Reply to both posts on: What environmental influences on pricing currently affect U.S. firms looking to expand outside the US?

Post #1:

Some common environmental influences on pricing is competition and government regulations. For competition, it is important for companies to remain price competitive, meaning it is not significantly more expensive than other products so that consumers still purchase it. This can be particularly difficult for firms looking to expand outside of the US, because the firm will have an increased cost to export these products or an increased cost to put a manufacturing facility in a different country. For example, it is difficult for US firms to sell small toy products in China because they are produced and sold for cheaper by domestic companies in China. Additionally, if competition that already exists outside of the US that has a cheaper manufacturing cost and more natural resources, their products will be significantly cheaper than the imported one from the US firm.

Additionally, government regulation is extremely difficult when trading between different countries. Governments can impose tariffs and non-tariff barriers like quotas on external firms, limiting the product that is imported so that the company will have to raise their prices to maintain a profit, and will not be able to sell additional product.

Post #2:

There are several environmental influences on pricing decisions: currency fluctuations, inflation, government controls and subsidies, and competitive behavior. (Keegan and Mark, 2017) Currency fluctuations affect U.S. firms’ pricing decision when looking to expand outside the U.S especially when the trade relation between the destination country and the U.S. is not looking well. Recently, the escalated trade war between the U.S. and China has caused Chinese yuan to lower by 10%. (Olsen, 2018) That means for the same price labeled in US dollar product/service consumer would need to pay 10% Chinese yuan for it. 10% is a pretty big difference in price. Inflation has a similar idea behind it coming from consumer’s buying power. It is important to find the balance between pricing and inflation. This is also affected by the market-entry strategy whether the production is in the U.S. or globally. Government controls and subsidies are some restrictions to pricing as price ceiling and floor that sometimes hurts the pricing strategy especially when those restrictions are protecting local firms. This leads to the last but not least factor, the competitive behavior. Some of the things that competitors would do could increase their profit margin without changing sales price. This becomes more difficult for foreign companies to match such as a U.S. firm.