Financial implications of the Euro on cost-pricing decisions in the local export manufacturing industry

Abstract

After Malta joined the EU, the Maltese market changed from a small closed market to an open single market. Businesses must now anticipate the impact that the euro will have when setting the price, analysing its advantages and disadvantages. If they want to remain competitive in the global market, it is also important for them to determine a suitable pricing strategy to arrive at the price at which their product is most likely to appeal to potential buyers and what the market is most likely to accept, rather than set an arbitrary price. The main pricing strategies that the study will focus on are cost-plus pricing and target pricing. This study evaluates the financial implications that the euro will have on cost-pricing decisions in the local export manufacturing industry, in light of current theories and practices. The research carried out is intended to help provide in-depth descriptive evidence of the reasons why the fifteen companies interviewed adopt their current pricing policies, and how they think that the euro can affect their decisions. The main findings indicate that most Maltese exporters use target pricing as their main pricing strategy, and few of them have assessed the financial implications it will have on their pricing decisions. Most of the respondents did not show any real interest in an event of such importance as the adoption of the new single currency.