Survival Objectives in difficult times like in case of recession for ship

Survival objectives in difficult times like in case

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Survival Objectives – in difficult times like in case of recession for ship building industries pricing may be used for survival i.e., sell at no profit or even at slight losses not covering fixed expenses just to tide over the difficult times, but it cannot be a long term tactic. Pricing Policies and Strategies These guide and direct pricing decisions Provide a framework within which decisions can be made. How to respond to competitive price threats in a mass market. New Product Pricing Strategy It is important to get the launch price right as later it may be difficult to correct. A low entry price may give wrong signal of low quality and hence may offer it as an introductory price off and later after acceptance bring it up. The other aspect is how competition will react to the price, a high price may invite more competitors to enter, a very high price may prompt customers to reject the product because of price sensitivity. 71
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PRICING Me too product – a new brand in a crowded market will get other established brands as a reference point to set price. Innovative product – a completely new product may not have a reference point like the very first domestic video cd. Product Mix Pricing Strategy A product which is part of a product range cannot be priced in isolation from the rest of the products. Thus when Maruti has to take a pricing decision for its 800 it has also to consider the prices of Alto, Zen, Wagon R so if it has to make some price change it may do so by adding frills. Managing Price Changes Prices are never static particularly for long periods. Competition, costs, governmental policies, changing customer habits, substitutes, all can force price changes. Price changes will have some effect on sales volumes. Initiating price cuts price cuts will have impact on profitability besides the likely response from customers/competitors. A ready recknor may be prepared to evaluate how much volume increase may be required to compensate for reduction in prices to make up the loss of absolute profits. Impact of price reduction on sales volumes price cuts may be prompted by Table no: 5.4 If price cut by (percent) If gross profit margin is (percentage) 10 percent 15 percent 20 percent 25 percent 30 percent Need an increase in unit sales of (percent) 1 percent 11.1 percent 7.1 percent 5.3 percent 4.2 percent 3.4 percent 2 percent 25 percent 15.4 percent 11.1 percent 8.7 percent 7.1 percent 3 percent 42.9 percent 15 percent 17.6 percent 13.6 percent 11.1 percent 72
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PRICING (i) Capacity utilization: where excess production capacity is available organization may be prompted to cut prices and sell more volumes to utilize capacity. (ii) Market dominance: if the organization enjoys a price and cost leadership position and is not likely to fall foul of competition it can take initiative to cut prices to squeeze out smaller players to get a better stronger hold on the market – like what Big Bazaar today is trying.
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