Pricing Decisions

‡ Keegan¶s four steps to global pricing strategy ‡ General pricing strategies ‡ Problems with pricing for multinational markets ‡ Problems with foreign currency and economic conditions ‡ Grey markets

Four Steps 1 Determine the price elasticity of demand (Inflexible demand will allow for a higher price) 2 Estimate fixed and variable manufacturing costs (product adaptation costs must be calculated) 3 Identify all costs associated with the marketing programme 4 Select the price that offers the highest contribution margin Warren J.Global Pricing Strategies . Keegan (1995) .

Pricing Strategies ‡ Market skimming ‡ Market penetration ‡ Market holding ‡ Cost-plus pricing .

Sony Betamax Harvey Schein.295 at launch! .$1. President .Market Skimming .

Daewoo µblitz¶ the market .Market Penetration .

Market Holding ‡ Maintain their share of the market ‡ Currency fluctuations often trigger price adjustments ‡ Price adjustments can mean lower. or no profit margin ‡ strong home currency could mean manufacturing/licensing abroad .

Cost-plus ‡ Adds-up all cost of production (and shipping) ‡ Easy to make quotes ‡ Ignores demand and competitive pricing in target market ‡ Consumer and competitor value issues must always considered in a rational pricing strategy .

g. Sandvik (Sweden) ‡ Parallel imports or µGrey¶ markets? .Problems of multinational pricing ‡ Co-ordination across various markets? ‡ Do we maintain a µuniform¶ pricing policy across markets? ‡ How to transfer price between and across markets? E.

Problems with foreign currency and economic conditions ‡ Which currency for pricing in international markets? ‡ How to deal with fluctuating exchange rates? ‡ Strategies for high inflation rates? .

legal restrictions. transport costs) ‡ Price differentials must be great enough (so that grey marketers can make a profit) Duhan and Sheffet (1988) .Grey Markets ‡ Products must be available internationally (as products are standardised in global markets) ‡ Low trade barriers (tariffs.

Sign up to vote on this title
UsefulNot useful