Recommendation for pricing strategy, product differentiation and barriers to entry during Trough:
U. S. economy entered its 10th recession in late 2007 since 1950 and still recovering from recession in 2010. The rise and decline in the level of activity are called business cycles. Business cycles occur because disturbances to the economy of one sort or another push the economy above or below full employment. Four phases of business cycles are Peak, recession, trough and expansion. The duration and intensity of such business cycle may vary from one business cycle to another.
Different phase of business cycle calls for different set of business decisions to adjust or overcome the business situation.
The trough phase of business cycle refers to the stage where economy is about to change its course from recession to expansion. In the trough of recession or depression, output and employment “bottom out” at their lowest levels.
Since trough phase marks the turning point in the economic activity, Larson Inc. should adopt a pricing strategy that allows the battery price acceptable to the buyers. Larson Inc.’s current mark up of 35 % should be revised to 10% to 15% to increase sales and market share. Quantity discount and other price related incentives would have a positive impact on subsequent price hike when the battery market grows in future.
Since Larson Inc. is operating in competitive battery market, product differentiation is even more important. It should attempt to differentiate its product in terms of quality, weight, size, and eco friendliness. This can be achieved by increased investments in research and development and building stronger brand name.
Non-price barriers to entry:
Non-price barriers refer to steps to distinguish product from that of competitors which can also work as deterrent to potential competitors. Such steps can be to improve on style, delivery,...