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Internationalization Essay

2365 words - 10 pages

International Marketing

International Marketing

Lesson 5

Dr. David Ambaye

Lesson outline
 International pricing decisions

 International distribution decisions

International Marketing - ESC 1


The 4Ps of Marketing
«Meeting consumers’ needs»

Variety Quality Options and features Design, style Brand Packaging Size Guarantee After sales service

Fees (margins) Discounts Sales Terms of payment Credit terms

Advertising Sales force Sales promotion Public relations Direct mail Direct Marketing

Distribution channels Sales outliets Stock keeping Warehousing Means of transport

...view middle of the document...

International pricing decisions

In a true global market, the law of one price would prevail: all customers in the market could get the best product available for the best price- one price.

Because of differences in national markets (costs, regulations, the intensity of the competition among industry members), the global marketer must develop pricing systems and pricing policies

Fragmented beer market: Budweiser, the leading global brand, has less that 4% of market share!

A six-pack of Heineken varies in price by as much as 50% depending on where it is sold!
International Marketing - ESC 1 10

I. International pricing decisions
 The Global Manager must develop systems and policies that address

• Price Floor: minimum price • Price Ceiling: maximum price • Optimum Prices: function of demand
 Marketers must

• be consistent with global opportunities and constraints • be aware of price transparency created by Euro zone, Internet

International Marketing - ESC 1


Price ceiling
 Sellers cannot charge more than this price.

• In many cases, price ceilings are below market price.
• If a price ceiling is set at or above market price:
– No noticeable effect – Price ceiling are usually put in to benefit buyers. – Ceiling is only a preventative measure (think about reserve effect on Ebay). • If ceiling is set below market price – There will be a shortage of goods. – For instance, if the government thinks 1) that people need bread to live, and 2) that the market price of bread is too high, then they might install a price ceiling. Assume that the following graph represents the market for bread. At equilibrium, the price will be p*=5, and the quantity will be q*=5.

Price Floors

 Sellers will not sell below a certain price. The opposite of a price

ceiling is a price floor. • A price floor is an artificially introduced minimum for the price of a
good. • In most cases, the price floor is above the market price. • Price floors are usually put in to benefit sellers. – For example, price floors are sometimes used for agricultural products. The market price can sometimes be so low that farmers cannot make enough money to support themselves. In such cases, the government steps in and sets a price floor, which can cause problems of its own:

A. New-product pricing strategies

Market-skimming pricing: a strategy with high initial prices to “skim” revenue layers from the market

• • • •

Product quality and image must support the price

May occur at the introduction stage of product life cycle
Buyers must want the product at the price Costs of producing the product in small volume should not cancel the advantage of higher prices

• Competitors should not be able to enter the market easily

International Marketing - ESC 1


Perceived Value
 V- value, the value a customer perceives a product to have  P- Price, the price at which the product is sold  C- Cost, the cost of production...

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