ch-11-17 pricing decisons (1) (1)
TRANSCRIPT
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Chapter 11Export Pricing
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Product
Price
Promotion
Place
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Price is the only element generating revenue
Pricing strategy involves: skimming, penetration
Depends on the entry strategy of the firm
Pricing Situations could be as follows
First-Time Pricing
Changing Pricing-proactive or reactive Multiple-Product Pricing
Pricing Dynamics
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EXTERNAL1 Market-related factors
Nature of demand/targetaudience characteristics
Government regulations(e.g., duties)
Exchange rate stability
2 Industry-related factors Competition intensity
Nature of competition
INTERNAL1 Marketing Mix
Product (e.g., old/new;standardized/differentiated
Distribution system (e.g.,length)
Promotion needs (e.g., sales
efforts)2 Company characteristics
Extent of internationalization
Countries exported to
3 Management attitudes
Importance of exports
Overall price position of firm
ASSESSMENT OF PRICING ENVIRONMENTS
Pricing Policy Selection
Pricing Strategy Determination
Setting of Specific Price
Exhibit 11.2
Stages in SettingExport Prices
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Standardization vs. Adaptation inPricing
Price differentiation/adaptation can bebased on
Cost-plus
Marginal cost
Full vs. variable cost
Market differentiated
Export Pricing Strategy
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Reasons for Price Escalation
Cost of exporting Taxes, tariffs and administrative costs
Inflation/deflation Exchange rate fluctuations Varying currency values Middlemen and transportation costs
See Exhibit 11.4 as an example of PriceEscalation
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Overcoming Price Escalation
Lowering cost of goods
Adapt the product
Using efficient method of manufacturing Global sourcing, off-shore manufacturing, produce overseas
Lowering product quality
Take a lower profit
Lowering distribution costs
Using Foreign Trade Zones (FTZ)
Reorganize the channel of distribution
Use new or more economical tariff or tax classification
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Term of Sale Incotermsthe internationally accepted standard
definitions for terms of sale set by the InternationalChamber of Commerce (ICC)
Four Categories E-termsSeller make the goods available to the buyer
only at the sellers own premises F-termsSeller is called upon to deliver the goods to a
carrier appointed by the buyer
C-termswhereby the seller has to contact for carriagebut without assuming risk of loss or damage to the goodsor additional costs after the dispatch
D-termsseller has to bear all the costs and risks to bringthe goods to the destination determined by buyer
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Selected Trade Terms
(Incoterms) Ex-works (EXW)
Free carrier (FCA)
Free alongside ship (FAS)
Free on board (FOB)
Cost and freight (CFR) Delivered duty paid (DDP)
Delivered duty unpaid (DDU)
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Getting Paid for Exports
Risks involved and how to overcome them
Commercial risk
Political risk
Buyers credit worthiness
Foreign Exchange risk
Letter of Credit Methods of Payment
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Export Import Process
Informs
Exporter
Exporters
Bank
Importer
Importers
Bank
Receivespayment
Ships
Bill of lading
Informs
Reimbursement
Payment Opens Letter ofCredit
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Exporter Strategies UnderVarying Currency Conditions
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Methods of Payment(see Exhibit 11.7)
Cash in advance
Letter of credit
Drafts-similar to a personal check
Documentary collection
Bankers acceptance
Discounting Open account
Consignment selling
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Sources of Export Financing
International marketers assist their customersabroad in securing appropriate financing
Commercial Banks Forfaiting and Factoring
Official trade finance
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Sources of Export Financing
The following entities insure credit risks forexports.
Export credit agencies (ECAs) Export-Import Bank of the United States (Ex-Im
Bank) The Overseas Private Investment Corporation
(OPIC) The Agency for International Development (AID) The U.S. Department of Agricultures Commodity
Credit Corporation (CCC) Small Business Administration (SBA)
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Leasing
Trade liberalization is expected to benefitlessors both through expected growth in
target economies and eradication of countrylaws and regulations hampering outsidelessors.
Total net income from leasing is often higher
than it would be if the unit was sold.
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Dumping
Definition Predatory vs. Unintentional dumping Remedies for dumping
Antidumping dutyis a duty imposed onimports alleged to be dumped or sold at lessthan fair market value on a domesticmarketplace
Countervailing dutiesa duty imposed onimports alleged to be priced at less than fairmarket value, due to subsidization of anindustry by a foreign government