Basic data required for Export pricing Decisions

An important prerequisite or scientific export pricing decisions is regular availability of authentic basic data relating to export product, foreign market and other relevant marketing information. The details of information requirements vary from product to product, market to market and firm to firm.

In general the following information is usually necessary for facilitating export pricing decision:
Product Information>
Production cost details:

1. Cost of production
(a) Prime cost
(b) Factory overheads
(c) General administration overheads
2 . Cost of distribution
(a) Cost of packing
(b) Cost of selling ‘
(c) Cost of transportation including insurance
(d) Distribution cost at the importing end
(1) Cost of marketing support – advertising, sales promotion and technical literature:
These data may have to be obtained for India for competing countries and for consuming countries.

(2)Nature of the product:

(a) Whether a consumer or an industrial product
(b) If consumers product whether it is a necessity , comfort or luxury
(c) Whether is a seasonal product
(d) Range of profits available for consumption
(e) Can demand be pushed up by promotion
(f) Elasticity of supply of the product

(3) Nature of the demand: Quantities that can be sold over a range of prices at some specific point of time.

(a) Elasticity of demand – elastic, inelastic, or unitary elastic
(b) Strength of the demand weak or strong
(c) Importance given to the price quality mix
(4) International levies taxes etc.
(5) Export incentives
(6) Floor price and ceiling price regulations, if any
(7) Specifications, if any
(8) Product design
(9) Time required to effect deliveries
(10) For turnkey jobs – local labor rates, labor regulations and availability of construction equipment
(11) Product guarantees
(12) Installation and after sales services requirements and
(13) Percentage incidence of rejects

Market Information:

(a) Market Structure – high competition, little competition or low competition.
(b) Peculiarities of the market
Developed and developing countries. Particular segments in developed countries may be interested in low price goods.
(c) Ruling price in the foreign market including process of substitutes
(d) Terms of payment offered by the competitors and demanded by importers
(e) Import duties border fiscal charges and quota restrictions
(f) Major sources if supply in the importing country—local and foreign
(g) Trade preferences and/or trade agreements, if any
(h) Extent of GSP concessions, if any
(i) Production and import statistics in the importing country
(j) Consumption pattern – seasonal variations, if any
(k) Brand image, brand loyalty and consumer preference
(l) The nature of market segmentation, if any
(m) Publicity – need, media in cost
(n) Channels of distribution and the margins allowed to various intermediaries
(o) Shipping freight, insurance, Packing, banking transportation and other charges incidental to export and
(p) Documentation and involving requirements, health and sanitary regulation and other government regulations.

Other information:

(a) Whether goods have to be sold by tender
(b) Frequency of available shipping services
(c) Warehousing facilities and costs
(d) Existence of bilateral agreements , if any
(e) Political embargoes on trade and
(f) Company’s philosophy or policy

Information Required at the Micro Level:

Some of the strategic points of information necessary for pricing decisions at the micro level cover the following aspects:

(a) Production capacity of the firm installed as well as utilized.
(b) Proportion of total production supplied to the home market
(c) Home demand and supply position
(d) Domestic price structure,
(e) Proportion at present exported
(f) Inter se competition among domestic firms in the export field, and
(g) Additional Export possibilities

As regards the supplies for additional exports, the essential information required is:

(a) Whether it would involve curtailment of supplies for the domestic market, or
(b) It would lead to the utilization of idle capacity ,or
(c) It would require commissioning of new capacity

Information needed for making a Quotation:

(a) Currency in which quotation is to be made.
(b) Discounts, if any viz., trade discount, quantity discount, cash discount.
(c) Whether it is to be an f.o.b quotation? Whatever may be the type of quotation, it is good policy to give a complete breakdown of costs at each stage.
(d) Terms of payment, D/P or D/A or against confirmed irrevocable letter of credit.

Other term of sale:

1. Who is to pay for export packing?
2. If the sale is through an intermediary, is commission included in price?
3. Shipment required in one or more lots?
4. Freight paid or to pay?
5. Who is to arrange for shipping space and insurance cover?
6. The date of delivery and penalties, if any for non-fulfillment.