Chapter 16

Pricing Strategies:
Basic Decisions
Chapter Outline

 The Role of Price

 Price Standardization
Chapter Outline
 Pricing Decisions
- Supply and Demand
- Cost
- Elasticity and Cross Elasticity of Demand
- Exchange Rate
- Market Share
- Tariffs and Distribution Costs
- Culture
Chapter Outline

 Alternative Pricing Strategies

 Dumping

- Types of Dumping
- Legal Aspect of Dumping
- How to Dump (Legally and Illegally)
 Price Distortion
 Inflation
 Transfer Pricing
Pricing Decisions

 Supply and Demand

 Cost
 Elasticity and Cross Elasticity of Demand
 Exchange Rate
 Market Share
 Tariffs and Distribution Costs
 Culture
Dumping

 charging different prices for the same product

in similar markets
 unfair price
– below production cost
– below home-country price
 harm to host-country companies
Transfer Pricing

 prices used by the parent firm and

subsidiaries when trading among themselves
Transfer Pricing Methods
 direct manufacturing costs
 direct manufacturing costs plus markup
 market-based transfer price
 arm's length price