INTRODUCTION
International pricing is one of the most critical and complex issues that global firms face so it can give a break or a boost to companys revenue. It is important because:
Price is the only marketing mix that generates revenue all other entail costs. Lack of the coordination in the global market will give rise to gray market or parallel trade situation 4 Cs are the main drivers of global pricing strategies of any company operating internationally: COMPANY, CUSTOMER, COMPETITION and CHANNELS
PRICING POLICY
Selecting the pricing objective Determining demand Estimating costs Analysing competitors costs, prices, offers Selecting a pricing method Selecting the final price
COMPETITIVE PRICING
Setting the price of a product based on what the competition is charging. Competitive pricing is used more often by businesses selling similar products. Going rate pricing, the firm base its price largely on competitors price, charging same, more or less than major competitor. Ex- FMCG product
quality
Price
Optional feature pricing- company offer optional product, feature and services along with their main product. Ex- car
Two part pricing fixed price + rental(variable) price Ex- electricity bill, car hire,
Skimming pricing A marketer sets a relatively high price for a product at first then lowers the price over a time. It is only applicable for innovative product.
DUMPING PRICING
It occurs when manufacturers export a product to another country at a price either below the price charged in its home market, or in quantities that cannot be explained through normal market competition.
TRANSFER PRICING
Price of goods transferred from a company's operations or sales units in one country to its units elsewhere in the world is know as transfer pricing. Following criteria should be considered while making transfer pricing decisions: Tax regimes Local Market conditions Joint-venture partner Morale of local country managers
Multi-Domestic firms give wide leverage for subsidiaries on pricing resulting in different prices in different countries Results in gray markets Use a regional (global) standard pricing Plus a local markup. Base price is derived from cost plus formula Affected by local tax laws leading to gray markets
Geocentric Pricing
Geocentric Pricing
E.g: HP uses a global standard price in USD plus regional markup. This avoids gray trade but loses competitive position when competitors discount their products IBM discounts products where they have competition, but to prevent gray market, IBM sells services at a higher price for gray goods
Ethnocentric Pricing
Have a common price all over the world A global standard price Ideal for big-ticket industrial items such as Aircrafts, computers etc. There is no competition from local manufacturers.
PRICE ESCALATION
Costs of exporting Taxes, tariffs, and administrative costs Inflation Varying currency values Middleman and transportation costs