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Antecedents and actions of export pricing strategy: A conceptual framework and

research propositions
Matthew B Myers, S Tamer Cavusgil, Adamantios Diamantopoulos. European Journal
of Marketing. Bradford: 2002. Vol. 36, Iss. 1/2; pg. 159, 30 pgs
Abstract (Summary)
The export-pricing literature is characterized by a distinct lack of sound theoretical and
empirical works. Of the marketing decision variables, pricing has received the least
attention in research despite the continued identification of this issue as an important
problem area for firms engaged in export marketing. Businesses competing
internationally must develop an effective pricing strategy, as this is a critical factor in
their operation. Globalization also requires that management coordinate prices across
multiple export markets. Research is thus needed on the empirical relationship between
an export-pricing strategy (EPS) and the factors that influence this strategy, as well as the
relationship between EPS and the performance of the export venture. A multidimensional
conceptualization of export-pricing strategy is proposed in order to integrate the various
components of an EPS and link it with its antecedents.

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Full Text (12297 words)
Copyright MCB UP Limited (MCB) 2002

Keywords Pricing, Export, International business, Marketing, Management

Abstract The export-pricing literature is characterized by a distinct lack of sound
theoretical and empirical works. Of the marketing decision variables, pricing has received
the least attention in research despite the continued identification of this issue as an
important problem area for firms engaged in export marketing. Businesses competing
internationally must develop an effective pricing strategy, as this is a critical factor in
their operation. Globalization also requires that management coordinate prices across
multiple export markets. Research is thus needed on the empirical relationship between
an export-pricing strategy (EPS) and the factors that influence this strategy, as well as the
relationship between EPS and the performance of the export venture. A multidimensional
conceptualization of export-pricing strategy is proposed in order to integrate the various
components of an EPS and link it with its antecedents. Theoretical insights and empirical
findings from the general pricing literature, as well as executive insights from qualitative
interviews, are connected with the conventional export-pricing and strategy literature into
an integrated model, and specific research propositions are offered for future cross-
industry empirical studies.

The pricing of products in international markets is becoming increasingly difficult for
managers due to heightened competition (Cavusgil, 1996), gray market activities (Myers,
1999; Assmus and Wiese, 1995), counter-trade requirements (Cavusgil and Sikora,
1988), regional trading blocs (Weekly, 1992), the emergence of intra-market segments
(Dana, 1998), and volatile exchange rates (Knetter, 1994). As global economic
foundations continue to shift, long-proven pricing structures are collapsing (Simon,
1995). As competitive pressures increase, strategies for effective pricing of products for
sale in foreign markets remain elusive (Samli and Jacobs, 1993).

Unfortunately, there is little research to guide managers in their international pricing

efforts (Clark et al., 1999). Typically, they rely on intuitive measures and give more
strategic focus to other marketing decision variables (Cavusgil, 1996). This often leads to
unsuccessful market ventures, since businesses operating in a global environment must
have a systematic pricing procedure (Samiee, 1987). Although Ricks et aL (1992) found
that it was the number-two problem for international managers, pricing has perhaps been
the most ignored marketing decision variable within the research (Li and Cavusgil, 1991;
Gronhaug and Graham, 1987; Cavusgil and Nevin, 1981). Most efforts to understand the
effects of pricing strategies on firm performance have been undertaken within a purely
domestic or single market context with little consideration for the increasingly
international configuration and organizational goals of the firm (Myers, 1997).

Several types of international pricing are done by firms, and each demands a different
approach. Transfer pricing concerns the sale of products within the corporate family.
Foreign-market pricing is done by a firm with production facilities within an overseas
market (completed products do not cross borders to reach the customer). Export pricing
refers to products made in one country and sold to customers outside the corporate family
in another country (i.e. independent distributors). In this article, we concentrate solely on
export pricing, which is a frequent and formidable challenge for most exporters (Walters,
1989). In addition, we focus on direct, rather than indirect, exporters, since indirect
exporters are often restricted in their pricing choices by export agents, and rarely deal
with the international issues which make direct exporting so complex (Nagle and
Ndyajunwoha, 1988). In this context, while there is evidence to suggest that pricing is a
key variable affecting export performance (e.g. Bilkey, 1982; Koh and Robicheaux,
1988; Kirpalani and Macintosh, 1980), most pricing research emphasizes the domestic
market, (addressing such issues as price promotions, consumers' reaction to price, and
price-quality relationships), rather than export customers. Given that: few studies have
examined export pricing as opposed to other aspects of pricing strategy; what little
research that does exist lacks strong conceptual foundations; and insights from the
general pricing literature have not been applied to an export context to any appreciable
extent, the present article seeks to provide a conceptual framework for pricing in an
export context and link it to export performance. Specifically, the purpose of the study is
threefold. First, we identify key organizational and environmental factors specific to an
export setting that act as antecedents of export pricing strategies. Second, drawing upon
the pricing and exporting literatures as well as from exploratory interviews with export
managers, we develop a series of research propositions designed to link pricing strategies,
contextual variables, and export performance. Finally, we make several suggestions
regarding future research in this area and provide guidance in operationalizing key

In the next section, we highlight the distinct nature of export pricing decisions and
provide a brief review of past literature. This is followed by a presentation of the
proposed conceptual framework and associated research propositions. The paper
concludes with identification of future research directions.

The distinct nature of export pricing

Global marketing decisions about product; price and distribution differ from those made
in a domestic context, in that environments within which those decisions are made are
unique to each country Gain, 1989), and the pricing problems faced by exporters are
distinct from those faced by purely domestic firms in that variables associated with both
home and export markets must be integrated into managerial decision making (Diller and
Bukhari, 1994). Distinct issues include increased competitive levels, gray market
activities, counter-trade requirements, regional trading blocs, standardization versus
localization issues, the emergence of intra-market segments, and exchange rate volatility
(Cavusgil, 1996; Cavusgil and Zou, 1994; Paun and Albaum, 1993; Samli and Jacobs,
1994; Samiee, 1987). The methods which management utilize to address these
environmental issues must be synthesized with organizational concerns such as objectives
of the venture (Cavusgil, 1988) and market-related concerns such as market volatility and
disparate customer needs (Cavusgil and Zou, 1994), which can greatly narrow the domain
of the firm's foreign market activities.

Pricing strategies are often based on the premise that the most effective strategies are not
apparent until certain shared economies or cross-subsidies are evident. In his taxonomy
of pricing strategies, Tellis (1986, p. 147) states that:

... in a shared economy, one consumer segment ... bears more of the average costs than
another, but the average price still reflects cost plus acceptable profit. The use of such
economies may be triggered by heterogeneity among consumers.

In business-to-business exchange, the consumer is the firm, and the heterogeneity across
these firms is a product of economic conditions within the market as well as different
utility among buyers (see Moriarty (1983)). However, buyer heterogeneity in business-to-
business exchange will be reduced relative to that of consumers for a number of reasons.
Organizational buyer behavior theorists (e.g. Moriarty, 1983; Heide and John, 1990) posit
that organizational buying is distinct from consumer buying behavior in that:

(1) organizational purchases are made in group form, typically by a decision-making unit;

(2) an organizational decision to purchase must satisfy differing needs and objectives of a
variety of participants;
(3) certain types of organizational buyer information, including proposals, price quotes,
and purchase contracts, add to the organizational purchase a formal dimension not found
in consumer buying; and

(4) the personal and organizational risk of a company's purchasing decision is generally
greater than that of individual consumers (see Moriarty, 1983).

Given these parameters, organizational buying is seen as more rational in nature than
consumer purchasing, and as a result more homogeneous. When the purchasing entities
are importers, however, heterogeneity in the pricing decision model is enhanced by
diverse economic conditions across markets (cf. Bello and Gilliland, 1997). In these
exchange relationships, information deficiency still exists, yet this deficiency enhances
problems beyond what is experienced in domestic exchange. For instance, the search
costs of importers compared with domestic buyers will be considerably higher (Anderson
and Gatignon, 1986). Furthermore, transaction costs associated with travel, commercial
risk and capital significantly exceed that of domestic exchange (Aulakh and Kotabe,
1997). The lack of incorporating the dyadic diseconomies, or the differences in market
environments between the buyer and seller which are present in import-export exchange,
and the omission of market-related variables, is largely responsible for our inability to
rely on traditional theory to explain export pricing strategies.

Examples of these dyadic diseconomies are easily made. For instance, market volatility,
particularly in the form of foreign currency volatility and inflation rates, are
characteristics of economic fluctuations, which result in risk and uncertainty in overseas
markets (Aulakh and Kotabe, 1997). Frequent volatility of currency rates suggests that
exporters may find themselves benefiting from a weak currency one month and
struggling with an over-- valued currency the next. These exporters must be vigilant in
their pricing by concentrating on the market's ability to purchase during exchange rate
fluctuations. Import policies and trade barriers in import markets have a significant effect
on export pricing decisions as well (Cavusgil, 1988, 1996). Price escalation due to import
barriers may eat away at profit margins. Price-- quality relationships in overseas markets
may also vary significantly, since all imported products may suffer from price escalation
(Johannson and Erickson, 1985). The strategy options open to firms may be limited in
order to maintain affordable products for the buyer. With the increased tension between
nations over trading policies, such issues as intellectual property rights (Maggs and
Rockwell, 1993), non-tariff barriers (Frank, 1984), and anti-dumping legislation have
assumed considerable importance and have an obvious connection to export pricing
(Joelson and Wilson, 1992). Export markets with strict price-- window regulations often
restrict the ability of firms to price at competitive levels (Myers, 1997) and often firms
must satisfy local conditions by concentrating on non-price aspects of exchange, such as
the use of local or third country currencies of offering volume discounts (Weekly, 1992).

The degree of customer sophistication can also vary widely across markets (see Morris
and Morris (1990)) and, in many developing economies, customers are less
technologically proficient or knowledgeable regarding potential suppliers (Kotabe and
Helsen, 2001). More sophisticated customers will often accept high search costs in efforts
to locate the best price (Tellis, 1986), and are familiar with the pricing schedules of
suppliers and will time their purchases accordingly to lock-in lower prices. Also, more
sophisticated customers understand the cost structures of particular products better and,
therefore, have a reference for fair price" (Nagle, 1987). Upper and lower thresholds for
acceptable prices are thus more firmly established.

Given the critical nature of pricing decisions and the large number of firms that employ
export marketing as an internationalization strategy, one would expect a wide range of
studies concerning company practices in export pricing. As noted, however, relatively
few have been conducted. According to Walters (1989), much of the work in
international pricing concerns transfer pricing in multinational corporations (e.g. Al-
Eryani et al., 1990; Arpan, 1973). Some important studies exist, however, on the effect of
an overseas market environment on pricing, on pricing in developing countries and in
specific markets, and on price controls overseas (Walters, 1989). Several pricing--
decision models have resulted from research on fluctuating exchange rates, including
work by Clague and Grossfield (1974) and Choi (1986), and the literature also includes
several qualitative models and approaches in overseas pricing situations (e.g. Farley et at,
1980; Rao, 1984; Walters, 1989).

The research that does exist, however, (e.g. Clark et at, 1999; Samli and Jacobs, 1993,
1994; Diller and Bukhari, 1994), supports our argument that a wide variety of
organizational and environmentally specific factors influence export pricing. Cavusgil
(1988) summarizes these factors into six groups of variables:

(1) nature of the product or industry;

(2) location of the production facility;

(3) system of distribution;

(4) location and environment of the foreign market;

(5) regulatory framework; and

(6) management attitudes.

In a similar vein, Lancioni (1988) states that price setting in international markets should
be approached at two different levels - the external (customers, competition, government
regulations) and the internal (cost reduction, ROI levels, and sales volume requirements)
- and that both must be taken into account. This is plausible, since export pricing is an
integral part of overall export strategy; indeed, exporting itself can be conceived as a
strategic response by management to both internal and external forces (Cavusgil and Zou,
1994). The former relate to such organizational characteristics as corporate goals, desire
for control over prices, and degree of company internationalization, while the latter
include competitive pressures, demand levels, legal and governmental regulations, and
exchange rates. The degree of alignment of these forces with the marketing strategy of
the firm determines its performance (Aldrich, 1979; Porter, 1980). This principle suggests
that pricing can be used as a distinct proactive strategy within the overall export
marketing strategy of the firm. In this context, both the exporting literature (e.g. Walters,
1989) and the general pricing literature (e.g. Diamantopoulos and Mathews, 1995)
suggest that successful price decision making is highly dependent on the situational
variables that characterize dynamic, turbulent environments.

In summary, while managers will encounter many of the same type of market forces in
the international arena as at home, in each export market these forces have a different
effect and a different "constellation" of components (Kublin, 1990), including specific
components not characteristic of domestic operations. These characteristics, discussed in
detail in the following section, make pricing in export markets particularly problematic
for managers.

A conceptual framework for export pricing decisions

Both the export marketing literature (e.g. Walters, 1989) and the general pricing literature
(e.g. Gabor, 1988; Morris and Morris, 1990) indicate that successful price decision
making is dependent on situational variables in dynamic environments. This calls for a
contingency approach to export pricing, since the pricing process is far too complex to be
amenable to a universal type of explanation (Diamantopoulos and Mathews, 1995). The
variables in contingency theory (Zeithaml et al, 1988) blend well with the internal-
external forces/export strategy/export performance framework of Cavusgil and Zou
(1994). Contingency variables (which provide only limited or indirect opportunities for
control by the firm) relate to internal and external forces, response variables (those that
reflect decisions and actions taken by the firm) relate to export pricing dimensions, and
performance variables (those that represent the outcome of such action, enabling an
evaluation of fit between contingency and response variables) are accounted for by the
firm's export marketing performance. Successful implementation of EPS depends on
accurate identification of the contingency variables and the proper "fit" of pricing
decisions and actions by the firm.

A contingency approach to export pricing requires the proper identification of these

components. As Hofer (1975) and Diamantopoulos (1991) show, dozens of factors can
affect pricing strategy and, including all possible variables in future empirical research,
would result in highly situation-specific studies. Therefore, for present purposes, the list
must be condensed, but care must be taken to identify the most significant factors
important in an export setting. To pinpoint the most critical contingency variables, in-
depth interviews with international managers were conducted, following the suggestions
of Bonoma (1985) and Eisenhardt and Bourgeois (1988). Specifically, 12 interviews with
a diverse set of manufacturing exporters in the Midwest and Southern USA took place,
utilizing open-ended questions regarding the export pricing strategies of these firms and
the factors shaping these strategies. These firms were chosen not only because of the
significant amount of exporting conducted, but also due to the disparate markets which
they serve (European, Asian and LatinAmerican). Firm size (as a function of sales)
ranged from US$10 million to over US$500 million. In all instances, the key informant
was the manager in charge of overseas operations for specific products or product lines.
These qualitative interviews highlighted critical variables and help reduce reliance on
theoretical reasoning and past findings in the development of our conceptual framework.

This conceptual framework, illustrated in Figure 1, is designed to provide directions for

future research in determining the best pricing strategies for export marketing managers.
The key constructs address the relationships between export pricing strategy and the
internal and external forces described by Tellis (1986) and extended by Cavusgil and Zou
(1994). By integrating the research that links export strategy to export performance with
the research that identifies pricing strategy as a determinant of marketing performance
(e.g. Rao, 1984; Tellis, 1986), we argue that export pricing strategy affects the export
marketing performance of the firm. In turn, selected internal and external variables are
seen as antecedents to the EPS adopted by the firm. These antecedents can be categorized
into three distinct groupings, incorporating a number of specific variables each:

(1) firm and management characteristics, which include the international experience of
the firm and its commitment to the export venture;

Figure 1.

(2) product characteristics, which comprise degree of standardization and age; and

(3) export market characteristics, which include channel length, customer sophistication,
regulatory and competitive intensity, foreign currency volatility, and rate of inflation.

The details of these variables and their proposed relationships with export pricing
strategy are discussed below, and specific propositions are developed. It should be noted
that in this study we address only those variables that have been frequently identified in
the literature to affect export pricing strategy, or those that were identified in our
qualitative interviews by export managers to drive their pricing decisions. These variables
are defined in Table I. We remained selective in inclusion of relevant variables, since
excessive detail could result in an "almost endless, and thus unmanageable, listing of
situational variables, providing little scope for comparison and generalization across
settings" (Diamantopoulos and Mathews, 1995, p. 27); our concentration is only on those
factors which make export pricing distinctive from domestic pricing.

Export pricing strategy

While export pricing is regarded by management as a strong determinant of performance

and profitability, it is perhaps the most misunderstood and least effectively used
competitive tool (Cavusgil, 1996). The literature does not offer any well-established
measures or conceptualizations of export pricing strategy (EPS). In this study we define
EPS as the means by which a firm responds to the interplay of internal and external
forces that affect export-pricing decisions in order to meet the goals of the export venture.
The construct incorporates three basic dimensions:
(1) management's price-setting philosophy;

(2) price determination; and

Table I.

Table I.

Table I.

(3) pricing implementation.

The literature supports this conceptualization, and our preliminary interviews with
international managers confirm it. Within these dimensions lie the various alternatives
available to the firm, including uniform pricing of products, market versus cost-based
pricing and the centralization of the pricing decision within the organization.

Export price-setting philosophy

Export price-setting philosophy refers to the guiding principles used by management in

its pricing strategy. These are reflected in a variety of managerial and environmental
factors and address such issues as the pricing objectives of management, the competitive
posture associated with export pricing, the control of the export-pricing decision within
the organization, and the flexibility or rigidity of export-pricing procedures.

Pricing objectives. Pricing objectives are the strategic and economic goals desired by
management in pricing the product (Diamantopoulos and Mathews, 1995). Although the
operationalization of export marketing performance indirectly captures these objectives,
here we formally operationalize them within the strategy construct. Given that pricing
behavior is purposive (i.e. seeks to achieve specific and conflicting goals), an EPS
reflects not only export-- market factors but also the short- and/or long-term pricing goals
of the firm, which themselves are a subset of overall corporate objectives (Morris and
Morris, 1990). In this context, from the perspective of empirical analysis,
Diamantopoulos (1991) argues that comparisons of pricing strategies are not in
themselves instructive, unless differences in specific objectives pursued are taken into
account, and that the objective functions of real world firms are multi-faceted rather than
singular, "... which implies that any theoretical representation ... based on a single goal
(whatever that goal may be) involves a substantial (and potentially unacceptable) degree
of abstraction from reality" (Diamantopoulos, 1991, p. 138)[1]. Moreover, the pricing
objectives of the firm are not static and will change within the export market, as such
factors as product age and competitive levels change (Engleson, 1995).
It is critical to determine the firm's pricing objectives before proceeding to formal
examination of export pricing (Diamantopoulos and Mathews, 1995). Morris and Morris
(1990) list 21 different pricing objectives available to the firm. Following Samiee (1987),
we classify them as profit (e.g. return on investment, profit growth) and competitive
positioning (barriers to entry, matching competition, maintain/increase market share).
Pricing objectives can be conflicting as well as complementary (increased market share
brings increased profits, yet to increase market share the firm may have to experience
losses in the short term by undercutting competitive price offers), as well as subject to
hierarchical considerations regarding level of importance (see Paun and Albaum (1993)).
Much of the conflicting nature in pricing objectives may be attributed to temporal issues,
in that short-term objectives, from the pricing perspective, are not easily synthesized with
long-term objectives (see Guiltinan and Gundlach (1996)). Individuals involved in the
pricing of exports are interested in the long-term survival of the firm, which in turn is
reliant on the ability of the organization to adapt to a variety of environmental pressures
and constraints (see Thach and Axinn (1991)). The question of whether the objective of
the firm is purely to maximize profits is further challenged in the export setting in that the
firm often adopts a satisfactory profits approach in order to justify market participation
and establish longer term relationships with satisfied customers (Monroe, 1990).

Relationships between antecedent variables and export-pricing objectives have yet to be

explored in the literature, so reliance on domestic and consumerrelated pricing studies is
necessary to a certain degree. Diamantopoulos and Mathews (1994) demonstrate the
relationships between a variety of antecedent variables and pricing objectives in domestic
markets. Similarly, Nagle (1987) indicates that a number of variables (such as market
growth and competitive intensity) affect individual pricing objectives. Specifically, as
competitive levels within the export market increase, the firm must price its product at or
near that of the competition in order to survive (Simon, 1995). If firms attempt to
maximize return on investment or profit growth in competitively intense environments,
then competitive price margins will detrimentally affect the attainment of these goals, so
the firm must choose a price at or near that of rivals (Engleson, 1995). Pricing objectives
will also change, as the product evolves from its introductory stage through growth and
maturity, with profit-oriented pricing being standard for new products and more
competitive pricing being standard for mature products (Morris and Morris, 1990; Porter,
1986). It should be remembered that exporters are often faced with different life-cycle
scenarios in overseas markets from their domestic counterparts with the same product.
Once new products become exposed to markets, competitors often enter with similar
products and new process technologies that enable them to compete on price, which
prompts firms to re-orient their pricing policy (Monroe, 1990). This is supported by
managerial comments during the qualitative interviews:

Our product is the same as our competitors'. The only way to compete is on price and
delivery reliability. Our effort is to maintain market share.

A number of international economic factors affect export pricing objectives, particularly

inflation and exchange rate fluctuations (Cavusgil, 1996). The underlying relationship
between exchange rates and the prices of traded goods, or the exchange rate pass-through
relationship, is a critical factor in determining prices (Athukorala and Menon, 1994). The
relationship between the export market currency and the home currency of the exporter
will affect the affordability of the exported product as well as the exporter's ability to
raise prices and still reach sales targets. When the exporter's currency is weak, it will be
able to stress price benefits, particularly when compared with in-- market competitors.
When the exporter's currency is strong, it may resort to competitive pricing and/or engage
in non-price competition by stressing quality and customer service (Cavusgil, 1988).
Similarly, in preliminary interviews managers stated that high inflation rates in the export
market will produce a "false elasticity" effect in that, even though the exporter's quoted
prices of goods do not change, effective prices will be higher. This will limit the
exporter's ability to pursue profit oriented pricing objectives, since the purchasing power
of the buyers will be reduced.

Given this background, the following proposition is offered:

P1. Management is more likely to pursue competitive pricing objectives (as opposed to
profit-oriented objectives) when: the competitive intensity of the export market is high;
the product is mature in the export market; foreign currency volatility is high; and the
inflation rate in the export market is high.

Competitive posture. In the equations of supply and demand that influence price, the
supply side includes competing firms within the industry willing and able to sell at
different prices (Morris and Morris, 1990). Export markets are experiencing rapid rates of
change, as technology, governmental regulations, and economic foundations shift
(Simon, 1995). Often, this increases the differentiation across markets (see Sheth, 1985),
while within a particular market the customer base is fairly homogeneous and serviced by
several sellers with specialized technologies. When buyers are homogeneous, product
differentiation becomes less critical, and sales are based on competitive prices (Tellis,
1986). This mandates constant monitoring of the competition's prices, and a philosophy
of using price as a competitive tool. Price is determined solely on competitive moves;
here exporters charge a price roughly equivalent to that of competitors. Complications
arise if local competitors (i.e. those from the export market) remain unaffected by
economic or regulatory shifts within that market, shifts which affect the exporter's price
and not the local competition's. This is considerably different from domestic competitive
environments where each competitor is affected by the same economic changes, as is the
buyer. In our preliminary interviews, exporters indicated that this was often the case:

We base our prices on what our competition is doing, and try to keep a specified amount
above or below the competitor's price.

We base our prices on the competition's, and change the price as often as every order.
Our price is either just below our competition's, or it is exactly the same, never above.
Our distributor tells us what [the competition's] price is, because we've had a long
International experience is positively related to export performance (Kirpalani and
Macintosh, 1980) and, since pricing is a key factor in a firm's overall marketing strategy,
the perception of export pricing as a competitive tool will be partly determined by the
firm's experience in international markets and its emphasis on price versus non-price
benefits. In addressing the characteristics of the finn, Katsikeas and Morgan (1994) found
that more experienced firms perceive export-pricing activities as more problematic than
less experienced firms, and that firms of all experience levels rank pricing issues very
high in their export decisions. More experienced firms seem to realize the complexity of
pricing and are willing to address it deliberately in formulating a competitive posture.

According to Guiltinan and Gundlach (1996), firms can enact predatory pricing strategies
that involve lowering prices to an unreasonably low or unprofitable level in order to
weaken, eliminate, or block the entry of a rival, and this obviously deviates from
traditional profit maximization objectives. Several motivations for low or below cost
pricing exist, including volume sales and market share. Pricing that is designed to achieve
long-term customer satisfaction or other volume-oriented objectives can be profit-
oriented, because short-term profits may be traded for long-term gains (Guiltinan and
Gundlach, 1996, p. 90). However, firms seeking these long-term gains must be
committed to the venture to a degree that warrants these short-term losses; otherwise
these losses cannot be recovered over time.

The degree of importance management attaches to price as a competitive tool depends on

whether the firm seeks competitive advantage by offering its customers a less expensive
product than that of rivals or a differentiated product (Nagle, 1987). A firm offering a
comparable product at a lower cost can increase sales via opportunistic pricing, but this
advantage can only be maintained if costs can be controlled (Monroe, 1990). One method
of controlling costs is by standardizing products, and firms that emphasize non-price
benefits to the customer may not perceive price as a competitive tool. A superior product
often enables the firm to profit from premium prices (Porter, 1986). Following the work
of Jain (1989), the presence of heavy competition in the market may necessitate
customization of export products. When this is not possible, however, the firm will be left
to compete on price and other aspects of the marketing mix.

A weak exporter's currency will enable that firm to utilize price as a competitive tool.
Those with weak domestic currencies often use price to build market share and combat
competitors (Kotabe and Helsen, 2001). On the other hand, firms exporting to countries
where the currency is depreciating face greater need to remain competitive in pricing
(Cavusgil, 1988). Similarly, those export markets suffering from high inflation are
conducive to using price as a competitive tool, since the importer is already burdened by
increasing costs of goods manufactured in the export market, and the exporter can price
his goods below local competitors with little effect on its own profit margins (Myers,
1997). This allows him to use price as a competitive tool. All this suggests:

P2. Management is more likely to use price as a competitive tool when: the competitive
intensity of the market is high; the international experience of the firm is high;
commitment to the export venture is high; product standardization is high; and foreign
currency volatility is high.

Decision control. The level within the organizational hierarchy at which the pricing
decision is made plays a critical role (Abratt and Pitt, 1985; Clague and Grossfield,
1974). Who is responsible, or the degree of price-setting autonomy outside upper
management, is a key determinant of an export pricing strategy (Baker and Ryans, 1973).
The salesforce tends to concentrate on competitive factors that affect sales volume, while
management usually is concerned with profit margins above the total cost of the product
(Myers, 1997).

As noted, the sophistication of buyers in the export market will often differ drastically
from domestic customers (Kotabe and Helsen, 2001). Thus, exporters must deal with
different levels of customer sophistication in each market. Preliminary interviews
indicate that, as customer sophistication increases, the ability of the salesforce to
determine the actual end-price of the product becomes critical. This point-of-sale decision
making increases the firm's responsiveness to well-informed customers (Anderson, 1985)
and, while sales force personnel are rarely aware of the changing costs of input prices
(Grove et al., 1992), more sophisticated buyers demand the service that a saleforce
provides, including the ability to make on-the-spot price decisions in order to meet buyer
needs. Sophisticated customers are also more likely to have price objections, and these
objections are best addressed by the salesforce personnel (Winkler, 1983), meaning that
decision control is better left to the individual closest to the point of sale.

In the domestic marketing literature, the effect of channels and distribution processes on
pricing decisions has received extensive attention (Stem and El-- Ansary, 1977). In the
international environment, however, relatively little empirical work has been reported.
An exception is Williamson and Bello (1992), who examined export management
companies (EMCs) and the pricing methods used in transactions between EMCs and
domestic producers. Following this study, it is evident that the services offered within the
channels in overseas markets, as well as the complexity and development of those
channels, also will influence pricing strategy. Lengthy and dynamic international
distribution channels are susceptible to export-price escalation (Cavusgil and Zou, 1994);
without in-market or close-to-market decision making, the possibility of overpricing
exists. Exporters must maintain price levels in markets where the large number of
middlemen in the distribution channel often forces prices above competitive levels
(Kotabe and Helsen, 2001). Control over the final price often decreases, as the product
travels though the distribution channel, depending on the relationship between the
channel members and the exporter (Bowersox et al., 1992). Price decision control will
therefore be less centralized in order to control price escalation inside the market. This
understanding of added in-market price by lower level management increases the firm's
ability to combat this escalation (see Cavusgil (1988)).

When faced with external uncertainty, firms are better off internalizing transactions and
allowing the absorption of uncertainty through specialized decision making within the
firm (Aulakh and Kotabe, 1997). Pfeffer and Salancik (1978) argue that looser, flexible
structures are more effective under conditions of high external uncertainty: this ability to
respond to uncertainty is facilitated through salesforce autonomy. External uncertainty, of
course, can take the form of competition or volatile economic conditions in the export
market. High competitive intensity in the export market increases the need for quick
decisions, dictating a fluid and simple pricing method by those familiar with the market
and the customer (Engleson, 1995). This is possible only if lower-level managers and
sales representatives are given autonomy. Concurrently, they must be familiar with
customers, distributors, and competitive levels within their area of responsibility
(Winkler, 1983), a familiarity that results from significant exposure to the export market.
For the same reasons, markets with volatile fluctuations in exchange rates or those
suffering from inflation problems will necessitate local pricing control, with close to
market decision makers changing prices as currency fluctuations and inflation rates
modify the purchasing ability of buyers. Thus:

P3. Control of the export-pricing decision by high-level (headquarters) management is

more likely to increase when: customer sophistication is low; the distribution channel is
short; foreign currency volatility is low; the inflation rate of the export market is low; and
competitive intensity within the export market is low.

Pricing flexibility. Pricing flexibility is defined as the willingness to change prices based
on special circumstances, versus rigidly enforcing a set price. Traditionally, the practice
of an annual pricing review has been consistent with the literature (Diamantopoulos and
Mathews, 1995), which posits that prices should be changed no more than once a year, so
that customers can make their own costing and pricing plans (Garda, 1984). This policy,
however, can create problems for the firm such as forward buying by distributors who
anticipate the review; and failure to effectively "pass through" exchange-rate induced
margin changes in export market currency terms (Cavusgil, 1996; Clark et al., 1999).
With the increasing competitive intensity of global markets, it is imperative to be more
flexible, to change prices based on special circumstances, such as competitive price shifts
and currency rate changes. Economic fluctuations will affect the purchasing power of
buyers, particularly as foreign currency valuations between the buyer-seller dyad change
(Piercy, 1981). Therefore, in order to maintain sales volume firms must be flexible in
setting prices. It is apparent from managerial responses that economic volatility in the
export market plays a significant role in pricing activities:

The conditions in our markets are constantly changing. Overnight we can be priced out of
the market, because our products become too expensive. Unless we change our price
according to the Peso, our buyers can't afford our products.

The inflation rates in our market [Brazil] are often so out of hand that we change our
prices every month.

Unauthorized distribution is a big problem. When currency rates fluctuate a lot, we

inevitably will find our buyers going next door [to another market] to buy our product
from a cheaper distributor. While we have a smooth relationship with our importer, we
know that he is very familiar with our cost structure and, that if we raise prices too high,
he will attempt to find another supplier.

Farley et al. (1980), who analyzed marketing decision systems within two European
industrial firms, report that prices and volumes of each product were under continuous
review, since conditions constantly changed in many end-use markets. Through
forecasting, firms develop ongoing systems for both volume planning and pricing; these
feedback systems are triggered by perceived changes in market conditions (Engleson,
1995), and these changes take several forms. As competitive levels fluctuate within a
market, exporters must constantly monitor their prices in relation to the prices and
offerings of competitors (Cavusgil, 1988). Volatile exchange rates also affect the
exporting firm's need to occasionally change prices (Cavusgil, 1988). Firms exporting to
markets where the currency widely fluctuates must examine their pricing policy
frequently. Similarly, high inflation rates in the export market will necessitate frequent
review of prices. As is evident from the managerial responses, inflation rates can rapidly
erode the ability of buyers to pay export prices, and firms will have to reduce prices
according to levels of in-market inflation fluctuation. Therefore:

P4. Management is more likely to use flexible than rigid pricing when: the competitive
intensity of the export market is high; foreign currency volatility is high; and the inflation
rate in the export market is high.

Export-pice determination

Export-price determination refers to the specific methods employed to calculate and

achieve the final price. Many methods are available, since managers need more than one
option for pricing various products in various competitive environments. A wide range of
organizational and environmental factors affect the methods) used:

Specifically, it has been established that the more sophisticated pricing formulae are
typically used by large firms ... It has also been observed that pricing methods vary across
different industry sectors, product types, and production and distribution methods
(Diamantopoulos, 1991, p. 151).

We will concentrate on the methods considered strategically manipulable by the firm;

that is, monopsonistic pricing will not be included in our discussion.

Price determination can be broadly categorized into two groups:

(1) methods that are cost based (i.e. cost-plus and marginal-cost pricing); and

(2) market based (i.e. market, trial-and-error, penetration, and value pricing). The market-
based approaches focus on competition, customer demand, or both (Morris and Morris,
1990). Of these two categories, cost-based pricing appears to be much more prevalent
Monroe, 1990):
This tendency is one of the great ironies of business, and reflects a general level of
naivete among managers responsible for pricing decisions (Morris and Morris, 1990, p.

Cost-based versus market-based export pricing. According to Cavusgil (1988), product

and resource costs influence the pricing strategies of the firm. Costs are frequently used
as a basis for price determination, largely because they are easily measured and provide a
"floor" under which prices cannot go in the long term (Simon, 1995). Most exporting
companies focus on a cost-centered pricing strategy, particularly the cost-plus method
(Hunt, 1969; White and Niffenegger, 1980). According to Backman (1953, p. 148), "the
graveyard of business is filled with the skeletons of companies that attempted to base
their prices solely on costs." Given that firms must also focus on two other key aspects of
price: demand and competition (Monroe, 1990), which are particularly complex in
international environments, this observation is especially ominous to exporters. The
popularity of cost-based strategies reflects the fact that they are easy to implement and
manage; setting a price that covers costs and generates a fixed profit margin makes
intuitive sense to the manager (Morris and Morris, 1990). Often, exporters will simply
place the same price on their exported products as that of those sold domestically (Seifert
and Ford, 1989).

Cost-based pricing strategies are indicative of profit-oriented firms, often with short-run
expectations within the market (Cavusgil, 1996). This is similar to a "skimming" strategy
(Monroe, 1990), yet, while the motives of profit-taking firms may be the same
domestically as internationally, the opportunities which allow these firms to profit often
find a different genesis in that exporters benefit from the cross-market dyadic
diseconomy which allows them to take profits in times of economic fluctuations between
markets. These are opportunistic firms that take advantage of market inefficiencies such
as monopolistic structures or new technologies within the export market (Myers, 1997).
The objectives are shortterm. Price is determined by strict cost-plus or marginal cost
procedures, with little interest in market, customer or competitive factors. This is evident
in many of the responses from managers when asked to describe their pricing methods:

Our price is based on the domestic price. We typically price our products based on a
standard percentage mark-up. We will until our profits decrease.

Our prices are based primarily cost-plus or 30 percent off suggested retail. We do this in
every market because we haven't seen any reason to adjust our approach.

We move in and out of a variety of markets, and price our products as high above costs
for as long as we can. When profits begin to decline, we move on to other markets.

Our prices, both domestic and export, are based on cost plus added amount for profit
margin. No special pricing for our exports.

Despite the prevalence of a cost-based perspective to pricing exports, there is an

alternative. By incorporating market, competition, and customer related variables into
their pricing decisions, exporters can address a number of potentially confounding issues.
This market-based pricing is particularly critical, given the discussion on environmental
determinants of pricing in an international environment, and it is at times difficult to
understand why exporters do not incorporate these variables into their pricing strategies.
In our contact with export managers, however, several indicated that this strategy is the
foundation of their pricing efforts, and for a number of critical reasons:

With our exports, we are continuously under suspicion of dumping our products. We
have to take care not to violate the local regulations on this issue, and ... we have to
compete on service, not price.

We develop a base price acceptable to our distributors. Deviations are made based on
specific situations in the market, such as new import taxes and volume limitations.

Based on governmental procedures, we must sell our product at a higher base price to our
foreign customers. We try to remain price-competitive in our terms of trade.

We have to manipulate our prices based on what the import regulations let us do, and
they are constantly changing. If we have to price above our local competitors, then we try
to offer volume discounts or work with the buyer in their currency of choice.

Pricing methods such as penetration pricing are based on the market, and focus on the
customer and/or competition (charging a price roughly equivalent to that of competitors
or what the market will bear). In more price-sensitive markets, strategies based on the
demand and competitive dimensions of the market are considered to be more suitable
than cost-based pricing (Morris and Morris, 1990). Piercy (1981) found that certain UK
exporters price according to the individual target market, almost two-thirds emphasize a
market-based approach, due to the price focus of competitors. Intense competition often
dictates market pricing (Diamantopoulos, 1991), and firms involved in highly
competitive export markets often have little price discretion, as what they can charge will
be established by the market, especially if they are not a market leader (Engleson, 1995).

Import policies and trade barriers in international markets have a significant effect on
export-pricing decisions. Price escalation due to import barriers may eat away profit
margins (Cavusgil, 1996). With the increased tension between nations over trading
policies, such issues as intellectual property rights (Maggs and Rockwell, 1993), non-
tariff barriers (Frank, 1984), and antidumping legislation have assumed considerable
importance and have an obvious connection to export pricing (Joelson and Wilson, 1992).
For example, antidumping laws regarding specific products will affect pricing decisions,
since the simple cost-plus method may result in a price too low to comply with market
regulations. Export markets with these price-window regulations dictate market pricing.
Caught between high base costs and the need to charge break-even prices, firms often
cannot compete in highly price-sensitive markets.

Some buyers will have a low reservation price for the product in that they are price-
sensitive or do not need the product urgently enough to pay the price other buyers pay
(Tellis, 1986). Economic and behavioral foundations within the market affect customer
reactions to price and, with sophisticated customers, i.e. those aware of potential
alternative suppliers and prices, exporters face increased challenges in that customers will
have search costs exceeding those within the market (Cavusgil, 1996). This means that
the opportunity costs associated with finding an overseas supplier may exceed the
benefits associated with that relationship (Anderson and Gatignon, 1986). Transaction
costs associated with investment risk, currency exchange, or switching costs also factor in
to the buyers' decisions (Williamson, 1975). Mostly, however, firms employing a market-
based EPS focus on the customer's ability to pay for the goods, or the value placed on
that good, or both. This perspective is evident in several comments made by export

Price is always based on the individual customer. They request certain sizes, colors, etc.,
then we price based on the information they provide us.

We have to constantly watch the exchange rates. If the dollar gets too strong, our buyers
will go to local suppliers. Information from our agents and meeting with our overseas
customers allow us to constantly monitor the market.

Within the literature, studies show that external uncertainty allows negative information
asymmetries to develop and provides the opportunity for outside forces to behave
opportunistically (Klein et al, 1990). In export markets, external uncertainty exists in the
form of economic fluctuations, particularly in volatile exchange relationships and rising
inflation rates. Those exporters with weak home-country currencies often use price to
build market share and combat competitors. On the other hand, firms exporting to
countries where the currency is depreciating face greater need to remain competitive in
pricing (see Kublin, 1990).

Frequent volatility of currency suggests that exporters may find themselves benefiting
from a weak currency one month and struggling with an over-valued currency the next.
These exporters must be vigilant in their pricing by concentrating on the market's ability
to purchase during exchange rate fluctuations, understanding that cost-based pricing
techniques can send the price of the product above the purchasing ability of the buyer, or
result in lost opportunities if prices are not adjusted accordingly (Assmus and Wiese,
1995). High rates of inflation in the export market will also urge managers to remain
market-oriented in their pricing, because the buyer's ability to purchase in periods of
increasing inflation rates will limit his ability to purchase products from overseas, due to
home currency devaluation (see Knetter (1994)). Therefore:

P5. Management is more likely to use market-based than cost-based export pricing when:
the competitive intensity of the export market is high; customer sophistication is high; the
regulatory intensity of the export market is high; foreign currency volatility is high; and
the inflation rate in the export market is high.

Export pricing impLementation

Day-to-day price management involves tactical moves that allow the firm to combat or
take advantage of anomalies within the export market. Export pricing implementation
comprises the degree of coordination the firm seeks in pricing across markets and the
choice of currency used in price quotations.

Price coordination. Within the international environment, a great deal of pressure is being
placed on firms to align or coordinate their prices (Diller and Bukhari, 1994). One of the
primary reasons for this pressure is gray market imports. Defined as selling trademarked
products through channels not authorized by the trademark holder (Myers, 1999; Duhan
and Sheffet, 1988), gray marketing is in effect a type of arbitrage brought about by
inflexibility in the face of price and exchange-rate fluctuations across markets. The
volume of gray market imports is significant, particularly in premium products and
brands (Assmus and Wiese, 1995; Cavusgil and Sikora, 1988). The situation sometimes
results from the unavailability of goods in certain markets and the ease of product
movement across borders, but most often the cause is a substantial price difference
between or among national markets (Myers, 1997). The problem is aggravated, as the
firm's presence in economically diverse markets increases and as the margin between
prices in domestic and adjacent markets tempts unauthorized sellers to cross borders and
sell products at higher prices than at home (Assmus and Wiese, 1995). Firms attempt to
coordinate their product prices uniformly across all markets in order to curtail gray
market imports. This approach is difficult, however, when inflation or devaluation of
local currency results in prices beyond the purchasing power of indigenous customers but
not those in a neighboring economy.

Customer satisfaction can be better met by adapting the product to an individual market
(Douglas and Craig, 1989), but the costs of adaptation and the advantages gained will
influence the export price of the product (see Samli and Jacobs (1994)). The
standardization/adaptation issue has long been debated in terms of market coverage,
capacity utilization, specialty products, and market niches (Samiee and Roth, 1992).
Product adaptation incurs costs in developing alternative variations (Cavusgil et al.,
1993), and these must be reflected in the export price. Managing a series of adapted
products in multiple markets calls for pricing decisions to be made close to those
markets, which decreases the effectiveness of a pricing coordination strategy.
Concurrently, sophisticated customers familiar with competitive prices and experienced
in purchasing will demand quick pricing decisions at the market, not upper--
management, level. Thus:

P6. Management is more likely to seek price coordination across its export markets when:
foreign currency volatility is high; and product standardization is high.

Currency choice. With an increase in the global sourcing of raw materials, components,
and other products by firms, exporters are increasingly compelled to price their products
in non-domestic currency denominations (Samiee and Anckar, 1998). The choice of
currency, then, has become increasingly critical in securing export contracts, as well as
maintaining or increasing export market share (Samiee and Anckar, 1998; Donnenfeld
and Zilcha, 1991)[3]. The currency a firm chooses to use in its export transactions is
determined by a number of variables. Along with product cost, the degree and caliber of
competition are perhaps the most important factor (Abratt and Pitt, 1985), and most
companies will adjust price or other elements of their total offer in order to meet
competitive situations (Farley et aL, 1980; Lecraw, 1984). This means that flexibility
regarding the currency used for the transaction is critical to remaining competitive. In
many cases the exporter has no choice but to offer currency terms comparable with those
of competitors (Diamantopoulos and Mathews, 1994; Piercy, 1981). This is evident in the
statement of an exporter of machinery to Latin America:

In highly competitive markets, we'll price our goods in whatever currency the customer

This is consistent with past studies (e.g. Javaid, 1985) that, in highly competitive markets
the buyer's negotiating position improves, and exporters are faced with increasing
demand to invoice importers in their domestic currencies.

In their recent study of currency choices among firms, Samiee and Anckar (1998) note
that firms dealing in currencies other than their domestic currency face greater financial
risks. Greater involvement and experience in exporting afford the firm better knowledge
of markets, customers, and risks involved in dealing with local currencies. As
management develops more skill with complex exchange rates, it can price exports in
various currencies, as dictated by the customer. Experienced exporters are inclined to use
currencies other than that of their home market in their trading (Cavusgil, 1988). Also, in
markets with high foreign currency volatility, the exporter may be forced to choose
currencies other than those customarily used (e.g. Bilson, 1983), making it easier for the
buyer to purchase products with more affordable, or available, currencies. Therefore:

P7. Management is more likely to use third-country and/or indigenous customer

currencies in export pricing when: the competitive intensity of the export market is high;
the international experience of the firm is high; and foreign currency volatility is high.

The relationship between EPS and export Performance

Aaby and Slater (1989) show that an export marketing strategy and management's ability
to employ it determine export performance. When this strategy is aligned with the export
venture as defined by the characteristics of the firm, product, industry, and export market,
positive performance can be expected (Anderson and Zeithaml, 1984; Venkatraman and
Prescott, 1990). Consistent with Cavusgil and Zou (1994), export performance is
conceived at the product-market level, and it incorporates both economic (e.g. sales and
profits) and strategic (e.g. competitive response, market expansion) outcomes in the
market. Accordingly, export marketing performance refers to the extent to which a firm's
economic and strategic outcomes are enhanced when selling a product in a foreign

As noted, the use of purely cost-based pricing strategies has been associated with
substandard firm performance. Managers who see pricing as no more than a mark-up
over costs may price the product out of the market. This is particularly true in
international environments, where rapidly changing market conditions can result in price
increases beyond the control of management (Myers, 1997). Furthermore, White and
Niffenegger (1980) found that pricing decisions are centralized in firms using cost-based
strategies, which implies a degree of rigidity and inertia in adapting to market changes
and the lack of an organized market research program.

Several authors (Douglas and Craig, 1989; Quelch and Hoff, 1986; Walters and Toyne,
1989) have described competitive pricing strategies as one way in which firms can adapt
offerings to fit the demands of foreign markets. This theme of increasingly competitive
export environments is prevalent within the international marketing literature, and
following this perspective it is expected that export performance is positively influenced
by competitive export pricing. Similarly, and following Porter (1980, 1986) and Ohmae
(1990), among others, an increasingly competitive and dynamic international business
environment will reward flexible and responsive marketing strategies rather than more
static practices. This flexibility calls not only for a change in traditional pricing
philosophy but also for frequent pricing policy reviews to monitor market and competitor
conditions. A competitive environment mandates a focus on customers' satisfaction and
their desire for the use of certain currencies in transactions. As international business
transactions increase world-wide, customer sophistication will also increase, dictating a
more buyer-oriented approach to marketing export products (Kotabe and Helson, 2001).
This mandates greater autonomy of pricing decisions within the salesforce and other
entities close to the point of purchase, and less centralization of upper-level management
pricing decisions.

Finally, as firms proactively or reactively enter multiple export markets to enhance their
competitive position, the issue of gray market imports must be addressed (Assmus and
Wiese, 1995). The rapid influx of businesses exporting to multiple markets (Aaby and
Slater, 1989), and the demand for increased sales volume to take advantage of scale
economies (Porter, 1980), will mandate greater vigilance in coordinating prices to avoid
unauthorized imports. The greater the coordination, the greater the profits enjoyed by the
exporting firm. The exploratory interviews also revealed some relevant insights on the
choice of invoiving currency. While most managers avoid using importer or third-country
currencies, some companies tolerate greater risk in order to gain competitive advantage
over rivals. The ability to utilize multiple currencies also affords the firm some flexibility
by proactively managing exchange rate shifts (Samiee and Anckar, 1998). Plus, as
overseas buyers increase their understanding of cross-national trade, they may become
less willing to bear currency risks themselves, particularly in highly competitive markets,
where exporters must diligently protect key accounts from other firms. A willingness to
invoice in currencies other than the exporter's only increases the chance of enhancing
customer portfolios and increasing sales. All this suggests:

P8. Performance of the export market venture is enhanced when: the firm's use of price as
a competitive tool is high; the use of market-based pricing is high; the degree of senior
management control of pricing is low; the degree of price flexibility is high; the degree to
which management seeks price coordination across country markets is high; and the use
of customer-preferred currency in pricing is high.

Conclusion and directions for future research

Traditionally, many firms have treated the pricing of exports as an afterthought.

Similarly, researchers have considered export pricing a minor aspect of overall pricing
strategy. How pricing enhances the competitive positioning of a product or the economic
success of an export venture has yet to be explored, despite general agreement that it is a
critical component of an export marketing strategy. Today, managers must take a more
systematic and proactive approach to setting prices for export markets, due to an
increasingly competitive global environment, a need for expansion into foreign markets
to augment market share and economies of scale, complex government regulations world-
wide, and gray market considerations.

This article sets the stage for a more analytical and deliberate approach to export pricing

* identifying relevant variables as antecedents to an EPS and developing a conceptual

framework for addressing their relationship to export performance; and

* advancing research propositions that should allow empirical tests of these relationships
in future research.

From a policy standpoint, the evaluation of both external environmental factors and
internal organizational characteristics, as initially described by Cavusgil and Zou (1994),
is critical for managers exporting to overseas markets. They must understand that an EPS
is determined by a dynamic set of variables and that a successful venture requires
thoughtful and timely response to constantly shifting economic, competitive and
customer-related forces.

Future research can advance knowledge of export pricing in at least two ways. First, our
conceptual framework identifies a number of antecedent variables in the relationship
between pricing strategy and performance. Yet, the list of situational factors involved in
decision making is almost endless (Achrol et al., 1983). We have limited our attention to
those considered most relevant in an export context in order to create a generalizable and
manageable framework, but future studies may indicate others or a different emphasis.
Second, we have concentrated solely on the structural aspects of export pricing to upper-
and midstream customers in the value chain rather than to end-users. Future work could
focus on export prices from the perspective of ultimate customers.

At the operational level, research is needed on the complex interrelationship between

export pricing and performance as well as on the extent to which management strategy
choices and pricing practices are responsible for firm performance. Our study has
provided a foundation for exploration of:
* "best" practices in export pricing;

* the role of the firm, product, industry, foreign market, and other environmental factors
in setting EPS; and

* how managers should make decisions about export pricing.

It is hoped that scholars will respond to the call for more work in this important area. In
this context, Table I presented a list of relevant constructs, suggested measures, and
supporting literature. Empirical research along these lines would give us a more
comprehensive picture of the export-pricing environment and allow a more exact
evaluation of the relationship between EPS and performance.


1. Much of the discussion regarding pricing objectives of the firm is based on the work of
Diamantopoulos (1991), whose analysis and discussion of this complex area are by far
the most comprehensive within the management-oriented pricing literature (see also
Diamantopoulos and Mathews (1995, pp. 48-61)).
2. Here we view cost-based and market-based export pricing to be dichotomous variables.
While market-based pricing does often incorporate cost factors in price determination, it
is distinct in that market and customer related issues drive the determination of price.
Costbased pricing is driven solely by the underlying costs of the product.
3. When discussing the effects of foreign currency volatility on export pricing strategies,
we follow the work of Mathur and Loy (1984) and assume that the efficiency of the firm
is not such that currency pass-through problems are alleviated through the use of foreign
currency futures and other strategies.

4. This article posits that EPS is determined by internal forces, such as firm and product
characteristics, as well as external forces, such as industry and export market
characteristics. EPS mediates between these forces and export performance; it partly
determines the success of the venture. A significant amount of research has shown,
however, that several direct effects between internal/external forces and performance can
be expected. Cavusgil and Zou (1994) found that international competence, managerial
commitment, and the marketing decision variables have a direct effect on export
performance. Studies of export pricing also indicate that international competence and
managerial commitment will directly affect performance. Similarly, in the strategy
literature, environmental uncertainty (the degree of dynamism and unpredictability) has
been shown to affect performance (Miller and Droge, 1986; Zeithaml et at, 1988). Since
this paper concentrates on the EPS of the firm, we do not include these linkages in the
framework; however, it is understood that these relationships do exist.

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Matthew B. Myers

[Author Affiliation]
University of Oklahoma, Norman, Oklahoma, USA
S. Tamer Cavusgil

[Author Affiliation]
Michigan State University, East Lansing, Michigan, USA, and
Adamantios Diamantopoulos
Loughborough University, Loughborough, UK

Indexing (document details)

Subjects: Studies, Pricing policies, Exports, Multinational corporations,
Marketing management
Classification 9130 Experimental/theoretical, 1300 International trade & foreign
Codes investment, 9510 Multinational corporations
Matthew B Myers profile, S Tamer Cavusgil profile,
Adamantios Diamantopoulos
Author Matthew B. Myers
University of Oklahoma, Norman, Oklahoma, USA
S. Tamer Cavusgil

Michigan State University, East Lansing, Michigan, USA, and

Adamantios Diamantopoulos
Loughborough University, Loughborough, UK
Document Feature
Publication European Journal of Marketing. Bradford: 2002. Vol. 36, Iss. 1/2; pg.
title: 159, 30 pgs
Source type: Periodical
ISSN: 03090566
ProQuest 203736691
Text Word 12297
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