In some cases, transfer rates may be made use of to weaken a subsidiary’s competitors. Such competitive considerations would must be balanced against lots of offsetting disadvantages. Transfer rates may perhaps, for competitive causes, invite antitrust actions by host governments or retaliatory actions by neighborhood competitors. Internally, pricing subsidies do tiny to instill a competitive mode of thinking inside the minds with the managers whose providers obtain from the subsidy. What begins as a temporary help may perhaps conveniently come to be a permanent management crutch.
Sunday, April 1, 2012
Competitive Factors
To facilitate the establishment of a foreign subsidiary abroad, a parent provider could provide the subsidiary with inputs invoiced at pretty low rates. These price tag subsidies may be removed gradually because the foreign affiliate strengthens its position inside the foreign market place. Similarly, lower transfer rates may be made use of to shield an current operation from the effects of elevated foreign competitors inside the neighborhood market place or a further market place; in other words, income earned in one particular country could subsidize the penetration of a further market place. Indirect competitive effects are also probable. To strengthen a foreign subsidiary’s access to neighborhood capital markets, setting low transfer rates on its inputs and high transfer rates on its outputs could bolster its reported earnings and economic position.
In some cases, transfer rates may be made use of to weaken a subsidiary’s competitors. Such competitive considerations would must be balanced against lots of offsetting disadvantages. Transfer rates may perhaps, for competitive causes, invite antitrust actions by host governments or retaliatory actions by neighborhood competitors. Internally, pricing subsidies do tiny to instill a competitive mode of thinking inside the minds with the managers whose providers obtain from the subsidy. What begins as a temporary help may perhaps conveniently come to be a permanent management crutch.
In some cases, transfer rates may be made use of to weaken a subsidiary’s competitors. Such competitive considerations would must be balanced against lots of offsetting disadvantages. Transfer rates may perhaps, for competitive causes, invite antitrust actions by host governments or retaliatory actions by neighborhood competitors. Internally, pricing subsidies do tiny to instill a competitive mode of thinking inside the minds with the managers whose providers obtain from the subsidy. What begins as a temporary help may perhaps conveniently come to be a permanent management crutch.
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