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Export marketing has two different types of costs:production costs and selling and delivery costs. Factors affecting pricing are international marketing objective, costs, competition, product …

Export marketing has two different types of costs:production costs and selling and delivery costs. Factors affecting pricing are international marketing objective, costs, competition, product differentiation, image and government factors. Besides supply conditions, demand and competitive conditions, cost is the other most important factor in export pricing.

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  • 1. Chapter 10International Pricing International Marketing Chapter-10 International Pricing
  • 2. Objectives What determines export prices What are the objectives of pricing What factors affect pricing what are the approaches in export pricing What is transfer pricing What is dumping International Marketing Chapter-10 International Pricing
  • 3. What are the steps involved in pricingWhat are the steps in retrograde pricingWhat are export price quotation andincotermsWhat are the information requirementsof export pricing International Marketing Chapter-10 International Pricing
  • 4. Introduction Right price is one of the important determinants of business success. The uniqueness of price in the marketing mix is that it is the only element that generates revenue. At the outset one may think that price must cover at least the full cost of production and marketing. International Marketing Chapter-10 International Pricing
  • 5. Types Of Costs In ExportMarketing1. Production costs2. Selling and delivery costs International Marketing Chapter-10 International Pricing
  • 6. Productions Costs1. Fixed costs2. Variable costs International Marketing Chapter-10 International Pricing
  • 7. Pricing Objective1. Market penetration2. Market share3. Market skimming4. Fighting competition5. Preventing new entry6. Shorten pay-back period7. Early cash recovery International Marketing Chapter-10 International Pricing
  • 8. 8. Meeting export obligation9. Disposal of surplus10. Optimum capacity utilization11. Return on investment12. Profit maximization International Marketing Chapter-10 International Pricing
  • 9. Factors Affecting Pricing International marketing objective Costs Competition Product differentiation Exchange rate Market characteristics Image Government factor Marketing International Chapter-10 International Pricing
  • 10. Cost Based PricingCost based pricing, also known as cost pluspricing, is a common method of pricing.Under this method the price includes acertain percentage of profit margin on thesum total of the full cost of production,marketing costs and an allocation of theoverheads.That is, price=(fixed costs+variablecosts+overheads+marketing costs)+specified percentage of the total costs International Marketing Chapter-10 International Pricing
  • 11. Market Oriented Pricing This is a very flexible policy in the sense that it allows the prices to be changed in accordance with the changes in market conditions. The product may be priced high when demand conditions are very good and the price may be lowered when the market is sluggish if that helps increasing sales. This method is sometimes referred to as what the traffic will bear method. International Marketing Chapter-10 International Pricing
  • 12. Break Even PriceBreak-even price is the price for a given levelof output at which there is neither any lossnor profit.Break-even analysis helps to understand theminimum sales required to avoid any loss andalso the profit or loss at various levels ofsales.The break-even point(BEP) is the point ofsales at which there is neither any loss norany profit. International Marketing Chapter-10 International Pricing
  • 13. Calculation Of BEP In TermsOf Physical UnitsBEP = FC α FC SP-VC CWhereFC = fixed costVC = variable costSP = selling priceC = contribution per unit ( C=SP-VC ) International Marketing Chapter-10 International Pricing
  • 14. Marginal Cost Pricing Marginal cost pricing approach is common in evaluating the profitability of new orders in case of firms with excess capacity. Under the marginal cost pricing, the relevant cost considered for pricing is the variable cost, the fixed cost is excluded from the calculation of the cost of the product. Marketing International Chapter-10 International Pricing
  • 15. Creative Pricing Marginal costing may give scope for creative pricing. Creative pricing means taking advantage of the flexibility between the lower limit of break-even price and the upper limit of the competitor’s price for similar product. International Marketing Chapter-10 International Pricing
  • 16. Transfer Pricing Transfer pricing or intra company pricing refers to the pricing of goods transferred from operations or sales units in one country to the company’ s unit elsewhere. The appropriate basis for intracompany transfers often depends on the nature of the subsidiaries, the market conditions and government policies and regulations. International Marketing Chapter-10 International Pricing
  • 17. Some studies show that, in most cases,setting up transfer prices remains theabsolute prerogative of the parentcompany executives regardless of thefirm’s nationally. International Marketing Chapter-10 International Pricing
  • 18. Steps In Pricing1. Defining pricing objectives2. Analyzing market characteristics3. Calculating costs4. Calculating value of incentives5. Determining export price International Marketing Chapter-10 International Pricing
  • 19. Export Price Quotations AndIncoterms EXW – EX WORKS FCA – Free carrier FAS – Free Alongside Ship FOB – Free On Board CFR – Cost And Freight CIF – Cost, Insurance and Freight CPT – Carriage Paid To International Marketing Chapter-10 International Pricing
  • 20. CIP – Carriage and Insurance Paid ToDAF – Delivered At FrontierDES – Delivered Ex ShipDEQ – Delivered Ex QuayDDU – Delivered Duty UnpaidDDP - Delivered Duty Paid International Marketing Chapter-10 International Pricing
  • 21. Documents Required UnderVarious Terms EXW – Ex Works FCA – Free Carrier FAS- Free Alongside Ship FOB – Free on Board CFR – Cost and Freight CIF – Cost, Insurance and Freight CPT – Carriage Paid to International Marketing Chapter-10 International Pricing
  • 22. CIP – Carriage and Insurance Paid toDAF – Delivered at FrontierDES – Delivered Ex ShipDEQ – Delivered Ex QuaryDDU – Delivered Duty UnpaidDDP – Delivered Duty Paid International Marketing Chapter-10 International Pricing
  • 23. Information Requirement ForExport Pricing Information on the total market Information on competition Information on prices Information on Government policies Information on production and costs Information on revenue and profits International Marketing Chapter-10 International Pricing
  • 24. SummaryThere are two types of cost in exportmarketing; production costs and selling anddelivery costs.The factors which affect pricing policies are;international marketing objective, costs,competition, product differentiation,exchange rate, market characteristics, imageand government factors.Cost is one of the most important factor inexport pricing besides supply conditions anddemand and competitive conditions. International Marketing Chapter-10 International Pricing