Welcome Pricing and factors affecting international pricing Dr

Welcome! Pricing and factors affecting international pricing Dr. Satyendra Singh Professor, Marketing & International Business University of Winnipeg, CANADA https: //abem. uwinnipeg. ca s. singh@uwinnipeg. ca

Pricing methods Penetration Parity Skimming Prestige Multi-point Transfer Breakeven Cost-plus and cost-minus Strategic Foreign national International Retail coefficient … 2

Factors affecting international pricing ① Parallel Imports ② Inflation ③ Exchange Rate ④ Price Escalation ⑤ Government Influences 3

① Parallel Imports Distributors in one country sell in another country Overstocking Luxury product retailers, margin (tax differences) Medicine/dental Canada USA Has implications foreign national vs international pricing Strategy Language, packaging For sale in specific country only Product is not suitable for another country e. g. too sweet/color Warranty/repair not transferable between countries Close relationship with distributors 4

② Inflation Eliminates consumer’s purchasing power Inflation Adjust price Delayed payment will erode profit Problem with consignment basis shipment, ie paid when sold Strategy Careful price quotations and supply contracts Increase brand value Retain and win trust of customers 5

③ Exchange Rate Weak currency export and vice-versa Govt. may intervene if too much fluctuations Monitor other currencies movement also Strategy Review entire operation system Adjust cost structure Increase brand value Check mode of operation in foreign markets Exports vs. licensing vs. investment 6

Strategies if currency is weak/strong S. Tamer Cavusgil, “Unraveling the mystique of export pricing, ” Chapter 71 in Sidney J. levy, George R. Frerichs and Howard l. Gordon (eds), The Dartnell Marketing Manager’s Handbook (Chicago: Dartell Corporation, 1994), Figure 2, p. 1362. 7

④ Price Escalation Selling overseas naturally ↑ price operating/transportation/admin/insurance/packaging… costs Import duty (Fixed/unit, Valorem/values of goods x%, both $1 per unit + x% of its value), VAT, PST/GST Strategy Move to ↓ cost manufacturing countries ↓ distribution costs ie Internet ↓ features and ↓ quality Re-classification of the product to save on duty (art vs. jewelery) Adjust dimension (shoes less thick, larger containers) ie i. Phone 12 (no charger), packaging size ↓, so can fit more units in container 8

Causes and effects of price escalation CIF Cost, Insurance, Freight, The exhibit assumes that all domestic transportation costs are absorbed by the exporter. Just for illustration purposes. 9

⑤ Government Influences Keep retail margins below exorbitant level Correlation between car-owners and superstores visits Maximum Suggested Retail Price (MSRP) Limited period of discount EU Feb & Aug Adjust interest rate Cocoa, coffee, sugar, wheat Board Monitor the market to prevent abuses (Canada Competition Bureau) 10

Group activity—promotions Discounts BOGOs … Design 3 promotional schemes success/effectiveness/calculations with objectives and show 5 -minute -presentation from each group 11

Questions? s. singh@uwinnipeg. ca https: //abem. uwinnipeg. ca