Now the world has become more smaller and shorter than before as it is possible to reach any one person(s)or product(s)with in few seconds.So it is more difficult to determine Pricing products or services in international marketing.Price is,in part,a function of cost, and the foreign exchange rate is an important determinant of a company’s cost of production. When borrowing capital to do business the cost of that capital can be very influential in the price decision.
Global Marketing Success Depends On Products Pricing For Multinational & Transnational Company
It is conducting business across international boundaries,and dealing with foreign exchange, the risks rise enormously,especially the impact on financial resources and decisions,and particularly on pricing strategy.Foreign exchange is the way business can be conducted across national boundaries.Customers buy value, reflected in the price and intangible attributes of the product.Price is a function of cost in part,and foreign exchange affects the cost position.Foreign exchange rates, therefore,directly impact on the production quality and effectiveness of a company’s marketing effort.
Present day Foreign exchange:-
What emerged from the collapse was a managed dirty float(due to supply and demand)with special drawing rights(SDR).”Dirty”refers to actions by governments participating in exchange rates to influence rates,”managed” refers to the effort by governments to influence exchange rates with fiscal or monetary policy instruments.SDRs were created by the IMF to supplement the dollar and gold reserves.Its allocation is based on a formula which takes into account factors such as share of world trade and can be used to help balance of payments situations or settle financial obligations like swaps,donations and security for financial obligations.
IMF controller of Foreign exchange:-
Most countries of the world are members of the IMF which,amongst its many functions,exercises surveillance over exchange rate policies of members,manages the SDR,provides temporary balance of payment assistance and technical assistance.
Dynamic nature of Foreign exchange:-
The foreign exchange market is very dynamic. The price of one currency in any other currency is the result of forces of supply and demand in the foreign exchange market.The demand for one currency may be due to consumers wishing to buy from overseas or a belief that one country’s currency is stronger than another’s.In Africa, where exchange controls occur in some countries,this can lead to an official or unofficial black market.Also currency allocation is a feature which tends to slow down business or hinder its development.
If a country sells more than it buys,its currency value will rise and vice versa.If foreign exchange rates were set simply by money exchanged for goods and services then forecasting exchange rates would be easy. However,short and long term capital flows, speculative purchases and sales distort the picture.
Major factors of Foreign exchange:-
Governments intervene to dampen fluctuation in exchange rates.Often they get involved in extensive trading to stem the rise in currency value so exports are not harmed.Exchange rates are very difficult to forecast due to a multitude of factors.Forecasts are,therefore,a continuation of economic analysis and judgement.One of the issues in analysing a country’s competitive position is the critical adjustment of the exchange value of a country’s currency.The index is a trade weighted index (based on world trade share).Indices are issued by various bodies like the IMF.Three basic factors determine the boundaries of the pricing decision:-the price floor,or minimum price, bounded by product cost,the price ceiling or maximum price,bounded by competition and the market and the optimum price,a function of demand and the cost of supplying the product. In addition,in price setting cognisance must be,taken of government tax policies,resale prices,dumping problems,transportation costs, middlemen and so on.Whilst many agricultural products are at the mercy of the market (price takers)others are not.These include high value added products like ostrich,crocodile products and hardwoods,where demand outstrips supply at present.
Prices are fixed,usually on the basis of cost, competitive or market considerations and may be pitched high or low,depending on supply/demand and intangible (image) factors.The process of price fixing is compounded by exchange rate considerations,currency fluctuations,inflation, devaluation or revaluation,transfer and price escalation considerations.Pre-financing in export is often essential as sellers have often to bear the costs involved before obtaining the revenue from the sale.Sources vary,including internal and external sources.In order to make sure that the export system is supported and encouraged,many countries have an export credit guarantee system which helps reduce the financial risks involved.Other methods of obtaining revenue in a risk situation are by operating in the futures and options market. However,these are not as prevalent in less developed countries as in more developed ones.
i.Global marketing management by W.J.Keegan
ii.Global pricing methods by James R C.
iii.Global market in India by Apurba K Roy