2. What the Presentation Covers A brief of how to strategize International Pricing Factors affecting Pricing Decision
3. Pricing A Psychological element valuing product or service Essential that products & services be competitively priced Fair price reflects the perceived value of the product in question
4. Elements of International Pricing Pricing decisions Pricing policies Factors affecting international pricing Price quotations Dumping Counter trade
5. Pricing Decisions Supply & Demand Elasticity or Cross Elasticity of Demand Exchange Rates Market Share Tariffs and Distribution Costs Culture Purchasing Power
6. Supply & Demand Marginal Utility & Money Marginal Utility & Price Indifference Theory Pricing Laws of Supply
7. Elasticity or Cross Elasticity of Demand No proportional demand – supply Elasticity can be used to justify and reason the behaviour of demand In some cases demand for one product affects the demand of other products The concept of Supplementary & Complementary Goods
8. Exchange rates Pattern of money payment whether installment or one time If money to be recovered is over a period of time, it is necessary to hedge the pricing to avoid excessive losses or profits Spur in arbitrages can cause exchange rate fluctuations Effect of Exchange rates is on both the importer and exporter
9. Market Share Generally follows law of demand International Pricing normally based on PPI and CPI Pricing basis can be done on Wholesale Price Index of the manufacturers Guarding against Monopolistic and Restrictive trade practices although ideally every exporter would like to have 100% market share
10. Tariffs & Distribution costs Tariffs are in the form of Duties and taxes Tariffs can also be in the form of trade barriers in the form of subsidies Costs take into account the taxes and duties Distribution costs include the cost of supply chain This includes, Commissions, Shipping costs, Cost of setting up the supply chain for products Regular Vs Rush orders
11. Culture Based more on promotional activities Localization of products, a necessity which might effect a major change in the product signature Pricing should go in line with the consumer behaviour of the targeted market What is right in one country may not apply to other countries
12. Purchasing Power An economic concept Depends on The strength of the currency Employment GDP growth Exchange Rate
13. Factors Affecting International Pricing Cost Competition Product Differentiation Exchange Rate Economic conditions of the importing country Government factors
14. Cost Should keep low in the short run for a long term gain May operate at No-Profit-No-Loss Level initially Cost of promotion Cost of Distribution
15. Competition Import Substitution Local as well as Foreign Competition pricing will depend on trade agreements Initial low cost products can be offered to gain market share
16. Product Differentiation Can accelerate market share growth Spurs buying if a strong USP exists Can create a niche product if put in IPR Can be used to fix varying prices
17. Exchange Rate Exchange rate fluctuation can be offseted in a probabilistic market condition Higher price can be fixed for a favoured currency payment Hedging should be done if payments are to be received over a period of time Uncovered Interest rate parity can also be used to neutralize the effects of Exchange rate fluctuations
18. Economic Conditions of the Importing Country Exports should take into consideration: Per Capita Income Spending pattern Demand means Desire to acquire something Willingness to pay for it Ability to pay for it
19. Government Factors Margin Regulations (Profit Rates) Price floors & Price ceilings indicating lowest and highest price levels Subsidies provided by the government Tax concessions as in SEZs Encouragement to local exporters through finance, inputs at lower indexes
20. Pricing Strategies Transfer Pricing Parity Pricing Cost plus Pricing Low Price Strategy Complimentary Product Pricing
24. Ball, McCulloch, Frantz, Geringer, Minor, International Business – The Challenge of Global Competition, Mc-Graw Hill Atkeson Andrew and Burstein Ariel, “Pricing-to-Market, Trade Costs, and International Relative Prices”, through http://www.econ.ucla.edu/arielb/ABPricingtoMarket.pdf
