alexander consulting enterprise 9/9/2015 pricing strategies

Alexander Consulting EnterpriseAlexander Consulting Enterprise 04/19/2304/19/23

Pricing Strategies


1. Pricing Methods

“The employer does not pay the salaries. It is the customer who pays for the salaries. The employer is just handling the monetary transaction”

Henry Ford


- Cost Oriented Full cost pricing: Price = Fixed Cost + Profit + Variable Cost Markup pricing: Price as a percentage of sales Incremental cost pricing: Price is set to cover variable cost only

- Demand Orientated

Price is set according to the firms estimate of potential buyers’ price elasticity.


Skim pricing Penetration pricing

- product has strong relative advantage- low elasticity of demand- low competition- product is differentiated and difficult to copy- small total market

- economies of scale in production- high elasticity of demand- strong competition- product is not differentiated and easy to copy- large market

2. Skim pricing versus penetration pricing


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low Skimming

Penetration

Cash Flow Pattern of Pricing Strategies


3. Legal restrictions of pricing decisions

- Dumping

- Price fixing

- Price discrimination

- Price advertising

While governmental restrictions on pricing vary among different nations, most developed countries have laws relating to:


4. Costs of Exporting

Taxes

Tariffs

Administrative Costs

Inflation

Exchange Rate Fluctuations

Varying Currency Values


5. Lessening Price Escalation

1. Lower Cost of Goods Lower Manufacturing Costs Eliminate Functional Features Lower Quality


2. Lower Tariffs Tariff Reclassification Product Modification Partial Assembly Repack aging

3. Lower Distribution Costs Shorten Channels of Distribution Lower Shipping Costs

4. Foreign Trade Zones


6. Countertrades

BarterBarter

Compensation DealsCompensation Deals

Counterpurchase or Offset TradeCounterpurchase or Offset Trade

Product Buy-Back AgreementProduct Buy-Back Agreement


7. Why Countertrade?

To Preserve Hard CurrencyTo Preserve Hard Currency

To Improve Balance of TradeTo Improve Balance of Trade

To Gain Access to New MarketsTo Gain Access to New Markets

To Upgrade Manufacturing

Capabilities

To Upgrade Manufacturing

Capabilities

To Maintain Prices of Export GoodsTo Maintain Prices of Export Goods


8.Transfer Pricing

Manipulation of TaxesManipulation of Taxes

Manipulation of Duties and CustomsManipulation of Duties and Customs

Repatriation of ProfitsRepatriation of Profits

Management of DivisionsManagement of Divisions


9. Gray Trades

Currency Exchange RateCurrency Exchange Rate

Import QuotasImport Quotas

Different PositioningDifferent Positioning

Opportunities for Parallel Imports Arise through Price Differentials

alexander consulting enterprise 9/9/2015 pricing strategies

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