Channelling and Pricing Strategy

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Introduction

Globalisation has facilitated trade among countries. It has made the world a global village where goods made in one country can get access to another, off-course after meeting logistics set by the exporting and importing countries. Selling in international market has advantages to the producers of a certain product with the most notable benefit as large access to market. Japan and United States have good trade relation.

Goods from Japan can be sold in United States of America without major trade barriers other than duties and import quotas. When venturing in the market, the marketing team, product and development team and the general management must decide on appropriate channelling and pricing strategy. These strategies will assist the products enter Unites States market and remain competitive thereafter.

There are different rationales that are used when determining the channelling and pricing strategies to use (Grant, 2008). This paper looks into channelling and pricing strategies to be adopted in domestic market and United States of America market on goods made in Japan. It will also justify the choice of United States as a secondary market.

Justification for choice of United States as the second market area

United States has the world largest economy. The country has embarked on massive international trade and places limited trade barriers and restrictions to international trade. In the efforts of ensuring that there is fair competition among all players, both local and international, the country has removed/given subsidies to local producers.

It removes subsidies when local products are likely to be produced at a lower price than imported goods. On the other hand, it may use taxes on imported goods to create equality in imports and locally produced goods. Secondly, the country gives subsidies when local products are produced at a higher price than imports. This offers a growth to free trade.

United States is a world market destination; this will assist the company is targeting customers who are not only Americans residents but from other countries.

To facilitate such a trade, United states have a re-import re-export mechanisms which means that if imported goods are to be exported from United States at their raw state, then taxes which were paid for the goods is refundable. The only thing that is not refunded is intention to import declaration fee (IDF) and handling charges. This move will assist in targeting traders from other parts of the globe.

Internal market is another factor that has made the choice of United States. The population of United States is increasing by day. According to United States bureau of census, the population of the county as per 2009 census stood at 310,600,915. This number is increasing with at least one birth every 7 seconds and in every 37 seconds on average the country record’s an immigrant.

The net effect is an increase in one person for every 12 seconds. The population on the other hand is composed of people from different parts of the world. This move will help in reducing negative perception of goods made from other countries.

This is facilitated further by good relation that exists between the United States and Japan. The culture of the people facilitates trade with other countries; the most important thing the people look for is quality and price of the product; they are less concerned about the country of origin (US. POPClock Projection, 2010).

United States has a well developed transport and communications network. This will facilitate transport of goods from Japan to United States where there are options of using water transport of using air. Japanese national carrier fly’s to United States at-least three times in a day. This will facilitate trade among them.

Getting a licence for an international business is easy in united states; the country also has a special taxation policy aimed at encouraging foreign direct investment. Japan and United States have a double taxation policy which ensures that income taxed in united States will be an allowable amount in Japan. This will reduce chances of double taxation of the company’s income (Alexander, 2010).

Channelling strategies

Channelling refers to the method used to ensure that good move from the manufacturer to the market where the consumers they can get them. The way goods are distributed and places where they are found are elements of channelling.

The methods adopted for channelling determines the effectiveness of a certain venture. In international trade, getting into the market involves massive campaigns and persuasion to customers to accept a company’s products.

In the case of United States, the channel strategy that will be adopted is a combination of four strategies; they are competition strategy, value strategy, direct strategy and third party strategy.

Direct strategy

The company will establish a permanent business in the country which will be receiving goods from Japan and distributing then in the country. They will be whole-selling and also retailing. These establishments will be stationed at different strategic points. They will not be manufacturing but their task will be distributing.

Third party strategy

Third parties like super markets will be target market for whole sale goods. They will either be encouraged to buy from the company’s branch in United States or import directly from Japan. This will ensure that a larger number of customers will get access to the products.

Competition strategy

After venturing in the market, an S.W.O.T. analysis will be conducted for the company to ensure that it has understood the strengths, weaknesses, opportunities and threats that it has. Good produced by competitors will be analysed and a gap that they don’t fulfil established.

This is the gap that the company with its products will aim at filling. Continuous product improvement will be made to ensure that the company is ahead of its competitors in product differentiation and quality.

Value strategy

To remain competitive in the highly competitive United States market, the company will ensure a continued product improvement. Internal processes will be improved to ensure that goods of high quality are produced from the company. This will make the company competitive, increase customer satisfaction and the end results will be loyal customers.

To help in entering the market and increasing sales, there will be a number of marketing campaigns in the country. Advertising and marketing costs will be borne by the company. Research and development will be the order of the day to ensure that the needs of customers are recognised and addressed appropriately (Kotler & Kevin, 2007).

Pricing strategy

The price of a commodity is a product of production cost and profit margin. For a company to break even, total cost of production must equal total revenue. A pricing strategy approaches prices in two perspective; company’s perspective and consumer perspective.

The company must get some profit from the sale and on the other hand the customer should not be injured by the price. When the price is too low, the company losses and when it’s too high the consumer suffers. There should be a middle ground.

To determine the price of good in United States, the company will adopt a minimum price and segmentation price strategies.

Minimum price strategy

This is whereby the minimum cost that can be sold is determined. This equals to the total cost incurred in delivering the product to the final consumer. In this case, the company will incur manufacturing cost, transport costs, customs costs and operating expenses.

These costs will be distributed among individual products. Decision on how advertising and marketing costs will be shared will be analysed to ensure that both domestic and internationally sold goods get a similar portion.

After determining the cost for both local and international market, a profit margin is then added to the cost to get the selling price. The amount of profit will be determined among others by the price that other products are sold. The margin should not be too high that the price of the product is higher than that of competitors (Kotler & Kevin, 2006).

Market segmentation strategy

For pricing purposes, the market will be divided into three segments; low earning segment, middle class segment and high class segment. After getting the segments, then strategies to price in the segments are then devised. This approach utilizes characteristic of these groups in regards to price.

Low class segment

These are people who are less fortunate in the society. To sell to them, the company must aim at selling their products lower than those of the competitions. This class is more sensitive to price changes. To sell low, products should be packed in the lowest quantities possible.

They should also be available at low class estates. Another method that can be used to sell at lower cost is passing the packaging cost to the retailer. Here the company will produce goods in bulks and supply them to the retailer who will subdivide them to his customers according to various quantities they require.

Middle class

This class are well informed about the costs of competitor’s goods. They are less likely to buy goods which they consider highly priced, alternatively, they will down upon goods whose prices are very low compared to the prevailing market price. The approach to this class is to ensure that the price changed is more or less the same with the price charged by competitors.

High class

This class of people are more concerned with quality and product differentiation. They have a perception that goods that are retailing at high prices are of good quality. Prices here can be set slightly high to benefit from this believe, however the company should account for the high price in terms of quality that they offer.

Distribution of goods should be to places that these groups are likely to be found like shopping malls and designer shops. Packaging should be attractive since this class is attracted by the first impression (Newsom, VanSlyke & Kruckeberg, 2004).

Conclusion

With globalisation, selling of goods in the international market is facilitated. United States is the world largest company whose government has put measures to facilitate international trade. Channelling of products both in local and international market is of great importance to a company since it determines the success of such products. These strategies include competition strategy, value strategy, direct strategy and third party strategy.

The price that a product is sold determined the market of the products; market segmentation assists in determining the price to charge for a particular item, it should however cover manufacturing and operational cost and give the company some profit.

References

Alexander, R. (2010). Compost Sales Tips To Meet Current Market Conditions. BioCycle, 51(6), 21. Retrieved from MasterFILE Premier database.

Grant, J. (2008). The Green Marketing Manifesto, 1e. New York: John Wiley & Sons, Inc.ISBN: 9780470723241

Kotler, P. And Kevin K.(2007). A Framework for Marketing Management, 3e. New Jersey: Prentice Hall, Inc. A Pearson Education Company. ISBN: 9780131452589

Kotler, P. and Kevin K. (2006). Marketing Management, 12e. New Jersey: Prentice-Hall, Inc. A Pearson Education Company. ISBN: 0131457578

Newsom,D. , VanSlyke, J., Kruckeberg, D. (2004). This is PR: The Realities of Public Relations. Thomson Learning. ISBN: 0534562639

US. POPClock Projection (OCTOBER 2010). Web.

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