Designing Product Pricing Strategies - Part 4

On International Market Pricing

The complexity of cost considerations are dependent of two factors: (1) firm characteristics and (2) export market characteristics. As the organization gives up the natural protection of its local market to expanding internationally, the unique environmental conditions will render pricing decisions complex.

Multinational enterprises formulate and implement international strategies to respond to pressure for both external flexibility and internal efficiencies. Uniformity and adaptation to local conditions and worldwide economies of scale. Being global maybe insufficient as becoming more transnational is likely to be more desirable. To pursue means to overcome the trade-offs associated with flexibilities and efficiencies derived form responsiveness and global integration.

Standardization does not depend on managerial discretion alone. Certain external and internal factors may limit the degree of standardization that a firm is able to apply. These are needed for mandatory adaptations to meet legislations, government regulations and inescapable and/or uncontrollable marketplace realities.

One of the drivers for internationalization is the Internet. However, it is not suitable for new task buying. It does allow skimming of foreign market but not penetration. Internationalization is supported because of speed of contact with lesser sunk costs in terms of setting up local representation.

Counter Trade

Equal consideration can be given to the advantages of counter trade in dealing with international exchanges. The product or service prices can be charged in kind to help: circumvent currency controls, conceal a price cut, free blocked funds, conserve hard currencies, reduce debt burdens, and make purchases without deteriorating balance of trade.

The success of a counter trade or barter is determined by the framework presented earlier. It considers the seller's marketing objective, seller's pricing strategy, buyer's marketing objective and buyer's pricing strategy.

Operating as a transnational offers many difficulties to the marketer. But Sellers charge and buyers pay at the going rate to establish long-term seller-buyer relationships, increase sales volume. Sellers sell at a discount to generate customer goodwill, use excessive production capacity, dispose of surplus products, gain entry into difficult markets, and access to marketing networks. Similarly, buyers will pay a premium to gain the above plus acquire badly needed technology and obtain access to critical sources of supplies.

Conclusion

Finally, we define strategy in the context of product and service pricing.

Strategy is basically a plan of action intended to achieve a certain goal. It is not just getting one foot in a company at whatever costs or is all about profit maximization. It is an elaborate "design of options" that is mixed to generate a desired result. Kotler's framework is an example of a pricing strategy. It is a framework for the creation of value.

The problem that burdens most organizations is the use of strategy. Planning and strategizing all relate to the desired goals. What you want to achieve tomorrow is made probable by working on the problems and solutions today. Any organization wants monetary gain. This is basic. Whether it is a for-profit manufacturer wanting to give the best returns to its stakeholders, or a non-profit service provider wanting to extend the best possible support to its beneficiaries, the bottom line is choosing the right marketing direction. The price that the organization sets for its product and service offerings will largely determine the achievement of their objectives.

We have presented the many strategies and policies that were used in studies in the last few years. Some are so new that they are not included in Kotler's book. Some were influenced by economic factors...but some were products of advances in technology and internet security. Ebay, Amazon, Yahoo - the shining example of cost efficiencies and embrace of innovation.

There are still more questions that needs to be understood and answered. This is perhaps how this article, as well as all current and future articles, by other authors will end. As we draw solutions we move to another level where there are more complex problems. That is the law of advancement.

Roberto M. Bernardo, Jr. is the principal consultant and designer at Motive (a full-service marketing, design and manpower agency), and a senior Lecturer and former Academic Chairperson of the Industrial Design program of the De La Salle-College of St. Benilde's School of Design and Arts. He is currently completing his Doctor of Business Administration degree at the De La Salle University-Professional Schools, Manila.

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