Pricing in Global Markets

1
Pricing in Global Markets

• Price Should Reflect Quality
• Pricing Strategy
• Types of Discount
• Pricing in Markets
• Gray Marketing

Penetration Skimming Market Holding
2
Gray Market Designer Fragrances
3
Pricing in Global Markets (cont.)
At Cost Cost Plus Margin Market-Based/ At Arms
Length
Transfer Pricing
4
Pricing in Global Markets (cont.)

• PPP
• Dumping Laws
• Import Duties
• Distn. Efficiency
• Transportation Cost

Full-Cost Variable Cost/ Marginal Cost
FTZ Reclassification Host Country Assembly
Price Escalation
5
Price Escalation An American-Built Jeep
Cherokee Makes the Trip to Japan
6
Price Escalation
Ex FOB FAS CF CIF
7
Pricing in Global Markets (cont.)

• Market Elasticity
• Host Govt. Price Controls
• Inflation
• Competitive Envt.
• Exchange Rate Fluctuations
• No Normal Margins
• Licensing Vs. Buying

External Environment
8
Types of Countertrade Agreements

• Barter
• Counter Purchase
• Offset
• Compensation Trading
• Cooperation Agreements
• Switch Trading

9
Reasons for Countertrade

• Conserve Hard Currency
• Overcome Some Trade Barriers
• Promotional Tool
• As an Access to New Markets
• To Induce Technology Transfer
• Repatriate Funds in Soft Currency
• Protect Against F/X Fluctuations

Problems of Countertrade

• Lack of Flexibility
• Managed Trade not Free Trade
• Harder to Determine Price
• Tax Evasion
• Dumping