MGT518 Global Business Management

“Should Companies Marketing Their Products to International Markets Charge Lower Prices in Developing Markets than They Do in Developed Markets?”

 

This question has become more important in recent years as developed nations reach out in a variety of ways to lesser-developed ones. Examples include the G-20 nations providing the International Monetary Fund with $1 trillion in April of 2009 to assist developing nations experiencing economic problems, and the United States supplying greater levels of economic aid to developing nations in Africa.

 

Companies in developed nations have a no- blesse oblige to improve the standard of living for people in developing countries that are less fortunate than people in developed countries. Aside from this argument, if the standard of living in poorer nations is improved, there would be more income to purchase more products from companies in developed nations that are charging the lower prices. If the products include prescription drugs, life expectancies in developed countries will also be improved.

Companies have the major obligation to their stockholders, not to individuals in developing countries. Stockholders benefit if the prices of the stocks they hold increase in value. This is most likely to occur if profits are increased. Charging lower prices may jeopardize a company’s profits; lower prices may lead to allegations of dumping. Another option may be to give the products away. With the tax savings achieved, the company’s profits may exceed those obtained by selling the products at lower prices in developing markets.