GLOBAL PRICING:THREE POLICY ALTERNATIVES FOR MULTINATIONAL COMPANY

There are three alternative positions a company can take toward worldwide pricing.  

(1)EXTENSION/ETHNOCENTRIC:--
The first can be called an extension/ ethnocentric pricing policy.This policy requires that the price of an item be the same around the world and that the importer absorb freight and import duties.This approach has the advantage of extreme simplicity because no information on competitive or market conditions is required for implementation.The disadvantage of this approach is directly tied to its simplicity.Extension pricing does not respond to the competitive and market conditions of each national market and therefore does not maximize the company's profits in each national market.
(2)POLYCENTRIC:--
The second pricing policy can be termed polycentric.This policy permits subsidiary or affiliate managers to establish whatever price they feel is most desirable in their circumstances.Under such an approach there is no control or fixed requirement that prices be coordinated from one country to the next.The only constrain on this approach is in setting transfer prices within the corporate system.The strategies are not applied because the local managers are free to price in the way they feel is most desirable and they may not be fully informed about company experience when they make their decision.
(3)INVENTION:--
The third approach to international pricing can be termed invention.Using this approach a company neither fixes a single price worldwide nor remains aloof from subsidiary pricing decisions but instead strikes an intermediate position.A company pursuing this approach works on the assumption that there are unique local market factors that should be recognized in arriving at a pricing decision.These factors include local costs,income levels,competition and the local marketing strategy.

Post a Comment

PROFESSIONAL BLOGGER ACCOUNT OPENING FREE