Global Pricing Strategies and Alternatives.

1. Global Pricing
Course Instructor: Sneha Sharma

2. Price is the only marketing mix instrument that
creates revenues

3. Pricing Objective
 Profit Maximization
 Marketing Penetration
 Market Skimming
 Increasing Market Share
 Fighting Competition
 Short Pay-back period
 Completing Export Obligation
 Disposal of Surplus
 Capacity Utilization

4. Global Pricing Policy Alternatives

5. Global Pricing Policy Alternatives
Ethnocentric Polycentric
Geocentric

6. Global Pricing Strategies

7. Global Pricing Strategies
Market Skimming
Market Penetration
Market Holding
Cost Plus

8. Market Holding Strategy
 Adopted by companies that want to
maintain their share of the market.
 For E.g : in single country marketing ,
strategy involves reacting to price
adjustments by competitors.
 Telecom Sector in India

9. Market Holding Strategy
 In global marketing , currency fluctuations often
trigger price adjustments.
 E.g : Appreciation of source country currency will not be
automatically passed in form of higher prices.
 If the competitive situation in market countries is price
sensitive.
 Manufacturers must absorb the cost of currency
appreciation by accepting lower margins in order to
maintain competitive prices in country market.

10. Market Holding Strategy
 A strong home currency and rising costs in the
home country may
 force a company to shift its sourcing to in-country or
third country manufacturing or licensing agreements
 instead of exporting from the home county in order to maintain
the market share.
 E.g. IKEA sourced 50% of its products in the USA in 1992
compared to only 10 % in 1989.

11. Market Holding Strategy
 If the currency of a country weakens it becomes
more difficult to compete in price with imported
product.
 A weak currency country can be a windfall for a global
company with production operations in a weak currency
country.
 E.g During Asian Flu of 1990’s the Indonesian rupiah
fell from 2400 to 18,000 and then recovered to below
8000 to the US Dollar.
 Global companies made windfall profits.
 Their costs in rupiah increased 100 % but the value of
their production in dollars or any hard currency increased
by 300 to 700 %.

12. Cost Plus Pricing
 It requires adding up all costs required to
get the product to where it must go plus
shipping and ancillary charges and a profit
percentage.

13. Drivers of Foreign Market Pricing
4 C’s : Company (cost, goals) , Customers (price
sensitivity, preferences), Competition (Market
structure ) and Channels

14. Company Costs: Export Pricing policy
 Rigid Cost plus pricing
 Export pricing set by adding all costs accrued in
selling product in international market and a gross
margin.
 Flexible cost plus pricing
 Adjustments of prices to market conditions in host
market. The domestic fixed costs are not considered
as theses are sunk costs.
 Dynamic incremental pricing
 Export related incremental costs include
manufacturing costs, shipping expense, insurance ,
overseas promotional cost.

15. Two important terms
Cost floor Cost Ceiling
Costs incurred Customer willingness to
pay

16. Customer demand
 Countries with low per capita income
 Brand Dilution
 Cannibalization
 E.g. P & G
 Ariel in Egypt
 Packaging changed from 200 gms to 150 gms
 Crest Toothpaste in China
 Cavity protection (generic)
 Whitening (Premium )

17. Customer Demand
 Niche Strategy
 Starbucks
 Haagen Dazs
 Extended Product Portfolio
 HUL
 Selling Older version at lower price

18. Competition
 Number of competitors
 Nature of competition
 E.g: Indian Rural Market
 Global vs local
 Private vs State owned
Presence of counterfeit products
E.g Microsoft in China
- Piracy rate for PC software in china is more than 80 %
- Prices slashed by over 70 %

19. Distribution Channel
 Variation in trade margins
 Length of channel
 Size of channel member
Parallel Imports/Gray Market

20. That’s All For Today