The implementation of transfer pricing for a strategic business advantage

Abstract

The aim of this study was to investigate the impact of transfer pricing strategy and performance in terms of how this provides for a strategic business advantage. A further aim was to assess the extent that transfer pricing is primarily tax-driven or business strategy-driven. The reason for choosing this research problem was based on the gap that exists in the theory and literature on the link between transfer pricing being utilised strategically for a multinational. This study was best served as a single quantitative exploratory case study to gain an understanding of how the implementation of transfer pricing can provide for a strategic business advantage. The non-probability sampling technique of judgment (purposive) sampling was used for this study in which primary data was collected. Relevant statistical analyses was performed in order to answer the research questions and involved descriptive statistics as well as correlation analysis. Based on the findings it was confirmed that transfer pricing is considered to be part of the business strategy in the Process Automation division at ABB. However, it was not confirmed that ABB has a unique global environment for transfer pricing nor a unique country level environment for transfer pricing. There was agreement that it is beneficial for transfer prices to be set by a centralised control system.