AL

ON M
RNATI

AR TI
AL

KE
ON M

PRICING OF KITKAT
RNATI
E

AR TI
NG
T

KE
IN
TE

NG
IN
 APPROACHES TO REDUCING PRICE
PRICING POLICY
ESCALATION
1. Pricing objective
1. Lowering Cost of Goods
2. Parallel Imports
2. Lowering Tariffs
APPROACHES TO INTERNATIONAL
3. Lowering Distribution Costs
OUTLINE

PRICING
4. Using Foreign-Trade Zones to Lessen Price
1. Full-Cost versus Variable-Cost Pricing
Escalation
2. Skimming versus Penetration Pricing
5. Dumping
PRICE ESCALATION
LEASING IN INTERNATIONAL MARKETS
1. Costs of Exporting
PRICE QUOTATIONS
2. Taxes, Tariffs, and Administrative
ADMINISTERED PRICING
Costs
1. Cartel
3. Inflation
2. Government-influenced pricing
4. Exchange Rate Fluctuations
COUNTERTRADE AS A PRICING TOOL
5. Varying Currency Values
GETTING PAID: FOREIGN COMMERCIAL
6. Middleman&Transportation cost
TRANSACTIONS
Pricing policy

Pricing objectives

Parallel Imports
Exclusive distribution
 In general, price decisions are viewed two ways: pricing as an
active instrument of accomplishing marketing objectives, or
pricing as a static element in a business decision.
If prices are viewed as an active instrument, the company
sets prices to achieve specific objectives
The company that follows the second approach, pricing as
a static element, probably exports only excess
Competition from other confectionery brands in Europe as
Pricing
well as in Asia, along with the development of discount
Objectives: confectionery stores has forced Nestle in general and Kitkat in

particular to cut their prices of products to compete with
competitors, especially products in the field of food and
confectionery.
Parallel Imports:

Parallel imports (or gray market goods) refer to branded goods that are imported
into a market and sold there without the trademark owner’s consent in that
market.
Exclusive distribution:
Exclusive distribution definition is a
kind of distribution a manufacturer or
supplier authorizes only one
distributor to carry out within a
definite region.

The same the slogan: Have a break Have a KitKat, but through two
Kitkat advertisements, the difference in advertising helps people to
clearly see the difference between individualism and collectivism index
 Approaches to
International Pricing
1. Full-Cost versus Variable-Cost Pricing

I n variable-cost pricing: Firm The full-cost pricing: No unit of a

regard foreign sales as bonus similar product is different from

sales and assume that any return any other unit in term of cost,

over their variable cost makes a which much bear it’s full share of

contribution to net profit the total fixed and variable

=> Kitkat using the full-cost pricing: Traditional Kitkat approximate 35,000

to 40,000 VND
 2. Skimming versus Penetration Pricing
Skimming pricing: This used to reach a segment of market relative price-insensitive

and thus willing pay a premium price for product

=> Thanks to the brand format that specializes in selling unique and limited chocolates,

the manufacturer applies skimming pricing to the most unique products.

Penetration Pricing: This use stimulate market growth and capture market share by

liberality offering product at low price

=> Kit Kat uses a penetration pricing strategy in all the countries for its upcoming flavors

introducing them with a low price and developing a niche for them. It also applies

promotional pricing during some seasons with special editions and it also offers

discounts pricing in certain time of the year to attract customers.

 PRICE
For example, Nestle has built two
Escalation factories directly in Japan to reduce the
Costs of Exporting: is the added costs cost of exporting from other countries
incurred as a result of exporting
products from one country to another.
 Taxes, Tariffs, and
Administrative Costs
A tariff, or duty, is a special form of taxation. A tariff is a fee charged when goods

are brought into a country from another country.

For example, KitKat Itohkyuemon Uji Matcha 12 Pieces - costs 800 yen in Japan while

in Vietnam it is only about 1.38 yen.

 Inflation

Inflation: is the decline in the purchasing power of a

certain currency over time.

For example:

- Wholesale import pricesrose to a record 38%.

- To avoid being affected by inflation, KitKat resized

the product, but keeping the original price (120 yen

~ 0.94 euros)
 Exchange Rate Fluctuations
An exchange rate is defined as the conversion of the price of one currency into another
country's currency
Kitkat products are managed by Nestle. In the Nestle report, they mentioned that the base
currency of the group is Euro. From the two charts, you can see the fluctuation of the currency
when exchanging US dollars or Japanese Yen to Euro. So Nestle report also mentions the
fluctuation will be effected on the company's profits.
 Varying Currency Values
Varying Currency Values: Currency fluctuations are a natural result of floating exchange rates,
which are the norm in most major economies.
Prices for Kit Kats chocolate bars may increase due to Brexit. The drop in the value of the
pound could affect the pockets of consumers.
--> If necessary, Nestle only increases the cost to maintain the high quality of the product.
Approaches to Reducing
Price Escalation

Three methods used to reduce costs and lower

price escalation are:
Lowering the cost of goods

Lowering tariffs.
Lowering distribution costs.
Lowering One of the important reasons for manufacturing
Cost of Goods in a third country is an attempt to reduce
manufacturing costs and thus price escalation

For example, KITKAT changed plastic

packaging to origami paper to protect the
environment and reduce production costs
 Lowering Tariffs

When tariffs account for a large part of

price escalation, as they often do,
companies seek ways to lower the rate.
Some products can be reclassified into a
different, and lower, customs classification.

For example, Kitkat in the UK changed the Lowering Distribution Costs:

formula to cut sugar by 10%.
Shorter channels can help keep
prices under control.
Middleman &
Transportation cost:
The term middleman is an informal word for an
intermediary in a transaction or process chain.
Transportation cost The expenses a company
incurs when it transfers its inventory or other
assets to another location.

For example: KitKat's intermediaries in Japan are

mainly convenience stores, grocery stores or
souvenir shops.
 Leasing in
International Markets
An important selling technique to
alleviate high prices and capital
shortages for capital equipment or
high-priced durable goods is the
leasing system.
Price Quotations
In quoting the price of goods for international
sale, a contract may include specific elements
affecting the price; the currency to be used,
credit terms, and the type of documentation
required.the price quotation and contract
should define quantity and quality.
Parties to the transaction must be certain that
the quotation settled on appropriately locates
responsibility for the goods during
transportation and spells out who pays
transportation charges and from what point.
 1. Cartel: Cartel is an organization made up of a group of
producers of goods or services that come together to
Administered negotiate with the aim of regulating supply in order to
manipulate or regulate prices
Pricing
are pricing for services or 2. Government-influenced pricing: Companies doing
goods that are regulated by business in foreign countries encounter a number of
a government or different types of government price settings.
regulatory authority, as
The prices of Kitkat products are governed by the decision of
opposed to buyers and
Nestle and there is no agreement between other businesses to
sellers interacting
govern the market price of confectionery. And Nestle is not
according to supply and
affected much by Government-influenced pricing. They still have a
demand
lot of power in Kitkat pricing decisions for most products and
markets.
 Countertrade as a pricing tool

Countertrade is a pricing tool that every international marketer must be ready to

employ, and the willingness to accept a countertrade will often give the
company a competitive advantage. Marketers must be aware of which markets
will likely require countertrades, just as they must be aware of social customers
and legal requirements
 There are 5 important foreign trade transaction
methods:
Getting Paid:
Letter of credit
Foreign Commercial Bill of Exchange
Cash in Advance
Transactions Open Account
Forfaiting.

Nestle is an international company, so foreign commercial transactions are an

extremely important role in the business to collect money.
Nestle Finance International Ltd (NFI) is responsible for the finances of Kitkat.
For buyers with small quantities they are required to pay in cash. For partners,
they use bill of exchange transactions. NFT are responsible for requiring the
partners to pay on time and declare the amount paid in the financial statements.
Thank
for
your
tentio

!n
a