Global Marketing

Challenges in International Pricing

The authors of the last blog post talked about optimal international pricing strategies. Companies face many different challenges, outside of culture, language, and government policies, when deciding which strategy to implement. These challenges mainly revolve around currency.

Export Price Escalation: Prices are often higher in foreign markets in order to ensure that export costs, such as shipping, tariffs, and insurance, are covered.

Inflation: When inflation rates are constantly fluctuating, it can be difficult to set a price in order to continuously make a profit. Companies can attempt to modify their components so that the raw materials and packaging are lower-cost. A great example of fluctuating inflation rates is Mexico. Due to the Coronavirus, inflation rates in Mexico are currently higher than expected for the year, which is leading to difficulty in buying products.

Inflation rates in Mexico for the past 5 years.

Currency Movement: Exchange rates are effected by political and economic conditions. The gains and losses by the change in exchange rate can be transferred to customers.

Anti-Dumping laws: This occurs when imported goods are sold at an unfair price. Countries are switching to anti-dumping laws due to the removal of trade barriers; these laws are supposed to protect local industries.

Countertrade: Non-cash compensation that can be used to barter (ie. exchange of raw materials). This is the largest way of indirect export and a good way to stimulate industries. However, companies can run into legal difficulties.

These factors above should be included in analysis of pricing. While a company may not change the type of pricing strategy, it could change the price points that are picked for each country, or the lowest sales price possible.

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2 replies on “Challenges in International Pricing”

Thanks for the succinct notes on pricing challenging. Another general problem for a new product or service is figuring out what price to start with in general. Per the example in class: $54 vs. valued at $1,000 by contracting companies. With a bit of research and focus groups, they may have come closer to a price equilibrium.

I definitely agree for a new company that setting a price is an issue. Personally, I do not like the idea of price changes based on fluctuating exchange rates. In general, exchange rates do not change so drastically that a price corridor could not be used. This could, in conjunction with the research and focus groups, be used to determine the best pricing in each country.

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