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Week 5 Team Paper - The United States market for Larson’s...

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After a thorough review, our group has decided to utilize Larson’s current pricing strategy, which is cost-plus. Cost-plus pricing is the simplest pricing model, which allows companies to cover all costs associated with the production and sale of the products, and still make a decent profit. Larson would simply calculate the cost of manufacturing their product, and multiply it by a percentage that will allow them to achieve desired profit level needed to maintain the company. Cost-plus pricing is easy, but has two imperfections they may cause future problems. Cost-plus pricing does not consider the demand, which may be lower than expected and cause a loss in profit due to over manufacturing. Cost-plus pricing also does not consider projections, mean no way of verifying if customers will buy the product at estimated price.
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Unformatted text preview: The United States market for Larson’s product is highly competitive. It has been very hard for Larson Inc. to establish product differentiation. With the U.S. present economy woes, which ranges from the housing market, all the way through high unemployment rates, Larson Inc. must consider all of these conditions in order to stay successful. Plan A is to use cost-plus pricing. Plan B is to use competition-based pricing, which allows Larson Inc. to adjust its pricing to competitors pricing. It will also allow Larson Inc to overcome the products little distinctiveness from its competitor’s product, but take into effect that the product has elevated price elasticity, has some cross elasticity, and has no expectation that the demand of its product will rise. This strategy will allow us to stay competitive at all times....
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