PRICING Strategy

PRESENTATION ON
INTERNATIONAL PRICING,PRICING DECISIONS & PRICING STRATEGIES
INTERNATIONAL PRICING
Pricing in international marketplace require a combination of intimate knowledge of market costs and regulation,an awareness of possible countertrade deals,infinit e patience for detail and a shrewd sense of market strategy.
INTERNATIONAL PRICING DECISION

Methods of Pricing: 1 .Cost-based price method :It includes Full-cost method : It includes adding a mark -up to total cost to determine price. Marginal cost Pricing:It sets the lower limit to which a firm can reduce its price without af fecting its overall profitability. 2.Market-based Pricing:The exporters in developing countries are generally price follewers rather than price setters
FACTORS INFLUENCING PRICE DECISION

Cost e.g. a bypass surger y in india costs around Rs40000 and in

US it cost above Rs 6lac. Competition The competition is much higher in international markets compared to the domestic markets. Irregular or unaccounted payments in export import:An international marketer should have a broad understanding of irregular payments in export -import business as these have direct implications on marketing costs. Purchasing power: e.g. McDonalds prices its product in international market depending upon countrys purchasing power. Buyers behaviour: buyers from high -income countries are more demanding and knowledgeable,and buyers from low income countries make choices based on price of product and ser vices. Foreign exchange fluctuations : firm should make constant vigil on fluctuations of exchange rate .
INTERNATIONAL PRICING STRATEGIES

M arket Penetration Strategy :Under this strategy, exporter offers a very low introducto ry price to speed up their sales and therefo re to w iden their market share. Probe pricing strategy : When no informa t ion is available on the extent of compet itio n or the likely preference of the buyers ,sufficiently higher prices may be quoted on first few offers. No business is really expected to grow except feedback informa tion .So prices can be adjusted according ly. Follow the leader Pricing Strategy :In competit iv e w orld or w here adequate informa tion is not available , it may be useful to follow the leader. Skimming Pricing Strategy : Under this strategy a very high introductory price is fixed to skim the cream of demand at very outset. Differential Trade Margins :This strategy allow various types of discount on the list price.Quant ity discount encourage to procure huge orders . Standard Export Pricing strategy :Exporter quotes standard price or list price i.e. one price for all.this is generally adopted in export of capital goods i.e. plant & machinery
Cheaper price for original equipment and higher price for spare parts :This strategy is useful w here only the supplier of original
equipment can supply standard spare parts.This could be used for tractors ,telephone equipment,ra ilw ay equipment .
DUMPING
Dumping is an important international pricing strategy issue. Dumping means selling of a product or commodity below the cost of production or at a lower price in overseas market compared to domestic market. Dumping may be of various forms: Sporading dumping:selling excess goods or surplus stock in overseas market at lower prices than domestic price or below the cost. Predatory dumping:it is used to force the competitors to leave the market , thus enabling the predator to raise the price in the long run. Persistent dumping:it refers to the consistent tendency of a firm to sell goods at lower prices in international market. Example can be chinese consumer goods.
COUNTERTRADE
Countertrade is a practice wherein transaction involves reciprocal commitments other than cash payments. Various types of countertrade: Barter:It is one time direct and simultaneous exchange of products of equal value(one product for other) Buy-back compensation requires a company to provide machinery or technology and to buy products made from this machinery over an agreed period. Where counterpurchase involves two unrelated products. Switch trading involves third party in the transaction. Offset is used in aircraft and military equipment. In this the importer makes partial payment in hard currency besides promising to source inputs from the importing country and also investment to facilitate production of such goods.
TRANSFER PRICING
The price of an international transaction between related parties is called transfer pricing. Types of transfer pricing: Market-based transfer pricing: transaction between unrelated parties Non-market pricing: deviated from market based arms length pricing. Pricing at direct manufacturing costs: refers to intra firm transactions that take place at marketing costs.
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PRICING Strategy

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PRESENTATION ON

INTERNATIONAL PRICING,PRICING DECISIONS & PRICING STRATEGIES

INTERNATIONAL PRICING DECISION

FACTORS INFLUENCING PRICE DECISION

INTERNATIONAL PRICING STRATEGIES

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