International Pricing
Pricing Objectives
1.? As an active means of attaining marketing objectives
•? Companies use this when trying to achieve certain objectives, profit margins or targeted market share.
2.? As a static element in a business decision
•? Companies use this when they are foreign marketing is not a priority
–? Usually associated with trying to get rid of excess inventories
NON-COST FACTORS TO CONSIDER IN INTERNATIONAL PRICING
DEMAND
n?? n??
Price Sensitivity Modes of Payment
COMPETITION
n?? n??
Prices of Competing and Substitute Products Competitor Reaction
DISTRIBUTION
n?? n??
Availability of Certain Outlets/Discounters, etc. Regulation of Retail/Wholesale Margins and Prices
Pricing Strategies
"? "? "?
"? "?
Full Cost vs Variable Cost Skimming Vs. Penetration Pricing Standard Pricing
Two-tier price Market price (Profit Maximizing)
"?
Market Holding (absorbing currency fluctuations)
Pricing Strategies (contd..)
" ?Pre-Emptive
" ?Counter
Pricing " ?Extinction Pricing
trade (barter system) " ?Transfer Pricing Strategy (Intracompany) " ?Administered Pricing (Cartels)
Price Escalation
" ?What causes prices to escalate vary in different countries:
" ? Things
that drive up costs of exporting
•?Taxes, Tariffs and Administrative Costs •?Inflation •?Exchange rate fluctuations •?Middlemen and transportation costs
How to Lower the Effects of Price Escalation
"?
1. Lower cost of goods thru
•? Manufacturing overseas where labor costs are lower (China) •? Eliminate features or product quality •? Reclassification (Modification of product to fit in another class) •? Persuading foreign country s government
"?
2. Lower tariffs thru
"?
3. Lower distribution costs thru
•? Eliminate or reduction of middlemen
–? Especially where value-added taxes are imposed
How to Lower the Effects of Price Escalation
4. Using Foreign Trade Zones
•? FTZ s can lower costs thru:
–? Lower duties imposed –? Lower labor costs in importing country –? Lower ocean transportation costs with unassembled goods (wt and volume are less) –? Using local materials in final assembly
Parallel Imports/Gray Markets
Parallel Imports/Gray Markets
Branded or trade-marked product sold through unauthorized distribution channels triggered by price differentials between countries
NEGATIVE CONSEQUENCES n?? Damage to Trademark/ Quality Image n?? Legal Liabilities -Warranties, etc. n?? Strained Channel/ Distributor Relations n?? Disruption of Global Marketing Strategy COUNTERACTING GRAY MARKETS n?? Price Cutting n?? Differentiate Product Model, Warranties, etc. n?? Cutoff/Control Supply n?? Promote Gray Market Product Limitations
International Promotion
Promotional Policy
?? Advertising ?? Personal
Selling ?? Sales Promotion ?? Publicity
International Promotion
Typical constraints on Int l promotion
?deep rooted cultural factors ?the restrictions on advertising ?media availability and quality ?agency experience ?level of competition ?distribution channel configurations " ?language differences " " " " " "
Language
•?
Languages Delineate Cultures
–? Spoken languages demarcate cultures just as physical barriers do.
•?
Foreign Language
–? When many spoken languages exist in a single country, one foreign language usually serves as the principal vehicle for communication across cultures.
•?
English, the Link Language of Business
–? English as a business lingua has spread rapidly in Europe that in 1996
?? Over
half the European Union s adults could speak English.
Language
•?
Translations
–? To avoid translation errors, the experienced marketer will prefer two translations.
•?
Technical Words
–? Translators have difficulty with technical terms that do not exist in a language and with common words that have a special meaning for a certain industry.
International Promotion
Typical decisions to be taken ... " ?agency selection : international vs. local
" ? Need
for international co-ordination
" ?the level of standardization to be employed " ?desirability of and potential for cooperative promotion " ?the level of effectiveness measures " ?budget setting
Advertising Checklist for Entering International Markets:
??
Identify the context of the country.
??
Identify the significance of color and music.
??
Translate ads from English very carefully.
??
Is your target audience ad literate?
International Communications
??
Personal selling requires company representatives to be well versed in the culture of countries in which they do business.
–? Care needs to be taken with the danger of salespeople spreading themselves too thinly over too many markets
??
Exhibitions and trade fairs are important sources of publicity in those markets where conventional advertising is hard to apply, or where an ‘on-thespot’ demonstration of equipment
Deciding on the Global Marketing Program
Five International Product and Promotion Strategies
Don t Change Product
Product
Adapt Product
Promotion
Don t Change Promotion Adapt Promotion
Straight Extension Communication Adaptation
Product Adaptation Dual Adaptation
Product Invention
Develop New Product
International Distribution
20
Major Logistics Functions
Minimize Costs of Attaining Logistics Objectives
Costs
Order Processing
Received Processed Shipped
Logistics
Rail, Truck, Water, Pipeline, Air, Intermodal
Transportation
Functions
Inventory
Warehousing
Storage Distribution
When to order How much to order Just-in-time
21
Marketing Channel Functions or Tasks
These functions or tasks can be re-allocated among all channel members, but that cannot be eliminated. Risk Taking Financing Physical Distribution Negotiation Information Promotion
Contact
Contracts/Title
22
Distribution Policy
?? Channels ?? Physical
of distribution
distribution and logistics
23
Issues Related to International Distribution
?? Using Established Channels §?? Could charge high prices §?? Could be blocked by competition §?? Choice is a long-term decision: company may be bound indefinitely to the channel choice ?? Building
§?? §??
Channels
Necessary if there are no channels at all and if the existing channels do not conform to company needs Expensive
24
Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.
Channel 1 M Channel 2 M Channel 3 M Channel 4 M W J R C
25
Direct Channel Indirect Channel
C
R
C
W
R
C
Whole-Channel Concept for International Marketing
26
Distribution Channels
?? Choice
of which steps in value chain to internalize within the firm - how long should be the channel length? Should it be in-house or contracted out (to a foreign distributor)?
–? mfg - import agent - customer –? mfg - import agent - wholesaler - customer –? mfg - import agent - wholesaler - retailer - customer
27
Home-Country Middlemen
Export Management Companies §?? Highly specialized in certain industries and/or regions ?? Trading Companies
??
The Japanese Model: sogo shoshas ?? Home-Country Brokers and Agents §?? Middlemen who bring international buyers and sellers together in the company's home country §?? Do not carry title to the product §?? Manufacturer s export agent: represent a manufacturer §?? Buying offices: buyers located in the firm s home country, representing different international firms
§??
28
Home-Country Middlemen (Contd.)
??
Cooperative Export Arrangements §?? Also known as piggybacking and mother henning
–? Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis
29
Foreign-Country Middlemen
??
??
??
Merchant Middlemen §?? Intermediaries who carry the manufacturer s product line in a particular country §?? Usually carries title to and has physical possession of the products Agents and Brokers §?? Many types of agents and brokers in foreign markets, such as manufacturer's representatives and managing agents -? Could act as the manufacturer s sales representatives and are paid on commission Alternative Distribution Structures: Network Marketing §?? Using acquaintance networks for the purpose of both sales and distribution §?? Have high potential in emerging markets 30
Service Providers
?? Distribution
Centers ?? Transportation Firms ?? Customs Brokers ?? Government Agencies
?? ??
Non-governmental
§??
Chamber of Commerce
Banks ?? Insurance agencies ?? Marketing research firms ?? Consultants
31
Logistics Alliances
1)? 2)? 3)? 4)? 5)? 6)? 7)?
Establish objectives Identify providers Express needs/wants Evaluate and select bidder Develop integration plan Measure and analyze performance Redefine goals and objectives
32
Selection and Screening of Channel Intermediaries
an ineffective foreign distributor can set you back years; it is almost better to have no distributor than a bad one in a major market.
33
Channel Design Determined by:
" " " " " " " ?Customers ?Competition ?Company ?Capital ?Coverage ?Control ?Continuity
34
doc_338418667.pdf
Pricing Objectives
1.? As an active means of attaining marketing objectives
•? Companies use this when trying to achieve certain objectives, profit margins or targeted market share.
2.? As a static element in a business decision
•? Companies use this when they are foreign marketing is not a priority
–? Usually associated with trying to get rid of excess inventories
NON-COST FACTORS TO CONSIDER IN INTERNATIONAL PRICING
DEMAND
n?? n??
Price Sensitivity Modes of Payment
COMPETITION
n?? n??
Prices of Competing and Substitute Products Competitor Reaction
DISTRIBUTION
n?? n??
Availability of Certain Outlets/Discounters, etc. Regulation of Retail/Wholesale Margins and Prices
Pricing Strategies
"? "? "?
"? "?
Full Cost vs Variable Cost Skimming Vs. Penetration Pricing Standard Pricing
Two-tier price Market price (Profit Maximizing)
"?
Market Holding (absorbing currency fluctuations)
Pricing Strategies (contd..)
" ?Pre-Emptive
" ?Counter
Pricing " ?Extinction Pricing
trade (barter system) " ?Transfer Pricing Strategy (Intracompany) " ?Administered Pricing (Cartels)
Price Escalation
" ?What causes prices to escalate vary in different countries:
" ? Things
that drive up costs of exporting
•?Taxes, Tariffs and Administrative Costs •?Inflation •?Exchange rate fluctuations •?Middlemen and transportation costs
How to Lower the Effects of Price Escalation
"?
1. Lower cost of goods thru
•? Manufacturing overseas where labor costs are lower (China) •? Eliminate features or product quality •? Reclassification (Modification of product to fit in another class) •? Persuading foreign country s government
"?
2. Lower tariffs thru
"?
3. Lower distribution costs thru
•? Eliminate or reduction of middlemen
–? Especially where value-added taxes are imposed
How to Lower the Effects of Price Escalation
4. Using Foreign Trade Zones
•? FTZ s can lower costs thru:
–? Lower duties imposed –? Lower labor costs in importing country –? Lower ocean transportation costs with unassembled goods (wt and volume are less) –? Using local materials in final assembly
Parallel Imports/Gray Markets
Parallel Imports/Gray Markets
Branded or trade-marked product sold through unauthorized distribution channels triggered by price differentials between countries
NEGATIVE CONSEQUENCES n?? Damage to Trademark/ Quality Image n?? Legal Liabilities -Warranties, etc. n?? Strained Channel/ Distributor Relations n?? Disruption of Global Marketing Strategy COUNTERACTING GRAY MARKETS n?? Price Cutting n?? Differentiate Product Model, Warranties, etc. n?? Cutoff/Control Supply n?? Promote Gray Market Product Limitations
International Promotion
Promotional Policy
?? Advertising ?? Personal
Selling ?? Sales Promotion ?? Publicity
International Promotion
Typical constraints on Int l promotion
?deep rooted cultural factors ?the restrictions on advertising ?media availability and quality ?agency experience ?level of competition ?distribution channel configurations " ?language differences " " " " " "
Language
•?
Languages Delineate Cultures
–? Spoken languages demarcate cultures just as physical barriers do.
•?
Foreign Language
–? When many spoken languages exist in a single country, one foreign language usually serves as the principal vehicle for communication across cultures.
•?
English, the Link Language of Business
–? English as a business lingua has spread rapidly in Europe that in 1996
?? Over
half the European Union s adults could speak English.
Language
•?
Translations
–? To avoid translation errors, the experienced marketer will prefer two translations.
•?
Technical Words
–? Translators have difficulty with technical terms that do not exist in a language and with common words that have a special meaning for a certain industry.
International Promotion
Typical decisions to be taken ... " ?agency selection : international vs. local
" ? Need
for international co-ordination
" ?the level of standardization to be employed " ?desirability of and potential for cooperative promotion " ?the level of effectiveness measures " ?budget setting
Advertising Checklist for Entering International Markets:
??
Identify the context of the country.
??
Identify the significance of color and music.
??
Translate ads from English very carefully.
??
Is your target audience ad literate?
International Communications
??
Personal selling requires company representatives to be well versed in the culture of countries in which they do business.
–? Care needs to be taken with the danger of salespeople spreading themselves too thinly over too many markets
??
Exhibitions and trade fairs are important sources of publicity in those markets where conventional advertising is hard to apply, or where an ‘on-thespot’ demonstration of equipment
Deciding on the Global Marketing Program
Five International Product and Promotion Strategies
Don t Change Product
Product
Adapt Product
Promotion
Don t Change Promotion Adapt Promotion
Straight Extension Communication Adaptation
Product Adaptation Dual Adaptation
Product Invention
Develop New Product
International Distribution
20
Major Logistics Functions
Minimize Costs of Attaining Logistics Objectives
Costs
Order Processing
Received Processed Shipped
Logistics
Rail, Truck, Water, Pipeline, Air, Intermodal
Transportation
Functions
Inventory
Warehousing
Storage Distribution
When to order How much to order Just-in-time
21
Marketing Channel Functions or Tasks
These functions or tasks can be re-allocated among all channel members, but that cannot be eliminated. Risk Taking Financing Physical Distribution Negotiation Information Promotion
Contact
Contracts/Title
22
Distribution Policy
?? Channels ?? Physical
of distribution
distribution and logistics
23
Issues Related to International Distribution
?? Using Established Channels §?? Could charge high prices §?? Could be blocked by competition §?? Choice is a long-term decision: company may be bound indefinitely to the channel choice ?? Building
§?? §??
Channels
Necessary if there are no channels at all and if the existing channels do not conform to company needs Expensive
24
Number of Channel Levels
Channel Level - Each Layer of Marketing Intermediaries that Perform Some Work in Bringing the Product and its Ownership Closer to the Final Buyer.
Channel 1 M Channel 2 M Channel 3 M Channel 4 M W J R C
25
Direct Channel Indirect Channel
C
R
C
W
R
C
Whole-Channel Concept for International Marketing
26
Distribution Channels
?? Choice
of which steps in value chain to internalize within the firm - how long should be the channel length? Should it be in-house or contracted out (to a foreign distributor)?
–? mfg - import agent - customer –? mfg - import agent - wholesaler - customer –? mfg - import agent - wholesaler - retailer - customer
27
Home-Country Middlemen
Export Management Companies §?? Highly specialized in certain industries and/or regions ?? Trading Companies
??
The Japanese Model: sogo shoshas ?? Home-Country Brokers and Agents §?? Middlemen who bring international buyers and sellers together in the company's home country §?? Do not carry title to the product §?? Manufacturer s export agent: represent a manufacturer §?? Buying offices: buyers located in the firm s home country, representing different international firms
§??
28
Home-Country Middlemen (Contd.)
??
Cooperative Export Arrangements §?? Also known as piggybacking and mother henning
–? Involve exporters agreeing to handle export functions for unrelated companies on a contractual basis
29
Foreign-Country Middlemen
??
??
??
Merchant Middlemen §?? Intermediaries who carry the manufacturer s product line in a particular country §?? Usually carries title to and has physical possession of the products Agents and Brokers §?? Many types of agents and brokers in foreign markets, such as manufacturer's representatives and managing agents -? Could act as the manufacturer s sales representatives and are paid on commission Alternative Distribution Structures: Network Marketing §?? Using acquaintance networks for the purpose of both sales and distribution §?? Have high potential in emerging markets 30
Service Providers
?? Distribution
Centers ?? Transportation Firms ?? Customs Brokers ?? Government Agencies
?? ??
Non-governmental
§??
Chamber of Commerce
Banks ?? Insurance agencies ?? Marketing research firms ?? Consultants
31
Logistics Alliances
1)? 2)? 3)? 4)? 5)? 6)? 7)?
Establish objectives Identify providers Express needs/wants Evaluate and select bidder Develop integration plan Measure and analyze performance Redefine goals and objectives
32
Selection and Screening of Channel Intermediaries
an ineffective foreign distributor can set you back years; it is almost better to have no distributor than a bad one in a major market.
33
Channel Design Determined by:
" " " " " " " ?Customers ?Competition ?Company ?Capital ?Coverage ?Control ?Continuity
34
doc_338418667.pdf