Explain the Objectives of pricing in International Marketing.
The objectives of pricing in international marketing are:
- Holding Market Share.
- Enhancing the Share
The first objective of a new entrant to an international market is to create demand for the product. For this, the firm will be tempted to adopt low-price strategy, which may divert demand from a regular channel of supply or to generate new demand. Low price strategy is justified for the new entrant in the light of his image disadvantage and the nature of his product. However, the danger of this strategy is that it may invite anti-dumping charges from foreign competitors apart from yielding low profits for the exporter.
Another objective of pricing policy may be to use a very high price to skim the cream of the demand. High price strategy is generally used if the export firm is selling a unique or a new product, or the exporter intends to establish a high quality image for the product. The advantage of this strategy is that the exporter can earn higher profit margins but it can limit the product’s marketability. This may also attract more competition in the market for that product. Hence, this strategy should be used only when an exporter has gained a strong foothold in a foreign market and has built up a good image for his product and himself.
Holding Market Share:
Another objective of pricing in international marketing is to maintain their share in the market, i.e., to survive in the face of strong competition in the market. In a market where there is strong competition, weaker export firms will disappear and the stronger ones will survive the competition. Price of the product should be fixed keeping in mind the competitive situation. Hence, the export firm likes to fix a relatively low price for its product to discourage potential customers.
Enhancing the Share:
One of the objective of pricing decision maybe capturing the export market. A company fixes comparatively lower prices for its products. Sometimes, prices are fixed at the lowest. which may result in no profit to the business, but the main aim is to enhance the market share of the product and the firm. Besides above mentioned objectives, other objectives of pricing of international marketing may be listed as under:
- Fighting competition.
- Preventing new entry.
- Shortening pay back period.
- Early cash recovery.
- Optimum capacity utilization.
- Profit maximization.