12-6 Developing The International Pricing Mix

12-6 Developing the International Pricing Mix
MAJOR ASPECTS OF COMPANY’S INTERNATIONAL PRICING STRATEGIES: (SSAD)
● Setting transfer prices

● Setting prices for international markets,
● Addressing the issue of dumping
● Developing pricing objectives
Why are these important decisions
— because it affect companies' sales, costs, & profits obtained in overseas markets
12-6a Pricing Objectives
TO DETERMINE INTERNATIONAL PRICING MIX: consider four major objectives (PPMS)
● Performance objectives–involves bottom-line goals (e.g. net profit, ROI, market share,
& penetration)
● Prevention objectives–used to keep competitors out of a foreign market (e.g. offering
low prices that competitors have difficulty matching, discouraging scrutiny by home & host
country gov’t)
● Maintenance pricing objectives–keep the status quo: maintaining the same competitive
landscape or maintaining favorable dealer relations (the margins dealers receive, the effort
they put into selling products, and so forth).
● Survival objective–allow a company to survive in an international market (e.g. Mazda) .
12-6b Setting Prices in International Markets
Once pricing objectives have been established, a company will be faced with the task of
setting specific prices in its various international markets. Factors that must be considered
include:
● costs;
● attractiveness of competitive products and their prices;
● how competitive the product is
● how much marketing support (promotion budget, level of customer service,
number of salespeople selling the product, etc.) the product will get;
● and what the demand will likely be.
One approach to setting prices is to charge the same price in the foreign market as in
the domestic market. This approach recognizes the fixed and variable costs associated with the
products. Often, a price will be set that includes these costs and the marginal costs
(transportation, storage, and proportion) required to market the product overseas. A market
differentiation approach also recognizes costs but places a greater emphasis upon the demand
that exists for products at various prices.
Example:
➔ Gray Marketing - (parallel importation) refers to unauthorized importers reselling a

manufacturer’s product in the manufacturer’s domestic market at a price less than what
the manufacturer charges in that domestic market.
Is selling gray market goods illegal?
Legality of Gray Market Goods
In the U.S., the importation of gray market goods “is not per se unlawful due to the "first-
sale doctrine," which provides that once a trademark owner releases its goods into
commerce, it cannot prevent the subsequent re-sale of those goods by others.”
126c Dumping
Dumping happens when a -company that sets a price in a foreign market that undercuts the prices
of competitive companies.
It can be classified into 3 types.
1. Sporadic or Intermittent Dumping - The firm sells at a low price in the foreign market
without reducing the domestic price.
2. Persistent dumping - The firm continuously sells at a high price in domestic and a low
price in foreign.
3. Predatory Dumping - The firm sells products at a very low price or at a loss in the foreign
market to drive out some competitors.
Dumping primary advantage is the ability to permeate a market with product prices that are often
considered unfair. Exporting country may offer the producer a subsidy to counterbalance the
losses incurred when the products sell below their manufacturing cost. The biggest disadvantages
will then, subsidies can become too costly over time to be sustainable
Dumping is legal under WTO rules unless the foreign country can reliably show the negative
effects the exporting firm has caused its domestic producers. In the Philippines, RA 8752,
otherwise known as the ANTI-DUMPING ACT OF 1999 is being implemented to impose dumping.
Scope - The provisions of this Implementing Rules and Regulations (IRR) shall apply to any
product which is imported into the Philippines at an export price less than its normal value in the
ordinary course of trade for the like product when destined for consumption in the country of
export or origin and which is causing or is threatening to cause material injury to a domestic
industry, or materially retarding the establishment of a domestic industry producing the like
product in the Philippines.
Transfer Pricing
Many firms, especially large MNCs, have overseas subsidiaries to which they will sell products;
the subsidiary, in turn, will resell the product. The prices a company charges its overseas
subsidiaries, known as transfer prices. These bodies often allege that a transfer price is set not
to maximize profits but to minimize taxes. Taxing authorities often stipulate that the prices charged
must be an arm’s length price, that is, a price that the overseas market is willing to pay.
In the Philippines, BIR regulate transfer pricing under the Revenue Regulations (RR) No. 2-2013.
The regulations apply to both domestic and cross-border transactions. Domestic transactions
include those companies taking advantage of special tax privileges granted to them.
12-7 Developing the International Customer Service Mix

12-6 Developing The International Pricing Mix

Uploaded by

Copyright:

Available Formats

12-6 Developing The International Pricing Mix

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

12-6 Developing The International Pricing Mix

Uploaded by

Copyright:

Available Formats

12-6 Developing the International Pricing Mix

MAJOR ASPECTS OF COMPANY’S INTERNATIONAL PRICING STRATEGIES: (SSAD)

● Setting transfer prices

Why are these important decisions

12-6a Pricing Objectives

TO DETERMINE INTERNATIONAL PRICING MIX: consider four major objectives (PPMS)

12-6b Setting Prices in International Markets

➔ Gray Marketing - (parallel importation) refers to unauthorized importers reselling a

Is selling gray market goods illegal?

Legality of Gray Market Goods

It can be classified into 3 types.

12-7 Developing the International Customer Service Mix

You might also like