Pricing Strategies in International Markets

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Introduction

The theory of marketing establishes pricing as one of the major contributors of the marketing mix. Pricing attracts potential buyers and inspire them to purchase goods. Fast food companies distribute and advertise their products using the marketing strategy; they also apply the strategy to retain a desirable business relationship with their clients. Pricing is important in marketing mix.

It is however one of the hard decisions experienced by fast food industries because of high competition rates (Myers 1997,p.20), local trading blocks, counter market requirements (Cavusgil & Zou 1994,p.18) and harsh exchange rates (Knetter 1994,p.14).

Fast food customers have different opinions about the products produced by different fast food restaurants depending on their pricing. For that reason, setting product price to satisfy different customers is a hard task. The price of a product may have an effect on consumer’s feelings about the quality of the product.

Fast food companies have to come up with pricing strategies for their products in order to fit into global markets.

Fast food industries are faced with a hard task of setting prices for global markets. Different countries have different decisions concerning products, their pricing and distribution in global markets and local markets (Jain 1998, p.71).

In addition, other factors like trade penetration, product demand and competition, control over competition entry, market and environmental factors, fast cash recovery, political, social-cultural and economic factors should be considered when making pricing decisions for global markets.

Pricing strategies

Price is the value charged for goods and services in monetary terms. The price of a product takes into account the cost of producing the item, the cost involved in providing the item to the customer and the amount expected in profit to avoid being eliminated from the business.

In order for the fast food companies to stay in international markets, they should try to maintain best quality at lowest price. Price can be direct indication of quality of goods and services. Fast food companies should therefore consider different factors before pricing their products when venturing into global markets.

Reasons for selling globally

Companies opt to sell globally following the pull factors attracting them to foreign markets, and the push factors that make local markets unattractive.

Some of factors that have led fast food companies to go international include: production of goods for international export only, congestion of local market thus goes globally to enjoy large economies of scale, the type of products that call for companies to operate globally and saturation of local markets.

Fast food companies should consider pricing as a measure of readiness to face competition not only from local markets, but also from global markets. Being globally competitive is important for the success of fast food companies’ exports. It also strengthens the domestic companies to counter foreign imports. Success in exports is important to a nation’s economy, not only at macroeconomic level, but also at micro economic level.

Fast food companies that are involved in global markets have an additional advantage to those at domestic market levels. These advantages includes: high levels of sales and opportunities, reduced production cost due to large sales volume, high profits due to low production cost , high competitive power increases the companies status at global market levels and taking advantage over large economies of scale.

Fluctuations in prices of fast foods help the fast food companies to set prices both domestically and globally. Discovery of new markets for their products with low local prices assists these companies in setting the prices of these products internationally.

This helps in extending the life cycle of the product in the market. Fast food companies that operate internationally have the advantage of finding untapped markets for their products; therefore, they have a choice of fixing prices for their products.

Pitfalls of international markets

Knowing the pitfalls associated with international markets is a strategy that is applied by fast food companies when setting the prices for their products. Some of these pitfalls include: a lot of time is required by the management in decision making process and neglect of domestic industries as a result of a lot of devotion to international companies by the key staff.

Additional industry facilities maybe required and advertising and sales promotion might be needed to translate into overseas languages.

The products might require more modification to cater for global market requirements and the companies may be required to offer credit facilities to curb competition and domestic custom transactions, which consumes lot of time. Considering these pitfalls is an important strategy that fast food companies should use when setting the prices for their products globally.

Global markets vs. domestic markets

Before making decision about setting prices for their products in global markets, fast food companies have a task of determining the factors that influence the environment in which the international market takes place. They should take precautions like making comparison between the natures of local market with that of international market.

Basically, there are added complications associated with making sales across international borders. These challenges may be associated with environmental, economical, legal and cultural factors of the new global market. The company may be required to follow some regulations, both political and monetary; this may affect the initial stages of global pricing and marketing (Diamantopoulos 1995,p.6).

Fast food companies that operate in international markets face more competition as compared to those operating locally. International markets are comprised of extra markets as well as new environments and parameters.

This means that companies have to take more marketing and administration functions. Therefore, when pricing for global markets, these companies should consider the change in attitudes of the targeted clients. It is imperative to carry out a survey to get accustomed with the consumers’ culture, religion and language (Douglass & Wind 1987, p.24).

For fast food companies to survive and to be established in international markets, they have to think ahead of their local markets. The duty associated with global markets is similar to that of local markets. In both cases, consumers are the driving powers towards marketing, and therefore, companies need consistency in production.

The pricing should match the market needs and their distribution channels. This can however be different in the domestic markets. Therefore, companies get used to the requirements of these domestic consumers. However, at global levels, economic, social, political and technological factors have been used to examine international market opportunities in pricing products.

Social factors

Different people from different cultures have diversity in tastes of products. When setting the prices for their products, fast food industries should put into consideration the population structure of the international market they are targeting. Most major international markets of western culture are comprised of an aging population. The demographic trends associated with countries like China and India indicate a high rise in global marketing.

Social factors will incorporate the emergence of young people as a new market segment. New global markets, like Africa, are growing and becoming a significant part of international trade. Fast food companies have to consider the local languages, education and religion, values and attitudes, material culture and aesthetics.

Fast food companies have the responsibility of cautiously studying the target group in the market, customer’s behaviors and their purchasing power.

According to Douglass and Wind (1987, p.27), the level of pricing is a significant criteria applied by customers in determining the competitiveness of a product. In addition, other criteria like the quality of goods and their performance are also vital to customers.

Therefore, when pricing, fast food companies must have information concerning perceptions, tastes, preferences and purchasing power of consumers in regard to the prices of the products (Theodosiou 2000, p.247).

Technological factors

In order to come up with good pricing strategies, fast food companies should examine the technological nature of the global market. Advancement in communication and infrastructure is a significant step in satisfying the needs of customers.

Most international companies depend on already established local infrastructural networks for distribution of goods to their customers. This is cost effective and may have a great impact on price and profits. Technological advancements are dynamic phenomena.

An ideal example is the Internet; it facilitates online transactions between companies’ suppliers, partners, customers and subsidiaries worldwide. However, it can also create an increase in competition, and therefore, technological advancements create both challenges and opportunities.

Pricing is affected by environmental factors; by considering the fundamentals of cost and self interests of the companies, fast food industries should take advantage when there is a fluctuation in environmental factors (Williamson 1975, p.34). Due to technological improvements, environmental factors such as monetary and competitive forces affect the global performance.

Economic factors

The economic stability of any international market is measured using its Gross Domestic Product (GDP). An increase in GDP means an increase in demand for products and services. Fast food companies should put into consideration the flow and distribution of profits within the country which they want to invest. In this way, they are capable of determining their pricing following the GDP of that country.

It is important for the companies to look not only the current economic development of a country, but also the future development. This can be determined by the overlook of country’s demographic trends, the trends on economic development and inflation, income distribution and age, the state of urban growth as well as activities that will influence markets and pricing.

The nature of the economy of a host nation affects the decisions concerning pricing. It affects the company’s costs; influences demand power of a particular product in the market and the will to purchase a product by the consumers (Whitelock & Pimblett, 1997, p.48).

Political factors

According to Theodosiou (2000, p.249), pricing is determined by rules and laws which facilitate modifications of goods, compliance with the hygienic standards, environmental policies, and production procedures that exists in global markets.

Policies set by the government of foreign countries are vital in lawmaking and establishment monetary frameworks. For fast food companies to carry out their businesses in global markets, they should abide by these rules and regulations when setting prices for their products.

Policy environment

For fast food companies to make decisions about pricing their products in foreign markets, they should put into consideration the environmental factors of such markets. These factors are put in place to determine whether such decisions are opportunities or constraints in that market. The social and cultural structure of such a market is the determining factor that is first put into consideration.

By accepting bilateral market agreements and other fiscal and policy interactions, companies should also abide by the country’s marketing standards and rules. Therefore, companies must obey the law; know government policies and the way they are created. This is vital for their decision making concerning the product pricing (Myers & Harvey 2001,p.4)

Conclusion

Pricing can be considered as one of the greatest challenges faced by fast food companies. Making decisions concerning the price in global marketing is a complicated task. It may comprise the cost of production, cost of distributing the goods and the outcome of goods in terms of profits in order to remain in the market. Appropriate pricing considers the costs, competition and demand for the product in the market.

In local markets fast food companies have a freedom to price their products without taking into account the pricing policies of their competitors. This also applies to international markets where the market is dominated by many competitors. Fast food companies are left with no choice but to follow the existing price, or sometimes lower their prices to sell more and win more customers.

Refrences

Cavusgil, T & Zou, S 1994, “Marketing Strategy-Performance Relationship: An Investigation of the Empirical Link in Export Market Ventures”. Journal of Marketing , vol. 58 no. 1, pp.1-21.

Diamantopoulos, A 1995, Making Pricing Decisions: a Study of Managerial Practice, London, Uk, Chapman and Hall.

Douglass, P & Wind, Y 1987, “The Myth of Globalization”. Columbia Journal of World Business , vol. 22 no. 1, pp.19-29.

Jain, S 1989, “Standardization of International Marketing Strategy: Some Research Hypotheses”. Journal of Marketing , vol. 53 no. 1, pp.70-79.

Knetter, M 1994, “Is Export Price Adjustment Asymmetric? Evaluating the Market Share and Marketing Bottleneck Hypothesis”. Journal of International Money and Finance , vol. 13 no. 1, pp.13-68.

Myers, M 1997, “The Pricing of Export Products: Why Aren’t Managers Satisfied with the Results”. Journal of World Business , vol. 32 no. 3, pp. 277-289.

Myers, M & Harvey, M 2001, “The Value of Pricing Control in Export Channels: A Governance Perspective”. Journal of International Marketing , vol. 9 no. 4, pp.1-29.

Theodosiou, M 2000, “Factors Influencing Degree of International Pricing Strategy : An Empirical Investigation”. Marketing in a Global Economy Proceeding , vol. 36 no. 3, pp. 246-530.

Whitelock, J & Pimblett, C 1997, “The Standardization Debate in International Marketing”. Journal of Global Marketing , vol. 10 no. 3, pp.45-66.

Williamson, O 1975, Markets and Hierarchies: Analysis and Anti-trust Implications, New York, The Free Press.

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