2. Pricing
Pricing is an act of determining price for the
product.
Pricing in international marketing is a tricky
problem as well as a technical job
It is a competitive weapon in international
marketing
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
3. Types of International Pricing
Policy
Export pricing/Free market pricing
Administered pricing
Transfer pricing
Foreign market pricing
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
4. Export Pricing
Export pricing is a policy whereby the firms
determine prices independently by the free play of
demand and supply factors
It is also known as free market pricing
Exporters assume that there is perfect competition
in the market.
Competition and demand factors are considered
It is based on cost plus method
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
5. Constraints or Problems in Export
Pricing
Price escalation
Price for the product may unnecessarily increase or
decrease due to the changes in transportation cost,
custom duties, distributor’s charges.
E.g. FOB, C& F, CIF
International dumping
Dumping is the unfair practice of cutting prices for
injury, destruction, or prevention of domestic
industry
Dumping is illegal in many counties
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
6. Types of Dumping
Predatory dumping: Selling the product at a loss to gain
access to the market and thus drive out the competitors
Persistent dumping: Sells at lower prices in one market
than in others
Sporadic dumping: Firms cut the price of the unsold stocks
Unintentional dumping: due to the time lag between sales
agreement and arrival of products
Reverse dumping; low price in home country
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
7. Export Pricing strategy
Penetration pricing
Low price in the initial stage
Skimming pricing
High price in the initial stage
Market holding pricing
Setting price at competitive rate
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
8. Administered Pricing Policy
Administered pricing relates to attempts to
administer prices for an entire market, including a
country, region, or the continent as a whole
Such prices may be arranged through
The cooperation of competitors
National , state or local governments
By international agreement
The end goal of all administered pricing activities is to
reduce the impact of price competition
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
9. Forms of Administered Pricing
Counter trades
Switch trading
Leasing international
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
10. Counter Trade
Countertrade means exchanging goods or services
which are paid for, in whole or part, with other
goods or services, rather than with money
In dealings between sovereign states, the term
bilateral trade is used. OR "Any transaction
involving exchange of goods or service for
something of equal value."
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
11. Need of Counter trade
Shortage of convertible currency
Liquidity problems
Develop new markets
Stimulation of jobs and Industry
To balance overseas trade
Ensure future selling contracts (Counter purchase)
To gain a competitive edge over other suppliers.
It has become popular as a means of financing
international trade to reduce risks or overcome problems
associated with various national currencies
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
12. Forms of Counter Trade
Barter
Switch Trading
Counter purchase
Buyback
Compensation trade
Offset
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University, Nepal
13. Barter
Exchange of goods or services directly for other
goods or services without the use of money as
means of purchase or payment. Examples : Indo
Iraq Wheat and Rice for Oil deal
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University, Nepal
14. Switch Trading
It involves at least three parties. This means a
country may barter goods from another country
which may be of no use to itself so it sells the
goods to other country for hard cash
Brazil exported corn to East Germany (before
Unification) and received products in return.
Germany did not use corn , so it sold the corn to
other countries for hard cash
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
15. Counter Purchase
Counter purchase is a reciprocal buying
agreement. It occurs when a firm agrees to
purchase a certain amount of materials in future
back from a country to which a sale is made.
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
16. Compensate Trade
Compensation trade is a form of barter in which
one of the flows is partly in goods and partly in
hard currency
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University, Nepal
17. Offset
Agreement that a company will offset a hard -
currency purchase of an unspecified product from
that nation in the future.
Agreement by one nation to buy a product from
another, subject to the purchase of some or all of
the components and raw materials from the buyer
of the finished product, or the assembly of such
product in the buyer nation.
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
18. International Transfer Pricing
It is intra-company pricing
It is a pricing policy that attempts to set price to be
charged by the head office to its subsidiaries in
foreign market.
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
19. Transfer Pricing Strategies
Transfer at direct cost
Transfer at a competitive price derived from end
market price
Transfer at direct cost plus additional expenses
Transfer at an Arm’s-length price
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
20. Foreign Market Pricing
It is concerned with pricing policy within foreign
markets.
Each foreign subsidiary may have separate pricing
policy as determinants may vary market to market
It is also called decentralized pricing policy
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal
21. Determinants of Foreign Market
Pricing
Company goals
Costs
Demand pattern
Competition
Tax policy
Distribution structure
2/28/2021 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal