Price Dynamics

Price Dynamics

w   Pricing is the only revenue generating element of the marketing mix.

w   Pricing is a means of attracting and communicating an offer to a potential buyer.

w   Pricing is a competitive tool.

w   Pricing can be used to position the product or service in the marketplace.

Different Pricing Strategy


n    Is to achieve the highest possible contribution in a short initial time period, then gradually lowering the price as the market.

qMarket Pricing

n    Following competitive pricing in the target market; adjusting production and marketing mix to competitive conditions.

qPenetration Pricing

n    Offering low pricing to generate volume sales which hopefully will compensate for low margins.



1       Market-related factors

•       Nature of demand/target audience characteristics

•       Government regulations (e.g., duties)

•       Exchange rate stability

2       Industry-related factors

•       Competition intensity

•       Nature of competition


1       Marketing Mix

•       Product (e.g., old/new; standardized/differentiated

•       Distribution system (e.g., length)

•       Promotion needs (e.g., sales efforts)

2       Company characteristics

•       Extent of internationalization

•       Countries exported to

3       Management attitudes

•       Importance of exports

•       Overall price position of firm

The Setting of Export Prices

Customer Purchase Factors

w     ability to pay

w     price-quality relationship

w     reaction to marketing mix

w     market support

Pricing Policies Factors

w     profit maximization

w     market share

w     survival

w     return on investment

w     competitive policies

n     copy competitive pricing

n     follow competitive pricing

n     price to discourage competitive entry

Export Pricing Strategy

ØCost-oriented pricing

n    Standard worldwide price- regardless of buyer’s location in the market(s)

n    Dual pricing differentiates between domestic and export prices

ØMarket-differentiated pricing

n    based on the dynamics of the marketplace

l  changes in competition, exchange rates, or other environmental changes etc.

Export-Related Costs

w   Export-related costs

n    Cost of modifying a product for a foreign market

n    Operational costs of exporting

n    Cost incurred in entering the foreign market

w   Price escalation for exports results from

n    Clear-cut  and hidden costs

Methods for combating price escalation

n    Reorganize the channel of distribution

n    Product adaptation

n    Change tariff or tax classifications

n    Overseas assembly or production

Negotiating Terms of Payment

w   Considerations

n    The amount of payment and the need for protection.

n    Terms offered by competitors.

n    Practices in the industry.

n    Capacity for financing
international transactions.

n    Relative strength of the
parties involved.

Terms of Payment

n    Cash in Advance

l   Not widely used except for first time transactions

n    Letter of Credit

l   Promise to pay

l   Irrevocable, confirmed, nonrevolving

n    Drafts

l   Similar to personal check

l   Must obtain shipping documents prior to delivery

n    Documentary collection

l   Bank acts as collection agent

l   Draft may be sold at discounted rate for immediate cash

Managing Foreign Exchange Risk

vForward rate exchange market

n    “the exchange of currencies on a future date at an agreed upon exchange rate”

vSpot rate transaction

n    “the exchange of currencies for immediate delivery”


w   Ranges of dumping

n    Predatory dumping

l   is intentional selling at a loss to increase market share

n    Unintentional dumping

l   occurs when market factors cause the import’s selling price to fall below prices in the exporter’s home market

w   Remedies for dumping

n    Antidumping duty

l   are levied on imported goods
sold at less than fair market value

n    Countervailing duties

l   are imposed on imports which are subsidized in the exporter’s home country