One of the biggest challenges of the marketing mix of an international firm is pricing a product. On the contraire to the other elements of the marketing mix: product, placement, and promotion (whereas are considered a cost to the firm) pricing is the one element that produces revenues. Thus pricing is the key element to succeed or fail expansion efforts (Global Market Today). At the time of selecting the correct pricing strategy, diverse departments such as finance, accounting, and manufacturing, must unify criteria and take in consideration tax and legal conditions before making a decision. Hence this task potentiates once operating abroad.
Explain the concept of price escalation and why it can mislead an international marketer.
According to Cateora, Gilly, and Graham, the price of escalation is “the pricing disparity in which goods are priced higher in foreign markets than in their home market; caused by the added cost involved in exporting products from one country to another” (Cateora, Gilly, and Graham, p.543, 2013). According to the Global Market the mayor influencers of price setting are labeled under the 4 C´s: “Company (costs, company goals), Customers (price sensitivity, segments, consumer preferences), Competition (market structure and intensity of competition)
Channels (of distribution)” (Global Market Today).
Marketers observe price variations between similar products and their prices abroad. Considering political and legal agreements, economic issues and many other issues can vary from country to country so will the prices escalation, therefore a product price scales around the world. E.g. a Blackberry Bold 900 costs $571 in New York thus cost $754 in Sydney Australia (Global Market Today). Elevated prices may mislead international marketers in assuming that they can perceive bigger profits by distributing their products abroad, at a higher price than
References: Cateora, Philip R. & Gilly, Mary C. & Graham, John L. (2013). International Marketing. McGraw-Hill. 16th ed. NY Anonimous. Global Marketing Mix: Price. Global Market Today. http://globalmarketingtoday.wordpress.com/about/global-marketing-mix-price/ Zaribaf, Mehdi (2008). Pricing Challenges in Global Marketing: a Model for Export Pricing. Islamic Azad University of Iran,