International Price Setting

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The obligation of international marketing strategy is to match the organization with its environment.

If the business environment extends internationally then national environments become significant in its development.


In its home country, Heineken is positioned as an averaged price beer, which in restaurants and bars can be compared with the price of soft drinks and mineral water.


Internationally, however, it uses a global positioning strategy of premium price and high quality.

Similarly, Kronenbourg and Stella Artois are premium priced, exclusive drinks in the UK, whereas in Belgium and France, they are low priced drinks.


Terpstra and Sarathy, suggest that there are several factors important in international pricing. Their framework sees firm-level, product-specific, market specific, and environmental factors each as influential factors of foreign price setting.

The framework opens our minds to question and challenge certain issues, but it does not provide us with a sufficient framework for analyzing the microenvironment, which is ultimately responsible for determining the international pricing of a product.


Price setting in international marketing is influenced on three levels – the internal level, which takes into consideration objectives for return on investment, required sales volume and cost factors.

The structure of the company is also a significant internal influence, for example, a company that has chosen an ‘umbrella’ structure is unlikely to have central price control.


The core element of international viability is the cost of producing and marketing the product, which inevitably has to be considered. This is considered in the case of exporting Australian wine to foreign countries:


“High production and distribution costs associated with Australia’s remote geographic location and distance from the major importing countries of Canada and the United Stated makes exporting success unlikely”


The macro level incorporates elements such as government restrictions. Consider the pricing in the Australian wine industry – an increase in tax to 20 per cent prompted producers to increase prices in an attempt to retain profitability (Edwards, 1990). The business cycle stage, exchange rate and cultural factors also influence pricing decisions.


For example, China’s market has now entered the growth stage of its life cycle and market share in Chinese markets will be increasingly dependant on competitive pricing strategies.


Both these levels are recognized to influence the international pricing of a product, and shape the microenvironment, which must be considered as the major determinant of international pricing.


For the purpose of this paper, in order to provide specific industry examples, the internal and macro environments are not discussed in isolation, but are seen as working through the micro determinant.


A useful framework of international pricing for discussing the determinants of international pricing, is that of Diller and Bukhari.


The factors relating to the microenvironment are assembled into five classifications, which coin the market determinants of international pricing. The discussions will take place under the proposed framework detailed below.


Carefully evaluating competitors pricing policies before setting prices is just as important in the international market as in the domestic market. The level of competition in the market is often strongly linked to the stage of the products life cycle in different countries.


For instance, consider the carbonated soft drinks market in France reaching maturity in the lemonade, fruited carbonates and tonic sector.


The main driving force is competition from still iced teas and fruit juice drinks with their “new age positioning”. These impose new challenges for price setting with companies forced to resort to positioning on value for money.


We also see prices under pressure in the French mustard market, an impact of the rapid growth of the low priced vinegar’s market.


The high prices demanded by mustards appear to be pushing customers away.



The emergence and continued growth of own branded labels in the French breakfast cereals market is altering the competitive structure of the industry.


The market was created by Kellogg, the large US multinational. However, more recently, own-labelled products have gained significant market share of 14 per cent in volume sales.


In particular, close to a quarter of sales in the French muesli sales are from own branded products seen to be at the lower end of the price range.


As the growth continues, the flexibility, which companies such as Kellogg have in their pricing policies will decrease, presenting management with a series of implications placed on their pricing strategies.



Heilwasser, a German bottled water company, markets its water product on a “semi-medicinal basis”, which since 1995 has been losing market share. This is said to be linked to:



Promotion of the healthy lifestyle qualities of mainstream mineral waters, which differ little from higher price Heilwasser in terms of mineral content.



Competitor activity within an industry such as this can have profound effects on the products price.
 

The obligation of international marketing strategy is to match the organization with its environment.

If the business environment extends internationally then national environments become significant in its development.


In its home country, Heineken is positioned as an averaged price beer, which in restaurants and bars can be compared with the price of soft drinks and mineral water.


Internationally, however, it uses a global positioning strategy of premium price and high quality.

Similarly, Kronenbourg and Stella Artois are premium priced, exclusive drinks in the UK, whereas in Belgium and France, they are low priced drinks.


Terpstra and Sarathy, suggest that there are several factors important in international pricing. Their framework sees firm-level, product-specific, market specific, and environmental factors each as influential factors of foreign price setting.

The framework opens our minds to question and challenge certain issues, but it does not provide us with a sufficient framework for analyzing the microenvironment, which is ultimately responsible for determining the international pricing of a product.


Price setting in international marketing is influenced on three levels – the internal level, which takes into consideration objectives for return on investment, required sales volume and cost factors.

The structure of the company is also a significant internal influence, for example, a company that has chosen an ‘umbrella’ structure is unlikely to have central price control.


The core element of international viability is the cost of producing and marketing the product, which inevitably has to be considered. This is considered in the case of exporting Australian wine to foreign countries:


“High production and distribution costs associated with Australia’s remote geographic location and distance from the major importing countries of Canada and the United Stated makes exporting success unlikely”


The macro level incorporates elements such as government restrictions. Consider the pricing in the Australian wine industry – an increase in tax to 20 per cent prompted producers to increase prices in an attempt to retain profitability (Edwards, 1990). The business cycle stage, exchange rate and cultural factors also influence pricing decisions.


For example, China’s market has now entered the growth stage of its life cycle and market share in Chinese markets will be increasingly dependant on competitive pricing strategies.


Both these levels are recognized to influence the international pricing of a product, and shape the microenvironment, which must be considered as the major determinant of international pricing.


For the purpose of this paper, in order to provide specific industry examples, the internal and macro environments are not discussed in isolation, but are seen as working through the micro determinant.


A useful framework of international pricing for discussing the determinants of international pricing, is that of Diller and Bukhari.


The factors relating to the microenvironment are assembled into five classifications, which coin the market determinants of international pricing. The discussions will take place under the proposed framework detailed below.


Carefully evaluating competitors pricing policies before setting prices is just as important in the international market as in the domestic market. The level of competition in the market is often strongly linked to the stage of the products life cycle in different countries.


For instance, consider the carbonated soft drinks market in France reaching maturity in the lemonade, fruited carbonates and tonic sector.


The main driving force is competition from still iced teas and fruit juice drinks with their “new age positioning”. These impose new challenges for price setting with companies forced to resort to positioning on value for money.


We also see prices under pressure in the French mustard market, an impact of the rapid growth of the low priced vinegar’s market.


The high prices demanded by mustards appear to be pushing customers away.



The emergence and continued growth of own branded labels in the French breakfast cereals market is altering the competitive structure of the industry.


The market was created by Kellogg, the large US multinational. However, more recently, own-labelled products have gained significant market share of 14 per cent in volume sales.


In particular, close to a quarter of sales in the French muesli sales are from own branded products seen to be at the lower end of the price range.


As the growth continues, the flexibility, which companies such as Kellogg have in their pricing policies will decrease, presenting management with a series of implications placed on their pricing strategies.



Heilwasser, a German bottled water company, markets its water product on a “semi-medicinal basis”, which since 1995 has been losing market share. This is said to be linked to:



Promotion of the healthy lifestyle qualities of mainstream mineral waters, which differ little from higher price Heilwasser in terms of mineral content.



Competitor activity within an industry such as this can have profound effects on the products price.

Hey dear, i think you did a great job and your content on International Price Setting would help many people. BTW, i thought i should also add something so i am uploading a document which would give useful information on International Price Setting.
 

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