Dumping in Pricing
Dumping in pricing refers to the practice of selling goods in a foreign market at a price lower than the domestic market or below the production cost. This can harm local businesses and is often considered an unfair trade practice. Dumping can lead to trade disputes and anti-dumping measures by governments to protect domestic industries.
6 Key excerpts on "Dumping in Pricing"
eBook - ePub- Stanley Paliwoda, Michael Thomas(Authors)
- 2013(Publication Date)
- Routledge(Publisher)
...Firstly, it does not damage his share of the domestic market. Secondly, the lower prices abroad are usually acceptable on a short-term basis and are preferable to the much longer term damage which would result from offering similar product discounts on the domestic market. Once the precedent of offering domestic price discounts has been established, it is difficult to break. As a strategy, dumping may, therefore, protect the domestic price structure. Elsewhere, dumping may be predatory, as when an exporting manufacturer working with factor costs much lower than his local foreign market competitors, ’ offers a low price in the foreign market with the intention of buying market share. Persistent dumping of this kind will lead to a restructuring of market supply as it will force many companies out of business, at which point the dumping company may then revert back to price levels closer to pre-existing market levels. Dumping and anti-dumping measures have become issues of increasing concern to the world trading system, and the complexity of dumping within a global economy is seen from the six topics of an international symposium in Tokyo in 1989 concerning the need for reform in the GATT Anti-dumping Code (Matsumoto, Finlayson, 1990) : 1. Symmetry in the comparison of normal value and export price. 2. Calculation of constructed value. 3. Sale prices below the cost of production. 4. Like products. 5. The definition and treatment of related parties. 6. Anti-circumvention measures. The EU have outlined a new calculation formula which attempts to bring more fairness into dumping calculations. When export sales are made to distributors (whether related or not), only sales to unrelated domestic distributors should be used as a basis of normal values. Domestic prices to other categories of customers (dealers, end-users, etc.) should be omitted from calculations. In EU terminology, this new method is called ‘selective normal value’...
eBook - ePubGlobal Business
Positioning Ventures Ahead
- Michael R. Czinkota, Ilkka A. Ronkainen(Authors)
- 2010(Publication Date)
- Routledge(Publisher)
...Accusations of dumping are common, especially in highly competitive industries such as computer chips. It can be predatory or unintentional. Predatory dumping happens when a nondomestic firm intentionally sells at a loss in another country so it can increase its market share. Unintentional dumping usually results from time lags between the date of sale and the product’s arrival in the market. If exchange rates have changed and the final sales price falls below the cost of production or the prevailing price in the exporter’s home market, it looks like the product is being dumped, even if it is not. Companies need to watch market developments to avoid dumping their own products, even inadvertently. Minimize the risk of being accused of dumping by focusing on currency shifts. It also helps to reduce misleading transparency by increasing product differentiation. This could involve including services in the product offering. In the U.S., domestic manufacturers may petition the U.S. International Trade Commission and the U.S. Department of Commerce with a complaint. If the domestic industry is considered threatened or harmed by the situation, the government can impose an antidumping duty equal to the dumping margin. International agreements and U.S. law also work to offset the advantages imports receive from foreign government subsidies. This reaction via duties can cause backlash, though, from countries imposing retaliatory duties. Responding to a Financial Crisis No matter what the pricing strategy or situation, global marketers will often need to make major adjustments when hit with a regional or international financial crisis. History shows that financial crises are not uncommon and that companies should prepare for them. A series of currency crises shook emerging markets beginning with the devaluation of the Mexican peso in 1994 and continuing to the Argentine default in 2001...
- Amitrajeet A Batabyal, Hamid Beladi(Authors)
- 2001(Publication Date)
- CRC Press(Publisher)
...The same concept has been used by Davies and McGuinness (1982) for their definition of dumping in goods markets. One of the scenarios they consider is that of a monopolist who uses a dumping strategy to deter the entry of a competitor. The definition of dumping as pricing at less than marginal production cost neglects the fact that the entry of a competitor is costly to the incumbent and may be viewed as a part of her cost function. 3 A similar model with traded and non-traded goods has been analyzed by Jones (1974). In this model, however, the exported good is not consumed in the home country. 4 Algebraically, the condition f K E i > 0 follows from constant returns to scale and the concavity of the production function. 5 Even with this restrictive assumption, there will be a large variety of feasible results and a more general welfare function would not add much to the analysis in this respect. 6 This type of welfare function is known from models with endogenous factor supply. See Kemp and Jones (1962). 7 An additional ambiguity arises when the determinant of the matrix of the partial derivatives of (Equation 5.13a, b, c) with respect to P, E 1, and E 2 has the “wrong” sign. An explanation of this will be given below. 8 Let M be the quality of manna falling from heaven. Then d p / d M = D − 1 P U C C 3 (U C 1 F K K 1 + U C C 1 (F K 1) 2 + U C 2 F K k 2 + U C C 2 (F K 2) 2). It follows that sign (dP / dM) = sign (D). 9 This can be verified by computing d Q 2 / d E 2 = F E 2 − F E 2 (D K 1 / d E 2). 10 It follows from Equation (5.24b) that an increase in emissions in the export industry will always raise its output. At least in this model framework, a situation in which exporters benefit from more rigid environmental policies in their own sector is not possible. This may, however, change if more complicated versions of the model are considered, e.g., if the country is large and if more general utility functions are introduced....
eBook - ePub- Ross Brennan, Louise Canning, Raymond McDowell(Authors)
- 2020(Publication Date)
- SAGE Publications Ltd(Publisher)
...The essence of collusion in tendering is that there is an agreement between the bidders to win the contract for one bidder, with the other parties receiving some other benefits – these may be direct financial benefits, or agreements that they will win future contracts. Collusion aims to undermine the rationale for competitive tendering by avoiding direct price competition between the bidders. In commercial contracts this means that the buyer is disadvantaged by paying more than they otherwise would, while in government contracts the ultimate loser is the taxpayer. Collusion is illegal in all of the world’s major economies but nevertheless is by no means an uncommon practice (Zarkada-Fraser, 2000). Dumping is ‘the selling of exported goods in a foreign market below the price of the same goods in the home market’. Claims of dumping have been made in a range of industrial markets including computer chips, nylon yarn, semiconductors, steel, transformers and vinyl (Delener, 1998: 1747). The General Agreement on Tariffs and Trade (GATT) of the World Trade Organization (WTO, 1994) permits countries to take measures against dumping. Responding to Ethical Issues in Pricing Nagle and Holden (2002) provide a spectrum of ethical behaviour concerning price that is a useful basis for understanding one’s own ethical position in pricing matters...
- Xiaochuan Zhou, China Development Research Foundation, China Development Research Foundation(Authors)
- 2016(Publication Date)
- Routledge(Publisher)
...In terms of imports, the variety of product categories has increased greatly, competition has gradually grown, and trade companies are more autonomous and now implementing the policy of being responsible for both profits and losses. The domestic pricing of a number of products that have been imported now relies on the internationally set price as the basis of comparison. Competition from imported goods is also having a profound influence on domestic pricing of goods. When imports are not only low-priced but more reliable in terms of quality, then it becomes harder to sell our domestic production of the same item. Most of our manufactured goods are still inferior to imported goods when it comes to quality. Customs duties are also fairly high, which allows for a certain degree of protectionism. For the majority of products, however, the role being played by import competition is quite apparent. For example, China has set customs duties on the import of raw materials at a fairly low level in order to promote and encourage raw materials imports. This has gradually affected the input prices of many products being produced in China, including steel, materials for the chemical industry, chemical fibers, and so on. Many enterprises make use of imported materials in their production right now, so it is unavoidable that the pricing of their products will draw closer to those of international markets. Meanwhile, we adopt a variety of protectionist and import-substitution measures to limit the import of manufactured (finished) goods. Nevertheless, even here the international markets will ultimately have a major effect on China’s domestic markets. China’s importing system itself has been undergoing major change, which has unavoidably impacted our domestic pricing. Since reform of the foreign trade system began, the following changes have occurred to strengthen competition. First, the number of companies that are allowed to carry out importing has increased enormously...
eBook - ePubInternational Marketing (RLE International Business)
A Strategic Approach to World Markets
- Simon Majaro(Author)
- 2013(Publication Date)
- Routledge(Publisher)
...Chapter 7 Pricing in World Markets Pricing the product is a tricky problem in a domestic market. In international marketing it can be a nightmare. The trouble is that the price is a quantitative and unequivocal figure. It is there to be compared and analysed by competitors, distributors and consumers alike. The mismanagement of a firm's pricing policy can easily lead to: 1 Substantial variations in the price of the same product in different countries. 2 Pressures for price reductions and/or bigger discounts resulting from such variations. 3 The development of a ‘grey market’ by unscrupulous traders. A grey market is created where the product is purchased in a cheap market with the view of being sold in markets enjoying higher prices. In extreme situations these pressures can undermine the marketer's profit expectations. A sound international marketing strategy demands therefore that a framework for decision-making in the pricing area is evolved. In the absence of such a framework or a series of guidelines the firm runs the risk of allowing its international pricing to run out of control. The problem becomes even more acute in an era of exchange anarchy and floating currencies. The structure of the firm and the level of decentralisation developed therein have a major influence on the pricing policies of such a company. A firm that has opted for an ‘umbrella’ structure is unlikely to attain a centrally-controlled price uniformity. In fact the underlying philosophy of the organisation may be quite unsympathetic to such a strategy. On the other hand a company structured as a macropyramid is much better attuned to a policy of relatively homogeneous international pricing. In the extreme case one encounters the firm that seeks to impose a single price for its product throughout world markets. Attractive as such a policy is one must not overlook the complications that may arise from the incidence of local taxes, such as sales tax or value added tax, custom duties, etc...
