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• Economic conditions, especially the forecasts for interest rates and
inflation

• The exchange rate
• Terms of scale.

9.4 Price in relation to cost and profit

Terpstra and Sarathy (2000) state that in the long-term, prices must be set

to cover full costs, but they may initially be set lower to gain a market share
and to accommodate the economic recessionary cycle in particular

markets. The international company can also reduce its prices deliberately
in anticipation of reducing costs through increases in manufacturing

volume. In relation to the company’s costs, it is important to focus on those
that are relevant to the company’s international marketing effort. ‘Relevant
cost’ is the cost specific to marketing a product in a specific international

market. This concept should be used in examining the price–cost
relationship.

9.5 Influences on international pricing

Hollensen (2001, p. 447) points out that pricing policy is an important

strategic and tactical competitive weapon that, in contrast to the other
elements of the global marketing mix, is highly controllable and

inexpensive to change and implement. At this stage, pricing strategies and
action should be integrated with the other elements of the global marketing
mix. According to Terpstra and Sarathy (2000, p. 522) there are several

factors in international pricing:

• Setting pricing and strategic objectives

• Monitoring price-setting behaviour by competitors and assessing their
strategic objectives

• Evaluating the consumer’s ability to buy in different countries’ markets

• Relating price to a firm’s costs and profit goals