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



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.



International Pricing Situations

First-time pricing

Changing pricing

Multiple-product pricing



1. First – Time Pricing

The alternatives available are:

a) Skimming,

b) Following the market price, and

c) Penetration Pricing.



(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



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



(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



Conditions favouring setting a low price:

- price-sensitive market

- decreasing production and distribution costs assales volume increase

- low price discourages competitors



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



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



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



Export Pricing Strategy

Standard worldwide Price

Dual Pricing

Market-differentiated Pricing



(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



(b) Dual Pricing

The two approaches available for pricing exports are:

i) Cost- plus method

ii) Marginal cost method



(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



(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



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



(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



Thank You !!!

export pricing decision

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