Falling trade barriers between national markets, the rise of newly industrialized countries and technological changes have affected the structure of international markets and imposed new challenges on the international business environment.
The bases of competition within many markets are changing so much that the opportunities to survive with purely domestic strategies are becoming limited.
One of the implications of these developments is that the efforts of many international firms to maintain profits by reducing costs or increasing production quantities has reached a limit in many markets. Therefore a lot of managers are concentrating more
and more on another determinant of profit: pricing. Indeed, a good pricing management is able to increase profits and liquidity, and therefore shareholder value.
While achieving economies of scale through their global operations, companies still have to act locally. The increasing importance of the price suggests that traditionally simple methods (e.g. cost or competition related pricing) are not enough to meet the
requirements anymore. As a consequence, more comprehensive pricing strategies have to be developed in order to still be successful in future.
When defining a global pricing strategy, international firms should consider several determinants that influence pricing decisions in international markets. The following paper takes a closer look at the different significant determinants required to set up a global pricing strategy as well as the different pricing strategies that can be used to
reach the determined goals. In order to visualize aspects of the pricing process, practical examples are used to help to understand the importance of different elements within pricing management.
Table of Contents
1. Introduction
2. Factors in international pricing management
2.1 External factors
2.1.1 Governmental Regulations and Legal Environment
2.1.2 Demand and Economic Environment
2.1.3 Market Conditions and Competitive Structure
2.1.4 Distribution Infrastructure
2.1.5 Inflation and Exchange Rates
2.1.6 Cultural Factors and Consumer Behavior
2.2 Internal factors
2.2.1 Goals
2.2.2 Costs
2.2.3 Marketing Policies
2.2.3.1 Product Policies
2.2.3.2 Service Policies
2.2.3.3 Product Range Policies
2.2.3.4 Conditional Policies
2.2.3.5 Communication Policies
2.2.3.6 Distribution Policies
2.2.4 Organizational Structure
2.2.5 Transfer Pricing
3. Pricing strategies
3.1 International pricing strategies
3.1.1 Standardization strategy
3.1.2 Dual-Pricing Strategy
3.1.3 Differentiation Strategy
3.1.4 Price Corridor Strategy
3.2 Intranational Pricing Strategies
3.2.1 Skimming Strategy
3.2.2 Penetration Strategy
3.2.3 Premium Pricing Strategy
3.2.4 Medium Pricing Strategy
3.2.5 Promotion Pricing Strategy
3.2.6 Pulsation Strategy
3.3 Combining International and Intranational Pricing Strategies
4. Price setting
5. Conclusion
Objectives and Themes
The primary objective of this work is to explore the complexities of global pricing management by analyzing the internal and external determinants that influence international pricing decisions. The research examines how multinational firms can transition from simple cost-based models to comprehensive, strategic pricing frameworks to remain successful in an evolving global business environment.
- Identification of external market determinants such as legal regulations, competition, and cultural factors.
- Analysis of internal factors including organizational goals, costs, and marketing mix integration.
- Evaluation of international pricing strategies (standardization, dual-pricing, differentiation, and corridor strategies).
- Investigation of intranational pricing tactics for market entry and product life cycle management.
Excerpt from the Book
2.1.1 Governmental Regulations and Legal Environment
Differences in government laws and regulations are among the major factors that affect companies’ pricing decisions across markets. For example, a common law found in many countries that directly influences pricing is retail price maintenance, which requires firms to sell certain products at specified prices. The purpose of such laws is either to protect customers from unfair exploitation or to ensure that certain products (e.g., pharmaceuticals) are easily accessible to almost everybody in the population. Governments may also impose price controls on certain products to protect local producers from unfair international competition. Further, pricing is influenced indirectly by laws and regulations which necessitate product modifications, in compliance with different technical specifications, health and safety standards, environment-protection acts, electric, weight, and measure systems, and such like, that may prevail in foreign markets. In order to make the required modifications firms incur extra costs, forcing them to either charge higher prices or reduce their profit margins.
Import tariffs also play an important role when setting prices in international markets. Import tariffs are essentially handled as regular taxes; however, only foreign competitors are forced to play these duties. A special case is comprised by the so-called anti-dumping provisions. Their purpose is to prevent the importations of merchandise that could be sold at “dumping” prices (broadly defined as lower than regular market prices). The purpose of these tariffs is to protect vulnerable national industries against foreign competitors.
Summary of Chapters
1. Introduction: This chapter highlights the challenges posed by globalization and the shifting competitive landscape, emphasizing the need for sophisticated international pricing management to sustain profitability.
2. Factors in international pricing management: This section provides a comprehensive breakdown of the external environmental constraints (legal, economic, competitive) and internal organizational requirements that shape pricing decisions.
3. Pricing strategies: This chapter categorizes and evaluates various international and intranational pricing methodologies, ranging from standardization to complex price corridor models and market entry strategies.
4. Price setting: This section details practical pricing methods, focusing on cost-based, buyer-based, and competition-based approaches to determining final product prices.
5. Conclusion: The final chapter summarizes the necessity of integrating market-specific knowledge into a coherent pricing policy to avoid poor performance and maximize long-term shareholder value.
Keywords
Global pricing strategy, international marketing, price determinants, standardization strategy, differentiation strategy, price corridor, skimming strategy, penetration strategy, competitive advantage, transfer pricing, market entry, cost leadership, retail price maintenance, consumer behavior, price elasticity.
Frequently Asked Questions
What is the primary focus of this work?
The publication examines the theoretical and practical aspects of establishing effective pricing strategies for firms operating in international markets, highlighting that domestic strategies are often insufficient for global success.
Which factors primarily influence international pricing?
Pricing is influenced by a range of external factors such as governmental regulations, import tariffs, economic development, competition, and cultural nuances, alongside internal factors like organizational structure and product policy.
What is the core objective of developing a global pricing strategy?
The main goal is to optimize profit and liquidity while ensuring long-term competitiveness by aligning pricing with enterprise goals and local market realities.
What scientific methods are analyzed regarding price determination?
The work reviews cost-based pricing (cost-plus, break-even), buyer-based pricing (perceived value), and competition-based pricing (going-rate, sealed-bid tenders).
How are international and intranational pricing strategies distinguished?
International pricing strategies regulate price coordination between different national markets, whereas intranational strategies focus on the chronological sequencing of price changes within a single country's market.
Which keywords best characterize this research?
The study is characterized by concepts such as global pricing strategy, international marketing, differentiation, standardization, and the balance between centralized and decentralized pricing authority.
How does the author view the role of transfer pricing?
Transfer pricing is seen as an essential element for multinational firms to allocate resources, minimize tariffs, and manage profit transfers, illustrated by the specific case of Hoffmann-LaRoche.
What is a "price corridor strategy"?
It is a hybrid approach that establishes a basic price with a defined bandwidth, allowing foreign subsidiaries some local flexibility while maintaining control over global price gaps.
- Quote paper
- Jochen Volm (Author), 2001, Global Pricing Strategies. Theoretical Concepts and Practical Experience, Munich, GRIN Verlag, https://www.grin.com/document/6755
