Valuating your products can be the most challenging, especially pricing overlooked holdings from underutilized resources that affect their corporate balance sheet and profit margins.
Valuating goods for export markets, as in the domestic market, the price at which a product or service directly determines your company’s revenues. Your firm’s market research should include an evaluation of all variables that may affect the price range for your product or service.
If your company’s price is too high, the product or service will not sell. If the price is too low, export activities may not be sufficiently profitable may create a net loss.
Traditional components for determining proper pricing are costs, market demand, and competition. Each- component- must be compared with your company’s objective in entering the foreign market. An an-analysis of each component from an export perspective may result in export prices being different from domestic prices.
Some of the costs are in addition. And are typically borne by the importer. These include tariffs, customs fees, currency fluctuation, transaction costs (including shipping), and value-added taxes (VATs). These costs can add substantially to the final price paid by the importer, sometimes resulting in a total that is more than double the price charged in products often compete better on quality, reputation, and service than they do on price—but buyers consider the whole package.
As you develop your export pricing strategy, these considerations will help determine the best price for your product overseas:
An essential aspect of your company’s pricing analysis is the determination of market objectives. For example, is your company attempting to penetrate a new market, seeking long-term market growth, or looking for an outlet for surplus production or outmoded products? Marketing and pricing objectives may be generalized or tailored to particular foreign markets.
The actual cost of producing a product and bringing it to market is key to determining if exporting is financially viable.
The cost-plus method is when the exporter starts with the domestic manufacturing cost and adds administration, research and development, overhead, freight forwarding, distributor margins, customs charges, and profit. However, the effect of this pricing approach may be that the export price escalates into an uncompetitive range once exporting costs have been- included.
Marginal or Incremental cost pricing; is a more competitive method of pricing a product for market entry.
This method considers the direct out-of-pocket expenses of producing and selling products for export as a floor beneath which prices cannot be; assessed without incurring a loss. For example, additional costs may occur because of product modification for the export market. Costs may decrease. However, the export products are stripped-down versions or made without increasing the fixed costs of domestic production.
The costing must be assessed- for domestic and export products according to how much benefit each product receives from such expenditures, and may include:
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Market demand per capita measurement for consumer goods and services is a good gauge of a market’s ability to pay for Some products. (for example, popular fashion labels) create a strong demand that even low per capita income will not affect their selling price. Simplifying the products to reduce their selling price; may be an answer for your company in markets with low per capita income. Your company must also keep in mind that currency fluctuations may alter the affordability of its goods and services.
In the domestic market, companies carefully evaluate their competitors’ pricing policies. You will also need to assess your competitors’ prices in each potential export market. If there are many competitors within the foreign market, you may have to match the market price or even underprice the product or service for the sake of establishing a market share.
If the products or services are new to a particular foreign market, it may be possible to set a higher price than in the domestic market.
It’s important to remember several key points when determining your product’s price:
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