Price Escalation and Issues

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Price Escalation and Issues

According to Cavusgil, Knight & Riesenberger (2012), price escalation is the pricing discrepancy where goods are sold expensively in foreign markets as opposed to the local markets. It can be misleading to an international marketer in that it can make him or she think that the higher prices charged in the foreign markets implies higher profit, and, therefore, him or she may end up running at a loss. This owes to the fact that the higher charges imposed on the foreign goods cater for the high hidden costs.

Castro, Irizarry, Ashuri (2014) attributed shipping costs, longer distribution channels, middlemen, tariffs, warehousing and taxes such as the duty tax imposed on the foreign goods to the increased prices of the foreign goods. In addition, they argue that the need for higher profits can also drive the international marketers into increasing the costs of their products and thus the price escalation. It is, therefore, evident that the factors that lead to price escalation also affects the good sold in foreign countries or the exports.

There are several ways to counter price escalation. To begin, shopping locally helps in preventing price escalation as the locally produced goods are not subjected to many pric.............


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