Factors Affecting International Pricing…

1. Welcome to class of International PricingbyDr. Satyendra SinghProfessor, Marketing and International BusinessUniversity of WinnipegCanadas.singh@uwinnipeg.cahttp://abem.uwinnipeg.cawww.abem.ca/conference

2. Factors Affecting International Pricing… • Inflation • Exchange Rate Fluctuations • Parallel Imports • Price Escalation • Government Influences

3. Factors Affecting International Pricing… • Inflation • Eliminates consumer’s purchasing power • Inflation  • Adjust price  • Delayed payment will erode profit • Problem with consignment basis shipment I.e paid when sold • Strategy • Careful price quotations and supply contracts • Increase brand value • Retain and win trust of customers

4. Factors Affecting International Pricing… • Exchange Rate Fluctuations • It fluctuates • Govt. may intervene if too much fluctuations • Weak currency  export and vice-versa • Monitor other currencies movement also • Strategy • Review entire operation system • Adjust cost structure • Increase brand value • Check mode of operation in foreign markets • Exports vs. licensing vs. investment

5. Strategies Under Varying Currency Conditions Source: S. Tamer Cavusgil, “Unraveling the mystique of export pricing,” Chapter 71 in Sidney J. levy, George R. Frerichs and Howard l. Gordon (eds), The Dartnell Marketing Manager’s Handbook (Chicago: Dartell Corporation, 1994), Figure 2, p. 1362.

6. Factors Affecting International Pricing… • Parallel Imports • Distributors in one country sell in another country • Not illegal • Overstocking • Distributor bankrupt • Exclusive distributors, luxury products, upscale retailers, margin  • Internet I.e. inexpensive music CDs Italy… • Drugs/medicine Canada USA • Strategy • Self-certify the product! • Language, packaging • For sale in specific country only • Product is not suitable for another country e.g. too sweet/color • Warranty/repair not transferable between countries • Close relationship with distributors

7. Factors Affecting International Pricing… • Price Escalation • A direct result of products moving across borders • Manufacturers Importers Distributor  Jobber  Consumer • Import duty (Fixed/unit, Valorem/values of goods x%, both $1 per unit + x% of its value), VAT, PST/GST • Operating costs  • Additional transportation costs • Two distributors: high lot and low lot • Insurance, packaging, country of origin, other admin. costs • Strategy • Move to low cost manufacturing countries • Lower distribution costs • Lower features and lower quality • Re-classification of the product to save on duty (art vs. jewellery) • Adjust dimension (shoes less thick, larger containers)

8. Causes and Effects of Price Escalation Source: CIF Cost, Insurance, Freight, The exhibit assumes that all domestic transportation costs are absorbed by the exporter. Just for illustration purposes.

9. Factors Affecting International Pricing… • Government Influences • Reduces the impact of price competition or eliminate it • Keeps retail margins below exorbitant level • Correlation between car-owners and superstores visits • Maximum/suggested retail price • Limited period of discount  EU Feb & Aug. • Wal-mart Everyday Low Price (EDLP) i.e., No discount • Displaced sales • Strategy • North American Approach • Govt creates environment conducive to conducting business • Adjusting interest rate • Monitoring the market to prevent abuses • Canada Competition Bureau • Cocoa, coffee, sugar, wheat  Board