How to decide export price?

 

 

 

Factors affecting determination of Export price

The following factors affect the pricing decisions of the exporters:

(a) Cost of the Product: Cost is the most important determinant of the price of other direct goods. The cost of product constitutes:

Direct Costs, viz., cost of materials, labor cost and other direct expenditure

Indirect Costs, viz., expenditure such as manufacturing office/administrative costs, selling/distribution costs, etc.

(b) Competition: international market is highly competitive. Exporters face competition from three angles. In order to survive intense competition, an exporter has to charge a reasonable price. However, an exporter can charge higher prices and can face competition by innovating and improving the quality of his goods and services.

(c) Elasticity of Demand: The price, to a great extent, depends upon the elasticity of demand. In the markets, where demand for exporter's product is Inelastic, he may charge a higher price and can earn supernormal profit while in the markets where demand is elastic he may earn normal profit by charging a marginal price.

(d) Government Policies: Liberal and encouraging EXIM policy encourages exports. The EXIM policy of the economy is closely linked with the other policies of the governments such as fiscal policy, monetary policy, etc. If the overall export environment in terms of these policies is favourable then the exporter can certainly charge lower prices in the international market.

(e) Incentives Offered by the Government: The Governments of developing countries, including India, offer various incentives to their exporters. Various incentives such as tax exemption, Customs and excise duty exemption, trade agreements, etc., may provide greater financial benefits to the exporters. Exporters may transfer the benefit of such incentives to Consumers by charging lower prices.

(f) Frequency of Purchase: Products of daily requirements, which are bought very frequently such as Consumer non-durables and food articles, are generally priced low. On the other hand, consumers are willing to pay higher prices for durable goods such as electronic products and luxurious products, which are bought once in a while,

(g) Product Differentiation and Brand Image: The products marketed by Multinationals (MNCs) and Transnationals (TNCs) are widely accepted in the world market due to their brand equity and reputation. Such companies can charge higher prices for their products. While exporters competing with such companies should charge lower prices.

(h) Miscellaneous Factors: Besides these factors, other factors listed below affect the pricing decisions of exporters.

Marketing policies;

Inflation rate;

Objectives of the firm, etc.

 

 

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Comments


Tapan Ghosh: Respected Sir/Madam, Myself Tapan Ghosh an Exporter of jute bag,so please kindly if you help me some prospective importer of that country where jute bag is demand very much. Thanks and Regards Ghosh Garments. Tapan Ghosh(Director) Contact no.8697880457. India(Kolkata).

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