Many firms view the foreign market as a secondary market and consequently have lower expectations regarding market share and sales volume. This naturally affects pricing decisions. Marketing and pricing objectives may be general or tailored to particular foreign markets. For example, marketing objectives for sales to a developing nation where per capita income may be one tenth of that in the United States are necessarily different from the objectives for Europe or Japan. Costs The computation of the actual cost of producing a product and bringing it to market is the core element in determining if exporting is financially viable.
Many new exporters calculate their export price by the cost-plus method.
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 effect of this pricing approach may be that the export price escalates into an uncompetitive range. Table 4 gives a sample calculation. It clearly shows that if an export product has the same ex-factory price as the domestic product, its final consumer price is considerably higher once exporting costs are included. Marginal cost pricing is a more competitive method of pricing a product for market entry.