As a business strategy, the strategy behind “dumping” is to __. A.gain a foothold in a new market B. better utilize e-commerce opportunities
C. avoid trade protectionist laws D. achieve eligibility for foreign aid
The correct answer and explanation is:
Correct Answer: A. gain a foothold in a new market
Explanation:
“Dumping” is a business strategy where a company exports a product to another country at a price that is lower than its domestic price or even below the cost of production. This practice is typically employed as a competitive tactic to gain a foothold in a new market. By offering products at significantly reduced prices, companies can outcompete local businesses, attract customers, and establish their presence in the market. Once a dominant market share is achieved, the company may raise prices to recoup initial losses and generate profits.
This strategy is often controversial as it can undermine domestic industries in the target country, potentially leading to job losses and market imbalances. Dumping can also trigger retaliatory trade measures, such as anti-dumping tariffs or duties imposed by the affected country’s government to protect local businesses.
Dumping is not motivated by better utilization of e-commerce opportunities (B) or achieving eligibility for foreign aid (D). These objectives do not align with the fundamental intent of the strategy, which is to disrupt and dominate a foreign market. Similarly, dumping does not help in avoiding trade protectionist laws (C); in fact, it often invites stricter regulations and punitive measures.
Although dumping can offer short-term advantages to the exporting company, it poses long-term risks, such as damage to the company’s reputation, strained international relations, and legal actions by affected countries. Companies engaging in dumping need to balance the potential benefits of market entry with these risks and the broader implications for fair trade practices.