PRICE

STRATEGY IN
INTERNATIONAL
MARKET

Team: Chickenchese
Lecturer: Mai Quynh Anh
Team Members
Hua Cong Tho
Le Ba Hai
Nguyen Tran Chinh
Nguyen Ngoc Lien
Nguyen Thi Thanh Nhan
Dang Nguyen Phuong Uyen
Su Pham Uyen Nhi
 MENU
Pricing in parallel imports and gray market

Approachs to international pricing

Factors affects international pricing strategies

Control price in international market

Countertrade

Getting Paid
Pricing objective
In general pricing are viewed in 2 ways:
- Pricing as an active instrument of accomplishing
marketing objectives
- Pricing as a static element in a business decision
Parallel importation or Gray Market
On account of competition, firm may have to charge different
prices from country to country

Parallel imports develop when importers buy products from

distributors in one country and sell them in another distributors
who are not part of manufacturer's regular distribution system

The possibility of a parallel market occurs whenever price

differences are greater than the cost of transportation between
two markets
Parallel importation or Gray Market
Example

There is a difference price between countries in the same

region. Price of a burger in 3 countries China, Korea, Japan

¥18 = $2.83 ₩3800 = $3.18 ¥390 = $3.37

 Approachs to international
pricing
Full - cost pricing Variable - cost pricing Skimming pricing

Market penetration Value - based Competition-based

pricing pricing strategy pricing strategy
Full-cost VS Variable-cost
Full-cost
pricing
Prices are often set on a cost-
plus basis, i.e., total costs
plus a profit margin
Variable-cost
pricing
This is a practical approach to
pricing when a company has high
fixed costs and unused
production capacity
 Skimming pricing
VS
Market penetration pricing
Price skimming sets a high price at Penetration pricing uses lower
first prices at the

used to reach a segment of the market This is used to stimulate market

that is relatively price insensitive growth and capture market share
KFC's
pricing strategy

Competitor- Value-based
Product
based pricing
bundle pricing
strategy strategy
Factors affects
international
pricing strategies
Production Tax, Tariffs,
administration

Middle man and

Inflation
transportation
cost
Exchange rate
fluctuations and varying
currency values
 Production
Costs of Production: the term relates to situations in which ultimate
prices are raised by shipping costs, insurance, packing, tariffs,
longer channels of distribution, larger middlemen margins, special
taxes, administrative costs, and exchange rate fluctuations
Tax, Tariffs, Administration
These costs results in higher prices, which are generally
passed on to the buyer of the product
For example: KFC - Kentucky Chicken which a product of Yum
Restaurant International Group (USA), to become a KFC franchise,
KFC branches must pay royalties of about 4% or 600USD/month,
advertising fees in the region 3% and national advertising about
2% of the total income ("Taxation", 2022).
 Inflation
Inflation causes consumer prices to escalate and the
consumer is faced with rising prices that eventually
exclude many consumers from the market
Middle
man and
transportation
cost
Longer channel length, performance of
marketing functions and higher margins may
make it necessary to increase prices

KFC simply set about establishing a

distribution arm of its own, which ensured the
process could be carefully controlled and
monitored on a daily basis.
Exchange rate fluctuations
and varying currency values

China does not have a floating exchange rate that is

determined by market forces, as is the case with most
advanced economies
Control price in international
market
Lowering cost Lowering tariff Lowering
of goods distribution costs
Reclassifying product
Manufacturing in a into a different, and Shorter channels
third country lower customs reducing or
Eliminating costly classification eliminating
Modify product to middlemen
functional features
Lowering overall qualify for a lower
tariff rate within
product quality
classification
Requiring assembly or
further processing
Repackaging

EXAMPLE
Samsung's largest factory in the suburbs of
New Delhi (India) will allow Samsung to
produce phones at a lower cost at a large
scale, while other phone production
centers in China, Korea and Vietnam are
becoming expensive.
KFC reveals refreshed
packaging design
KFC said that its updated packaging is a step
forward in the balance of business growth
and environmental sustainability. The packs
will be made from paperboard that has been
certified by either the Sustainable Forestry
Initiative or the Forest Stewardship Council
(FSC)
Control price in
international market
Using Foreign-Trade Zones to Lessen Price Escalation
Established foreign or free trade zones (FTZs) or free ports:
Tax-free enclave not considered part of country
Postpones payment of duties and tariffs

One of the more important benefits of the FTZ in controlling prices

is the exemption from duties on labor and overhead costs incurred
in the FTZ in assessing the value of goods
 Countertrade
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.

There are four distinct transactions in countertrading, which include: Barter,

Compensation deals, Counter-purchase or off-set trade, Buy-back.

Countertrade is a resourceful way to arrange for the sale of a product from an

exporter to a company in a country that does not have the resources to pay for it in
hard currency.

Countertrade as a Pricing Tool which is an effective and excellent mechanism to

gain entry into new markets.
 Countertrade
Example..
BHEL looked for countertrade opportunities with other state-
owned firms. The company entered into a joint effort with an
Indian, state-owned mineral-trading company, MMTC Ltd.,
to import palm oil worth $1 billion from Malaysia, in return
for setting up a hydropower project in that nation. Malaysia is
the second-largest producer of palm oil in the world. Because
India imports an average of 8 million tons of edible oil every
year but consumes 15 million tons, importing edible oil is
valuable
 Getting Paid:
Foreign Commercial Transactions
There are 5 importain foreign trade transaction methods:
- Letter of credit (L/C)
- Bill of Exchange
- Cash in Advance
- Open Account
- Forfaiting

The commitment and payment made by the bank at the request of the customer (the
person requesting the opening of the letter of credit) will issue a letter, called the L/C
(Letter of Credit). Credit), undertakes to pay or accept a Bill of Exchange to a third party
upon presentation to the opening bank a set of payment documents in accordance with
the terms and conditions of the L/C.
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