Chapter Ten Pricing for Global Markets. Copyright © Houghton Mifflin Company. All rights...
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Transcript of Chapter Ten Pricing for Global Markets. Copyright © Houghton Mifflin Company. All rights...
Chapter Ten
Pricing for Global Markets
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Figure 10.1: Global Pricing Strategies
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Company Internal Factors
• Profit and Cost Factors
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Company Internal Factors (cont’d)
• Transportation Costs
• Tariffs
• Taxes
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Company Internal Factors (cont’d)
• Local Production Costs
• Channel Costs
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Market Factors Affecting Pricing
• Income Levels
• Competition
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Environmental Factors Affecting Price
• Exchange Rate Fluctuations
• Inflation Rates
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Environmental Factors Affecting Price
• Price Controls
• Regulatory Factors: Dumping Regulations
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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
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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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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
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Figure 10.5: Financing Global Marketing Transactions
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Financing International Marketing Transactions (cont’d)
• Risks– Commercial Risk– Foreign Currency Risk– Transfer Risk– Political Risk
• Customer- Arranged Versus Supplier-Arranged Financing
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Export Payment Terms Risk/Cost Tradeoff
Risk to Exporter
Least Risk____________________________________________ Highest Risk
Confirmed Irrevocable Bank BankCash in Irrevocable Letter of Collection Collection OpenAdvance Letter of Credit Credit Sight Draft Time Draft Account
Cost to Buyer
Highest Cost ___________________________________________ Least Cost
SOURCE: Business America, February 1995.
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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
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Sources of Financing (cont’d)
• Noncash Pricing: Countertrade
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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
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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