Page 183 - International Marketing

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BRILLIANT'S Overseas Market 185

requires the passage of the goods through many more channels than
in domestic sale. Each channel member must be paid a margin for
services it provides which naturally increases cost. Also a variety of
government requirements, domestic and foreign, must be fulfilled which
further results in increase of costs.
8. Export price quotation: In this method, an export price may be
quoted to overseas buyer in any one of the several ways. Every alternative
implies mutual commitment by exporter and importer and specifies the
terms of trade. The price alters according to the degree of responsibility
that the exporter undertakes, which varies with each alternative. There
are five principal ways of quoting export prices ex-factory, free-alongside-
ship (FAS), free on board (FOB), cost insurance and freight (CIF) and
delivered duty paid.
9. Dumping:
Note: Please refer further questions for details of this topic.
10. Leasing: Leasing has emerged in international marketing
especially in the area of industrial marketing. Actually leasing is employed
by essentially all capital goods and equipment manufacturers active in
foreign markets today. Leasing is getting popularity due to capital shortage,
the need for maintenance and servicing customer's unwillingness to make
long term commitments because of the prospect of intermittent need or
technological obsolescence and investment incentives including tax
advantages for leasing. Leasing provides a way to procure use of equipment,
and permit international marketers an entry into a market that otherwise
might be closed because of capital shortage. Leasing also transfers the
burden of maintenance and service unto the lesser and relieves the customer
from worry where the equipments require regular maintenance and service
while setting leasing prices presents difficulties for various reasons even if
it provides a good entry into markets. Thus, an attempt is made to recover
the total cost of the leased equipment in about half of its useful life while
fixing the lease price. Finally, the inclusion of foreign inflation factor in
setting the lease price poses problems, because forecasts of inflation
rates are usually unreliable. 
Q.28. Discuss “cost based pricing”, “market oriented pricing” and
“break even pricing” as methods of international pricing.
[MBA(FT) 2009]
1. Cost-Based Pricing: Cost is an important factor in price
determination. Ordinarily, the cost consists of two broad categories
fixed cost and variable cost. Fixed costs are those costs that do not vary