Price Flashcards
1
Q
What makes pricing internationally complicated?
A
- exchange rates
- accelerating inflation
- alternative payment methods (leasing, barter..)
2
Q
What pricing strategy should you use at each stage of the PLC?
A
- cost-plus
- penetration
- match or best
- cut price
3
Q
What is the percentage of price escalation when you choose to export, and when you add an additional distribution link?
A
21%, 39%
4
Q
What is the cost-plus technique?
A
Adding all costs required to get a product where it is sold and pricing it above that
This ignores competition
5
Q
How can you manage price escalation?
A
- rearrange distribution channel
- eliminate costly features
- downsize the product
- assemble or manufacture the product in foreign markets
- adapt the product to escape tariffs or tax levies
6
Q
How to counter price escalation?
A
- rationalizing the distribution process
- lowering the export price from the factory
- establishing local production
- pressuring channel members to accept lower profit margins
7
Q
What are some environmental factors?
A
- gov influences and constraints
- currency fluctuations
- business cycle stage
8
Q
What are market factors
A
- consumer perceptions, needs, and wants
- purchasing power
- nature of competition
- competitors objectives, strategies, strengths and weaknessses
9
Q
What are nagel’s 9 factors of price sensitivity?
A
- more distinctive products
- greater perceived quality
- substitutes
- difficulty in making comparisons
- small portion of expenditure
- perceived benefit
- used with previously purchased product
- costs are shared
- cannot be stored
10
Q
What are the three international pricing strategies?
A
- skimming
- market pricing
- penetration
11
Q
What is market holding?
A
- dictates that home country’s currency appreciation will not automatically be passed on in export countries in the form of higher prices
- may accept lower margins
- may have to shift production to other countries or use licensing
12
Q
What is dumping?
A
- a company exports a product at a lower price than it normally charges in home country
- important global pricing issue, because it is sometimes regarded as unfair competition
13
Q
What is transfer pricing?
A
- pricing transactions between buyers and sellers that belong to the same corporation
- will vary with the nature of the firm (could be cost-based, market-based, or negotiated)
- sometimes used to transfer prices to shift profits from high-tax to low-tax countries
14
Q
What is the pocket price waterfall effect?
A
- a leak which reveals how the company’s profits are reduced by transaction costs (volume purchase discounts, early payment bonuses, frequent customer incentives)
- enables a company to monitor and control the pricing puzzle
