Global pricing


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Global Pricing Strategies and Alternatives.

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Global pricing

  1. 1. Global Pricing Course Instructor: Sneha Sharma
  2. 2. Price is the only marketing mix instrument that creates revenues
  3. 3. Pricing Objective  Profit Maximization  Marketing Penetration  Market Skimming  Increasing Market Share  Fighting Competition  Short Pay-back period  Completing Export Obligation  Disposal of Surplus  Capacity Utilization
  4. 4. Global Pricing Policy Alternatives
  5. 5. Global Pricing Policy Alternatives Ethnocentric Polycentric Geocentric
  6. 6. Global Pricing Strategies
  7. 7. Global Pricing Strategies Market Skimming Market Penetration Market Holding Cost Plus
  8. 8. Market Holding Strategy  Adopted by companies that want to maintain their share of the market.  For E.g : in single country marketing , strategy involves reacting to price adjustments by competitors.  Telecom Sector in India
  9. 9. Market Holding Strategy  In global marketing , currency fluctuations often trigger price adjustments.  E.g : Appreciation of source country currency will not be automatically passed in form of higher prices.  If the competitive situation in market countries is price sensitive.  Manufacturers must absorb the cost of currency appreciation by accepting lower margins in order to maintain competitive prices in country market.
  10. 10. Market Holding Strategy  A strong home currency and rising costs in the home country may  force a company to shift its sourcing to in-country or third country manufacturing or licensing agreements  instead of exporting from the home county in order to maintain the market share.  E.g. IKEA sourced 50% of its products in the USA in 1992 compared to only 10 % in 1989.
  11. 11. Market Holding Strategy  If the currency of a country weakens it becomes more difficult to compete in price with imported product.  A weak currency country can be a windfall for a global company with production operations in a weak currency country.  E.g During Asian Flu of 1990’s the Indonesian rupiah fell from 2400 to 18,000 and then recovered to below 8000 to the US Dollar.  Global companies made windfall profits.  Their costs in rupiah increased 100 % but the value of their production in dollars or any hard currency increased by 300 to 700 %.
  12. 12. Cost Plus Pricing  It requires adding up all costs required to get the product to where it must go plus shipping and ancillary charges and a profit percentage.
  13. 13. Drivers of Foreign Market Pricing 4 C’s : Company (cost, goals) , Customers (price sensitivity, preferences), Competition (Market structure ) and Channels
  14. 14. Company Costs: Export Pricing policy  Rigid Cost plus pricing  Export pricing set by adding all costs accrued in selling product in international market and a gross margin.  Flexible cost plus pricing  Adjustments of prices to market conditions in host market. The domestic fixed costs are not considered as theses are sunk costs.  Dynamic incremental pricing  Export related incremental costs include manufacturing costs, shipping expense, insurance , overseas promotional cost.
  15. 15. Two important terms Cost floor Cost Ceiling Costs incurred Customer willingness to pay
  16. 16. Customer demand  Countries with low per capita income  Brand Dilution  Cannibalization  E.g. P & G  Ariel in Egypt  Packaging changed from 200 gms to 150 gms  Crest Toothpaste in China  Cavity protection (generic)  Whitening (Premium )
  17. 17. Customer Demand  Niche Strategy  Starbucks  Haagen Dazs  Extended Product Portfolio  HUL  Selling Older version at lower price
  18. 18. Competition  Number of competitors  Nature of competition  E.g: Indian Rural Market  Global vs local  Private vs State owned Presence of counterfeit products E.g Microsoft in China - Piracy rate for PC software in china is more than 80 % - Prices slashed by over 70 %
  19. 19. Distribution Channel  Variation in trade margins  Length of channel  Size of channel member Parallel Imports/Gray Market
  20. 20. That’s All For Today