international marketing

1. Price determination

a. Cost of the shipment of goods

Amazon is known for their fast shipping methods. In India, “total shipping cost is calculated by adding the “Per Shipment” cost and the “Per Item” cost” (Shipping Rates to Asia and Pacific Islands). To ship to India, the “Per Shipment” cost is $4.99 and the “Per Item” cost is $2.99/lb. Although, if you are an Amazon Prime member you receive free one-day shipping, two-day shipping, no-rush shipping, or standard shipping for buying Prime eligible items, which the Amazon Alexa is.

b. Transportation costs

Amazon has its own shipping services called “Shipping by Amazon.” Although, for certain services, like international shipping, it uses carriers such as UPS and Fedex. To ship a package from the United States to India costs around $123 with UPS and around $110 with FedEx.

c. Insurance costs

Amazon offers its own product protection insurance. Consumers can purchase this for about $45 U.S. dollars or

3,000 Indian rupees.

d. Customs duties/Import taxes

Amazon has no control over import taxes, custom duties, and fees, nor can they predict what they may be (About Customs, Duties, & Taxes). In India though, “consumers have to pay customs duty for importing mobile phones, electronics, and other goods from another country” (Agarwal, 2015). The total duty rate for electronics is 28.852%, which will need to be paid to buy the Alexa.

e. Companies gross margins

Amazon’s gross profit margin is continuing to increase. It is currently at a high of 27.08% for June 30, 2018 (Amazon.com Gross Profit Margin).

f. Retail price

The retail price of Amazon’s Alexa is ₹9,999.00, which is $145.87 in United States dollars.

2. Methods of payment

a. Cash in advance

Exporter/seller can eliminate credit risk/risk of nonpayment since the payment is received prior to the transfer of ownership of the goods. Wire transfer and credit cards are the most common form of cash in advance payments.

b. Open accounts

Transactions where goods are shipped and delivered before payment is due, which is typically within 30,60 or 90 days. Obviously this option is advantageous to importer in terms of cost flow and cost, but it is consequently a risky option for an exporter.

c. Consignment sales

Variation of open accounts. Contractual arrangement in which foreign distributor receives, manages and sells the goods for the exporter who retains title to goods until they are sold.

Payment to exporter are only required for those items sold.

d. Letters of credit

Most versatile and secure instruments available to international trades. A letter of credit is a commitment by a bank on behalf of the importer (foreign buyer) that payment will be made to the beneficiary (exporter) provided that the terms and conditions stated in the letter of credit have been met, as evidenced by the presentation of specified document.

3. Pro forma financial statements and budgets a. Marketing budget

A detailed financial projection is needed to sell Amazon Alexa in India. A market analysis along with these financial projections serve as the basis of our Pro Forma.

i. Selling expenses

Amazon usually likes as much control of their supply chain as possible. Because of this selling will be solely online. Online also provides the cheapest option of a selling channel.

ii. Advertising/promotion expense

A large portion of or initial 5 year will be allocated to marketing. The Indian market needs to be aware of Alexa coming to their country. Our marketing strategy provides 20,

17, 13, 10, & 9% of product cost for the first 5 years.

iii. Distribution expense

All Alexa units will be shipped from Amazon fulfillment center #ONT6/8 in Riverside,

California. The units will then be trucked to the port of Long Beach to be shipped to the East Indian port of Ennore. Because a warehouse needs to be built there will be a stepped distribution percentage from 8,6,4,3, & 3% of product cost for the first 5 years.

Product cost

The Alexa unit costs Amazon $82.69 to produce per unit to produce.

iv. Other costs

There will be a $42.09 cost per unit based of of India's 28.852% import duty on electronics