International

Business
INTERNATIONAL PRODUCT LIFE CYCLE
&
PRICING DECISIONS

Group members
Shahnoor Khan 20
Tabassum Nagothanekar 34
Talhah Patel 40
Abdul Shaikh 46
Prashant Shejwal 53
What is PLC

The life cycle begins when a developed country,

having a new product to satisfy consumer needs,
wants to exploit its technological breakthrough by
selling abroad.
Other advanced nations soon start up their own
production facilities, and before long LDCs do the
same.
The International Product Life Cycle

Introduction Early Late Decline

and Growth Maturity: Maturity
Stages:
MNC Manufactures MNC Moves Developing Developing Country
Product in Developed Production to Country Markets Remain Viable
Countries; Exports to Developing Competitor Target Markets for
Developing Countries Country; Begins Exports Product MNC; MNC Home
Importing to To MNC Home Country Market Is
Home Country Country; Diminishing
Competes
with MNC
Imports

Sales

Time
IPLC Curve
Stage 0—Local Innovation Stage
Stage 1—Overseas Innovation
Stage 2—Maturity
Stage 3—Worldwide Imitation
Stage 4—Reversal
IPLC Stages and Characteristics
STAGES /IMPORT TARGET COMPETITORS PRODUCTION
EXPORT MARKET COST

0 LOCAL INNOVATION NONE U.S.A FEW LOCAL INITIALLY

FIRMS HIGH
1 OVERSEAS INCREASING U.S.A & FEW LOCAL DECLINE DUE
INNOVATION EXPORT ADVANCED FIRMS TO ECONOMIES
NATION OF SCALE

2 MATURITY STABLE EXPORT ADVANCED ADVANCED STABLE

NATION AND NATION
LDCS

3 WORLD WIDE DECLINING LDCS ADVANCED INCREASE DUE

IMITATION EXPORT NATION TO LOWER
ECONOMIES OF
SCALE

4 REVERSAL INCREASING U.S.A ADVANCED INCREASE DUE

IMPORT NATION and LDCs TO COMPRATIVE
DISADVANTAGE
 International Pricing Strategy

Pricing is especially important in international

marketing strategy decisions, due to its effect on
product positioning, market segmentation, demand
management, and market share dynamics.
 Pricing Considerations

Nature of the product

Production plant locations
Distribution system used
Economic climate
Currency fluctuations and exchange rates
 Pricing Decisions

Keegan’s four steps to global

pricing strategy
General pricing strategies
Problems with pricing for

multinational markets
Problems with foreign currency and

economic conditions
Grey markets
Global Pricing Strategies - Four Steps

1 Determine the price elasticity of demand

(Inflexible demand will allow for a higher price)
2 Estimate fixed and variable manufacturing
costs
(product adaptation costs must be calculated)
3 Identify all costs associated with the
marketing programme
4 Select the price that offers the highest
contribution margin
 Pricing Strategies

Market skimming
Market penetration

Market holding

Cost-plus pricing
 Market Skimming - Sony Betamax
Harvey Schein, President - $1,295 at launch!
 Market Penetration –
Daewoo ‘blitz’ the market
 Market Holding

Maintain their share of the market

Currency fluctuations often trigger

price adjustments
Price adjustments can mean lower,

or no profit margin
strong home currency could mean

manufacturing/licensing abroad
 Cost-plus

Adds-up all cost of production (and

shipping)
Easy to make quotes

Ignores demand and competitive

pricing in target market

Consumer and competitor value

issues must always considered in a

rational pricing strategy
 Problems of multinational pricing

Co-ordination across various

markets?
Do we maintain a ‘uniform’ pricing

policy across markets?

How to transfer price between and

across markets? E.g. Sandvik

(Sweden)
Parallel imports or ‘Grey’ markets?
THANK
YOU