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Step 8: Preparing your export plan

You are here:Step 8:Preparing your export plan > Preparing an export marketing strategy for your firm > The export price > Step 3: Approaches to pricing



Step 3: Approaches to pricing


Three broad approaches will guide your pricing strategies

You have completed the formal costing exercise and you now know what your costs are. The next step is to decide on an export price. This decision is divided into to parts; the first is to decide on the broad pricing approach you intend to follow (which we discuss below) and the second is to decide on a specific pricing strategy. As far as the broad approaches to price setting are concerned, there are essentially three ways in which you can approach your pricing in foreign markets. These are discussed below:

1. Competitor-oriented pricing

In terms of this approach, your pricing decisions would depend on what the competition does. Competitor-oriented pricing is the approach to follow when you are dealing with a market where prices are openly set through the process of supply and demand as in the case of most commodity markets such as coal, coffee, wheat and gold. It is also common in markets where there are one or two powerful competitors that set the price levels, for smaller suppliers to follow.

2. Cost-oriented pricing

In the case of cost-orientated pricing, you would calculating your total unit cost and add on a profit margin to arrive at an export price. Consumer demand or competitor actions thus have little bearing on your decision-making. This approach is commonly used in the case of industrial goods where it is often difficult to differentiate between products in terms of their perceived value to the customer.

3. Demand-oriented pricing

Also referred to as market-orientated pricing, the demand-oriented company sets prices according to the intensity of demand for the product. Where demand is strong high prices are normally set, and where demand is weak lower prices are the norm. The unit cost is not a major determinant of pricing in this case, although it is obviously taken into consideration when the lower limit on a price is considered. Demand-oriented prices are usually applied to branded consumer goods but they may also be appropriate in respect of many industrial products.

From pricing approaches to pricing strategies

In formulating an optimal pricing strategy for your export markets, it is important to recognise and accept the approach to pricing that you intend to follow (these have been discussed above), as your approach will to a large extent determine the export pricing strategy that you will ultimately implement. In the next section we will discuss the various export pricing strategies at your disposal. The strategy that you will eventually adopt might any one or more of the following objectives in mind:

  • Aiming to reach a particular profit level
  • Striving to become a low-cost competitor
  • Attempting to carve out a specific market share for your firm
  • Establishing an acceptable market image (as a bargain or premium supplier)
  • Reinforcing a product differentiation strategy that you may have decided to follow in a particular market, i.e. based on a unique feature which differentiates your product from its competitors
  • Combating competition
  • Attempting to stabilise prices
  • Creating a competitive advantage for your firm based on your price
  • Securing wider distribution by offering your intermediaries a great share of the income

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Step 8: more information

Step 8: Preparing your export plan
      Synopsis of research already done
      Revisiting an export SWOT analysis of the firm
      Setting the export objectives of the firm
      Preparing an export marketing strategy for your firm
                  The export product
                  The export price
                        .Step 1: Undertaking a price analysis of your target market
                        .Step 2: Costing for exports
                        .Step 4: Export pricing strategies at your disposal
                        .Step 5: The export price - your key to success
                        .Step 6: From an export price to a final selling price
                        .Step 7: Reviewing the pricing process
                  Export promotion
                  Export distribution
      Preparing an export budget for your firm
      Outlining an implementation schedule for your export activities
      Preparing and presenting your export plan
      Obtaining approval for your export plan

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More information on Step 8
Learning to export...
The export process in 21 easy steps
Step 1: Considering exporting
Step 2:Current business viability
Step 3:Export readiness
Step 4:Broad mission statement and initial budget
Step 5:Confirming management's commitment to exports
Step 6: Undertaking an initial SWOT analysis of the firm
Step 7:Selecting and researching potential countries abroad
Step 8: Preparing and implementing your export plan
Step 9: Obtaining financing for your exports
Step 10: Managing your export risk
Step 11: Promoting the firm and its products abroad
Step 12: Negotiating and quoting in exports
Step 13: Revising your export costings and price
Step 14: Obtaining the export order
Step 15: Producing the goods
Step 16: Handling the export logistics
Step 17: Export documentation
Step 18: Providing follow-up support
Step 19: Getting paid
Step 20: Reviewing and improving the export process
Step 21: Export Management
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