Export Pricing and Global Pricing

Posted: November 27th, 2013

Export Pricing and Global Pricing

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Export Pricing and Global Pricing

Question One

Export prices unlike domestic ones are quite dissimilar based on both tangible and intangible costs defined by demand and rivalry within a given sector. To acquire an in-depth comprehension on export pricing, we will analyze sugar prices within the US economy and review the procedure followed to attain the export price, to a nation like Mexico. A kilogram of sugar in the US is purchased averagely at 36.34 dollars in wholesale outlets. Note that the wholesale price excludes delivery charges and other carriage inwards noted in the acquisition process. The first charge to be included on export products is the fee of board charges comprising of four elements; conveyance costs to the carrier, for instance airport or harbor; custom clearance costs; supplementary charges noted in transport as defined by packing and labor requirements; and agent’s fees computed as a percentage of the three preceding charges.

The second charge is termed as cost and freight comprising also of four factors; freight costs charged by the aircraft or marine vessel; charges for documenting the products; bunker adjustment factor constituting to additive prices on fuel;  and transport emergency charges usually fixed as five percent of the three preceding factors. The third charge is referred to as cost, insurance and freight comprising of indemnity premiums for the mode of transport acquired. Last is the delivery duty charge comprising of three aspects; import tariffs normally fixed as twenty percent of the accumulated figures up to the third charges costs; clearance costs; and carriage outwards incurred by the conveyance company to the exporter’s delivery point. After the last phase, the amount acquired is the export price.

Present exchange rates of the US dollar against the Mexican Peso are 12.15, indicative of the dollar’s strength. As an exporter the exchange will be highly beneficial when the remuneration is acquired in dollars. The more the Mexican Peso weakens, the higher the gains acquired. The most prevalent risk attached to export trade occurs when the foreign currency acquires strength because the gains are proportionately reduced. Exchange fluctuations being irrepressible in nature aggravate the uncertainty in export practices. Managing such can therefore only be attained through speculative behavior where the exporter has to monitor the exchange rates and only authorize the freight clearance and transport in favorable circumstances.

Question Two

            Employing the preceding example, the given costs outline the export charges alone and therefore upon the safe conveyance of the product to the Mexican market a selling price would be required. This can be computed with the inclusion of the profit element within the export price. It is easier to calculate this factor as a percentage of the export price, for instance ten percent. Therefore, having acquired the selling price, other factors have to be assessed in a bid to analyze the suitability of the given price in the intended market. Competitors within the Mexican market would be other importers as well as the domestic producers. The global import price averages at $29.90 and this marks the price that a majority of the exporters would offer. Domestic producers on the other hand would offer the same quantity for $29.47 in a bid to create a competitive edge against the foreigners.

The best stratagem would be setting a price beneath other foreign players and the domestic manufacturers as this would act as a propelling factor for enhanced purchases by the consumers. Additionally, as more sales are achieved, the returns are also enhanced. This game factor denotes the counter-trade behavior existing between the trading rivals with a significant benefit being reaped by consumers in terms of low product charges. Additionally, product substitutes are created, diversifying the consumers’ product mixes thus bringing about the preference factor. For the market players, it enhances the competition thereby offering market safeguards from structural limitations like monopolies. Additionally, it enhances sales levels and profits. Drawbacks will be noted in the Mexican infant industries as they will be overcome by the enhanced competition. The gains however are more than the drawbacks thus valuable to the US as the exporter, as well as the Mexican consumers.

Name:

School:

Course:

Lecturer:

Date:

Export Pricing and Global Pricing

Question One

Export prices unlike domestic ones are quite dissimilar based on both tangible and intangible costs defined by demand and rivalry within a given sector. To acquire an in-depth comprehension on export pricing, we will analyze sugar prices within the US economy and review the procedure followed to attain the export price, to a nation like Mexico. A kilogram of sugar in the US is purchased averagely at 36.34 dollars in wholesale outlets. Note that the wholesale price excludes delivery charges and other carriage inwards noted in the acquisition process. The first charge to be included on export products is the fee of board charges comprising of four elements; conveyance costs to the carrier, for instance airport or harbor; custom clearance costs; supplementary charges noted in transport as defined by packing and labor requirements; and agent’s fees computed as a percentage of the three preceding charges.

The second charge is termed as cost and freight comprising also of four factors; freight costs charged by the aircraft or marine vessel; charges for documenting the products; bunker adjustment factor constituting to additive prices on fuel;  and transport emergency charges usually fixed as five percent of the three preceding factors. The third charge is referred to as cost, insurance and freight comprising of indemnity premiums for the mode of transport acquired. Last is the delivery duty charge comprising of three aspects; import tariffs normally fixed as twenty percent of the accumulated figures up to the third charges costs; clearance costs; and carriage outwards incurred by the conveyance company to the exporter’s delivery point. After the last phase, the amount acquired is the export price.

Present exchange rates of the US dollar against the Mexican Peso are 12.15, indicative of the dollar’s strength. As an exporter the exchange will be highly beneficial when the remuneration is acquired in dollars. The more the Mexican Peso weakens, the higher the gains acquired. The most prevalent risk attached to export trade occurs when the foreign currency acquires strength because the gains are proportionately reduced. Exchange fluctuations being irrepressible in nature aggravate the uncertainty in export practices. Managing such can therefore only be attained through speculative behavior where the exporter has to monitor the exchange rates and only authorize the freight clearance and transport in favorable circumstances.

Question Two

            Employing the preceding example, the given costs outline the export charges alone and therefore upon the safe conveyance of the product to the Mexican market a selling price would be required. This can be computed with the inclusion of the profit element within the export price. It is easier to calculate this factor as a percentage of the export price, for instance ten percent. Therefore, having acquired the selling price, other factors have to be assessed in a bid to analyze the suitability of the given price in the intended market. Competitors within the Mexican market would be other importers as well as the domestic producers. The global import price averages at $29.90 and this marks the price that a majority of the exporters would offer. Domestic producers on the other hand would offer the same quantity for $29.47 in a bid to create a competitive edge against the foreigners.

The best stratagem would be setting a price beneath other foreign players and the domestic manufacturers as this would act as a propelling factor for enhanced purchases by the consumers. Additionally, as more sales are achieved, the returns are also enhanced. This game factor denotes the counter-trade behavior existing between the trading rivals with a significant benefit being reaped by consumers in terms of low product charges. Additionally, product substitutes are created, diversifying the consumers’ product mixes thus bringing about the preference factor. For the market players, it enhances the competition thereby offering market safeguards from structural limitations like monopolies. Additionally, it enhances sales levels and profits. Drawbacks will be noted in the Mexican infant industries as they will be overcome by the enhanced competition. The gains however are more than the drawbacks thus valuable to the US as the exporter, as well as the Mexican consumers.