EXPORT PRICING AND

METHODS OF PAYMENT

Presented by
group 3

DEFINATION OF PRICE
Price is the value of utility of goods and services
expressed in terms of money.
It is one of the important factors that determine the
success of an export organization.
International market being buyer market, the price
quoted by an export should be reasonable and fi nal.

FACTORS AFFECTING DETERMINATION OF EXPORT PRICE:

a.
b.
c.
d.
e.
f.
g.
h.

Cost of the Product

Competition
Elasticity of Demand
Government Policies
Incentives off ered by the Government
Frequency of purchase
Product Diff erentiation and Brand Image
Miscellaneous factors

IMPORTANCE OF EXPORT PRICING

a.
b.
c.
d.
e.
f.
g.
h.

Helps to achieve objectives

Increases probability
Helps to penetrate the market
Helps to skim the cream
Helps to increase market share
Helps to develop brand loyalty
Helps to face competition
Refl ects the quality of product

EXPORT PRICING STRATEGIES

a.
b.
c.
d.
e.
f.

Skimming pricing strategies

Penetration pricing strategy
Transfer pricing
Marginal cost pricing
Market oriented pricing
Competitors pricing

EXPORT PRICING QUOTATIONS

a. Freight on board (FOB) quotation

b. Cost and freight(C&F) quotation
c. Cost Insurance and freight (CIF) quotation

CONDITIONS FOR REALIZATION OF EXPORT PAYMENT

a.
b.
c.
d.
e.
f.

Payment in permitted currencies

Prevent Immobilization of foreign exchange
Submission of shipping documents
Export full value of goods
Authorized dealers
Diff erent form of payments

FACTORS AFFECTING EXPORT PAYMENT TERMS

a.
b.
c.
d.
e.
f.
g.
h.

Nature of product.
Creditworthiness of buyer.
Exchange and import controls in importing country.
Competitors credit terms.
Economic situation in importers country.
Sixe of export order.
Financial position of the exporter
Relation with the importer.

METHOD OF PAYMENT

a.
b.
c.
d.
e.

Payment in advance.
Open account.
Consignment stock payment.
Documentary bills of exchange.
Letter of credit.

ADVANTAGES OF LETTER OF CREDIT

For Importer

For Exporter

a. Avoids blockage of
finance
b. Prevents Bad Debts
c. Fulfillment oh Import
Regulation
d. Guarantee of Payment
e. Avoids refusal by
importer

a.
b.
c.
d.

Better terms of trade

Timely Delivery
Overdraft Facility
NO Blocking of
Finance
e. Good Relations &
Protection for both
Parties