International Pricing Policy (Export Prices)

Course Contents

1. Introduction to International Pricing Policy
2. International Prices and Incoterms
3. International Pricing Strategies
4. Pricing options available to the exporter
5. e-Business and pricing policy

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Objectives

• The primary objective of this Learning Unit is to understand the importance of an appropriate pricing strategy when entering new export markets.
• We are going to examine the pricing options available to the exporter and outline the criteria to be used when establishing a pricing strategy.
• We will also look at the criteria defined in pricing under Incoterms 2000.

Learning Unit Summary

One of the most complicated aspects of foreign trade is pricing policy. An incorrect pricing policy can lead to total failure in international markets. First of all we should find out about prices in various international markets, this information will allow us to have some real criteria for setting our export prices. However, we will meet the familiar dilemma of global or local prices. From another point of view the price is attached to the selected Incoterms, in the more competitive markets it is habitual to deliver product to client´s premises, thereby offering DDP prices. In some countries this is impossible, and it will cause us problems. One of the solutions can be if we have FOB Global prices and then we will be able to adapt them to each market according to the costs of this market.

When designing our international pricing policy we will have previously carried a survey of our competitor's prices in our different target markets. We will be able to act according to this information one-way or the other. It will be a basic reference when establishing our own prices. In this respect, Internet is a valuable research tool for the exporter.

The pricing strategies to be followed in foreign markets are often closely linked to the product life cycle. We must examine pricing strategies for various stages of the cycle:

1- Introduction Strategies. Basically there are two product introduction strategies:

• Setting low prices for penetration.
• "Skimming" the market.

2- Strategies for existing products. The strategies for existing products are usually based on:

• Maintaining prestige prices.
• Maintaining a given low price, when commercializing mass sale products.
• Corrective actions.

Maintaining prices on the basic products and offering a diversification in prices for different models of the original product. This often applies to motor cars where different specifications have different prices.