Download Understanding Price and Environmental Influences in Global Marketing and more Study notes Business Administration in PDF only on Docsity! Pricing Decisions and environmental influences in pricing decisions. 1.1 Introduction It is a universally accepted fact that ―Price‖ is the hero of any transaction, because the Demand for any commodity or service, depends on the price quoted for it; Similarly the supply of any commodity or service also depends an the price is paid for it. The transaction takes place where the prices for demand and supply meet. Under the conditions of perfect competition, ―bargaining‖ takes place and an average price is arrived at. Here, it will be pertinent to define the 2 words ― Price‘ and ―Price Level‖ Price is defined as the particular value of exchange or money quoted for a particular commodity at a particular time of a particular day. (For instance the price in share market as well as the foreign exchange market varies 3 times a day i.e., at 10 A.M., 2 A.M. and 5. P.M.) Price level is defined as the average of higher quotations and lower quotations given by various dealers for one particular commodity (for example the price of goods is higher in air – conditioned shops with all facilites when compared to the price of the same commodity on a road – side dealers shop. This average price is the basis for demand and also repeated demand for goods. In the matter of Services like very popular high class hospitals, the changes ae very high than the Government Hospitals. Therefore wherever a new product is introduced in the market, this factor called ‗Price Level‘ must be considered as the basis for the Sales Price or selling price. In this connection the famous formula is CP + P = SP. Where CP is cost of purchase / production; P is profit margin and SP is the selling price. In the market economy of the capitalistic countries, this formula is generally followed because P is determined by Demand and supply, as per law of Demand. For a need product in the market if there is not much of competition, P can be more. In contrast, when there is cut – throat competition P may be less. Here, we may recollect the old saying that ―failing at one unit in a million is better than aiming at one hundred and getting full success‖. In the long run when the total sales is very high the P (Profit margin may be kept lower). Equally the P has to be fixed at a lowest level in market penetration conditions for a new product. In the global marketing management ―Price‖ refers to the ―Export Price‖ mainly. The global marketing management should pay a special attention to the development of suitable policies for pricing. They are analysed thoroughly as product policies. Almost all information on global firms apply a standard ―mark-ups‖ to sales in any part of the global. This is probably because of the greater diversity of foreign market conditions, the various levels of intervention by government, the escalation cost for certain exports, due to tariff and non-tariff barriers and the volatility of currencies in the exporting and importing countries. Therefore, the Global Marketing Management must consider the ―Price‖ as the integral part of the whole global marketing strategy. The Price is very closely related to the utility, as utility in the ability of a commodity to satisfy human wants. The global marketing management is comprised of 3 different stages. (1). Export, (2). Create foreign exchange, and (3). Import When these stages or steps are followed especially in multi national corporations there will be a smooth outflow of goods. Hence, the export pricing decisions are very important.
