Unit 1.Price
I. Basic knowledge of pricing
1.Cost structure: cost of production, selling and delivery costs, taxes and tariffs.
a. Cost of production
● Costs related to the product manufacture: labor, raw materials, component parts, salaries, heating & lighting, general maintenance of the factory building and plant.
● Other ancillary costs directly allocated to the product: warehousing/storage, distribution involving inter-factory transfer handling, assembly costs.
b. Selling and delivery costs
● Fixed costs: salesman’s salaries
● Variable costs: packaging, transport, commissions, advertising and sales trip expenses, insurance premium.
c. Customs duties: other costs factors taken into account by the exporter.
2. Points to be considered in pricing: be acceptable to the customers; generate enough revenue to cover all its costs.
a. International market level: relevant market data on competitive prices for similar products
b. Policies and regulations: those applying to a particular market area
c. Exporters' purpose and importers' requirements:
d. Supply and demand relationship: the world market may fluctuate (rising or falling of the market prices) with the change of it.
e. Others:
● Adequate profit margin over your actual costs
● Details of the contract: quality and quantity of the products, transportation costs, place and terms of delivery etc.
● Method of payment and fluctuations of foreign exchange rates
3. Approaches to pricing strategies
● Based on price range: high, low and moderate
● Based on market areas: ethnocentric, polycentric and geocentric pricing
Cost-oriented pricing methods以成本为导向的定价法
a. Break-even pricing损益两平定价法: a method of determining the quantity of sales where the firm’s revenues will equal its costs.
b. Cost-plus pricing成本加成定价法: a method of adding to a basic cost figure, an amount to cover profit and other unassigned costs.
c. Marginal cost pricing边际成本定价法: a method of calculating the extra production costs involved.
II. Terms:
Price
noun: skimming price/loaded price/market price/competitive price/cost price/basic price/invoice price
verb: go up/mark up/increase/rise/advance/raise/improve/lift/come down/mark down/drop/fall/decline/cut down/reduce/bring down
adj.: reasonable/practicable/popular/on the low side/in line with the market level/workable/attractive/low/high/on the high side/out of line with the market level
Profit:
margin rate
make a profit/gain profit/net profit/total profit/profit after tax/profit before tax/profit margin/p
rofit ratio/average rate of profit/to reap fabulous profit/ quick profits(easy profits)

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