a. Frequency of Price Adjustments:

Firms in international competition differ in their ability and willingness to adjust prices in response to exchange rate changes. Some firms constantly adjust their prices for exchange rate changes. However, other companies feel that stable prices are a key ingredient in maintaining their customer base.

For example: A customer who have invested in machinery or other assets that operate best with supplies from the selling firm may value a contract that is fixed in both price & quantity. Similarly, the company may try to shield risk-averse customers by offering them prices fixed in their local currency for a certain period of time.

It is important also not to neglect the effect of frequent price changes on the exporter’s distributors, who must constantly adjust their margins to conform to the prices they pay. A number of firms now have different list prices for domestic & foreign customers in order to shield their foreign customers- especially those who sell through catalogues from continual revisions of overseas prices.