Business Recommendations Based on Economic Projections
Milestone I:Business recommendations based on economic projections
ECO 561
November 28, 2010
John McNary
Milestone I:Business recommendations based on economic projections
Determine pricing strategy to meet organizational goals In every organization strategies have to be put in place to ensure the company runs smoothly. Larson is currently facing a slowdown in business due to financial issues throughout the economy. The company is currently being labeled as a risk because of some of the past dealings with products and pricing. Larson is currently using the cost-plus pricing strategy. This strategy consists of setting the price at the company’s production cost which includes fixed cost at current volume, cost of goods, and a certain profit margin. (Allen,2010). This strategy is a good choice because the business should always be operating at a profit. However, due to the competition in the battery market and financial issues Larson needs to due some restructuring to its pricing strategy. After evaluating the present plan, it is clear that Larson needs to establish a new pricing strategy to assist with the recent dilemma. The pricing strategies that Larson should use is value based pricing. With value based pricing companies charge on a variable scale according to the results achieved. If Larson can successfully restructure to this strategy it may be the most profitable form of pricing. (Allen,2010). With this strategy Larson will charge a cheaper price than other competitor in the battery market. This will allow the company to capture new clients in the market and building an image for the products. Once clients realize Larson’s batteries are unique and long-lasting they will become valuable necessity, which in turn cause clients to return and suggest the products to others. Once the product has been deemed as valuable clients are willing to pay more. Therefore Larson can gradually begin to raise the price for a bigger profit.
ECO 561
November 28, 2010
John McNary
Milestone I:Business recommendations based on economic projections
Determine pricing strategy to meet organizational goals In every organization strategies have to be put in place to ensure the company runs smoothly. Larson is currently facing a slowdown in business due to financial issues throughout the economy. The company is currently being labeled as a risk because of some of the past dealings with products and pricing. Larson is currently using the cost-plus pricing strategy. This strategy consists of setting the price at the company’s production cost which includes fixed cost at current volume, cost of goods, and a certain profit margin. (Allen,2010). This strategy is a good choice because the business should always be operating at a profit. However, due to the competition in the battery market and financial issues Larson needs to due some restructuring to its pricing strategy. After evaluating the present plan, it is clear that Larson needs to establish a new pricing strategy to assist with the recent dilemma. The pricing strategies that Larson should use is value based pricing. With value based pricing companies charge on a variable scale according to the results achieved. If Larson can successfully restructure to this strategy it may be the most profitable form of pricing. (Allen,2010). With this strategy Larson will charge a cheaper price than other competitor in the battery market. This will allow the company to capture new clients in the market and building an image for the products. Once clients realize Larson’s batteries are unique and long-lasting they will become valuable necessity, which in turn cause clients to return and suggest the products to others. Once the product has been deemed as valuable clients are willing to pay more. Therefore Larson can gradually begin to raise the price for a bigger profit.
References: Allen , S. (2010). Pricing methods. http://entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm ecofine.com. (2010). Differenciation strategy. Retrieved on November 28, 2010 from: http://www.ecofine.com/strategy/Differenciation%20stategy.htm McConnell, C. R. ,Brue, S. L., & Flynn, S.M. (2009). Economics: Principles, problems, and policies (18th ed.). New York: McGraw-Hill Irwin. Reference for Business. (2010). Competition. Retrieved on November 28, 2010 from: http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Competition.html schoolforchampion.com (2010). Reducing Business Costs. Retrieved on November 26, 2010 from: http://www.school-for-champions.com/business/reducing_costs.htm University of Phoenix (2010). Economics UOP custom CW. Retrieved from University of Phoenix Material website: https://portal.phoenix.edu/classroom/coursematerials/eco_561/20101115/