Tuesday, March 24, 2009

- international promotion mix & pricing decision

Promotion plays a vital role in providing information of the product to the foreign customers. It also creates the desirability of the product among foreign potential buyers. Foreign companies desire to communicate with their marketing intermediaries and potential buyers to ensure favourable sentiment toward themselves and their products. Promotion is more culture bound than other Ps.
Hence, the foreign companies must take special care in promoting the product in the host country.

The promotion mix include:
1. Advertising
3. Sales Promotion, and
2. Personal Selling
4. Public Relations

Though advertising is not given due importance in developing countries, it plays crucial role in international marketing and particularly for consumer goods and consumer durables. The international firm while formulating advertising strategy should consider -
(a) Message
(b) Medium
© Extent of global advertising efforts.

Sales promotion includes specialised marketing efforts like coupons, in-store promotions, sampling, direct mail campaigns, co-operative advertising and trade fair attendance. International companies attend trade shows like Paris Air Show, Tokyo Auto Mart etc. Most of the Airlines companies use sales promotion to lure customers.

Public relations include efforts aimed at enhancing a firm's reputation and image with the general public. The consequence of public relations is that the firm is a 'good corporate citizen.' This image in its turn enhances company sales.

Pricing Decision

Though the pricing is significant among the 4 Ps, it receives the least attention in the international marketing. Pricing decisions can be studied from the following approaches:
•• Supply and Demand
•• Cost
•• Elasticity or Cross Elasticity of Demand
•• Exchange Rates
•• Market Share
•• Tariffs and Distribution Costs
•• Culture
•• Purchasing Power

The pricing policies of international companies include:
•• Standard price policy
•• Two-tiered pricing
•• Market pricing.

Standard price policy: Under the standard price policy, the international company sells the product at the same price for the customers of any country or nationality. Crude oil producers like Kuwait Oil, Aramco and Pemex sell their products to all customers at price determined by supply of and demand for crude oil in the world crude oil market. .

Two-tiered pricing policy: International company under this policy sells its product at two prices, viz., one price for domestic sales and another price for the foreign sales. This policy is adopted due to the involvment of shipping costs, tariffs and foreign distribution costs.

Marketing pricing policy: International companies following this policy customise their pricing on a market-by-market basis in order to maximise their profits in each market. Japanese automobiles follow this policy in pricing their cars.

Alternative pricing strategies: There are a number of alternative pricing strategies in addition to the above-mentioned strategies. These include:
Discounts (cash, quantity, functional etc.)
Financing or credit terms
Bundle or unbundle.

Factors affecting international pricing

Pricing factors of international business vary from those domestic business. A number of factors affect the international pricing. The important among them are:
(a) Cost
(b) Competition
(c) Product Differentiation
(d) Exchange Rate
(e) Economic Conditions of the Importing Country:
(f) Government Factors:
(g) Other incentives like supply of finance, inputs etc. at lower prices in order to encourage the domestic exports.

The normal ex-price structure is as follows:
(i) Cost of production
(ii) Producer's profit
(i) + (ii) = Ex-factory gate price
(iii) Packing and Marking
(iv) Loading charges at the factory
(v) Transportation charges to docks, railway station or airport
(vi) Handling charges and fee at port, railway station, airport
(vii) Cost of documents (like cost of lading and airway bill)
(viii) Consular invoice, certificate of origin
(ix) Export duty (if any)
(x) (i) to (ix) = C and F Price
(xi) Cost of insurance
(xii) Sea or air freight charges
(i) to (xii) = CIF Price
(xiii) Unloading charges at destination
(xiv} Import duties and taxes
(xv) Fee paid to the Clearing Agent
(i) to (xv) = Landed Price
(xvi) Transportation charges to Importer's Warehouse
(xvii) Importer's Margin/Mark-up
(xviii) Mark-up/Margin of all other market intermediaries in the importing country
(i) to (xviii) = Price to the consumer


Dumping is a form of price discrimination. Under dumping the international company charges different prices for the same product in different markets. Dumping means selling the products at below the cost of production or at below the on going price in the market. Consequently, the imported goods are sold at prices so low as to be detrimental to local producers of the same kind of merchandise. I I For example, China dumped its steel, USA and Malaysia dumped cooking oil in India. Consequently, Indian Government imposed
antidumping measures to protect domestic industry.

Types of Dumping
(1) Sporadic dumping : Sporadic dumping occurs when an international company sells its unsold inventories in a foreign country to get rid of them.
(2) Predatory dumping: Predatory dumping is selling the product in a foreign market at a loss as a strategy of entering the market. Zenith uses this strategy for selling televisions and computers.
(3) Persistent dumping: Persistent dumping involves consistently selling the product at lower prices in one market than in other markets. Japan sells its electronic products at high prices in Japan and sells the same products consistently at lower prices in USA and India.
(4) Reverse Dumping: Under reverse dumping the product is sold at high price in international markets and at a low price in the domestic market.

Antidumping Terms
Dumping adversely affects the domestic manufacturers, suppliers of raw materials, components, labour and other stakeholders of the domestic companies. Further, it affects the economic activity in the domestic country and also the government revenue. Hence, the domestic governments 'importing' impose antidumping terms/measures.

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