Pricing for Foreign Markets

• Market Considerations

Costs Competitors Customers’Values

Minimum Maximum

• Additional Foreign Market ConsiderationsAdditionalExportingCosts

AdditionalExotic Value

Minimum Maximum

Additional Export Costsand types of price quotation

• factory price (ex works)

• delivery to ship (free on board)

• sea transport(Cost, Insurance, Freight ‘CIF’)*

• Import Duty (Delivered Ex Quay)*

• delivery to distributor (delivered duty paid)*

• Retailer’s mark-up

• VAT (Retail Price)

* not incurred in domestic market

Economic Considerations

• Exchange Rate differences– offset by futures, pricing in dollars or euros

• Taxation differences

• Average earnings

• cost of living

• pricing strategies of competitors and dealers

Perceived Affordability

Product Factors• Scarcity value

• exotic value– image of producer nation– status value

• economies of scale– export price based on marginal costing

• adaptation costs– to local conditions or preferences

• transfer pricing – between parts of the company for tax purposes

Pricing Strategy Options• Skimming

– to exploit exotic value– to offset adaptation and export costs

• Penetration– to exploit economies of scale (cost leadership)– to gain market share and brand awareness

• Harvesting– sell off older versions in less developed markets– international product life-cycle

Megamarketing ConsiderationsThe additional Ps (Kotler)

Politics and Public Opinion

Dumpingselling at less than normal home market price in

order to sell surplus goods by under-cutting local producers’ prices

can cause protests eg British lamb in France

banned by WTO agreements

liable to punitive tariff surcharges

The Grey Market

• Parallel importsgoods sold at lower prices abroad and unofficially re-

imported (eg beer, Tesco/Levis)

new versions/releases not yet available eg CDs

• Prevention measures– repackaging (less/more features)– technical incompatibility

Solution: ‘Arms-length’ Pricing Policy– sell at the local market price

The Future• The Internet

• Satellite shopping channels

• The €uro-> Easier for consumers to compare prices

-> Erosion of local price differences

-> ‘commoditisation’

-> Pressure to cut costs

-> smaller local producers suffer?

See: Italians desert designer labels for bargains

Henley Centre 2003