There are two conditions necessary: •National markets are kept separate to prevent arbitrage. Capitalisation of price differentials by purchasing product in countries where prices are lower & reselling where prices are higher. •Different price elasticities of demand in different countries. This is greater in countries with low income levels & highly competitive conditions.
Strategic PricingDifferent types of strategic pricing include:•Predatory Pricing. Here price is used as a competitive weapon to drive weaker competition out of a national market. Firms then raise prices to enjoy high profits. Firms normally have profitable position in another national market. •Multipoint Pricing. This is where two or more international firms compete against each other in two or more national markets. A firm's pricing strategy in one market may impact a rival in another market e.g. Kodak & Fuji. •Experience Curve Pricing. This is where firms price low worldwide in order to build market share. Incurred losses are made up as the firm moves down the experience curve, making substantial profits. This allows cost advantage over its less aggressive competitors.
Regulatory Influences of PricesThere are a number of regulatory influences on prices, such as: •Antidumping Regulations. This is selling a product for a price that is less than the cost of producing it. Antidumping rules are vague, but place a floor under export prices & limit a firm's ability to pursue strategic pricing. Article 6 of GATT allows action against an importer if the product is sold at 'less than fair value' & causes 'material injury to a domestic industry'. •Competition Policy. There are regulations designed to promote competition & restrict monopoly practices.
New Product Development The rate of new product development is greater in countries where there is more money spent on R&D, the underlying demand is strong, consumers are affluent & competition is intense. Integrating R&D, production & marketing ensures that project development is driven by customer needs, new products are designed for ease of manufacture, development costs are kept in check & the time to market is minimised. There is a high failure rate ratio in new product development, as between 33% & 60% of new products fail to earn adequate profits. Reasons for failure include: limited product demand, failure to adequately commercialise the product & an inability to manufacture the product cost-effectively.
Cross-Functional Product Development Teams The objective of the Cross-Functional Product Development Team is to take a product development project from the initial concept development to market introduction. Effective teams must: •Have a 'Heavyweight' project manager. •Have one member from each key function. •Be physically co-located to facilitate communication.