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19 Cards in this Set
- Front
- Back
Global Pricing
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*the most critical and complex issues in international marketing
*price is the only marketing mix instruemtn that creates revenues. All other elements entail cost. *a company's global pricing policy may make or break its overseas expansion efforts *there are challenges of how to coordinate theirpricing across different countries |
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Drivers affecting global pricing
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*company goals
*company costs *customer demand *competition *distribution channels *government policies |
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Company Goals
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drivers affecting global pricing
*what do they want to achieve *satisfactory ROI *Market share *specified product goal |
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Company Costs
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drivers affecting global pricing
*costs set the floor: the company wants to set at least a price that will cover all cost need to make and sell its products. *Cost-plus pricing: most popular. adds international costs and a markup to the domestic manufacturing cost. *Dynamic Incremental Pricing: arrives at a price after removing domestic fixed costs *Incremental Costs |
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Customer Demand
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drivers affecting global pricing
*sets a ceiling to the price *comsumer demand is a function of buying power, tests, habits and substitutes. |
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Competition
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drivers affecting global pricing
*will usually lead to cross-border price differentials. *nonprice competition: advertising, channel coverage |
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Distribution Channels
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drivers affecting global pricing
*variations in trade margins and length margins |
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Government Policies
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drivers affecting global pricing
*direct impact: sales tax rates, tariffs, and price controls impact *indirect impact |
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Price excalation
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*the final foreign retail price will often be much higher than the domestic retail price.
*Must confront: -will our foreign customers be willing to pay the inflated price for our product -will this price make our product less competitive |
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Options to lower export price
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*rearrange the distribution channel
*eliminate costly features (or make them optional) *downsize the product *assemble or manufacture the product in foreign markets *adapt the product to escape tariffs or tax levies. |
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Currency Gain/Loss Pass-through
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global pricing and currency movement
*Pass-through issue: *pricing-to-market (PTM):adjustments ofmarkups in response to exchange rate movements *Local-currency price stability: markups are adjusted to stabalize prices in the buyer's currency |
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Currency Quotation
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global pricing and currency movement
*sellers and buyers usually prefer a quote in their domestic currency. *that way, the other party will have to bear currency risks. |
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Price coordination
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*issue is critical for global brands that are marketed with no or very few cross-border variations.
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Considerations for developing a global pricing strategy
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*nature of customers
*amount of product differentiation *nature of channels *nature of competition *market integration *internal organization *government regulations |
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Aligning Pan-Regional Prices
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price coordination
*pricing corridor: to find the middle ground by upping prices in low-price countries and cutting them in high-price countries |
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Steps to determining the pan-regional prices
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*determine optimal price for each country
*find out whether parallel imports (gray markets) are likely to occur at these prices *set a pricing corridor |
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Countertrade
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*an umbrella term used to describe unconventional trade-fiancing transactions that involve some form of noncast compensation
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Forms of Countertrade
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*simple barter:swap of one product for another
*clearing agreement: 2 gov't agree to import a set specified value of goods from one another *switch trading: a third party is involved *Buyback (compensation): the sellers provides equipment and agress to be paid by the products resulting from using the equipment *counterpurchase: most popular. same as clearing agreement - gov't *offset: the seller agress to "offset" the purchase price by sourcing from the importer's country or trandsferring technology to the other party's country. |
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Motives behind countertrade
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*gain access to new or difficult markets
*overcome exchange rate controls or lack of hard currency *overcome low coutnry credit worthiness *increase sales volume *generate long-term customer goodwill |