Export Pricing Decision
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Transcript of Export Pricing Decision
7/28/2019 Export Pricing Decision
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P R E S E N T A T I O N B Y
SHREYA BARANWAL
MIBA(09-11)
ROLL NO.37
Export Pricing
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What is Price???
Price - The only element of the marketing mix thatis revenue generating.
- Price is what an exporter offers to a customer
on particular products while cost is what anexporter pays for manufacturing the same product
Export pricing is the most important factor for
promoting export and facing international tradecompetition. It is important for the exporter tokeep the prices down keeping in mind all export
benefits and expenses.
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International Pricing Situations
First-time pricing
Changing pricing
Multiple-product pricing
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1. First – Time Pricing
The alternatives available are:
a) Skimming,
b) Following the market price, and
c) Penetration Pricing.
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(a) Skimming
Makes sense under following conditions:
- sufficient no. of buyers with high current demand
- not very high unit cost of production
- does not attract competitors
- image of a superior product
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Example
When Sony introduced the world's first highdefinition television to the Japanese market in 1990,the high-tech sets cost $43,000
By 1993, a 28-inch HDTV cost a Japanese buyer justover $6,000
In 2001, a Japanese consumer could buy a 40-inchHDTV for about $2000
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(b) Market Pricing
Followed if similar products already exist inthe target market
The final customer price is determined on the basis of competitive prices
A reactive approach
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Conditions favouring setting a low price:
- price-sensitive market
- decreasing production and distribution costs assales volume increase
- low price discourages competitors
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2. Changing Pricing
Practised when a new product is launched
When there is a change in overall marketconditions
When there is a change in the exporter’sinternal situation, say, costs of production
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3. Multiple – Product Pricing
The different items in the product line may bedifferentiated by pricing them appropriately,such as, Economy version, Standard version,and Top-of- the-line version
The product may also be priced differently to
protect against competitors or to gain marketshare from existing competitors
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Stages in Setting of Export Prices
One Target market analysis
Two Marketing Mix Composition
Three Pricing Policy Selection
Four Pricing Strategy Determination
Five Specific Price
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Export Pricing Strategy
Standard worldwide Price
Dual Pricing
Market-differentiated Pricing
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(a) Standard Worldwide Price
Same price irrespective of the buyer or may be based
on average unit costs of fixed, variable and export-related costs
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(b) Dual Pricing
The two approaches available for pricing exports are:
i) Cost- plus method
ii) Marginal cost method
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(i) Cost – Plus Method
Fully allocating domestic and foreign costs to theproduct
The final price may be so high that that the firm’scompetitiveness may be compromised
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(ii) Marginal Cost Method
Considers the direct costs of producing and sellingproducts for export as the floor beneath which prices
cannot be set
Fixed costs for plants, R&D, domestic overhead, as well as, domestic marketing costs, are disregarded
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Production Costs Standard Worldwide price
Cost Plus Pricing Marginal costPricing
Materials 2.00 2.00 2.00
Fixed costs 1.00 1.00 0.00
Additional ForeignProduct costs
0.00 0.10 0.10
ProductionOverhead
0.50 0.50 0.00
Total Productioncosts
3.50 3.60 2.10
DomesticMarketing costs
1.50 0.00 0.00
General & Admin. 0.75 0.75 0.00
Foreign marketing 0.00 1.00 1.00
Other foreign costs 0.00 1.25 1.25
Subtotal 5.75 6.60 4.35
Profit margin(25%) 1.44 1.65 1.09
Selling Price 7.19 8.25 5.44
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(c) Market – Differentiated Pricing
Export pricing according to the dynamic conditionsof the marketplace
The marginal cost strategy provides a basis, andprices may change frequently due to changes incompetition, exchange rate changes, or other
environmental changes
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Thank You !!!