International Business : Prof Bharat Nadkarni International Pricing

Right price is one of the important determinants of business success. Right price does not necessarily mean low price. What is the right price will depend upon a number of factors like the nature of other elements of the marketing mix, nature of the market, including demand and competitive situations. The price has to be consistent with other elements of the marketing mix. At the same time it has to be very responsive to the demand. The uniqueness of price in the marketing mix is that it is the only element that generates revenue, all other elements incur costs. It should, at the same time, be appreciated that the other elements, product-packaging-promotion and distribution, are also designed to help the firm to realize revenue through an appropriate, comprehensive, marketing strategy, of which the pricing strategy is an ingredient.

International Business
Pricing for Export market is more complex and difficult than for the domestic market. Export pricing will have to accommodate into itself the trade practices and the regulations of the overseas market. Export prices should take into account additional costs involved in respect of packaging, packing, labeling, marking, transportation and storage, insurance, documentation, pre shipment inspection, cost of holding stocks, cost of advertising and personal selling etc. Export incentives, like duty drawback, will also influence export pricing. Other important factors which may have to consider are exchange rate and fluctuations, competition, host govt. protecting domestic market.

International Business
Pricing Objectives market penetration market share market skimming fighting competition preventing new entry shorten pay back period early cash recovery meeting export obligation disposal or surplus optimum capacity utilization return on investment profit maximization

International Business
Pricing Methods / Approaches Cost based pricing

Following competitors
Negotiated prices

Customer determined price

Break-even price

Marginal cost pricing

Creative pricing

International Business
Transfer Pricing Transfer pricing or intra company pricing refers to the pricing of goods transferred from operations or sales units in one country to the companys unit elsewhere. It depends on nature of the subsidiaries market conditions govt. policies and regulations In most cases setting up transfer price remains the absolute prerogative of the parent company regardless of the firms nationality. Dumping Dumping refers to selling in the foreign market at a price below the home market price. According to some economists, it is selling at a price below the cost of production at domestic market.

International Business
Dumping is generally condemned. Most nations take measures to combat dumping by imposing anti dumping import duties. Dumping could be of three types, sporadic, intermittent and for a long period. Steps in Export Pricing 1. Defining pricing objectives 2. Analyzing market characteristics 3. Calculating costs 4. Calculating value of incentives 5. Determining export price