INTERNATIONAL PRICING STRATEGY

1
INTERNATIONAL PRICING STRATEGY

• Pricing is critical and complex variable
• Pricing decision affects the companys ability to
  stay in the market
• Unpredictable market forces such as cost,
  competition, and demand threaten with numerous
  pitfalls for international pricing

2
Importance of Pricing

• Pricing decision directly affects revenue and
  thus profitability of any business, be it
  domestic or international
• Appropriate pricing aids proper growth, as
  development of mass market depends to a large
  extent on price.

3
Uniform Versus Differentiated Pricing

• The decision between uniform and differentiated
  pricing would be dictated by such factors as
• - competitive conditions
• - life style
• - position of the product
• - product diffusion process
• - regulatory considerations

4
Uniform Versus Differentiated Pricing

• - channel structure
• - company objectives, and
• - consumer price perceptions

5
International Pricing Setting

• International pricing is affected by differences
  in costs, demand conditions, competition and
  government laws

6
Pricing orientation

• The Cost Approach (computing all relevant costs
  and then adding a desired profit mark up to
  arrive at price)
• The Market Approach (an estimate is made to the
  acceptable price in the target segment. The price
  is in the view point of the customer)

7
Factors affecting Export Pricing

• The price destination (who will pay the price?)
• The nature of the product (raw, semi-processed or
  finished, services, or intangible property)
• The currency used for the billing.

8
Export Pricing Quotation

• Ex factory
• Free along-side-ship (FAS)
• Free on board (FOB)
• Cost insurance and freight (CIF)
• Delivery duty paid (Rendu)

9
FACTORS AFFECTING PRICING DECISIONS

• Cost
• Competition
• Purchasing Power of Customers
• Buyers Behaviour (Cultural influence)

10
TRANSFER PRICING

• This is the price of international transaction
  between related parties/Countries/firms. When the
  parties are not related, then it is called
  Arms length Price.
• Mainly, it is for allocation of profits among the
  subsidiaries and the parent company. It becomes
  more complicated when the taxation system between
  the countries is incompatible.

11
Objectives of TRANSFER PRICING

• Maximize overall after-tax profits
• Reducing incident of customs duty payments
• Overcoming quota restrictions
• Reducing exchange rate differential problems
• etc

12
Dumping
Finally

• Practice of pricing exports at levels lower than
  the domestic price.
• Is a way of setting differential prices to
  achieve certain objectives.
• WTO is now prohibiting the dumping at the
  international legal perspective