Unit 1.Price I. Basic knowledge of pricing 1.Cost structure: cost of production, selling and delivery costs, taxes and tariffs. 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. Selling and delivery costs Fixed costs: salesman’s salaries Variable costs: packaging, transport, commissions, advertising and sales trip expenses, insurance premium. 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: make a profit/gain profit/net profit/total profit/profit after tax/profit before tax/profit margin/profit ratio/average rate of profit/to reap fabulous profit/ quick profits(easy profits)