594 Part 4 Developing Global Marketing Strategies
Summary
Pricing is one of the most complicated decision areas encountered
by international marketers. Rather than deal with one set of market
conditions, one group of competitors, one set of cost factors, and one
set of government regulations, international marketers must take all
these factors into account, not only for each country in which they
are operating but also often for each market within a country. Market
prices at the consumer level are much more difficult to control in
international than in domestic marketing, but the international mar-
keter must still approach the pricing task on a basis of established
objectives and policy, leaving enough flexibility for tactical price
movements. Controlling costs that lead to price escalation when
exporting products from one country to another is one of the most
challenging pricing tasks facing the exporter. Some of the flexibility
Key Terms
Parallel market Skimming
Gray market Penetration pricing policy
Exclusive distribution Price escalation
Variable-cost pricing Dumping
Full-cost pricing
Questions
1. Define the key terms listed above.
2. Discuss the causes of and solutions for parallel imports and
their effect on price.
3. Why is it so difficult to control consumer prices when selling
overseas?
4. Explain the concept of price escalation and why it can mislead
an international marketer. How can this problem be counter-
acted? Discuss.
5. What are the causes of price escalation? Do they differ for
exports and goods produced and sold in a foreign country?
6. Why is it seldom feasible for a company to absorb the high
cost of international transportation and reduce the net price
received?
7. Volatile currency values have an impact on export strategies.
Discuss.
8. “Regardless of the strategic factors involved and the company’s
orientation to market pricing, every price must be set with cost
considerations in mind.” Discuss.
9. “Price-fixing by business is not generally viewed as an accept-
able practice (at least in the domestic market), but when gov-
ernments enter the field of price administration, they presume
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in pricing is reduced by the growth of the Internet, which has a ten-
dency to equalize price differentials between country markets.
The continuing growth of Third World markets coupled with
their lack of investment capital has increased the importance of
countertrades for most marketers, making countertrading an
important tool to include in pricing policy. The Internet is evolv-
ing to include countertrades, which will help eliminate some of the
problems associated with this practice.
Pricing in the international marketplace requires a combination
of intimate knowledge of market costs and regulations, an aware-
ness of possible countertrade deals, infinite patience for detail,
and a shrewd sense of market strategy. Finally, letters of credit and
other issues related to getting paid are discussed.
Countervailing duty Cartel
Countertrade Letters of credit
Barter Bills of exchange
Administered pricing Forfaiting
to do it for the general welfare to lessen the effects of ‘destruc-
tive’ competition.” Discuss.
10. Do value-added taxes discriminate against imported goods?
11. Explain specific tariffs, ad valorem tariffs, and compound tariffs.
12. Suggest an approach a marketer may follow in adjusting prices
to accommodate exchange rate fluctuations.
13. Explain the effects of indirect competition and how they may
be overcome.
14. Why has dumping become such an issue in recent years?
15. Cartels seem to rise again, after they have been destroyed. Why
are they so appealing to business?
16. Discuss the different pricing problems that result from infla-
tion versus deflation in a country.
17. Discuss the various ways in which governments set prices.
Why do they engage in such activities?
18. Why are costs so difficult to assess in marketing internationally?
19. Discuss the major problems facing a company that is
countertrading.
20. If a country you are trading with has a shortage of hard cur-
rency, how should you prepare to negotiate price?
12/3/18 8:47 PM