1. Global Pricing Decisions Overview Of the four Ps, price alone generates revenue. Competitive pricing enhances market position and earnings

2. Pricing Methods Cost-Oriented Methods - Focus on Cost, Not Market Conditions 1. Markup pricing - adding markup to unit cost of product a)Information needed: fixed cost, variable cost, expected sales, markup b)Appeal is simplicity c)Risks: overpricing and underpricing

3. Pricing Methods a)Drawbacks: lacks marketing orientation, difficult to implement b)Advantage: firm wont be blamed for price discrimination 2. Standard pricing - charging the same price in all countries

4. Pricing Methods a)Information needed: total investment, desired target return, unit cost, expected sales b)Drawbacks: lacks marketing orientation, sales and cost estimates must be accurate 3. Target return pricing - setting a target rate or return

5. Pricing Methods Market-Oriented Methods - Focus on Both Market Conditions and Cost 1.Market-based pricing - may attract accusations of unfair pricing and encourage the practice of gray marketing 2.Strategic pricing-setting minimum standard price while giving local managers freedom to charge more

6. Strategic Issues in Global Pricing Managing Price Escalation - Increased Cost Due to International Product Transfers 1.Ship components, assemble locally 2.Downsize 3.Shorten distribution channel 4.Increase overall productivity

7. Strategic Issues in Global Pricing Transfer Pricing - Price Charged for Goods Transferred Intraorganisationally Exchange Rate Fluctuations - Must Be managed to Control Gray Marketing and Accusations of Dumping

8. Strategic Issues in Global Pricing Gray marketing or Parallel Imports - Buying in Low-Price Countries, Selling in High-Price Countries 1.Causes: market-based pricing and exchange rate fluctuations 2.Remedial measures: narrow price differential, differentiate product

9. Strategic Issues in Global Pricing Dumping - Selling at Price Below Normal Value in Export Market 1.Sporadic - to reduce surplus inventory 2.Predatory - to drive out competitors, to gain market control 3.Persistent - high prices in protected markets, low in competitive markets

10. Terms of Payment EXW (Ex Works) - For Goods at Point of Origin FAS (Free Alongside Ship) - For Goods Delivered Alongside Vessel FOB (Free on Board) - For Goods Aboard Vessel C&F (Cost and Freight) - For Goods at Overseas Port

11. Terms of Payment CIF (Cost, Insurance, Freight) - For Goods at Point of Debarkation CPT (Carriage Paid To) - same as C&F for Nonwater Transportation CIP (Carriage and Insurance Paid To) - Same as CIF for Nonwater Modes

12. Modes of Payment Cash in Advance Open Account - Payment for Goods at Future Date

13. Modes of Payment Letter of Credit - Issued by a Bank 1.Revocable - can be altered by buyer after issuance 2.Irrevocable - cannot be altered without an agreement between the buyer and the seller 3.Confirmed -seller assured of payment by sellers bank 4.Confirmed Irrevocable

14. Modes of Payment Draft or Bill of Exchange - Negotiable Instrument 1. Sight - payable upon presentation 2. Time - payable within specified period 3. Date - payable on specific future date

15. Modes of Payment Forfating - seller Paid by Bank, Not Buyer Countertrade - Payment in Whole or in Part by Goods or Services 1.Barter - no money changes hands 2.Counterpurchase - goods purchased from each other with cash 3.Compensation deals - payment in both cash and goods 4.Buyback arrangements