1. Pricing Strategies

2. 1. Pricing Methods
“The employer does not pay the salaries. It is the customer who pays for the salaries. The employer is just handling the monetary transaction”
Henry Ford

3. - Cost Oriented
 Full cost pricing: Price = Fixed Cost + Profit + Variable Cost
 Markup pricing: Price as a percentage of sales
 Incremental cost pricing: Price is set to cover
variable cost only
- Demand Orientated
Price is set according to the firms estimate of potential buyers’ price elasticity.

4. 2. Skim pricing versus penetration pricing
Skim pricing Penetration pricing
- product has strong
relative advantage
- low elasticity of demand
- low competition
- product is differentiated
and difficult to copy
- small total market
- economies of scale in
production
- high elasticity of demand
- strong competition
- product is not differentiated
and easy to copy
- large market

5. Cash Flow Pattern of Pricing Strategies
Penetration
Skimming
accumulated Cash Flow
Zeit

6. 3. Legal restrictions of pricing decisions
While governmental restrictions on pricing vary among
different nations, most developed countries have
laws relating to:
- Dumping
- Price fixing
- Price discrimination
- Price advertising

7. 4. Costs of Exporting  Taxes  Tariffs  Administrative Costs
 Inflation
 Exchange Rate Fluctuations
 Varying Currency Values

8. 5. Lessening Price Escalation
1. Lower Cost of Goods
Lower Manufacturing Costs
Eliminate Functional Features
Lower Quality

9. 2. Lower Tariffs
Tariff Reclassification
Product Modification
Partial Assembly
Repack aging
3. Lower Distribution Costs
Shorten Channels of Distribution
Lower Shipping Costs
4. Foreign Trade Zones

10. 6. Countertrades Barter Compensation Deals
Counterpurchase or Offset Trade
Product Buy-Back Agreement

11. 7. Why Countertrade? 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

12. 8.Transfer Pricing Manipulation of Taxes
Manipulation of Duties and Customs
Repatriation of Profits
Management of Divisions

13. 9. Gray Trades Opportunities for Parallel Imports Arise through
Price Differentials
Currency Exchange Rate
Import Quotas
Different Positioning