by Pricing and costing are two different things and an exporter should not confuse between the two. Price is what an exporter offer to a customer on particular products while cost is what an exporter pay for manufacturing the same product.
Export pricing is the most important factor in for promoting export and facing international trade competition. It is important for the exporter to keep the prices down keeping in mind all export benefits and expenses. However, there is no fixed formula for successful export pricing and is differ from exporter to exporter depending upon whether the exporter is a merchant exporter or a manufacturer exporter or exporting through a canalising agency.
Export Pricing can be determined by the following factors:
- Prompt deliveries and continuity in supply.
- After-sales service in products like machine tools, consumer durables.
- Product differentiation and brand image.
- Frequency of purchase.
- Range of products offered.
- Specialty value goods and gift items.
- Credit offered.
- Preference or prejudice for products originating from a particular source.
- Aggressive marketing and sales promotion.
- Presumed relationship between quality and price.
- Prompt acceptance and settlement of claims.
- Unique value goods and gift items.
Export Costing
Export Costing is basically Cost Accountant’s job. It consists of fixed cost and variable cost comprising various elements. It is advisable to prepare an export costing sheet for every export product.
As regards quoting the prices to the overseas buyer, the same are quoted in the following internationally accepted terms which are commonly known as Incoterm.
The following players are part of distribution channels:
A producer: Can be any company working with a primary product, such as agricultural products, to a manufacturer making products from (primary) materials, for instance a garment manufacturer using organic cotton, yarn, buttons and other accessories.
A specialised exporter: May export the goods, if the producer does not do it by his/herself. The exporter takes care of logistical arrangements and ships the products to his/her counterpart in the target market, the importer.
The importer: Receives and puts the products on the target market.
Agents or Distributors: Can help put the product on the target market, if not done without intermediators. In fact, the importer may also be a retailer, in which case the importer is the final step before the end consumer. More commonly, however, the importer/distributor transfers the product to a retailer, for instance in the case of final products where no further processing is needed.
The Retailer: Sells products to end consumers.
Wholesalers: May be an extra stop between retailer and importer, as wholesalers supply several businesses.
The processing industry: Is a player if the product is used in its production, such as ingredients used in bakery products (chocolate in energy bars for instance), bulk foodstuff repacked in consumer packaging (seeds and nuts for example) or fabrics used for textile products made in the target market.
Packaging:
Language
A package does promotion functions too. The literature printed on the package material must be in local language. Then only a majority of the users can understand the product information the package label bears. Thus, language is one of the important considerations to be borne in mind while designing export packaging.
Buyer’s specifications
Sometimes, buyers specify their requirements with regard to packaging. They may like to purchase the product in a specific form which may be convenient to them. When the package is in the form of a tube rather than a jar, it would be easy for the buyers to handle the package of the product till it is used up.
Regulations in the foreign countries
Packaging is subject to government regulations in foreign countries. Packaging standards are specified for certain commodities. If packaging does not comply with foreign regulations, it may attract punitive action.
Length of the distribution channel
Channel distribution is the pathway of reaching goods to the ultimate consumers. A lengthy distribution channel involves too many middlemen taking a longer time between production and final consumption. Then the package must endure the rigors of travel and handling in the long distribution channel. Stronger packaging is preferred in such cases.
Depending upon the time factor involved in the distribution channel, packaging must be designed. A package should be capable of withstanding the stresses of handling in transport and storage.
Disposability of packages
Generally, consumers in developed countries prefer disposable containers. If the package is disposable immediately after use, then due care must be given to the package material. The package material should not cause environmental hazards. It would be better if the material could be recycled.
Environmental factors
Environmental factors like weather and climatic conditions greatly influence the package design. A tropical country requires different packaging than for a country with cold climate.
Size of package
The size of the package is one of the important considerations in designing packages. It depends upon the buying characteristics of consumers. If buyers purchase regularly at short intervals, then the size of the package can be small. On the other hand, buyers with freezers at home may prefer big packages.
