PRICE

INTERNATIONAL
MARKETING
SPOTIFY X HONDA
 Pricing Policy Leasing in
International Markets

CONTENT Approaches to
International Pricing
Countertrade as a
Pricing Tool

Price Escalation Price Quotations

The Sample effect

of price escalation Administered Pricing

Approaches to Getting Paid:Foreign

TABLE OF reduce price Commercial Payments
escalation
Pricing Policy
A pricing policy is a company's approach to determining
the price at which it offers a good or service to the market
Pricing Policy

Price decisions are viewed in two ways: pricing as an

PRICING active instrument of accomplishing marketing objectives
or pricing as a static element in a business decision

OBJECTIVES Maximizing profits is the ability of a business or company

to earn maximum profit at low cost, which is considered as
the main goal of any business.

Parallel imports are goods that are imported and sold

outside of the brand's authorized distribution channels

They are purchased by a third party, and their legality is

often unclear
PARALLEL
Different prices are possible in different country markets.
A product sold in one country may be exported to another
IMPORTS
and undercut the prices charged in that country.
Pricing Policy

CASE The ulcer drug Losec sells for only

$18 in Spain but goes for $39 in
STUDY Germany. The heart drug Plavix
costs $55 in France and sells for
$79 in London. Presumably, such
price differentials would cease
once all restrictions to trade were
eliminated in the European Union,
and in most cases, this is true.
However, the European Union does
not prevent countries from
controlling drug prices as part of
their national health plans
Approaches to
International
Pricing
Approaches to International Pricing

FULL COST PRICING

Full cost pricing is a
practice where the
price of a product is
calculated by a firm
based on its direct
costs per unit of output
plus a markup to cover
overhead costs and
profits. Companies
insist that no unit of a
similar product is CASE
different from any
other unit in cost. STUDY
Each unit must bear a
full share of the total Spotify using the full cost pricing: Premium package in the
Vietnam market for 1 month is 59.000 VNĐ/month. While the
fixed and variable price in foreign countries is up to 10 USD/month, that is more
costs. than 200,000 VND/month
VARIABLE-COST
PRICING

In variable-cost pricing: Firms regard foreign sales

as bonus sales and assume that any return over
DEFINITION their variable cost makes a contribution to net
profit.
The firm is concerned only with the marginal or
incremental cost of producing goods to be sold in
overseas markets.
Skimming Pricing
This strategy is used by a company
when the objective is to reach a
segment of the market that is relatively
price-insensitive. The market is willing
to pay a premium price for the value
received
Thanks to the brand format that
specializes in selling unique and limited
chocolates, the manufacturer applies
skimming pricing to the most unique
products
Case Samsung,
study like its rival Apple, used a price-cutting strategy to gain
dominance in the smartphone market. In February 2017, when
Samsung Galaxy C9 Pro—the company's first smartphone—launched
in the Indian market, it was priced at Rs 36,900 to attract an early
group of customers. After that, Samsung reduced the price twice, to
Rs 31,900 (June 2017) and Rs 29,900 (October 2017), to remain
competitive in this market.
PENETRATION PRICING
Used to stimulate market and sales growth by
deliberately offering products at low prices

CASE STUDY
Spotify uses a penetration pricing strategy in all
newly launched countries to introduce them at low
prices and develop a niche for them. It applies not only
promotional prices to new customers but also to old
customers who have canceled their Spotify Premium
subscription, who also have the opportunity to "fall in
love again" with super attractive offers from the
service. Besides, Spotify also runs promotions during
certain festive seasons and offers discounts during
certain times of the year to attract customers.
Price Escalation
COSTS OF
EXPORTING
is the added costs incurred as a
result of exporting products from
one country to another.

CASE STUDY
Honda CT125 is offered for sale in
Vietnam for 198 million VND, which is
four times more expensive than the
selling price of this model in Thailand.
 CASE STUDY
TAXES, TARIFFS, The price for Premium is 59.000
VND, including VAT (value-added
AND tax). Vietnam imposed a 10% value-
added tax (VAT) on the sales of tech
ADMINISTRATIVE Spotify.

COSTS INFLATION
A tariff, or duty, is a special form of taxation.

Tariffs may be levied for the purpose of

protecting a market or for increasing
government revenue.
 CASE STUDY
With inflation rising to 9% in the
United Kingdom, Spotify's packages
all increased by £1, while Premium
Family subscription increased by £2
from £14.99 to £16.99/month.

INFLATION
Inflation is a rise in prices.
Causing consumer prices to
escalate, consumers face ever-rising
prices that eventually exclude many
from the market.
EXCHANGE RATE
FLUCTUATIONS
An exchange rate determines the
price at which one currency will be
exchanged for another and has an
impact on international trade and
money transfers.
CASE STUDY
Spotify's base currency is mostly dollars over
euros. Therefore, the risk is mostly caused by
the exposure to considerable currency
exchange rate changes, which could have a
negative impact on the operating results
presented in euros.
 Because different nations have
diverse economic environments,
several currencies exist. A country
that exports a lot of goods will
typically strive to have a low-
value currency to maintain their
trade advantage and entice
consumers to purchase their
goods.

VARYING CURRENCY
VALUES
CASE STUDY
Subscription prices for Spotify
Premium are different in each
region.

For example, if you use

Premium in the US, a
subscription costs $9.99 per
month in 2022. However, It will
only run you about $1.13 or
$1.74 per month if you sign up
from Turkey or Argentina.
 Middleman &
Transportation
Cost
A Middleman is an intermediary or agent
between two parties.
Transportation costs include the costs
associated with moving workers, finished
goods, and raw materials.
CASE
STUDY
Honda distributes channels of distribution
such as authorized showrooms/dealerships,
authorized service centers, resellers, and
eCommerce sites to make its products
available to customers.
Sample Effects Of
Price Escalation
SAMPLE EFFECTS OF
PRICE ESCALATION

Notes: All figures in U.S. dollars; CIF = cost, insurance, and freight; n.a. = not applicable.
The exhibit assumes that all domestic transportation costs are absorbed by the
middleman.
Transportation, tariffs, and middleman margins vary from country to country,
but for the purposes of comparison, only a few of the possible variations are
shown.
Approaches To
Reduce Price Escalation

Lowering Cost
country and eliminating costly
of Goods
There are many ways to reduce the
cost of goods in the company such as
Eliminating costly functional
features, even lowering overall
product quality or manufacturing in
a third country
Case Study
Honda chose both
manufacturing in a third
functional features. One of
the penetration pricing
strategies initiated by honda
is that they set artificially low
prices to gain market share.
Honda always tries to cut
down costs can be cut to
minimize their costs, bringing
Best price for the market
 Lowering Tariffs
Tariffs and taxes account for a
large part of price escalation
(Cater, Gilly, and Graham,
p.549, 2013).
Approaches to Reducing
Price Escalation
A company may be paying an
erroneous percentage on tariff,
therefore ensuring their products
being placed under the correct
category is paramount.
Lowering
Distribution Costs
Low distribution cost can be achieved by
eliminating or reducing middlemen. A channel
which has fewer middlemen may lower
distribution cost
 The leasing

LEASING IN
system is a key
sales approach

INTERNATIONAL for reducing high

MARKETS
equipment prices
and capital
shortages.
 Advantages
Leasing opens the door to a large segment
of nominally financed foreign companies
that can be sold on a lease but may not be
purchased for cash.
Leasing can reduce the problem of selling
new test equipment because it is less risky
for the user.
Leasing helps to ensure better
maintenance and service for equipment
overseas.
Rental and used equipment helps to sell to
other companies in that country.
Rental revenue tends to be more stable
over a period of time than direct sales.
Disadvantages
You can't claim capital allowances on the
leased assets if the lease period is for less
than five years (and in some cases less than
seven years)
You may have to put down a deposit or
make some payments in advance
It can work out to be more expensive than if
you buy the assets outright
Your business can be locked into inflexible
medium or long-term agreements, which
may be difficult to terminate
Leasing agreements can be more complex to
manage than buying outright and may add
to your administration
Countertrade as a
Pricing Tool
 Countertrade is a pricing tool
that every international
marketer must be ready to
employ, and the willingness to
accept a counter trade will often
COUNTERTRADE give the company a competitive
advantage.
AS A PRICING
TOOL
Countertrade may be
described as a technique by
which one can obtain goods or
services without necessarily
having to use money. (Scott J.
Lochner, 1985).
Price Quotations
 Parties to the transaction
must be certain that the
quotation settled on
appropriately locates
responsibility for the goods
during transportation and PRICE
spells out who pays
transportation charges and QUOTATIONS
from what point.

In quoting the price of goods for

Honda would like to make international sale, a contract may include
sure that their price specific elements affecting the price; the
quotation contains all the currency to be used, credit terms, and the
necessary information type of documentation required.The price
related to the business quotation and contract should define
transaction quantity and quality.
ADMINISTERED PRICING
Internal Pricing Strategies

ADMINISTERED PRICING
An administered price is one that is set by a
government or other central authority rather than by
buyers and sellers acting in accordance with supply
and demand.

GOVERNMENT-INFLUENCED
PRICING
Governments may establish
margins, set prices and floors
CARTEL or ceilings, restrict price
changes, compete in the
A cartel is a formal market, grant subsidies, and
organization formed when a act as a purchasing or selling
number of producers of a good monopoly.
or service agree to control
supply in an effort to control or
manipulate prices.
Getting Paid:Foreign Commercial
Payments
 Internal Pricing Strategies

GETTING PAID: FOREIGN

COMMERCIAL PAYMENTS
1. Cash in Advance
A method of prepayment to the
exporter before the goods are shipped
or handed over. However, it brings risks
to the buyer and weak competition.
3. Documentary Collection
The bank collects payment on behalf
of the exporter after the buyer has
received the ordered goods.
4. Open Account Terms
Is a sale transaction in which goods are shipped
and delivered before arrival for payment. This
method is popular in many countries.

2. Letter of Credit 5. Consignment and Trade Finance

Is an agreement between the exporter he payment is sent to the exporter only after
and the importer by bank terms. the goods have been sold by the importer and
Commit that the goods and money are the distributor to the final customer
properly transferred to both parties.
Vietnamese cashew businesses have signed
contracts with a number of Italian customers
through a brokerage company to export
cashew nuts to Italy with the payment
method D/P - payment by collection with
original documents.However, the original
documents sent by Vietnamese businesses
were lost in a scam and businesses are at risk
of losing their goods without receiving
payment
Q&A
 The pricing strategy is used to reach a market segment that is relatively
price-insensitive and thus willing to pay a premium price for product

A. Penetration Pricing C. Full-cost pricing

B. Skimming Pricing D. None of these

 The pricing strategy is used to reach a market segment that is relatively
price-insensitive and thus willing to pay a premium price for product

A. Penetration Pricing C. Full-cost pricing

B. Skimming Pricing D. None of these

 A method of pricing goods in foreign markets in which a company is
concerned only with the marginal or incremental costs of producing
goods for sale in those markets?

A. Variable-cost pricing C. Value-based pricing

B. Full-cost pricing D. None of these

 A method of pricing goods in foreign markets in which a company is
concerned only with the marginal or incremental costs of producing
goods for sale in those markets.

A. Variable-cost pricing C. Value-based pricing

B. Full-cost pricing D. None of these

 Which factors influence the pricing decision

A. Organization’s objectives C. Operation market

B. Demand D. All of these

 Which factors influence the pricing decision

A. Organization’s objectives C. Operation market

B. Demand D. All of these

 A firm once enjoyed a monopoly in its home country; however, its span
and control have declined due to globalization. Which of the following
implication of globalization does the firm need to address?

A. Location decision C. Economies of scale

B. Competition D. Diseconomy of scale

 A firm once enjoyed a monopoly in its home country; however, its span
and control have declined due to globalization. Which of the following
implication of globalization does the firm need to address?

A. Location decision C. Economies of scale

B. Competition D. Diseconomy of scale

 . . . . . is effective for maximizing yield while ensuring all business costs
are accounted for in the sales process.

A. Variable-cost pricing C. Value-based pricing

B. Full-cost pricing D. None of these

 . . . . . is effective for maximizing yield while ensuring all business costs
are accounted for in the sales process.

A. Variable-cost pricing C. Value-based pricing

B. Full-cost pricing D. None of these

 Which is an approach to overcome price escalation?

A. Lower tariffs
C. Carry out price increases

B. Match selling prices D. Charges some groups

closely to production costs more than others
 Which is an approach to overcome price escalation?

A. Lower tariffs
C. Carry out price increases

B. Match selling prices D. Charges some groups

closely to production costs more than others
 Price escalation is:

A. Carrying out price increases. C. Changes in price due to inflation.

B. Additions to the basic selling D. Additions to the basic selling

price due to all intermediates price because retailers and
adding a margin for services. wholesalers add their margins.
 Price escalation is:

A. Carrying out price increases. C. Changes in price due to inflation.

B. Additions to the basic selling D. Additions to the basic selling

price due to all intermediates price because retailers and
adding a margin for services. wholesalers add their margins.
 Why a firm lower its cost of good solds?

A. Local market factors C. Reduce trade barrier

B. Increased sale D. All answer is correct.

 Why a firm lower its cost of good solds?

A. Local market factors C. Reduce trade barrier

B. Increased sale D. All answer is correct.

In letter of credit transaction, the bank deals only with the documents

A. True B. False
In letter of credit transaction, the bank deals only with the documents

A. True B. False
THANK YOU!