IM grp1.pptx
Transcript of IM grp1.pptx
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Pricing Strategies & IndustrialMarketing in International
Environment
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Pricing Strategy
Pricing is the key to developing and sustaining acompetitive advantage in the market.
The launch of a new product has to be backed by a strongpricing strategy. In industrial markets gaining a marketfoothold and maintaining a competitive edge is vital.
The Pricing strategies:
Market Skimming Strategy
Penetration Pricing
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Market Skimming Strategy
Skimming pricing is the strategy of establishing a high initial price for
with a view to skimming the cream off the market at the upper end
demand curve.
Large profit in Short life span, thus quick recovery of capital.
Patent protection is important.
Buyers ready to pay premium.
Potential competitors are distant or weak in time.
Uncertainty about the price, thus it can be slashed if required.
Surplus Earnings can be used to expand into large volume markets, thuproduction costs per unit.
Disadvantage is that high profit margins attract high competition.
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At the top of the demandcurve, price elasticity is low.
absence of any close
substitute, cross-elasticity isalso low.
High price also helpssegment the market. Onlynon-price-consciouscustomers will buy a new
product during its initialstage.
By gaining profits,economies of scale can laterbe achieved and the massmarket can be tapped by
lowering the price.
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How was it used
When Sony introduced the world's first high definition television to theJapanese market in 1990, the high-tech sets cost $43,000. (Profit margin$18,000)
Sony rapidly reduced the price over the next several years to attract newbuyers.
By 1993, a 28-inch HDTV cost a Japanese buyer just over $6,000. In 2001, aJapanese consumer could buy a 40-inch HDTV for about $2000 (Profit margin
$4,350 & $870) In this way, Sony skimmed the maximum amount of revenue from the various
segments of the market.
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Saka Engineering Systems - Mixed flow dryers
In the milk powder industry
there was no availabletechnology of mixed flowdryers which could reducethe milk to a powder devoidof moisture.
This was priced at a
premium price and sold toMilk Maid manufacturingfacilities.
This price was lowered whenLipton ice tea entered themarket and then was sold to
them for the sametechni ue.
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Penetration Pricing Strategy
Based on a low price strategy.
Aim to gain market share quickly byunderpricing.
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1. Utilities Reliance (pioneer plan) & TataSky HD (first 3 months free)
Phone and cable or satellite services
Offer a discounted rate for a period of time, such as your first 3 mservice, to get you to switch to their service. (Tata Sky HD)
After your discount period has ended, the price increases significathe company ensures you have become used to its service.
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2. Discount Stores
Discount stores such as Big Bazaar use penetration pricingin two ways.
1. They offer new products through their stores at prices much lowerthan other stores, thus ensuring consumer buys more products. Theyare willing to lose money on the new product as a way to get morecustomers through the door.
2. Also, use of penetration pricing in new geographic markets byunderselling their more well-established competitors. Once theyhave a loyal customer base, they can begin to gradually increaseprices.
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3. Wholesale Indian Tool Manufacturers(Birla Group)
Offered extremely low wholesale prices to hardwarestores to carry its products for a certain length of timeto gain market share.
The hardware stores were allowed to sell the tools at aconsiderable profit during that time and use that time
to determine whether the tools are a good value fortheir customers.
After the discount period had ended, ITM begannegotiating a higher wholesale price with its now-loyalretailers since it had a dominant market share.
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Product Life Cycle
Competitive situation and market situation vary greatly.
Product needs continuous innovation and modification.
Price, similarly needs constant monitoring and adjustmentas the market demands.
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Three Stages
Growth
Maturity
Decline
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Growth
Customers develop a necessity for the product and the brand.
Competitors introduce substitutes.
Price arises as the critical factor in purchase.
In expanding markets, however, non-price factors act as USPs.
Industrial buyers opt for multiple suppliers ;
Leading to cut down of the innovators volume.
In general, price falls from introductory level.
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Maturity Competition level : At its peak
Product differentiation : Dying out
Sales begin to stabilize ; Sales growth rate decreases.
Cutting into the market share of competitors, to increase volume ;
Leading to price war.
Key to survival : Differentiation ;
Quality ;
Serviceability ;
Price.
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Decline Due to visible stagnation in the market ;
Competitors start opting out.
Profitable for the remaining suppliers.
Both sellers and buyers realize the relation betweenproduction volumes and incurred costs.
Image of the company plays its role.
Well accepted firm can increase price
to an acceptable level and;
maintain profits.
As long as the product is alive and needed in the market.
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Discount pricing
Involves deduction from the published price list
Encourage customers to buy in large volumes
Encourage rapid payment by customers
Account for cost and benefits of dealing with different range of customers
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Trade discount
Account for benefits derived from dealing with various groups of customers ormiddlemen
Discounts afforded should cover the operating costs
Must be non discriminatory and cost justified (Robinson-Patman act)
Eg. Discounting in OEMs
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Quantity discounts
An incentive offered to a buyer that results in a decreased cost per unit ofgoods when purchased in greater numbers
Encourage volume purchasing and maintain brand loyalty
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Cumulative discounts:
Reducing market expense
Reduce competitive pressure
Noncumulative discounts:
Encourage large individual orders
Reduce costs of storage and order processing
Examples: Buy five for the price of four and buy one get one free
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Cash discounts
Deduction in payable amount of debtors
Encourage rapid payment
Allow for a better cash flow
Problem may arise when large buyers pay their bills beyond the due date andstill demand the discount rates
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Geographical pricing
Modifying a basic list price based on the geographical location of the buyer
Important to remain competitive in market
Handling shipping costs on the basis of weight to value ratio
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Comparative Advantage: Nations should produce and sell those products
they specialize in and a most efficient in producing.
A firm may not actually engage in International marketing but maybechallenged by at home by a foreign competitor, making it essential thatmarketing decisions be made with on the basis of international rationale
Basis of International Marketing
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Impetus for going International
Profit Enhancement
Opportunity to utilise unused plant capacity Offset seasonal fluctuations
Make wider applications of RnD findings
Recover Manufacturing Investment
Offset declining markets (home market is saturated)
Keep pace with competitors overseas
Marketing Environment
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Marketing Environment
Controllables
PRICE PRODUCT
PRICING CHANNELS
DOMESTICUNCONTROLLABLES
POLITICAL
ECONOMIC
LEGAL
FOGEIGNUNCONTROLLABLES
ENVIRONMENT ASPECT IMPLICATION/CONDITIONS STRATEGY TOVARY OFF
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VARY OFF
ECONOMIC 1. EXCHANGE RATE When foreign currency becomesmore expensive
1. Expand to o
2. Increase Mk
3. price to P
When own currency becomesmore expensive
1. Import less
2. Price to
3. Relocate pr
2. Trade Balance Long term trade deficit withdecline in exchange rate
Government w1. Devalue Cu2. Direct spe
rather tha
POLITICAL/LEGALDetermines:Which market to enter;How to enter; How itemploys mktingstrategies
1.Take control ofassets
1. Expropriat
2. Confiscatio
3. Normalizat
4. Socializatio
5. Domesticat
ENVIRONMENT ASPECT IMPLICATION/CONDITIONS STRATEGY TO BEVARY OFF
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VARY OFF
POLITICAL/LEGAL 2. Import Restrictions Restrict inflow of foreigngoods
3.Market and Monetarycontrol
Protect domestic industry 1. Restrict sale o
2. Levy tax on foproduction facilit
3. Establish priceforeign owned pl
4.Make partnershmandatory
CULTURALImportant since ininternationalmarketing, emphasis ismore on personalselling rather thanperceptions of theproduct.
1. Time perception Degree of Promptness Set aside sufficienegotiation. Eg: Ethopians
2.Spatial perception Use of physical space Differences in spof apprenhensionV/s Americans
3. Materialism
perception
Motivators and what ppl
desire
Eg: Some culture
money
ENVIRONMENT ASPECT IMPLICATION/CONDITIONS STRATEGY TO BVARY OFF
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VARY OFF
CULTURAL 4. Friendshipperception
Trust, friendship, and serviceV/s more pragmatic case bycase orientation
Eg: Saudi Arabia
5. Contractualperception
Relationship Vs Transactional Some places wrinecessary and o
insignificant; otalmost offensive
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International Market Entry
Operational Strategies Strategic Strategies
Indirect Exporting:Sells to domestic intermediaries
Joint Ventures:Local and foreign firms shareownership.
Direct Exporting:Sells directly to foreign buyer orforeign intermediaries- local companyships and handles financing and
shipping documentation
Foreign Production:Establishes solely owned productionin foreign facilities.
Foreign Licensing:Exports know-how throughmanagement contract.
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Segmentation
Segmentation is referred as Comparative Analysis.
Advantages:
Firm can employ same marketing strategy in several countries.
Economies of scale and learning curve effects.
Comparisons help in controlling and evaluating marketing performance.
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International Product Strategies
Economic Considerations
Cultural Considerations
Political/Legal Considerations
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International Pricing Strategies
Transfer Pricing
Dumping
Government Influence
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Personal Selling
Trade Fairs
Direct mails
Advertising & Publicity
International PromotionalStrategy
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Domestic versus Foreign Sales People
Domestic Foreign
More knowledge about thecompany and its products.
More knowledge about the marand culture.
Better connected toobtainconcessions
Better connected with custome
More expensive Less expensive
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Distribution Strategies
Exporting
Licensing
Joint Venture
Foreign Production
First
AspectInternational PL
International SC
InternationalDistribution
Second
Aspect
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International PLC
New
Product
AdvancedNation
GrowingProduct
Otheradvancednations
OldProduct
Lessdevelopednation
Stage Import/Export
TargetMarket
Competitors
Pron C
Localinnovation
None OriginCountry
Few localfirms
Inithig
Overseasinnovation
Increasingexport
Moreadvancednations
Few localfirms
Decdueecoof s
Maturity Stableexport
Advancednations
and LDCs
Advancednations
Sta
Worldwideimitation
Decliningexport
LDCs Advancednations
Incduelow
Reversal IncreasingImport
Advancednation
Advancednationsand LDCs
Incduecom
ve
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International SCM
Bull whip effect of industrial markets tend to be higher
Integration of channels to reduce this effect
SCM requires developing trust between and within firms
99% delivery reliability in four weeks is more acceptable than 85% reliability in two
weeks
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Promotional Strategy for SMEs
Use of new technology International development
SME Chamber of India
Trade Promotion Organizations
Investment Boards
Financial Institutions
BI-LATERAL TRADE DIVISIONS
Export Promotion Council
Indian SME Knowledge Forum
Industrial and SME Research
Centre of India (ISRCI)
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Promotional Strategy of TATA
Sub functions within department
order generationorder fulfilmentmarket development
Corus: Europes second largest steel maker withoperations in the UK and mainland Europe and over40,000 employees worldwide
Tata Chemicals North America produces natural sodaash, which requires much less energy, capital and rawmaterials than synthetic soda ash production, thusmaking it a significantly less costly process. This costdifferential gives the company a competitive edge ininternational markets.
Internalcampaigns
InternalMarketingprograms
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Presented by-Apoorva Arora 401
Basant Boob 402Neha Jain 405Arjun Kaushik 407Arjun Kochhar 408Siddharth Lahoti 409