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7/21/2019 Module 6 Lecture
http://slidepdf.com/reader/full/module-6-lecture 1/24
Global Pricing Decisions
Module 6
7/21/2019 Module 6 Lecture
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7/21/2019 Module 6 Lecture
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Price EscalationPrice Escalation
The Lower Prices are at HomeThe Lower Prices are at Home
Aspirin $ 0.99 $ 1.23 $ 7.07 $ 6.53 $ 1.78
Moie 7.50 10.50 7.89 17.29 !.55
"ei 501 #eans 39.99 7!.92 75.!0 79.73 5!.5!
a%&'an sunglasses !5.00 88.50 81.23 13!.!9 89.39
(on% )al*+an 59.95 7!.98 86.00 211.3! 110.00,i*e Air -ordan 125.00 13!.99 157.71 172.91 15!.2!
,i*on ca+era 629.95 8!0.00 691.00 768.!9 105!.!2
,e/ or* "ondon Paris o*%o Meico i4%
SOURCE: Norihiki Shirouzu, “Luxury Prices for U.S. Goods No Longer Pss !us"er in #$n,% &''
S"ree" #ourn', (e)rury *, +-, $. +/ nd E'iz)e"h ('eick, “0he Cos" of Euro$e: uyer e1re,
Euro$ens 2re Ge""ing !d s 3e'' )ou" Prices,% 0i4e 5n"ern"ion', 6ece4)er +7, +, $. 7*.
"os Angeles Madrid (4oc*ol+ 'erlin o+e
Maria are% D 16.22 16.09 17.82 15.31 20.67
)indo/s 98 117.99 123.9! 179.79 211.20 26!.!6
Diapers 13.52 5.03 5.!2 6.86 10.55
7/21/2019 Module 6 Lecture
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Price Promotions in ChineseCultures with End-8 Prices
7/21/2019 Module 6 Lecture
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Introduction
Global pricing is one of the most critical andcomplex issues in international mareting!
Price is the onl" mareting mix instrument
that creates re#enues! $ll other elementsentail costs!
$ compan"%s global pricing polic" ma" maeor brea its o#erseas expansion e&orts!
'ultinationals also face the challenges ofhow to coordinate their pricing acrossdi&erent countries!
7/21/2019 Module 6 Lecture
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Introduction
Pricing for overseasmarkets is more complexbecause managementmust be concerned with
Foreign National Pricing
omestic pricing inanother countr!
International Pricing"etting prices of goodsfor export for bothunrelated and related
#rms
7/21/2019 Module 6 Lecture
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Pricing Impact
Pricing is especiall" importantin international mareting
strateg" decisions( due to itse&ect on product positioning(maret segmentation(demand management( andmaret share d"namics!
7/21/2019 Module 6 Lecture
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Pricing $onsiderations
)ature of the product
Production plant locations
*istribution s"stem used
Economic climate Currenc" +uctuations and
exchange rates
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© 2005 Prentice Hall
n4erna4ionaln4erna4ional
PricingPricing
(4ra4egies(4ra4egies
Anal%4icDi+ensions
Decision&Ma*ing
Decision&Ma*ing
o+pan% n4ernalac4ors
Proi4abili4%ranspor4s os4sarisaesProduc4ion os4sannel os4s
n4erna4ional Pricing (4ra4egies
Mar*e4 ac4ors
nco+e "eelso+pe4i4ionus4o+ers ul4ure
:niron+en4alac4ors
oreign :cangea4esnla4ion a4esPrice on4rolsegula4ions
Mar*e4&b%&Mar*e4Pricing
;nior+ Pricing
Managerialssues
ranser Pricingoreign urrenciesParallel +por4s<Gre%Mar*e4s:por4 Price :scala4ionGlobal Pricing (4ra4egies
inancing n4erna4ionalransac4ion
is*sus4o+er&Arrangeds.(upplier&Arranged
(ource o inancing
o++ercial 'an*sGoern+en4s,on&casransac4ions=
oun4er&4radingSource: Jeannet & Hennessey, 2001
7/21/2019 Module 6 Lecture
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Global Pricing ,becti#es and.trategies 'anagers must determine the obecti#es
for the pricing obecti#es /nit .ales
'aret .hare Return on in#estment
0he" must then de#elop strategies toachie#e those obecti#es Penetration Pricing
'aret .imming
7/21/2019 Module 6 Lecture
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*ri#ers of oreign 'aret Pricing
Customer Demand Competition
Cross-order Price *i&erentials
Distribution Channels 3ariations in 0rade 'argins and 4ength of
'argins 5ssues of E#er"da" 4ow Prices 6E*4P7
Parallel 5mports 6Gra" 'aret7 Government Policies
7/21/2019 Module 6 Lecture
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Approaches to International Pricing
1. Full-Cost Pricing: no uni" of si4i'r $roduc" is differen" fro4 ny o"her uni" in"er4s of cos", 1hich 4us" )er i"s fu'' shre of "he "o"' fixed nd 8ri)'e cos".
• here are seeral approaces 4o pricing in in4erna4ional +ar*e4s !hich
inclu"e:
• here are seeral approaces 4o pricing in in4erna4ional +ar*e4s !hichinclu"e:
2# >ariable&os4 Pricing= $ir%s regar" $oreign sales as onus sales
an" assu%e that any return o'er their 'ariale cost %a(es acontriution to net pro$it
• Prices are o4en se4 on a cos4&plus basis i.e. 4o4al cos4s plus a proi4+argin
• Prices are o4en se4 on a cos4&plus basis i.e. 4o4al cos4s plus a proi4+argin
• his is a practical approach to pricing !hen a co%pany has high $i)e" costsan" unuse" pro"uction capacity
• his is a practical approach to pricing !hen a co%pany has high $i)e" costsan" unuse" pro"uction capacity
7/21/2019 Module 6 Lecture
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Approaches to International Pricing
7. Skimming Pricing: 0his is used "o rech seg4en" of "he 4rke" "h" is
re'"i8e'y $rice insensi"i8e nd "hus 1i''ing "o $y $re4iu4 $rice for
$roduc"
*# Pene4ra4ion Pricing= his is use" to sti%ulate %ar(et
gro!th an" capture %ar(et share y "elierately o$$eringpro"ucts at lo! prices
• It is use" to ac+uire an" hol" share o$ %ar(et• It is use" to ac+uire an" hol" share o$ %ar(et
7/21/2019 Module 6 Lecture
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'aret .imming and inancial,becti#es
'aret .imming
Charging apremium price
'a" occur at theintroduction stageof product life c"cle
Sony A"# $or ca%cor"ers
7/21/2019 Module 6 Lecture
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Penetration Pricing and )on-inancial ,becti#es
Penetration Pricing Charging a low
price in order to
penetrate maretuicl"
$ppropriate tosaturate maret
prior to imitation b"competitors
1- Sony .al(%an
7/21/2019 Module 6 Lecture
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%pproaches to International Pricing"kimming versus Penetration Pricing
(oppers A/ai4 ?pening o irs4 )al&Mar4 ?u4le4 in ina
7/21/2019 Module 6 Lecture
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Price Coordination
The following considerations will benecessar! when developing a globalpricing strateg!&
1! )ature of customers2! $mount of product di&erentiation
9! )ature of channels
! )ature of competition
;! 'aret integration<! 5nternal organi=ation
>! Go#ernment regulation
7/21/2019 Module 6 Lecture
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11&18
*umping
5n international trade( this occurs whenone countr" exports a signi?cant amountof goods to another countr" at prices
much lower than in the domestic maret umping occurs when imports
are sold at an 'unfair( price)
7/21/2019 Module 6 Lecture
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Countertrade $ountertrade means exchanging goods or
ser#ices which are paid for( in whole or part( with
other goods or ser#ices( rather than with mone" Forms of $ountertrade
"imple barter
$learing agreement& clearing account barterwith no currenc" transaction reuired
"witch trading& Practice in which one compan"sells to another its obligation to mae a purchase in
a gi#en countr" *u!back +compensation,& occurs when a ?rm
builds a plant in a countr" - or supplies technolog"(euipment( training( or other ser#ices to the countr"
and agrees to tae a certain percentage of thelant@s out ut as artial a ment for the contract!
7/21/2019 Module 6 Lecture
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Countertrade Forms of $ountertrade
$ounter Purchase& .ale of goods andser#ices to one compan" in other countr" b" a
compan" that promises to mae a future
purchase of a speci?c product from the same
compan" in that countr"
-.set& $greement that a compan" will o&set ahard - currenc" purchase of an unspeci?edproduct from that nation in the future! $greementb" one nation to bu" a product from another(
subect to the purchase of some or all of thecomponents and raw materials from the bu"er ofthe ?nished product( or the assembl" of suchproduct in the bu"er nation!
7/21/2019 Module 6 Lecture
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Exhibit : Classi?cation of orms ofCountertrade
7/21/2019 Module 6 Lecture
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Countertrade
/otives behind $ountertrade& Gain access to new or diAcult marets
,#ercome exchange rate controls or lac of
hard currenc" ,#ercome low countr" credit worthiness
5ncrease sales #olume
Generate long-term customer goodwill
7/21/2019 Module 6 Lecture
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7/21/2019 Module 6 Lecture
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0han Bou