The document discusses the importance of pricing in international marketing, outlining objectives such as maximizing sales and profits while considering market demands and competition. It details various pricing methods like cost plus, marginal cost, penetration, and skimming, alongside factors influencing pricing decisions including costs, competition, and regulations. Additionally, it covers the concepts of transfer pricing and counter-trade, emphasizing different pricing approaches like ethnocentric, polycentric, and geocentric strategies for global markets.

1. INTERNATIONAL
PRICING
B Y V I J YATA
A S S I S TA N T P R O F E S S O R ( D E P T T. O F M B A )
R A N C H I W O M E N ’ S C O L L E G E , R A N C H I U N I V E R S I T Y

2. INTRODUCTION
Of the 4Ps of the marketing mix, pricing receives the least
attention but success in international marketing depends on
right pricing of the product.

3. OBJECTIVE OF PRICING IN
INTERNATIONAL MARKETING
The main objective of pricing in overseas marketing should be to meet the customer
demand in competitive situation in such a way that sales and profit are maximised.
Additionally there can be these following objectives too specific to market and product :
• PENETRATION- quoting a low price to divert demand or to generate new demand
• SKIMMING – to charge premium price after having a strong foothold in market
• HOLDING MARKET SHARE – to react with price adjustments with competitors and
exchange rate fluctuations( single country
market )
• ENHANCING SHARE – out-pricing competitor either by enhancing cost efficiency or by
quoting price based on direct costs and not on total costs

4. FACTORS AFFECTING PRICING
DECISIONS
• Cost of the Product
• Competition in the foreign market
• Demand for the product in the foreign market
• Exchange rate fluctuations
• International transportation cost
• Governing trade policies and price regulations
• Varying inflation and interest rates in different countries
• Micro and Macro marketing environments of the overseas as well
as domestic market

5. PRICING PROCESS
Price Quotation and term of sale
Calculation of Price Structure
Determination of Pricing Objectives
Determination of price limits
Lower limits : cost limit Upper Limits : Market limits
Marketing Analysis
Market size, segment and competition Price levels and price categories
Cost Analysis
Cost of product Cost of distribution and marketing

6. ELEMENTS OF COST IN EXPORT
1. Direct Cost i.e Material , labor, other direct charges
2. Indirect Cost + Factory overhead = Factory Cost
3. General and Administrative expenses = Total Cost
4. Distribution and selling Expenses
5. Marketing Support cost = Total cost of Sale
6. Export packaging , marketing and labelling
7. Port/Dockyard/Airport handling charges
8. Documentation fees
9. Duties and taxes related to exporting
10.Importer’s, Wholesaler’s, Retailer’s and agent’s margin and mark-
up

7. INTERNATIONAL PRICING METHODS
• Cost Plus Method
• Marginal Cost Pricing
• Differential Pricing
• Probe Pricing
• Penetration Pricing
• Skimming Pricing
• Competitive Pricing
• Transfer Pricing

8. COST PLUS METHOD
This implies charging the total costs plus profit. Here
includes all costs incurred in international trade like special
packaging, labelling, transportation , insurance , handling
duties, taxes and levies at different stages from the place of
origin in the exporting country to the foreign country ,
depending on terms of sale.
MARGINAL COST PRICING
In some circumstances , exporter may charge price to
cover only prime cost or just material cost-plus packing and
other direct export marketing cost.This is known as Marginal
cost pricing method . It is used to penetrate into foreign
markets.

9. DIFFERNTIAL PRICING
Different prices are charged in different markets
and different segments based on competition and
business environment varying from country to
PROBE PRICING
A new entrant into a foreign market having
little/no knowledge of the market tries to probe the
prospects of the market by quoting price
approximation relating to sales volume and value.
plus profit and competitor’s prices are used for setting
probe pricing parameters.

10. PENETRATION PRICING
This price may yield marginal surplus over the total
cost, or just cover the full cost or in some cases even the
total cost may not be realised, but there are considerable
chances of realising them in future.
SKIMMING PRICING
If the exporter has very strong foothold in foreign
market with very unique selling proposition and
competitive advantage with favourable positive image,
higher prices may be charged to maximise gains.

11. COMPETITIVE PRICING
Adjustment and adaptations of pricing depending on the
prices quoted by competitors is know as competitive pricing.
TRANSFER PRICING
In international marketing, different units under the same
corporate body but located in different foreign countries,
goods and services among themselves, the pricing of such
exchanges is known as transfer pricing. Transfer pricing takes taxes
and duties leviable in the countries concerned , their marketing
conditions, paying potential of prospect clients , profit transfer rules
and varying government rules into account.

12. TRANSFER PRICING METHODS
Alternative approaches to transfer prices are :
Transfer at cost :
This approach assumes that lower costs lead to better
performance by the subsidiary/affiliate and also helps in keeping
duties low at the receiving end. The transferring company do not
have expectation of profit , rather the receiving subsidiary is
expected to generate profit by subsequent sale.
Transfer at cost plus overhead and margin
This approach assumes that profit must be shown at every
stage of movement through the channel. But this may result in
pricing unrelated to competition or demand condition in foreign
market.

13. Transfer at price derived from end market prices
Under this method the price is derived from the
competitive foreign market prices. Here , there are chances of
not meeting the production cost by the seller or the margins
may be too low but, it helps in establishing name into a new
market.
Transfer at “ Arm’s length price”
Using this method , the transfer price is the price that
unaffiliated parties in a similar transaction agreed on.

14. DUMPING
One of the challenging issues in international pricing is dumping.
Dumping refers to the practice of charging a very low price for imported
goods to the detriment of the same product manufactured domestically.
Dumping can be sporadic when the manufacturer with unsold inventories
wants to dispose it in other countries, at lower price. By means of
Predatory dumping company gains access to overseas market by selling
initially at a loss to drive out competition.
Reverse dumping is another form of dumping where overseas demand is
less elastic and will tolerate a higher price. In this case , dumping occurs in
the home market.
Dumping can be legal or illegal based on the laws of the market in which
it takes place.

15. COUNTER-TRADE
Counter- trade is one of the practice in international pricing.
Counter trade refers to a government mandate to pay for goods and
services with something other than cash. Counter trade can be in the
form of barter where one product is exchanged for another (parallel
barter), where two contracts or a set of parallel cash sales agreement
is effected.
The main reasons for spread of counter trade are :
i. It provides a trade financing alternative to the countries having
international debt and liquidity problems.
ii. It facilitates access to new market
iii. It fits well with the growth of bilateral trade agreements between
governments.

16. GLOBAL PRICING ALTERNATIVES
Finns operating in international markets follow three
pricing approaches, predominantly:
Ethnocentric approach
Polycentric approach
Geocentric approach

17. ETHNOCENTRIC APPROACH
A company following an ethnocentric approach follows the
same pricing policy throughout the world. The importer of
the product will bear the freight and import duties. This
approach is convenient to adopt because there is no need
to make any modifications to price based on competitive
or market conditions. The firm need not put in efforts to
collect information on these market conditions. But by
adopting tins approach, a firm might fail to make optimum
profits by not fixing the prices of the products based on
regional market conditions

18. POLYCENTRIC APPROACH
A firm following this approach allows its regional managers
to fix the product prices based on the circumstances in
which they operate. Tins approach might prove to be not
so good, when the disparity in product prices from one
region to another is higher than transportation costs and
duties. When this condition prevails, customers will buy the
products in markets where they are available at low price
and ship them to where the prices are relatively high. This
will result in loss of revenue for the firm following this
approach.

19. GEOCENTRIC APPROACH
A firm adopting this approach takes a medium position
between fixing a single price worldwide and fixing different
prices based on the requirements of subsidiaries. One of
the fundamental assumptions underlying tins approach is
that markets are unique, and specific factors related to
them have to be taken into account while making a pricing
decision. Also the approach takes into consideration tire
price coordination necessary at headquarters to deal with
international accounts and product arbitrage. This
approach is the most practical of all because it takes into
consideration both global competition and local rivalry in
establishing prices.

20. THANK YOU
F O R F E E D B A C K / S U G G E S T I O N S M A I L AT
V I J YATA . R W C @ G M A I L . C O M