Implementing International Pricing Strategies

Many suppliers charge different prices in different countries. Today, this situation often leads to parallel imports and gray markets. Nevertheless, it is not necessary that products really be transported from one country to another. Based on an increasing process of concentration by mergers, acquisitions, and purchasing co-operations, purchasing managers compare international prices and payment terms. They ask their suppliers for the reasons of the international price differences they found and achieve – sometimes backdated – better prices and discounts. If necessary, they selectively purchase some products in a low price country to place particular emphasis on their demands; they change suppliers or at least - they threaten to do so. Customers can influence the form of the international pricing scheme by two principal dimensions. One of them is the international degree of co-operation between purchasing entities. The other is the relationship with the supplier: Purchasing managers can follow a strategy of squeezing or a strategy of co-operation. These dimension have a major influence on the width and the level of an international price corridor. As tools to determine this corridor, customers can use international price comparisons, purchasing pools, and international value chain optimization. However, each of these tools has its particular challenges. Customers have to overcome several hurdles to use the mentioned tools successfully. Data which we gathered by interviewing 127 purchasing managers gives hints on how to master these challenges. With regard to this concept, different strategic options exist for the supplier. On the one hand, he can make it more difficult for the customers to overcome the challenges of international price comparisons, purchasing pools, and value chain optimization. On the other hand, the supplier can follow a strategy of expediting the way to the advanced steps of international purchasing by helping the customers to grow internationally. Designing international product and service systems plays an important role in this strategy. However, suppliers often face severe problems in the fields of “international organiza-tion”, “international decision making”, and “international information management” when they try to implement their international pricing strategies. It depends on the customers’ degree of international co-ordination and on the importance of different elements of the product and service system in which way the selected strategy should be implemented. Based on empirical data from a second survey, in which 172 marketing managers have been interviewed, we give proposals on how companies can master these core challenges to be successful in international pricing.