When Reebok, the world‘s number two athletic shoe company, decided to enter India in 1995,
it faced several basic marketing challenges. For one thing, Reebok was creating a market from scratch. Upscale sports shoes were virtually unknown, and the most expensive sneakers available at the time cost 1,000 rupees (about $23). Reebok officialsalso had to select a market entry mode. There were two other issues as well: product and price. Should Reebok create mass-market shoes specifically for India and priced at Rs 1,000, or offer the same designs sold in other parts of the world and price them at Rs 2,500 ($58), the equivalent of a
month‘s salary for a junior civil servant. As Reebok‘s experience in India illustrates,
a basic issue inglobal marketing is establishing a pricing policy.
To show that pricing decisions are a critical element of the marketing mix that must reflect costs, competitive factors, and customer perceptions regarding value.
To explain the pricing strategies of
,terms of a sale such as
To show how costs lead to
, the accumulation of costs that occurs when transporting products abroad.
To explain that expectations regarding currency fluctuations, inflation, government controls, and the competitive situation must be factored into pricing decisions.
To show how globalcompanies maintain competitive prices by shifting production sources as business conditions change.
To categorize a company‘s pricing policies as
To consider pricing issues such
gray market goods
To explain how
plays an important role in today‘sglobal environment.
are countertrade options.
Two basic factors determine the boundaries for setting market prices.
Product cost establishes a
, or minimum price. Prices for comparable substitute products create aprice ceiling
, or upper boundary.
Generally, international trade results in lower prices, which keep a country‘s rate of inflation
in check. Between the lower and upper boundary there is an
, a function of the demand for the product as determined by the willingness and ability of customers to buy.
Discussion Question #1:
What are the basic factors that affect price inany market? What considerations enter into the pricing decision?
____________________________________ Basic Pricing Concepts
In a true global market, the
prevails: All customerscould get the best product available for the best price (e.g., a global market exists for crude oil). Compact discs and other products are offered in national rather than global markets, which reflect differences in costs, regulation, and rivalry (e.g., in Japan, beer price is a function of the competition between Heineken, other imports, and five national producers).
Companies must havepricing systems and policies that address price floors, price ceilings, and optimum prices in each national market (e.g., companies in the euro zone must adjust to new cross-border prices).
Within a corporation, there are interest groups and conflicting price objectives.