...Discuss the main factors affecting product pricing in the UK? The Oxford English dictionary defines price as “ a value that will purchase a definite quantity, weight, or other measure of a good or service”. Simply put, the price of an object represents the overall demand for that product at a specific time. However, every firm had a different ideology about price and they way they set price. One of these main factors that affect price is the actual objective of the firm. Traditional theory suggests that firms will charge a profit-maximizing price where price is determined when marginal cost equals marginal revenue. They operate to seek a maximum return on the investment and costs they have input. The diagram below shows how firms produce at the profit maximisation point (MC=MR) and what costs they incur (point C). It also shows that most firms that follow a profit maximizing strategy incur a profit (price is greater than cost) . Figure 1 From Wikipedia.org Figure 1 From Wikipedia.org Although profit maximization looks like the most viable business objective that a firm can adopt, the majority of firms tend not to follow it. Research done by economist Shipley in 1981 states that “of 728 firms studied only 15.9% are true profit maximizers” (Sloman, Wride (2009). Economics. 7th ed. London: Pearson Education. p7.). Baumol in 1959 and Williamson in 1963 stated that this was because managers were more focused on sales revenue since their salaries were matched with how much was...
Words: 1402 - Pages: 6
...Discuss factors affecting product pricing in the UK. Product pricing in the UK is dependent on several factors. Market structures such as monopoly and oligopoly play a major part in setting price. Market structures can then influence the objectives and behavior within a firm (Sloman & Wride, 2009). This can lead to the use of different pricing strategies, thus having varied effects on the level of price set. Traditional theory suggests that a firms’ main objective is profit maximization. Therefore, prices will be set in line to meet this objective. A monopoly is defined as one dominant firm in the industry. In theory, a monopoly will have inelastic demand due to no available substitutes. Therefore the firm will be a “price maker”. They can use their market power to control price and raise it to a level where price is greater than marginal cost (Sloman & Wride, 2009). Average cost Marginal cost Average revenue Marginal revenue Output Price 0 Q1 P1 Average cost Marginal cost Average revenue Marginal revenue Output Price 0 Q1 P1 Source: Adapted from Sloman & Wride, 2009. Fig.1. Diagram shows that a profit maximizing monopoly has the ability to profit maximize where marginal cost equals marginal revenue, and will therefore produce at output (Q1). Hence they will charge price (P1) that consumers are willing and able to pay for Q1. At price P1, the monopolist is making excess profit (highlighted). In perfect competition firms...
Words: 1173 - Pages: 5
...Discuss the main factors affecting product pricing in the UK (1000 words) Two surveys on the price-setting behaviour of UK firms published by the Bank of England in 1996 and 2008 concluded that the price, the amount of money expected, required or given for a certain level of output, was most often set as a result of market conditions. The same report however found that the second largest price differential was the objective of the specific firm surveyed, and thus product pricing in the UK can be seen to be determined primarily by the objectives of its firms, which are bounded by the differing market structures under which they operate. In the UK these dominant structures are monopolistic, oligopolistic and perfectly competitive, within which there are differing degrees of price setting ability and inter-firm competition, both of which influence the individual objectives the firms choose to pursue. As witnessed in recent years with the impact of the global recession however, all markets are vulnerable to external shocks to their product pricing. The classical theory of the firm assumes that they will pursue the objective of profit maximisation. As Milton Friedman put it in his 1970 article, ‘‘There is one and only one social responsibility of business - to use its resources in activities designed to increase its profits so long as it... engages in open and free competition without deception or fraud’1. Within a profit-maximising objective, the price charged will still be...
Words: 1233 - Pages: 5
...Product pricing is the price fixed upon a product by producers or suppliers to achieve sales in order to gain profit. There are a number of factors affecting product pricing in the UK. The first factor is the structure of the market. Oligopoly is a type of market that can be seen in the UK, for example, electricity and gas supply industry in Britain. Oligopoly is a market structure where there are few enough firms to enable barriers to be erected against the entry of new firms. Firms will come together (collude) and try to maximise their joint profits either by a formal agreement or tacit. However, formal agreements are illegal in the UK and it may also be unstable to due incentive for individual member firms to ‘cheat’. Non-collusive oligopoly is when firms do not collude and work independently for their own businesses. Firms are, however, interdependent when it comes to pricing policy. There is a variety of models to explain non-collusive oligopoly. The first model is the Cournot model where one firm changes its output, assuming their rival firm will keep their output fixed. There is also the Bertrand model which is when one firm changes its output in assumption that their rival firm will keep their prices fixed. Lastly, the kinked demand theory shows how price reduction of a firm is followed by others but not an increase in price. Figure 1 shows the kinked demand diagram but it does not show how price P1 and quantity Q1 came to exist. Figure 1 Another type of market...
Words: 1160 - Pages: 5
..."Discuss the main factors affecting product pricing in the UK". • Product and price: one of the 7 ps • Pricing of a product is extremely crucial for a business because “the price of your product can either break or make your business”[i] • Examples of any 2 companies where pricing has helped in it’s success and other where it has caused a major downfall: Wal-Mart have gained and retained leadership position in its industrysimply because of their unique pricing strategy. They devised a unique pricing strategy that set them apart and gave them competitive edge.[ii] • There are several factors that need to be taken under consideration before deciding your product pricing strategy. • Intensity of competition/ type of market structure. The 3 main market structures in UK. Perfect competition, monopoly, oligopoly. Selling a product with a high profit margin would obviously be any entreneurs’ wish. However this will not be possible in perfect competition but will only work in a monopolistic market. Thus while determining it’s product pricing strategy one of the major factors is the level of competition. For example if a rival firm sells the same product at a lower price then this could have an adverse effect on your sales. The greater the number of close substitutes, the more flexible one’s product pricing strategy will have to be(details. Example. Graph). It is often assumed that setting lowest prices for your product as compared to your rivals is the easiest...
Words: 689 - Pages: 3
...Strategic marketing of Mahindra Reva 1. Introduction After the phase out of G-Wiz from the UK market in 2011, no Reva versions have been launched in this market for four years. During this period, the sales of electric cars market in the Britain have surged, especially in the past two years. Now, Mahindra Reva decides to launch its new product Reva e20, the successor of G-Wiz in the UK, and plans to export another new version halo to the country. The problem is whether the company can re-occupy the market just as it had done 10 years ago. This report aims to provide some recommendations on its strategic marketing objectives in the UK market on the basis of market analysis, its competitiveness, competitor analysis and customer analysis. 2. Market analysis 2.1 Political factors The British government holds considerable support of the electric and hybrid vehicles. Plans for Britain to become the pioneer of a green car revolution were proposed in 2008 by the current prime minister Gordon Brown who advised that electric or hybrid cars would dominate the car industry and produce no more than 100 grams of CO2 per kilo (Environmental Transport Association, 2009). Thereafter, British cities had bidden to become the green cities. For instance, for London to be the "electric car capital of Europe", the local authority had issued the plans to build 25,000 electric car-charging places around the city. The support also had come from fiscal arrangement for the purpose of deploying plug-in...
Words: 4371 - Pages: 18
...about who their customers are and their value, the level of quality of products and services they should be offering. Thompson and Coe (1997) suggested that competitive advantage that is sustainable is acknowledged as a factor that is critical for survival in the turbulent environment of the 1990s. They opined that most organisation strive to exist and at the same time aim to have a market share that is considerable in making a profit, the means to be more marketable is not by selling existing goods or services but by creating a brand name that is distinctive for itself.. However, for us to have a better understanding of the question, I would be examining the UK grocery industry with particular reference to Tesco plc and ALDI GMBH. Rivals organisations try to outperform one another thus ending up competing solely on basis of incremental improvements that is either in cost or quality. Striving to capture attention and retain their customers, the strategies of supermarkets varies between price wars, innovation and loyalty schemes. According to Harvey (2000) the developments in the UK supermarkets of recent are distinctive in retailing in the country hence it is vital in assessing the competition in this market. Furthermore, he suggested that the supermarket in the UK delivers a market place that is different from a simple “basket of goods” with a price that is specific and quality. The concerns of product range, potential innovation and factors that are associated with convenience...
Words: 3908 - Pages: 16
...Contents Executive summary 1. Introductions 2 2.1 history 2.2 SWOT analysis 2. Organizational objectives 3-5 3.3 Target market 3.4 Target customer 3. Product & brand portfolio 6 4.5 Core customer value 4.6 Product portfolio 4. Pricing strategies 6 5. Distribution strategies 7-8 6. Promotional mix 8 7. Conclusion 9 Reference 1. Introduction 2.1 History Haagen-Dazs was founded in 1961 by Reuben Mattus and his wife, who helped his mum to sell ice-cream from a horse-drawn wagon in the crowded street in New York when he was young. At the very beginning, Haagen-Dazs only had three flavors ---- coffee, vanilla and chocolate, and can only be bought in gourmet shops in New York City. Because of the fantastic creamy and rich taste, Haagen-Dazs became more and more popular in the east coast of the United States. In 1976, after Mattus’ daughter opened the first Haagen-Dazs shop, Haagen-Dazs shops had expanded rapidly across the country. The Pillsbury Company bought Haagen-Dazs brand from Mr. Mattus in 1983, and then the Grand Metropolitan bought Plillsbury Company in 1989 implied Haagen-Dazs was controlled by a European company and began...
Words: 2072 - Pages: 9
... 2 2. Marketing Objectives and Strategies 3 3. Marketing Mix A. Product 4 B. Price 7 C. Place 9 D. Promotion 11 4. Conclusion 13 5. References 14 1. Introduction Jaguar Land Rover Limited is a British car manufacturer whose main trade is described as “the design, development, manufacture and marketing of high performance luxury saloons and specialist sport cars” (Fame, 2015). Owned by Tata Motors since 2008, Jaguar is one of the leading luxury car brands in the UK, known for its rich British heritage....
Words: 3188 - Pages: 13
...fiscal and monetary policy on business organisations and their activities | | 2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organisation | | 3.1 Explain how market structures determine the pricing and output decisions of businesses | | 3.2 Illustrate the way in which market forces shape organisational responses using a range of examples | | 3.3 Judge how the business and cultural environments shape the behaviour of a selected organisation | | 4.1 Discuss the significance of international trade to UK business organisations | | 4.2 Analyse the impact of global factors on UK business organisations | | 4.3 Evaluate the impact of policies of the European Union on UK business organisations | | Introduction Understanding the Business Environments hep us understand how an organisation or business runs and what manager roles are and what a stockholder is and how environment in the business or outside it may harm it or not. Employees will also play a really important role in a business and how the organisations businesses will also cause a problem. Understand the situation that the organisation will face and knowing the products that should be sold according to the customers needs and providing it according to the environment that the customers also live...
Words: 3632 - Pages: 15
...Side (Market Gap) 12-13 6.8. La Four Chette 12 6.9. Groupon – France 12-13 6.0. Market Entry Strategy 14-15 7.10. Entry Strategy 14 7.11. The Value Chain Framework 14-15 7.0. Product Adaptation 16-18 8.0. Pricing Strategy 19-20 9.0. Distribution Options 21 10.0. Promotion and Communications 22 11.12. Social Media Websites 22 11.13. Pay Per Click Advertising 22 11.14. Partnerships with established brands 22 11.0. References 23-26 12.0. Appendices 27-30 * List of Figures Figure 1.0 – Strength of Economic and Technological Factors in France 6 Figure 2.0 – Consumer Foodservice by Independent Vs Chained Outlets 9 Figure 3.0 – Leading Chained Consumer Foodservice Brands by 10 Number of Units Figure 4.0 – The Value Chain Framework 15 Figure 5.0 – French translation of the tastecard brand name 17 Figure 6.0 – River Thames outline on tastecard and map of London 17 Figure 7.0 – River Seine outline in France 18 Figure 8.0 – Pricing Strategy Matrix 19 Figure 9.0 –...
Words: 5548 - Pages: 23
... . . . . 2 3.0 The nature of national environment in which businesses operates . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3.1 Distinctions between Planned, Free market and mixed economic models with examples . . . . . . 6 3.2 Use of Monetary and fiscal policy in management of economy . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.0 The behavior of organizations in their market environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.1 Market structure Tesco operates and its effects on pricing and output decisions . . . . . . . . . . . . . 9 4.2 Use of PESTEL analysis to judge how the market forces affect the behavior of Tesco 11 5.0 The significant of global factors in shaping national business activities . . . . . . . . . . . . . . . . . . . . 12 5.1 Significance of international trade to Business organization located in UK . . . . . . . . . . . . . . . 12 5.2 Benefits and drawbacks for UK business Of EU policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 6.0 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.0 Introduction An...
Words: 4102 - Pages: 17
... 2.2 Propose segmentation criteria for the products 4 2.3 Targeting Strategy for products 5 2.4 Impact of buyers behavior on marketing actvities 5 2.5 New positioning for the product or service 6 TASK 3 6 3.1 Development of prodcuts to sustain competitive advantage 6 3.2 Explaining how disribution is arranged to provide customer convience 8 3.3 Explain how prices are set to reflect an organisation’s objectives and market conditions 9 3.4 Integration of promotional actvity to achive marketing objectives 9 3.5 Additional elements of the extended marketing mix 10 TASK 4 10 4.1 Marketing mixes for two different segments in consumer markets 10 4.2 Differences in marketing products and services to businesses rather than consumers 10 4.3 International marketing differs from domestic marketing 11 CONCLUSION 11 REFERENCES 12 List of tables Table 1: Market Segmentation 4 Table 2 : Questionnaire for Tesco service 5 list of figures Figure 1: Elements of Marketing Process for Tesco 1 Figure 2 : Environmental Factors affecting Tesco 3 Figure 3 : Classification of Products 7 Figure 4: Distribution channel of intermediaries 8 INTRODUCTION The heart of success of the business lies in the marketing and most of the business aspects depend on successful marketing. Many firms use a variety of marketing principles in order to maintain the sales of existing products and effectively launch the new product in the market. Attributed from this, the main...
Words: 3667 - Pages: 15
...The feasibility for SONY to develop low-end versions of its video games in UK market from the perspective of marketing 2.0 Aims and objectives: 1. Obtain a preliminary understanding of the target market environment of SONY (1) Understand the basic development conditions of the UK game market. Is it a mature market or an emerging one? (2) Understand SONY's main products in the UK game market. Is there a market for lower-end video game products of SONY? (3) Understand the sales of SONY’s video game in 2013 in the UK. Is it impressive in the industry today? (4) Understand the conditions of main contenders of SONY. Compare the sales between SONY and its main competitors in 2013. (5) Understand the market share of the low-end video games developed by SONY in the UK. Is there a market for it? What kind of consumers prefer to buy such products? 2. Analyze the establishment of a viable product marketing mix of SONY in the low-end market from the perspective of 4P marketing theory. Price (1) What is the consumer expected price (2) What pricing strategy is appropriate for SONY (3) Estimate whether the product can bring profit Product (1) How to position a suitable product to meet market demand (2) How to increase the competitiveness of the products with an outstanding product concept. Place and promotion (1) How to select ideal sales locations to boost sales (2) What promotional tools would be appropriate? Through the answers to the first part of questions, it can be known...
Words: 1910 - Pages: 8
...created by using criteria used by the customer while buying a product and it is about charging premium prices so that it covers the extra production costs justifying the need of choosing their differentiated product over the competitor’s product (Porter, 1985). They give an edge over the competitor like TESCO, ASDA, Lidl, Netto,BI-LO, Kwiksave, Save-A-Lot, Penny Market, Plus, Dia by providing goods at cheap price but high quality product. And thus, it creates an excellent value for the money paid. Another important system introduced by ALDI is the checkout system. Long queue is a common thing in most supermarket but in ALDI through checkout system it is made efficient in spite of the less number of staffs .The savings made by ALDI is generally passed on to the ALDI consumers. All these factors make ALDI a low-cost producer and thus enable to offer customer at a lower price and yet still obtain the profits needed which gives a competitive advantage over others Strategy – Cost Focus: Firm dedicates to product that is basic at a lower cost to a segment of people but acceptable by the consumer (Porter, 1985). ALDI supermarket as mentioned above, considers the middle class people in the rural and the sub-urban areas mainly by introducing the low price offer on all its products. Organisations need a balanced marketing mix to meet the needs of its customers. Aldi’s focus is on offering the best possible quality products at the lowest possible prices. Every buyer for Aldi, from fresh...
Words: 2533 - Pages: 11
