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© 2005 Prentice Hall11-1 Chapter 11 Pricing Decisions Power Point By Kristopher Blanchard North Central University
© 2005 Prentice Hall11-2 managing marketing from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. International Marketing Mix Decisions Strategic Alternatives in international and global marketing mix decisions. Managerial issues International Pricing considerations Global pricing is one of the most critical and complex issues in international marketing. Price is the only marketing mix instrument that creates revenues. All other elements entail costs. A companys global pricing policy may make or break its overseas expansion efforts. Multinationals also face the challenges of how to coordinate their pricing across different countries.
© 2005 Prentice Hall11-3 International Pricing Strategies Analytic Dimensions Decision- Making Company Internal Factors Profitability Transports Costs Tariffs Taxes Production Costs Channel Costs International Pricing Strategies Market Factors Income Levels Competition Customers Culture Environmental Factors Foreign Exchange Rates Inflation Rates Price Controls Regulations Market-by-Market Pricing Uniform Pricing Managerial Issues Transfer Pricing Foreign Currencies Parallel Imports/Grey Markets Export Price Escalation Global Pricing Strategies Financing International Transaction Risks Customer-Arranged vs. Supplier-Arranged Source of Financing Commercial Banks Governments Non-cash Transactions: Counter-trading Source: Jeannet & Hennessey, 2001
© 2005 Prentice Hall11-4 The Gaps that the Euro Could Close Prices on selected goods and services (1998!) All prices in 1998 US$ a Two door model b Model 4504 in Spain, 2240 elsewhere c Mercedes C-class without insurance Cateora & Ghauri, International Marketing, European Edition, © 2000 McGraw-Hill
© 2005 Prentice Hall11-5 managing marketing from global headquarters ©2005 Dr.Gerard Ryan, Universitat Rovira i Virgili. International Marketing Mix Decisions Strategic Alternatives in international and global marketing mix decisions. Managerial issues Prices for a Volkswagen Golf* BRITAIN$13,040 FINLAND8,290 FRANCE10,510 GERMANY11,040 ITALY10,690 International Pricing comparisons
© 2005 Prentice Hall11-6 The Hamburger Standard Under (-)/ over (+) valuation Local Currency Dollars Implied PPP* Actual $ exchange against the of the dollar rate 17/04/01 dollar %
© 2005 Prentice Hall11-7 Basic Pricing Concepts The Global Manager must develop systems and policies that address –Price Floors –Price Ceilings –Optimum Prices Must be consistent with global opportunities and constraints
© 2005 Prentice Hall11-8 Global Pricing Objectives and Strategies Managers must determine the objectives for the pricing objectives –Unit Sales –Market Share –Return on investment They must then develop strategies to achieve those objectives –Penetration Pricing –Market Skimming
© 2005 Prentice Hall11-9 Market Skimming and Financial Objectives Market Skimming –Charging a premium price –May occur at the introduction stage of product life cycle Sony Ad. for camcorders
© 2005 Prentice Hall11-10 Penetration Pricing and Non- Financial Objectives Penetration Pricing –Charging a low price in order to penetrate market quickly –Appropriate to saturate market prior to imitation by competitors 1979 Sony Walkman
© 2005 Prentice Hall11-11 Companion Products Products whose sale is dependent upon the sale of primary product –Video games are dependent upon the sale of the game Console If you make money on the blades you can give away the razors. X-Box Game System and Sports Game
© 2005 Prentice Hall11-12 Target Costing – 8 Questions 1.Does the price reflect the products quality? 2.Is the price competitive given local market conditions? 3.Should the firm pursue market penetration, market skimming, or some other pricing objective? 4.What type of discount (trade, cash, quantity) and allowance (advertising, trade-off) should the firm offer its international customers? 5.Should prices differ with market segment? 6.What pricing options are available if the firms costs increase or decrease? Is demand in the international market elastic or inelastic? 7.Are the firms prices likely to be viewed by the host- country government as reasonable or exploitative? 8.Do the foreign countrys dumping laws pose a problem?
© 2005 Prentice Hall11-13 Dumping In international trade, this occurs when one country exports a significant amount of goods to another country at prices much lower than in the domestic market pricing_policy%29
© 2005 Prentice Hall11-14 Target Costing Cost-Based Pricing is based on an analysis of internal and external cost Firms using western cost accounting principles use the Full absorption cost method –Per-unit product costs are the sum of all past or current direct and indirect manufacturing and overhead costs
© 2005 Prentice Hall11-15 Target Costing Rigid cost-plus pricing means that companies set prices without regard to the eight foundational pricing considerations Flexible cost-plus pricing ensures that prices are competitive in the contest of the particular market environment
© 2005 Prentice Hall11-16 Terms of the Sale Obtain export license if required Obtain currency permit Pack goods for export Transport goods to place of departure Prepare a land bill of lading Complete necessary customs export papers Prepare customs or consular invoices Arrange for ocean freight and preparation Obtain marine insurance and certificate of the policy
© 2005 Prentice Hall11-17 Terms of the Sale IncotermsIncoterms make international trade easier and help traders in different countries to understand one another. These standard trade definitions that are most commonly used in international contracts are protected by ICC copyrightICC copyright –Ex-works – seller places goods at the disposal of the buyer at the time specified in the contract; buyer takes delivery at the premises of the seller and bears all risks and expenses from that point on. –Delivery duty paid – seller agrees to deliver the goods to the buyer at the place he or she names in the country of import with all costs, including duties, paid.
© 2005 Prentice Hall11-18 Environmental Influences on Pricing Decisions Currency Fluctuations Inflationary Environment Government Controls, Subsidies, Regulations Competitive Behavior Sourcing
© 2005 Prentice Hall11-19 Global Pricing: Three Policy Alternatives Extension Adaptation Geocentric
© 2005 Prentice Hall11-20 Gray Market Goods Trademarked products are exported from one country to another where they are sold by unauthorized persons or organizations Occurs when product is in short supply, when producers use skimming strategies in some markets, and when goods are subject to substantial mark-ups
© 2005 Prentice Hall11-21 Dumping Sale of an imported product at a price lower than that normally charged in a domestic market or country of origin. Occurs when imports sold in the US market are priced at either levels that represent less than the cost of production plus an 8% profit margin or at levels below those prevailing in the producing countries To prove, both price discrimination and injury must be shown
© 2005 Prentice Hall11-22 Price Fixing Representatives of two or more companies secretly set similar prices for their products –Illegal act because it is anticompetitive Horizontal price fixing occurs when competitor within an industry that make and market the same product conspire to keep prices high Vertical price fixing occurs when a manufacture conspires with wholesalers/retailers to ensure certain retail prices are maintained
© 2005 Prentice Hall11-23 Transfer Pricing Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction Intra-corporate exchanges –Cost-based transfer pricing –Market-based transfer pricing –Negotiated transfer pricing
© 2005 Prentice Hall11-24 Countertrade Countertrade occurs when payment is made in some form other than money Options –Barter –Counter-purchase –Offset –Compensation trading –Cooperation agreements –Switch trading
© 2005 Prentice Hall11-25 Barter The least complex and oldest form of bilateral, non-monetary counter-trade A direct exchange of goods or services between two parties
© 2005 Prentice Hall11-26 Looking Ahead Chapter 12 Global Marketing Channels and Physical Distribution
© 2005 Prentice Hall11-27 Incoterms FAS (free alongside ship) named port of destination – seller places goods alongside the vessel or other mode of transport and pays all charges up to that point FOB (free on board) – sellers responsibility does not end until goods have actually been placed aboard ship CIF (cost, insurance, freight) named port of destination – risk of loss or damage of goods is transferred to buyer once goods have passed the ships rail CFR (cost and freight) – seller is not responsible at any point outside of factory Return
© 2005 Prentice Hall11-28 Extension Ethnocentric Per-unit price of an item is the same no matter where in the world the buyer is located Importer must absorb freight and import duties Fails to respond to each national market Return
© 2005 Prentice Hall11-29 Adaptation Polycentric Permits affiliate managers or independent distributors to establish price as they feel is most desirable in their circumstances Sensitive to market conditions but creates potential for gray marketing Return
© 2005 Prentice Hall11-30 Geocentric Intermediate course of action Recognizes that several factors are relevant to pricing decision –Local costs –Income levels –Competition –Local marketing strategy Return
© 2005 Prentice Hall11-31 Currency Fluctuations Return
© 2005 Prentice Hall11-32 Inflationary Environment Defined as a persistent upward change in price levels –Can be caused by an increase in the money supply –Can be caused by currency devaluation Essential requirement for pricing is the maintenance of operating margins Return
© 2005 Prentice Hall11-33 Government Controls, Subsidies, and Regulations The types of policies and regulations that affect pricing decisions are: –Dumping legislation –Resale price maintenance legislation –Price ceilings –General reviews of price levels Return
© 2005 Prentice Hall11-34 Competitive Behavior If competitors do not adjust their prices in response to rising costs it is difficult to adjust your pricing to maintain operating margins If competitors are manufacturing or sourcing I a lower-cost country, it may be necessary to cut prices to stay competitive Return
© 2005 Prentice Hall11-35 Using Sourcing as a Strategic Pricing Tool Marketers of domestically manufactured finished products may move to offshore sourcing of certain components to keep costs down and prices competitive Return Can you stay competitive while staying local?
© 2005 Prentice Hall11-1 Chapter 11 Pricing Decisions Power Point By Kristopher Blanchard North Central University.
© 2005 Prentice Hall 11-1 Chapter 11 Pricing Decisions.
Pricing Decisions Chapter 12 Global Marketing. Keegan and Green, Chapter 12 2 Boundaries for Market Price Product costs establish the price floor Prices.
© 2005 Prentice Hall11-1 Chapter 11 Pricing Decisions.
Chapter 11 Pricing Decisions Introduction to Pricing Issues Basic concepts Target costing Price escalation Environmental issues Gray market goods.
1 Pricing Decisions Global Marketing Chapter 11. ©2011 Pearson Education, Inc. publishing as Prentice Hall 11-2 Introduction to Pricing Issues rice floors,
Chapter 12 Pricing Decisions – Chapter 12Andrew P. Yap - FIU – MAR 4156 Basic Pricing Concepts Basic pricing considerations global marketing 1.Does.
Global Marketing Warren J. Keegan Mark C. Green Global Marketing Warren J. Keegan Mark C. Green Pricing Decisions Chapter 11.
1 Pricing Decisions Global Marketing (Global Edition) Chapter 11.
1 Pricing Decisions Global Marketing Chapter 11. ©2011 Pearson Education, Inc. publishing as Prentice Hall 11-2 Introduction to Pricing Issues Law of.
Pricing Decisions. ©2011 Pearson Education, Inc. Introduction to Pricing Issues Law of one price Price floors, ceilings Optimum prices Target costing.
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall Global Pricing Decisions.
Global Pricing. Basic Factors in Pricing Costs Experience Curve Competition Demand.
Chapter 11- slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Eleven Pricing Strategies.
Chapter pricing concepts for establishing value thirteen Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Global Marketing 20.
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Understanding Pricing 13.
Copyright Atomic Dog Publishing, 2002 International Pricing Strategy Dana-Nicoleta Lascu Chapter 16.
Chapter foundations of Chapter M A R K E T I N G Understanding Pricing 13.
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Managing the Pricing Function 14.
Global Pricing Decisions Overview Of the four Ps, price alone generates revenue. Competitive pricing enhances market position and earnings.
© 2005 Prentice Hall12-1 Chapter 12 Global Marketing Channels and Physical Distribution Power Point by Kristopher Blanchard North Central University.
Executing the Transactions Section III. Pricing in International Trade.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata 10–1 Chapter 10.
© 2005 Prentice Hall8-1 Chapter 8 Exporting, Importing, and Sourcing Power Point by Kris Blanchard North Central University.
Developing Pricing Strategies and Programs Marketing Management, 13 th ed 14.
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Global Perspective The Price War Setting the right price for a product or service can be the key to success or failure An offerings price must reflect.
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 Supply Contracts.
International Marketing Chapter 15 Exporting and Logistics: Special Issues for Business.
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall Pricing.
Chapter 9: Pricing Objectives and Policies. Pricing Chapter objective Chapter objective What is price? What is price? Strategic dimensions Strategic.
1 Pricing Concepts & Setting the Right Price. 2 The Importance of Price to Marketing Managers Revenue Profit The price charged to customers multiplied.
RISK MANAGEMENT: AN INTRODUCTION TO FINANCIAL ENGINEERING Chapter 24.
Unit 8 You Reap What You Peddle. Introduction Export price may include: dock charges, clearing and forwarding charges, freight, insurance, profit margin.
Chapter 10 - slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Ten Pricing: Understanding and Capturing Customer Value.
Chapter 11: Pricing Decisions Ashley Gary-Roper Judith Smith.
. C h a p t e r 1 8 Global Pricing for International Markets Modular: Afjal Hossain Assistant Professor, Department of Marketing PSTU McGraw-Hill/Irwin.
International Marketing 15 th edition Philip R. Cateora, Mary C. Gilly, and John L. Graham.
© 2007 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin Marketing Management, 8e Chapter Eleven Pricing Strategy Key Words / Outline.
Chapter McGraw-Hill/Irwin Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. Cost of Sales and Inventory 6.
Objective 5.02 The Price Strategy. Factors Affecting Price Costs and Expenses ◦ fixed - Business costs that are not affected by changes in sales volume.
Chapter 17 Title and Risk of Loss in Sales of Goods Title and Risk of Loss in Sales of Goods McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies,
Chapter 26 Pricing Strategies 1 Marketing Essentials Chapter 26 Pricing Strategies Section 26.2 Setting Prices.
Import/Export Basics (Ch. 2). Beginning Steps 1.Terminology 2.Homework 3.Choosing the product 4.Making contacts 5.Market research 6.What’s the bottom.
Exporting and Logistics: Special Issues for Business Chapter 15 McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved.
Exporting and Logistics: Special Issues for Business Chapter 15 McGraw-Hill/Irwin© 2005 The McGraw-Hill Companies, Inc. All rights reserved. PowerPoint.
1 Pricing for International Markets Broad-based pricing policies Terms of Sale Terms of Payment Countertrade.
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