Page 145 - DMGT547_INTERNATIONAL_MARKETING

International Marketing

Notes to utilize financial tools, such as spreadsheets, to build their case for setting price levels. While
financial tools are widely used to assist in setting price, marketers must consider many other
factors when arriving at the price for which their product will sell.
The marketing manager uses the parameters suggested by the economists for arriving at a price.
These parameters may be enumerated as under:
1. Costs
2. Demand and supply

3. Economic, legal and political conditions
1. Costs: Costs represent the base line for setting the price. In other words, costs represent
the price floor beyond which prices cannot be dropped. As already explained costs are
made up of two components, fixed costs and variable costs. Fixed costs represent the un-
escapable element of cost, whereas, the variable cost represent the escapable costs. The
variable costs are also sometimes interpreted as marginal costs or incremental costs.
Each of these components has its own significance when pricing a product but the
significance is in turn dependent upon the marketing goals, and other similar variables.
2. Demand & Supply: For a marketing manager, the upper limit is demonstrated by the
demand and supply conditions as they exist in the market. The demand conditions are
interpreted from the market conditions and the consumer behaviour whereas; the supply
conditions are interpreted by an analysis of the competition. The prices charged by the
competitors, and the attributes and quantity sold by the competitors, set the supply
parameters.

Example: the prices being charged for garments by the Italians and the South Asians will
determine broadly the range that can be charged by the apparel exporters. Again, if the
international buyer is alert he will through his awareness, bargain against the subsidies being
provided by the Government to the exporter, thus forcing the Indian exporter to charge as per
real costs.
3. Economic, Legal and Political conditions: These represent parameters outside the market
forces which influence the price structure. The Government, it has been noted, can through
its policy, in fact modify the market conditions, making them lopsided. Thus, the countries
where the economic policies are directed by the Government, the economic and political
conditions have an important bearing on price structures. Taxes and duty drawbacks
represent excellent examples for the same.
Legalities lengthen any process and complicate it and thereby influence the price structure.
The more the legal constraints to be adhered to, more the price charged from the customers,
in an effort to pass the increase in costs.
The parameters explained above suggest the upper and lower limits but, the actual price lies
somewhere in between. The effort of every manager is to arrive at a process that is easy and
minimizes the deviation from the chosen price, in order to ensure the resultant profit. As a result
of this, various methods of pricing, have come into vogue which emphasise one variable as
against the other variable for example, cost plus pricing, competitive pricing. Cost plus pricing
reflects an accounting thought rather than a managerial thought whereas competitive pricing
reflects a supply side thought process.

It must be pointed out that marketing efforts are directed at fulfilling the need of the identified
consumers. Price is an inherent factor of need. Therefore price must reflect managerial thought,
and must fit into the overall marketing strategy.

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