Pricing for International Markets Chapter 15 Matakuliah: J0474 International Marketing Tahun: 2009.

Pricing for International MarketsChapter 15

Matakuliah : J0474 International MarketingTahun : 2009

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Learning Outcome

• Pricing Policy• Approaches to International Pricing• Price Escalation• Approaches to Reducing Price Escalation• Leasing in International Markets• Counter trade as a Pricing Tool• Transfer Pricing Strategy• Price Quotations• Administered Pricing

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Pricing Policy

Pricing Objectives

In general, price decisions are viewed two ways :

Pricing as an active instrument of accomplishing marketing objectives

Pricing as a static element in a business decision.

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Pricing Policy

How Gray-Market Goods End Up in U.S. Stores

Manufacturer

Buyer X

FreightForwarder

FakePaperwork

U.S. StoreU.S. StoreU.S. Store

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Approaches to International Pricing

SkimmingVersus

Penetration Pricing

Full-CostVersus

Variable-Cost Pricing

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Price Escalation

Costs of Exporting

Taxes, tariffs andAdministrative cost

inflation

Deflation

Exchange ratefluctuations

Varying currencyvalues middleman

AndTransportation costs

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Approaches to Reducing Price Escalation

Lowering Cost

Of Goods

Lowering Tariffs

Lowering Distribution

costsUsing

foreign trade zones to lessen

price escalation

Dumping

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Leasing in International Markets

The system of leasing used by industrial exporters is similar to the typical lease contracts used in the United States.Terms of the leases usually run one to five years, with payments made monthly or annually; included in the rental fee are servicing, repairs, and spare parts.

Just as contracts for domestic and overseas leasing arrangements are similar, so are the basic motivations and shortcomings. For example :1. Leasing opens the door to a large segment of nominally financed foreign firm that can be sold on a lease option but might be unable to buy for cash.2. Leasing helps guarantee better maintenance and service on overseas equipment.

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Counter trade as a Pricing Tool

Types of Counter trade

Problems of Counter trade Proactive Counter trade strategy

The internet andCounter trading

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Counter trade as a Pricing Tool

Why Purchasers Impose Counter trade?

•To preserve hard currency•To improve balance of trade

•To gain access to new markets

•To upgrade manufacturing capabilities•To maintain prices of export goods•To force reinvestment of proceeds

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Transfer Pricing Strategy

Four arrangements for pricing goods for intra company transfer :• Sales at the local manufacturing cost plus a standard mark up• Sales at the cost of the most efficient producer in the company plus a standard mark up• Sales at negotiated prices.• Arm’s-length sales using the same prices as quoted to independent customers.

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Administered Pricing

Cartels

Government-

influenced pricing

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Summary

• Pricing is one of the most complicated decision areas encountered by international marketers. Market prices at the consumer level are much more difficult to control in international than in domestic marketing, but the international must still approach the pricing task on a basic of established objectives and policy, leaving enough flexibility for tactical price movements.

• The continuing growth of third World markets coupled with their lack of investment capital has increased the importance of counter trades for most marketers.