sebutkan dua definisi dari dumping?
Answer:
Definisi dumping dalam perdagangan internasional menurut para ahli adalah suatu
bentuk diskriminasi harga di dalam pasar internasional, yang mana hal ini dilakukan
oleh sebuah perusahaan atau negara yang bertindak sebagai pihak pengekspor yang
menjual barang dengan harga yang lebih rendah (bahkan bisa dibawah ongkos
produksi) di pasar luar negeri dibanding dengan harga yang ditetapkan untuk pasar
dalam negeri sendiri.Definisi dumping dalam perdagangan internasional menurut
kamus hukum ekonomi diartikan sebagai sebuah praktik dagang yang dilakukan
eksportir dengan menjual barang-barang komoditi di pasar internasional dengan harga
yang sangat miring kurang dari nilai wajar atau lebih rendah daripada harga yang
ditentukan untuk barang tersebut di negerinya sendiri atau lebih rendah daripada
harga jual kepada negara tertentu lainnya.
Sumber:http://www.pengertianmenurutparaahli.net/pengertian-dumping-dalam-
perdagangan-internasional/
BAB 10
QUESTION:
ANSWER:
10-1. Most Favored Nation adalah suatu asas yang mengatur jalannya perdagangan
dengan menggunakan asas non-diskriminasi, yakni tidak boleh membeda-bedakan
antara satu negara anggota GATT atau WTO dan anggota lainya.
Para anggota tersebut tidak boleh membeda-bedakan antara anggota yang satu dengan
anggota yang lainnya atau tidak boleh memberikan kemudahan hanya kepada satu
anggota saja tanpa perlakuan yang sama dengan anggota yang lainya baik itu
berkenaan dengan tarif ataupun perdagangan.
https://www.dictio.id/t/apa-yang-dimaksud-dengan-most-favored-nation/6306
10-2. Perjanjian WTO membolehkan suatu Negara untuk meminta pembebasan dari
penerapan kewajiban MFN ini mencakup upaya-upaya dan syarat-syarat tertentu.
Untuk maksud tersebut, manakala suatu Negara meminta pembebasan kewajiban
MFN, maka permintaan tersebut akan ditinjau setiap lima tahun. Pembebasan dari
penerapan kewajiban MFN ini hanya boleh dilakukan untuk jangka waktu 10 tahun.
Prinsip National Treatment merupakan suatu kewajiban dalam GATS yang mana
Negara-negara secara eksplisit harus menerapkan prinsip ini terhadap jasa-jasa atau
kegiatan jasa-jasa tertentu. Oleh karena itulah prinsip National Treatment atau
perlakuan nasional ini pada umumnya merupakan hasil dari negoisasi atau
perundingan diantara Negara-negara anggota.http://otoritas-
semu.blogspot.com/2016/01/prinsip-most-favoured-nation-dan.html?m=1
10-3. WTO:
GATT:
Hanya serangkaian perjanjian antaranggota yang dilayani oleh sekertariat ad
hoc
Hanya sebatas tentang tariff dan barang tangible
Hanya terdiri dari banyak perjanjian dimana keanggotaannya terbatas pada
beberapa Negara saja.
http://listyani-novitasari-fisip13.web.unair.ac.id/artikel_detail-144786-
EKI303%20PPEI-
GATT%20dan%20WTO:%20Serupa%20Tapi%20Tak%20Sama.htm
Bentuk integrasi ekonomi yang kedua adalah custom union, dimana ini merupakan
satu level integrasi dibawah common market. Pada custom union, negara-negara
setuju untuk menghapus semua batasan pada perdagangan mutual dan mulai
menentukan bersama sistem pajak dan kuota impor.
http://diansasip-fisip13.web.unair.ac.id/artikel_detail-138449-
Prinsip%20Ekonomi%20Internasional-
Kelembagaan%20Perdagangan%20Internasional%20di%20ASEAN.html
https://id.wikipedia.org/wiki/Masyarakat_Ekonomi_Eropa
BAB 11
11-1. Apa Yang Dimaksud Dengan Manajemen Strategi Internasional?
Jawaban :
Manajemen Strategi Internasional adalah prosesperencanaan manajemen yang
komprehensive dan berkelanjutan untuk merumuskan dan menerapkan strategi yang
memungkinkan sebuah perusahaan untukbersaing internasional secara efektif.
11-2. Apa Saja Empat Filosofi Dasar Yang Memandu Manajemen Stratetgis
Pada Sebagian Besar MNC?
Jawaban:
1. Strategi replikasi asal
2. Strategi multi domestik
3. Strategi Global
4. Strategi transnasional
11-3. Bagaimana Perumusan Strategi Internasional Dan Penerapan Strategi
Internasional Dapat Berbeda?
Jawab : Pada saat perumusan strategi perusahaan menetapkan tujuannya serta rencana
strategis yang akan mengarahkan perusahaan untuk mencapai tujuan yang telah
ditetapkan. Dalam perumusan strategi internasional, para manajer mengembangkan,
menyaring, dan menyetujui akan masuk (atau keluar) pada dasar mana serta
bagaimana cara terbaik untuk bersaing pada masing-masing pasar.
Dalam penerapan strategi, perusahaan mengembangkan sejumlah taktik untuk
mencapai strategi internasional yang telah dirumuskan. Keputusan Disney untuk
membangunHongkong Dsineyland adalah bagian dari perumusan strategi. Akan tetapi
memutuskan atraksi apa yang akan dipertontonkan, kapan dibuka, berapa biaya
masuknya, serta bagaimana pengaruh investasi pada taman tersebut untuk memasuki
pasar TV, film, dan lisensi karakter di Cina merupakan bagian implementasi strategi.
Implementasi strategi biasanya dicapai melalui desain organisasi, kinerja pegawai,
serta sistem dan proses kendalinya.
11-4. Apa Saja Langkah-Langkah Dalam Perumusan Strategi Internsional?
Apakah Berbeda Di Antara Perusahaan?
Jawab:
1. Mengembangkan Pernyataan Misi. Mengidentifikasi nilai, tujuan, dan arah
perusahaan.
2. Melakukan analisis SWOT. Menilai lingkungan eksternal dan internal perusahaan
untuk mengidentifikasikan kekuatan, kelemahan, peluang, serta ancaman.
3. menentukan tujuan strategis. Memanfaatkan kekuatan perusahaan dan peluang
lingkungan. Menetralkan ancaman eksternal dan mengatasi kelemahan perusahaan.
4. mengembangkan tujuan taktiks dan rencana. Merancang cara untuk meraih tujuan
strategis dan menjadi pedoman bagi aktivitas sehari-hari perusahaan.
5. Mengembangkan kerangka pengendalian. Merumuskan sistem dan proses
manajerial dan organisasi.
Ya berbeda sesuai kebijakan dari perusahaan dan tujuan perusahaan.
11-10. Apa Saja Tipe-Tipe Dasar Strategi Fungsional Yang Paling Banyak
Digunakan Perusahaan? Apakah Mungkin Jika Beberapa Perusahaan Memiliki
Strategi Fungsional Yang Berbeda?
Jawab :
1. strategi keuangan internasional
2. strategi pemasaran internasional
2. strategi operasional perusahaan
3. strategi sumber daya manusia internasional
Ya mungkin sesuai dengan tujuan dan kebijakan perusahaan.
Despite the strong economic and political arguments for integration, it has never been
easy to achieve on a meaningful level. There are two main reasons for this. First,
althougheconomic integration benefits the majority, it has its costs. While a set of
nations as a whole may benefit significantly from a regional free trade agreement,
certain groups may lose. The second impediment to integration arises from concerns
over national sovereignty.
2. In my opinion, I do not think is right for the European Commission to restrict merger
between American companies that do business in Europe. However, I do believe that
upholding some legal laws that limit certain restriction to ensure the legality of
American business done in Europe. By doing so, Europe Union, creates a positive
economy unity throughout Europe. The monetary stability with the use of Euro, the
ability to strengthening individual countries, and the free border makes Europe a
strong country. The ability to restrict, propose, and review any America business done
in Europe gives them the power to control many political and economical within the
country. In reality by them limiting the international business sets boundaries on what
American business can do in European grounds.
4. The creation of the single market means that it may nolonggerbe efficient to
operare separate production facilities in each country. Instead, the facilities
should either be linked so that each specializes in the production of only
certain items, or several sites shoud be closed down and production
consolidated into the most effieciens. Existing differences between countries
as well as the need to be located near imprortant customers my limit a firm’s
ability to fully consolidate or relocate production facilities for production cost
reasons.
Chapter 9
1. The interest rate on South Korean government securities with one-year maturity is 4%
and the expected inflation rate for the coming year is 2%. The US interest rate on
government securities with one-year maturity is 7% and the expected rate of inflation
is 5%. The current spot exchange rate for Korea won is $1 = W1,200. Forecast the
spot exchange rate one year from today. Explain the logic of your answer.
Answer: Drawing on what we know about the Fisher effect, the real interest rate in
both the US and South Korea is 2%. The international Fisher effect suggests that the
exchange rate will change in an equal amount but in an opposite direction to the
difference in nominal interest rates. Hence since the nominal interest rate is 3%
higher in the US than in South Korea, the dollar should depreciate by 3% relative to
the South Korean Won. Using the formula from the book: (S1 - S2)/S2 x 100 = i$ -
iWon and substituting 7 for i$, 4 for iWon, and 1200 for S1, yields a value for S2 of
$1=W1165.
2. Two countries, Great Britain and the US, produce just one good: beef. Suppose that
the price of beef in the US is $2.80 per pound, and in Britain it is £3.70 per pound. (a)
According to PPP theory, what should the $/£ spot exchange rate be? (b) Suppose the
price of beef is expected to rise to $3.10 in the US, and to £4.65 in Britain. What
should be the one year forward $/£ exchange rate? (c) Given your answers to parts (a)
and (b), and given that the current interest rate in the US is 10%, what would you
expect current interest rate to be in Britain?
Answer: (a) According to PPP, the $/£ rate should be 2.80/3.70, or .76$/£. (b)
According to PPP, the $/£ one year forward exchange rate should be 3.10/4.65, or
.67$/£. (c) Since the dollar is appreciating relative to the pound, and given the
relationship of the international Fisher effect, the British must have higher interest
rates than the US. Using the formula (S1 - S2)/S2 x 100 = i£ - i$ we can solve the
equation for i£, with S1=.76, S2=.67, I$ = 10, yielding a value of 23.4% for the
British interest rates.
3. Reread the Management Focus feature on Volkswagen in this chapter, then answer
the following questions: a) Why do you think management at Volkswagen decided to
hedge only 30 percent of their foreign currency exposure in 2003? What would have
happened if they had hedged 70 percent of their exposure? b) Why do you think the
value of the U.S. dollar declined against that of the Euro in 2003? c) Apart from
hedging through the foreign exchange market, what else can Volkswagen do to reduce
its exposure to future declines in the value of the U.S. dollar against the euro?
Answer: a) When Volkswagen decided to hedge just 30 percent of its foreign
exchange exposure in 2003, the company essentially gambled that the euro would
decline in value relative to the dollar. The company hoped that by saving the cost of
the commission involved in selling a currency forward, it would increase its profit
margin. This strategy of course, backfired. b) The appreciation of the euro relative to
the U.S. dollar took many people by surprise. Its rise has been attributed to record
U.S. foreign trade deficits and pessimism about the future value of the dollar. c) In
addition to using forward contracts, Volkswagen could use currency swaps, and lead
and lag payables and receivables.
4. You manufacture wine goblets. In mid-June you receive an order for 10,000 goblets
from Japan. Payment of ¥400,000 is due in mid-December. You expect the yen to
rise from its present rate of $1=¥130 to $1=¥100 by December. You can borrow yen
at 6% per annum. What should you do?
Answer:The simplest solution would be to just wait until December, take the
¥400,000 and convert it at the spot rate at that time, which you assume will be
$1=¥100. In this case you would have $4,000 in mid-December. If the current 180-
day forward rate is lower than 100¥/$, then a forward contract might be preferable
since it both locks in the rate at a better level and reduces risk. If the rate is above
¥100/$, then whether you choose to lock in the forward rate or wait and see what the
spot does will depend upon your risk aversion. There is a third possibility also. You
could borrow money from a bank that you will pay back with the ¥400,000 you will
receive (400,000/1.03 = ¥388,350 borrowed), convert this today to US$ (388,350/130
= $2,987), and then invest these dollars in a US account. For this to be preferable to
the simplest solution, you would have to be able to make a lot of interest (4,000 -
2,987 = $1,013), which would turn out to be an annual rate of 51% ((1,013/4000) * 2).
If, however, you could lock in these interest rates, then this method would also reduce
any exchange rate risk. What you should do depends upon the interest rates available,
the forward rates available, how large a risk you are willing to take, and how certain
you feel that the spot rate in December will be ¥100 = $1.
5. You are the CFO of a US firm whose wholly owned subsidiary in Mexico
manufactures component parts for your US assembly operations. The subsidiary has
been financed by bank borrowings in the United States. One of your analysts told you
that the Mexican peso is expected to depreciate by 30 percent against the dollar on the
foreign exchange markets over the next year. What actions, if any, should you take?
Answer: Your financing and operating capital are in dollars, yet many of your costs
(labor) must be in peso. Your hard assets are all in peso, and their value will decline.
On the other hand, if the peso depreciates, then your dollars will go further. So
perhaps doing nothing is the best approach. If you are pretty sure that the peso will
depreciate, then you may want to avoid any major peso-denominated costs that you
can until after devaluation. That may mean holding back on shipments if possible, and
you may want any dollar-denominated purchases made before the devaluation. You
may want to move any peso-denominated major accounts into dollars before the
devaluation.
Chapter 10
1. Why did the gold standard collapse? Is there a case for returning to some type of gold
standard? What is it?
Answer: The gold standard worked reasonably well from the 1870s until the start of
World War I in 1914, when it was abandoned. During the war several governments
financed their massive military expenditures by printing money. This resulted in
inflation, and by the war's end in 1918, price levels were higher everywhere. Several
countries returned to the gold standard after World War I. However, the period that
ensued saw so many countries devalue their currencies that it became impossible to be
certain how much gold a currency could buy. Instead of holding on to another
country's currency, people often tried to exchange it into gold immediately, lest the
country devalue its currency in the intervening period. This put pressure on the gold
reserves of various countries, forcing them to suspend gold convertibility. As a result,
by the start of World War II, the gold standard was dead. The great strength of the
gold standard was that it contained a powerful mechanism for simultaneously
achieving balance-of-trade equilibrium by all countries. This strength is the basis for
reconsidering the gold standard as a basis for international monetary policy.
2. What opportunities might current IMF lending policies to Third World nations create
for international businesses? What threats might they create?
Answer: The IMF lending policies require the recipient countries to implement
governmental reforms to stabilize monetary policy and encourage economic growth.
One of the principal ways for a developing nation to spur economic growth is to
solicit foreign direct investment and to provide a hospitable environment for the
foreign investors. These characteristics of IMF lending policies work to the
advantage of international businesses that are looking for investment opportunities in
developing countries.
3. Do you think the standard IMF policy prescriptions of tight monetary policy and
reduced government spending are always appropriate for developing nations
experiencing a currency crisis? How might the IMF change its approach? What
would the implications be for international business?
Answer: Critics argue that the tight macroeconomic policies imposed by the IMF in
the recent Asian crisis are not well suited to countries that are suffering not from
excessive government spending and inflation, but from a private-sector debt crisis
with inflationary undertones. Anti-inflationary monetary policies and reductions in
government spending usually result in a sharp contraction of demand, at least in the
short run. In the longer term, the policies can promote economic growth and
expansion of demand, which creates opportunities for international business.
4. Debate the relative merits of fixed and floating exchange rate regimes. From the
perspective of an international business, what are the most important criteria for
choosing between the systems? Which system is the more desirable for an
international business?
Answer: The case for fixed exchange rates rests on arguments about monetary
discipline, speculation, uncertainty, and the lack of connection between the trade
balance and exchange rates. In terms of monetary discipline, the need to maintain
fixed exchange rate parity ensures that governments do not expand their money
supplies at inflationary rates. In terms of speculation, a fixed exchange rate regime
precludes the possibility of speculation. In terms of uncertainty, a fixed rate regime
introduces a degree of certainty in the international monetary system by reducing
volatility in exchange rates. Finally, in terms of trade balance adjustments, critics
question the closeness of the link between the exchange rate and the trade balance.
The case for floating exchange rates has two main elements: monetary policy
autonomy and automatic trade balance adjustments. In terms of the former, it is
argued that a floating exchange rate regime gives countries monetary policy
autonomy. Under a fixed rate system, a country‟s ability to expand or contract its
money supply as it sees fit is limited by the need to maintain exchange rate parity. In
terms of the later, under the Bretton Woods system, if a country developed a
permanent deficit in its balance of trade that could not be corrected by domestic
policy, the IMF would agree to a currency devaluation. Critics of this system argue
that the adjustment mechanism works much more smoothly under a floating exchange
rate regime. They argue that if a country is running a trade deficit, the imbalance
between the supply and demand of that country‟s currency in the foreign exchange
markets will lead to depreciation in its exchange rate. An exchange rate depreciation
should correct the trade deficit by making the country‟s exports cheaper and its
imports more expensive. It is a matter of personal opinion in regard to which system
is better for an international business. We do know, however, that a fixed exchange
rate regime modeled along the lines of the Bretton Woods system will not work.
Nevertheless, a different kind of fixed exchange rate system might be more enduring
and might foster the kind of stability that would facilitate more rapid growth in
international trade and investment.
5. Imagine that Canada, the US, and Mexico decide to adopt a fixed exchange rate
system. What would be the likely consequences of such a system for (a) international
businesses, and (b) the flow of trade and investment between all three countries?
6. Reread the Country Focus on the U.S. dollar, oil prices and recycling petrodollars,
then answer the following questions:
a) What will happen to the value of the U.S. dollar if oil producers decide to invest most
of their earnings from oil sales in domestic infrastructure projects?
b) What factors determine the relative attractiveness of the dollar, euro, and yen
denominated assets to oil producers flush with petrodollars? What might lead them to
direct more funds towards non-dollar denominated assets?
c) What will happen to the value of the dollar if OPEC members decide to invest more
of their petrodollars towards non-dollar assets, such as euro denominated stocks and
bonds?
d) In addition to oil producers, China is also accumulating a large stock of dollars,
currently estimated to total $1.4 trillion. What would happen to the value of the dollar
if China and oil producing nations all shifted out of dollar denominated assets at the
same time? What would be the consequences for the United States economy?
Answer:
a) If oil producers decide to invest their earnings in domestic infrastructure projects, it
would be expected that the countries involved would see a boost in economic growth,
and an increase in imports. This would put downward pressure on the dollar as the
petrodollars are sold, or are invested in the local community, however the expected
increase in imports that should result from greater economic growth would increase
the demand for dollars.
b) The relative attractiveness of an investment whether it is denominated in dollars, euro,
or yen depends on expected returns and the degree of risk associated with the
investment. When considering different currencies, it would be important to consider
expected shifts in the exchange rate. So, for example, if the dollar was expected to
depreciate relative to the euro or yen, non-dollar denominated assets might be more
attractive all else being equal.
c) Oil producers have significantly increased their holdings of dollars as a result of
higher oil prices. Should OPEC members decide to sell their dollars to invest in non-
dollar denominated assets such as euro denominated stocks or bonds, we would
expect to see downward pressure on the dollar.
d) If China and the oil producers simultaneously decide to sell off their dollars, there
would be significant downward pressure on the dollar. This downward pressure
would probably cause considerable pessimism among investors, and the U.S.
economy, and the world economy in general, would likely suffer.
Chapter 11
1. Why has the global capital market grown so rapidly in recent decades? Do you think this
growth will continue throughout the next decade? Why?
Answer: The global capital market has experienced rapid growth in recent decades. In
2000, for example, the stock of cross-border loans was just $7,859 billion. By 2010, this
number had increased to $32, 430 billion! Similarly, outstanding international bonds
increased from $5,908 billion in 2000 to $26,613 billion in 2010. A similar pattern exists
with international equities offerings. Two key factors are behind this growth: advances in
information technology and deregulation by government. The financial services industry
has been revolutionized by advances in information technology, and most students will
probably suggest that this trend will continue. Similarly, most students will probably
agree that the deregulation of the financial services industry that began in the United
States and spread to other markets facilitating the growth of the capital market will
continue.
2. In 2008-2009, the world economy retrenched in the wake of a global financial crisis. Did
the globalization of capital markets contribute to this crisis? If so, what can be done to
stop global financial contagion in the future?
Answer: Most students will probably agree that the globalization of capital markets was a
significant contributing factor to the 2008 financial crisis. If markets still operated on a
national basis, the crisis would have largely been contained, if indeed it started at all.
Many students might suggest that imposing better financial safeguards in major markets
could minimize the potential for future crises. However, identifying just what the
safeguards should be could be difficult. The G-20 did recently agree to focus on working
together to avoid future financial crises.
3. Reread the Country Focus on the search for capital in the Czech Republic. What are the
advantages to Czech firms of listing their equity on the London stock exchange? Can you
see any disadvantages?
Answer: Because of the improprieties surrounding the Prague stock exchange, Czech
firms have little choice but to go outside the country to raise capital. By listing on the
London exchange, Czech firms have access to a wider pool of investors and a probably a
lower cost of capital. Some students will probably point out that by making the decision
to list on the London stock exchange, Czech companies are also making a commitment to
ensuring that it is complying with British accounting methods, and so raises its cost of
capital.
4. A firm based in Mexico has found its growth is restricted by the limited liquidity of the
Mexican capital market. List the firm’s options for raising money on the global capital
market. Discuss the pros and cons of each option, and make a recommendation. How
might your recommended options be affected if the Mexican peso depreciates significantly
on the foreign exchange market over the next two years?
Answer: Companies seeking to raise money in the global capital markets can pursue
equity loans or debt loans. Equity loans involve selling stock to investors, while debt
loans involve issuing bonds. In either case, the cost of capital is generally lower than it
would be in the domestic market. The firm could also simply borrow money from a bank.
In any situation, firms must be careful to factor in the risk of adverse exchange rates. If
the peso is expected to depreciate significantly, the firm should be aware that it
QUESTION 5: Happy Company wants to raise $2 million with debt financing. The funds
are needed to finance working capital, and the firm will repay them with interest in one
year. Happy Company’s treasurer is considering three options: a) Borrowing U.S. dollars
from Security Pacific Bank at 8 percent. b) Borrowing British pounds from Midland Bank
at 14 percent. c) Borrowing Japanese yen from Sanwa Bank at 5 percent.
5. If Happy borrows foreign currency, it will not cover it; that is, it will simply change
foreign currency for dollars at today’s spot rate and buy the same foreign currency a year
later at the spot rate that is in effect. Happy Company estimates the pound will depreciate
by 5 percent relative to the dollar and the yen will appreciate 3 percent relative to the
dollar in the next year. From which bank should Happy Company borrow?
Answer: Happy Company needs to consider both the cost of capital and foreign exchange
risk. If Happy Company borrows $2 million from Security Pacific Bank, in one year it
will owe the bank $2 million plus 8 percent. If Happy Company borrows British pounds
from Midland it has to factor in the higher interest rate (14 percent), and also its estimate
that the pound will depreciate by 5 percent. If its prediction about the pound is accurate,
this could prove to be an attractive option. Finally, while the interest rate at the Japanese
bank is the lowest of the three, if the yen does appreciate by 3 percent, this option becomes
less attractive. In the end, given that its expectations about the future value of the British
pound and the Japanese yen are only guesses into the future, Happy Bank will have to
decide how much risk it is willing to take on before it can choose which bank to approach.
will cost more to purchase the currency necessary to repay a foreign currency loan.
Chapter 12
Answer: The theory of comparative advantage suggests that activities should take
place in the countries that can perform them most efficiently, given that different
countries are endowed with different factors of production. If there are no barriers or
costs to trade, then it is likely that many industries will be based out of the countries
that provide the best set of factor endowments. Given location economies, a
company can develop a global web of value-creation activities to take advantage of
differing factor endowments in differing locations.
For firms already located in the countries with the most favorable factor endowments
for their industry, however, there may not be a need to expand internationally at a
certain point in time. As factor endowments evolve, the firm may want to disperse its
value-creating activities to those markets that offer comparative advantages. If the
firm is in a competitive market, it will benefit from international expansion that
includes its value-creating activities because ofthe costposition and product
differentiation opportunities such expansion can confer. A firm may be able to
survive in a local market without international expansion, as long as the local market
is not targeted by competitors who have taken advantage of the economies offered by
dispersing their value-creation activities internationally. An example is an inefficient,
high-priced locally-owned supermarket that has not yet faced the entry of Wal-Mart
in its market.
2. Plot the position of the following firms on Figure 12.8: Procter & Gamble, IBM,
Nokia, Cola-Cola, Dow Chemical, US Steel, and Mc Donald’s. In each case,
justifty your answer.
Answer: Procter & Gamble would be located in the middle right-hand portion of the
graph. This is a position of high pressures for local responsiveness and moderate
pressures for cost reductions. P&G sells personal and home care products, which do
face pressures for local responsiveness. Although these products are not
commodities, there are many competitors in the industry, which implies a moderate
degree of cost pressures. IBM would be in the upper middle portion of the graph.
This is a position of moderate pressure for local responsiveness and high pressure for
cost reductions. There is a moderate amount of pressure for local responsiveness for
IBM products due to language differences and differing voltage requirements for
electronic products across countries. IBM is in a very competitive industry, and cost
pressures are high. Apple manufactures computers and other electronic products.
Apple, because it must customize its product offering according to the technical
standards prevailing in a given country would be in the lower right hand side of the
graph. Dow Chemical and U.S. Steel would both be located in the upper left-hand
portion of the graph. Both Dow and U.S. Steel sell products that are commodity-like
by nature. As a result, cost pressures would be high and local responsiveness
pressures would be low for these products. Finally, McDonald’s and Coca Cola
would be located in the middle left-hand portion of the graph. Pressures for local
responsiveness would be low because a selling feature for both companies is the
“American experience,” and cost reduction pressures would be moderate.
3. What do you see as the main organizational problems that are likely to be
associated with implementation of a transnational strategy?
4. Reread the Manahement Focus feature, “ Vodafone in Japan,” then answer the
following question :
Answer:
a. Vodafone’s vision was to build a global brand using a phone that
would work anywhere in the world. To achieve that vision, the
company offered consumers a standardized product with the same
technology regardless of where they were located.
b. In theory, by offering the same basic product everywhere, Vodafone
would not only capitalize on a brand name, it would also capitalize on
a streamlined production process. However, the company failed to
recognize that consumers in different locations value different
features.
c. Discussion Points: In Japan, Vodafone was selling primarily to
younger people who did not travel much, and did not value the global
portability of the company’s phones. Instead, Japanese consumers
were more interested in other features like games and cameras. In
retrospect, Vodafone probably should have paid more attention to
local preferences. The company delayed introduction of phones using
3G technology that would allow users to watch video clips and
teleconference because it wanted to launch the technology only when
it had a phone that would work inside and outside Japan.
d. Strategy Used
1) Localization Strategy
When there are low cost pressures and low pressures for local
responsiveness, an international strategy is appropriate. An
international strategy involves taking products first produced for the
domestic market and then selling them internationally with only
minimal local customization.
5. Reread the Management Focus feature on the “ Evolution of Strategy at Procter &
Gamble,” then answer the following question:
a. What strategi was Procter &Gable pursuing when it first entered foreign
markets in the period up until the early 1990s?
b. Why do you think this strategy became less viable in the 1990s?
c. What strategy does P&G appear tobe moving toward? What are the benefits
of this strategy? What are the potential risks associoatd with it?
Answer:
Chapter 13
1. Choice of strategies for multinational companies must use the solution of the
project with the cost of implementation. On this basis, it might be logical for
companies that share a localization strategy, which is another global and
international strategy and other transnational strategies. Is this report correct?
Answer: the challenges are products, distribution and promotion in the right
way.
Chapter 14
Answer: License Strategy, This strategy is carried out if the company has
technical capabilities but does not have the international capacity to enter
foreign markets and there is a desire to avoid risks when sending or
incorporating resources into unusual markets, volatile political conditions and
instability economy. A major loss from the License is the risk of providing
valuable technology so that foreign companies know how the technology is and
thus lose control over its use.
2. Discuss how the need to control foreign operations varies with the company's
strategy and core competencies.
3. In what situations joint ventures are preferred over wholly owned subsidiaries
as the most appropriate mode for entering foreign countries
In other instances, the small company only ended up part of the "deep pockets"
company alliance that faced the opposing alliance with the second "deep
pocket" company with many smaller allies. Thus this choice does not eliminate
the competitors between "deep pockets". It only creates an alliance of balance
to neutralize the benefits of "deep pockets" on the other side.
Answer:
a. Social Risk, The main source of risk is society, meaning that people's
actions create events that cause harmful deviations from our
expectations. The following is an example that illustrates the nature and
role of sources of risk, in the United States more than 777,800 cars are
stolen every year. Recently a survey of 680 cities with more than 25,000
shows that in one year a total of nearly $ 6 billion in assets was stolen.
With the development of self-service shops, the tokowan will face the
risk of shoplifting. However, not all thefts are outsiders but there is also
embezzlement and abuse by insiders who number more than $ 4 million
a day or $ 1.5 billion a year.
b. Physical Risk, There are many sources of physical risk which are
actually natural phenomena, while others are caused by human error.
Fire is a major cause of injury, death and damage. Large fires can be
caused by nature such as lightning, or by physical causes such as
defective cables or due to human negligence. Climate weather is a
serious risk, sometimes it rains too much so the harvest is flooded and
the river overflows. Floods occur every year, which changes only in
location, but sometimes repeats at the same location. Floods can cause
loss of life and millions of dollars in property damage.
c. Economic Risk, Many risks faced by humans are economic. Examples
of economic risks are inflation, local fluctuations, and instability of
individual companies. During the period of inflation, the purchasing
power of money declined and retirees and those who earn a living were
no longer likely to maintain a normal level of living.
The method used to deal with risk depends on the nature of the person or
entity that is at risk.
1. Avoiding Risk
One cannot avoid all risks, but in some cases he can avoid certain risks.
However, although avoiding risk is possible, it is often not profitable.
One can avoid the risk of loss of certain goods by not having the goods
and not be responsible for them. That is why some people prefer to rent
goods rather than buy them.
3. Withholding Risk
Withholding risk means taking the risk of possible losses. This might
happen if someone who is open to the risk does not realize it. So, the
risk does not cause concern so that it is ignored.
4. Transferring Risk
The most important way to move risk is insurance. With insurance, a
person or company can move or shift certain risks that they carry to
insurance companies by paying premiums.
Chapter 15
1. A firm based in Washington State wants to export a shipload of finished lumber to the
Philippines. The would-be importer cannot get sufficient credit from domestic sources
to pay for the shipment but insists that the finished lumber can quickly be resold in the
Philippines for a profit. Outline the steps the exporter should take to effect this export
to the Philippines.
Answer:The exporter should recommend to the importer that the importer apply to
Eximbank for a loan. Eximbank has a direct lending operation under which it lends
dollars to foreign borrowers for use in purchasing U.S. exports. The foreign
borrowers use the loans to pay U.S. suppliers and repay the loan to Eximbank with
interest.
2. You are the assistant to the CEO of a small textile firm that manufactures quality,
premium-priced, stylish clothing. The CEO has decided to see what the opportunities
are for exporting and has asked you for advice as to the steps the company should
take. What advice would you give the CEO?
Answer: This question is designed to stimulate classroom discussion and/or to
encourage your students to “think” about the export process in completing a written
answer for this question. There are a number of approaches that can be pursued in
answering this question. The first step might be to tap into some of the government
information sources that are available, free of charge, to see if international markets
are available for the company’s product. There are also a number of resources on the
Internet, mentioned throughout the text that can assist companies in learning about the
foreign market potential of their products. Another approach would be to contact an
export management company for assistance. While this approach may involve some
cost, it may be the fastest way to get “up and running” in regard to initiating an export
program.
3. An alternative to using a letter of credit is export credit insurance. What are the
advantages and disadvantages of using export credit insurance rather than a letter of
credit for exporting (a) a luxury yacht from California to Canada, and (b) machine
tools from New York to Ukraine?
Answer: Exporters prefer to get letters of credit from importers. However, when the
importer is in a strong bargaining position and able to play competing suppliers off
against each other, an exporter may have to forgo a letter of credit. The lack of a
letter of credit exposes the exporter to the risk that the foreign importer will default on
payment. The exporter can insure against this possibility by buying export credit
insurance. Students may suggest that in the case of the luxury yacht, should the
importer fail to make payment, the clearly defined laws of Canada would make it
easier to go after the importer than would be the case with the machine tools in the
Ukraine, and that therefore a letter of credit is less important for the yacht exporter.
On the other hand, students may note that there is probably more competition in
machine tools as compared to luxury yachts and that the exporter of machine tools
may lose the sale if the exporter insists on a letter of credit.
4. How do you explain the continued existence of countertrade? Under what scenarios
might its popularity increase still further over the next few years? Under what
scenarios might its popularity decline?
Answer: This question requires students to speculate on the future state of global
trade. As trade between developing and developed countries, and trade among
developing countries continues to grow, many students will predict that the popularity
of countertrade will increase by the year 2010. Some students may predict a decline
in the popularity of countertrade by 2010 as countries from the former Soviet Union
and Eastern European Communist bloc either become members of the EU an adopt
the fully convertible euro as their currency, or develop their own fully convertible
currency.
Answer:For marketers, countertrade is a great tool to use. “It is a way for the sale of a
product from an exporter to a company in a country that does not have the resources to
pay for it in hard currency” (Nakra, 2005). Countertrade is also a way for a company to
enter into a new, foreign market. This can lead to an increase in exports, and more
profits for the firm.There are some risks associated with countertrade, and pursuing it as
a marketing weapon. In many countertrade situations, companies are dealing with
products or services that they know little about. They can also deal with products that
are not ready for market, the quality of that product may not be up to par, and
companies can also run into an increase in transaction costs
Chapter 16
1. An electronics firm is considering how best to supply the world market for
microprocessors used in consumer and industrial electronic products. A
manufacturing plant costs about $500 million to construct and requires a highly
skilled workforce. The total value of the world market for this product over the next
10 years is estimated to be between $10 billion and $15 billion. The tariffs prevailing
in this industry are currently low. Should the firm adopt a concentrated or
decentralized manufacturing strategy? What kind of location(s) should the firm favor
for its plants?
Answer: The firm should pursue a concentrated manufacturing because (1) the tariffs
prevailing in the industry are low, (2) the cost of building a plant to produce the
microprocessors is high, and (3) the product's value-to-weight ratio is high. All of
these factors favor a concentrated versus a decentralized manufacturing strategy. In
terms of location, the company should consider three factors: country factors,
technology factors, and product factors. First, in terms of country factors, the firm
should locate its plant in a country that has a highly skilled pool of workers available.
That criterion could limit the firm to developed nations. Second, in terms of
technology factors, the firm is compelled to limit the number of its manufacturing
facilities because of the high cost of constructing a plant. Third, in terms of product
factors, the firm can manufacturer its product in a central location due to the relatively
high value-weight ratio and the universal appeal of the product.
2. A chemical firm is considering how best to supply the world market for sulfuric acid.
A manufacturing plant costs about $ 20 million to construct and requires a moderately
skilled workforce. The total value of the world market for this product over the next
10 years is estimated to be between $20 billion and $30 billion. The tariffs prefailing
in this industry are moderate. Should the firm favor concentrated manufacturing or
decentralized manufacturing? What kind of location(s) should the firm seek for its
plant(s)?
Answer: This question is a tougher call than the scenario depicted in Question #1.
The firm should probably pursue a limited decentralized manufacturing strategy
(meaning that the firm should not set up a plant in every country that it sells to, but
should set up plants in several "regions" of the world). This strategy makes sense
because (1) The tariffs prevailing in the industry are moderate (rather than low), (2)
the cost of constructing a facility is relatively modest ($20 million), and (3) only a
moderately skilled work force is needed (which is probably available in many low-
cost regions of the world). The firm should select its location based on country
factors, technology factors and product factors. In terms of country factors, the firm
should find locations where semi-skilled labor is inexpensive. In terms of technology
factors, the firm is not constrained by a high fixed costs associated with its product, so
technology is not a pervasive issue. Finally, product factors favor the firm locating in
several locations throughout the world. The company's product has a low value-
weight ratio, making it unattractive to produce the product in a central location and
export it across the world.
3. Reread the Management Focus feature on Philips in China, then answer the following
questions:
a. What are the benefits to Philips of shifting so much of its global production to
China?
b. What are the risks associated with a heavy concentration of manufacturing assets
in china?
c. What strategies might Philips adopt to maximize the benefits and mitigate the
risks associated with moving so much product development and production
activity to developing nations like China?
Answer:
a)China an attractive production location for Phillips for several reasons. Perhaps the
most important factor is the country’s cheap wages. In addition, the Chinese
workforce is well educated, the economy is strong, and many of the company’s
suppliers are doing business there.Students should recognize that using China as a
global supply base from which to serve the world offers several advantages to
Phillips. By having a single production location, the company can capitalize on
costs savings that come from economies of scale as well as the low wages in
China.
b) Most students will recognize that Philips is taking a risk by concentrating its
manufacturing in China. If economic, political, or other types of problems arise in
the country, Phillips could be in serious trouble since it will not have alternate
locations to fill production gaps.
c)Some students might recommend that Philips consider forming joint venture with
local firms to gain some protection against the threat of nationalization or other
adverse moves from a foreign government. Other students may suggest that
Philips maintain production facilities in more than one country to offset potential
problems in another.
4. A firm must decide whether to make a component part in-house or to contract it out to
an independent supplier. Manufacturing the part requires a nonrecoverable investment
in specialized assets. The most efficient suppliers are located in countries with
currencies that many forign exchange analysts expect to appreciate substantially over
the next decade. What are the pros and cons of (a) manufacturing the component in
house and (b) outsourching manufacturing to an independent supplier? Which opton
would you recommend? Why?
Answer:
Manufacturing in-house would reduce the risk of currency appreciation and rising
costs from independent suppliers.Specialized asset investment would make firm
dependent on specific suppliers, however, technological know-how would be
protected, and improved scheduling would be available. Out-sourcing would be
beneficial if the product using the component fails in themarket because the supplier
will bear the cost of the non-recoverable investment, and flexibility in case a better
component can be designed or bought would be preserved. Outsourcing would also
lower organizational and coordination costs. Based on what we know, manufacturing
in house may be slightly preferred, but other information could tip the decision the
other way.
5. Explain how an efficient logistics function can help an international business compete
more effectively in the global marketplace.
Answer:
Given the complexity involved in coordination of material and product flows in a
multinational enterprise (purchases, currency exchange, inbound and outbound
transportation, production, inventory, communication, expediting, tariffs and duties),
a materials management function can help to assure that these flows take place in the
most efficient manner possible. A related advantage is that by having a materials
management function, a firm may obtain improved information about the costs of
different transport alternatives, and choose to reconfigure some of its flows to better
take advantage of these costs. By being better able to utilize just in time techniques,
the cost of production can be lowered while the quality is increased. The materials
management function can also help an international business to develop information
technology systems that allow it to better track the flow of goods throughout the firm.
Chapter 17
1. Imagine you are the marketing manager for a U.S. manufacturer of disposable
diapers. Your firm’s is considering entering the Brazilian market. Your CEO believes
the advertising message that has been effective in the United States will suffice in
Brazil. Outline some possible objections to her belief. Your CEO also believes that
the pricing decisions in Brazil can be delegated to local managers. Why might she be
wrong?
Answer:
While babies behinds serve the same function in all cultures, and the product's
technical standards may be similar, sensitivity to bodily functions does vary across
cultures. Thus the advertising message may need to be changed for different attitudes
towards what is appropriate advertising. Likewise, where it might be progressive to
show an ad with a male changing a diaper in some countries, in other countries this
message could be lost or misinterpreted. Another consideration would be the noise
level created by the advertising message of competitor's products, which may well be
different in Brazil. While local demand and price elasticity decisions should play an
important role in Brazil, pricing should not be left solely to the discretion of the local
managers. Since this is a global business, your firm will likely be competing in Brazil
with some of the same competitors as elsewhere. Thus pricing decisions in one
country can have an impact on pricing and competition in other markets. Relatedly,
your firm may want to position and price the brand similarly across different South
American countries.
2. Within 20 years, we will have seen the emergence of enormous global matkets for
standardized consumer products, Do you agree with this statement? Justify your
answer.
Answer:
One could either choose to agree or disagree, while the best answer would likely
hedge it somewhere in the middle. There clearly already are enormous global markets
already for products like Coke and Levis, while it is questionable whether there will
ever be a global consumer market for Norwegian lutefisk. More global consumer
markets will likely emerge, but there will continue to be national distinctions for
many products.
3. You are the marketing manager of a food products company that is considering
entering the indian market. The retail system in india tends to be very fragmented.
Also, retailers and wholesalers tend to have long term ties with indian food
companies, which makes access to distribution channels difficult. What distribution
strategy would you advise the company to pursue? Why?
Answer:
The firm should sell to either wholesalers or import agents. Because the retail system
in India is very fragmented, it would be very expensive for the firm to make contact
with each individual retailer. As a result, it would be more economical for the firm to
sell to wholesalers or import agents. Import agents may have long-term relationships
with wholesalers, retailers, and/or other import agents. Similarly, wholesalers may
have long-standing relationships with retailers and, therefore, be better able to
persuade them to carry the firm’s product than the firm itself would.
Answer:
In some specific instances this statement is correct, but as a general rule it is
not. When a firm is pricing lower in a foreign country than it is in its domestic
market, it can be difficult to distinguish dumping from price discrimination unless it is
clear that the firm is selling at below cost in the foreign market. Yet when costs are
reasonably well known and all prices are above these, or if the firm is pricing lower in
its domestic market than in foreign markets, it can reasonably concluded that price
discrimination rather than dumping is occurring.