Feb 4, 2012

MBA Notes: Pricing for Global Markets

The price is an important element of global business strategies. However, it is very difficult on the international stage, with various factors, such as multiple currencies, additional costs, a wider distribution network and complex trade barriers and heterogeneity in the markets.

Prices in effect has an impact on the value for the customer. It also has an indirect influence on the strategy for the promotion and may for some other gaps in the marketing mix to make.

It is important for managers to pay close attention to during the development of pricing policy. Apart from production costs and analysis of supply and demand, must they consider other factors such as insurance costs, fluctuations in exchange rates, etc. The most important influencing factors on the pricing decision as follows:
  • Type of business / type of product - a product that is new to the market and has little or no competition can have a high price. However, as competition increases or reduces technological advantage, the company should effectively pricing strategies based on the focus of selected market segments.
  • Location - A company has manufacturing facilities in foreign countries often relative advantage over companies that are in their home country and still exports. This is because some changes in the economic policies of the countries heavily in export activity.
  • Distribution - An exporter who has its own subsidiaries outside the distribution has a greater influence on pricing decisions in relation to those who bank with independent distributors. Independent distributors tend to highlight the prices significantly. This problem may be by reducing the number of intermediaries between the company and the final consumer, setting up its own subsidiaries overseas minimized on the market.
  • Foreign markets - external environmental factors contribute to the complexity of pricing.
  • Differences in foreign currencies - Several economic factors such as inflation influence, and regards price controls, exchange rates, the pricing decisions.

Many companies follow the central price, because it helps the consistency in terms of price. This in turn prevents the unauthorized importation of cheaper countries to sell in expensive markets. A company faced with almost the same competitors in different markets on the world stage. For example, a fragmented strategy will not be very effective. Centralized price leads to a better forecast and plan effectively for the production. This is necessary in order to create uniformity, if the company seeks to market its products comprehensive set of homogeneous markets, which are distributed in different countries. These are markets that may differ in terms of geographical presence, however, market segments and customer requirements. However, a company promotes decentralized prices on some occasions. It is necessary to freedom, subsidiaries or distributors be to change the pricing policy, if there are sudden need for change due to external factors. For example, the companies have to follow the market trend, if there are more players in the region. The authority should amend the prices are taken to be that society does not lose market share because of a delay in the implementation of changes. You can also make changes if it were a market where most or all of the customers belong to a group with low income. It is important that the prices will meet local needs.

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