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INTERNATIONAL MARKETING MANAGEMENT

INTERNATIONAL MARKETING MANAGEMENT. SESSION 11: INTERNATIONAL PRICING. 1. ISSUES IN ESTABLISHING INTERNATIONAL PRICING POLICY. Use of Price as a Competitive Tool Standardized vs. Differentiated Prices. 2. PRICING: BARRIERS TO STANDARDIZATION. Shipping and Transportation Costs, Tariffs

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INTERNATIONAL MARKETING MANAGEMENT

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  1. INTERNATIONAL MARKETING MANAGEMENT SESSION 11: INTERNATIONAL PRICING 1

  2. ISSUES IN ESTABLISHING INTERNATIONAL PRICING POLICY • Use of Price as a Competitive Tool • Standardized vs. Differentiated Prices 2

  3. PRICING: BARRIERS TO STANDARDIZATION • Shipping and Transportation Costs, Tariffs • Income Levels, Price Sensitivity • Prices of Competing and Substitute Products • Trade Margins, Taxes, Price Regulation 3

  4. Foreign Exchange Risk: Changes in Value of One Currency vs. Another HEDGING • Rates of Inflation • Lack of Foreign Exchange BARTERING • Gray Markets FACTORS COMPLICATING INTERNATIONAL PRICING DECISIONS 4

  5. PORTRAIT OF A DEAL 5

  6. GRAY MARKETS DEFINITION Branded or trade-marked product sold through unauthorized distribution channels triggered by price differentials between countries POSITIVE CONSEQUENCES • Taps Price-Sensitive Customers NEGATIVE CONSEQUENCES • Damage to Trademark/Quality Image • Legal Liabilities -- Warranties, etc. • Strained Channel/Distributor Relations • Disruption of Global Marketing Strategy STRATEGIES TO COUNTERACT GRAY MARKETS • Price Cutting • Differentiate Product Model, Warranties, etc. • Cutoff/Control Supply • Promote Gray Market Product Limitations 6

  7. COSTS • Production • Freight and Packaging • Handling and Processing Costs DUTIES • Import Duties • Custom Duties MARGINS • Importer Margins • Distribution Margins PRICE ESCALATION COST-BASED PRICING 7

  8. NON-COST FACTORS TO CONSIDER IN INTERNATIONAL PRICING DEMAND • Price Sensitivity • Modes of Payment • Quality and Prestige Associations COMPETITION • Prices of Competing and Substitute Products • Competitor Reaction DISTRIBUTION • Availability of Certain Outlets/Discounters, etc. • Regulation of Retail/Wholesale Margins and Prices 8

  9. ONE CAR, SO MANY PRICES Prices for a Volkswagen Golf* BRITAIN $13,040 FINLAND 8,290 FRANCE 10,510 GERMANY 11,040 ITALY 10,690 * Excludes taxes DATA: EUROPEAN UNION 9

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  11. SUMMARY • Aggressive Pricing as Difficult to Sustain • Difficult to Standardize Pricing Internationally • Importance of Considering Demand, Competition and Infrastructure Factors 11

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