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Bina Nusantara University 3
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
Bina Nusantara University 4
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.
Bina Nusantara University 5
Pricing Policy
How Gray-Market Goods End Up in U.S. Stores
Manufacturer
Buyer X
FreightForwarder
FakePaperwork
U.S. StoreU.S. StoreU.S. Store
Bina Nusantara University 6
Approaches to International Pricing
SkimmingVersus
Penetration Pricing
Full-CostVersus
Variable-Cost Pricing
Bina Nusantara University 7
Price Escalation
Costs of Exporting
Taxes, tariffs andAdministrative cost
inflation
Deflation
Exchange ratefluctuations
Varying currencyvalues middleman
AndTransportation costs
Bina Nusantara University 8
Approaches to Reducing Price Escalation
Lowering Cost
Of Goods
Lowering Tariffs
Lowering Distribution
costsUsing
foreign trade zones to lessen
price escalation
Dumping
Bina Nusantara University 9
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.
Bina Nusantara University 10
Counter trade as a Pricing Tool
Types of Counter trade
Problems of Counter trade Proactive Counter trade strategy
The internet andCounter trading
Bina Nusantara University 11
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
Bina Nusantara University 12
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.
Bina Nusantara University 14
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.
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