Chapter 18 Flashcards
What are the variables that impact price?
Tariffs
costs
attitudes
competition
currency fluctuations
methods of price quotation
methods of payment
bitcoin and blockchain protocol
Culture’s impact on pricing
In cultures with high power distance, consumers are less price sensitive and rely more on price as a signal of quality
What are the two ways of looking at pricing objectives?
either as an active instrument to complete objectives in the market
or, as a static business element, Views exports as passive contribution to sales volume, and probably only exports excess inventory
Parallel imports / gray markets
firms charge different prices per country
- products sold to developing countries at lower price
- product exported illegally between company and its own subsidiary branches
in the end, a company competes with its own branches
ex: N95 masks
Explain a case of parallel imports:
Pharmaceutical companies face this problem in Italy, Greece, and Spain because of price caps imposed on prescription drugs in those countries. For example, the ulcer drug Losec sells for only $18 in Spain but goes for $39 in Germany
What is exclusive distribution?
Company restricts which retailers can carry product
What is variable-cost pricing?
Pricing concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets
regards foreign sales as bonus sales
Often accused of dumping
Full-cost pricing?
no unit of a similar product is different from any other unit in terms of cost and, and each that each unit must bear its full share of the total fixed and variable cost
essentially, you sell for full price
What are cost and market considerations?
Cannot sell goods below cost of production or above what the market will accept
What is strategic pricing?
- Segmentation from country to country or market to market
- ensuring competitive pricing in the marketplace
- price for stability of operations
- cultural differences in perceptions of pricing
Skimming pricing?
A company uses skimming when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received
Used for markets with two income levels: wealthy and poor
May be used for public policy reasons, ex: high prices of alcohol to discourage consumption
Penetration pricing
Deliberately offering products at low prices
competitive maneuver to capture market share fast
What impacts costs of exporting?
shipping and packings costs
insurance
financing costs
tariffs, taxes administrative cost
Exchange rate
How does taxes, tarrifs and admins costs lead to cost escalation?
It costs to obtain export licences, import licenses and other documents
also, physical arrangement for transport costs
Tariffs also protect domestic markets and discriminate foreign goods
Inflation and escalation
Inflation causes higher cost of production and replacement, and companies are forced to increase their price - loss of customers
Prise escalation and deflation
In deflation, generals costs are low in market and supply chains are pressured to lower costs to make sales
Company must raise brand value to win consumer trust
Exchange rate fluctuations
World trade contracts are difficult to write due to the fluctuations, and payment specifications are challenging.
All major currencies are floating freely relative to one another.
Currency devaluation
Governments can intervene to stabilize currency, Mexico knocked off three 0 of their peso in the mid 1990s in response to the decreasing currency value.
