How to succeed with value-based pricing : A case study of how a Swedish OEM is working with price strategy in the context of globalization

Abstract: In today’s world, change is faster than ever with rapid technological development and increasing global competition. The effects of globalization have led to more intense international competition when competitors originate from different parts of the world. Thanks to the use of new information technology, transparency has increased and made it possible for customers to compare products and prices between suppliers and prices in different markets and also buy cross-border. This puts pressure on companies to differentiate and develop their competitive advantage. Pricing could be such an advantage. Organizations need to develop pricing strategies well adapted to meet these external changes and remain profitable. Value-based pricing strategy has proven to help companies to move away from discussions about pricing and instead focus on the unique value the company’s offerings can provide the customers. This is also the pricing strategy that creates the best opportunities to maximize the profit in every sales situation. Therefore, this study has investigated how OEMs work with value-based pricing strategy and pricing processes in the context of globalization and ICT.   This has been done by conducting a case study at the company Atlas Copco in Sickla, Sweden, that is market leader within sustainable production solutions. The case study consisted of interviews with, and a questionnaire sent out to, managers at Atlas Copco, Industrial Technique, General Industry, involved in the pricing process.   The results indicate that Atlas Copco strive to work with value-based pricing and are somewhat taken into consideration global trends affecting pricing and working internally with factors affecting pricing. Furthermore, the findings suggest that in order to use value-based pricing in the context of globalization, the company should state and implement a clear pricing strategy, decentralize pricing authority, provide the sales organizations with guidelines, training and communication platforms and work to move away from commodities.   The findings of this study have implication both in a theoretical and industrial aspect. From the theoretical aspect, the findings contributes to the existing research about value-based pricing, a research area which is usually fragmented and mostly describes what value-based pricing is, not how it is used, especially not in a global context. This study contributes with a case showing how OEMs are working with value-based pricing, taking into consideration both global trends and internal factors. From the industrial aspect, the results from this study give OEMs competitive advantage through following the findings about what internal and external factors to consider when working with their pricing strategy.