International Marketing Management

International
Pricing
Decisions
Presentation By Group 4 - Satwik Gupta
Saumya Jaiswal
Rudhir
Flow of Key takeaways:

Presentation Introduction to Global Pricing

Price Escalation

International transfer Pricing

Pricing Strategies

Factors Influencing the Establishment of

International Prices
Export Pricing

Differential Pricing
Global Pricing
Pricing refers to the value that is put
forward for a product or service.
Pricing is a part of marketing mix.
Only marketing mix instrument that
creates revenues.
A firm’s pricing policy is inherently a
highly cross-functional process
Multinationals face challenge in
coordinating their pricing policy across
different nations.
Lack of price coordination across different
nations can create a parallel trade or gray
market situation.
 Active instrument of accomplishing marketing
objectives
Pricing The company uses price to achieve some specific

Objectives objectives.
These objectives could be targeted returns on profit,
targeted sales volume, etc.

Static element in a business decision

Companies that follow these approach places a low

priority on foreign business.
Probably exports only excess inventory.
Export sales are viewed as passive contributions to
sales volume.
Parallel Companies need to guard against competition with their
own subsidiaries or branches in international markets.

Imports Parallel imports refer to the goods that are imported into
a market and sold there without the trademark owner's
consent in that market.
The practice is lucrative when wide margins exist
between prices from the same product in different
countries.
The possibility of a parallel market occurs whenever price
differences are greater than the cost of transportation
between two markets.
The practice of excessive distribution by companies can
also create a favorable condition for parallel importing.
Exhibit: How gray market goods end up in U.S. stores

Manufacturer

Buyer X

Freight
Fake Paperwork
Forwarder

US Store US Store US Store

 Price escalation is added costs incurred as a
Price result of exporting products from one country to
another.

Escalation It is the cause of disproportionate difference in

price between the exporting country and the
importing country.
This price escalation happens because of many
reasons, such as:
Taxes, Tariffs and administrative costs
Inflation
Deflation
Exchange Rate Fluctuations
Varying Currency values
Middleman and Transportation Costs
Exhibit: Sample Causes and Effect of Price Escalation
APPROACHES TO REDUCE PRICE ESCALATION

Lowering cost Lowering Lowering

of goods Distribution Tariffs
Costs

Using Foreign
Dumping
Trade Zones
International
A common practice most prevalent among MNC's
many subsidiaries to trade among themselves or
with the parent firm.
Transfer Basically, intrafirm trading of goods and services
among multinational corporations.
Pricing Transfer pricing decisions in an international
context need to balance off the interests of a
broad range of stakeholders:
parent company,
local country managers,
host government(s),
domestic government, and
joint venture partner(s) when the transaction
involves a partnership.
CRITERIAS TO BE CONSIDERED BY MNC'S WHEN MAKING
TRANSFER PRICING DECISIONS

Tax Regimes Local market Market

Conditions Imperfections

Joint Venture
Morale of Local
Partner
Country
Managers
Methods to Direct Manufacturing Cost
Determine
Transfer Involves the transfer at direct
Prices manufacturing cost.
Buying subsidiary acquires
merchandise at a very low price from
the selling subsidiary.
Market based Transfer Price
Involves the use of a market-based
transfer price.
The price, though competitive, may
end up being too low for the selling
subsidiary because production cost
may not be considered.
Direct Manufacturing Cost
Plus a Predetermined Markup
Involves a transfer at direct
manufacturing cost plus a
predetermined mark upto cover
additional expenses.
Profit is produced and added at every
stage.
Arm's Length Price
In this, the price would be the price
that unaffiliated traders would agree
on for a particular transaction.
The problem with using this method
occurs when the product has no
external buyers or is sold at different
prices in different markets.
 Pricing Strategies
1. Market Skimming and Financial Objective-In
this strategy a high price is charged to ‘skim the
cream’ from the top end of the market.
2. Market Pricing- This approach requires the
exporter to have a thorough knowledge of product
costs, as well as confidence that the product life
cycle is long enough to warrant entry into the
market.
3. Penetration pricing- It is used to stimulate
market growth and capture market shares by
deliberately offering products at low prices.
4. Freemium- It is a pricing strategy by which a
product or service is provided free of charge, but
money is then charged afterward for more
advanced features or functionality.
5. Subscription-based pricing- Refers to an e-
business that provides periodic delivery of a
customized box of merchandise or services directly
to the consumer’s home
6.Product-service bundle pricing-Bundling
product and services together in a system-
solution product.
7. Product Line Pricing- Here, the various items
in the line may be differentiated by pricing them
appropriately to indicate.
 Factors influencing the
Establishment of International
Pricing
Internal factors External factors
Product Environmental
factors factors
Firm-level Market factors
factors
 Internal Factors
Product factors Firm-level factors

Place in Product Line Corporate and Marketing

Most important product objectives
features: quality, service Competitive Strategy
etc. Product Development
Product Postioning Market entry modes
Product Cost Structure Country of Origin
 External Factors
Environmental factors
Government influences and
constraints: import controls,
price control
Inflation
Currency Fluctuations
Market factors
Customer's perceptions
Customer's ability to pay
Nature of Competition
Competitor's objectives,
strengths and
weaknessess
Export Pricing
Meaning

Pricing that exporter intended to sell

in overseas market
Broadly, 4 methods are used for
export costing
Batch Costing
Process Costing
Standard Costing
Marginal Costing
 3.Maximum
1. Survival
Current Profit Objectives
(of Export Pricing)
2. Maximum 4. Establishing
Sales Growth Leadership
 Importance
(OF EXPORT PRICING)

1.Customer will get best quality at a reasonable price

2.Pricing Policy will be fair enough
3.Competitiveness in foreign market
4.Success/Failure of export
5.Goodwill in the market
6.Capturing foreign market
7.International brand image
8.Penetration in the market
9.Enhancing market share
 Export Pricing Strategies
(USED IN INTERNATIONAL MARKETING)

1) SLIDING-DOWN 2) SKIMMING 3) PENETRATION 4) PREEMPTIVE 5) EXTINCTION

THE DEMAND THE MARKET PRICING PRICING PRICING
CURVE
Differential
Pricing
Introduction
It is an integral component of dynamic
pricing
It have wide rage of benefits
Sophisticated method to generate
business
It is based on current market
condition
Have some down sides also
Definition

ALLOWING YOUR IT FOCUSES ON A THE PURPOSE IS

COMPANY TO FLUCTUATING TO STREAMLINE
CHARGE PRICE SYSTEM YOUR BUSINESS
DIFFERENT OPERATIONS AND
PRICES FOR THE INCREASE
SAME PRODUCT REVENUES
 1.INCREASED MARKET REACH

Advantages 2.INCREASED REVENUES

of Differential
Pricing
3.BETTER PRICE MANAGEMENT

4.STREAMLINED PRODUCTION
DISADVANTAGES OF DIFFERENTIAL PRICING

Your profits on the discounted sales drop

You may lose new customers when the price

go back to normal

In case of any return of physical product,

company is at loss
How to Use Differential Pricing

Identify Market Segments

DEVELOP A SOLID STRATEGY

Type of Differential Pricing
Brand Image

Products

Geographic Location

Offer Discounted Prices

Group Discounts

Seasonal Discounts
Final Words
(for differential pricing)
 Global Pricing (Chapter 12), Global Marketing

References Management by Kotabe and Helsen (5th edition)

Pricing For International Markets (Chapter 18),

International Marketing (15th edition) by Philip R.
Cateora, Mary C. Gilly, John L. Graham
Pricing decisions and terms of doing business (Chapter
15), Global Marketing by Svend Hollensen (8th edition)

Pricing Strategies: Basic Decisions (Chapter 16),

International Marketing Analysis and Strategu by Sak
Onkvisit and John Shaw (4th edition)

https://accountlearning.com/concepts-job-costing-
features-subdivision-estimation-price/

https://prisync.com/blog/differential-pricing/