International pricing and price management

For companies operating internationally, the optimal design of international pricing is of crucial importance. Targeted concepts and systematic approaches enable international sales and earnings potential to be fully exploited and potential risks, especially in the form of gray market risks, to be controlled and minimized.

Complexity and gray market risks as key challenges for international price management

Increasing internationalization and the associated development of different markets offer great opportunities for companies. At the same time, however, activity on international sales markets also harbors weighty risks and poses complex challenges for international price management.

Complex decisions

To be able to exploit international sales and earnings potential to the fullest, a large number of complex decisions have to be made in the context of price management. These decisions relate to the structure for international price differentiation and the extent of international price differences. In addition, price management also involves issues relating to internal transfer prices and the handling of different currencies and the resulting risks.

Gray market risks

With more pronounced international price differences, gray market risks or imports as well as professional and globally positioned purchasing organizations and structures represent relevant challenges for suppliers. Low barriers and trade barriers between different countries as well as increasing international price transparency make price differentiation more difficult and can even lead to dangerous price and profit erosion. Insufficiently thought-out or careless international price management can therefore become a dangerous risk factor for successful operation on international sales markets – this applies to almost all industries and to manufacturers and retailers alike.

Optimal international price control and setting through analytical approaches and suitable concepts

In the context of optimal international price control, strategic considerations (for example, growth or earnings focus) should first be made with regard to the relevant markets for further consideration. This should be accompanied by a systematic evaluation of different options and possibilities for international price differentiation (for example, country prices or price regions). In order to determine the structure as well as to assess potential price levels, systematic analyses and evaluations of various internal and external factors in relation to the relevant markets must be carried out

These include, for example, the competitive situation and competition, purchasing behavior and purchasing power as well as willingness to pay, cost aspects, legal framework conditions and, above all, the risk of possible gray market risks. Suitable analyses of internal data can also provide important insights into the current extent of international price differentiation or the international price levels of a supplier.

International price differentiation subdivided from uniform price to individual price

With regard to a concrete design of international price levels, a defined price corridor can represent the optimal solution in many cases. When defining the corridor, both market- and country-specific price-sales functions or optimum price levels and the resulting gray market risks can be considered and taken into account in combination in order to map the optimum from a global supplier perspective. On the one hand, this allows international sales and earnings potential to be exploited in the best possible way and unfavorable effects caused by potential gray market risks to be controlled.

An analytical view of international pricing as well as systematic control are therefore essential – in addition, it may be necessary to embed systems for international price control into already existing price logics. A systematic and analytical approach in conjunction with the application of targeted concepts and tools not only enables the complexity of international pricing to be mastered, but also allows the opportunities in the form of sales and earnings potential to be optimally exploited while simultaneously controlling the risks.

Project examples

Some of the projects we have worked on over the past years can be found here:

  • Introduction of a system for international price control at an internationally operating trading company
  • Design, simulation and implementation of a performance-based condition system and an international price corridor for a global brand manufacturer in the sanitary industry
  • Introduction of price regions and a logic for international price control for the initial business and aftersales business of a globally positioned mechanical engineering company
  • Development of a global pricing concept incl. price regions and price corridors for a manufacturer and dealer in the automotive aftermarket
  • Redesign and harmonization of international pricing for a global pump manufacturer
  • Design and implementation of international price control as well as simulation of possible gray market risks for a leading household appliance manufacturer

Optimize your international pricing and make the most of international sales and earnings potentials

We are always available to discuss your questions and challenges in international pricing and our suitable solutions by telephone or in person.