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    International Pricing Strategies

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    shailu
    This document discusses various pricing strategies and considerations for international markets. It outlines objectives like maximum profit and market share. Approaches covered include cost-based pricing, market-based pricing, and penetration pricing. Factors like exchange rate fluctuations and alternative payment methods are also discussed. Specific payment options like letters of credit, countertrade arrangements like barter, and potential price distortions are summarized.

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    International Pricing Strategies

    Uploaded by

    shailu
    413 views19 pages
    This document discusses various pricing strategies and considerations for international markets. It outlines objectives like maximum profit and market share. Approaches covered include cost-based pricing, market-based pricing, and penetration pricing. Factors like exchange rate fluctuations and alternative payment methods are also discussed. Specific payment options like letters of credit, countertrade arrangements like barter, and potential price distortions are summarized.

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    international marketing

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    This document discusses various pricing strategies and considerations for international markets. It outlines objectives like maximum profit and market share. Approaches covered include cost-based pricing, market-based pricing, and penetration pricing. Factors like exchange rate fluctuations and alternative payment methods are also discussed. Specific payment options like letters of credit, countertrade arrangements like barter, and potential price distortions are summarized.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    413 views19 pages

    International Pricing Strategies

    Uploaded by

    shailu
    This document discusses various pricing strategies and considerations for international markets. It outlines objectives like maximum profit and market share. Approaches covered include cost-based pricing, market-based pricing, and penetration pricing. Factors like exchange rate fluctuations and alternative payment methods are also discussed. Specific payment options like letters of credit, countertrade arrangements like barter, and potential price distortions are summarized.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 19

    International Pricing

    Strategies
    International Pricing Compared to
    Domestic Pricing
    • Fluctuation in Exchange Rates
    • Accelerating Inflation in Certain Countries
    • Use of alternative payment methods such as leasing barter and
    counter-trade
    International Pricing Objectives
    • In order to determine the price of a new product in the international
    market, the objectives are as:
    • 1. Maximum Current Profit
    • 2. Maximum Market share
    • 3. Maximum Market Skimming
    • 4. Product-Quality Leadership
    International Pricing Framework
    Pricing Approaches for International
    Markets
    • 1. Cost-based Pricing
    • 2. Full Cost Pricing
    • 3. Marginal Cost Pricing
    • 4. Market-based Pricing
    • 5. Skimming Pricing
    • 6. Penetration pricing
    • 7. Premium pricing
    • 8. Economy pricing
    • 9. Cost leadership pricing
    Cost-based Pricing
    • Costs are widely used by firms to determine prices in international
    markets especially in the initial stages.
    • Generally, new exporters determine export prices on ‘ex-works’ price
    level and add a certain percentage of profit and other expenses
    depending upon the terms of delivery
    Full Cost Pricing
    • It includes adding a mark-up on the product’s cost to determine price.
    • Now assume, manufacturer wants to earn a 20 % markup on sales.
    The manufacturer’s markup price is given by
    Marginal Cost Pricing
    • As the intensity of competition in international markets is much
    higher than the domestic market, competitive pricing becomes a
    precondition for success.
    • A large number of firms adopt this pricing approach.
    Terms of Payment in International
    Transaction
    • Cash in Advance
    • Letter of Credit
    • Draft
    • Consignment
    • Open Account
    Countertrade as a Pricing Tool
    • Countertrade is a unique way of setting overseas transactions. At
    times, countries experience difficulty in generating enough foreign
    exchange to pay for imports. They, therefore, need to devise creative
    ways to get the products they want.
    Different types of counter trade
    • Barter Without cash
    • Counter purchase Purchase materials back from a country
    • Offset exporter greater flexibility to choose the goods
    • Switch trading sells the credits to a third-party
    • Buyback Compensation pricing
    Barter
    • Barter is the direct exchange of goods/services between two parties
    without a cash transaction.
    Counterpurchase:
    • Suppose a US firm sells some products to China. China pays the US
    firm in dollars, but in exchange, the US firm agrees to spend some of
    its proceeds from the sale on textiles produced by China.
    Offset
    • Pepsi can fulfill the obligation with any firm in Russia
    Switch Trading
    • a US firm concludes a counterpurchase agreement with Poland for
    which it receives some number of counterpurchase credits for
    purchasing Polish goods.
    • The US firm cannot and does not want any Polish goods, however it
    sells the credits to a third-party trading house at a discount. The
    trading house finds a firm that can use the credits and sells at a profit.
    Buyback
    • A US chemical company built a plant for an Indian company and
    accepted partial payment in cash and the reminder in chemicals
    manufactured at the plant.
    Price distortions
    • Deviations of quoted prices from a level that would clear the market if
    all participants were trading for conventional products.
    • Significant gaps between mark-to-market prices
    • Use advantages in market access or in pricing know-how to extract
    value. 
    Dumping
    • In international trade, this occurs when one country exports a
    significant amount of goods to another country at prices much lower
    than in the domestic market

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