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Tuesday, 11 September 2018

Special Pricing Systems

 
 some special pricing system exist and are at the disposal of the international marketer. They are:
1.    Transfer pricing
2.    Leasing
3.    Barter and counter trading.

Transfer pricing: The issue of transfer pricing becomes prominent as a company becomes multinational company k (MNC) which subsidiaries in various countries of the world. here the price of finished goods and ingredients used in production between the parent company and subsidiaries p-s and between subsidiary and subsidiary s-s may have to be adjusted to enhance the profitability of the company as a whole. The benefits acurable to (MNC) in this direction are as follows:

1.   It facilitates the repatriation not dividend to parent company headquarters especially in countries where the host government frowns at this practice. For such countries therefore, the (MNC) will advise a means of sending their profits home by changing higher price in product or component send to their subsidiaries in such countries.

2.   Changing of higher prices for transferred goods or components could be done to reduce income taxes payable in high tax country.

3.   In countries where high are charged on goods shipped into the country, the lowering of the cost of goods or component will enable the company to pay low duties.

Leasing international marketing:  for some heavy equipment the purchase of which might be a threat to the working capacity of companies leasing becomes the veritable option in international market. Assets considered here air conditioners, computers, earth moving equipment, automobile etc, In nigeria most of the major oil companies like shell petroleum development company spdc, is mobile, EXXON petroleum, chevron, etc, all depends heavily on leasing services for greater aspects of their service.

Main features of leasing:
1.   The main parties to a typical lease arrangement are the lessor and the lessee. While the laser retains ownership right, the lessee is left with the processory right of the assets. The lessee makes use of the assets within the specified period of contract.

2.   Among the obligations expected of the lessee to perform is the payment of the periodic rentals as agreed.

3.   Undernet please agreement the lead space for maintenance taxes, insurance and other specified expenses. On the other hand, under a maintenance lease the laser maintains the assets and pays the insurance.

4.  it is optional to either renew the lease or to purchase the assets as the end of the basic lease.. Otherwise, the leasor takes possession of the asset and is entitled to any reducing value associated with it.

The types of leasing arrangements available in the international marketplace are:

-  Operating leasing.
-  Financial lease or finance lease.
-  sales and lease back.
-  full service lease.
-  leveraged leasing lease and direct leasing.

     ADVANTAGES OF LEASING.

 1. Working capital is made available to the lease as the leaser maintain the assets.
2.  Capital equipment are made available to the lease as low annual cost.
3.  New and latest products are provided for lessee.
4.  Tax advantages enjoyed by the lessee.
5.  Effective and efficient service is rendered to the lessee.
6.  The lessor also gains large net income as he sales to many customers who could not afford outright purchase or heavy equipment.

      DISADVANTAGE OF LEASING

1. Modification of leased assets to suit certain working conditions may not be possible.
2.  Currency devaluation could lessen the value of the assets to the demerits of the lessor.
3.  Political risk such as expropriation could endanger the investment of the lessor.
4.  During the period of economic downtown or recession they may be lost defaulters as many lessor may not be able to meet the obligation. This translate to income loss to the lessor.
5.  In the case of short term lease the risk of the firm increases. This is because when the lease contract is terminated subsequent renewal may be difficult.

Barter Counter Trading in International Marketing.
Despite the functions of money in the marketplace with respect to means of exchange and unity of value of goods and services, situation still arise in the ever-changing marketplace where parties are compelled by uncontrollable forces to exchange product for products. This is known as counter trading or counter trade. Government, individuals, international organisations, and institutions are usually involved in this type of trading as the situation warrants.

Trade is a variety of unconventional international trade practice which link exchange of goods, direct or indirect in an effort to to dispense with currency transactions. This seek to explain a market situation whereby part or all of the payment for trade merchandise is made in something other than money. It could involve a simple exchange of goods among the parties partly cash payment while the remaining is credit or it may involve some commitment on the part of the seller or exporter to buy goods from the importer or even different company in the importer's country. Simply put, countertrade is a reciprocal from of trade in which an export transaction is usually matched or paid for with a counter import transaction.

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