5 PRICING DECISIONS IN INTERNATIONAL MARKETS

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 Agenda
Discussing the concepts
• 3Cs in pricing

• Pricing process
– 6 steps
– Cost incurred in international markets
– Appropriate pricing to importers

• Emerging pricing issues in international markets

Assessing the concepts

15. Discuss pricing decisions of Apple (G3)
16. Discuss pricing decisions of Vietnam Airlines (G4).
17. Discuss pricing decisions of Toyota (G5).

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 Topics 15, 16 & 17

1. Introduction of the company and selected product.

2. Discuss factors that the company consider when setting prices of selected
product.
3. How do the company’s marketing objectives and its marketing mix
strategy
affect its pricing decisions?
4. What general pricing approaches has the company used? How does the company
apply value-based pricing and cost-based pricing?
5. What pricing strategies did the company use: market-skimming pricing or
market-penetration pricing? Why would the company choose that strategy when
launching a new product?
6. Briefly describe the five product mix pricing decisions of the company.
7. Discuss price adjustment strategies of the company. What factors influence the
price the company charges in different countries?
8. When and how did the company change its price?

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 3Cs in pricing

3Cs khi định giá

• customer perceptions of values Current
distribution
New
distribution
channels channels
(Khách hàng)
• Product costs (Chi phí sản

Curre nt
I II

products
xuất của
công ty)
• Other internal and external IV III

New
considerations (Các cân nhắc

products
bên trong và bên ngoài khác ):
– Cost and price of competitors
– Objectives and strategies of
company 4
– Market.
 Setting Price of Apple

• Cost (Giá vốn): 45% of price

• Customer (Giá trị cảm nhận của khách hàng): price of new
model is higher than previous one.

• Competition (Cạnh tranh) at the same time

– Price of iPhone 5: 850-1199$
– Price of Galaxy S3: 523$

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 Pricing Process

1. Decide Pricing Objectives

2. Evaluate Customer Perceived Values
3. Calculate Cost of Good Sold
– Cost Incurred in Exporting/International Markets
4. Analyze Prices and Products of Competitors
5. Decide Pricing Methodology
6. Finalize Prices in International Markets
– Appropriate Pricing to Importers

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 S1. Pricing Objectives

1. Increase profit
2. Increase sales
3. Get the most profitable segments
4. Establish distribution channels, attract customers’
trial.

Apple?

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 Step 2. Evaluate Customer Perceived Values

1. Product levels
2. Significance of each factor to target customers
3. Price sensitivity (of each factor)
4. Demand curve and demand elasticity (with price)

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 Step 3. Calculate Cost of Good Sold

Data Analyses:
1. Fixed cost
2. Variable cost
3. Average cost

Apple:
• Parts are from 150 in the world
• Supply chain and expenses

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 Costs incurred in international markets

3 types of costs to be considered in international markets (Czinkota

& Ronkanen, 2010)
• Cost to modify products to serve international markets
• Operating expenses for export activities including manpower,
R&D, transport, insurance, communication to foreign buyers,
and promotion expenses in international markets
• Costs incurred when accessing international markets like tariff
and fee, risks (political, credit, exchange rate).

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Vietnamese Lychee prices to the USA

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Step 4. Analyze prices and products of competitors

• Find out competitors’ objectives and cost structure

• Considerations
– Relationship between quality, cost and prices
– Foresee reactions of competitors

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 Step 5. Deciding pricing methodology

• Pricing methodology
1. Customers perceived pricing (định giá theo cảm nhận của
khách hàng)
2. Mark up (on cost) pricing (cộng lời vào chi phí)
3. Target profit pricing (định giá theo mức lãi dự kiến)
4. Value based pricing (định giá theo giá trị)
5. Current price pricing (định giá theo mức giá hiện hành)

• 2 pricing strategies for new products

1. market skimming pricing (giá hớt váng sữa)
• Home appliances, computers, telephone
2. market-penetration pricing (giá thấm dần)
• Fast moving consumer goods (FMCG), drinks.
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Step 6. Finalizing price in international markets

• Psychological factors (quality and price)

• Brand equity
• Consistency of customers’ value and profitability of
company
• Pricing effects to related parties
• Competitors’ reactions

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 Appropriate pricing to importers

• Importers are clear on how much they want to pay.

• Appropriate pricing process to importers

1. Discover selling channels of importers
2. Collect information on final price to end-users
3. Assume profit margin at each point in the process
4. Calculate the selling price of ours (exporters)

• Dutch company selling coat

– Selling price in the market is lower than 120 €
– Buying price from exporters must be lower than 50 € in order
to
meet target profit.
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 Price of Lychee: Dubai market & USA market

• Retail price at supermarket:

17 dirhams/kg (1 USD =
3.67 dirhams)  4,63$ =
104.000 đồng/kg
• Whole sale price at Al Aweer
market: 12.5 dirham/kg 
3,41$/kg = 76.635 đồng/kg
• Import price from Africa:
2.5
USD/kg (9,175 dirhams/kg)

56.250 đồng/kg
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Emerging pricing issues in international markets

• Dumping (Bị kiện bán phá giá)

• Transfer pricing (Bị điều tra về chuyển giá)
• Grey market (Vấn đề giá của hàng trôi nổi)

• 2 issues since late 1990s

– Financial crises
– Oil prices.

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 Topics 15, 16 & 17

1. Introduction of the company and selected product.

2. Discuss factors that the company consider when setting prices of selected
product.
3. How do the company’s marketing objectives and its marketing mix
strategy
affect its pricing decisions?
4. What general pricing approaches has the company used? How does the company
apply value-based pricing and cost-based pricing?
5. What pricing strategies did the company use: market-skimming pricing or
market-penetration pricing? Why would the company choose that strategy when
launching a new product?
6. Briefly describe the five product mix pricing decisions of the company.
7. Discuss price adjustment strategies of the company. What factors influence the
price the company charges in different countries?
8. When and how did the company change its price?

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