This presentation would cover the following: • Objectives of pricing • Factors affecting pricing decisions • Terms of sale used in international transaction • Major pricing methods and practices in international • Discuss pricing process and strategy • Concept of transfer pricing and methods • Types of conter trade • The pricing angles and issues in counter trade

1. COURSE: Competing in Global Markets
Course Code:403
Unit 3
International Pricing
Session 1

2. Unit 3 Outcome
1. Explain the objectives of pricing in international marketing
2. Describe factors affecting pricing decisions
3. Explain major pricing methods and practices in international
marketing
4. Discuss pricing process and strategy
5. Explain the steps involved in export pricing
6. Illustrate the cost and price calculations for export
7. Discuss the concept of transfer pricing and methods
8. Describe the pricing angles and issues in counter-trade

3. INTRODUCTION TO PRICING
• Price of the same branded product varies from country to country
• The price of an imported product in a country and the country of
manufacture
• Local manufacturers complaining of items being – dumped
• Psychological Pricing

4. OBJECTIVES OF PRICING

5. OBJECTIVES OF PRICING
• Success in international marketing -on right pricing of the product
• Not to be considered independent of other elements
• Only the dominant supplier may have the privilege of setting the price
in a foreign market.
• The price in international marketing is determined by the cost of the
product, competition from other suppliers and demand for the product

6. OBJECTIVES OF PRICING
• Meet the customer demand in a competitive situation in such a way
that sales and profit are maximised
• The pricing objectives may vary
• PENETRATION
• SKIMMING
• HOLDING MARKET SHARE
• ENHANCING SHARE

7. • FACTORS AFFECTING PRICING DECISIONS

8. FACTORS AFFECTING PRICING DECISIONS
i) Cost of the product
ii) Competition in the
foreign market
iii) Demand for the
product in the foreign
market,
1.Exchange rate Changes
2.International Transportation cost
3.Distribution cost
4.Nature
5.Trade policies, Price regulation and
antidumping
6.Inflation and interest Rate
7.Global marketing Requirements

9. Pricing Methods and Practices
1. Cost Plus Method: It is a method of pricing which covers full cost and
profit
2. Marginal Cost Pricing: It covers only part of the costs as the market
situation permits mostly only variable costs.
3. Differential Pricing: Under this method, different prices are charged for
the same product in different markets.
4. Probe Pricing: To probe the reaction of the customers particularly when
not much of information is available about the overseas market
conditions.
5. Skimming Pricing: Charging the highest Price possible price.
6. Competitive Pricing: Adjust and adapt the prices

10. PRICING PROCESS AND STRATEGY
• Price as a major Strategic Variable
• Pricing decisions –What they Include?
• Floor Price is enabled by Cost and sales forecast
• Ceiling price is determined by Demand factors and competition

11. STEPS INVOLVED IN EXPORT PRICING PROCEDURE
1. Cost Analysis
2. Market Analysis
3. Determination of Price limits
4. Determination of Pricing Objective
5. Calculation of Price Structure
6. Price Quotation and term

12. • An international trade contract cannot. be won or lost merely on the
basis of Pricing
A. True
B. False

13. • Varying inflation rates and interest rates in different countries affect
the pricing strategy of the firm.
A. True
B. False

14. • Skimming pricing is resorted to by an export who has gained a strong
foothold in a foreign market..
A. True
B. False

15. COURSE: Competing in Global Markets
Course Code:403
Unit 3
International Pricing
Session 2

16. Outcome
1. Price Quotation and terms of sale
2. Terms of Sale used in International Transaction
3. Transfer Pricing Concept And Methods
4. Conter Trade And Its Reason Of Spread

17. PRICE QUOTATION AND TERMS OF SALE
• When is quotation prepared?
• Quotation: A formal statement setting out the estimated cost for a
particular job or service
• Enquiry from abroad – Quotation
• What is Price Quotation?
• Details of the Product, its quality, weight and volume, its price, place of
delivery,payment terms and time of shipment (Critical)
• Explicity state the term- SUBJECT TO CHANGE WITHOUT NOTICE
• Specify the Precise Period

18. PRICE QUOTATION AND TERMS OF SALE
• Price Terms or Terms of Sale
• It describes tile point of delivery and sharing of risk between an exporter
and the importer.

19. PRICE QUOTATION AND TERMS OF SALE
• What Is the Difference Between an Invoice and Proforma Invoice?
• Invoice is a commercial instrument that states the total amount
due,
• The proforma invoice is a declaration by the seller to provide
products and services on a specified date and time
• To apply for import licence and/or for arranging funds.
• Proforma invoice should be conspicuously marked
• Statement certifying that proforma invoice is true and correct
• Indicate the4country of origin of the Product

20. Terms of Sale used in International Transaction
• Ex-Works(Ex Named Point of Origin)
• Exporter undertakes to make the goods available to the importer at
specified time and place
• FAS-Named Point of Shipment (Free Alongside ship)
• Price includes all expenses up to delivery of goods along side the vessel or
other means of transport

21. Terms of Sale used in International Transaction
• FOB-NAMED PORT: Free On Board
• FOB price includes expenses till the goods are placed on board the ship
• C&F to Named Port of destination(Cost and freight)
• C&F Price includes cost of transportation to the port of import
• CIF to Named Port of Destination( Cost, insurance and freight)
• The CIF price includes the cost of goods ,insurance and all transportation
charges to the point of disembarkation at destination point

22. Terms of Sale used in International Transaction
• Ex-Dock Named Port of Destination: Ex-Dock means from the dock
at the import port
• Means that the exporter is responsible for delivering the goods off the
dock at the named overseas port of destination with the landing charges
and appropriate duty having been paid.
• DDP - Delivered Duty Paid
• This price term implies that the exporter undertakes the delivery of goods
to the place named in the country of import, most likely the importer's
warehouse, with all the cost met and duties paid

23. Sales Term
• Ex-Works(Ex Named Point of Origin)
• FAS-Named Point of Shipment (Free Alongside ship)
• FOB-NAMED PORT: Free On Board
• C&F to Named Port of destination(Cost and freight)
• CIF to Named Port of Destination( Cost, insurance and freight)
• Ex-Dock Named Port of Destination
• DDP

24. TRANSFER PRICING CONCEPT AND
METHODS
• It is pricing of goods or services exchanged between a company and
its foreign affiliate/subsidiary.
• To ensure Profitability at each level
• Take into account a number of factors like taxes and duties leviable in
the countries concerned, the market conditions, ability of the potential
customers to pay for the company's products,different profit transfer
rules, conflicting objectives of joint venture partners and varying
government regulations.

25. ALTERNATIVE APPROACHES TO TRANSFER PRICES
• Transfer at cost
• Transfer at cost plus overhead and margin
• Transfer at price derived from end market prices
• Transfer, at "arm's length price"

26. TRANSFER AT COST
• This approach is based on the assumption that lower costs lead to
better performance by the subsidiary
• The receiving unit (subsidiary Or affiliate) is expected to generate
profit by subsequent sale

27. TRANSFER AT COST PLUS OVERHEAD AND MARGIN
• This method is applied in recognition of the principle that profit must
be shown for every product or service at every stage of movement
through the corporate system.

28. TRANSFER AT PRICE DERIVED FROM END MARKET PRICES
• Under this method, the price is derived from the competitive foreign
market prices.
• This method enables a company to establish its name or franchise in
the new market without undertaking production there.

29. TRANSFER, AT "ARM'S LENGTH PRICE"
• In this method, the transfer price is the price that unaffiliated parties in
a similar transaction agree on
• This method enables a company to establish its name or franchise in
the new market without undertaking production there.

30. ALTERNATIVE APPROACHES TO TRANSFER PRICES
• Transfer at cost
• Transfer at cost plus overhead and margin
• Transfer at price derived from end market prices
• Transfer, at arm's length price
“The cost plus and the market based pricing are the most popular
methods used by companies in the case of inter firm transfer”

31. CONTER TRADE AND ITS REASON OF SPREAD
Counter trade is a form of trade where import of goods and services is
balanced with exports of goods and services
i) It provides a trade financing alternative to the countries having
international debt and liquidity problems
ii) It facilitates access to new markets
iii) It fits well with the growth of bilateral trade agreements between
governments

32. CONTER TRADE AND ITS REASON OF SPREAD
1. Barter: It is simplest of the many types of counter-trade and is one time
direct and simultaneous exchange of products of equal value
2. Counter purchase: Under counter purchase, a supplier sells a product to
a buyer and agrees to purchase, in exchange, some products from the
buyer. It may involve parallel cash sales agreements between the two
parties
3. Compensation Trade and Buy Back Arrangement: In this type of
counter-trade, a company provides machinery, factory of technology lo
another party and agrees to buy back products made from the
machinery/factory or use of technology earlier received, for a specified
period of lime.

33. TYPES OF CONTER TRADE
4. Switch Trading: It involves a triangular rather than bilateral trade
agreement. When goods, all or part, received by the initial buyer from the
seller and disposed of by bringing in a third party.
5. Offsetting: In offsetting arrangement, a foreign supplier is required to
manufacture or assemble a product locally and purchase local components in
exchange for the right to sell its product in the market
6. Clearing Agreement: An agreed value or volume of trade in the form of
exchange of products between the two countries is designed to be achieved
over a period. Any imbalance after the end of the period is settled by credit
into the succeeding period

34. PRICING ISSUES IN COUNTER TRADE
1. Counter-trade is alleged to increase overhead costs and ultimately
the prices of the products exchanged.
2. Financing becomes more complicated in the case of counter-trade
3. Counter-trading is also alleged to be covert dumping
4. Counter-trading is also considered by some as a form of
protectionism

35. COURSE: Competing in Global Markets
Course Code:403
Unit 3
International Pricing
Session 3

36. Outcome
1. Price Quotation and terms of sale
2. Terms of Sale used in International Transaction
3. Transfer Pricing Concept And Methods
4. Conter Trade And Its Reason Of Spread

37. Sales Term
• Ex-Works(Ex Named Point of Origin)
• FAS-Named Point of Shipment (Free Alongside ship)
• FOB-NAMED PORT: Free On Board
• C&F to Named Port of destination(Cost and freight)
• CIF to Named Port of Destination( Cost, insurance and freight)
• Ex-Dock Named Port of Destination
• DDP

38. TRANSFER PRICING CONCEPT AND
METHODS
• It is pricing of goods or services exchanged between a company and
its foreign affiliate/subsidiary.
• To ensure Profitability at each level

39. ALTERNATIVE APPROACHES TO TRANSFER PRICES
• Transfer at cost
• Transfer at cost plus overhead and margin
• Transfer at price derived from end market prices
• Transfer, at "arm's length price"

40. TRANSFER AT COST
• This approach is based on the assumption that lower costs lead to
better performance by the subsidiary
• The receiving unit (subsidiary Or affiliate) is expected to generate
profit by subsequent sale

41. TRANSFER AT COST PLUS OVERHEAD AND MARGIN
• This method is applied in recognition of the principle that profit must
be shown for every product or service at every stage of movement
through the corporate system.

42. TRANSFER AT PRICE DERIVED FROM END MARKET PRICES
• Under this method, the price is derived from the competitive foreign
market prices.
• This method enables a company to establish its name or franchise in
the new market without undertaking production there.

43. TRANSFER, AT "ARM'S LENGTH PRICE"
• In this method, the transfer price is the price that unaffiliated parties in
a similar transaction agree on
• This method enables a company to establish its name or franchise in
the new market without undertaking production there.

44. ALTERNATIVE APPROACHES TO TRANSFER PRICES
• Transfer at cost
• Transfer at cost plus overhead and margin
• Transfer at price derived from end market prices
• Transfer, at arm's length price
“The cost plus and the market based pricing are the most popular
methods used by companies in the case of inter firm transfer”

45. CONTER TRADE AND ITS REASON OF SPREAD
Counter trade is a form of trade where import of goods and services is
balanced with exports of goods and services
i) It provides a trade financing alternative to the countries having
international debt and liquidity problems
ii) It facilitates access to new markets
iii) It fits well with the growth of bilateral trade agreements between
governments

46. CONTER TRADE AND ITS REASON OF SPREAD
1. Barter: It is simplest of the many types of counter-trade and is one time
direct and simultaneous exchange of products of equal value
2. Counter purchase: Under counter purchase, a supplier sells a product to
a buyer and agrees to purchase, in exchange, some products from the
buyer. It may involve parallel cash sales agreements between the two
parties
3. Compensation Trade and Buy Back Arrangement: In this type of
counter-trade, a company provides machinery, factory of technology lo
another party and agrees to buy back products made from the
machinery/factory or use of technology earlier received, for a specified
period of lime.

47. TYPES OF CONTER TRADE
4. Switch Trading: It involves a triangular rather than bilateral trade
agreement. When goods, all or part, received by the initial buyer from the
seller and disposed of by bringing in a third party.
5. Offsetting: In offsetting arrangement, a foreign supplier is required to
manufacture or assemble a product locally and purchase local components in
exchange for the right to sell its product in the market
6. Clearing Agreement: An agreed value or volume of trade in the form of
exchange of products between the two countries is designed to be achieved
over a period. Any imbalance after the end of the period is settled by credit
into the succeeding period

48. PRICING ISSUES IN COUNTER TRADE
1. Counter-trade is alleged to increase overhead costs and ultimately
the prices of the products exchanged.
2. Financing becomes more complicated in the case of counter-trade
3. Counter-trading is also alleged to be covert dumping
4. Counter-trading is also considered by some as a form of
protectionism

49. PACKAGING AND LABELLING

50. PACKAGING AND LABELLING
• Functions and Importance in Packaging
• Protection:
• Preservation
• Promotion/Presentation
• The following developments have increased the importance of
packaging and the need to make packaging very impressive
• Self-service
• Consumer Affluence
• Integral Marketing Concept

51. Factors Influencing Packaging Decision
• Physical Characteristics
• Chemical Characteristics
• Economy
• Convenience

52. Special Considerations in International Marketing
• Regulations in the Foreign Countries
• Buyer's Specifications
• Socio-Cultural Factors
• Retailing Characteristics
• Environmental Factors
• Disposability

53. Importance and Requirements of Export Packing
• It should be capable of withstanding the hazards of handling and
transport
• It should be easy to handle
• It should be amenable to quick examination of contents
• it should be easy to identify
• It should be adequately marked.
• Packing must conform to the buyer's specifications

54. Labelling
• Labelling may be regarded as part of packaging because packaging
decision making also involves consideration of labelling requirements.

55. COURSE: Competing in Global Markets
Course Code:403
Unit 3
International Pricing
Session 4

56. PACKAGING
PACKING: Protective covering used for transport
of goods
Packaging:(Product or Consumer
Packaging):Package in which products reaches the
Consumer
Packaging in International Context

57. PACKAGING AND LABELLING
• Functions and Importance in Packaging
• Protection
• Preservation
• Promotion/Presentation
• The following developments have increased the importance of
packaging and the need to make packaging very impressive
• Self-service
• Consumer Affluence
• Integral Marketing Concept

58. Factors Influencing Packaging Decision
• Physical Characteristics
• Chemical Characteristics
• Economy
• Convenience

59. Special Considerations in Foreign Market
• Regulations in the Foreign Countries
• Buyer's Specifications
• Socio-Cultural Factors
• Retailing Characteristics
• Environmental Factors
• Disposability

60. Importance and Requirements of Export Packing
• It should be capable of withstanding the hazards of handling and
transport
• It should be easy to handle
• It should be amenable to quick examination of contents
• it should be easy to identify
• It should be adequately marked.
• Packing must conform to the buyer's specifications

61. Labelling
• Labelling may be regarded as part of packaging because packaging
decision making also involves consideration of labelling requirements.

62. •Warranty and Guarantee

63. • Warranty: An assurance that the buyer will be compensated if the'
product does not perform upto reasonable expectations.
Caveat Venditor( Seller)
Caveat Empror (Buyer)
• Guarantee: An assurance that the product can be returned if its
performance is unsatisfactory.