‘

‘‘
 
  ‘‘ 


‘

 ‘
As compared to domestic market, international marketing is highly complicated and complex.
International marketing is an offshoot of ever increasing interdependence of nations and the rise
of MNC¶S which consider the globe as their market. International marketing is an important
aspect of international business. International marketing is not the same thing as international
trade. Only a part of the international trade flows represent international marketing. There is a
category of international marketing which is not captured by the international trade statistics.


 ‘
Philip R Cateora and John M Hess have defined international marketing as ³ ‘‘
‘‘ ‘‘!‘‘"#‘‘‘$%‘&!‘!‘ ‘‘‘‘
‘‘‘‘‘'‘

‘
‘

‘
c
 Y PORT PRICING

‘ ‘(‘ 
‘)
 ‘  )
‘
In July, 1977, Mr. Roy, the senior financial executive of the metal product company, was
faced with the task of fixing an export price for the company¶s product which you enable the
company to make a successful and profitable entry into export markets.

The metal product company was a medium sized organization which had for a number of
years manufactured and sold a line of metal products in the Indian markets. In 1977, the
opportunities for the expansion of sales in the domestic market were limited by special factors
and the executives of the company had turned their attention to potential export market.

The operating statement for the company for the previous year had shown the result set
forth in Yxhibit I. during this period the company had manufactured and sold approximately
5,50,000 units of products throughout the Indian market.

*‘‘

&‘‘‘‘$‘!!‘

+,‘-.‘/011

2&‘‘!‘‘
34‘

Sales (net) 1,100

Raw materials 156

Direct wages 182

Direct factory expenses 74

Supervision 82

Depreciation 24

Maintenance 90

Other Indirect factory expenses 100 708

Gross profit 392

Administration expenses 58

Selling and distribution expenses 58 116

£
 The production capacity of the company for 1978 had been estimated at 7,20,000 units.
Mr. Sen, the senior sales executive, had budgeted for the sales of 5,50,000 units in the domestic
market and 1,70,000 units in the export market. Mr. Sen had preliminary studies of selected
export markets such as Africa, Pakistan, Singapore and Hong kong and had ascertained the
competitive prices ruling in those markets. He informed Mr. Roy that the price of the product
which were directly competitive with Metal¶s product was the equivalent of about Rs. 1.60 per
unit f.o.b Bombay. ³This figure´, Mr. Sen said, ³ did no compare at all with the favorable with
the average ex-factory price per unit of Rs. 2 which the company had been obtaining for its
product in the Indian market. ³The Rs. 1.60 was, however´ he said, ³ a realistic figure of
competitive prices ruling in the export market and in my judgement the company would have to
plan on that figure being the maximum to be obtained in the short run. ³ Mr. Sen also voiced the
thought that competition might force somewhat lower prices during temporary fluctuations of
supply and demand for the products.´

Mr. Roy thought that the figures available from the operations of the previous year would
provide a sound basis for estimating the cost which would be incurred in the previous year. He
knew that the unit cost which could be calculated from those figures would only be average and
that with further refinements in costing procedure he would be able to obtain more exact cost,
but he thought the years figures would provide a reliable basis for the practical purpose of fixing
averages prices of Mr. Sen. The accounting records of the company had been set up so as to
facilitate the segregation of cost which tended to remain constant despite variations in the
volume of product produced and those cost which tended to vary directly with the volume of
products produced. Mr. Roy recognized that there were some marginal elements in the each
category but he thought that there effect upon the total analysis would not be significant. A
careful examination of the effect which the proposed increased in the volume of production
would have upon the elements of the cost structure led him to the following conclusion regarding
those cost which would vary and which would remain constant.

Cost Ylement Impact of increase in volume

from 5,50,000 to 7,20,000 units

Raw materials

Direct wages These cost would vary in direct

Direct factory expenses Proportion to the increase in volume

Supervision

Depreciation These cost would not vary much

D
 

‘
The metal product company was a medium sized organization which had for a number of years
manufactured and sold a line of metal products in the Indian markets and during that time they
sold approximately 5,50,000 units of products throughout the Indian market. Mr.Roy is the
senior financial. In July 1977, this company wanted to enter into the export market, but had
many challenges ahead of them in exploring the potential export market.

The selected export market were Africa, Pakistan, Singapore and Hong kong which had
competitive prices. The company had been obtaining Rs.2 per unit in the Indian market which
would reduce to Rs. 1.60 per unit in the export market. The company also had to keep a close
watch on the fluctuations of supply and demand for the product.

Mr. Roy the financial senior executive thought the figures available from the operation of
the previous years and further refinements in the costing procedure he would be able to obtain
more exact cost. Mr. Roy also recognized that there were some marginal elements in each
category which would not have significant effect. Mr. Roy was also successful in drawing certain
conclusion.

Mr. Sen had requested Mr. Roy to calculate the cost figures which would form the basis
of fixing an export price.


‘‘(‘
‘‘

1)‘ In July 1977, Mr. Roy the senior financial executive had to fix an export price to be
successful and profitable entry into export market.
2)‘ It is a medium sized organization.
3)‘ They sold metal products in Indian market for number of years and during that time they
sold approximately 5,50,000 units of products throughout the Indian market.
4)‘ Production capacity of the company for 1978 has been estimated at 72,00,00 units.
5)‘ Out of which 5,50,000 in domestic market and 1,70,000 in export markets.
6)‘ As per study of Mr. Sen the price of the products which were directly competitive with
metal products was equivalent of about Rs.1.60 per unit but it did not compare with the
average price of company which is Rs.2 per unit.
7)‘ The accounting records of the company had been set up so as to facilitate the segregation
of costs
8)‘ After a careful examination Mr. Roy recognized that there were some marginal elements
in each category
9)‘ They decided to make some changes in the balance sheet and calculate it to fix the export
price and to know whether it is profitable for the company to compete at the same price
i.e Rs. 1.60 per unit.

·
 A ‘
‘
/4‘ o"!‘‘‘"‘‘‘$‘‘‘‘‘‘‘‘ &‘‘
‘3/35,‘)‘‘33‘6$7‘

o
89‘
No it would not be profitable for the company to compete on the basis of an average
price.
I would choose to expert a product rather than remain strictly a domestic company to
increase the sales volume to a level where costs to produce an individual item.
Yxporter must decide whether it¶s exported Product price will be higher, at the same level
or lower than in the domestic market.
In fact companies forget to think about the customers and define prices just looking at the
Production cost marketers.
The minimum price is determined by the cost of the product or service. And if
competitors
Do not adjust their prices in response to rising costs.
Management will be constrained in its ability to adjust prices accordingly. The higher
Competition in the market to more difficult will be to push prices up.
The USA automobile market is a good example concerning the competitive influence:-if
Manufacturer decides to move up its price, it is likely to loose market share. Between
the lower and upper boundary. For every product there is an optimum price. This is a
Function of the demand for the product as determined by willingness and ability of
customer to buy.


£4‘ ‘‘!‘"#‘.‘#‘‘"#‘"!‘‘$‘&‘‘!‘
‘‘‘7‘

o
89‘
I feel that the suggestion given by Mr.Sen to increase or decrease the price wherever
necessary in balance sheet is right. He thinks that there could be fluctuations in demand
and supply in the international market. So I feel that the rate i.e Rs 1.60 per unit is
relevant in the international market. Because the company is already in loss of 0.40 paise
per unit by selling the product at Rs.1.60 per unit as they use to sell the same product at
Rs.2 per unit in Indian market. So I feel the rates should be same.
Meeting the competition is a very common but is only a lowest cost producer.
More typically companies offering products that are directly comparable to each other
may be forced to play this game. if they want to compete and built a good reputation in
the international market they have to set a price little below the price set by them in the
Indian market. It is important to understand what different pricing strategies are available
so you can select a starting point that fits with your companies business strategy. Pricing
is a strategic tool that can be used as a competitive weapon but is best applied as part of
an overall business strategy. Pricing must contribute to a companies strategy to be
successful. In order to do so there needs to be a company strategy or vision. Companies
that can articulate why they are in business and how they want to compete provide the
strategic backdrop for successful pricing.
Call it a corporate strategy statement, a vision, a mission statement or
whatever. This statements are very useful for tying together all of your sales and
marketing activities of which pricing is one important element.

+4‘
‘‘"$.‘#‘"!‘‘‘"#‘"‘‘‘" "‘‘‘!‘:7‘

o
89‘
I feel that the lower limit should not exceed Rs.1.60 per unit as in the Indian market the
price is Rs.2 per unit according to the factory cost. Because if they lower the price more
they will be in more loss. So for some years to gain reputation in the market the company
has to compete in the international market with same price and after years by looking at
the demand of the product the company can raise the price.
As in any business we cannot gain profit at the start of any business. We have to
keep patience and wait for some years to gain good reputation and earn profit in any
market then may it be Indian market or international market.

  ‘
We feel that as per the advice of Mr. Sen the price is relevant enough to compete and it
should not be less or more than Rs 1.60 per unit for some years until they gain good
reputation in the international market.