GMMCH13.ppt 71KB Jun 05 2011 09:30:25 PM

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John Wiley &Sons, In c c 1998

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GLOBAL PRICING

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Global Pricing

 Overview

 _{1. Drivers of Foreign Market Pricing}  _{2. Price Escalation}

 3. Pricing in Inflationary Environments  4. Currency Fluctuations

 5. Transfer Pricing

 6. Global Pricing and Antidumping Legislation  7. Coordinating Prices

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1. Drivers of Foreign Market Pricing

– _{Exhibit 13-1 Highest and Lowest Prices in ECU}

of Products in EC Cities



Company Goals



Company Costs



Customer Demand

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1. Drivers of Foreign Market Pricing

(cont)



Competition

– _{Exhibit 13-3 The Cost of a Pack of Marlboro}

Cigarettes vs The Highest- and Lowest- Price Brands in Each Market

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2. Managing Price Escalation

– _{1. Rearrange the distribution channel}

– _{2. Eliminate costly features (or make them}

optional)

– _{3.Downsize the product}

– _{4. Assemble or manufacture the product in}

foreign markets

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3. Pricing in Inflationary Environments



Ways to safeguard against inflation

– _{1. Modify components, ingredients, parts,}

and/or packaging materials.

– _{2. Source materials from low-cost suppliers} – _{3. Shorten credit terms}

– _{4. Include escalator clauses in long-term}

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3. Pricing in Inflationary Environments

(cont)

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3. Pricing in Inflationary Environments

(cont)



Courses of action with price controls

– _{1. Adapt the product line}

– _{2. Shift target segments or markets}

– _{3. Launch new products or variants of existing}

products

– _{4. Negotiate with the government}

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4. Currency Fluctuations

– _{Exhibit 13-4 Exporter Strategies under Varying} Currency Conditions



_{Currency Gain/Loss Pass Through}

– _{Exhibit 13-5 A Numerical Illustration of} Pass-Through and Local Currency Stability

– _{Exhibit 13-6 Retail Price Changes During} Dollar Appreciations: Japanese and German Exports to the U.S. Market

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5. Transfer Pricing



Determinants of Transfer Prices

– _{Tax regimes}

– _{Local market conditions} – _{Market imperfections} – _{Joint partner venture}

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5. Transfer Pricing (cont)



Setting Transfer Prices



Minimizing the Risk of Transfer Pricing

Tax Audits

– _{Exhibit 13-7 Decision Model Making for}

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6. Global Pricing and Antidumping

Regulation



Trading-up



Service Enhancement

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7. Coordinating Prices



1. Nature of customers



2. Nature of channels



_{3. Nature of competition}



_{4. Market integration}

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7. Coordinating Prices (cont)

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Aligning Pan-Regional Prices

– _{Exhibit 13-8 Frame 1 Development of Prices in}

Europe

– _{Step 1: Determine Optimal price for Each}

Country

– _{Step 2: Find out whether parallel imports (“gray}

markets”) are likely to occur at these prices

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7. Coordinating Prices (cont)

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Implementing Price Coordination

– _{1. Economic Measures} – _{2. Centralization}

– _{3. Formalization}

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8. Countertrade



Forms of Countertrade

– _{Exhibit 13-9 Classifications of Forms of}

Countertrade

– _{Non cash payments}

• Simple Barter, Clearing Agreement, Switch Trading – _{Cash payment flows}

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8. Countertrade (cont)



Motives Behind Countertrade

– _{Gain access to new or difficult markets}

– _{Overcome exchange rate controls or lack of}

hard currency

– _{Overcome low country credit worthiness} – _{Increase sales volume}

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8. Countertrade (cont)



Shortcomings of Countertrade

– _{No “in-house” use for goods offered by}

customers

– _{Timely and costly negotiations}

– _{Uncertainty and lack of information on future}

prices