oduct. Many smaller firms calculate the markup asa percentage of their total cost. Markup pricing is easy toapply, and it is used by most businesses. However, it hastwo major flaws. The first is the difficulty of determining aneffective markup percentage. If this percentages too costly,the product may be overpriced for its market. On the otherhand, if the markup percentage is too low, the seller is"giving away" profit that could have earned simply byassigning a higher price. In other words, the markuppercentage needs to be set to account for the working ofthe market, and that is very difficult to do. The secondproblem with markup pricing is that it separates pricingfrom other business functions. The product is priced afterproduction quantities are decided upon, after cost areincurred, and almost without regard for the market or themarketing mix. To be effective, the various businessfunctions should be integrated.The different types of pricing can vary in internationalmarketing. Geographic pricing strategies deal with deliverycost. The seller may assume all delivery cost, no matterwhere the buyer is located. The seller may sharetransportation cost with the buyer to pay the greatest partof delivery cost. When a foreign product enters a country,there is a tax added to the cost. Import duties are designedto protect specific domestic industries by raising the pricesof competing imported products. The importer first paysmost of the import duties. After the importer pays the priceit is then passed on to the customers through higher prices.These higher prices are usually less competitive. The costof shipping and complying with other various regulationscan also add to the pricing method. Prices are also effectedby exchange rates, especially by changes in these rates.Financial limitations are normally imposed throughexchange rates. It is required to convert local currency toforeign currency at government-imposed exchange rates.Because of the adde...
