INTERNATIONAL

PRICING
 Export’s costs
 Export prices are determined by cost and
supply conditions and the demand and
competitive conditions .
 The cost and supply conditions dictate the
minimum price that export must get
 Demand and competitive conditions determine
the maximum price he can charge.
 Exporter’s costs

Production costs:
a) Fixed costs
b) Variable costs
Selling and delivery costs:
cost of holding costs, packing ,
transport , documentation ,
preshipment , inspection ,insurance and
marketing costs like cost advertising ,
personal selling etc.
 Pricing objectives
Market Market Market
Penetration Share Skimming

Preventing Fighting
New Entry Competition

Shorten Pay- Early cash Meeting Export

back period Obligation
flows

Optimum Disposal
Capacity
Utilization of surplus

Return on Profit
investment maximization
 Factors affecting pricing

International
marketing Costs
objectives

Competit Product
ion differentiation
 Market Characteristics

Consume Important Trade

Deman of product characterist
r income to the ics of trade
d trends levels customers margins
Gover ●

●
Regulation of margins
Price floors and ceiling

nment
●
Subsidies
●
Tax concessions and Exemptions
●
Other incentives
●
Government competition
●
Taxes

Factor
●
International Agreements
Transfer Pricing :
pricing of goods transferred from
operations or sales units in one country to the
company’s units elsewhere

Objectives:
 Maximize total profits

 Facilitate parent-company control

Dumping:
Selling in the foreign market at a price
below the home market price.

Dumping may be
 Sporadic dumping

 Intermittent dumping

 Long period dumping

 Steps in Pricing

Analyzing
Define pricing
market
objectives
characteristics

Calculati Calculating
value of
ng costs incentives
 Retrograde pricing

Working backwards for a given market price to

ascertain whether export will be profitable or not

Market price range

for similar products

Less local mark up

on import price

Less duties
payable if any

Less documentation
and freight costs in
exporting country

Less forwarding
,packing a nd
marketing costs

Less agent’s, commission,

proportion of Export
overheads

profits
 profits

Plus contribution to
fixed ov erheads

Less exports
incentives, if any

Direct production costs

and variables’
production overheads
Elements of export price structure:

 Build up the final price stage by stage

 Compare the pricing at all stages with that of
the competitors
 Analyse the prices to find out whether cost
saving can be achieved in one or more
elements.
 Export price structure
a) Factory cost of product
b) Producer’s profit
a + b = price, ex-factory gate
c) Loading at factory
d) Transport to docks railheads or airport
e) Pore/rail/airport handling charges and fees
f) Cost of documents
g) Consular invoice , certificate of origin
h) Export pricing and making
i) Export duty if any
a to i = C & F price
j) Insurance premium and cost of policy
k) Sea or freight charges
l) Dock/rail/airport handling charges and
fees:
a to 1 = CIF price
m) Unloading charges at destination
n) Import duties and taxes
o) Clearing agents fees
a to o = Landed price
p) Transport to imports warehouse
q) Importers margin or mark-up
r) Wholesaler’s margin or mark-up
s) margin or mark-up
a to s price to consumer
Margins or Mark-up:
Important components of an export
price are the importers’, wholesalers’ , and
retailers’ margins which inflate the price before
the price reaches the final consumers.
 For example: a dozen boxes of confectionery

Index $
CIF price 100 29.0
Custom duty 20% +20 +5.80
Landed price 120 34.80
Importers mark-up 35% +42 +12.18
Price to wholesaler 162 46.98
Wholesaler’s mark-up 25% +40 +11.75

Price to retailer 202 58.73

Retailers mark-up 50% +101 +29.63
Price to consumer 303 88.09
 Index $
Price to consumer 100 88.09
Retailers mark-up 50% -33 -29.36
Price to retailer 67 58.73
Wholesaler’s mark-up -14 -11.75
25%

Price to wholesaler 53 46.98

Importers mark-up 35% -13 -12.18
Landed price 40 34.80
Custom duty 20% -6 -5.80

CIF price 33 29.0

 INCO TERMS
 EXW – EX WORKS
The seller’s obligation to deliver the goods
under this term is complete when he places the
goods at the disposal of the buyer at his own
premises or another place not cleared for export and
not loaded on any collecting vehicle
 FCA – FREE CARRIER
The seller’s obligation to deliver the
goods is complete when he delivers to the carrier
nominated by the buyer at the named place cleared
for export
FAS- FREE ALONGSIDE SHIP
The seller clears the goods by placing the
alongside the vessel at the named port of shipment
FOB-FREE on BOARD
The seller fulfils his obligation of delivery
when the goods ship’s rail at the named port of
shipment
CFR-COST AND FREIGHT
The seller also pays freight necessary to bring
the goods to the named port of destination.
CIF-COST, INSURANCE AND FREIGHT
The seller, pays the cost and freight necessary
to the named port of destination and contracts for
insurance and pays the insurance premium.
CPT-CARRIAGE PAID TO
The seller delivers the goods to the carrier
nominated by him. The seller in addition must pay
the cost of carriage to bring the goods to the named
destination
CIP-CARRIAGE AND INSURANCE PAID TO
same as CPT , except the seller has to obtain
insurance and pay the insurance premium for a
minimum cover
DAF-Delivered at Frontier
The seller delivers by placing the goods as the
disposal of the buyer on the arriving means of
transport not unloaded ,cleared for exports but not
cleared for import at the named port.
DES-Delivered Ex Ship
The seller delivers the goods by placing them
at the disposal of the buyer on the board of the ship
not cleared for import at the named port of
destination.
DEQ-Delivered Ex Quay
The seller bears the cost of discharging the
goods at the quay in addition to the cost and risk
involved as per the terms DES
DDU- Delivered Duty Unpaid
The seller delivers the goods to the buyer
not cleared for import but not unloaded for any
arriving means of transport at the named place of
destination.
DDP-Delivered Duty paid
The seller delivers the goods to the
buyer cleared for import but not unloaded from
any arriving means of transport at the named
place of destination.
THANK YOU