3. NATIONAL MARKET SIZE
One of the main factors to determine an international pricing strategy
is the size of the national market, which affects prices in different
ways.
A company will often attempt to use the potential volume of sales to
estimate the price at which they will need to market their product to
break even.
For larger countries with the potential for more sales, this price may
be set lower; for smaller countries, the price may be higher.
4. EXCHANGE RATE
Due to discrepancies in the value of different currency, similar
products in different countries may be priced differently.
This has to do not just with demand for that particular product,
but with macroeconomic demand for national currencies, which
affects inflation and, by extension, pricing.
Companies often have to adjust prices due to fluctuations in
exchange rates.
5. CULTURAL DIFFERENCES
Cultural variations that affect pricing can take many forms,
most of which have to do with how members of certain
cultures perceive the value of certain products, which in turn
affects how much they are willing to pay for them.
For example, in the United States women's handbags often are
seen as a status symbol. Female consumers, therefore, often
are willing to pay high prices. In other cultures, however,
handbags are considered more functional, meaning they can
only command a significantly lower price.
6. REGULATIONS
When setting prices in other countries, companies must
research all national regulations relevant to their product.
Many countries set price ceilings as well as price floors on
certain products.
For example, in Nigeria (a large oil producer) the price of
gasoline and other petroleum derivatives is capped. Even if the
product a company is selling does not have price restrictions,
regulations placed on the prices of similar products may affect
potential demand and thus price.
9. CASE STUDY
IKEA localized its products, pricing and even menu for India
The Swedish furniture retailer opened its first store in India, in
Hyderabad.
India, with a growing middle class, is a massive opportunity for the
Swedish company
The company has changed its restaurant menu based on local feedback.
Their signature pork and beef meatballs have been replaced with the
vegetarian and chicken item.
Moreover, the 1,000-seater restaurant offers a very affordable menu.
10. Pricing is always the most important decision when it comes to the
Indian market.
IKEA India plans to offer over 1000 products priced below Rs. 200
Experts, however, feel that the company needs to be careful as it will
have to balance between setting prices low enough to attract price-
conscious buyers and high enough not to discourage the status-conscious
class.
CASE STUDY
11. CASE STUDY
Pricing Challenges
High Investment on infrastructure - IKEA has invested about Rs 1,000 crore
(about $150 million) in the store, which has a retail space of 400,000 sq ft and
offers about 7,500 products. The 13-acre campus is located at the heart of the
city
Higher import duties - This may affect IKEA’s pricing strategy. If IKEA India
decides to keep prices low, it could take longer to break even
High Competition- Though the majority of the furniture market is dominated
by unorganized retail and local vendors, lately online furniture startups such as
Pepperfry and UrbanLadder have become popular in big cities.
12. CASE STUDY
In spite of all this challenges pricing in India has been kept low because
Indian market is price sensitive.
