CEC International E-commerce Expansion 4 — Questions and Answers
Question 1: What is the main risk of using a 'gray market' distribution strategy when expanding internationally?
- Higher import duties on all product categories
- Brand equity damage, price erosion, and loss of control over customer experience (Correct answer)
- Mandatory registration with local chambers of commerce
- Slower delivery times compared to authorized distribution
Correct answer: Brand equity damage, price erosion, and loss of control over customer experience
Gray market goods (authentic products sold through unauthorized channels) can undercut official pricing, damage brand perception, create warranty and support issues, and erode the trust of authorized distributors.
Question 2: An e-commerce company is evaluating international markets using a 'TAM-SAM-SOM' framework. What does SAM represent in this context?
- Strategic Addressable Market — countries aligned with brand strategy
- Serviceable Addressable Market — the portion of TAM the company can realistically target given its product and capabilities (Correct answer)
- Standard Assessment Metric — industry benchmark for market entry
- Sales Achievable Monthly — projected monthly revenue in a new market
Correct answer: Serviceable Addressable Market — the portion of TAM the company can realistically target given its product and capabilities
SAM (Serviceable Addressable Market) is the segment of the Total Addressable Market that a company can realistically serve based on its product fit, geographic reach, and competitive positioning.
Question 3: When setting international pricing, which approach involves charging different prices in different countries based on local purchasing power and competitive dynamics?
- Cost-plus pricing
- Market-based (differential) pricing (Correct answer)
- Uniform global pricing
- Penetration pricing
Correct answer: Market-based (differential) pricing
Market-based or differential pricing sets prices according to each country's local conditions — purchasing power, competition, and willingness to pay — rather than applying a single global price.
Question 4: A merchant selling electronics to Australia must be aware of which mandatory compliance marking required for electrical products sold in Australia?
- CE marking
- UL listing
- RCM (Regulatory Compliance Mark) (Correct answer)
- FCC ID marking
Correct answer: RCM (Regulatory Compliance Mark)
The RCM (Regulatory Compliance Mark) is mandatory in Australia and New Zealand for electrical and electronic products, replacing the separate C-Tick and A-Tick marks, and must be affixed before sale.
Question 5: What is 'currency hedging' and why is it important for international e-commerce merchants?
- Listing prices in multiple currencies simultaneously to attract more shoppers
- Using financial instruments to lock in exchange rates and reduce revenue risk from currency fluctuations (Correct answer)
- Automatically converting foreign currency sales to USD at point of sale
- Offering cryptocurrency as payment to avoid exchange rate exposure
Correct answer: Using financial instruments to lock in exchange rates and reduce revenue risk from currency fluctuations
Currency hedging uses financial tools like forward contracts or options to lock in favorable exchange rates, protecting a merchant's profit margins from adverse currency movements between sale and settlement.
Question 6: An e-commerce seller on a global marketplace discovers a competing seller in another country is listing counterfeit versions of their products. The first step should be:
- File a lawsuit in the counterfeit seller's country immediately
- Submit a brand registry or intellectual property complaint through the marketplace's official IP protection program (Correct answer)
- Lower prices to undercut the counterfeit seller
- Contact local customs authorities in the seller's country
Correct answer: Submit a brand registry or intellectual property complaint through the marketplace's official IP protection program
Major marketplaces like Amazon, Alibaba, and eBay have official IP protection programs (e.g., Amazon Brand Registry) that allow verified brand owners to report and remove counterfeit listings quickly.
Question 7: Which international trade agreement most directly impacts US e-commerce merchants selling to Canada and Mexico by reducing or eliminating tariffs?
- WTO Trade Facilitation Agreement
- USMCA (United States-Mexico-Canada Agreement) (Correct answer)
- Trans-Pacific Partnership (TPP)
- ASEAN Free Trade Area (AFTA)
Correct answer: USMCA (United States-Mexico-Canada Agreement)
USMCA (which replaced NAFTA) governs trade between the US, Canada, and Mexico, establishing preferential tariff rates and rules of origin that directly affect cross-border e-commerce duty obligations in North America.
CEC International E-commerce Expansion 4
What is the main risk of using a 'gray market' distribution strategy when expanding internationally?