CPM Global Pricing & Cross-Border Strategy Flashcards

Which factor most directly causes the need for international price differentiation?

Answer: Differences in purchasing power, competitive landscape, and willingness to pay across countries

Price differentiation across markets reflects genuine differences in economic conditions, competition, and customer value perceptions, not just logistics costs.

Purchasing Power Parity (PPP) adjustment in global pricing means:

Answer: Calibrating prices so that buyers in different countries pay an equivalent share of their income for the same product

PPP-adjusted pricing ensures that the relative burden of a price is similar across markets, improving affordability and market penetration.

Gray market (parallel imports) arbitrage occurs when:

Answer: Products priced lower in one market are resold in higher-priced markets, undermining pricing strategy

Large international price gaps incentivize intermediaries to buy in low-price markets and resell in high-price markets, eroding controlled pricing.

Transfer pricing for tax purposes must comply with the:

Answer: OECD arm's length principle requiring intra-company prices to match what unrelated parties would agree to

OECD guidelines require that prices between affiliated entities reflect what independent parties dealing at arm's length would agree to.

A global pricing corridor policy is designed to:

Answer: Set maximum and minimum price boundaries across countries to limit arbitrage while allowing local flexibility

A price corridor sets guardrails that prevent both arbitrage-triggering extreme gaps and local price wars without requiring rigid uniform pricing.

Dumping, in international trade pricing law, is defined as:

Answer: Selling goods in a foreign market at a price below their home market price or cost of production

Anti-dumping laws address the practice of pricing exports below home market prices or cost to gain market share, which is treated as an unfair trade practice.