chapter  7
18 Pages

Pricing in International Trade

Price is an important factor in determining a firm’s ability to compete in world markets. For many companies, pricing policies and procedures are secret information and not easily available to outsiders. Export prices should be high enough to make a reasonable profit and yet low enough to be competitive in the market. Products rarely sell on one factor alone, and the exporter should be competitive on nonprice factors of different kinds. Sources of nonprice competition include reliable delivery, short delivery time, product reliability, product quality, as well as any other feature considered unique by customers. 'This form of product differentiation based on specific characteristics of a product or service gives firms a competitive advantage (Dussauge, Hart, and Ramanantsoa, 1987). Apple Computer increased its market share in Japan not only by slashing prices but also by broadening distribution outlets and through the addition of Japanese software packages.