Jul 13, 2015
Unit 4Pricing and distribution
PRICINGy THE UNIQUENESS OF PRICE IN MARKETING MIX IS
THAT IT IS THE ONLY ELEMENT THAT GENERATES REVENUE, ALL OTHER ELEMENTS INCUR COSTS. y PREDATORY PRICING IS A PRACTICE OF TEMPORARILY SELLING AT A PRICE BELOW COSTS WITH THE INTENTION OF DRIVING OUT EXISTING COMPETITORS OR WARDING OFF NEW COMPETITORS. ITS BANNED AS PER MRTP ACT.
TYPES OF COSTS IN EXPORT MARKETINGCOST
PRODUCTIO N COSTS
SELLING & DISTRIBUTION COSTS
FIXED & VARIABLE COSTS
FACTORS AFFECTING PRICINGy INTERNATIONAL MARKETING OBJECTIVES y COSTS y COMPETITION y PRODUCT DIFFERENTIATION y EXCHANGE RATE y MARKET CHARACTERISTICS y GOVERNMENT FACTOR
PRICING METHODS OR APPROACHESy COST BASED y MARKET ORIENTED y FOLLOWING COMPETITORS y NEGOTIATED y CUSTOMER DETERMINED PRICE y BREAK EVEN PRICE y MARGINAL COST PRICING y CREATIVE
TRANSFER PRICINGy OR INTRA CO. PRICING REFERS TO PRICING OF
GOODS TRANSFERRED FROM OPERATIONS OR SALES UNIT IN 1 COUNTRY TO THE CO.S UNIT ELSE WHERE. y ITS OBJECTIVES ARE: TO MAXIMISE THE TOTAL PROFITS OF THE CO. TO FACILITATE PARENT CO. CONTROL.
METHODS OF TRANSFER PRICINGDIRECT MANUFACTURING COSTS ONLY 2. (1) + A MARK UP TO COVER THE ADDL. EXP. 3. MARKET BASED PRICING 4. ARMS LENGTH PRICE: REFLECTS THE PRICE THAT AN UNAFFILIATED TRADER WOULD AGREE FOR A PARTICULER TRANSACTION.1.
DUMPINGy REFERS TO THE PRACTICE OF CHARGING A VERY
LOW PRICE FOR IMPORTED GOODS TO THE DETRIMENT OF THE SAME PRODUCT MANUFACTURED DOMESTICALLY. y EG: DUMPING OF CHEAP CHINEESE TEXTILES AND ALKALINE BATTERIES IN INDIAN MARKET IN RECENT TIMES.
TYPES OF DUMPINGy SPORADIC DUMPING : REFERS TO SELLING OUT THE
EXCESS STOCK THAT MAY ARISE OCCASIONALLY. y PREDATORY OR INTERMITTENT DUMPING :
International pricing framework
STEPS IN PRICINGDEFINING THE PRICING OBJECTIVE ANALYSING THE MARKET CHARACTERISTICS CALCULATING COSTS CALCULATING VALUE OF INCENTIVES
DETERMINING EXPORT PRICE
Global Pricing Strategies - Four Steps1 Determine the price elasticity of demand (Inflexible demand will allow for a higher price) 2 Estimate fixed and variable manufacturing costs (product adaptation costs must be calculated) 3 Identify all costs associated with the marketing programme 4 Select the price that offers the highest contribution margin Warren J. Keegan (1995)
Pricing Strategies
yMarket skimming yMarket penetration yMarket holding yCost-plus pricing
Market Holdingy Maintain their share of the market y Currency fluctuations often trigger price adjustments y Price adjustments can mean lower, or no profit margin y strong home currency could mean manufacturing/licensing
abroad
Cost-plusy Adds-up all cost of production (and shipping) y Easy to make quotes y Ignores demand and competitive pricing in target market y Consumer and competitor value issues must always
considered in a rational pricing strategy
RETROGRADE PRICINGy THE ESTIMATES OF THE COST, AND THE VALUE OF
THE INCENTIVES AND THE EXPORT OBJECTIVES ENABLE THE CO. TO ESTIMATE THE MIN.AMT. IT MUST REALISE SO AS TO MAKE THE EXPORT FEASIBLE. FOR THIS THE CO. WILL HAVE TO WORK BACKWARDS FROM THE MARKET PRICE. THIS IS CALLED RETROGRADE PRICING.
Problems of multinational pricingy Co-ordination across various markets? y Do we maintain a uniform pricing policy
across markets? y How to transfer price between and across markets? E.g. Sandvik (Sweden) y Parallel imports or Grey markets?
Problems with foreign currency and economic conditionsy Which currency for pricing in
international markets? y How to deal with fluctuating exchange rates? y Strategies for high inflation rates?
Grey Marketsy Products must be available internationally (as products are
standardised in global markets) y Low trade barriers (tariffs, legal restrictions, transport costs) y Price differentials must be great enough (so that grey marketers can make a profit)Duhan and Sheffet (1988)
INCOTERMS AND DOCUMENTS REQUIREDINCO TERMSy EXW EX WORKS y FCA FREE CARRIER
DOCUMENTS REQUIREDy COMMERCIAL INVOICE & y
y
y FAS FREE ALONGSIDE
y y y
SHIP y FOB FREE ON BOARD y CFR COST & FREIGHT y CIF COST,
BUYERS RECEIPT COMMERCIAL INVOICE, DOC. EVIDENCING DELIVERY TO THE CARRIER,EXPORT LICENSE -DO-DO -DOALL THE ABOVE AND INSURANCE POLICY
INCOTERMS AND DOCUMENTS REQUIREDINCO TERMSy CPT CARRIAGE PAID
DOCUMENTS REQUIREDy COMMERCIAL INVOICE
TOy CIP CARRIAGE AND
INSURANCE PAID TO
y DAF DELIVERD AT
TRANSPORT DOC. & EXPORT LICENSE y COMMERCIAL INVOICE, TRANSPORT DOC. EVIDENCING CARRIAGE OF GOODS,EXPORT LICENSE, INSURANCE POLICY y COMMERCIAL INVOICE,CUSTOMARY TRANSPORT DOC.EXPORT LICENSE
FRONTIER
INCOTERMS AND DOCUMENTS REQUIREDINCO TERMSy DES DELIVERED EX
DOCUMENTS REQUIREDy COMMERCIAL
SHIPy DDU DELIVERED
INVOICE, DELIVERY ORDER y -DOy -DO- AND IMPORT
DUTY UNPAID y DEQ DELIVERED EX QUAY y DDP DELIVERED DUTY UNPAID
LICENSEy -DO-
INFORMATION REQUIREMENTSy CONSIDERATIONS IN EXPORT RPICING ARE:
COSTS : FACTORY COSTS, SELLING AND DISTRIBUTION, COST FOR MARKETING SUPPORT AND DEVELOPMENT,ADMINISTRATIVE COSTS 2. FOREIGN MARKETS : SIZE AND NATURE OF DEMAND, EXTENT OF COMPETITION 3. PRICES1.
CHECK LIST OF INFO. REQUIREDy INFO. ON TOTAL MARKET y INFO. ON COMPETITION y INFO. ON PRICES y INFO. ON GOVT POLICIES y INFO. ON PRODUCTION AND COST y INFO. ON REVENUE AND PROFIT
INTERNATIONAL CHANNEL SYSTEMSEXPORT
DIRECT
INDIRECT
DOMESTIC OVERSEAS INTERMEDIARIES FOREIGN INTERMEDIARIES
y INDIRECT CHANNELS AT THE DOMESTIC LEVEL
INCLUDE: MARKETING MIDDILE MEN CO OPERATIVE ORGANISATIONS FOREIGN INTERMEDIARIES INCLUDE: IMPORTERS,DISTRIBUTORS,WHOLESALERS, RETAILERS,MULTIPLE CHANNELS, GOVT DEPT.S, STATE BUYING ORGN, JOINT VENTURES,LICENSEES OR FRANCHISEESS
FACTORS INFLUENCING CHANNEL SYS.y PRODUCT y MARKET AND CUSTOMER y MIDDILE MEN y CO. OBJECTIVES y COMPETITORS
ISSUES IN DISTRIBUTIONy COMPARISON OF MODE3S OF TRANSPORTATION y CARGO OR TRANSPORTATION INSURANCE y PACKING y FREIGHT FORWARDER y DOCUMENTATION
Success Strategies in Channel ManagementPower Point Presentations by Sections
30
1. Competition and Cooperation The basic assumption in Strategy is competition. Competitive behaviour sees organisations taking an adversarial role in all exchange situations
2. Monopolistic/Oligopolistic Market Behaviour The problem with building a defensive wall is that one loses the benefits of competition improved performance.
3. Co-operative Market Behaviour Co-operative behaviour is characterised by organisations exhibiting behaviour that focuses primarily on cooperation with market supporters (strategic relationship building to leverage collaborative efforts.
4. Syncretic Market Behaviour The attempt to achieve a dynamic balance between positives to be found in both competitive and cooperative strategies
Competition31 Sec1-1.ppt
Marketing Channels Creating Customer Value via Channels of Distribution\
Components of Customer Value form, place, possession, and time
Marketing Channels: Structure and Functions
Customer Relationship Management Three types of channel relationships exist: Supplier Relationships. Customer Relationships. Lateral Relationships.
SIFTing
Marketing ChannelsSec2.ppt
Demand-Side Factors Facilitation of Search, Adjustment of Assortment Discrepancy, Routinisation of Transactions Reduction in Number of Contacts.
Marketing Channel Membership32
What Is The Work Of The Marketing Channel?
Logistics and Supply Chain Management Supply Chain ManagementEfficient Consumer Response Changes in Merchandising
The Importance of Logistics in Channels
Inventory Management in Marketing ChannelsInventory Holding Costs
Physical Efficiency versus Market Responsiveness
Reducing Inventory Pseudo Inventory Reduction Real Inventory ReductionSec4-1.ppt
Category Management Fulfilment and Transportation Critical Supply Chain Elements Documentation33
Logistics and Supply Chain Management Sec4.ppt
Who Should Be In The Channel?
Should Intermediaries Be Used at All? What Types of Intermediaries Should Be Used?
Channel Structure and Membership Issues 8 - Selection Criteria.doc The Impact Of Structural Decisions On Channel Coordination
Flows to Be Performed, Appropriate Intermediary Choices
A Single Channel or Multiple Distribution?
Which Specific Intermediaries Should Be Used? How Many Channel Members Should There Be At A Given Level of the Channel?
34
Distributor and Agent Selection Criteria
Recruiting and Screening New Prospects
Business Policies that Bond Your Channel to You Preparing a Business Policy Statement
Recruiting as a Continuous Process.
ScreeningCredit Personality
Channel Candidate Inducements
Business and Operational Criteria
Final Selection Criteria SPEAR35
Distributor and Agent Selection Criteria Sec9.ppt
Forms of Channel Conflict Managing Conflict to Increase Channel Coordination Managing Conflict to Increase Channel CoordinationSec16.ppt
Assessing the Degree and Nature of Channel Conflict
Measuring Conflict Styles of Conflict ResolutionAccommodation Repeated Compromise Competition Collaboration
When Conflict Is Desirable When Is Conflict Functional?
Major Sources of Conflict Conflict Resolution StrategiesCo-optation Third-Party Mechanisms Building Relational Norms Information Exchange 36 Competing Goals Differing Perceptions of Reality
Fuelling Conflict
Clashes Over Domains Multiple Channels
Performance Measurement
Channel Member Evaluation
A Framework for Developing Measures of Channel Member Performance
Performance MeasurementSec17.ppt
Direct and Indirect Measures
Financial Measures
37
Legal Constraints on Marketing Channel Policies
Market Coverage Policies Pricing Policies Discounts Legal IssuesSec19.ppt
Product Line Policies Promotional Allowances and Services Product Policies
Exclusive Dealing
38
Selection and Termination Policies International Variations
Selection and Termination PoliciesSec21.ppt
Terminating Agents and Distributors
Termination as Strategy
Common Ground Rules Confusion Over Terms
39
Pricing Policy and Methods
Price Cutting Buyer Evaluation
Pricing in ChannelsSec21.ppt
Eight Stages In Establishing Prices
Segmented Pricing
Price and ValueCommon Pricing and Methods Discounts and AllowancesCompetition-Based Methods Profit-Based Methods Competition Oriented Pricing
40
Vertical Integration: Owning the Channel Make or Buy: A Critical Determinant of Company Competencies Degrees of Vertical Integration Important forms of companyspecific capabilities Deciding When to Vertically Integrate Forward Vertical Integration: Owning the ChannelSec22.ppt
Outsourcing as the Starting Point Vertical Integration Forward When Competition Is Low Six Reasons to Outsource Distribution
41
Channels for Services Direct Delivery of Value
Delivery of Value via Intermediaries
Independent Service Channels Innovations in Methods of Distributing ServicesChannels for Services42 Sec6.ppt
INTERNATIONAL LOGISTICSy IT IS DEFINED AS THE DESIGNING AND MANAGING OF A SYS
THAT CONTRACTS THE FLOW OF MATERIALS INTO, THROUGH AND OUT OF THE INTERNATIONAL CORPORATION.y COMPONENTS OF LOGISTICS MANAGEMENT :
FIXED FACILITIES LOCATION TRANSPORTATION INVENTORY MANAGEMENT ORDER PROCESSING MATERIALS HANDLING AND WARE HOUSING