Companies are increasingly looking to adapt their pricing strategies and tactics to deal with macroeconomic volatility and shifting corporate mandates in Latin America.
As Latin America’s operating environment has become more volatile and bottom lines begin to receive more scrutiny from the corporate center, regional executives are focusing on how they can shift their pricing strategies to maximize profitability mandates while protecting volumes. FSG’s recent study Protecting Profits and Managing Costs: Pricing Strategies and Tactics for Latin America (clients only) focuses on the best approaches to manage pricing and maximize earnings in Latin America’s evolving operating environment.
In this study, FSG concludes that multinationals’ approaches to pricing strategy are often dictated by organizational constraints, in particular the degree to which regional teams have the capabilities to adjust prices in response to macroeconomic shocks. This depends in large part on how centralized both risk management and pricing strategies are within a given company.
Companies seeking to maximize the focus of local teams on executing a pre-determined market strategy often find that a centralized approach to pricing and risk management is optimal. By leaving the management of transaction and operational exposure to the corporate treasury, companies can help to ensure that local teams are not distracted by short-term fluctuations in the market environment.
However, a centralized approach to pricing and risk management often means that companies lose the ability to adapt pricing to local market conditions. This makes it more likely that an organization will leave money on the table or lose market share when adjusting prices.
To succeed, companies should ultimately seek to deploy a mix of hedging and operational strategies, coordinated across centralized and decentralized functions within the company. FSG’s study provides a set of best practices and case studies for companies to learn from and consider as they determine the optimal approach to pricing for their business in the region.