Dumping refers to which practice?

Dumping refers to the practice of exporting goods at prices lower than their production costs. This strategy is often employed by companies to gain market share in a foreign market by undercutting local competition. By selling products at such a reduced price, exporters can create a significant advantage, especially in markets where they seek to establish a presence or increase sales volumes quickly.

The long-term aim may be to drive competitors out of the market or to create brand loyalty among consumers at the expense of immediate financial loss. Once the company has secured a sufficient market position, it may then raise prices to more sustainable levels. This practice is viewed unfavorably by other countries, as it can disrupt local economies and lead to calls for anti-dumping measures to protect domestic industries.

Understanding this concept is important in international business, as it highlights the competitive dynamics that can influence trade relationships and market behaviors across different countries.