Page 180 - International Marketing

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182 International Marketing BRILLIANT'S

6. Exchange rate: The exchange rate of the currency may also influence
the pricing. For example, if the rupee is steadily appreciating, the Indian
exporter would quote high dollar prices for a product and vice-versa.
7. Government factors: Export pricing is also influenced by the
government policies and regulations. The price may be determined on the
bases of subsidies, taxes, international agreements, concessions and
exemptions, etc. imposed by the government of both the home country
and the targeted country.
Pricing Policies
There are three possible international pricing policies in international
marketing. They are extension (ethnocentric), adaptation (polycentric) and
invention (geocentric).
1. Extension/Ethnocentric: This policy requires that the price of an
item be the same around the world and the importer absorbs freight and
import duties. This is a very simple method because no information on
competitive or market conditions is required for implementation. The
disadvantage of this method is that it does not respond to the competitive
and market sensitivity of each national market. So, it does not maximize
company's profit in each market.
2. Adaptation/Polycentric: Under this approach, different price is
fixed in different markets. There is no control or fixed requirement that
prices be coordinated from one country to another. The only control is
setting transfer prices within the corporate system. This approach is
sensitive to local conditions, but it does present problems of product
arbitrage opportunities in cases where disparities in local market prices
exceed the transportation and duty cost separating markets. When such
condition exists, there is an opportunity for the manager to take advantage
of these price disparities by buying in the lower price market and selling in
the more expensive market. Under this policy, the marketer can maximize
his profits from a different market by gathering valuable knowledge and
experience about the market conditions of different nations.
3. Invention/Geocentric: Under this approach, a company neither
fixes a single price worldwide nor remains aloof from subsidiary pricing
decisions, but instead strikes an intermediate position. The company
assumes that there are unique local market factors that should be
recognized in arriving at a pricing decision. These factors include costs,
income levels, competition and local marketing strategy. In addition to
these local factors, it recognizes that head quarters price coordination is
necessary in dealing with international accounts and product arbitrage.
Finally, geocentric approach consciously and systematically seeks to