International pricing

International Pricing
Dr. Gopal Thapa
Associate Professor
Tribhuvan University

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
6/2/2020 Copy right reserved: Dr. Gopal Thapa, Tribhuvan
University, Nepal

Types of International Pricing
Policy
◼ Export pricing/Free market pricing
◼ Administered pricing
◼ Transfer pricing
◼ Foreign market pricing
University, Nepal

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
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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
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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
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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
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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
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Forms of Administered Pricing
◼ Counter trades
◼ Switch trading
◼ Leasing international
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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."
University, Nepal

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
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Forms of Counter Trade
◼ Barter
◼ Switch Trading
◼ Counter purchase
◼ Buyback
◼ Compensation trade
◼ Offset
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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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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
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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.
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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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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.
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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.
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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
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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
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Determinants of Foreign Market
Pricing
◼ Company goals
◼ Costs
◼ Demand pattern
◼ Competition
◼ Tax policy
◼ Distribution structure
University, Nepal

Any Queries?
Thank You
University, Nepal

International pricing

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