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  1. 1. <ul><li>Identify the factors that must be considered by businesses when setting prices. </li></ul><ul><li>Describe pricing methods used by businesses. </li></ul><ul><li>Discuss some pricing factors that are unique to global markets. </li></ul>INTERNATIONAL PRICING ACTIVITIES LESSON 18-1 GOALS
  2. 2. Price Planning for Int’l Marketing <ul><li>Every business must decide what amount to charge. </li></ul><ul><li>Must decide how to get goods and services to customers. </li></ul><ul><ul><li>Factors: Export costs, foreign currencies, availability </li></ul></ul><ul><li>Price is the monetary value of a good or service. </li></ul>
  3. 3. Price Planning for International Marketing <ul><li>Three main factors influence the price a company charges for goods & services: </li></ul><ul><ul><li>Costs </li></ul></ul><ul><ul><li>Consumer demand </li></ul></ul><ul><ul><li>Competition </li></ul></ul>
  4. 4. Costs <ul><li>The cost to modify a product to meet cultural or legal restrictions. </li></ul><ul><li>Tariffs and other taxes that must be paid when selling to customers in another country. </li></ul><ul><li>Fees to acquire export or import licenses </li></ul><ul><li>Expenses for the preparation of export documents. </li></ul><ul><li>Changes in the exchange rate for a nation’s currency. </li></ul><ul><li>Transportation costs due to selling to buyers at a great distance. </li></ul>
  5. 5. Consumer Demand <ul><li>When prices are high, consumers tend to buy less than when prices are low. </li></ul><ul><li>Lower incomes, higher prices, and needs for other items result in reduced demand for a good or service. </li></ul>
  6. 6. Competition <ul><li>If many companies are selling an identical product, consumers have more choices. </li></ul><ul><li>Competition keeps prices _______. </li></ul>
  7. 7. Price Selection Methods <ul><li>Markup Pricing </li></ul><ul><li>New Product Pricing </li></ul><ul><li>Psychological Pricing </li></ul><ul><li>Discount Pricing </li></ul>
  8. 8. Markup Pricing <ul><li>Markup is the amount added to the cost of the product to determine the selling price . </li></ul><ul><li>Example: </li></ul><ul><li>Percentage × Cost = Markup </li></ul><ul><li>40% × $50.00 = $20.00 </li></ul><ul><li>Cost + Markup = Selling Price </li></ul><ul><li>$50.00 + $20.00 = $70.00 </li></ul>
  9. 9. New Product Pricing <ul><li>Competitive pricing -Sell at a comparable price if there is already competition in mkt. </li></ul><ul><ul><li>Examples: gas, pizza, groceries </li></ul></ul><ul><li>Skim pricing -sets a relatively high introductory price. Attracts buyers who are not concerned with price. </li></ul><ul><ul><li>Examples: MP3 players & Tivo when 1 st introduced. </li></ul></ul><ul><li>Penetration pricing -setting a relatively low introductory price for a new product. Gains strong acceptance. Takes away sales from the competition. </li></ul>
  10. 10. Psychological Pricing <ul><li>Promotional pricing </li></ul><ul><ul><li>Loss leader – very low-priced items to attract customers to come and make other purchases </li></ul></ul><ul><li>Odd-even pricing – </li></ul><ul><ul><li>$4.95 and $9.99 Bargain Oriented </li></ul></ul><ul><ul><li>$175 and $12.50 Quality Conscious </li></ul></ul><ul><li>Prestige pricing – set high prices to project status, influence, and power. </li></ul><ul><li>Price lining-All merchandise in a category is same price. All CD’s $12.99. All Suits $150 </li></ul>
  11. 11. Discount Pricing <ul><li>Seasonal discounts </li></ul><ul><li>Cash discounts – discount for paying bills quickly or on time. </li></ul><ul><li>Quantity discounts – encourages more sale. </li></ul><ul><ul><li>Different price for amounts 1-4, 5-9, 10 or more </li></ul></ul><ul><li>Trade discounts - </li></ul><ul><ul><li>Manufacturer to distributor discount. </li></ul></ul>
  12. 12. Pricing in Global Markets <ul><li>Difficult to set prices across national borders. </li></ul><ul><ul><li>Setting prices high enough to cover unexpected fluctuation in exchange rates is common. </li></ul></ul><ul><ul><li>Two additional methods IB’s use to minimize risk. </li></ul></ul><ul><ul><li>Countertrade </li></ul></ul><ul><ul><ul><li>Direct exchange of products or services between companies in different countries minimizes these risks. </li></ul></ul></ul><ul><ul><li>Dumping </li></ul></ul><ul><ul><ul><li>Set prices extremely low, lower than what is charged in home country. This drives out competition. </li></ul></ul></ul><ul><ul><ul><li>Dumping is not good for economy. </li></ul></ul></ul>
  13. 13. Assignment Due on Thursday (20 Points) <ul><li>Bring in an example of the following pricing methods (LABEL each). </li></ul><ul><ul><li>Promotional Pricing </li></ul></ul><ul><ul><li>Odd-Even Pricing </li></ul></ul><ul><ul><li>Prestige Pricing </li></ul></ul><ul><ul><li>Price Lining </li></ul></ul><ul><ul><li>BONUS: Any of the Discount Pricing methods will be bonus. </li></ul></ul>
  14. 14. <ul><li>Contrast direct and indirect channels of distribution. </li></ul><ul><li>Describe the activities of agents, wholesalers, and retailers. </li></ul><ul><li>Explain the role played by global intermediaries. </li></ul>GLOBAL DISTRIBUTION ACTIVITIES LESSON 18-2 GOALS
  15. 15. Distribution Channels <ul><li>Distribution Channel - the path taken by a good or service to get from producer to final user . </li></ul><ul><ul><li>When to use wholesalers? Retailers? </li></ul></ul><ul><ul><ul><li>Depends on product and customer. </li></ul></ul></ul><ul><ul><li>Direct Distribution Channel – </li></ul></ul><ul><ul><li>Indirect Distribution Channel – </li></ul></ul><ul><ul><li>Intermediary – </li></ul></ul>
  16. 16. Common Distribution Channels <ul><li>Channel A </li></ul>Channel B Channel C Channel D Consumer Consumer Consumer Consumer Producer Producer Producer Retailer Wholesaler Agent Retailer Retailer Wholesaler Producer Intermediaries
  17. 17. Distribution Channel Members <ul><li>Agent ( broker ) - *does not take ownership. </li></ul><ul><li>Wholesaler – *buys large quantities, sells to retailers. </li></ul><ul><ul><li>5 main functions: </li></ul></ul><ul><ul><ul><li>Provide information - </li></ul></ul></ul><ul><ul><ul><li>Processing orders - </li></ul></ul></ul><ul><ul><ul><li>Storing and transporting - </li></ul></ul></ul><ul><ul><ul><li>Financing and taking possession - </li></ul></ul></ul><ul><ul><ul><li>Promoting - </li></ul></ul></ul>
  18. 18. Distribution Channel Members <ul><li>Retailer – *store or business, sells directly to final users. </li></ul><ul><li>Serve customers 5 ways: </li></ul><ul><ul><li>Product Selection – </li></ul></ul><ul><ul><li>Convenience – </li></ul></ul><ul><ul><li>Product Quality – </li></ul></ul><ul><ul><li>Sales Staff Assistance – </li></ul></ul><ul><ul><li>Special Services – </li></ul></ul>
  19. 19. Retailers <ul><li>Convenience stores </li></ul><ul><li>General merchandise retailers </li></ul><ul><li>Specialty stores </li></ul><ul><li>Direct sellers </li></ul><ul><li>Online retailers </li></ul><ul><li>Automatic vending </li></ul>
  20. 20. International Retailing Activities <ul><li>Vehicles converted to mini-restaurants allow companies to serve customers at temporary locations. </li></ul><ul><ul><li>Sporting events </li></ul></ul><ul><ul><li>Parks </li></ul></ul><ul><ul><li>Fairs, </li></ul></ul><ul><ul><li>Concerts </li></ul></ul><ul><li>ATMobiles (portable cash machines) </li></ul><ul><li>Sidewalk merchants/vendors </li></ul>
  21. 21. Global Intermediaries <ul><li>Export management company (EMC) </li></ul><ul><li>Export trading company (ETC) </li></ul><ul><li>Freight forwarder </li></ul><ul><li>Customs broker </li></ul>
  22. 22. <ul><li>Summarize the shipping requirements for international distribution. </li></ul><ul><li>Compare transportation modes available to international distributors. </li></ul>MOVING GOODS AROUND THE WORLD LESSON 18-3 GOALS
  23. 23. Preparing for Shipping <ul><li>Packing </li></ul><ul><ul><li>Avoid breakage </li></ul></ul><ul><ul><li>Maintain the lowest possible weight and volume </li></ul></ul><ul><ul><li>Provide moisture-proof surroundings </li></ul></ul><ul><ul><li>Minimize theft </li></ul></ul>
  24. 24. Preparing for Shipping <ul><li>Labeling </li></ul><ul><ul><li>Name and address of the shipper </li></ul></ul><ul><ul><li>Country of origin </li></ul></ul><ul><ul><li>Container’s weight </li></ul></ul><ul><ul><li>Size, # of packages, destination </li></ul></ul><ul><ul><li>Labels for hazardous material </li></ul></ul>
  25. 25. Documentation <ul><li>Bill of lading </li></ul><ul><ul><ul><li>Contract between the exporter and the transporter. </li></ul></ul></ul><ul><ul><ul><ul><li>Contains…. </li></ul></ul></ul></ul><ul><li>Certificate of origin </li></ul><ul><ul><li>Documents the country in which the goods were produced. </li></ul></ul><ul><li>Export declaration </li></ul><ul><ul><li>US Dept of Commerce if more that $500. </li></ul></ul><ul><li>Destination control statement </li></ul><ul><ul><li>Verifies the country to which the goods are being shipped. </li></ul></ul><ul><li>Insurance certificate </li></ul><ul><ul><ul><li>Amount of insurance coverage for fire, theft, water damage. </li></ul></ul></ul>
  26. 26. Transportation in the Global Market <ul><li>Physical Distribution </li></ul><ul><li>Motor carrier </li></ul><ul><li>Railroad </li></ul><ul><li>Waterway </li></ul><ul><li>Pipeline </li></ul><ul><li>Air carrier </li></ul><ul><li>Intermodal movement </li></ul>