IBUS Chapter 16

Rigid cost-plus pricing

Set a fixed price for all export markets by adding a flat percentage to the domestic price to compensate for added costs of IB

(form of standardization)

Flexible cost-plus pricing

Set price to accommodate local market conditions such as customer purchasing power, demand, and competitor prices

(form of adaptation)

Incremental pricing

Set price to cover only variable costs, not fixed costs. This assumes that fixed costs are already paid from sales in the home or other countries

Factors that affect international pricing

-Nature of the market

-Nature of the product or industry

-Type of distribution system

-Location of the production facility

When is standardized marketing appropriate?

When customers have similar needs or the product has universal specifications

When will adaptation be needed?

When customer preferences and country environments vary

A(n) ______ relationship often exists between profits and market share

inverse

Strategies to combat international price escalation

-Shorten the distribution channel

-Redesign the product to remove costly features

-Ship components unassembled

-Reclassify product to different tariff classification

-Move production/sourcing to another country

Parallel importation

Legal importation of genuine products into a country by other than authorized intermediaries

Parallel importers buy the product at a low price
in one country, import it into another country,
and sell it there at a higher price

Strategies to cope with parallel importation

-Aggressively cut prices

-Hinder the flow of products

-Design products with exclusive features

-Publicize the limitations of parallel import channels

Global account management

Serving a key global customer in a consistent and standardized manner regardless of where it operates