General Overview

 Interdependence of World Economies

 Emergence of New Economic Players
 Formation of More Distinct Trading Groups
 Shift in Economic and Political Ideologies
 Sophistication of Technology
 Increase in Market Concentration
 Crisis in National Identity
 Greater Divergence Between Haves and Have-Nots
 Greater Internationalization of Business Relations
 Growth in “Global” markets

1
 General Overview

 Self-Reference Criterion/Marketing Relativism

– stages of involvement—foreign marketing
• None
• Infrequent
• International
• Global
– Strategic orientation
• Domestic market extension
• Multidomestic market concept
• Global market concept
– role of culture
– sociological, psychological, anthropological factors

2
 General Overview

 Cateora’s Int’l Marketing Task

Paradism
– controllables vs. uncontrollables
– interaction between controllables &
uncontrollables
– static vs. dynamic behaviour

3
 General Overview
 Levitt’s Globalization Concept
– Commonality of Wants and Desires Presumed
– Marketing Program Driven by Cost Considerations
– Minimizes Adherence to “Marketing Concept”
– Provides Cohesiveness and Order for Planning
– Management Led to Believe “controllables” are
actually controllable

4
 General Overview
 Economic Prosperity Derives from Trade
– Absolute Advantage
– Comparative Advantage
– Heckscher-Ohlin Factor Endowment Theory
– Foreign Direct Investment
– market imperfections
– market failure
– Multinational Enterprise
– internalization
– diversification
– eclectic

5
 General Overview
 Porter’s Comparative Advantage of Nations
– Focus on Firm’s “Value Chain”
– Highlights Government’s Role in Business Relations
– Evaluates Factors Employed to Create Value
– unique factors
– lowest production costs
– maximum market potential
– optimal risk-return tradeoff
– importance of strategic positioning

6
 Porter’s Diamond of
National Competitive Advantage
GOVERNMENT
Firm Strategy
Structure
and Rivalry

Factor Demand
Conditions Conditions

Related and CHANCE

Supporting
Industries
 General Overview
 Govt’s Role in Creating Wealth and Value
– Balanced vs. Unbalanced Growth
– Facilitators of Trade
– Protectionism
– tariffs
– quotas
– voluntary restraints
– monetary barriers
– technical standards
– local content rules

8
 General Overview
 Multilateral Trade Organizations
– GATT (General Agreement on Tariffs and Trade)
– WTO (World Trade Organization)
– IMF (International Monetary Fund)
– IBRD (International Bank for Reconstruction and
Development--World Bank)
– Regional Development Banks
– Common Market Arrangements
– Free Trade Agreements
– Direct Foreign Aid Agencies

9
 General Overview
 Growth of Transnational/Multinational Enterprise
– Marshall Plan in the U.S.
– U.S. Foreign Direct Investment
– Development of Information Technology
– Market Failure to signal efficiencies and profits
– Desire to Diversify
– New, More Profitable Markets
– Response to Gov’t Policy which emphasized national
defense and internal market protection

10
 General Overview
 World Response to Multinationals and DFI
– Canada
– United States
– Western Europe
– Asia
– Developing Nations
– Newly Emerging Democracies

11
 General Overview
 Factors Shaping Attitudes Towards Multinationals
– Development Needs -- Pro and Con
– Technology Needs -- Pro and Con
– Risk Sharing Needs -- Pro and Con
– Market Organization Needs -- Pro and Con
– Government Policy Needs -- Pro and Con

12
 Foreign Exchange
 Function and Nature of Foreign Exchange Markets
– Transactions-- Currency Needs Credit
– Hedging -- Interest arbitrage Swaps
– Speculation
 Monetary Institutions
– Commercial Banks
– Central Banks
– Money Markets
– Bond and Equity Markets

13
 Foreign Exchange
 Foreign Exchange
– Factors Affecting Demand
– Factors Affecting Supply

Dollar
Supply (Exports)
Df

De
Demand (Imports)

Qf Qe Quantity

14
 International Trade and Foreign
Exchange
 Demand and Supply of Foreign and Local Currancies
 Relationship to Terms of Trade
– Product Price (in Canadian Dollars) / Product Price (in Yen)
 Factors that Impact upon Volume of Trade
– Internal Efficiencies
– Financial Strength of Nations Currency and Credit
– Dynamic Innovativeness

15
 Balance of Payments
 Relationship between flows of financial assets within a
country over a year’s period.
– Current Account
– Exports and Imports
– Unilateral Transfers
– Net Trade Balance
– Net Capital Account Balance
– Capital Account
– Portfolio Investment
– Foreign Direct Investment
– Net Capital Account Balance
– Official Reserve Account
– Stock of Foreign Currencies
– Gold and other precious metals
– Bank IOUs etc.
16
 Balance of Payments
 Relationship Between Balance of Trade and Balance of
Payments
 Relationship Between Balance of Trade and Exchange
Rates
 Relationship Between Interest Rates and Capital
Account
 Government’s Role in Affecting Trade, Exchange
Rates, and Balance of Payments

17
 Public Policy Impact Chain

Economic
Political
Cultural
Demographic

National Goals Policy

National Industries and
and Instruments &
Policies Firms
Strategies Institutions

18
 Culture
 What is Culture?
– Ways of thinking, viewing, and responding to stimuli
which is learned
– socialization
– acculturation
– values (terminal and instrumental)
 Core Values of Cultures
– Canadian Asian Indian
– American Native Aboriginal Mexican
– European African Winnipeg

19
 Culture
 Cross-Cultural Analysis
– A systematic comparison of similarities and diff-erences
in material and behavioral aspects of culture.
– Descriptive
– Analytical/functional
– Outline of Elements in Cross-cultural Analysis
– Determine Relevant Motivations
– Determine Characteristic Behavior Patterns
– Determine Relevant Cultural Values
– Determine Important Institutions
– Determine Relevant Rules, Norms, and Laws
– Evaluate all the above with respect to mix variables
20
 Culture
 Group and Sub-group Identification
– Relevant In-Group Identities
– Relevant Out-Group Identities
– Boundaries Between In- and Out-Groups
 Egocentrism
 Ethnocentrism
– Ethnocentrism in the Extended Fishbein Model of
Consumer Behavior
 Role of Country-Of-Origin in Purchase Decision
– “Made in Canada”

21
 Culture
 Nine Nations of North America
– New England
– The Foundry
– Quebec
– Dixie
– The Breadbasket
– The Empty Quarter
– MexAmerica
– Ecotopia
– The Islands

22
 Culture
 Culture and Change
– Cultural Borrowing
– Resistance to Change
– Change Congruency
– Strategies for Change
– planned
– unplanned
– Consequences of Cultural Intervention
– Examples
– Quebec Atlanta, GA
– Vietnam Faculty of Management

23
 Political Environment
 Types of Governments
– Formation and implementation of legislation
– Degree of Political Participation
– Orientation to Free Market
 Nationalism
– Concept of the nation-state
– Economic Manifestations of Nationalism
– Conflict with Multinationalism
– Fear of Foreign Ownership and/or Control

24
 Political Environment
 Response to Nationalistic Fears
– Confiscation
– Expropriation
– Domestication
– Nationalization
– Direct Economic Sanctions
– exchange controls
– local content rules
– import restrictions
– tax controls
– gov’t intervention into factor resource markets

25
 Political Environment
– Direct Political Sanctions
– Censure for Actions in Domestic Country
– Complaint Lodged with Multilateral Body
– Violence
– Issue of Foreign Direct Investment
– Need to Conduct Thorough Risk Analysis
– Factors of Importance to Identify
– Need to Consider the Method of Entry
– Patterns in Canada
– Canadians Investing into Other Economies

26
 International Legal Environment
 No Single International Law or Agency
– As Many Legal Systems as there are Nations
– Issues of Interest to Marketers
– Competition Rules Product Quality Rules
– Packaging Rules Warranty Law Advertising
– Price Maintenance Price Regulations
– Channel Agreements Patents, Trademark, & Copyright Law
– Transport/Distribution Environmental
 Bases for Legal System
– Common vs Code Law
– Other Systems

27
 International Legal System
 Issue of Jurisdiction
– World Court
– International Court of Justice
– Determining Jurisdiction
– Jurisdictional Clauses in Contract
– Where Contract was Entered Into
– Where Provisions of the Contract were Performed
– Special Issues
 Legal Recourse
– Why Not Litigate
– Why Litigate
28
International Legal Environment
– Options to Litigation
– Placate Agrieved Party
– Conciliation
– Arbitration
 Protection of Intellectual Property Rights
– Difficulty of Policing Property Rights
– What is Counterfeit?
– Prior Use vs. Registration
– Conventions and Treaties

29
 International Legal Environment
 Marketing Laws: A Cross-Cultural Comparison
– Advertising
– Pricing
– Channel Relations
– Competition
– Extraterritoriality
– Transport/Distribution

30
 Researching World Markets
 Major Source of Error is a result of faulty information
 Tools and techniques remain the same regardless of
domestic vs. international basis of research --
differences lie in application and the environmental
differences.
 Major questions to ask:
– Can the Information be Collected?
– What are the Cost and Time requirements?
– How Reliable is the information?
– For what Purposes is the Information Being Collected?
– Is the Information Primary or Secondary?
– Does the Information Already Exist?

31
The Market Intelligence Gathering Process
International Issues
Identification and Definition Spatial and Cultural
of the Problem Multiple Perspectives
Lack of Market Knowledge

Selection of an Appropriate
Research Design
Selection of the Sample(s)
Meaning of Concepts
Response to Measurement
Sample Equivalence

Collection of Relevant Data Secondary Data

and Information
Accuracy
Comparability
Reliability
Analysis and Interpretation Source of Data
of
Data and Information Primary Data
Respondent biases
Researcher biases
Dissemination of Research Results
Organizational
Complexity
 Market Intelligence Gathering:
Research Design Issues
 What is the Project Attempting to Accomplish?
 Who are the Recipients of the Information?
 What is the nature of the Management Decision?
 What Length of Time is Available for the Project?
 What Funds are Available for the Project?

33
 Market Intelligence: Problem
Formulation Issues
 Spatial and Cultural Separation
 Multiple Perspectives
 Meaning of Ideas and Concepts
– Functional Equivalence
– Conceptual Equivalence
– Definitional Equivalence
– Temporal Equivalence
– Market Structure Equivalence

34
 Market Intelligence Gathering:
Research Design Issues
 Measurement Issues
– Single versus Cross-cultural Measurement
– Translation Issues
– Verbal Translation
• Back Translation
• Parallel Blind Translation
• Committee Translation
– Non-verbal Translation
– Scale Development Issues

35
 Market Intelligence Gathering:
Research Design Issues
 Sampling Issues
– Definition of the Population
– Representativeness of the Sample

36
 Market Intelligence Gathering:
Secondary and Primary Data Issues
 Data Issues
– Accuracy
– Comparability
– Reliability
– Affordability

37
 Market Intelligence Gathering:
Sources of Information
 Secondary Sources
– Federal Government
– Department of Foreign Affairs
– Statistics Canada
– Regional International Trade Centres
– Department of Commerce (US)
– European Commission (EU)
– Country Desks, Trade Missions, Embassies
– Trade Opportunities Program
– Overseas Business Reports
– Government Intelligence Units 38
 Market Intelligence Gathering:
Sources of Information
 Secondary Sources (cont.)
– Service Organizations
– Major Banks
– Investment Companies
– Public Accounting Firms
– Transportation Companies
– Advertising and Consulting Firms

39
 Market Intelligence Gathering:
Sources of Information
 Secondary Sources (cont.)
– Others
– Economist Intelligence Unit
– Business International
– Specialized Newsletters
– Internet
– Industrial Directories
– Universities

40
 Market Intelligence Gathering:
Sources of Information
 Provincial/State Governments
– Manitoba Industry, Trade, and Tourism
– Economic Development Agencies
– Various Sectoral Offices
– Aerospace
– Agriculture
– Health Care
– etc.

41
 Market Intelligence Gathering:
Sources of Information
 International Organizations
– IBRD (World Bank)
– WTO (World Trade Organization)
– WHO (World Health Organization)
– FAO (Food and Agriculture Organization)
– ILO (International Labour Organization)
– OECD (Organization for Economic Coop. &
Dev.)
– Trade Groups (LAFTA, EFTA, etc.)
42
 Market Information Gathering:
Sources of Information
 Trade Associations
– Chambers of Commerce
– IATA (International Air Transport Association)
– OPEC (Organization of Petroleum Exporting
Countries)
– Canadian Manufacturers Association
– Foreign Trade Tribunals

43
 Market Information Gathering:
Sources of Information
 Organization’s Own Experience
– Foreign National Employees
– Experienced Executives
– Subsidiaries

44
 Developing Markets and Market
Behaviour
 Rapid Changes in National Economies
– Closed Economies
– Developing Economies
– Newly Industrialized Economies
– Socialist Developed Economies
– Capitalist Developed Economies
– New Hybrids

45
Developing Markets and Market
Behaviour
 Marketing and Economic Development
– Challenges “Doing Business as Usual”
– Marketer Influences Direction and Magnitude of dev.
– Role of Marketer in Static vs. Dynamic Society
– Dealing with Expectations???
– W.W. Rostow’s Stages of Development Thesis
– Traditional Society
– Preconditions for Takeoff
– Takeoff
– Drive to Maturity
– High Mass Consumption
– ??????

46
 Developing Markets and Market
Behaviour
– Actual Experiences in Development
– Export Driven vs. Import Substitution Bases for Dev.
– Differences between Growth and Development
– Issue of Income Distribution and Marketing
– Need for Awareness of National Development Object.
 Areas where Marketers can Aid in Development
– Transfer of Entrepreneurial Spirit
– Transfer of hard and soft Technology
– Development of Infrastructure--distribution
– Orient society to Demand as well as Supply Planning
– Promote Trade as a stimulus for growth in employment

47
Developing Markets and Market
Behaviour
 Marketing Functions in Developing vs. Developed Econ.
– Nature of Goods & Service Storage Activities
– Means of Exchange Production sophistication
– Local vs. Out-sourcing Transport Infrastructure
– Communication Infrastructure Sales & Promotion Methods
– Pricing bases--Role of Bargaining Product Assortment
– Market Organization Customer Service Issues
– Role of Planning & Analysis Role of Credit
– Status Issues Importance of Geography
– Impact of Business Cycles Entrepreneur Orientation
– Role of the Family and Other Institutions

48
 Multinational Market Groups
 Factors Regarding Economic/Political Integration
– Economic Political Legal
– Cultural Social
 Patterns of Integration
– Regional Cooperative Group
– Free Trade Area
– Customs Union
– Common Market
– Economic Union
– Political Union

49
 Multinational Market Groups
 Examples of Integration
– European Economic Community (EEC)
– Enlargement of EEC (6 to 9 to 12)
– Single European Act--1992
– Canada-US Free Trade Agreement (FTA)
– North American Free Trade Agreement (NAFTA)
– European Free Trade Agreement (EFTA)
– Andean Common Market
– African Integration Experiences
– Association of Southeast Asian Nations (ASEAN)

50
 The Trading Blocs
European American Asian
Canada-US ASEAN
EU
FTA AFTA
EEA NAFTA

EFTA Mexico
CBI AUS, NZ, JAP

EEI SK, US, CD

CARICOM
NED
CACM
HK, JAP, SK
TH

Former MERCOSUR
USSR
ANCOM
Lome Other Pacific
(Africa) Nations 51
Multinational Market Groups
– Marketing Implications
– Marketing Strategy
– Tactical Issues
– Explicit Barriers and Potentials
– Marketing Mix Implications at Operative Level

52
 Global Marketing Management:
Planning and Organization
 Global Marketing Restated:
– product life cycle design segmentation
– competition production consumers
– product price promotion
– distribution
 Benefits and Costs of Global Marketing
– transfer of experience--benefit
– control and coordination--benefit
– uniformity--benefit
– unresponsiveness to consumers--cost
– inflexibility--cost
– tendency toward marketing relativism--cost
– control and coordination--cost
53
Global Marketing Management:
Planning and Organization
 Alternative Marketing Strategies
– Exporting Licensing Joint Venture
– Consortia Management Contracts
 Market Planning Process
– Study Chart on Planning Process in Text
– Analysis and Definition
– Marketing Mix Definition
– Marketing Plan Development
– Implementation, Evaluation, & Control
 Methods of Control
– Centralized - New Forms
– Decentralized 54
 International Product Analysis
Support Service
Components
Repair &
Maintenance Deliveries
Packaging
Installation Component
Warranty
Instructions Trademark Price
Spare Parts
Core Quality
Other Related Component
Services Styling Physical
Product Packaging

Brand Name Country-of-Origin

55
 International Product Analysis
 Degree of Standardization
– What is the aspect of the product to be made adaptable?
– What aspect of the product can be standardized?
– Which aspects of the product are critical for competitive
advantage?
– Begs the question of identification and ranking of
attributes and
consumer preferences. How should it be done? Who
should do it?
– Preference dimensions
• status taste achievement aspiration
material value 56
 International Product Analysis
 Innovation, Adaptation, and Diffusion
– Degree of Newness
– Newness and Product Life Cycle
– Degree of Perceived Newness

Congruent Continuous Dynamically Discontinuou

Innovation Innovation Continuous s
Innovation Innovation

57
 International Product Analysis
 Perceived Attributes of the Product
– Relative Advantage
– Compatability Relative
Relative to to Core
core and
and Non-Core attributes
– Complexity non-core attributes
– Trialability
– Observability

58
 Marketing Industrial Products
 Who are Industrial Customers?
– Commercial Enterprises
– Original Equipment Manufacturers
– User Customers
– Industrial Distributors
– Government Organizations
– Local
– Provincial
– Federal
– Institutional Customers
– Schools
– Hospitals
– Churches
59
 Why Enter International
Markets?
 Domestic Market Saturation
 Life Cycle Stages
 Inherent Perceived Quality Differences
 Protect Existing Market Share

60
 Why Not to Enter International
Markets
 Home Country Sufficient
 Lack of Sound Marketing Information re
Foreign Opportunities
 High Costs
 Organizational Inertia

61
 Information on International
Markets
 Dunn & Bradstreet’s Principal International
Businesses
 Predicast’s F & S Index
 Europe’s 1500 Largest Companies
 Major Firms in Europe and Far East

62
 Industrial Market Considerations
 Product Strategy
– Specifications R&D Support Services New Competition
– Licensing FDI Mgmt Contract Turn-Key Counter-trade
 Channel Strategy
– Resident Buyers Mfg’s Reps Distributors Trading Companies
 Promotion Strategy
– Use of Trade Fairs and Exhibits
– Expert Testimonials and Reputation
 Pricing Strategy
– Price/Quality Relationship Most Important
– Bid System
– Role of Physical Distribution and Demand Management Important
– Prices Often Difficult to Determine at Time of Sale

63
 International Distribution
 Components of Distribution
– Physical Handling
– Transportation
– Transfer of Ownership
– Buying and Selling Negotiations
– Customer Satisfaction--GOAL!!
 Alternative Distribution Channels
– Direct and Indirect Exporting
– Merchants and Agents
64
 International Distribution
 Critical Considerations for Merchant/Agent
– Availability
– Cost of Service
– Functions Performed
– Extent of Control Desired
 Alternative 1 - Direct -- Own Sales Force

65
 International Distribution
 Alternative 2 - Indirect--Merchant Middleman
– Domestic Merchant Middleman
– Purchase on Own Account
– Minimum Credit Risk
– Handles Functions Outside Domestic Market

66
 International Distribution
 Alternative 2 - (cont.)
– Varieties of Domestic Merchant Middlemen
– Export Merchants
– Export Jobbers
– Export Buyers
– Trading Companies
– Complementary Marketers
– Foreign Merchant Middlemen

67
 International Distribution
 Alternative 2 - (cont.)
– Varieties of Foreign Merchant Middlemen
– Distributors
– Import Jobbers
– Wholesalers and Retailers
– Affiliated Middlemen

68
 International Distribution
 Alternative 3 - Agent Middlemen
– Domestic Agents
– Export Management Companies
– Manufacturer’s Export Agent
– Broker
– Buyer
– Export Commission House

69
 International Distribution
 Alternative 3 - Agent Middlemen
– Foreign Agents
– Broker
– Manufacturer’s Rep
– Factor
– Managing Agent

70
 International Distribution
 General Issues
– Issue of Social Acceptance
– Line Breadth
– Costs and Margins
– Channel Length
– Maintenance of Customer Value
– Channel Existence
– Channel Cost and Control
– Conflict
– Cooperation
– Leadership 71
 Stages of Export Development
 Completely Uninterested Exporter
 Partially Interested Exporter
 Exploring Exporter
 Experimental Exporter
 Small Experienced Exporter
 Large Experienced Exporter

72
 Export Operations:
Preparing for Export Markets
 Set Objectives
 Determine Commitment
 Devise Preliminary Export Budget
 Determine Organizational Fit for Exporting
 Develop Export Information
 Assess Potential Markets
 Devise Marketing Plan
 Fully Assess and Reassess Company Readiness
73
 Export Operations: Export
Market Strategy
 Market Research and Analysis
 Product Design
 Pricing
 Distribution
 Promotion
 Packing, Marking, & Labeling
 Transportation

74
 Export Operations: Export
Payment Methods
 Cash with Order
 Cash on Delivery (COD)
 Open Account
 Electronic Transfer
 Bills of Exchange
 Letter of Credit (revocable, irrevocable, confirmed)
 Barter (compensation deals, swaps, offsets, counterpurchase
 Advanced Purchase Arrangement
75
 Export Operations
 Transportation Documentation
– Bill of Lading
– A8A Customs Cargo Control Document
 Licenses
– General License
– Validated License
– Commodity Control List
 Import Restrictions
– Tariffs Import License Quotas Exchange Permits

76
 Export Operations: Logistics
 Choice of Transport Mode
– Domestic
– Truck Rail Water Air Freight Pipeline
– Foreign
– Truck Rail Water Air Freight
 Choice of Carrier
– Cost Dependability Timeliness Risk Service
 Other Logistics Functions
– Inventory Order Processing Customer Service
– Packaging Storage Materials Handling

77
 Export Operations
 Export Documentation
– Commercial Invoice
– Consular Invoice
– Certificate of Origin
– Certificate of Value
– Packing List
– Health Certificate
– Insurance Certificate
– Export Permit
– Export Declaration

78
 Assessing Organizational
Readiness
 Capitalize on Strengths in Domestic Markets
 Provide the Financial Resources for the Job
 Human Resource Requirements are High
 Must Possess Export-Related Skills
– Ability to Speak Foreign Languages
– Familiarity with Foreign Languages/Business Practices
– Possess Contacts in Potential Foreign Target Markets
– Develop Contacts in Canadian Export Community
– Gain Experience in International Negotiating
– Experience Technical Aspects of International Trade
– Develop Ability to Assess Market Potential
– Be Involved in Continuous Training to Acquire Expertise
79
 Assessing Organizational
Readiness (cont.)
 Must Have Top-Level Commitment
– Any Reservations About Entering Foreign Markets?
– Is Exporting Viewed as Peripheral or Sporadic?
– Resistance to Developing a Strategic Export Market Plan?
– Willing to Devote Many Hours to Export Development
– Prepared to Trade-Off Profits in Short-Run?
– Interested in Long-Term International Relationships?

80
 Assessing Organizational
Readiness (cont.)
 Is the Organization Structured for Expansion?
– Past Growth Experience--Foreign or Domestic?
– Young, Energetic Staff with Drive and Ambition?
– Sound Organizational Structure
– Boundary Spanning
– Interorganizational Communication
– Continuous Learning Culture
– Market Intelligence Sensing Capability
– Flexibility, Adaptability, Viability

81
 Marketing Communications

 Public Relations
 Sales Promotions
 International Advertising
– The message
• Information source
• Encoding
• Message channel
• Decoding
• Receiver
• Feedback
• Noise

82
 Marketing Communications

 Legal Issues
– Puffing
– Comparative Advertising
– Specific Product prohibitions
– Use of media
– Truth in advertising
 Language and symbolism Issues

83
 Marketing Communications

 Production and Cost Limitations

 International Control of
Information/Advertising

84
 Sales Force Management
 Sources of Personnel
– Expatriates
– Virtual Expatriates
– Local Nationals
– Third-Country Nationals
– Host-Country Restrictions

85
 Sales Force Management
 Selection of Personnel
– Maturity
– Knowledge
– Positive Outlook
– Cultural Empathy
– Flexibility
– Tolerance
– Hard Working

86
 Sales Force Management
 Training
– Generally poor
– Minimal criteria
• Awareness of cultural setting
• Cultural imperatives and restrictions
• Economic reward
• Good communication
• Proper training re products/services
• Support of family

87
 Pricing in International Markets
 Pricing Objectives
– Enhance Market Share
– Enhance ROI
– Manage Demand
– Cost Recovery

88
 Pricing in International Markets
 Major Issues to Consider
– Nature of the Product
– Degree of Competition
– Degree of Substitutibility
– Channel Efficiency
– Price and Income Elasticity Considerations

89
 Pricing in International Markets
 Major Pricing Components
– Production Costs
– Marketing Costs
– Profit Margins
– Transportation and Distribution Costs
– Taxes, Tariffs, Duties, etc.
– Documentation Costs
– Exchange Rate Movements
– Interest Rates
– Insurance and Risk Bearing Costs
– Inflation
90
 Approaches to International
Pricing
 Cost-Based Methods
– Cost Plus
– Fully Allocated Cost
 Market Based Methods
– Zone Pricing
– “What the Market Will Bear”
– Incremental Cost Pricing
 Transfer Pricing
 Countertrade
 Dumping
91
Manufacturing Price (Domestic) $362.00 $362.00
Transportation to Wholesaler 18.00 23.00
$380.00
Export Documentation 4.00
Overseas Shipping & Handling 2.50
Overseas Freight and Insurance 58.50
$450.00
Import Tariff: 20% of Landed Cost 90.00
$540.00
Handling at Foreign Port of Entry 3.00
$543.00
Transportation form Port to Importer 17.00
$560.00
Importer Margin ( to Wholesaler) 10% 56.00
$616.00
Wholesale Margin: 8% 30.40 49.28
$410.40 $665.28
Retail Margin: 40% 164.16 266.12
FINAL RETAIL PRICE $574.56 $931.40