Global Pricing Strategies
The same Gucci handbag may sell for $200 in Italy, $300 in the United States, and $400 in China. Why? Gucci must add the cost of transportation, tariffs, importer margin, wholesaler margin, and retailer margin to its factory price. Price escalation from these added costs and currency-fluctuation risk might require the price to be two to five times as high for the manufacturer to earn the same profit. In addition, prices reflect customers’ willingness to pay for the benefits provided by the company’s offering.
Companies have two basic choices for setting prices in different countries:
Set a uniform price everywhere. PepsiCo might want to charge $1 for Pepsi everywhere in the world, but then it would earn quite different ...
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