1. Chapter Ten Pricing for Global Markets

2. Copyright © Houghton Mifflin Company. All rights reserved.10 - 2 Figure 10.1: Global Pricing Strategies

3. Copyright © Houghton Mifflin Company. All rights reserved.10 - 3 Company Internal Factors Profit and Cost Factors

4. Copyright © Houghton Mifflin Company. All rights reserved.10 - 4

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6. Copyright © Houghton Mifflin Company. All rights reserved.10 - 6 Company Internal Factors (cont’d) Transportation Costs Tariffs Taxes

7. Copyright © Houghton Mifflin Company. All rights reserved.10 - 7 Company Internal Factors (cont’d) Local Production Costs Channel Costs

8. Copyright © Houghton Mifflin Company. All rights reserved.10 - 8 Market Factors Affecting Pricing Income Levels Competition

9. Copyright © Houghton Mifflin Company. All rights reserved.10 - 9 Environmental Factors Affecting Price Exchange Rate Fluctuations Inflation Rates

10. Copyright © Houghton Mifflin Company. All rights reserved.10 - 10 Environmental Factors Affecting Price Price Controls Regulatory Factors: Dumping Regulations

11. Copyright © Houghton Mifflin Company. All rights reserved.10 - 11 Managerial Issues in Global Pricing Determining Transfer Prices –Impact of Tax Structure –Internal Considerations –External Problems Quoting Price in a Foreign Currency –How to Incorporate a Foreign Exchange Rate into a Selling Price Quote –Selection of a Hedging Procedure

12. Copyright © Houghton Mifflin Company. All rights reserved.10 - 12 Managerial Issues in Global Pricing (cont’d) Dealing with Parallel Imports or Gray Markets Managing Export Price Escalation Global Pricing Strategies

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14. Copyright © Houghton Mifflin Company. All rights reserved.10 - 14 Source: From “Prices at the Europlex,” The Economist, March 27, 1999, p. 110. Copyright © 1999 The Economist Newspaper Group, Inc. Reprinted with permission. Further reproduction prohibited. www.economist.com Figure 10.4: Price of a Movie Ticket in Major European Cities and New York City

15. Copyright © Houghton Mifflin Company. All rights reserved.10 - 15 Figure 10.5: Financing Global Marketing Transactions

16. Copyright © Houghton Mifflin Company. All rights reserved.10 - 16 Financing International Marketing Transactions (cont’d) Risks –Commercial Risk –Foreign Currency Risk –Transfer Risk –Political Risk Customer- Arranged Versus Supplier-Arranged Financing

17. Copyright © Houghton Mifflin Company. All rights reserved.10 - 17 Sources of Financing Commercial Banks –Forfaiting: Financing without Recourse Government-Sponsored Financing: The Export-Import Bank –Short-Term Financing –Medium-Term Financing –Long-Term Financing –The Value of Eximbank Loans to U.S. Exporters –Financial Engineering: A New Marketing Tool

18. Copyright © Houghton Mifflin Company. All rights reserved.10 - 18 Sources of Financing (cont’d) Noncash Pricing: Countertrade

19. Copyright © Houghton Mifflin Company. All rights reserved.10 - 19 Source: Barter, Compensation and Cooperation, Credite Suisse, Zurich, Switzerland, Vol. 47, IV, 1978, pp. 8-9. Reprinted by permission. Figure 10.6: Forms of Countertrade

20. Copyright © Houghton Mifflin Company. All rights reserved.10 - 20 Sources of Financing (cont’d) –Barter –Compensation Arrangements Full vs. Partial Compensation Parallel Deals Linked Deals Triangular Compensation Offset Deals Cooperation Agreements –Dangers in Compensation Deals –Precautions for Countertrade –Organizing for Countertrade