The major pricing issues covered in this chapter include the determinants of price, pricing strategy, how foreign prices are related to domestic prices, price escalation, the elements of price quotation, and transfer pricing.

Several factors must be taken into consideration in setting a price, including cost, competitors’ prices, product image, market share/volume, stage in the product life cycle, and the number of products involved. The optimum mix of these ingredients varies by product, market, and corporate objectives. Price setting in the international context is further complicated by such factors as foreign exchange rates, different competitive situations in each export market, different labor costs, and different inflation rates in various countries. Also, local and regional regulations and laws in setting prices have to be considered.