Pricing for Export

Prof. K. Chander

PRICING FOR EXPORT

Export Pricing assumes strategic importance because of

Lower Technology Base in India

1. 2. 3.

Prices depend on Cost Demand Competition. Reduction on Price may not help in Increase of Demand. Custom, Taste, Adaptation for particular Country are important to get right Price.

4. 5.

Competition is Severe.
Quality, delivery is essential for getting right price. Higher Price Higher Quality . Lower Price Low Quality.

Pricing For Export

6.

Normally Price given to Developing Countries is 15 to 20 % Lower than known products from developed countries. While cost price Relationship is important, cost does not determine price while other way round is True. Marked differences between producers but Price is Same. cost of Two

7.

8.

Non Price Factors

1. 2. 3. 4. 5. 6. 7. 8. 9. Presumed Relationship between Quality & Price. After Sale Service. Before Sale Service in consumer Goods. Prompt deliveries. Settlement of claims. Ability to Supply complete Range of product. Sales Promotion. Fancy Prices for Handicraft Goods. Fro Industrial Goods, demonstrating the product, spare parts, Trg. After Sales Service Financial Credit gets Related to price.

Traditional Products
India is able to get Reasonable Prices. To Reduce cut throat unfair Prices UNCATAD help is being sought. Indian Exporter 55 cents for shims Sold at $ 2.1 a pound.

Non Traditional Products

Intermediate Product.

a)
b)

Consumer Products.
All developing countries are put to Serve dis-advantage.

Marginal Cost Pricing

Direct cost are covered
Total Cost = Fixed Cost + Variable Cost Variable Cost Direct material + Direct Labor Marginal Cost Export Price

Variable Cost + Other Cost Directly related to Export

(i) Special Packing. (ii) Commission to Oversea Agent. (iii) Export Credit Insurance. (iv) Bank Charges. (v) Inland Fright.

Variable Cost + Other Cost Directly related to Export..

(vi) Port Charges. (vii) Forwarding Charging. (viii) Export duty. (ix) Documentation & Incidental. (x) Cost of after sales.

(xi) Promotional.
(xii) Pre-shipment Inspection (xiii) Prot Charges. - Less duty Drawback = Export Price

Based on Full Cost Add :

Fixed Costs/ Common Cost Production Overhead, Material overhead, Publicity Charges Freight (Volume or lost bases) Insurance.

Import of Contract Condition on Export Prices

1. 2. 3. 4. 5. 6. 7. Base of Export Quotation :- i.e. FOB, C$F, CIF Exchange Rate Variation. Packing Export Consignment. Guarantee Spare Parts. Price Variation Formula. Penalty/ Liquidated Damages

MARKETING PLAN FOR EXPORTS

Basically, Market plan comprises of the following Elements
(1) (2) (3) (4) (5) (6)

Market Fact. Problems & Opportunities Specific objectives. Plan of action. Budget. Control

Fact Finding
Facts about Market, Product distribution & consumers should be found do not take information collected at its face value. Cross check the facts. A check list will include the following:
(1)

Product Characteristics, quality in relation to competition, prices, packaging, new Technical development.
Total Market Size of Total Market, Trends, Seasonal variations & regional difference, share held by different brands. Distribution & Channels Types of Retail outlets selling product & their relative importance. Importance of whole sellers, brokers, buying associations. The strength of own & competing sales organizations, transport costs.

(2)

(3)

Fact Finding
(1)

Consumers who are the consumers (Age, Sex, Income, Group, Urgan. Rural). How frequently they buy & where they

use the product.

(2)

Competitors Who are the competitors there strengths (Price quality, Distribution, Advertisement etc.) Introduction of new product. Import Rules & Regulations Custom duties & Taxes, quotes, product standard etc.

(3)

Note : Statement of facts is, in many ways the most important

single part of plan. Since every thing else depends on these

facts. Market plan may include general situation about market characteristic, Economic Factors (GDP, GNP, Growth
Rate etc.) & environment analysis.

MARKET ASSESSMENT Once the relevant facts have been collected verified, they have to be put into perspective.
Translate them to Market Potential. Check all facts whether favorable or not.

Check Problems Area, Strength & Weakness.

Make Assumption for future. Assumption must cover Total Market Development charges in Market shares, consumer attitude prices, Competition & distribution. Do not Focus on opportunities but also on problems..

MARKETING OBJECTIVE
Objectives are the core of Plan & represent solution to the problems. Marketing objectives should be.
1.

Realistic

2.
3. 4.

Prioritized
Specific Result oriented (Should Specify end Result.)

PLAN OF ACTION
For each objective there has to be clear plan of action well documented & alternative to be specified.

BUDGET
A Budget is drawn based on the activities of plan and it covers all

expenditure necessary for that execution of plan.

- Market Budget normally covers Advertising & Sales promotion.

CONTROL
It is obvious that a quantified plan have to assessed against actual results.

These should be mid year review apart from monthly review and course correction undertaken.

Promoting The Product Internationally

The versions method of Export Promotion adopted are advertising, Direct Marketing Point Purchase Display, and Trade Fair and Exhibitions.
(1) Advertising This is the most common way adopted to bring the products to be sold to be notice of Foreign Customer. It is petty Expensive, should be used for Target Market. TV, print media, Radio will depend on country to country & Capacity Exporter. (2) Direct Marketing Cost much less & is very effect for industrial products. It is selective & more personal. Mailing list can be prepared based on names given in Trade Directory.

(3) Trade Fair & Exhibition They presents Goods & Services in an attractive manner with Aid of color light & motion. Catches attention of visitor & attracts him.