Rohit Oberoi MBA Marketing and Finance Global Marketing Management

Assignment 3: Pricing Honda uses different type of pricing for different segments all over the world. It uses the following pricing strategies: Market Skimming Market Penetration Premium Pricing Premium Pricing: Honda cars usually price their products at a higher level than their competitors. It believes that the customers should be provided the comfort level they deserve and launch their cars for people of upper middle class. On the same time, Honda is believed to be a ethical company and hence provide a genuine product and hence price higher. They started using this strategy in US and then used in Europe as well. Market Skimming: Honda always prices their products more than their competitors so that whenever the need arises they can decrease their prices or can offer an discount to lure people. This has worked well for them all over the world. This strategy is only used by Honda when they establish in a market. Market Penetration: This strategy has been usually used by Honda when they enter a new market. Honda two wheelers is using this strategy in India after their alliance broke with Hero. Now they are launching many two wheelers at a very low price to penetrate into the Indian market again and to regain the leadership they had earlier in alliance with Hero. Example of Skimming Pricing Strategy used by Hondas Luxury Brand (Acura): Acura's management realized that their new products had already obtained a strong foothold by the end of 1986, and a slight increase in price would not hurt the demand. Another argument was that higher price tags would contribute to the image of luxury. It was further learned that low prices compared to German prices undermined the status the customers were seeking. Therefore, Acura started in 1987 with a 2.3% price increase on its cars. By 1988, Integra had been selling for $10,915 (+3.5%), and the flagship Legend carried the price of $23,675 (+2.5%). However, sales data indicate that this price increase did not push the sales down. In fact, through the entire period of the late 1980's, prices kept rising, bringing new revenues to Acura. At the end of 1989, after some modifications, Legend carried the nominal price of $30,840 but, nevertheless, was still able to keep up with the pace of sales. By undertaking the described measures, Acura management gradually began to move from a penetrating pricing strategy to a market share strategy. By 1988, Acura already had a 7.2% share of the regular luxury car segment (Wall Street Journal 1989). The end of the penetrating strategy characterized Honda's start. With the introduction of the new model in 1991, Acura moved away from a market share pricing strategy to a skimming pricing strategy. It is positioned as the "ultimate" luxury car, and uses TV ads depicting ultra luxury to back up its claim. Acura becomes the number one imported luxury car in the U.S. surpassing M-B.

Environmental Factors affecting Pricing of Honda Weaknesses of Honda are presented in the form of external factors such as, USD depreciation Oil price raising Political recession Inflation

Example: In Europe, a variety of factors disadvantaged Hondas operations in the fiscal year 2001,the pressure of pricing in the united kingdom, the appreciation of the yen and the weakness of the euro compared to the sterling pound. Due to this hostile environment automobile unit sales decreased in Europe by 23.3% to 191,000 units. The net sales also declined by 30.8% to 311.2 billion. Due to all these happenings, Honda had to decrease their price throughout the Europe leading to lesser profits for that fiscal year and for the next two years. Example: In India, currently the sales of the automobile are decreasing as purchasing power of the people has decreased due to increased inflation, rupee depreciation and increase of oil prices in the international market. Moreover, Honda has most cars in Petrol whose prices are skyrocketing leading to its lesser sales as compared to its competitors. So, considering all these factors Honda decided to lower down the prices of its cars in the country by Rs 50,000 which later increased again due to increase of taxes by the government on luxury products.