Page 212 - GLOBAL STRATEGIC MARKETING

• Understanding product-specific factors, including the product life-
cycle stage, that affect pricing; generally prices are reduced on

mature products as they become more commodity-like and face
increased competition

• Recognising the differences in a country’s environment governing
prices, including the volatility of foreign exchange rates, the marketing

structure and the competitive environment

• The strength of competition and the company’s objectives interact in
determining how a firm sets its international prices

Price may also be standardised across international markets; or a dual
pricing policy may be adopted, with one price for the domestic market and

one for export markets (generally a lower price reflecting the marginal cost
of the exported goods without an apportionment of product-development
costs). A market-differentiated price policy may be used, reflecting the

different conditions in each market. Transfer prices for goods sold to
different branches of the same multinational also need to be considered;

these will reflect the internal policies of the company concerned and may,
in some cases, be designed to minimise the company’s international tax
liability. Price is, in any case, a sensitive issue in international markets;

claims of dumping and unfair competition may arise if export prices are
lower than domestic prices.

9.6 Coping with the foreign exchange rate

The best example of a serious impact of the exchange rate on an

international company is Subaru. Subaru was one of the most profitable
companies in the US for over a decade. When the Yen appreciated 50%
against the Dollar from the end of 1985 through 1987, the dollar price of

Subaru cars had to go up. Subaru sales dropped by over 20%, and it
began registering large losses. It is therefore essential to monitor

exchange rates in international markets (Terpstra and Sarathy, 2000, p.
534).

The three areas of foreign exchange rate risk are:

1. Transaction risk