MCom 2nd Year Transfer Prince In International Marketing Study Notes

MCom 2nd Year Transfer Prince In International Marketing Study Notes: In this post, we will learn about MCom 2nd Year Transfer Prince In International Marketing Study Material Notes. In MCom 2nd Year there is one of the most important questions comes from Marketing. You will learn about MCom 2nd Year Transfer Prince In International Marketing Study Material Notes. 

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TRANSFER PRICE IN INTERNATIONAL MARKETING

Transfer pricing refers to the pricing of goods and services bought and sold in operating units or divisions of a single company. In other words, transfer pricing concerns intra-corporation exchange transactions between buyer and Beller that have the same corporate parent. For example, Toyota subsidiaries lie to and buy from each other. The same is true of other companies operating globally. As companies expand and create decentralized operations profit Jenteres have become an increasingly important factor in the overall corporate financial picture. (MCom 2nd Year Transfer Prince In International Marketing Study Notes)

Appropriate incorporate transfer pricing systems and policies are required o ensure profitability at each level. When a company extends its operations across national boundaries, transfer pricing takes on new dimensions and complications. In determining transfer prices to subsidiaries, global companies must address a number of issues including taxes and duties, tariffs, the country’s Profit transfer rules, conflicting objectives of joint venture partners, and government regulations. 

There are three major alternative approaches to transfer pricing. The Approach used will vary with the nature of the firm’s products markets and the historical circumstances of each case. The alternatives are:

1. Market-Based Transfer Pricing. A market-based transfer price is “Derived from the price required to be competitive in the international market. The constraint on this price is the cost”. However, there is a considerable degree of variation in how costs are defined. Because costs generally decline with volume, my decision must be made regarding whether to price on the basis of current or planned volume levels. (MCom 2nd Year Transfer Prince In International Marketing Study Notes)

To use market-based transfer prices to enter a new market That is too small to support local manufacturing third-country sourcing may be required. This enables a company to establish its name or franchise in the market without committing to major capital investment. 

2. Negotiated Transfer Prices. A second alternative is negotiated transfer prices. This alternative allows the organization’s affiliates to negotiate the transfer of fabrics among themselves. In some instances, the final transfer price may reflect costs and market prices. But this is not a requirement. The gold standard of TVnegotiated transfer price is known as an arm’s length price. It is the price that few independent and unrelated entities would negotiate. 

3. Cost-Based Transfer Pricing. Some companies that use the cost-based approach may arrive at transfer prices that reflect variable and fixed manufacturing costs only. Alternatively, transfer prices may be based on full costs, including overhead costs, marketing, research and development (R&D), and other functional areas. The way costs are defined may have an impact on tariffs and duties on sales to affiliates and subsidiaries by global companies. 

Cost plus pricing is a variation of the cost-based approach. Companies that follow the cost plus pricing method are taking the position that profit must be shown for any product or service at every stage of movement through the corporate system. In such an instance transfer prices may be set at a certain percentage of fixed cost such as 110 percent of the cost while cost-plus pricing may result in a price that is completely unrelated to competitive or demands conditions in international markets, many exporters use this approach successfully. (MCom 2nd Year Transfer Prince In International Marketing Study Notes)