Multinational Corporate Pricing Strategy in the Developing Countries
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INTRODUCTION
THENEGLECT OF IN PRICING MARKETING STRATEGY
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individual products in that market are in fact generally low.6 In addition, during the past generation, marketing has emerged as a distinct profession with its own identity. This process of professionalization has facilitated the development of new techniques. Both because of changes in the market and because of professional self-differentiation, however, these new techniques often involved a movement away from the economist's traditional tools, with their stress on price. Furthermore, despite the neglect of pricing policy, demand for many consumer products in the less-developed countries has grown rapidly (albeit from a small base and limited to the relatively small share of the potential market discussed above). Rapid growth in markets has resulted from the high rate of growth of income and the high income elasticities of demand for most manufactured products. Also, in countries in which local production has replaced supply from importation, demand for the output of local producers has increased even more rapidly, as they have expanded their market share at the expense of imported supplies.7 In these conditions, it may not be surprising that little attention has been given to the possibilities of expanding markets by means of appropriate pricing strategy. Furthermore, marketing managers working in less-developed countries may feel that in fact they have little scope for pricing strategy. That is, firms may find it advantageous to make relatively minor tactical adjustments in price, in response to changing market conditions. Basically, however, price is determined as a mark-up over costs. Consequently, given the firm's present plant capacity-which is a major determinant of costs-and given the possibility of a quick response by oligopolistic market rivals, managers see little room for significant changes in current (real) prices. Such "mark-up" pricing policies may have an underlying rationality in more-developed country markets, where production runs are large and costs are low.8 Also, in conditions where firms have long experience and familiarity with local market conditions, ad hoc adjustments in mark-up pricing rules may bring them close to optimizing price.9 Neither of these conditions may hold, however, for multinational firms producing in the less-developed countries. Current pricing policies may also be begging an important question. Price may well be determined by cost. But in a world in which unit costs can vary with plant capacity, costs (and optimum scale of output) should be determined jointly with price, taking account of market possibilities. This brings us to the question of price elasticities of demand. The disinclination to accord much attention to questions of pricing strategy may in fact stem from an assumption, often implicit, that price elasticities of demand are in any case
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