Transcript Pricing Strategies

Pricing Strategies
Alexander Consulting Enterprise
4/8/2016
1. Pricing Methods
“The employer does not pay the salaries.
It is the customer who pays for the
salaries. The employer is just handling the
monetary transaction”
Henry Ford
Alexander Consulting Enterprise
4/8/2016
- Cost Oriented
 Full cost pricing: Price = Fixed Cost + Profit + Variable Cost
 Markup pricing: Price as a percentage of sales
 Incremental cost pricing: Price is set to cover
variable cost only
- Demand Orientated
Price is set according to the firms estimate of potential
buyers’ price elasticity.
Alexander Consulting Enterprise
4/8/2016
2. Skim pricing versus penetration pricing
Skim pricing
Penetration pricing
- economies of scale in
production
- high elasticity of demand
- strong competition
- product is not differentiated
and easy to copy
- large market
- product has strong
relative advantage
- low elasticity of demand
- low competition
- product is differentiated
and difficult to copy
- small total market
Alexander Consulting Enterprise
4/8/2016
Cash Flow Pattern of Pricing Strategies
accumulated Cash Flow
Penetration
Alexander Consulting Enterprise
Skimming
Zeit
4/8/2016
3. Legal restrictions of pricing decisions
While governmental restrictions on pricing vary among
different nations, most developed countries have
laws relating to:
- Dumping
- Price fixing
- Price discrimination
- Price advertising
Alexander Consulting Enterprise
4/8/2016
4. Costs of Exporting
 Taxes
 Tariffs
 Administrative Costs
 Inflation
 Exchange Rate Fluctuations
 Varying Currency Values
Alexander Consulting Enterprise
4/8/2016
5. Lessening Price Escalation
1. Lower Cost of Goods
 Lower Manufacturing Costs
 Eliminate Functional Features
 Lower Quality
Alexander Consulting Enterprise
4/8/2016
2.
Lower Tariffs
 Tariff Reclassification
 Product Modification
 Partial Assembly
 Repack aging
3.
Lower Distribution Costs
 Shorten Channels of Distribution
 Lower Shipping Costs
4.
Foreign Trade Zones
Alexander Consulting Enterprise
4/8/2016
6. Countertrades
Barter
Compensation Deals
Counterpurchase or Offset Trade
Product Buy-Back Agreement
Alexander Consulting Enterprise
4/8/2016
7. Why Countertrade?
To Preserve Hard Currency
To Improve Balance of Trade
To Gain Access to New Markets
To Upgrade Manufacturing
Capabilities
To Maintain Prices of Export Goods
Alexander Consulting Enterprise
4/8/2016
8.Transfer Pricing
Manipulation of Taxes
Manipulation of Duties and Customs
Repatriation of Profits
Management of Divisions
Alexander Consulting Enterprise
4/8/2016
9. Gray Trades
Opportunities for Parallel Imports Arise through
Price Differentials
Currency Exchange Rate
Import Quotas
Different Positioning
Alexander Consulting Enterprise
4/8/2016