Introduction
The pricing strategy of a commodity is one of the crucial aspects of the marketing mix for an international organization. Pricing is the only marketing mix element that generates revenue for a company. An organization’s pricing model is fundamental to its expansion strategies in the international market (Theodosiou & Constantine, p.2). This essay examines factors that affect global pricing strategy of a product by a firm.
Factors affecting global pricing
With the example of iPad Air 2, different markets around the world have different prices for the model. The iPad Air (16 GB) model retails at $ 499 in the US market. However, price variations are noted in different markets. In Canada, the model goes for $ 510 while in Switzerland it goes for $578, and in China iPad Air 2 retails at $585 (Wade, p.1). These differences at the global level arise due to the following factors. The cost of the product is the first issue that affects prices because of the expenses incurred in the production, marketing, promotion and the distribution processes.
Global pricing is also affected by the location of the manufacturing facility. When a company exports to a foreign market, the ability to have price flexibility is low. Consequently, manufacturing for the international market results to the absorption of currency rate fluctuations leading to higher or different prices in different markets (Theodosiou & Constantine, p.2). Thirdly, the distribution system of a product is critical to pricing, for instance, when a company distributes through its overseas subsidiaries, it can control the price depending on the market forces of demand and supply. The other issue that affects pricing is the exchange rate regime (Theodosiou & Constantine, p.2). For instance, competitive exchange rate increases the cost of a product if the local currency loses ground against major currencies like the US dollar. Conversely, a strong local currency lowers the price of a product in market.
Works Cited
Theodosiou, Marios, and Constantine S. Katsikeas. "Factors influencing the degree of
international pricing strategy standardization of multinational corporations." Journal of International Marketing 9.3 (2001): 1-18.
Wade, Roger. iPad Prices in 39 Countries around the World: iPad Air 2, iPad Mini 3 and
more. Price of Travel, October 2014. Web. 22nd April 2016. Accessed from http://www.priceoftravel.com/2928/ipad-prices-in-35-countries-around-the-world-cheapest-to-most-expensive/
