WHo is able to complete this discussion?
Markis_92
Discussion2ExamplefromClassmate.docxEXAMPLE OF HOW the assignment should be done.
Tshan Maynard
Sunday Mar 21 at 4:20pm
Part 1
Market Skimming is often “ part of a deliberate attempt to reach a market segment that is willing to pay a premium price for a particular brand or a specialized or unique product. One of the best examples of market skimming is Apple's lineup of cell phone devices and computers. Companies that seek competitive advantage by pursuing differentiation strategies or positioning their products in the premium segment frequently use market skimming. (Green & Keegan, 2018, p. 343)”
Market Penetration calls for "setting price levels that are low enough to build market share quickly. (Green & Keegan, 2018, p. 344)" Based on the text, market penetration is a company's ability to sell products at a loss for a short period. Green and Keegan also explained that new companies that are new to exporting could not afford to absorb these losses. However, a company that is successful at using a market penetration pricing strategy is Sony.
Companion Products (captive pricing) are the pricing of products with both a core product and several accessory products. “This type of pricing strategy takes advantage of a product that will be used primarily to attract a large volume of customers. (Campbell, 2020)” An example of this is cell phones. When a customer buys a cell phone, there is an initial cost for the device. However, hundreds of options are available, such as cases, screen protectors, and chargers that can be purchased separately.
Cost-base Pricing is the “practice of setting prices based on the cost of the good or service being sold. (Bragg, 2020)” The advantage of using this method is that a business can be assured of consistently generating a profit, as long as the markup price is sufficient and unit sales meet expectations. However, this approach can result in prices that diverge from the market rate and cause the firm to sell at a price that is too high and attracts few customers. An additional problem with cost-based pricing is that it does not force a business to keep its costs under control - instead, costs are passed through to the customer. Walmart is an excellent example of cost base pricing with the “Everyday Lower Prices” strategy. The strategy works by constantly reducing costs where possible to become leaders in the industry.
Incoterms were published by the International Chamber of Commerce to facilitate commerce around the world. Incoterms are also known as the International Commercial Terms. Incoterms works to prevent confusion in foreign trade contracts by clarifying the obligations of buyers and sellers. The parties involved in domestic and international trade use Incoterms to understand each other and the business arrangements' exact terms. "Some Incoterms apply to any means of transportation; others apply strictly to transportation across the water. (Segal, 2020)"
Incoterms are divided into four categories:
· E-Terms - the seller only makes the good available to the buyer based on its own premises.
· F-Terms - the seller is called upon to deliver the goods to a carrier that the buyer appoints.
· C-Terms - the seller has to contract for carriage without assuming the risk of loss or damage to the goods or additional costs due to events occurring after the shipment or dispatch.
· D-Terms - the seller has to bear all costs and risks needed to bring the goods to the destination.
It is important to understand trade as it can play a crucial role in establishing a company’s competitive advantage in the global market. Depending on the parties involved, they can use these terms to their advantage and build on a profitable relationship. Failure to adhere to the terms correctly can result in financial implications ranging from lawsuits to loss of profits.
Part 2
Apple and Samsung's use of pricing strategies varies from country to country. Apple and Samsung both utilize market (price) skimming that they used to target their customers that are looking for premium devices. They also used companion products (captive pricing) by having their products that complement their premium products. One thing that stands out about the Apple and Samsung is how the market skimming is set up. In South Africa, both Samsung and Apple have their premium devices listed as R24,699, which translates to around $1700 in US dollars. However, the same devices, if bought in America, would retail at $1199. The exact pricing structure applies to their companion products; a case that would cost $49.99 in the US would almost double in South Africa. One of the significant factors that affect the prices of goods is the difference in taxes and import duties across countries. Another factor that Apple and Samsung may be using to their advantage is the perceived value that their premium devices may have in South Africa compared to the United States. This provides an opportunity for them to charge a higher premium price based on the fact that people already think that the product is worth the price.
References
Bragg, S. (2020, December 17). Cost-based pricing definition. AccountingTools. https://www.accountingtools.com/articles/2018/2/25/cost-based-pricing
Campbell, P. (2020, May 6). What is captive product pricing? Examples, definition & more. Recur. https://www.profitwell.com/recur/all/captive-product-pricing
Green, M. C., & Keegan, W. J. (2018). Global Marketing. Pearson Education. https://uaglobalcampus.vitalsource.com/#/books/9780134899763/cfi/6/10!/4/2/64/2@0:0
Segal, T. (2020, October 20). Incoterms Definition. Investopedia. https://www.investopedia.com/terms/i/incoterms.asp
