An important aspect of a company's pricing analysis involves determining market objectives. For example, many firms view the foreign market as a secondary market and consequently have lower expectations regarding market share and sales volume. Pricing decisions are naturally affected by this view. Firms also may have to tailor their marketing and pricing objectives for particular foreign markets. For example, marketing objectives for sales to a developing nation where per capita income may be one tenth of per capita income in the United States are necessarily different from the objectives for Europe or Japan.
Many new exporters calculate their export price by the cost-plus method alone.
In the cost-plus method of calculation, the exporter starts with the domestic manufacturing cost and adds administration, research and development, overhead, freight forwarding, distributor margins, customs charges, and profit. The net effect of this pricing approach may be that the export price escalates into an uncompetitive range. For a sample calculation see table 10-1. The table shows clearly that if an export product has the same ex-factory price as the domestic product, its final consumer price is considerably higher. A more competitive method of pricing for market entry is what is termed marginal cost pricing.