The document discusses various considerations for international pricing strategies. It outlines different pricing methods like cost-based pricing, market-based pricing, and competitive pricing. It also discusses factors that affect international pricing such as competition, costs, product differentiation, exchange rates, and economic conditions of importing countries. The document then provides examples of pricing strategies such as using a standard worldwide price, competitive pricing based on market prices, and marginal pricing. It also gives the example of how Tata Nano might be priced if launched in the European market. Finally, it briefly introduces INCOTERMS which are international commercial terms of sale.

1. Pricing Strategy For
International Market
Presented By:
Anshu Nath - 02
Pranjali Sinha - 14
Kavya Vajjhala - 30
Subrata Kr. Dey - 45

2. International Pricing
• Global pricing is one of the most critical and
complex issues in international marketing.
• Price is the only marketing mix instrument that
creates revenues. All other elements entail costs.
• A company’s global pricing policy may make or
break its overseas expansion efforts.
• Multinationals also face the challenges of how to
coordinate their pricing across different
countries.

3. Export Pricing Decision For Developing Countries
 Lower production & technology base – higher
cost of production.
 Little bargaining power to negotiate –
compelled to sell products at below cost of
production.
 Less/ marginal value addition of the products
– limited scope for realizing optimal prices.
 Appropriate pricing strategies with innovation
– success in international market.

4. Pricing Methods
PricingMethod
Cost Based
Pricing
Full Cost Pricing
Marginal Cost
PricingMarket Based
Pricing

5. Cost Based Pricing
 Based on the cost of the product.
 Certain percentage of profit and other
expenses may be added to the cost.
 No optimum method for following reasons:
 May be too low vis-à-vis competitors,
and importers may earn a huge margin.
 May be too high, making goods non
competitive and rejection of offers

6. Full Cost Pricing
 Used during the initial stages of internationalization.
 Adding a mark-up on the total cost determine price.
Benefits:
 Ensures fast recovery of investments.
 Useful for firms dependent on international markets
than domestic markets.
 Eases operation and implementation of marketing
strategies.
Disadvantage:
 Overlooks prevailing international market price-
either uncompetitive due to high price or low price.

7. Marginal Cost Pricing
Marginal cost- cost of producing and selling one more
unit
Sets a lower limit to which a firm can lower its price
without affecting its overall profit
Fixed cost is recovered from the domestic market and
uses variable costing for international market
Used when to penetrate international market

8. Market Based Pricing
 Exporters in developing countries generally are:
price followers than price setters.
having limitations to offer
unique products•
 This makes them assess the prevailing price in the
international markets and top down calculation
to arrive at the cost of the product.
 Beneficial as it allows to meet the competitor
price in the market

9. Factors
affecting
International
Pricing
Competition
Cost
Product
Differen-
-tiation
Exchange
Rate
Government
Factor
Economic
Condition
of the
importing
country

10. Cost
• Should keep low in the short run for a long
term gain.
• May operate at no profit no loss level initially
• Cost of promotion
• Cost of distribution

11. Competition
• Import substitution
• Local as well as foreign
• Competition pricing will depend on trade
agreement
• Initial low cost products can be offered to
gain market share

12. Product Differentiation
• Can accelerate market share growth
• Spurs buying if a strong USP exist
• Can create a niche product if put in IPR
• Can be used to fix varying prices

13. Exchange Rates
• Exchange rate fluctuation can be offsite in a
probabilistic market condition
• Higher price can be fixed for a favoured currency
payment
• Hedging should be done if payments are to be
received over a period of time
• Uncovered interest rate parity can also be used to
neutralize the effects of exchange rate fluctuation

14. Economic Conditions of the
Importing Country
Exports should take into consideration:
Per capita income
Spending pattern
Demand means:
Desire to acquire something
Willingness to pay for it
Ability to pay for it

15. Government Factors
• Margin Regulation ( Profit rates )
• Price floors and price ceilings indicating lowest
and highest price levels
• Subsidies provided by the Govt.
• Tax concessions as in SEZs
• Encouragement to local exporters through
finance, inputs at lower indexes

16. Pricing Strategies
Pricing
Strategies
Standard
Approach
Competitiv
e Pricing
Domestic
price plus
Marginal
pricing

17. Standard Approach
Some firms use a standard worldwide price approach
where the exporter does not adjust the product price,
regardless of any outside factors. This method often
limits sales potential, because flexibility is often
required to successfully enter a market. However, this
approach may work with certain products that are in
high demand. An alternative to a standard price might
be average pricing, when a certain profit margin is
maintained on a worldwide basis, including the domestic
market.

18. Competitive Pricing
Competitive Pricing is based on evaluating the price of
competitive products in the target market
Domestic Pricing
Begin with the “Ex-Works" or the “FOB Factory” price
of product that includes possible sales agents’
commissions or distributor discounts

19. Marginal Pricing
By far, this method is the most logical since it
considers all of the direct costs relative to
international trade, and does not burden export sales
with domestic overhead costs. Begin with the actual
cost of manufacture. Add the costs of:
1. Product modification for international sale
2. Distributor discounts or sales commissions
3. Allowances for promotion or financing
4. Special packaging for international shipping
5. Administrative cost relative to international trade

20. Pricing Strategy: If Tata Nano is
Launched in European Market
 if Nano is expensive or even if price is at par, more over due
to increase in fuel prices, economic conditions customers
buying power is also affected. So they would prefer to buy a
small car with low price that would meet their basic
travelling needs.
 European customers are more safety conscious, and if Nano
is priced low then their perception about quality of product
will lead to a assumption that product on high of safety
standards and this car might be dangerous to travel in

21. International Commercial Terms
of Sale: INCOTERMS
INCOTERMS are divided into four main components and
are built around the main carriage of the shipment.
E-Terms (origin terms)
F-Terms (pre-main carriage terms)
C-terms (Main Carriage Terms)
D-Terms (post-main carriage or arrival terms)

22. INCOTERMS
E-Terms
Ex-Works
F-Terms
Free Carrier
Free Alongside Ship
Free on Board
C-Terms
Cost & Freight
Cost Insurance & Freight
CPT/Carriage Paid
Carriage & Insurance Paid
D-Terms
Delivered at Frontier
Delivered Ex Ship
Delivered Ex Quay
Delivered Duty Unpaid
Delivered Duty Paid

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