Factors That Affect The Pricing Decision

Factors That Affect The Pricing Decision In Finland, Lukka and Granlund (1996) observed that product cost information had its greatest importance in pricing, tendering and cost reduction decisions. In Italy, Cescon (1999) noted the most important uses of product costs were in cost reduction, pricing, make-or-buy and investment decisions, and its least important role related to decisions about distribution channels. Based on the above quotations, the costs of the product, its inputs including the amount spent on product development, testing, and packaging required to be taken into account when a pricing decision is made. Therefore, product costs are very important to make a pricing decision. In Australia, Joye and Blayney (1990) found that product costs were of major importance in the pricing decisions of the majority of companies. Therefore, cost is a  major factor that will affect pricing decisions. Variances between actual and  budgeted cost are inherent in business. Actual cost may not correspond  with budgeted cost, thus, it is important to have a thorough planning on  how can these cost affect company profit. Profit planning must take into account expected changes in cost. An   increase in cost with no corresponding change in selling price will   greatly affect company profits. Thus, the ability of the enterprise to limit suppliers bargaining power as to control the price of raw materials and production will be greatly influence the pricing decision. A products cost can be classified as fixed or variable costs, according to whether the volume changes. quoted by Dominiak Louderback, 1997. Fixed cost is the cost that  remains the same regardless of the level of production or the level of sales such as property taxes, rent, advertising, insurance, and utilities. Moreover, variable cost is the cost that changes in a directly proportion to changes in production volume such as sales commission, packaging, labeling and shipping costs. In many manufacturing companies, labor costs remain constant over wide ranges of output, so managers can consider labor as a fixed cost for many short-term output decisions. In addition, most overhead costs change only when managers decide to restructure the company, so these costs do not change as output fluctuates from day to day. The only cost that definitely does go up and down with production is the material cost. Hence, the cost of material will increase especially when economic downturn and the price of product will increase eventually. In spite of all, the product cost information was significantly more important when used directly in decision making. This may be because product cost information may be regarded as being more important when it is actually being used in a decision rather than as a guide for possible future decisions. Product cost information may be significantly more important in continuous production process manufacturing than in discrete-part and assembly manufacturing for product mix, output level and product discontinuation decisions because continuous production processes lead to the production of many different products for which a variety of product related decisions will need to be made. DISTRIBUTION(PLACEMENT) Placement under marketing mix involves all company activities that make the product available to the targeted customer, quoted by Kotler and Armstrong, 2004. With this, the easier the targeted customers can get the product, the more success of your company in distributing product. Distribution is getting your product to the consumer. Once you know your market area and have safely processed and packaged your product, you have to place it where your customer can buy it. On a general note, while planning placement strategy under marketing mix analysis, companies consider six different channel decisions including choosing between direct access to customers or involving middlemen, choosing single or multiple channels of distributions, the length of the distribution channel, the types of intermediaries, the numbers of distributors, and which intermediary to use based on the quality and reputation, quoted by Proctor, 2000. Therefore, distribution is important because it affects sales, profits and competitiveness. It can contribute up to fifty percent of the final selling price of some goods. Without distribution even the best product or service will fails. Author Jean-Jacques Lambin believes that a marketer has two roles which are organizing exchange through distribution and organizing communication. Moreover, distribution can be classified by channels, coverage, locations, transportation, logistics and others aspects. Physical distribution or Place must integrate with the other Ps in the marketing mix such as price, product and promotion. For example, the design of product packaging must fit onto a pallet, into a truck and onto a shelf, prices are often determined by distribution channels, and the image of the channel must fit in with the suppliers required positioning. You can see how Coca Cola further integrate the timing of distribution and promotion in the Hall Of Fame later. In fact, they see distribution as one of their core competencies. In addition, geographical pricing is setting different prices for a customer in different parts of the world which is includes shipping costs. Therefore, there will be difference price on the same product in differences country. Although within a country, the same product will be charged to different prices, which may be caused by the urban or metropolitan area, income distribution and others factors. Apart from that, distribution strategy is influenced by the market structure, the firms objectives, its resources and its overall marketing strategy. All these factors are addressed in the section on selecting Distribution Channels. The first strategic decision is distribution intensity which include of intensive, selective and exclusive distribution. Intensive distribution aims to provide saturation coverage of the market by using all available outlets. For many products, total sales are directly linked to the number of outlets used such as cigarettes and beer. Intensive distribution is usually required where customers have a range of acceptable brands to choose from. In other words, if one brand is not available, a customer will simply choose another. The second one is selective distribution which involves a producer using a limited number of outlets in a geographical area to sell products. The producer can choose the most appropriate or best-performing outlets and focus effort on them. Selective distribution works best when consumers are prepared to shop around or they have a preference for a particular brand or price and will search out the outlets that supply. The last one is exclusive distribution which is an extreme form of selective distribution in which only one wholesaler, retailer or distributor is used in a specific geographical area. The next strategic decision clarifies the number of levels within a channel such as agents, distributors, wholesalers, retailers, franchisees, direct marketing and others. In some Japanese markets there are many intermediaries involved. In the marketing channel of distribution in Japan, especially in the retail sector, the number of retailers had been increasing from 1950s to the beginning of 1980s consistently. However, it has begun to decrease in the beginning of 1980s, explained by Hisao Fujimoto. Companies such as Ford, Ferrari, Toyota, and Nissan use specific dealers to make their products available, whereas companies such as Nestle involve a whole chain of wholesaler retailers to reach its customers. In conclusion, distribution is playing a big role in the pricing decision. The business communities should place the product efficiently and effectively, and set a reasonable price for selling. There is some advice for the consumer, that is consumer should shop for the best price as they can find regardless of how long the levels of distribution and how far the place of selling the product from you. ECONOMIC CONDITION Economic environment of the country is an important factor affecting the pricing decisions. Inflationary and deflationary conditions will also affect the pricing decision of a company. Inflation is a rise in the average price level of goods and services in an economy over a period of time. Money loses purchasing power during inflationary periods since each unit of currency buys progressively fewer goods. Consequently, inflation also reflects erosion in the purchasing power of money which is a loss of real value in the internal medium of exchange and unit of account in the economy. Therefore, a company should decrease the price of product when there is an inflation so the consumer will be afford to buy it. On 20 July 1993, Alan Greespan, chairperson of the Board of Governors of the Federal Reserve System, testified before a congressional committee. He said: The role of expectations in the inflation process is crucial. Even expectations not validated by economic fundamentals can themselves add appreciably to wage and price pressures for a considerable period, potentially derailing the economy from its growth path. However, deflation is a decrease in average price level of goods and services in an economy over a period of time. While lower prices may seem ideal from a consumers point of view at first, but deflation leads to rising of unemployment and falling in production, a situation from which it is extremely difficult to recover. Therefore, a company should charge a higher price on product when selling it so that it can be able to pay for salary of employees and covered the production cost. On the other hand, the prices are increased in boom period to cover the increasing cost of production and distribution. To meet the changing economic conditions, several pricing decisions are available such as price can be boosted to protect profit against rising costs, price protection system can be linked with the price on delivery to current costs and emphasis can be shifted from sales volume to profit margin and cost reduction. On March 16 alone, five days after the earthquake and tsunami and as the nations nuclear crisis was worsening, United States investors put $700 million into Japanese Exchange Traded Funds, according to the data from Trim Tabs, an investment research organization. That was twice the previous largest daily inflow on record, in 2003. After the earthquake, investors waited for two trading days before acting. But on Wednesday, March 16, after stocks in Tokyo fell by about 10 percent, investors in the United States responded by moving heavily into E.T.F.s. One reason may be that Japanese stocks still have far to go in their recovery. Though the Nikkei 225 index in Tokyo has bounced back from recent lows, it is still down 9.43 percent since before the earthquake.

Bureaucracy and Public Policy

In most situations of dealing with government, people often find themselves experiencing communication with street-level bureaucrats who, despite of their comparatively low position, in many ways define the person’s further well-being. Street-level bureaucrats have a direct influence on the number of people participating in public programs, and it’s them who determines what number of people is going to receive certain benefits, or participate in some programs. This, their final decisions become vital for certain groups of society.The communication which occurs between bureaucrats and people in such situations creates the public policies which all the citizens experience when dealing with government. A very important issue concerning bureaucracy still remains understanding the mechanism of decision-making by street-level-bureaucrats, for it appears a much more difficult problem than it seems. As Brehm and Gates state, despite a large number of literatures sources on the point of decision-making by bureaucrats, it still remains uncertain what real reasons influence their behavior [1].Due to the complexity of decision-making by street-level bureaucrats, different approaches have been suggested towards this matter. Various authors suggest their own solutions of the problem. The first approach is connected with economics, while the other one deals with public administration and organization theory. According to the behavioral theory of choice, bureaucratic decisions are the function not only of rational decision-making, but as well of all the variables which might influence the decision-making in the process.This can occur in situations when cognitive abilities of decision-makers fail them in the situation of uncertainty, and they become unable to make rational decisions. One of the main economists who have carried out the research of decision-making by bureaucracy were Brehm and Gates in their work â€Å"Working, Shirking, and Sabotage: Bureaucratic Response to a Democratic Public†, and Michael Lipsky â€Å"Street Level Bureaucracy: Dilemmas of Individuals in Public Services†. John Brehm and Scott Gates in their work were dealing with the problem of the types of bureaucratic decisions.As far as authors have found out, the decisions which the bureaucrats make are divided into 3 categories: working, shirking, and sabotage, which are very different in their descriptions. The main criteria is the matching the supervisors’ goals by the street-level bureaucrats in their decisions. In the category of â€Å"working†, the bureaucrats completely answer the goals which their supervisors put in front of them, and this is the most efficient decision-making for them.In the case of â€Å"shrinking†, the bureaucrats direct some of their efforts towards recreation or any other activities which have nothing to do with the goals set for them by the supervisors. The category of â€Å"sabotaging† is the leas t efficient because in this case the bureaucrats choose the goals which completely differ from the goals which their supervisors set for them, and that is why they can often fail to achieve the outcome which the supervisors would like them to achieve [1].According to the analysis of the mentioned categories, Brehm and Gates come to the conclusion that in many cases it’s impossible for supervisors to coordinate the actions of street-level bureaucrats, and thus the public policy which they carry out on a high level might appear very different from the policy which is actually provided on the lower levels in which the actual interactions of people with government occur.It means that the efficiency of the government policy becomes much lower in the case of street-level bureaucrats’ shirking and sabotaging because they don’t achieve the goals set for them by higher officials. The connection between the bureaucrats of higher and lower levels does exist, but it’ s much weaker in reality than it appears in theory, so many decisions might simply not reach the lower level.As far as the empirical evidence shows, the main argument in decision-making by street-level officials lies not in the instructions which they get from the top but from their own preferences, or the preferences which other bureaucrats have. However, here lies the crucial point of the analysis: lower-level bureaucrats have their own interests which they want to follow, but those interests turn out very close to the interests of high-level officials, and thus the actual public policy which is provided in the country becomes very close to the policy which was elaborated in the high level of government.This means that according to Brehm and Gates, by understanding the policy-preferences of the bureaucrats, we are able to predict the decisions they will make in different situations. Michael Lipsky in his â€Å"Street-Level Bureaucracy: Dilemmas of Individuals in Public Servicesâ €  also investigates the problems of bureaucrats behavior in relation to their customers, and decision-making by bureaucrats of low level in relation to the instructions they get from higher officials.According to the author, the mentioned issues are very important because â€Å"†¦in delivering policy street-level bureaucrats make decisions about people that affect their life chances. † [2] Michael Lipsky defines one of the main reasons of the importance of bureaucrats’ behavior in the fact that â€Å"†¦they play a critical role in regulating the degree of contemporary conflict by virtue of their role as agents of social control. Citizens who receive public benefits interact with public agents who require certain behaviors of them† [2].When investigating the main aspects of bureaucrats’ decision-making, Michael Lipsky believes in rational decisions of bureaucrats: â€Å"There is every reason to think that the general evaluations of social wo rth that inform the society will also inform the decisions of street-level bureaucrats in the absence of strong incentives to the contrary† [2]. Unlike Brehm and Gates, Michael Lipsky focuses not on the relationship of higher and lower level bureaucrats but on the importance of discretion in this matter.If Brehm and Gates tend to analyze the main categories of bureaucrats’ decision-making through the prism of their working, shrinking, and sabotaging categories, Michael Lipsky devotes his attention to the analysis of the necessity of discretion in making decisions. He finds the main reasons of that in the fact that street-level bureaucrats cannot learn by heart all the instructions which they were given and carry them everywhere, or decide every matter in the same way not regarding the difference of cases, or not to take into consideration a personal impression of a person.The discretion is very necessary in order to carry out the right decision because only the particul ar official investigating the particular case can make the right decision based on his knowledge of instructions and his general impression. In case of following his personal impression of interaction with a client, the bureaucrat doesn’t simply sabotage or shrink, but makes the only right decision in the particular case. Michael Lipsky argues that there are some practices which commonly contribute to routine control of clients.One of them is that clients are separated from the officers by certain desks in order to minimize the personal conflict. There are no comfortable sofas in such places, either. Another practice is isolating one client from another one for them not to know what is going on with others in the same position. It’s also important to mention that street-bureaucrats carry out special sanctions for those who disobey the order of the procedure. The investigations have shown that it’s impossible to conclude the general criteria for decision-making b y street-level bureaucrats.Brehm and Gates investigate the subject from the point of view of interactions between higher and lower level officials in the general outcome of the public policy, and argue that at the end, the preferences of the officials turn out the same. Michael Lipsky makes a point that discretion is very important in decision-making, and the influence of higher officials and instructions is minimized in this situation. Bibliography. 1. John Brehm and Scott Gates. â€Å"Working, Shirking, and Sabotage: Bureaucratic Response to a Democratic Public†. 2. Michael Lipsky. â€Å"Street-Level Bure

Minny from the Help Essay

In the book â€Å"The Help† by Katheryn Stockett the author portrays Minny is one of the primary women representing â€Å"The Help†, the black women that make their employers life so nice and comfy. In Jackson the help or the maid as they are also called are expected to be obedient and respectful. Minny is the opposite of that. Minny is a bossy, hot headed maid who is unable to keep a job because of her mouth. She always states her mind and does not hesitate to sass-mouth anyone that crosses her. Her home life is difficult because of the fact that she has five children and a husband. Her marriage with Leroy is complicated since he often gets drunk and beats on her, and it is hard for Minny to look past this awful characteristic of Leroy because she is in love with him. Because Minny is courageous, fearless and loyal nothing can knock her down. Minny is a loyal person that worked for Miss Hilly’s mother, Miss Walter, throughout the beginning of the novel. They wanted Minny for a maid because she was â€Å"bout the best cook in Hinds County maybe, even all a Mississippi. But when Miss Hilly sends Miss Walters, her mother, to the old folks home and tells Minny that she needs to work for her. Minny does not accept so Miss Hilly goes out and tells her friends how Minny is a thief so she would have no choice but to work for her. Minny gets so outraged that she gives Miss Hilly that horrible pie. As fearless as Minny is she does not hesitate on taking action when someone crosses her. In the book â€Å"The Help† Miss Hilly crosses Minny by making everyone believe that Minny stole from her. Minny decides that she has had enough of Miss Hilly and that she needs to teach her a lesson so she puts it on herself to get payback. Minny as a way to get back at Hilly baked a cake with poop in it and fed it to Miss Hilly. Hilly didn’t even notice until Minny said â€Å"eat my shit†. As tension rises between Hilly and Minny. Minny decides to participate in the book, talking about the daily life of the help, since she has nothing to lose. As an act of courageousness Minny puts herself in danger by cooperating on the book as she puts her daily life on paper. But in Jackson that is a punishable crime because it is considered a rights movement and it is frowned upon. Since the maids are tired of being mistreated by the whites and having unfair laws they are ready for change. They are hoping to open everyone’s eyes so they can see how horrible African-Americans are being treated and Minny doesn’t hesitate on trying to accomplish that. So after she thought about it â€Å"every time we meet, I complain. I moan. I get mad and throw a ot potato fit. But here’s the thing: I like telling my stories. † Minny’s courageousness and actions influence major changes in Jackson, Mississippi. As an act of fearlessness Minny tamed Hilly without knowing it. By Minny being loyal she got respect from almost everyone. She has been through so much which has made her a better person.

International Trade and The Global Economy - 1018 Words

Free Trade International trade links countries to the global economy (Vollrath, 1991). The global economy needs free trade. Countries need free trade. Trade with other countries occurs at some level in every country globally. There may be some indigenous tribes within some countries that can lay the claim that they are self-sufficient, however, there is not a single country that can say the same. Proponents of an open trading system contend that international trade results in higher levels of consumption and investment, lower prices of commodities, and a wider range of product choices for consumers (Carbaugh, 2009, p26). Free trade is necessary. How do countries decide what to import and what to export? Comparative Advantage†¦show more content†¦Classical Trade Optimism Countries and governments are always looking at the economy both internally and externally. With current economic conditions within the United States and the world, economists are questioning free trade more frequently than when times are good. Economic development shapes the patterns of world trade. Education, technical skills, income, and natural resources, such as land, water, and climate, determine what countries will produce and trade. Low-income countries often specialize in industries that use large numbers of unskilled workers. High-income countries concentrate production in areas that take advantage of their abundance of highly skilled labor (Vollrath, 1991). World trade plays an important role in how stable the economy is. Imagine if the Unites States allowed more oil exploration and actually had enough oil to sustain our nation and also to start to export the commodity. How would the world economy change? If free trade changes, the world economy would adjust. Countries would find other alternatives for import and export of goods to ensure they are able to stay competitive. Conclusion What if free trade as the world knows it changed? What would the implications be? Would all countries still exist as we now know them, or would new leaders in the global economy emerge? Over the years, economists challenge the status quo - the theory of comparative advantage. Perhaps now is the perfect time toShow MoreRelatedThe Global Economy and International Trade1357 Words   |  6 Pagesï » ¿The Global Economy and International Trade What Is International Trade International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. 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