MAJOR 7

“PRICING STRATEGY”

Larra Mae B. Biron BSBA MM – III FINALS

Questions for Discussion:

1. Comment on the pricing philosophy, “Sometimes price should be wrong by design.”
- The pricing philosophy “Sometimes price should be wrong by design” because customers
are most likely to based or critic a product price based in its design and quality. It is a pricing
philosophy where the consumers guess price of a particular product is most likely about the
products appearance or design.

2. The standard worldwide base price is most likely looked on by management as full-cost
pricing, including an allowance for manufacturing overhead, general overhead and selling
expenses. What factors are overlooked?
- In regard to standard worldwide base price, there are three strategies for management to
consider. The first, as stated in the question, is full-price pricing. While management may focus
more on this strategy, there are two more that are overlooked. A second strategy to consider is
called dual-pricing, which differentiates between domestic and export prices. Both full-pricing and
dual-pricing are cost oriented methods that are relatively easy to implement and maintain. The
third strategy is market-differentiated pricing, which calls for pricing exports according to the
dynamic conditions of the marketplace. Unlike the first two factors, market-differentiated pricing is
more demand based and should be consistent with the market strategy or concept. Management
should consider all three factors.

3. In combating price controls, multinational corporations will deal with agency

administrators rather than policy makers. How can they convince administrators that price
relief is fair to the company and also in the best interest of the host country?
-Multinational corporations can convince administrators that price relief is fair to the
company and also in the best interest of the host country by proving or convincing the government
that their products greatly benefits the public and their prices are reasonable.

4. Which elements of pricing can be standardized?

- The element of pricing which can be standardized is manufacturing cost. Rather than
assigning actual costs of direct material, direct labor and manufacturing overhead to a product,
which can be costly and time consuming, manufacturers can use standard costing to reveal
variances between the expected and actual costs.

5. Why do local price differences stay in place even with the euro as a common currency?
- Local price differences stay in place even with the euro as a common currency because of
price localization which defined as the practice of adjusting prices to local markets rather than
charging the same amount or displaying sale prices in the same currency in all markets.

6. Discuss the advantages and drawbacks of countertrade.

- Advantage of Countertrade
 The primary reason is that world debt crises and exchange volatility have
made ordinary trade financing very risky
  It permits the covert reduction of prices and therefore allows firms and
governments to circumvent price and exchange controls.
 It can provide stability for long-term sales
 It can ensure the quality of an international transaction
 It can be equated to an exchange of hostages that ensures that all parties
involved live up to their agreement
- Drawbacks of Countertrade
 The time-consuming nature. As in any unconventional tactic, there will be
haggling over the good trades, so expect a long, drawn-out negotiation until
all parties are satisfied.
 Negotiation complexity. What should you do with the goods being offered?
 Higher transaction costs (including brokerage, for instance). Costs can
quickly add up, especially while looking for a buyer for the goods,
commissions to middlemen, and more.
 Logistical issues, especially if commodities are involved.
 Greater uncertainty on the value of the goods being traded and uncertainty
on the quality of the goods.