Pricing Strategies: Pricing strategies can be influenced by; o Nature of product and industry: Fluctuations in price and availability

y of raw. To overcome this many companies are engaging in fixed-price agreements with suppliers o Location of production facility: Companies that manufacture abroad often employ greater pricing flexibility both in the countries in which they are located and in export markets. MNCs are better able to calibrate production to demand and are better able to respond to foreign price fluctuations o Distribution system: When a company is able to distribute its products through its own subsidiaries, it has greater control over final prices, including the ability to adjust prices rapidly o Location & Environment of foreign market: Climatic conditions in foreign market may necessitate costly product or distribution modifications o Foreign currency differentials Options in export pricing: o Rigid cost-plus pricing: Ensures margins but may push the final price very high. Customer costs and gross margin to domestic manufacturing costs are added, as well as administrative and R&D costs. o Flexible cost-plus pricing: Allows for price variations in special circumstances. Discounts may be applied to the final price, depending on the customer, the size of the order, or the strength of the local competition. The primary objective is to maintain profit margins. o Dynamic incremental pricing: This method assumes that fixed costs are incurred regardless of the companys export sales performance. Therefore, it seeks to recover only variable and international customer costs in export prices while adding in a partial overhead factor rather than the full overhead load Transfer pricing practices: o Can become a vehicle for repatriating profits from those countries that have remittance controls o Can be a way to shift profits out of high-tax countries into low-tax ones Types of transfer pricing: o Actual cost: Manufacturing facilities are treated as cost centers rather than profit centers and so solves internal disputes over allocation of profits. A disadvantage is that it leaves the cost center with little inducement to make investments, leading to additional inefficiencies for the company. Tax authorities do not accept this technique too. o Standard cost: Has the advantage of identifying efficiencies or inefficiencies in the supplying unit. It facilitates management by exception. A disadvantage is that standard costing requires the management to make arbitrary assumptions and leaves the company to expend time unproductively in debates on how to set the standards

Modified cost: Useful in promoting achievement of strategic objectives. Companies that have unused capacity lower their transfer prices to cover the sunk costs o Market price: Products are sold at the market price. This approach removes internal bias. Disadvantage is that these prices give the supplying unit the entire profit on the transaction. Transfer prices must be lower than the market price o Modified Market Price: Prices are reduced to reflect lower marketing and distribution costs that occur in external markets o Negotiated prices: Determined by bargaining between buying and selling units. Disadvantage is that negotiations may feel to reach agreement or agreement terms may turn out to be unfair. It can also undermine achievement of congruent goals due to excessive internal competition. o Contract price: Eliminates variation that results from central sourcing decisions beyond the control of managers of foreign operations. But disadvantage is that it does not pass on price hikes in raw materials to marketing units and so the marketing unit is not incentivized to remove inflationary losses Things to see while setting transfer prices: o Local taxes; lower transfer prices mean lower levies. Low transfer prices can lower local VATs o Currency fluctuations o Subsidiary profits; startups require substantial corporate assistance which can be provided in the form of low purchase prices from company units o Expense accounting: Certain services are provided to subsidiary but cant be charged, cost for these services can be recouped by increasing the transfer prices of components sold to units o Joint venture support: Lowering the prices of products and services to a parent reduces the outflow of funds from the home country , while raising the prices of purchases from the parent shifts funds to the home country o Output capacity: High capacity leads to low prices

How Global Brands Compete: First global branding was only about saving costs and ensuring consistent customer communication Now companies are going for global scale on backstage activities like technology and production, while customizing communications, distribution and selling to local tastes and preferences. In essence, they are going GLOCAL. Global brands have become a lingua franca for people all around the world Three characteristics; o Quality Signal: Global brands are very dynamic, always upgrading themselves o Global Myth: Global brands are symbol of cultural ideals

Social responsibility: Mcdonalds has made so much money, they should pay something back Global customer segments: o Global citizens: Rely on global success of the company as a symbol of quality and innovation. They are concerned about social responsibility of global brands o Global Dreamers: They see global brands as quality products and readily buy into the myths they author. They arent very much concerned about CSR of global brands o Antiglobals: Dislike brands that preach American values o Global Agnostics: Dont regard the global nature of a brand as meriting special attention How to make a global brand: o Think globalness; Glocal o Manage the dark side; IBM is not an arrogant brand but is there for everyone o Build credible myths; Make people feel empowered o Treat antiglobals as disgruntled customers o Turn social responsibility into entrepreneurship; example of P&G developing a water sanitation system for Latin Americas poorest communities

Product standardization or adaptation; Standardization is done for cost-savings, economies of scale in R&D, production and marketing, and enforces tighter management control on overseas subsidiaries Adaptation which is the change or adjustment to the product offered in the overseas market, results in profit maximization because revenues accrued from marketing mix modifications may rise more than adaptation costs Climatic and Economic factors had a greater impact on packaging, while foreign laws affected product features and performance Label symbols are changed mostly, then label texts are changed, then language written is changed Firms with a long market presence tend to proceed with more extensive adaptations in almost all product aspects compared to recent market entrants Among demographic factors, population size exhibited the greatest impact on product adaptation. Household size affected packaging decisions more Least influential were government controls and policies on internal characteristics of product but more influential on external characteristics of the product Climate and territorial size had effect on both external and internal characteristics of product Of the socio-cultural factors, language differences were the most influential. Education, religion did not have much impact Economic factors had the least impact on product adaptation Japanese products marketed in Middle-east differed little from those marketed in the home market

The Right Way to Go Global: Competitive advantage means having the best technologies and processes for designing, manufacturing, selling and servicing your product at the lowest possible cost Whirpools most advanced expertise in a given area is not confined to one location or division Its vision is to be one company worldwide Whirpools new CEO says that many international companies are not managed as global businesses because top-level managers assume that since consumers differ from location to location, their businesses cant operate effectively as a unified entity Whirpool expanded its strategic horizon and not just its geographic reach It made employees feel like owners and compensation system allowed pay for performance When going global you have to convey to everyone what the company vision is and what the long-term goals are Whirpool created a cross-cultural team from Europe and North America to examine the best quality programs in the world Brings marketing and manufacturing leaders twice a year for global product and technology reviews In 1988, it was also flag planting in Asia, but the purpose was to build a distribution system in South East Asia and to gain an understanding of the consumer You cant achieve a competitive advantage by focusing exclusively on price and quality. You have to listen to the customer! Develop close relationships with similar businesses Consolidate suppliers, instead of 5 suppliers, work with 1 or 2 Virtual teams

Made in Affect: Product country image is the consumers general perception of quality for products made in a given country Intrinsic attributes of a product include the physical features of the product, while extrinsic include brand name, warranties, price, country of origin, perceived country image Origin information is depicted by brand names, logos, packaging, advertising, and so on PCI has become important today due to increase in free trade and national economies are turning global Made in image is the picture, the reputation, the stereotype that businessmen and consumer attach to products of a specific country created by such variables as Representative Products, Economic Background, National Characteristics, History and tradition.

Country identification generally has a positive effect on product evaluations for some, relatively more developed countries The significant COO effect has also been found in industrial purchasing situations Consumers utilize extrinsic cues in evaluating a product because they are often unable to determine true intrinsic value. In the face of increasingly complex social and business environment, consumers look for measures to simplify buying decision-making process. Stereotyped images of countries facilitates the decision making process Halo vs Summary construct: Both the concepts imply that country image is specific to product categories. The halo argument implies that consumers reliance on country of origin should reduce when they are familiar with product category. The summary construct says that consumers use their knowledge about the quality of foreign product from a specific country to construct information about the country and its products. Components of Country Image: o Cognitive component: country of origin cue is used as a signal for overall product quality and quality attributes, such as reliability and durability o Affective component: country of origin is an image attribute that links the product to symbolic and emotional benefits, including social status and national pride o Normative component: Purchasing domestic products may be regarded as a right way of conduct, because it supports the domestic economy Theory of PCI: o Countries belonging to third world do not have a good image in developed countries and resultantly their exports are severely limited by this fact. Third world countries with low image normally export low-tech low dollar value items with low financial risk for consumers Perceived Risk: o Authors postulate that perceived risk is more adequate comprehensive predictor of purchase decisions. Perceived risk incorporates not only the individual's perception of quality and value, but also the physical, financial, social, psychological dimensions of the purchase decision. Willingness to purchase and the evaluation of the product are inversely related to the amount of perceived risk Strategies for reducing perceived risk & negative COO impact: o Sell through reputable retail store: The perceived qualities and attribute claim credibility of electronic products made in Korea were enhanced when the products were associated with upscale department stores in the USA. Made in China, imported by Wal-Mart, Canada and made in Bangladesh for Sears Canada are real life examples of how a negative country image has been moderated by an association with a reputable store

Manufacture known brands: The negative perception of a country of origin may be countered by associating its products with highly valued brand names. Companies from third world countries can not only overcome negative country of origin affect but also enhance the country image by producing a well-known brand Develop own brands: Tomorrow if Nike finds Vietnam to be a cheaper source of imports as compared to China, it can just terminate its relationship with the sub-contractor in China and start importing shoes from Vietnam. Supporting own-brand name products is a strategy to reassure the market in a highly priced competitive environment, as well as adding value to products Promotion & Distribution: The successful brands from South Korea were able to hold ground in the developed countries only after setting up their own distribution centers and controlling the promotion Offer Warranty: for a country like Mexico seeking to export to the U.S., product warranty may be critical in helping overcome the negative stereotypical image associated with products made in that country. For household product purchase decisions, warranty is more important than country-of-origin and brand name Focus on Country Equity: Country equity is the emotional value resulting from consumers' association of a brand with a country. Nations must manage and control their branding. Some decades ago, "Made in Japan" meant low quality, cheap, and shoddy products

Distribution Strategies: Traditionally, import-oriented distribution structures existed, where importers controlled a fixed supply of goods, and the marketing system developed around the idea of selling a limited supply of goods at high prices to a smaller number of customers. It used to be a sellers market, where market penetration and mass distribution were not necessary because demand exceeded supply. Additionally, distribution systems were local rather than national, and the importerwholesaler traditionally performed most marketing activities. This left few opportunities for independent agencies that support a fully integrated distribution system to develop The goal of any multinational organization is to build the most efficient and effective channels among their alternatives, ultimately to establish a competitive advantage Size patterns, the use of direct marketing, and the resistance to change all affect how distribution channels and structures are composed. For example, in Italy, many small retailers specialize in different brands and product lines, while in Finland; most retailers sell more of the same products and services. One way that marketers are able to overcome the challenges posed by structures in place in underdeveloped nations is through direct marketing via direct sales through catalogs Many cultures are accustomed to when and how their products and services are made available, and may not respond positively to adjustments