International Pricing Chapter 18

Pricing Policy Pricing Objectives Pricing Objectives Parallel Imports Parallel Imports –How does it affect a company? –Exclusive distribution –How to prevent it

Approaches to International Pricing Full-cost v. Variable-cost Pricing Full-cost v. Variable-cost Pricing Price skimming v. Penetration Pricing Price skimming v. Penetration Pricing Market still sets price!!! Market still sets price!!! –Effects of growth and wealth

Price Escalation What is it? What is it? What are its effects? What are its effects? What causes it? What causes it? –Costs of exporting –Taxes, tariffs, and administrative costs –Inflation –Deflation –Exchange rate fluctuations –Carrying currency values –Middleman & Transportation costs

Lessening Price Escalation Lower COGS Lower COGS Lowering Tariffs Lowering Tariffs Lowering Distribution Costs Lowering Distribution Costs Free Trade Zones Free Trade Zones Dumping Dumping –What is it? –Countervailing duty

Countertrade Pepsi example Pepsi example Types of Countertrade Types of Countertrade –Barter –Comprehensive deals –Counterpurchase –Product Buy-Back Agreement Problems Problems Internet Internet Proactive Countertrade Strategy Proactive Countertrade Strategy

Transfer Pricing Strategies Definition Definition Branch shows no profit Branch shows no profit Advanced Pricing Agreement Advanced Pricing Agreement

Price Quotations Should list: Should list: –Quality –Quantity –Transportation –Responsibility

Administered Pricing How destructive is competition? How destructive is competition? Cartels Cartels –OPEC –DeBeers Government-induced Pricing Government-induced Pricing