Question

How do costs affect the pricing strategy in a foreign market?

Answer 1

Cost is the main factor when determining the pricing strategy in the foreign market. Cost affects price of the product or services.

Cost affects the pricing strategy in the following ways:

Market size- If market size is large, supply is more, demand of the product is more and company produces many units of products at a time, company gets economies of scale then the cost will come down so company can keep the price of the product low.

Exchange rate- Exchange rate affects the final cost of the product, if product is being imported or exported, its total cost may increase or decrease based upon the exchange rate, if cost of the product increases, price that customer has to pay will increase and vice versa.

Increase in raw material cost- If raw material cost increases due to weather condition then the final product cost will also increase and it will affect the pricing strategy of the company, company will increase the price for customers.