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Environmental Factors Affecting Global Pricing Decisions

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1.0 Introduction
This report aims to critically review the main environmental factors affecting global pricing decisions. An analysis of Foreign Exchange Rates, Inflation Rates, Price Controls and Government Regulations has been carried out to demonstrate the external variables which international management must consider whilst taking strategic pricing decisions. It was necessary to make reference to Market Factors such as income levels and tariffs which impact exporting activities of international business organisations. Pricing Strategies implemented by international management to avoid global pricing issues such as Transfer Pricing have been presented. Examples have been used throughout to support analysis.

2.0 Pricing Definition
Kistler (1984) offers a traditional approach to Global Pricing and defines it as, “Taking the domestic product price, adding insurance and freight, putting in a hefty cushion for contingencies and slapping on a profit mark up to the exporter.” However, some would deem this definition irresponsible as it fails to consider environmental and market factors which are of particular importance to international management. Hollensen (2012) recognises that even though cost structures are vitally important, they should not be considered as the sole detriments when setting prices. (See Fig. 1)

3.0 Why is Global Pricing Important?
“Even when the international marketer produces the right product, promotes it correctly and initiates the proper channel

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