Chapter Ten Pricing for Global Markets. Copyright © Houghton Mifflin Company. All rights reserved.10 - 2 Figure 10.1: Global Pricing Strategies

Chapter Ten

Pricing for Global Markets

Copyright © Houghton Mifflin Company. All rights reserved. 10 - 2

Figure 10.1: Global Pricing Strategies


Company Internal Factors

• Profit and Cost Factors




Company Internal Factors (cont’d)

• Transportation Costs

• Tariffs

• Taxes


Company Internal Factors (cont’d)

• Local Production Costs

• Channel Costs


Market Factors Affecting Pricing

• Income Levels

• Competition


Environmental Factors Affecting Price

• Exchange Rate Fluctuations

• Inflation Rates


Environmental Factors Affecting Price

• Price Controls

• Regulatory Factors: Dumping Regulations


Managerial Issues in Global Pricing

• Determining Transfer Prices– Impact of Tax Structure– Internal Considerations– External Problems

• Quoting Price in a Foreign Currency– How to Incorporate a Foreign Exchange Rate

into a Selling Price Quote– Selection of a Hedging Procedure


Managerial Issues in Global Pricing (cont’d)

• Dealing with Parallel Imports or Gray Markets

• Managing Export Price Escalation

• Global Pricing Strategies



Source: From “Prices at the Europlex,” The Economist, March 27, 1999, p. 110. Copyright © 1999 The Economist Newspaper Group, Inc. Reprinted with permission. Further reproduction prohibited. www.economist.com

Figure 10.4: Price of a Movie Ticket in Major European Cities and New York City


Figure 10.5: Financing Global Marketing Transactions


Financing International Marketing Transactions (cont’d)

• Risks– Commercial Risk– Foreign Currency Risk– Transfer Risk– Political Risk

• Customer- Arranged Versus Supplier-Arranged Financing


Export Payment Terms Risk/Cost Tradeoff

Risk to Exporter

Least Risk____________________________________________ Highest Risk

Confirmed Irrevocable Bank BankCash in Irrevocable Letter of Collection Collection OpenAdvance Letter of Credit Credit Sight Draft Time Draft Account

Cost to Buyer

Highest Cost ___________________________________________ Least Cost

SOURCE: Business America, February 1995.


Sources of Financing

• Commercial Banks– Forfaiting: Financing without Recourse

• Government-Sponsored Financing: The Export-Import Bank– Short-Term Financing– Medium-Term Financing– Long-Term Financing– The Value of Eximbank Loans to U.S. Exporters– Financial Engineering: A New Marketing Tool


Sources of Financing (cont’d)

• Noncash Pricing: Countertrade


Source: Barter, Compensation and Cooperation, Credite Suisse, Zurich, Switzerland, Vol. 47, IV, 1978, pp. 8-9. Reprinted by permission.

Figure 10.6: Forms of Countertrade


Sources of Financing (cont’d)

– Barter– Compensation Arrangements

• Full vs. Partial Compensation• Parallel Deals• Linked Deals• Triangular Compensation• Offset Deals• Cooperation Agreements

– Dangers in Compensation Deals– Precautions for Countertrade– Organizing for Countertrade

Documents

Chapter Ten Pricing for Global Markets. Copyright © Houghton Mifflin Company. All rights reserved.10 - 2 Figure 10.1: Global Pricing Strategies