Pricing for International Markets Chapter 15 Matakuliah: J0474 International Marketing Tahun: 2009

Bina Nusantara University 3 Learning Outcome Pricing Policy Approaches to International Pricing Price Escalation Approaches to Reducing Price Escalation Leasing in International Markets Counter trade as a Pricing Tool Transfer Pricing Strategy Price Quotations Administered Pricing

Bina Nusantara University 4 Pricing Policy Pricing Objectives In general, price decisions are viewed two ways : Pricing as an active instrument of accomplishing marketing objectives Pricing as a static element in a business decision.

Bina Nusantara University 5 Pricing Policy How Gray-Market Goods End Up in U.S. Stores Manufacturer Buyer X Freight Forwarder Fake Paperwork U.S. Store

Bina Nusantara University 6 Approaches to International Pricing Skimming Versus Penetration Pricing Full-Cost Versus Variable-Cost Pricing

Bina Nusantara University 7 Price Escalation Costs of Exporting Taxes, tariffs and Administrative cost inflation Deflation Exchange rate fluctuations Varying currency values middleman And Transportation costs

Bina Nusantara University 8 Approaches to Reducing Price Escalation Lowering Cost Of Goods Lowering Tariffs Lowering Distribution costs Using foreign trade zones to lessen price escalation Dumping

Bina Nusantara University 9 Leasing in International Markets The system of leasing used by industrial exporters is similar to the typical lease contracts used in the United States. Terms of the leases usually run one to five years, with payments made monthly or annually; included in the rental fee are servicing, repairs, and spare parts. Just as contracts for domestic and overseas leasing arrangements are similar, so are the basic motivations and shortcomings. For example : 1.Leasing opens the door to a large segment of nominally financed foreign firm that can be sold on a lease option but might be unable to buy for cash. 2.Leasing helps guarantee better maintenance and service on overseas equipment.

Bina Nusantara University 10 Counter trade as a Pricing Tool Types of Counter trade Problems of Counter trade Proactive Counter trade strategy The internet and Counter trading

Bina Nusantara University 11 Counter trade as a Pricing Tool Why Purchasers Impose Counter trade? To preserve hard currency To improve balance of trade To gain access to new markets To upgrade manufacturing capabilities To maintain prices of export goods To force reinvestment of proceeds

Bina Nusantara University 12 Transfer Pricing Strategy Four arrangements for pricing goods for intra company transfer : Sales at the local manufacturing cost plus a standard mark up Sales at the cost of the most efficient producer in the company plus a standard mark up Sales at negotiated prices. Arm’s-length sales using the same prices as quoted to independent customers.

Bina Nusantara University 13 Administered Pricing Cartels Government -influenced pricing

Bina Nusantara University 14 Summary Pricing is one of the most complicated decision areas encountered by international marketers. Market prices at the consumer level are much more difficult to control in international than in domestic marketing, but the international must still approach the pricing task on a basic of established objectives and policy, leaving enough flexibility for tactical price movements. The continuing growth of third World markets coupled with their lack of investment capital has increased the importance of counter trades for most marketers.