export

1. COSTING AND PRICING FOR
EXPORT

2. Introduction
Costing and pricing  not always easy
The exporter often :
High markup  few competitors and
differentiated products, market power
 Medicines, computers, chemicals,
communication equipment
Low markup  sectors of increased
competitors
 Textiles, food, electic machinery, motor
vehicles
 Roc-bottom prices  to penetrate into the
markets

3. Introduction
For Exporters three Financial Aspects are
Important:
Coming up with competitive prices when
considering market entry
Calculating the cost-price
Knowing how to react to prices changes

4. Setting the price
The export market is very complex.
The domestic prices  not always a better
indicator of what the export market is willing
to pay.
The easiest way  EXW  FOB  CIF ….
Cost-Plus Method, is common practice.

5. Note
The Cost-Plus method is not suited as an
instrument for export-marketing  not
mention factors that affect export pricing, ex:
functionality of the product, behavioral and
cultural aspects, disposable income of the
people, supply of similar or substitute
products…
Exporters from developing countries will
usually be price-followers, not price-setters.
SME exporters are dictated upon on prices by
the buyers
 Find your unique selling proposition (USP)

6. A critical nine-step approach
1. Establish the current market pricing for
comparative and/or substitutive products in
the target market.
2. Establish all the elements of the market
price, like VAT, margins for the trade and the
importer, import duties, freight and
insurance costs etc.
3. Make a top-down calculation, deducting all
the elements of the expected market price
of your product(s) in order to arrive at the
price “Ex Works”
4. See if you can meet this price.

7. A critical nine-step approach
5. If not, re-calculate your own cost price by finding
ways to decrease costs in your own factory or
organization. Or decrease your marketing budget,
which also burdens your export-market price.
6. Estimate total sales over a three years period,
add total planned expenses, including those of your
export department, traveling and canvassing
efforts.
7. Make a bottom-up calculation per product item,
dividing the supporting budgets over the total
number of items to be sold.
8. Set the final market prices.
9. Test the price (through market research)

8. Calculation methods
1. A “top-down” calculation, enabling you to
establish if you can meet your competitors’
market-prices at cost-price level.
2. A “bottom-up” calculation to help you
setting your final price in the target market