Lowering costs of goods

The important factor is that we can earn more profits if the manufacturing costs are lowered. Manufacturing in the third county is an attempt to reduce manufacturing costs and price escalation. Instead of locating factory in the U.S., if the company move it to the third company, it is beneficial to them. The impact is profound if we consider the hourly cost of skilled labor in a Mexican maquiladora is less than $3 an hour including benefits compare with more than $13 in the U.S. Eliminating costly function features brings the benefits for company be able to reduce the costs and maximize profits.

Lowering tariffs

The second factor of pricing tool is the lowering tariffs strategy. The companies intend to seek ways to lower the rate when tariffs account for a part of price escalation. For instance, some products can be reclassified into a different and lower classification. Therefore, it is important to research tariff schedules and classification criteria so that it can result in a lower tariff to enhance finance efficiency. Further, it may be possible to modify a product to qualify for a lower tariff within a tariff classification. Even if the product category is the same, the material and standard is different from the tariff rule, the lower tariff may be adapted to the product.

Lowering distribution costs

In addition, shorter channels can help keep prices under control. By having fewer middlemen and therefore reducing middleman markups, the company can keep lower distribution costs globally. Some countries levy a valued-added tax on goods as they pass through channels. Products are taxed each time they change hands. As a result, by taking lowering distribution costs strategy, the company can achieve the higher profits.