International PricingInternational Pricing

Chapter 18Chapter 18

Pricing PolicyPricing Policy

• Pricing ObjectivesPricing Objectives

• Parallel ImportsParallel Imports– How does it affect a company?How does it affect a company?– Exclusive distributionExclusive distribution– How to prevent itHow to prevent it

Approaches to International Approaches to International PricingPricing

• Full-cost v. Variable-cost PricingFull-cost v. Variable-cost Pricing

• Price skimming v. Penetration PricingPrice skimming v. Penetration Pricing

• Market still sets price!!!Market still sets price!!!– Effects of growth and wealthEffects of growth and wealth

Price EscalationPrice Escalation

• What is it?What is it?

• What are its effects?What are its effects?

• What causes it?What causes it?– Costs of exportingCosts of exporting– Taxes, tariffs, and Taxes, tariffs, and

administrative costsadministrative costs– InflationInflation– DeflationDeflation– Exchange rate Exchange rate

fluctuationsfluctuations– Carrying currency Carrying currency

valuesvalues– Middleman & Middleman &

Transportation costsTransportation costs

Lessening Price EscalationLessening Price Escalation

• Lower COGSLower COGS

• Lowering TariffsLowering Tariffs

• Lowering Distribution CostsLowering Distribution Costs

• Free Trade ZonesFree Trade Zones

• DumpingDumping– What is it?What is it?– Countervailing dutyCountervailing duty

CountertradeCountertrade

• Pepsi examplePepsi example• Types of CountertradeTypes of Countertrade

– BarterBarter– Comprehensive dealsComprehensive deals– CounterpurchaseCounterpurchase– Product Buy-Back AgreementProduct Buy-Back Agreement

• ProblemsProblems• InternetInternet• Proactive Countertrade StrategyProactive Countertrade Strategy

Transfer Pricing StrategiesTransfer Pricing Strategies

• DefinitionDefinition

• Branch shows no profitBranch shows no profit

• Advanced Pricing AgreementAdvanced Pricing Agreement

Price QuotationsPrice Quotations

• Should list:Should list:– QualityQuality– QuantityQuantity– TransportationTransportation– ResponsibilityResponsibility

Administered PricingAdministered Pricing

• How destructive is competition?How destructive is competition?

• CartelsCartels– OPECOPEC– DeBeersDeBeers

• Government-induced PricingGovernment-induced Pricing