Doole and Lowe Chapter 11 (2)

8/10/2019 Doole and Lowe Chapter 11 (2)

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Use with INTERNATIONAL MARKETING STRATEGY:Analysis, development and implementation 5THedition ISBN 13: 978-1-84480-763-5

Published by Cengage Learning DOOLE AND LOWE

ch11/1

PRICING FOR INTERNATIONAL MARKETS

Session 11


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ch11/2

THE STAGES OF DEVELOPMENT AND

IMPLEMENTATION OF PRICING STRATEGIES

Analysing the factors which influence international pricing such as the cost structures, the value of the product, the market

structure, competitor pricing levels and a variety of environmentalconstraints.

Confirming what impact the corporate strategies shouldhave on pricing policy.

Evaluating the various strategic pricing options and selecting the most appropriate approach.

Implementing the strategy through the use of a variety oftactics and procedures to set prices at SBU level.

Managing prices and financing international transactions.


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FACTORS INFLUENCING THE PRICING

STRATEGY

Company and Product Factors

Corporate and marketing objectives

Firm and product positioning

Product range, life cycle, substitutes, product

differentiation and unique selling propositions Cost structures, manufacturing, experience

effect and economies of scale

Marketing, product development

Available resources

Inventory

Shipping costs


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ch11/4


STRATEGY

Market Factors

Consumers perceptions, expectations andability to pay

Need for product adaptation, market servicing Market structure, distribution channels

discounting pressures

Market growth, demand elasticities

Need for credit Competition objectives, strategies and

strengths


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STRATEGY

Environmental Factors

Government influences and constraints

Currency fluctuations

Business cycle stage, level of inflation

Use of non-money payment and leasing


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THE EFFECT OF ADDITIONAL EXPORT

SALES ON CONTRIBUTION


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SPECIFIC EXPORT COSTS

(International Cost Reduction)

Economies of scale Learning curve

Greater labour efficiency

Task specialisation and method improvement

New production processes

Better performance of existing equipment

Changes to the mix of resources

Greater product standardisation

Improved product designs

Location of Production Facility Comparative advantage

Manufacturing costs in developed countries


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SPECIFIC EXPORT COSTS


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INFLUENCING THE RESPONSE TO PRICING

Consumer response Distinctiveness of

product

Level of perceived quality

Awareness of substitutes Ease of making

comparisons

Price as a proportion oftotal expenditure

Perceived benefit Use of product in

conjunction with another

Shared costs of purchase

Perishability

Competitors response

Commitment to markets

and products

Resources available

Internal cost structures

Customer/distribution

chain loyalty


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PRICING STRATEGIES AND OBJECTIVES

Standardisation

Ethnocentric

Adaption Polycentric

Invention

Geocentric

Are you taking a:

cost oriented

market oriented competition oriented

approach?


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PRICING OBJECTIVES

Rate of return

Market stabilisation

Demand-led pricing

Competition-led

pricing

To reflect productdifferentiation

Market skimming

Market penetration

Early cash recovery

Prevent new entry


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SETTING A PRICE

(Export pricing)

Determine export market potential Estimate the price range and target price

Calculate sales potential at the target price

Evaluate tariff and non-tariff barriers Select suitable pricing strategy in line with

company objectives

Consider likely competitor response

Select pricing tactics, set distributor and end-user prices

Monitor performance and take necessarycorrective action


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PRICING PROBLEMS

Multi-national pricing

Managing foreign currency / floatingexchange rates

Obtaining payment in high risk markets

Administrative problems of cross-bordergoods transfer


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THREE TYPES OF GREY MARKET

SOURCE: Assmus and Weiss (1995)


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PARALLEL IMPORTING OR

GREY MARKETING

Conditions:

Product priced lower in home market

Products available internationally

Low trade barriers

Large price differentials


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DEFENCE AGAINST GREY MARKETING

Seek government intervention or legalprotection

Refusal to issue warranties in certain markets Buying out grey marketer

Price coordination strategies Economic measures

Centralisation Formalisation

Informal Co-ordination


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A FRAMEWORK FOR SELECTING A

CO-ORDINATION METHOD

Source: Assmus & Wiess (1995)


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TRANSFER PRICING

Bases of Transfer:

At cost

At arms length At cost plus

Strategic Use:

Create and maintain barriers to entry

Avoid domestic tax liabilities

Avoid foreign tax

Manage levels of market involvement


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CURRENCY OF PRICING

Benefits of quoting in a foreign currency

provide access to finance abroad

At lower interest rates

good currency management

Leading to potential of gaining additional profit

responding to condition of contract customers prefer quotes in own currency

Allowing competitive comparison


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MANAGING CURRENCY FLUCTUATIONS

Domestic Currency Weak

Compete on price

Introduce new productswith additional features

Source / manufacture inthe domestic country

Fully exploit exportopportunities

Obtain payment in cash

Use full cost approach forexisting markets / marginalcosts for new, morecompetitive, markets

Repatriate foreign earned

income quickly

Reduce expenditure and

buy services (advertising,transport, etc) locally

Minimise overseas

borrowing

Invoice in domesticcurrency


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MANAGING CURRENCY FLUCTUATIONS

When Domestic Currency Strong

Compete on non-pricefactors (quality, delivery,service)

Improve productivity andreduce costs

Prioritise strong currencycountries for exports

Use counter-trade for weakcurrency countries

Reduce profit margins and

use marginal costs forpricing

Keep the foreign earnedincome in the local country

Maximise expenditures inlocal country currency

Buy services abroad in local

currencies Borrow money for expansion

in local markets

Invoice foreign customers intheir own currency


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TYPES OF COUNTER-TRADE

Barter

Compensation trading

Counter-purchase

Offset

Switch deals

Cooperation agreements


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COUNTER-TRADE

Advantages

New markets

Sell off surplus or poor quality products

Strengthens political ties

Entry to high risk areas

Circumvent government restrictions


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COUNTER-TRADE

Disadvantages and Limitations

Lack of flexibility

Exchange products difficult to sell

Difficulties in locating / organising

counter-trade products

No guide market prices

Difficult profit evaluation

May create new competition


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Doole and Lowe Chapter 11 (2)

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