1. Pricing for International Markets
International Marketing
15th edition
Chapter 18
Pricing for International Markets
Philip R. Cateora, Mary C. Gilly, and John L. Graham

2. Pricing Policy Parallel Imports
Develop when importers buy products from distributors in one country and sell them in another to distributors who are not part of the manufacturer’s regular distribution system
Occur whenever price differences are greater than cost of transportation between two markets
Major problem for pharmaceutical companies
Exclusive distribution .
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3. Full-Cost Versus Variable-Cost Pricing
Firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets
Full-cost pricing
Companies insist that no unit of a similar product is different from any other unit in terms of cost
Each unit must bear full share of the total fixed and variable cost
Roy Philip

4. Skimming Versus Penetration Pricing
Used by a company when the objective is to reach a segment of the market that is relatively price insensitive
Market is willing to pay a premium price for the value received
Penetration pricing policy
Used to stimulate market and sales growth by deliberately offering products at low prices
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5. Sample Causes and Effects of Price Escalation
Exhibit 18.2
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6. Approaches to Lessening Price Escalation (1 of 2)
Lowering cost of goods
Manufacturing in a third country
Eliminating costly functional features
Lowering overall product quality
Lowering tariffs
Reclassifying products into a different, and lower customs classification
Modify product to qualify for a lower tariff rate within classification
Requiring assembly or further processing
Repackaging
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7. Approaches to Lessening Price Escalation (2 of 2)
Lowering distribution costs
Shorter channels
Reducing or eliminating middlemen
Using foreign trade zones to lessen price escalation
Establish free trade zones (FTZs) or free ports
Tax-free enclave not considered part of country
Postpones payment of duties and tariffs
Dumping
Use of marginal (variable) cost pricing
Selling goods in foreign country below the price of the same goods in the home market
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8. How Are Foreign Trade Zones Used?
Exhibit 18.3
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9. Leasing in International Markets(1 of 2)
Selling technique that alleviates high prices and capital shortages
Opens the door to a large segment of nominally financed foreign firms
Firms can be sold on a lease option but might be unable to buy for cash
Can ease the problems of selling new, experimental equipment
Because less risk is involved for the users
Roy Philip

10. Leasing in International Markets(2 of 2)
Helps guarantee better maintenance and service on overseas equipment
Helps to sell other companies in that country
Revenue tends to be more stable over a period of time than direct sales
Leasing disadvantages
Inflation may lead to heavy losses at end of contract period
Currency devaluation, expropriation and political risks
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11. Countertrade as a Pricing Tool
Types of countertrade
Barter
Compensation deals
Counterpurchase or offset trade
Product buyback agreement
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12. Countertrade as a Pricing Tool
Problems of countertrading
Determining the value of and potential demand for the goods offered
Barter houses
The Internet and countertrading
Electronic trade dollars
Universal Currency/IRTA
Proactive countertrade strategy
Included as part of an overall market strategy
Effective for exchange-poor countries
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13. Transfer Pricing Strategy (1 of 2)
Prices of goods transferred from a company’s operations or sales units in one country to its units elsewhere
May be adjusted to enhance the ultimate profit of company
Benefits
Lowering duty costs
Reducing income taxes in high-tax countries
Facilitating dividend repatriation when dividend repatriation is curtailed by government policy
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14. Transfer Pricing Strategy (2 of 2)
Objectives
Maximizing profits for corporation
Facilitating parent-company control
Providing all levels of management control over profitability
Arrangements for pricing goods for intracompany transfer
Sales at the local manufacturing cost plus a standard markup
Sales at the cost of the most efficient producer in the company plus a standard markup
Sales at negotiated prices
Arm’s-length sales using the same prices as quoted to independent customers
Roy Philip