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Domestic and Foreign Pricing Strategies as Related to Supply Chain and Logistics

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Domestic and Foreign Pricing Strategies as Related to Supply Chain and Logistics

Supply chain management and logistics is the backbone of any organization’s business.

In this era of globalization, most organizations do not want to be limited to the boundaries of

their host country and therefore, domestic and foreign logistics systems are important for supply

chain integration both locally and internationally (Tien, Anh & Thuc, 2019). Domestic logistics

are based on movement and storage activities to support a supply chain in a consistent and stable

environment. On the other hand, foreign logistics support operations in different political,

national and economic setting while dealing with various uncertainties associated with demand,

distance, documentation and diversity of international trade.

Domestic Pricing Strategies as Related to Supply Chain and Logistics

The domestic pricing strategies which can be beneficial in logistics and supply chain

management include; the competitive pricing strategy, the cost-plus pricing strategy, the price

skimming strategy and the value-based pricing strategy (Kumar, Basu & Avittathur, 2018). The

competitive pricing strategy utilizes the pricing data of competitors to set the price of own

products. Instead of focusing on the value of the items or production costs, businesses can use

the competitive pricing strategy which heavily relies on market data.

The cost-plus pricing strategy considers the total cost of producing a product and

calculating a markup to decide the price of the product. This domestic pricing strategy is

considered a good strategy because business owners decide prices based on the costs involved in

production like labor, material, warehousing, utilities, machinery and others (Kumar et al, 2018).

As a result, the markup prices added to the production costs is what the company will make as

profit. The price skimming strategy involves charging higher for a product when it is launched,
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leverage demand and then readjust or lower the price based on demand. Value-based pricing

strategy is setting the price of a product based on the consumer’s perceived value of the product

(Kumar et al, 2018). This means a business sets the price of a product based on how much the

consumer believes it is worth.

Foreign Pricing Strategies as Related to Supply Chain and Logistics

The foreign pricing strategies are developed by businesses for international markets

based on the efficiency of the logistics and supply chain management. In relation to supply chain

and logistics, the foreign pricing strategies are penetration pricing strategy and the economy

pricing strategy (Neubert, 2017). The penetration pricing strategy involves setting the rates for

goods artificially low to earn a market share. After realizing the market share, the prices are

increased. On the other hand, economy pricing strategy is a volume based pricing strategy where

the prices of goods are low and revenue is realized from the number of customers who purchase

the products (Neubert, 2017). This strategy is mostly used for goods with no or less marketing

and advertising costs.

Conclusion

Due to globalization, most companies do not want to be limited to the boundaries of their

home country and therefore, domestic and foreign logistics systems are important for supply

chain integration both locally and internationally. The domestic pricing strategies which are

valuable in logistics and supply chain management are competitive pricing strategy, cost-plus

pricing strategy, price skimming strategy and value-based pricing strategy. On the other hand,

foreign pricing strategies include penetration pricing strategy and the economy pricing strategy.
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References

Kumar, M., Basu, P., & Avittathur, B. (2018). Pricing and sourcing strategies for competing

retailers in supply chains under disruption risk. European Journal of Operational

Research, 265(2), 533-543.

Neubert, M. (2017). International pricing strategies for born-global firms. Central European

Business Review, 6(3), 41-50.

Tien, N. H., Anh, D. B. H., & Thuc, T. D. (2019). Global supply chain and logistics

management. Dehli: Academic Publications.