lnternational transfer pricing strategies for minimizing global income taxes

Optimal financiai strategies are criticai for long term survival in competitive international markets. Financial strategies pertaining to transfer pricing have become increasingly important as income tax authorities seek additional revenues through increased monitoring of company practices. In this first of two articles, optimal tax strategies are presented after reviewing the transfer pricing concept and the rationale underlying governments' increased focus on transfer pricing. In the second forthcoming article, we analyze the effect of government restrictions on optimal pricing strategies.

Scenario Planning and Evaluation of Pricing Strategies in the Portuguese Bulk LPG Market

Portugal has the largest LPG (Liquefied Petroleum Gas) share of primary energy demand in the EU (about 5%). Due to the increasing international cost of LPG in the last years and the high price sensitivity of the consumers the preference for substitute energy sources in new and existing consumers has been increasing. To select the kind of energy, some consumer estimate and compare the total costs while others follow agents (equipment sellers) recommendations. It takes time to build agents perception about the most advantageous source of energy, which is seen as an important resource that drives client resource accumulation and retention. Marketing strategies have to take into consideration some market dynamic effects derived from the accumulation and depletion of these resources. A simple system dynamics model was built, combined with Economic Value Added framework, to evaluate some pricing strategies under different scenarios of LPG international cost.

Scenario Planning and Evaluation of Pricing Strategies in the Portuguese Bulk LPG Market

Portugal has the largest LPG (Liquefied Petroleum Gas) share of primary energy demand in the EU (about 5%). Due to the increasing international cost of LPG in the last years and the high price sensitivity of the consumers the preference for substitute energy sources in new and existing consumers has been increasing. To select the kind of energy, some consumer estimate and compare the total costs while others follow agents (equipment sellers) recommendations. It takes time to build agents perception about the most advantageous source of energy, which is seen as an important resource that drives client resource accumulation and retention. Marketing strategies have to take into consideration some market dynamic effects derived from the accumulation and depletion of these resources. A simple system dynamics model was built, combined with Economic Value Added framework, to evaluate some pricing strategies under different scenarios of LPG international cost.

Pricing strategies of the supermarket sector

The food retail industry is a very competitive market. Supermarkets use a combination of price, quality of products and service to lure consumers and increase their profit. This work project draws upon both empirical and theoretical literatures to understand the different pricing strategies that the supermarket sector uses. Everyday Low Price, Promotional, Zone Pricing and Loyalty Programs are the most common pricing strategies in this industry. By using data from the Portuguese supermarket leader – Pingo Doce - , this work project conclude that Pingo Doce uses a combination of Loyalty Program and Promotion to attain the desired outcomes

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case

We analyze a finite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon. We show that when the demand model is additive, the profit-to-go functions are k-concave and hence an (s,S,p) policy is optimal. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period. For more general demand functions, i.e., multiplicative plus additive functions, we demonstrate that the profit-to-go function is not necessarily k-concave and an (s,S,p) policy is not necessarily optimal. We introduce a new concept, the symmetric k-concave functions and apply it to provide a characterization of the optimal policy.

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: the Infinite Horizon Case

We analyze an infinite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are identically distributed random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to maximize expected discounted, or expected average profit over the infinite planning horizon. We show that a stationary (s,S,p) policy is optimal for both the discounted and average profit models with general demand functions. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period.

The impact of the internet on the pricing strategies of the European low cost airlines

This study seeks to analyse the price determination of low cost airlines in Europe and the effect that Internet has on this strategy. The outcomes obtained reveal that both users and companies benefit from the use of ICTs in the purchase and sale of airline tickets: the Internet allows consumers to increase their bargaining power comparing different airlines and choosing the most competitive flight, while companies can easily check the behaviour of users to adapt their pricing strategies using internal information. More than 2500 flights of the largest European low cost airlines have been used to carry out the study. The study revealed that the most significant variables for understanding pricing strategies were the number of rivals, the behaviour of the demand and the associated costs. The results indicated that consumers should buy their tickets before 25 days prior to departure.

Managing the Pricing of Integrated Solutions in Export Partnerships

Little research has been conducted to guide the management of marketing variables, such as pricing, in systems business context. Furthermore, given that international partnering has become a popular mode of operation for SMEs, the objective of the current thesis was to explore the scantly researched topic of managing the pricing of integrated solutions in an export partnership. Specifically, the thesis synthesizes literature findings from the three areas of export pricing, systems business, and export partnerships. The empirical section of the study consists of a qualitative single-case study of a Finnish systems integrator that has recently launched its export operations. Primary data was collected by conducting four interviews of the case company’s managers and by organizing one group interview session. The study findings indicate that a systems integrator’s pricing strategy in an export partnership can be very multidimensional and dependant on international pricing environment and partner characteristics, that an export partnership appears to have unique implications on a systems integrator’s pricing process, and that customer value –based pricing strategies might be particularly suited to pricing integrated solutions.

Value based pricing and marketing of marine engines

Objective of the thesis is to create a value based pricing model for marine engines and study the feasibility of implementing such model in the sales organization of a specific segment in the case company’s marine division. Different pricing strategies, concept of “value”, and how perceptions of value can be influenced through value based marketing are presented as theoretical background for the value based pricing model. Forbis and Mehta’s Economic Value to Customer (EVC) was selected as framework to create the value based pricing model for marine engines. The EVC model is based on calculating and comparing life-cycle costs of the reference product and competing products, thus showing the quantifiable value of the company’s own product compared to competition. In the applied part of the thesis, the components of the EVC model are identified for a marine diesel engine, the components are explained, and an example calculation created in Excel is presented. When examining the possibilities to implement in practice a value based pricing strategy based on the EVC model, it was found that the lack of precise information on competing products is the single biggest obstacle to use EVC exactly as presented in the literature. It was also found that sometimes necessary communication channels are missing and that there is simply a lack of interest from some clients and product end-users part to spend time on studying the life-cycle costs of the product. Information on the company’s own products is however sufficient and the sales force is capable to communicate to sufficiently high executive levels in the client organizations. Therefore it is suggested to focus on quantifying and communicating the company’s own value proposition. The dynamic nature of the business environment (variance in applications in which engines are installed, different clients, competition, end-clients etc.) means also that each project should be created its own EVC calculation. This is demanding in terms of resources needed, thus it is suggested to concentrate on selected projects and buyers, and to clients where the necessary communication channels to right levels in the customer organization are available. Finally, it should be highlighted that as literature suggests, implementing a value based pricing strategy is not possible unless the whole business approach is value based.

The Pricing of Customized Industrial Products

The main objective of this study was to examine the pricing of customized industrial products in international markets, and to understand what pricing decision making consists of. Another purpose of the study was to identify the main factors that affect the pricing decisions of industrial companies, as well as the different pricing strategies industrial companies may choose when pricing customized products. The research was conducted as a qualitative single case study, and a Finnish industrial company specializing in indoor environment solutions, Halton Marine Oy, was used as the case company in the study. The primary data was collected through semi-structured theme interviews with the key management personnel of the company, and the results were discussed and analyzed in the light of the existing literature. The results of this study indicate that the pricing of customized industrial products consists of several dimensions, and is influenced by a large variety of factors that are both internal and external to the firm. In addition, it was found that the choice of a pricing strategy is largely dependent on the chosen segment, the product category, and the stage in the product life cycle. The results also suggest that customizing companies should consider using the value-based pricing orientation, since customization is closely linked to customer value.

On the evolution of monopoly pricing in Internet-assisted search markets

This study examines the evolution of prices in markets with Internet price-comparison search engines. The empirical study analyzes laboratory data of prices available to informed consumers, for two industry sizes and two conditions on the sample (complete and incomplete). Distributions are typically bimodal. One of the two modes of distribution, corresponding to monopoly pricing, tends to attract such pricing strategies increasingly over time. The second one, corresponding to interior pricing, follows a decreasing trend. Monopoly pricing can serve as a means of insurance against more competitive (but riskier) behavior. In fact, experimental subjects who initially earn low profits due to interior pricing are more likely to switch to monopoly pricing than subjects who experience good returns from the start.

Defining the links between retail price strategies and price tactics

Retailers tend to become trapped in a price-promotion war where price issues are dealt with on a short-term basis, indicating almost solely tactical choices. Since price is the only part of the marketing mix providing direct revenues to the organisation, it should also be of strategic importance for the retailer. Not only in practice are price tactics often separated from pricing strategies, it is also the case in research where these are often studied in isolation from each other probably due to their individual complexity. This paper contributes to both the research area and practice by discussing these two complex areas together, and the essence of both strategy and tactics are defined. By considering the planning horizon for the retailer this paper further contributes by defining the links between price strategy and price tactic. The conclusion shows the importance of clearly establishing which analytical level is being analysed.

Active Learning and Dynamic Pricing Policies

In this paper, we address the problem of dynamic pricing to optimize the revenue coming from the sales of a limited inventory in a finite time-horizon. A priori, the demand is assumed to be unknown. The seller must learn on the fly. We first deal with the simplest case, involving only one class of product for sale. Furthermore the general situation is considered with a finite number of product classes for sale. In particular, a case in point is the sale of tickets for events related to culture and leisure; in this case, typically the tickets are sold months before the event, thus, uncertainty over actual demand levels is a very a common occurrence. We propose a heuristic strategy of adaptive dynamic pricing, based on experience gained from the past, taking into account, for each time period, the available inventory, the time remaining to reach the horizon, and the profit made in previous periods. In the computational simulations performed, the demand is updated dynamically based on the prices being offered, as well as on the remaining time and inventory. The simulations show a significant profit over the fixed-price strategy, confirming the practical usefulness of the proposed strategy. We develop a tool allowing us to test different dynamic pricing strategies designed to fit market conditions and seller s objectives, which will facilitate data analysis and decision-making in the face of the problem of dynamic pricing.

Faces of pricing and profit planning at the doorstep of the EU: government pricing policy in the innovative pharmaceutical sector in Turkey

The majority of research on the pharmaceutical sector has focused on an overall micro economic, medical oriented welfare issues, whereas the marketing management role of the innovative drug manufacturer has to a large extent been disregarded. Using the case of Turkey, through a series of in-depth interviews with highly innovative companies, other marketing management possibilities to develop pricing strategies and plan for profit are explored based on broader definitions of value and transparency. Our results suggest that pharmaceutical companies as well as governments might have a too narrow focus of value and underestimate the potential long term benefits of a broader approach to marketing management and long term relationships between the various stakeholders.