This presentation covers all the strategies that businesses adopt while making pricing and distribution decisions in global business. It covers terms under international pricing and distribution strategies.

1. PRICING & DISTRIBUTION

2.  3 As by C.K.Prahalad: Fortune at the bottom of the pyramid (developing countries)
Affordability (sachets), Access (time), Availability (place)
 Exporter’s cost (Production, selling and delivery/fixed and variable)
 INCOTERMS (common sale or trade terms used in international trade, defined by
International Chambers of Commerce e.g. FOB, CIF)
This presentation covers:
 Pricing objectives
 Price and non-price factors influencing pricing decisions
 Pricing methods
 Pricing strategies
 Pricing issues

3. Market share (market penetration)
Market skimming
Fighting competition
Preventing new entry
Shorten pay-back period
Early cash recovery
Meeting export obligation
Disposal of surplus
Optimum capacity utilization
Profit maximization
Return on Investment

4. International marketing objectives
Costs
Competition
Product differentiation
Exchange rate
Market Characteristics (Demand trends/ consumer income levels/ importance of
products to consumers/ trade characteristics)
Image of firm and country
Government factors (Regulation of margins/ pricing floors and ceiling/ subsidies/ tax
concessions and exemptions/ other incentives/ government competition/ custom
duties/ international agreements)

5.  Cost based pricing [FC+VC+Overheads+marketing costs+specified % of TC]
 Demand based/ market oriented pricing [‘what the traffic will bear’]
 Competition based pricing [at parity= Going rate pricing/discount/premium]
 Value pricing [based on value of benefits offered]
 Target return pricing [https://www.youtube.com/watch?v=ibb3ead58oA]
 Negotiated pricing [in govt. and institutional purchases]
 Break-even pricing [for a given level of output at which there is neither any loss nor
profit]
 Marginal Cost pricing [only VC is considered. FC is excluded from calculation of cost]
 Retrograde pricing [Working backwards from a given market price to ascertain
whether the export will be profitable or not]
 Transfer pricing
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6.  SKIMMING
 PENETRATION
 PREDATORY
 Follow the leader
 Psychological
 Differential trade margins
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This Photo by Unknown Author is licensed under CC BY-SA-
NC
This Photo by Unknown Author is licensed under CC BY-
SA
This Photo by Unknown Author is licensed under CC BY-SA
This Photo by Unknown Author is licensed under CC
BY-SA-NC

7.  TRANSFER PRICING
 DUMPING
 GRAY/GREY MARKET
 COUNTERTRADE
- Barter
- Switch trading
- Counter purchase
- Buyback
- offset
This Photo by Unknown Author is licensed under CC BY-SA-NC

8. This Photo by Unknown Author is licensed under CC BY-SA
Corporate tax
high
Cheap Labour
A: Profits:
70000 dollars
Cost of
patent/trademark/goods :
40000 dollars
B: Profits:
30000 dollars
TRANSFER PRICING

9.  Pricing of goods transferred from operations or sales units in one country to the
company’s unit elsewhere.
 To maximize total profits of the company
 To facilitate parent company control
 Accused of manipulative use of transfer pricing
 To lower effect of duty, minimal transfer prices for
goods shipped to high-tariff countries
 To reduce income tax, goods are overpriced when
transferred to high-tax countries
 When dividend repat is curtailed by govt. policy, income taken out in form of high
prices for products shipped to units in that country.

10. Non-market based:
 Sales at local manufacturing cost plus a standard mark-up
 Sales at cost of most efficient producers in the company plus a standard mark-up
 Sales at negotiated prices
Market Based:
Arm’s length sales using same
prices as quoted to
independent customer.

11.  Selling in foreign market at price lower than home market price/cost of production
 Reverse dumping
 1. Sporadic (excess stock)
 2. Intermittent (periodic sale)
 3. Long-period (full capacity)
 A kind of predatory pricing
 Anti-dumping/countervailing duties
 Watch the video on dumping at https://www.investopedia.com/terms/d/dumping.asp
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12.  Products sold outside manufacturer’s authorized distribution channels
 Unauthorised sales channels for imported products. May include counterfeit products
 Buy from one country in cheap, sell it in another country for a higher rate (but lower
than the rate in that country)
 Not covered by warranties
 Upsets price stability of distributors
 Loss of after-sales service revenues
 Customer dissatisfaction
 Lower margins- difficult to maintain dealer support
 Hit to sales team and distributors
 Some authorized distributors sell to unauthorized to take advantage of volume
discounts
This Photo by Unknown Author is
licensed under CC BY-SA

13.  No currency transaction
 For a simple understanding, https://www.youtube.com/watch?v=bV8rZX_rx4I
 Further reading: https://www.jstor.org/stable/40705641?seq=1 Guide to Countertrade and International
Barter
Counter trade
Pure Barter
Direct exchange of equal
value
Buyback/ compensation
trade
Buy an end product from
host country
(compensation trade can
be partly cash)
Payment in form of
resultant product
Counter Purchase
Exporter promises to
import from that
country, goods of same
value, 2 simultaneous
separate transactions.
Specified period
Offset
Agreement by an
exporting nation to buy
products from companies
in the other nation.
Defense and aerospace
Switch trading
One country sells to
another country its
obligation to purchase
from the given country

14.  DIRECT EXPORTING/MARKETING
Responsibility of selling activities is the
producer’s
o Direct sales to end users (Zero level
channel)
o Foreign retailers (One-level channel)
o Foreign
distributors/wholesalers/agents
(Multiple channel)
o Sales representatives
o Built-in export department
o Separate export department
o Export sales subsidiary
 INDIRECT
EXPORTING/MARKETING
Responsibility of sales is the
middleman’s
o Marketing middlemen
o Canalising agencies
o Cooperative organisations

15. INDIRECT MARKETING
o Marketing middlemen
- Export merchant (takes title of goods)
- Export/Trading houses
- Trading companies (export and import)
- Export drop shipper
- Overseas Agents or brokers (do not take title of goods)
o Canalising agencies (Can export only through specified government agencies e.g.
Minerals and Metals Trading Corporation i.e. MMTC)
o Co-operative organisations
- Piggyback marketing/mother-henning (uses its overseas distribution channels for others
products too)
- Exporting combinations (mutual benefit)
Export Consortia (enjoys govt. benefits)

16.  Product characteristics
(Nature of product, industrial/consumer products, unit value, standardised products,
newness of product, technical products, frequency of purchase)
 Market related factors
(Features of customers, nature of target markets, market competition, consumer buying
habits, order size)
 Company related factors
(Location of production, characteristics of company, financial position, marketing policies,
customer service)
 Middlemen considerations
(Availability of middlemen, middlemen’s attitude, services by middlemen, product line
specialisation, reputation and goodwill)
 Environmental factors
(Environmental factors, legal restrictions, economic conditions, competitors’ channel, fiscal
structure)
This Photo by Unknown Author is licensed
under CC BY-SA

17.  Cespedes F. et al (1988). Gray Markets: Causes and Cures. Harvard Business Review. Retrieved
April 1, 2020 from https://hbr.org/1988/07/gray-markets-causes-and-cures
 Cherunilam F. (2014). International Business – Text and Cases (5th Ed.). New Delhi: PHL
learning Pvt. Ltd.
 Counter Trade. Retrieved April 2,2020 from https://www.youtube.com/watch?v=bV8rZX_rx4I
 How big companies avoid taxes. Retrieved April 1, 2020 from
https://www.youtube.com/watch?v=Vn73-B9RT_g
 Local textbooks for T.Y.B.M.S. Semester VI on ‘International Marketing’
 Lochner, S. (1985). Guide to Countertrade and International Barter. The International
Lawyer, 19(3), 725-759. Retrieved April 2, 2020, from www.jstor.org/stable/40705641
 Target return pricing. Retrieved April 1,2020
fromhttps://www.youtube.com/watch?v=ibb3ead58oA
 Transfer pricing 2015. Retreived April 1,2020 from
https://www.youtube.com/watch?v=IvXQ0QwbyII This Photo by Unknown
Author is licensed under
CC BY-SA-NC