chat off
Toll Free:
order now
most popular orders
Accounting Essays
Biology Essays
Environment Essays
Law Essays
Literature Essays
Management Essays
Marketing Essays
Music Essays
Religion Essays
Technology Essays

Paypal

 
 
← Pricing Strategy of Beauregard Textile CompanyEthics Assignment →
Live Chat

Pricing Strategy

Buy custom Pricing Strategy essay

Introduction

Swing and Steady both operate in a widget industry. Their cost structures are different because swing is a machine intensive entity that relies on machines for most of its operations and therefore incurs less direct cost. Steady is a labor intensive entity that basis its operations on man power and incurs more direct cost, but less fixed cost (Gregson, 2008, 33-45). Both of them want to enter a market segment that is not currently served by them and can potentially increase their sales volume.

Identification of the Pricing Challenges

Swing and study both wan to enhance their profitability level. They want to enter in new market segment to enhance their sale level and profitability.  Both companies have their own limitations with their pricing strategies (Gregson, 2008, 33-45). For better understanding, each requirement with their suggested solution is mentioned below separately.

Alternatives Considered and Suggested Solution

Requirement A

If either company could operate in the new market by charging lower price to new customers only then the profit earned by them is calculated as under

Swing (Table 1.1)

Increase

20%

40%

Additional sales(units)

1000

2000

Price/unit

8.5

8.5

Variable cost

2.5

2.5

Contribution/unit

6

6

Total contribution

6000

12000

Steady (Table 1.2)

Increase

20%

40%

Additional sales(units)

1000

2000

Price/unit

8.5

8.5

Variable cost

5.5

5.5

Contribution/unit

3

3

Total contribution

3000

6000

As can be seen from the calculations above, both the companies provide a positive contribution from the additional sales which will contribute to cover the fixed costs per month and therefore increase profitability because fixed costs accrue evenly irrespective of the increase or decrease of the number of units produced (Gregson, 2008, 33-45). Therefore it is recommended that both the companies should take this opportunity to enter into this market if they are successful to create a separate segment of the market and charge lower prices to additional customers.

Requirement B

 If we assume that both the companies are not able to segment the market and they have to charge equal to all the customers

Swing (Table 2.1)

Increase

0%(original)

20%

40%

Sales (units)

5000

6000

7000

Price/unit

8.5

8.5

8.5

Variable cost

2.5

2.5

2.5

Contribution/unit

6

6

6

Total contribution

30000

36000

42000

Fixed cost

35000

35000

35000

Profit/(loss)

(5000)

1000

7000

Break even

5833 units

5833 units

5833 units

Steady (Table 2.2)

Increase

0%

20%

40%

Sales(units)

5000

6000

7000

Price/unit

8.5

8.5

8.5

Variable cost

5.5

5.5

5.5

Contribution/unit

3

3

3

Total contribution

15000

18000

21000

Fixed cost

20000

20000

20000

Profit/(loss)

(5000)

(2000)

1000

Breakeven

6667

6667

6667

If the companies are not able to create a separate market and have to charge same prices to all the customers then for swing it is feasible to enter into the market as profit and loss analysis of swing shows profit for both levels of increases. But for steady it is not recommended as the analysis shows a loss. Only in case, steady enters into the market alone and gets a 40% increase in sales only then it can come out with a profit (Gregson, 2008, 33-45).

The answer to part (b) differs from part (a) because; in part (b) we assume that the both companies are not able to segment the market and have to charge same prices to all the customers and we have made all the calculations on this assumption. While in part (a) recommendations were based on the assumption that companies have created a market segment and charge lower prices to additional customers.

Requirement C

Based on the calculations and analysis made above and the condition that no company is successful in creating a market segment, it is recommended that swing must continue towards entering the new market by decreasing the prices. For steady a loss of 2000 is calculated, based on the data provided even if the sales increase by 20%. So it is not recommended for steady to enter the market by decreasing the prices.

Requirement D

Steady’s decision to cut the price was right to survive in the market because if it did not cut the prices it could have lost its 60% share which means 3000units (5000*60%) and this steady could not afford (Gregson, 2008, 33-45). Even if it is currently making a loss after reduction of price, this price reduction has maintained it in the market and it has a chance to make it back in the race. If steady tries to reduce the variable cost, then it can turn the loss into profit and this cost reduction can also help to enter in the new market.

Buy custom Pricing Strategy essay

Order Now
Orderhesitating

Related essays

  1. Ethics Assignment
  2. Hypothetical E-Business
  3. Pricing Strategy of Beauregard Textile Company
  4. Encyclopedia of Business
 
Email:
Password:
why we are #1
More than a decade of practical
experiences working in the essay
writing business
Sustained customer satisfaction
A broad range of custom writing services
Complete confidentiality and privacy
Delivering custom papers within 3 hours
A cohesive team of outstanding, experienced writers
Free revision (within 2 days)
Direct communication with the assigned writer
Free reference and cover page
current status
At least 9 live chat and phone operators available at a time
943 active/working writers
16544 registered custom writers
9 writers passed our interviews and language tests yesterday
670 total pages completed
99% satisfied customers
9.6 of 10 writing quality and professionalism score
discounts
order now
Type of assignment:
Writer level:
Timeframe:
Cost per page: ...
Number of pages:
Total without discount: ...
categories
Buying an Essay
Essays for Sale
Good Advice
Purchase Term Paper
Research Paper Ideas
Student's Life
Using Writing Service
Writing a Reflection Paper
Writing an Essay
Writing Papers Guide
Writing Term Paper
categories
Moral Values in Daily Life
Discussing Computer Games: Are They Detrimental?
Effective Ways to Structure an Honor Essay
How to Become a Successful Online Student
Tips on Writing Applications: CV & Resume

15% off your first custom essay order. Order now

PRICES
from $12.99/PAGE
X