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PRICING
Pricing within individual Market
 Pricing within the individual markets
in which the company operates is
determined by:
1) Corporate Objectives
2) Costs
3) Customer Behavior and Market conditions
4) Market Structure
5) Environmental Constraints
Corporate Objectives
• Global marketers must set and adjust their objectives both
financial such as return on investment and marketing –related
such as maintaining or increasing market share.
• Pricing may influence the overall strategic moves of the company
as a whole.
Costs

• Costs are frequently used as a basis for price determination largely

because they are easily measured and provide a floor under which
prices cannot go in the long term.
• It concludes procurement, manufacturing ,logistics, and
marketing costs as well as overhead.
Demand and Market Factors
• Demand will set the a price ceiling in a given market.
• The global marketer must make judgements concerning the
quantities that can be sold at different prices in each foreign
market.
• The global marketer must understand the price elasticity of
consumer demand.
Market Structure and competion

• Competition helps set the price within the parameters of cost and
demand.
• It may choose to compete directly on price or elect for non price
measures.
• Price cuts can also be executed selectively rather than across the
board.
• If a company ‘s position is being eroded by competitors who focus
on price the marketer may have no choice but to respond.
Environmental Constraints

• Governments ifluence prices and prcing directly as well. In

addition Policy measures such as tarrifs and taxes, government
may also elect to directly control price levels.
• Once under price control, the global marketer has to operate as it
would in regulated industry.
Pricing Coordination
• Coordination of pricing function is necessary, especially in larger
regional markets such as the european union.
• Studies have shown that foreign-based multinational corporations
allow their U.S subsidiaries considerable freedom i pricing
TERMS OF SALE

-Carriage and insurance paid to (CIP)

-Delivered at Terminal (DAT)
-Delivered at Place (DAP)
-With Delivered Duty Paid (DDP)
SELECTED TRADE TERMS

 Free Alongside Ship (FAS)

 Free On Board (FOB)
 Under Cost and Freight (CFR)
 Cost, Insurance and Freight (CIF)
1. Exporters can offer foreign buyers an easy-to-understand
“delivered cost” for the deal
2. By getting discounts on volume purchases for transportation
services, exporters cut shipping cost and can offer lower
overall prices to prospective buyers.
3. Can control of product quality and service is extended to
transport, enabling the exporter to ensure that goods arrive
to the buyers in good condition.
4. Administrative procedures are cut for boyh the exporter and
the buyer.
Terms of Payment

 Factors in Negotiating Terms of Payment

1. The amount of payment and the need for

protection.
2. Terms offered by competitors
3. Practices in the industry
4. Capacity for financing International
Transactions.
5. Relative strength of the parties involved.
Methods of Payment for Exporters

 Irrevocable versus revocable

 Confirmed versus unconfirmed
 Revolving versus nonrevolving
Managing Foreign
Exchange Risk
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 result of an appreciating or depreciating
Exchange risk currency or result from a revaluation or
devaluation of a currency by a central brank

Monetary authority who are given the

Central bank privilege to control the production and
distribution of money.

-prints the national currency which is the legal

tender of a state
Countries with no Central Banks:
Cuba, North Korea and Iran
How business can protect against currency-related risks:

Risk Shifting Risk Modifying

Sources of Export
Financing
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 Commercial Bank

They provide trade financing

depending on their relationship
with the exporter and the
country of the borrower.

Services:
▪ Enhanced services
▪ Criterion of Choice

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 Forfaiting

Provides the exporter with cash

at the time of the shipment.

Exporter’s BENEFITS:
▪ Reduction of risk
▪ Simplicity of documentation
▪ Coverage

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 Factoring

Purchases an exporter’s
receivables for a discounted
price.

Exporter’s BENEFITS:
▪ Complete financial package
▪ Bookkeeping
▪ Collection services
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 Official Trade Finance
as a LOAN
The government will provide
funds to finance the sale and
charges interest on those funds
at a fixed rate
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as a GUARANTEE
A Private sector lender will
provide the funds and sets the
interest rate
While the government will
assure that it will reimburse the
lender if the loan is unpaid.
Price Negotiations

8
Pricing is a sensitive issue

Exporters should be ready to discuss by:

• Obtaining information
• Developing counterproposals

Exporters should avoid concessions:

• Discounts
• Improved product
• Costly demands
Leasing

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Leasing companies are sources for:
• Capital
• Developing new value-added services
• Forming business relationships

Benefit of Lessors (leasing company):

• expected growth
• Eradication of country laws and
regulations.
Pricing within individual Market
 Pricing within the individual markets
in which the company operates is
determined by:
1) Corporate Objectives
2) Costs
3) Customer Behavior and Market conditions
4) Market Structure
5) Environmental Constraints
Corporate Objectives
• Global marketers must set and adjust their objectives both
financial such as return on investment and marketing –related
such as maintaining or increasing market share.
• Pricing may influence the overall strategic moves of the company
as a whole.
Costs

• Costs are frequently used as a basis for price determination largely

because they are easily measured and provide a floor under which
prices cannot go in the long term.
• It concludes procurement, manufacturing ,logistics, and
marketing costs as well as overhead.
Demand and Market Factors
• Demand will set the a price ceiling in a given market.
• The global marketer must make judgements concerning the
quantities that can be sold at different prices in each foreign
market.
• The global marketer must understand the price elasticity of
consumer demand.
Market Structure and competion

• Competition helps set the price within the parameters of cost and
demand.
• It may choose to compete directly on price or elect for non price
measures.
• Price cuts can also be executed selectively rather than across the
board.
• If a company ‘s position is being eroded by competitors who focus
on price the marketer may have no choice but to respond.
Environmental Constraints

• Governments ifluence prices and prcing directly as well. In

addition Policy measures such as tarrifs and taxes, government
may also elect to directly control price levels.
• Once under price control, the global marketer has to operate as it
would in regulated industry.
Pricing Coordination
• Coordination of pricing function is necessary, especially in larger
regional markets such as the european union.
• Studies have shown that foreign-based multinational corporations
allow their U.S subsidiaries considerable freedom i pricing
 is the price at which divisions of a company transact with
each other, such as the trade of supplies or labor between
departments.
 Transfer prices are used when individual entities of a larger
multi-entity firm are treated and measured as separately run
entities. A transfer price can also be known as a transfer cost.
Benefits
 Transfer pricing helps in reducing the duty costs by shipping
goods into high tariff countries at minimal transfer prices so
that duty base associated with these transactions are low.
 Reducing income taxes in high tax countries by overpricing
goods that are transferred to units in those countries where
the tax rate is comparatively lower thereby giving them a
higher profit margin.
Risks
 There can be a disagreement among the organizational
division managers as what the policies should be regarding
the transfer policies.
 There are a lot of additional costs that are linked with the
required time and manpower which is required to execute
transfer pricing and help in designing the accounting system.
 Countertrade is a reciprocal form of international trade in which goods
or services are exchanged for other goods or services rather than
for hard currency.
 This type of international trade is more common in lesser-developed
countries with limited foreign exchange or credit facilities.