CHALELE TEAM

PRICE
INTERNATIONAL MARKETING
GLOBAL
PERSPECTIVE
THE PRICE WAR
A price war is a competitive exchange between

rival companies, who lower the price points on

their products, in a strategic effort to undercut

each other and capture a larger market share. As

can be seen, as globalization continues,

competition intensifies among multinational and

home based companies. All are seeking a solid

competitive position so they can prosper as

markets reach full potential.

INTERNATIONAL MARKETING
 PRICING
Pricing objectives

Price decisions are viewed two ways:

-Pricing as an active instrument of accomplishing

POLICY
marketing objectives, or Pricing as a static element in a

business decision.

- Maximize profits is the ability of a business or

company to earn maximum profit at low cost which is

The number of pricing problems and variables
considered as the main goal of any business.
relating to price policy.

CASE STUDY
Chanel, the luxury fashion made 149.1 billion won or $133.6

million in operating profit last year in South Korea, up

34.4% from a year earlier thanks to strong Korean demand

for luxury goods during the prolonged period of Covid-19

restrictions.

- Sales volumes is the number of units that are sold in a

given time period, which are usually quantified as a

monetary value.

INTERNATIONAL MARKETING
PRICING
POLICY
Parallel imports

Parallel imports are goods that are imported and sold outside of the

brand's authorized distribution channels. They are purchased by a third

party and their legality is often unclear.

CASE STUDY
With the same Chanel bag but the price in the UK is lower than in

Korea and China markets. Some people imported Chanel's bags

in the UK and sell them in the Korean and China market.

Therefore it creates an imbalance in price in these markets and

Chanel’s Korean market as a host country has competed with

themself about the market share.

Chanel has announced that the pricing of its top three most

famous bags, the 11, 2, 55, and boy, will be standardized.

Furthermore, the corporation stated that the bag will grow by

20% in Europe with their handbag, which will help combat

parallel resale marketplaces.

APPROACHES TO Cost and market considerations play

INTERNATIONAL vital roles

Full- cost pricing Penetration pricing

PRICING
No unit of a similar product is different from Stimulate market and sales growth

any other unit in terms of cost and that each by offering products at low prices.

unit must bear its full share of the total fixed Used to attract customers to a new

and variable cost product or service to win market

share. Price has to be set at a point

at which the consumer will perceive

Variable- cost pricing value received, and the price must

be within reach of the target market

Warner-Lambert has a well-known

Price most competitively in foreign markets,
product called Bubbaloo five-unit
they may be subject to charges of dumping.
pack that failed because it was

priced too high for the target

Skimming pricing market.

unit
They relaunched a single-

pack that had a more

affordable price for the Brazillians

The objective is to reach a

segment of the market that is

willing to pay a premium price

for the value received. When a

company has a monopoly on a INTERNATIONAL MARKETING

new or innovative product
APPROACHES TO
INTERNATIONAL Premium pricing
PRICING Pricing your company’s product higher than

your immediate competition. Luxury brands

have often implemented premium pricing.

CASE STUDY
With Chanel, they have applied premium pricing to their

pricing strategy. Chanel is a luxury brand, so they always

maintain the classy level of price. People desire to own a

Chanel bag because of not only the quality but also brand

value. Wearing a Chanel means that you are wealthy and

have the ability to afford this luxury hobby: collecting

classic bags.

Although being a well- known brand, not all Chanel

products are well-sold, some of them are unmarketable.

But instead of setting a discount for unsold merchandise,

Chanel burned all of them. This measure is necessary to

protect intellectual property and prevent counterfeiting.

 INTERNATIONAL MARKETING

Price Escalation

Price escalation is the added costs incurred as a result of exporting products

from one country to another

 Costs of Exporting
The majority of price escalation is a direct result of moving goods across

I N T E R N A T I O N A L M A R K E TI N G
borders from one country to another and often combines to escalate the

final price to a level considerably higher than in the domestic market.

Taxes, Tariffs, and Administrative Costs

Tariff:

A tariff is a fee charged when goods are brought into a country from

another country. The level of tariff is typically expressed as the rate of

duty and may be levied as specific, ad valorem, or compound.

Taxes:

Fees for import certificates or for other administrative processing can

assume such levels that they are, in fact, import taxes.

Administrative costs:

Administrative costs are directly associated with exporting and importing

a product.

Export and import licenses, other documents, and the physical

arrangements for getting the product from port of entry to the buyer’s

location mean additional costs.

Inflation
Inflation is a quantitative measure of how quickly the price of goods in an

economy is increasing. Inflation is caused when goods and services are in

high demand, thus creating a drop in availability.

 Deflation
Deflation occurs when too many goods are available or when there is not

enough money circulating to purchase those goods. As a result, the price of

goods and services drops.

Exchange Rate Fluctuations

An exchange rate is the value by which two currencies are traded for one

another. In other words, it is the rate or value at which one currency can

purchase another currency.

Varying Currency Values

In addition to risks from exchange rate variations, other risks result from the

changing values of a country’s currency relative to other currencies, such as

consumers’ perceptions of value.

Middleman and Transportation Costs

Transportation Costs:

Exporting increases transportation costs when moving goods from one

country to another. In the process of moving, there will be unexpected

situations for the goods, so to ensure the absolute safety and quality of the

goods, there will often be additional costs including transportation,

insurance, and shipping charges. Such costs add another burden because

import duties in many countries are based on them.

Middleman Costs:

A Middleman, or intermediary, will facilitate interaction between parties,

typically for a commission or fee. When entering new markets, businesses

cannot deal directly with manufacturers or distributors, so businesses often

have to spend a large amount of money for Middleman.

 Sample Effects of
Price Escalation
For example, according to Chanel’s website,

with the same classic bag but the price in the

INTERNATIONAL MARKETING

host country (France) has price is 7,800

pounds (8,790$), while the price for this bag in

Korea is 11,240,000 Won (9,430$) which is

higher than nearly 650$.

Approaches to Reducing LOWERING THE COST OF GOODS SOLD

LOWERING TARIFFS

Price Escalation LOWER DISTRIBUTION

USING FOREIGN TRADE ZONE

DUMPING
APPROACHES TO REDUCING PRICE ESCALATION

LOWERING THE COST OF GOODS SOLD

The cost of goods sold, also known as COGS, is one of the most important elements of your

business to understand. There are many ways to reduce the COGS in the company such as Buy in

Bulk and Receive Discounts, Substitute Lower Cost Materials, Leverage Suppliers, Automation, Move

Manufacturing Offshore On the other hand, some businesses don't choose reducing COGS as a

price strategy to compete. Because it will make the value and quality of their product decrease

heavily

In case of Chanel, Chanel never accept to decrease the COGS like a price strategy. Because it

make the value of their product decrease heavily on the market. Besides that, Chanel is a world-

renowned fashion house. Customers recognize their products as high-quality items or meticulously

produced handbags. Moreover, the value of product time in Chanel is also the reason make them

more luxury.

LOWERING TARIFFS:
Tariffs account for a large part of price escalation. Therefore, the international business did many

strategies to minimize it and reduce the cost. Some business with downsize the product to have less

tariff, using import and export materials to minimize the tariff cost, or repackaging also may help to

lower tariffs
APPROACHES TO REDUCING PRICE ESCALATION

LOWER DISTRIBUTION CASE STUDY

The firm must analyze the distributing procedures of and intent to reduce as E liminating personal resellers:
much as possible all intermediaries; mostly considering that in most
Nowadays, due to the problems that there are many personal resellers

in Chanel as middlemen which makes the price of Chanel's products

countries taxes are paid every time they change dealers. Low distribution
higher and higher. Chanel has applied the policy" KOREANS ARE ONLY
cost can be achieved by eliminating or reducing middlemen. Designing a
ALLOWED TO BUY ONE CHANEL BAG PER YEAR" as a way of new

channel which has fewer middlemen may lower distribution cost will lead to measures introduced to curb ‘opens runs’ as luxury fiends and resellers

eliminating middlemen mark up or rearrange the distribution channel. hoard bags.

Besides that, businesses can minimize the distribution cost through sales
Optimized sale channels and marketing cost distribution:
methods, shipping charges or transportation.
In the Korean market, Chanel also has various sales channels as direct

sales in exclusive stores, online payment, or buy-in Lotte duties and it

helps improve a lot about Chanel's sales in Korea. In Korea, there are

around 30 Chanel exclusive stores, including Lotte Duties. Therefore,

Chanel can save a huge amount of money from transportation costs

from place distribution.

Besides that, about marketing distribution cost, as we know in many

previous parts, all advertising of Chanel comes from a headquarter in

Paris, not for a specific market. Therefore, Chanel in Korea can cut

down a lot of costs from marketing distribution to operating business.

INTERNATIONAL MARKETING
APPROACHES TO REDUCING PRICE ESCALATION

USING FOREIGN TRADE ZONE DUMPING

A free trade zone (FTZ), also known as a free zone defined by Dumping is a term used in the context of

the government, foreign goods can be brought in, handled, international trade. It's when a country or

and processed. processing, splitting, packing, processing, company exports a product at a price that is

processing without import and export tax. lower in the foreign importing market than the

Some countries have FTZ are US, Mexico, China(Shanghai), price in the exporter's domestic market.

Japan( Okinawa) Nowadays, dumping typically involves

substantial export volumes of a product, it

often endangers the financial viability of the

product's manufacturer or producer in the

importing nation. Therefore, the WTO always

has policies to protect against dumping in

some countries. For example, they set the rules

for dumping from 25% to 30% for corn and

soybeans in the American market.

Leasing in
An important selling technique to alleviate high prices and capital

shortages for capital equipment is the leasing system. The concept of

International
equipment leasing has become increasingly important as a means of

selling capital equipment in overseas markets.

Markets In fact, an estimated $50 billion worth (original costs) of US-made and

foreign-made equipment is on lease in western Europe. It is estimated

that leased aircraft account for about 20 percent of the world’s aircraft

fleet.
Countertrade
as a Pricing
Tool
Counter trade is a pricing tool that every

international marketer must be ready to

employ, and the willingness to accept a

counter trade will often give the company a

competitive advantage.
 PRICE
QUOTATION.
A price quotation is a fixed-price offer made by a seller

to a potential buyer. Price quotes are used to help the

buyer and seller understand each other. For the seller,

they gain insight into what the customer is willing to pay

and what they expect out of their business. For the

buyer, they see what’s possible in terms of service and

how much it will cost

er.

Chanel wants to make sure that their price quotation

contains all the necessary information related to the

business transaction

INTERNATIONAL MARKETING
 INTERNATIONAL MARKETING

ADMINISTERED
PRICING An administered price is the price of goods

or services as dictated by a government or

centralized authority, as opposed to buyers

and sellers interacting according to supply

and demand.

Any type of price-fixing arrangement can be

adapted to international commerce,

although cartels are the most intimately

related with international marketing of all

the forms mentioned.

The final goal is to be paid completely and on
Letter of Credit (L/C)
schedule for each export sale. There are five major

payment methods that are frequently used by A commitment by a bank on behalf of the foreign

parties buyer that payment will be made to the exporter

provided the conditions in the L/C

Cash in advance (C/A)
Consignment
Paid in advance and can use the funds from your
A variation of open accounts in which payment is
client to fund the creation of the product
sent to the exporter after the goods have been sold

Open account (O/A) by the foreign distributor to the end customer

Is a sale in which the products are transported and

delivered before payment is due Collection

Entails using banking channels for more than just

arranging the flow of funds for your payment.

GETTING PAID: FOREIGN

COMMERCIAL PAYMENTS
THANK YOU

for listening