Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

Why do companies often choose to export goods at lower prices than offered in their home country?

1. To maintain consistent pricing globally

2. To create new overseas markets and reduce excess inventory

3. To increase competition in the home market

4. To enhance brand reputation internationally

The correct answer is: To create new overseas markets and reduce excess inventory

Exporting goods at lower prices than those offered in their home country is often a strategic decision aimed at creating new overseas markets and reducing excess inventory. By pricing goods lower in foreign markets, companies can gain a competitive edge, attract new customers, and penetrate markets that may be struggling with price sensitivity. This intentional pricing strategy helps businesses clear out surplus stock that may not be selling well domestically, thereby optimizing their inventory management and improving cash flow. Establishing a presence in new markets can lead to long-term growth and increased market share, as businesses can build customer bases in diverse geographic regions. This approach can also facilitate a learning curve about local consumer preferences that may not be evident in the home market. In comparison, while maintaining consistent pricing globally is important for brand integrity, it does not generally explain the strategy of lowering prices in international markets specifically. Enhancing brand reputation internationally and increasing competition in the home market are also valid concerns, but these goals do not directly relate to the reason for the pricing strategy being discussed.