Question

A company wishing to export its products into a new country needs to properly understand its pricing strategy.

What processes can a company explore in order to plan its pricing strategy? Briefly explain why and the implications for getting it correct and the results of being incorrect.

Answer 1

Firstly Planning should be done to export products into new country and then later pricing strategy to be formulated, for that these processes should be taken care of:-

a)Skimming pricing should be followed if their is not much competition and product is innovative and of best quality, in this higher price of the product should be there. Penetration startegy if market competition exists, product is common in the foreign market, for which low prices of the product should be imposed. Market research should be done properly

b) Pricing of a product should be done in a certain way that the new country is ready to accept the product

c) Importer has to take due care of all the additional cost that will be added on to the base price of the product such as taxes, currency fluctuation, tarrifs etc.

d) Export price must reflect the quality of the product

e) Back up plan should be made if any of the manufacturing costs increases in the future.

f) Foreign country's antidumping laws should be read properly

g) Demand of the product is elastic or not in foreign market.

If these processes are duly cared, then the results will be correct which will lead to:-

a) Better profitability

b) Better growth in foreign market

c) Better financial position as compared to other competitors

d) Margin size will increase consequiently

If these processes are not duly cared, then the results will be incorrect which will lead to:-

a) Losses in company

b) Company's growth will start to decline

c) Market position of the company will be adverse

d) Wastage of products if not sold in foreign market