CASE STUDY

INTRODUCTION TO INTERNATIONAL MARKETING
As compared to domestic market, international marketing is highly complicated and complex. International marketing is an offshoot of ever increasing interdependence of nations and the rise of MNC¶S which consider the globe as their market. International marketing is an important aspect of international business. International marketing is not the same thing as international trade. Only a part of the international trade flows represent international marketing. There is a category of international marketing which is not captured by the international trade statistics.

DEFINATION
Philip R Cateora and John M Hess have defined international marketing as ³ the performance of business activities that direct the flow of a company¶s goods and services to consumers or users in more than one nation´

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) Sales (net) Raw materials Direct wages Direct factory expenses Supervision Depreciation Maintenance Other Indirect factory expenses Gross profit Administration expenses Selling and distribution expenses 58 58 116 156 182 74 82 24 90 100 708 392 1. Mr. was faced with the task of fixing an export price for the company¶s product which you enable the company to make a successful and profitable entry into export markets. 1977 (Figures in thousands of Rs. The metal product company was a medium sized organization which had for a number of years manufactured and sold a line of metal products in the Indian markets.100 2 . In 1977. Exhibit I Operating statement for the year ended 30th June. during this period the company had manufactured and sold approximately 5.50.EXPORT PRICING CASE ON THE METAL PRODUCTS COMPANY In July.000 units of products throughout the Indian market. the senior financial executive of the metal product company. the opportunities for the expansion of sales in the domestic market were limited by special factors and the executives of the company had turned their attention to potential export market. Roy. 1977. The operating statement for the company for the previous year had shown the result set forth in Exhibit I.

The accounting records of the company had been set up so as to facilitate the segregation of cost which tended to remain constant despite variations in the volume of product produced and those cost which tended to vary directly with the volume of products produced. ³The Rs.70.´ Mr. had budgeted for the sales of 5.o. Pakistan. Roy thought that the figures available from the operations of the previous year would provide a sound basis for estimating the cost which would be incurred in the previous year. Sen had preliminary studies of selected export markets such as Africa.000 units. Sen. 1.60 was. Mr.60 per unit f.b Bombay. Sen.000 units Raw materials Direct wages Direct factory expenses Supervision Depreciation These cost would not vary much These cost would vary in direct Proportion to the increase in volume 3 . 1. Roy recognized that there were some marginal elements in the each category but he thought that there effect upon the total analysis would not be significant. Sen said. ³ did no compare at all with the favorable with the average ex-factory price per unit of Rs. Roy that the price of the product which were directly competitive with Metal¶s product was the equivalent of about Rs. Singapore and Hong kong and had ascertained the competitive prices ruling in those markets. ³This figure´. ³ a realistic figure of competitive prices ruling in the export market and in my judgement the company would have to plan on that figure being the maximum to be obtained in the short run. He informed Mr. Mr. Cost Element Impact of increase in volume from 5. ³ Mr. 2 which the company had been obtaining for its product in the Indian market.50.The production capacity of the company for 1978 had been estimated at 7. A careful examination of the effect which the proposed increased in the volume of production would have upon the elements of the cost structure led him to the following conclusion regarding those cost which would vary and which would remain constant.20. but he thought the years figures would provide a reliable basis for the practical purpose of fixing averages prices of Mr.20. Mr. however´ he said. Sen also voiced the thought that competition might force somewhat lower prices during temporary fluctuations of supply and demand for the products.000 units in the domestic market and 1.000 units in the export market. He knew that the unit cost which could be calculated from those figures would only be average and that with further refinements in costing procedure he would be able to obtain more exact cost.50.000 to 7. the senior sales executive. Mr.

The company also had to keep a close watch on the fluctuations of supply and demand for the product. The company had been obtaining Rs. 6) As per study of Mr. Mr.70. Mr.50.000 in domestic market and 1.000 units of products throughout the Indian market. Singapore and Hong kong which had competitive prices. 1.1.000 units of products throughout the Indian market.60 per unit. In July 1977.2 per unit in the Indian market which would reduce to Rs. Mr. 4) Production capacity of the company for 1978 has been estimated at 72. 5) Out of which 5.Roy is the senior financial.60 per unit but it did not compare with the average price of company which is Rs. but had many challenges ahead of them in exploring the potential export market. 1. Roy the financial senior executive thought the figures available from the operation of the previous years and further refinements in the costing procedure he would be able to obtain more exact cost.00. Mr.50. FACTS OF THE CASE 1) In July 1977. Roy to calculate the cost figures which would form the basis of fixing an export price. 7) The accounting records of the company had been set up so as to facilitate the segregation of costs 8) After a careful examination Mr. Roy also recognized that there were some marginal elements in each category which would not have significant effect. 4 .00 units.50. 2) It is a medium sized organization. this company wanted to enter into the export market. 3) They sold metal products in Indian market for number of years and during that time they sold approximately 5. Mr. Sen the price of the products which were directly competitive with metal products was equivalent of about Rs.000 in export markets. Pakistan. Sen had requested Mr. The selected export market were Africa. Roy was also successful in drawing certain conclusion.e Rs.60 per unit in the export market.2 per unit. Roy the senior financial executive had to fix an export price to be successful and profitable entry into export market.SUMMARY The metal product company was a medium sized organization which had for a number of years manufactured and sold a line of metal products in the Indian markets and during that time they sold approximately 5. Mr. Roy recognized that there were some marginal elements in each category 9) They decided to make some changes in the balance sheet and calculate it to fix the export price and to know whether it is profitable for the company to compete at the same price i.

o. In fact companies forget to think about the customers and define prices just looking at the Production cost marketers. I would choose to expert a product rather than remain strictly a domestic company to increase the sales volume to a level where costs to produce an individual item. Management will be constrained in its ability to adjust prices accordingly. For every product there is an optimum price. The USA automobile market is a good example concerning the competitive influence:-if Manufacturer decides to move up its price. And if competitors Do not adjust their prices in response to rising costs.1. 5 . it is likely to loose market share. The higher Competition in the market to more difficult will be to push prices up. at the same level or lower than in the domestic market. Exporter must decide whether it¶s exported Product price will be higher.60 Per unit f.b Bombay? ANSWER:No it would not be profitable for the company to compete on the basis of an average price. The minimum price is determined by the cost of the product or service.QUESTIONS 1) Would it be profitable for the company to compete on the basis of an average price of rs. Between the lower and upper boundary. This is a Function of the demand for the product as determined by willingness and ability of customer to buy.

60 per unit as they use to sell the same product at Rs. 6 .e Rs 1. how much lower could the company go in order to meet that competition? ANSWER:I feel that the suggestion given by Mr. So I feel the rates should be same. So I feel that the rate i.60 per unit as in the Indian market the price is Rs. More typically companies offering products that are directly comparable to each other may be forced to play this game. Pricing must contribute to a companies strategy to be successful. Because if they lower the price more they will be in more loss. Companies that can articulate why they are in business and how they want to compete provide the strategic backdrop for successful pricing. As in any business we cannot gain profit at the start of any business.60 per unit is relevant in the international market. a vision.Sen to increase or decrease the price wherever necessary in balance sheet is right. Call it a corporate strategy statement. This statements are very useful for tying together all of your sales and marketing activities of which pricing is one important element. what should be the lower limit to price level in a second market? ANSWER:I feel that the lower limit should not exceed Rs. It is important to understand what different pricing strategies are available so you can select a starting point that fits with your companies business strategy. a mission statement or whatever.1. CONCLUSION We feel that as per the advice of Mr. Pricing is a strategic tool that can be used as a competitive weapon but is best applied as part of an overall business strategy. if they want to compete and built a good reputation in the international market they have to set a price little below the price set by them in the Indian market.40 paise per unit by selling the product at Rs.60 per unit for some years until they gain good reputation in the international market.2 per unit according to the factory cost.2 per unit in Indian market.1. He thinks that there could be fluctuations in demand and supply in the international market. So for some years to gain reputation in the market the company has to compete in the international market with same price and after years by looking at the demand of the product the company can raise the price. Meeting the competition is a very common but is only a lowest cost producer. In order to do so there needs to be a company strategy or vision. Sen the price is relevant enough to compete and it should not be less or more than Rs 1. 3) As a policy. We have to keep patience and wait for some years to gain good reputation and earn profit in any market then may it be Indian market or international market.2) If competition forced lower prices. Because the company is already in loss of 0.

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