International Marketing Practices

Marginal costing is another method to calculate export pricing, which usually produces more competitive prices to enter new markets. Using marginal costing, the exporter only considers the differential costs of manufacturing products for export. However, marginal costing only works when the firm has steady income from domestic sales [1]. For the marginal costing method (Table 13), prices are lower than what the company charges in the domestic market. While more competitive, this price can be subject of anti-dumping regulation. Table 14 lists resources to calculate export pricing. It should be noted that these resources can provide a framework for thinking about various components of export pricing, and their outputs should not be taken as a precise calculation of export price.

Table 13. Export price calculation example using marginal costing method (based on [100]).

Total production capacity

120,000 units $1,400,000 $80 per unit $120 per unit 90,000 units

Fixed costs

Domestic variable cost Export variable cost*

Domestic sales

Break-even cost, domestic sales (total cost ÷ units sold) Break-even cost, export sales (total cost ÷ units sold) Using marginal costing (total variable cost ÷ units sold) Export sales

($1,400,000+$80×90,000) ÷ 90,000= $96 per unit

20,000 units

($1,400,000+$80×90,000+$120×20,000) ÷ 110,000= $100 per unit

($80×90,000+$120×20,000) ÷ 110,000= $87 per unit * Additional $40 includes transportation, insurance, product adaptation, tariffs, and commissions.

Table 14. Resources for export pricing calculation.

Author

Title/Link

Reference

Banco Santander

Export Price Calculator

[101] [102] [103]

Alpha Bank ExPortarYa

Selling Price Calculator – Export

Calculate FOB Price

Placement The final component of the marketing mix is placement, or distribution methods by which your product reaches the final consumer (see box on next page). Collectively, the distribution channel is an inter-organizational system made up of all agencies involved in moving things of value (products, services) from points of conception or production to points of consumption. The basic concepts of distribution are discussed in this section, and export logistics will be outlined further in Chapter 4.

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