EXPORT PRICING

Pricing Policies
1. Cost Plus Pricing 2. Demand Oriented Pricing

3. Competition Oriented Pricing

Cost Plus Pricing

Under this price of the product is fixed by adding the margin of profit to the cost of the product. This policy is followed in those cases where the exporter has monopoly over the product. In such a case, the exporter is able to decide the amount of margin he would like to take

and can thus accordingly fix the price of his product.

The various costing method are as follows: 1. Full Cost Pricing 2. Direct Cost Pricing 3. Marginal Cost Pricing 4. Break Even Pricing.

1. Full Cost Pricing

The cost includes all the fixed and variable costs and a pre-determined profit margin. 2.Direct Cost Pricing Price is determined by adding a certain % of margin to direct cost to cover the estimated overheads earn profit. 3. Marginal Cost Pricing Is used as a basis of cost to add the % of margin to arrive at the price. Margin cost refers to the amt by which total costs are changed if the volume of output of a product is changed by one unit. 4. Break-Even Pricing It extends the use of Marginal Cost Principle. It is based on the study of break even analysis to determine the effect on profits of changes in cost as a result of change in the volume/ output of the firm. The level of sales at which there is no profit, no loss is called the break even point. The firm is able to recover all its costs (fixed and variable)at this level of output or sales.

Demand Oriented Pricing

Price of the product is fixed by taking into account the

intensity of the demand. Higher price can be fixed

when the intensity of the demand is the highest and lower price is quoted during the period of low intensity

of demand. This pricing policy is very suitable in the

case of products with seasonal demand.

Competition Oriented Pricing

Under this an exporter cannot earn the margin that he decides to take. It all depends on the competition in the market. In this it is the market that decides the amount of margin an exporter can earn. In this market situation it is the customer who sets the price and the exporter should be fully prepared to negotiate the price. This policy is suitable in the case of consumer goods which have competitive market.

Pricing Objectives:1. To earn a specific % of profit on the sales or a given level of

absolute profits.
2. To achieve a certain level of export turnover. In such a case, the exporter would fix a price for the product that ensures the attainment of the target level of exports turnover. 3. To survive in the face of strong competition in the market. 4. To create a certain image for the brand of the product.

Pricing Strategies 1. High Price Strategy 2. Moderate Price Strategy 3. Low Price Strategy

High Price Strategy

Should be used if the export firm is selling a unique or a new product. It may also be used in case the exporter intends to establish a high-quality image for the product. The advantage of this strategy is that the exporter can earn higher profit margins but it can also limit the products marketability.

Moderate Price Strategy

Is the right strategy for a small and medium export firm as it would enable it to be competitive and earn reasonable profits. It also helps an exporter increase its market share in the long run. This strategy requires the exporter should have prior knowledge of the competitors market entry prices.

Low Price Strategy

Is best suited when the exporter plans to clear its stock of the goods. This strategy can at best be used as a short term strategy only. The danger of this strategy is that it may invite anti-dumping charges from foreign competitors apart form yielding low profits for the exporter.

Thank You