International Marketing Practices

quickly a new product will become profitable and whether a cost reduction is needed on an existing product. To determine fixed and variable costs, examine your monthly banking statements for the past year. Fixed costs are incurred whether or not your operation is running and often include property taxes, salaried employees, insurance, and loan payments. Variable costs accumulate when your business is running, such as fuel expenses, raw material purchases, and supplies such as saw blades. Once you establish your break-even point, you can mark up prices to make a profit. Consider the scenario in which it costs $150 to produce your product. If you want a 25% profit, the selling price should be $200; that is, $150/(1.00 -0.25). Ultimately, you should strive to set price at a point that customers are willing to pay for the value they perceive in the product; however, that value can be difficult to quantify. If the market is saturated with companies offering the same product or service, customers will typically choose the lowest price unless they perceive your product to be superior. Pricing for International Markets icing for internatio l markets is diff rent from domestic pricing because there are more factors to consider. For example, costs that do not exist in the domestic market must be accounted for when determining an export price, otherwise known as price escalation [1]. Consumer valuation and willingness to pay for a product are critical determinants of overseas export success, which makes it necessary to evaluate the demand and product acceptance within a foreign market. Overseas competition can help to determine the best export pricing, with the decision being whether to price below, at, or above the competition. It is important to note that export pricing usually varies from domestic pricing owing to domestic brand equity, established domestic distribution channels, or heightened export costs, including shipping, duties, and others. Political and legal tendencies must also be considered, because many countries have anti-dumping laws that prohibit exporters from lowering prices below that of the domestic equivalent. In addition to the basic pricing strategies explained earlier in this section, pricing decisions can also be made considering the prices that the company charges in its domestic markets. A company can set an export price lower, higher, or in line with domestic pricing or use differential pricing [20]. • Export pricing lower than domestic. When entering a market, exporters can use a lower price as an advantage to gain market share. However, as an exporter, it is important to recall that many countries have “anti-dumping” laws and to look preemptively for these when pricing. • Export price higher than domestic. Costs of exporting, such as tariffs, taxes, and legal fees, can be high, in turn pushing export pricing higher than domestic

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