《I-Marketing》 南京大学mkt18.ppt

INTERNATIONAL MARKETING 6e Global Pricing Strategies Transfer Pricing The allocation of resources through the intracorporate pricing of sales to members of the extended corporate family. Objectives of Transfer Pricing Competitiveness in the international marketplace Reduction of taxes and tariffs Management of cash flows Minimization of foreign exchange risks Avoidance of conflicts with home and host governments over tax issues and repatriation of profits Internal concerns - goal congruence or subsidiary manager motivation Corporate Use of Transfer Prices Transfer prices are set by the major financial officer to achieve corporate objectives. Transfer price setting approaches Cost-based approach uses an internally calculated cost with a percentage markup added. Market-based approach uses the market selling price with a discount to the buying division Cost-based pricing (subject to manipulation) Full cost Variable cost Marginal cost Influences on Transfer Pricing Decisions Market decisions in the foreign country Competition in the foreign country Reasonable profit for the foreign affiliate U.S. federal income taxes Economic conditions in the foreign country Import restrictions Customs duties Price controls Taxation in the foreign country Exchange controls Corporate Use of Transfer Prices Three philosophies of transfer pricing are used to achieve corporate objectives Cost-based: direct or cost-plus (most used) Market-based: discounted “dealer” pricing Arm’s-length: same pricing as for unrelated parties Transfer pricing and environmental influences Attempts to minimize tax liability of subsidiaries in high income tax countries and report profits in lowest tax rate jurisdictions may coincidentally increase other import taxes and duties. Transfer Pricing Challenges Internal and external problems for the multinational corporation Performance Measurement The clouding effect of manipulating intracorporate prices on a subsidiary’s apparent and actual profit performance