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Global Marketing, Ethics and Culture > Global Pricing Decisions > Flashcards

Global Pricing Decisions Flashcards

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1
Q

International Pricing Framework -

Internal: Firm-Level Factors (Hollensen, 2011)

A
  • Corporate and marketing objectives
  • Competitive strategy
  • Firm positioning
  • Product development
  • Production locations
  • Market entry modes
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2
Q

International Pricing Framework -

Internal: Product Factors (Hollensen, 2011)

A
  • Stage in PLC (Product Life Cycle)
  • Place in product line
  • Most important product features: quality, service, etc.
  • Product positioning (USP)
  • Product cost structure (manufacturing, experience, effects, etc.)
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3
Q

International Pricing Framework -

External: Environmental Factors (Hollensen, 2011)

A
  • Government influences and constraints: import controls, taxes, price controls
  • Inflation
  • Currency fluctuations
  • Business cycle stage
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4
Q

International Pricing Framework -

External: Market Factors (Hollensen, 2011)

A
  • Customers’ perceptions (needs, tastes)
  • Customers’ ability to pay
  • Nature of competition
  • Competitors’ objectives, strategies, and relative strengths/weaknesses
  • Grey market appeal
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5
Q

International Pricing Framework -

Internal and External Leads to… Pricing Strategies (Hollensen, 2011)

A
  • Price Level (first time pricing)
  • Price changes over PLC (Product Life Cycle)
  • Pricing across countries (standardization versus differentiation)
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6
Q

International Pricing Framework -

Pricing Strategies: Terms of Business (Hollensen, 2011)

A
  • Terms of Sale

- Terms of Payment

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7
Q 
International Pricing Framework - 
Pricing Strategy (and Other Marketing Mix P's elements) Leads to... Firm Performance (Hollensen, 2011)
A
  • Sales
  • Shares
  • Contribution
  • Margins
  • profit
  • Image
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8
Q

Price Escalation

A
  • A price-related phenomenon caused by the summation of all cost factors in the distribution channel including ex-works price, shipping costs, tariffs, and distributor mark-up
  • The longer the distribution channel, the higher the final price in the foreign market.
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9
Q

Price Escalation: Examples

A
  • Transport
  • Shipping
  • Insurance
  • Storage
  • Tax/Duties
  • Advertising
  • Product Modifications
  • Agents/Distributors Costs
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10
Q

Market Pricing

A
  • A price strategy involving charging a final price based on competitive prices
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11
Q

Market Pricing: Factors influencing Customer Sensitivity

A
  • More distinctive product
  • Greater perceived quality of products
  • Consumers less aware of substitutes in the market
  • Difficulty in making comparisons
  • Proportion price represents of total expenditure of the customer
  • Perceived benefit for customer increases
  • Product is used in association with a product bought previously, such that components and replacements are highly priced
  • Costs are shared with other parties
  • Product or service cannot be stored
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12
Q

The adoption rate of a new technology/innovative product in their five segmented groups (FIND SOURCE)

A
  1. Innovators: The first group to adopt a new product. Represents about 3 percent of a market.
  2. Early Adopters: The second group to adopt a new product. About 13 percent of a market.
  3. Early Majority: The third group to adopt a new product. About 34 percent of a market.
  4. Late Majority: The fourth group to adopt a new product. About 34 percent of a market.
  5. Laggards: The final group to adopt a new product. About 16 percent of a market.
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13
Q

Pricing Strategies -

Price Skimming

A
  • A pricing strategy which involves charging a high price at the top end of the market with the objective of achieving the highest possible contribution in a short time
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14
Q

Pricing Strategies -

Price Skimming: Issues

A
  • Having a small market share makes the firm vulnerable to aggressive local competition
  • Maintenance of a high-quality product requires a lot of resources
  • If product is sold more cheaply at home or in another country grey marketing is likely
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15
Q

Pricing Strategies -

Penetration Pricing

A
  • A penetration pricing policy is used to stimulate market growth and capture market shares by deliberately offering products at low prices.
  • This approach requires mass markets, price-sensitive customers and reduction in unit costs through economies of scale and experience curve effects.
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16
Q

Pricing Strategies -

Penetration Pricing - Motives

A
  • Intensive local competition
  • Lower income levels of locals
  • View of exporting as marginal activity
17
Q

Pricing Strategies -

Experience curve pricing

A
  • Price changes are based on the idea that total unit costs of a product in real terms can be reduced by a certain percentage with each doubling of cumulative production
  • Combination of the experience curve (lowering costs per unit) with accumulated production of the product with typical market price development within an industry.
18
Q

Pricing Strategies -

Bundle pricing

A
  • A pricing strategy based on grouping products and services in a system-solution product in order to overcome possible customer price concerns
  • Bundling product and services together in a system-solution product. If the customer thinks that the entry price is a key barrier, service contracts can be priced higher, which allows for lower entry product for pricing - the practice in many software businesses.
19
Q

Basic approaches to Pricing across countries

A

There are two essential opposing forces:

  • first, to achieve similar positioning in different markets by adopting largely standardized pricing (standardization)
  • second, to maximize profitability by adapting pricing to different market conditions. In determining to what extent prices should be standardized across borders two basic approaches appear. (differentiation)
20
Q

Structural Factors of Standardized Pricing vs. Differentiated Pricing:

Price Differentiation (Diller and Bukhari, 1994)

A

Differences in:

  • Average industry prices
  • Price segments
  • Methods and importance of special offers
  • Importance of own brands
  • Strength of local competitors
  • Retailer power
  • Terms and conditions
  • Consumer preferences
  • Price interest and awareness
21
Q

Structural Factors of Standardized Pricing vs. Differentiated Pricing:

Price Standardization (Diller and Bukhari, 1994)

A
  • Internationalization of competition
  • Homogenization of competitive structures
  • International activities of large retail organizations
  • Increased danger of cross-border arbitrage
22
Q

Structural Factors of Standardized Pricing vs. Differentiated Pricing:

Results (Diller and Bukhari, 1994)

A
  • Consumer prices
  • Retail prices
  • Price positioning
  • Terms and conditions
  • Product line pricing
  • Special offers
23
Q

A taxonomy of international pricing practices:

1: Local Price Follower

A

Industry Globalism: Multi local Market

Preparedness for internationalization: Low

24
Q

A taxonomy of international pricing practices:

2: Global Price Follower

A

Industry Globalism: Global Markets

Preparedness for internationalization: Low

25
Q

A taxonomy of international pricing practices:

3: Multi Local Price Setter

A

Industry Globalism: Multi local Market

Preparedness for internationalization: High

26
Q

A taxonomy of international pricing practices:

4: Global Price Leader

A

Industry Globalism: Global Markets

Preparedness for internationalization: High

27
Q

Pricing Strategies -

Global Pricing Contract

A
  • When a customer requires one global price per product from the supplier for all its foreign SBUs and subsidiaries, a global pricing contract has been requested.
28
Q

Parallel Importing

A 
- Occur when a product is sold more cheaply in one market than another, giving a third party the opportunity to trade between a cheaper market and more expensive market.
Solutions include:
- Erode differentials
- Change the product
- Change dealerships
- Buy back
- Warranties or Guarantees
29
Q

Pricing Strategies -

Marginal Cost Pricing (Dumping)

A
  • Selling price covers the variable costs
  • Fixed costs covered by sales in other markets
  • The pricing of goods in an overseas market cheaper than in the home market.

Conditions:

  • Little speedy intervention
  • Output represents a small proportion
  • Resource use have no more profitable use
  • No impact on principal markets
30
Q

Pricing Strategies -

Transfer Pricing

A
  • A term used to describe the prices charged for intracompany movement of goods and services
  • Transfer pricing is the practice of setting up prices for trading valuables between two entities across different tax jurisdictions.
  • The valuables can be tangibles, intangibles, services and financial transactions and the entities can be company divisions and departments, or parent companies and its subsidiaries.
31
Q

Pricing Strategies -

Transfer Pricing: The Approaches

A
  • Transfer at cost
  • Transfer at arm’s length
  • Transfer at cost plus

Global Marketing, Ethics and Culture (9 decks)

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