International Marketing 6

- Price is the only element of the marketing mix that generates revenue. All other elements entail costs 

- Pricing decisions are closely related to product positioning 

- Pricing can be the crucial issue in determining success or failure in international marketing 

- Coordinating international pricing is a challenge for multinational companies 

The global manager must develop systems and policies that address 

- Price floors 

- Price ceilings 

- Optimum prices 

Must be consistent with global opportunities and constraints 

Managers must determine the objectives for the pricing objectives 

- Unit sales 

- Market share 

- Return on investment 

They must then develop strategies to achieve those objectives 

- Penetration pricing 

- Market skimming 

Internal Factors:

- Marketing Mix Strategy

- Costs

- Marketing Objectives

- Organisation for pricing

External Factors:

- Nature of Market and Demand

- Competition

- Other environmental Factors (economy, resellers, government)

- Company goals 

- Distribution channels 

- Government policies and laws 

- Currency volatility 

- Inflation 

- Additional costs of export (transport, clearance fees etc.) 

- Purchasing Power Parity 

- Psychological factors 

Price sensitivity = The first step in estimating demand is to understand what affects price sensitivity. 

Price elasticity = A measure of the sensitivity of demand to changes in price. 

Price sensitivity = The first step in estimating demand is to understand what affects price sensitivity. 

Price elasticity = A measure of the sensitivity of demand to changes in price. 

- Maximizing profit in each single country, as well as worldwide 

- Grey market imports 

- Dumping 

- Transfer pricing 

- Inflation 

- Bartering 

Branded goods are exported and are sold unauthorized and outside of established distribution channels in the target market(s) 

Often products imitations with lower quality are sold image worldwide is affected 

Grey markets often occur, when: 

-There is a strong demand for the brand 

-The manufacturing company is using skimming strategies in some countries 

-The brands are highly priced and have high markup (e.g. luxury goods like Louis Vuitton handbags, Hugo Boss shirts, Gucci sun glasses) 

Imported product is sold for a lower price than in the home market or in COO the (country of origin) 

USA: if products sold in the US are being sold for - less than manufacturing costs plus 8% profit margin or - for a price that is lower than in the COO 

„If a company exports a product at a price lower than the price it normally charges on its own home market, it is said to be “dumping” the product. Is this unfair competition? The WTO agreement does not pass judgment. Its focus is on how governments can or cannot react to dumping – it disciplines anti-dumping actions, and it is often called the “Anti-dumping Agreement” 

Pricing of goods, services, and intangible property bought and sold by operating units or divisions of a company doing business with an affiliate in another jurisdiction. 

Intra-corporate exchanges 

- Cost-based transfer pricing 

- Market-based transfer pricing 

- Negotiated transfer pricing 

- An extremely high inflation rate can be an almost unmanageable challenge in some international markets 

- Example: in the 90ies P&G had to raise prices in Peru twice a week because of a hyperinflation (7000%) 

- General pricing positioning (luxury, premium, medium or low price segment) 

- Price positioning over time (skimming, penetration) 

- International standardisation or local adaptation (market-by-market pricing) 

- Geocentric pricing strategies 

- Pricing corridors 

Geocentric strategy 

A more world-orientated approach to multinational management without showing a bias to either home or host country preferences but rather spotlight the significance of doing whatever it takes to better serve the organization. 

In pricing terms, ‘geocentric‘ means a standardized strategy with room for local adaptation. A possibility is the definition of price corridors. 

Recognizes that several factors are relevant to pricing decision 

- Local costs 

- Income levels 

- Competition 

- Local marketing strategy 

Min & Max Price

Standardisation…

- Expensive products and luxury goods 

- It there is a danger of grey markets 

- For companies with a global marketing strategy and a geocentric corporate culture and strategy 

Local adaptation…

- For non/ almost not exportable products (e.g. services, low price goods) 

- If very diverse local laws that affect pricing decisions exist 

- If the PPP and competitive situation are very different