International pricing

La Trobe University – Faculty of Law and Management
Graduate School of Management

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Core unit:
IBU52IMMG
International Marketing Management

International Pricing

Lecturer in charge:
Mike Turner

Author:
Diego Mansilla Rivera
Student number: 15438481
Due date: 20th of September 2007

Price as a key point of the marketing mix, it is an important issue for a company inan internationalization process. This essay will focus on the elements that influence the international pricing of a product, followed by a review of the pricing objectives, and finally some of the pricing strategies that are use to accomplish the objectives are going to be considered.

A general review of pricing literature, offers a wide number of potential factors that influence the pricedetermination of a product. Some studies determine as much as ten factors influencing the pricing decision (Stevenson & Cabell, 2002) which leaves a spread rage of options in which focus. As a result, this paper is going to group those factors in levels.

Influencing factors could be assembly in two different levels. Macro level which groups all the factors that an individual company can not controlsuch as, exchange rate fluctuations, inflation rates, price controls and in general government regulatory factors. Micro level, on the other hand refers to all the market factors that an individual company is able to control and affects the pricing decision (Jeannet & Hennessey, 1998). Due to the unavailable nature of the macro level factors, this paper is going to focus primarily into the microlevel controllable factors.

There are four main factors into the micro level that determines the international pricing of a product; competitive structure, price structure, distribution structure and consumer behavior (Marsh, 2000). Completive structure refers to the stage of the product life cycle that the market posses. It is frequently that each product in its different life cycle stage,demands a singular price, as a result, the product life cycle turns into an important tool in order to develop a pricing strategy. (Morris & Morris, 1990). Furthermore, there is the case where the same product in a foreign market with a different life cycle demands a singular pricing program (Theodosiou & Katsikeas, 2001). The price structure is also related to the product life cycle, as long as aproduct in order to stimulate the demand, is positioned with a low price in a country while has a higher price in an other. The distribution structure refers to the influence that the price has over the distribution channels, where each market has different perceptions, and therefore, influence the flexibility of the pricing decisions (Marsh, 2000). Costumer behavior is linking to the perception ofvalue which is the particular most significant factor in the pricing policies; value that is often associate with the price that is also perceptual, should reflects the amount of value a costumer is receiving (Morris & Morris, 1990).

Following, the identification of the influence factors in the pricing decision, the company should identify what is trying to achieve (objectives) with thisparticular price. Apart from the obvious objective of increase the sales, a company could set a large number of objectives that could be mutually exclusive or used in combination (Morris & Morris, 1990). Those objectives should be measurable and placed before the pricing action in order to generate a valuable participation into the strategy process.

In spite of the fact that of the numberobjectives, Richard A. Lacioni (1988), identify four main objectives that a firm can set in an international market. These are return on revenues, price stability, market prestige and image, and meeting competition. Return on revenues refers to focus on the revenues from the sales, assets or a combination of booth in relation to the industry and how the firm is going to generate stability over those sales...