Contents

• Introduction
• Standardization, Adaption and Contingency
• Factors influencing standardization of international pricing strategy
• The Middle Path
• Conclusion
• References

Description

International trade refers to exchange of products and services across different nations. When a product is manufactured in a country, pricing of the product is done taking into account various factors like price of raw materials, manufacturing costs, freight and handling costs, distributor and dealer costs etc. Most importantly pricing of the product or service is based on demography like the region the product is sold, GDP of the country and hence consumers’ buying power. Developing a pricing strategy is increasingly becoming difficult task for marketing managers (Industrial Marketing Management, 2005). It is common to find price differences for similar products in a store in an area which is predominantly habituated by lower socio economical class people and in an up market store. Pricing of the same product can also vary between states in a country where tax structure is different across states. If such a variation in price can be seen within a country it is logical that prices vary among nations depending on so many factors like the country’s economy, cost of living etc. The pricing strategy is more difficult in nations with emerging markets (Mary Anne Raymond, Tanner Jr., John F,& Kim Jonghoon, 2001). The question arises for a multinational corporation as to whether the prices should be standardized across home and the host nations or the prices need to be customized as per the economics of the host nations. Firms often are faced with the dilemma of whether to adapt to the host nation’s unique demands or standardization of the price(Lars Perner, 2009). Theodosiou et al. 2001 discuss the nature of international business and factors that determine price in the host nations of a multinational corporation and the need for standardization of prices across home and host nations in their award winning journal article ‘Factors Influencing the Degree of International Pricing Strategy Standardization of Multinational Corporations’. The authors first discuss in their article traditional schools of thought on international pricing like standardization school of thought that advocates the need for standardization of prices across borders, adaptation school of thought, which advocates the need for prices to be adapted to the host nations’ socio economic conditions and the middle path or contingency school of though that advocates a mix of both standardization and contingency. The authors then try to identify the factors that have major influence on international pricing strategy formulation. The article is mostly descriptive in nature and it requires future quantitative research to prove the hypotheses presented in the article.