Question

When pricing a product for export, what factors are to be considered when setting the price? Should it be higher, lower or the same. Finally, when quoting a price, what needs to be considered?

Answer 1

Cost- Cost is one of the most important factors in determining the export price of goods. It's a large part of the price. It is necessary to take into account the direct costs involved in export pricing such as raw materials. Indirect costs such as overhead distribution should also be taken into consideration.

Demand- The price of goods largely depends on the form of the product's demand curve. If there is a lot of demand for the goods, it will lead to a maximization of income, even if there is no cost increase and a cost increase will justify a price increase. Nevertheless, due to the reaction of market conditions, this may not be true in all situations.

Competition- Foreign market competition is much more intense than domestic market competition, as exporters have to compete with foreign manufacturers who manufacture under different conditions and climate, as well as the regulations of their region. Competition from developed countries would be tough due to certain advantages; and developing countries might have to set the price to survive on the foreign market

Attitude towards Countries’ Products- Buyers usually establish bias on the international market against goods imported from developing countries. Exporters should recognize this aspect when setting prices, as goods from developed countries command higher prices than products from developing countries.

Quality and Price Relationship- Consumers tend to rely on price, especially in the case of prestige goods, as an indicator of product quality. The general assumption is that all cases result in higher revenue when the price is low, which may not be true. It should also be noted that when opposed to those from developing countries, consumers in developed countries may want to pay higher price for the product.

The price at which a product or service is offered, as in the domestic market, directly affects the profits of your business. Market research undertaken by your company should include an evaluation of all factors that may influence the price range of your product or service. If the price of your business is too high, it will not sell the product or service. If the price is too low, export operations may not be profitable enough or may in fact result in a net loss. Price, market demand, and competition are typical components for proper pricing. When entering the foreign market, each part must be contrasted with the target of your business.