Himanshu Dhumal 10020241087 Gauri Chitragar

Demand Supply Product Life cycle Product Line pricing Pricing to Intermediaries Penetration to skimming strategies

1)

Company Goals :
Objectives vary from country to country Joint Venture Constraint Changing economic situation

2)

Costs :
Not easy to determine relevant costs Full cost or variable cost ? Marketing Costs

3)

Inflation :
Costs go up faster than prices Strong price controls Strict controls over foreign exchange Different cost elements have different rate of inflation from the average Elapse of time between production and sale sale and payment Pricing in inflation will never be easy, especially with price controls. However certain guidelines can help : Good cost accounting, especially in forecasting of costs for pricing Source material or components from low-cost suppliers in other countries Long term contracts may need escalator clauses Short credit terms Change in product line/ingredients which are less subject to inflation or price controls.

4)

Government :
Tarrifs, taxes and competition policy Direct price control Price controls often limited to selected product groups

Actions taken by company :

Additional services Unbundling Matched-sales technique Change in product line Special orders

5)

Currency Inconvertibility :
Integration of multinational operations Transfer payments of goods and equipment Payment of dividends and capital repatriation

Reason :

Desire to conserve scarce foreign exchange Expects companies to be self-sufficient Expectation to deepen chinas base and capabilities

Pepsi in China : Dealing with Currency Volatility and Inconvertibility

Pepsi Subsidiary A in State A Pepsi Subsidiary B in State B

Capital contribution to Subsidiary B in the form of dividends

Friendly Foreign Bank Lend foreign currency (FC) to Pepsi

Pepsi
Deposit FC in Chinese bank as collateral, borrow local currency(LC)

Local Chinese Bank Receive FC collateral Lend LC

Repay LC loan
Receive repayment of FC loan with interest Repay FC loan with returned FC collateral Repay LC loan and release FC collateral

Pepsi in China : Dealing with Currency Volatility and Inconvertibility

Sourcing goods from local companies, paid for partly in LC; Export for use by Pepsi companies (e.g., mushrooms for Pizza Hut) Pepsi uses Dividends as cash source for : Investing in Chinese joint ventures( e.g., toy manufacturer and a spice company)

Comparative Advantage Technological Advantage Importance of Price as an attribute

Need to Cut Costs

Moving manufacturing to overseas location Redesign the product to cut component and direct labor costs Technology, Experience Curve

Sunbeam Model Types Old Model Redesign ed Model B&D (Singapor e)

Unit Cost 9.50 6.66 5.98

Material s 4.32 4.10 3.40

Labo r 1.06 .48 .53

Manufacturin g Overhead 4.12 2.08 1.25

No. of Parts 73 68 74

No. of Screws Needed 13 13 19

Global Model

5.33

3.40

.35

1.58

52

Redesign of the product to reduce the number of parts and assembly, thus reducing direct cost of labor Reduction in cost of materials Though Overhead is higher in B&D, manufacturing using capital intensive nature.

Countertrade is a form of financing international trade wherein price-setting and financing are tied together in one transaction It is essentially exchange of goods with some flexibility A typical transaction might be as follows : Polish apple juice factory may need equipment but unable to buy from the US because no bank ready to lend money. Austrian bank guarantees debt with the condition to buy large portion of apple juice for resale in western markets.

Forms of Countertrade :

Barter Counterpurchase Offset Buyback They lack foreign exchange They want multinational partners to sell their goods overseas Hope of successful technology transfer, thus transforming them into reliable suppliers of highquality raw materials and components

Reasons for Countertrade :