For any company, global pricing is a lot more difficult to assess than domestic pricing because of international currency fluctuations, price escalations due to tariffs, price controls, transfer pricing regulations, and the different forms of payment methods across the world. This week Elizabeth and I will discuss how global companies such as the Kellogg Company have to consider the different fundamentals that steer the decision processes when it comes to global pricing.
Kellogg products are manufactured in 35 countries and marketed in 180 countries. Every country that the Kellogg Company conducts business in, they must use the local currency. This can affect profitability for the company because each currency is susceptible to sudden appreciation and depreciation. Exchange rates can affect how the Kellogg Company conducts their business. If exchange rates for example continue to be unfavorable for an extended period of time, the Kellogg Company may decide to export products to that company in a different way, limit products that are exported, develop a manufacturing plant in the country of business, or completely stop all exports to that country if they deem it unprofitable.
Kellogg can also decide to determine transfer pricing which is used to attribute a multinational corporation’s net profit (or loss) before tax to countries where it does business. All in all it helps the company adjust the pricing of the related goods between parties. In the case of Kellogg, pricing would be adjusted for their food products, while keeping in mind fairness for the country they are conducting business in and satisfying their local laws.
Another important aspect of Global Pricing is that each company must remain competitive in markets. The Kellogg Company must work hard to price its products to retain a profit but to keep in mind that the consumer must still be able to purchase their products at a reasonable price. With the success that the Kellogg Company has internationally it is clear that they are thinking of all parties when it comes to pricing and keeps their consumers coming back for more.