1. Spoken English for International Business Lesson 3 On Price Foreign Languages College

2. Learning Point In this lesson, we will learn how to negotiate the price effectively in international business transactions. Lesson 3 On Price

3. Background Knowledge Price is one important objective of discussion in business negotiations. The word “price” also means “setting the price of a certain product” when it works as a verb, and “setting price” is a difficult and complicated process in international business negotiations. We always use the word “bargain” to describe the process of discussing price in oral business negotiations, and in written negotiations, there are inquiry and quotation, offer and counter-offer and acceptance or refusal of the offer or counter-offer partly or wholly. Lesson 3 On Price

4. Exporters entering new markets, particularly small and medium-size enterprises, often face problems in initial negotiations with importers, agents and buyers in the target markets. These difficulties generally center around pricing questions and particularly the fact that their prices may be considered too high. Although price is not everything but only one of many issues that has to be discussed during business negotiations, too frequently it tends to influence the entire negotiation process. And as pricing is often the most sensitive issue in business negotiations, the subject should usually be postponed until all of the other aspects of the transaction have been discussed and agreed upon. Lesson 3 On Price

5. An importer may reject an exporter’s price at the outset of the discussions simply to get the upper hand from the beginning of the negotiations, thereby hoping to obtain maximum concessions on other matters. The importer may also object to the initial price quoted to test the seriousness of the offer, find out how for the exporter is willing to lower the price, seek a specific lower price because the product brand is unknown in the market, or demonstrate a lack of interest in the transaction as the product does not meet market requirements. Lesson 3 On Price

6. If the importer does not accept the price, the exporter should react positively by initiating discussions on nonprice questions, instead of immediately offering price concessions or taking a defensive attitude. Widening the issues and exploring the real reasons behind the objections to the price quoted will put the talks on a more equal and constructive footing. Only by knowing the clauses of disagreement can an exporter make a reasonable counter-offer. This counter-offer need not be based on merely on pricing. It can also cover related subjected. Lesson 3 On Price

7. In a word, although pricing is a key factor in any business transaction, exporters should give more attention to the full range of marketing factors. They should stress the strengths of their firms and products and match them with the perceived needs of the buyers. Once these issues have been covered, they can consider the question of price and be able to develop a profitable business. Lesson 3 On Price

8. Case Study

9. Principle first, specific price later  F: Your prices have increased 20% over last year. Such a jump in price is very unusual on the international market.  C: We have indeed marked up our prices by a rather large margin. The reason is that in the past, our prices consistently tended to be too low compared with the prices of the same kind of products on the international market.  F: But at present, the price for this kind of commodity is tending downward on the world market.  C: Well then, how about this: since we hold different points of view toward the trend of the international market price, can we both first agree on the principle of setting the price, and then decide the specific price later? Lesson 3 On Price

10. Let's move together  C: According to today's market, I should've increased my price by two dollars. But in order to come to an agreement, our original quote remains unchanged. Hope you can make more efforts.  F: Thanks. I’ve received current market price, too. Judging its increase margin, I think it's a normal fluctuation. Perhaps its price will come down tomorrow. What I want to point out is that your original price exceeded the market price already. Even if you do not increase it, we cannot accept it.  C: You mean we'll have to lower our price though the market price is going up? This works against common sense, doesn’t it? We made it very clear when we quoted you the price that if there s change on the market, our quote will follow. But what has hap­pened now is that the market price has gone up and our quote has not changed. This means our price has actually decreased, right? Lesson 3 On Price

11.  F: True. But compared with the real market price, your quote is still too high.  C: You’ve saying your price should be the actual deal price then. You can't make any move? In that case, it'll be very difficult to proceed with our talk.  F: Let's not rush to conclusions yet. All I'm saying is my price will not change; even if it does, you won't accept it anyway, be­cause the difference between us is too great.  C: But no matter how great the difference is, you' 11 have to move. Both of us move, and move together, okay? You can’t expect me to make the move alone.  F: (thinking about C's proposal for a while) Alright then. I'll add 50 cents. Lesson 3 On Price

12. Class Activity

13. Compose dialogues on the following situations.  1. You sell electric heaters ( 电热器 ) on behalf of Shanghai Jianhua Electrical Appliance Factory ( 上海剑华电 器厂 ). Your product is suitable for both home and office use. Especially in spring and fall when heat is not on, an electric heater would be most desir­able. Your price is $46 FOB Huangpu. Now a businessperson from England wants to order 500 sets of your heater, but he counter offers $ 40 FOB Huangpu. You may or may not accept his counter offer after you calculate the margin of exchange cost ratio. Lesson 3 On Price

14.  2. You sell Forever brand ten - speed bikes ( 永久牌十 速自行车 ) on behalf of China National Light Industrial Corp, Shanghai Branch ( 轻工业公司上海分公司 ). Now a businessperson from Iraq wants to buy 500 of your ten- speed bicycles. Your offer is $ 120.00 FOB Huangpu, but this Iraqi businessman counter of­fers $ 108.00, which is a 10% cut. You can't accept that, and he's kind of stubborn, too. Actually, you know very well that after the Gulf War, because of the shortage of everything in Iraq, bicycles can sell for a very good price. You act this out with a classmate of yours. Lesson 3 On Price

15. Exercises

16. I. Answer the following question.  How to negotiate the price effectively in international business transactions? II. Interpret the following sentences.  1 ．这个价格很难说服用户。 Lesson 3 On Price

17.  2 ．由于原材料涨价，我们也不得不调整 产品价格。  3 ．如果你们大量订货的话，我们可以考 虑减价。  4 ．我们的价格还是合理的，你们再考虑 考虑。  5 ．这个价格已经是很低的了，你们的还 盘我们实在没办法接受。 Lesson 3 On Price

18. Thank you very much!