Dumping of Fmcg

Dumping of F.M.C.G.: Causing Challenges to the Western Economy

Jitendra Singh Maini

December 13, 2008


Dumping, generally means sell of goods to another country at less than cost of production, but technically dumping is not selling of goods at loss but it is a strategy in which a corporation sells its goods at cheaper prices in a foreign market than the home country i.e. where goods are produced. Basically dumping is discrimination between prices of home and foreign market.

FMCG i.e. fast moving consumer goods e.g. ready made clothes, toys, cutlery items, electronic goods etc. Usually dumping of goods is successful in FMCG rather than heavy machinery or other goods.

Reason behind dumping:
American and EU MNCs started establishing their manufacturing units into South East Asian countries when WTO agreement and GATT (General Agreement on Tariffs and Trade) is fully signed (commenced from 2000-01) by the most of the South East Asian countries.

How Dumping takes place:
The one of the main aspect of Dumping is that the corporation must exploit all of its Fixed Cost from the Domestic market and every subsequent commodity, which is produced at variable cost, should only be sold to the foreign market. Since, MNCs started selling their goods at higher costs in the domestic market to cover the fixed costs and set cheaper prices for the western market.

Fixed Cost/Constant Cost:
It means the cost, which is incurred for a period. It tends to remain constant for all levels of activities within a certain range of output such as rent, rates, insurance, executives salaries etc. Fixed Cost is not a function of output and it does not vary up to a certain level of activities. At the same time fixed cost can't be avoided in the short term. For example the rent and insurance of factory premises of a manufacturing unit is 50,000 p.a. and one shift of eight hours is indulged in the production so far. The rent...