Imm - Pricing

Pricing Decision

for

International Markets

Learning Objectives:

● To explain the concept of pricing decisions in

international markets

● To discuss various methods of export pricing

● Role of non-price factors in international

markets

● Pricing issues for developing countries

● To explain the concept of counter trade

The Meaning of Price

● Price is the sum of values received from the

customer for the product or service.

● Besides money, it may also include other

tangible and intangible items of utility.

Pricing is like a Tripod

Cost

Demand

Competition

Significance of Pricing for Developing and Least

Developing Countries

● Lower production and technology base

● Relatively low share in international markets

makes them marginal suppliers in most

product categories with little bargaining power

● Majority of products sold as commodities with

marginal value addition

Price Realization by Developing

Countries

● Traditional Products

Price Realisation by Developing

● Non-Traditional Products

Countries

○ Intermediate Products

Price Realization by Developing

Countries

● Non-Traditional Products

- Consumer Products

Rs 100

onwards

Good Brands Rs 450

onwards

Pricing Approaches for International Markets

● Cost based pricing

○ Full cost pricing

○ Marginal Cost Pricing

● Market based pricing

Top Down Calculation for

International Pricing

Consumer Price: 1,160

VAT* 160 + 16%**

Market Price minus VAT 1,000

* Figures based on assumptions.

Top Down Calculation for International

Pricing

Margin retailer: 250 = 25%**

Price to retailer: 750

Margin wholesaler: 90 + 12%**

Price to wholesaler 660

Margin to importer 33 + 5%

** Figures based on assumptions.

Top Down Calculation for International

Pricing

Landed-cost price: 627

Import duties: 110 + 20%**

Other costs (storage, banking) 17**

CIF (port of destination): 500

** Figures based on assumptions.

Top Down Calculation...