Pricing for Foreign Markets Market Considerations CostsCompetitorsCustomers’ Values MinimumMaximum Additional Foreign Market Considerations Additional Exporting Costs Additional Exotic Value Minimum Maximum

Additional Export Costs and 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 Considerations The additional Ps (Kotler) Politics and Public Opinion Dumping selling 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 imports goods 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