Which pricing objectives are profit-oriented?
There are many pricing objectives which are profit-oriented and companies implement these objectives so that the money invested in a product would have a return at the end of every sales year. However, the first pricing objective under discussion that is profit-oriented is return on investment (ROI). This typically means the projected profit a company intends to bring into the company from the product’s sales, which the company invested its assets or finance. For instance, when a company invests in a product, a certain amount is projected as a return on investment over a given period of sales. Imperatively, this pricing objective is strictly geared towards making profits for the company.
Maximizing
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However, the purpose of this strategy is for a company to generate quick revenues in order to settle some pressing needs which might include employees’ salary payments and other financial obligation to external stakeholders. Some companies will go as far as selling off their inventories and others will temporarily reduce the prices of products with the intention of generating quick cash for imminent settlement. Apparently, this sales-oriented strategy is necessary when a company is in a financial meltdown. However, studies have shown that companies use this strategy as a short-term objective because it does not encourage profits. (p. …show more content…
This awareness is carried out through various forms of advertisement which is massively expensive. So when companies are contemplating price decision, they consider the amount spent on developing the product, researching the product, testing the product, packaging the product, and advertising the product. This production cost is a huge factor that determines how companies decide the price of the product because they understand that “For a company to be profitable, revenues must exceed total costs.” (p.
By lowering selling prices across the board, Opossumtown, Inc. reduced its inventory turnover ratio, cutting the number of days to sell inventory from 174 days to 104 days; that is a 40% improvement. Opossumtown, Inc. also cut the number of days it takes to collect its credit accounts from 68 to 44 days, again that is 35% better than the previous year. The company is able to do this while cutting its debt ratio by 10% and increasing its current ratio by 25%, making it appear more favorable in terms of liquidity. As promising as this may look, this is not the whole picture. Opossumtown, Inc. shows an 11% decline in gross profit as well as operating income ratios, and a 3% decrease on the profit margin ratio. The decline of these ratios is a result of the company’s new strategy of decreasing the selling price and increasing its marketing and selling expenses. Opossumtown, Inc. made some noteworthy advancements with the implementation of its new plan for 2014. However, based on the assessment of the balance sheet, income statement and the ratios, the corporation did not achieve its goal to increase operating income by 6% and net income by 4%. Opossumtown, Inc. was only able to grow its operating income by a little more than half of one percent and net income by
A couple of Squares has a limited capacity for which to produce their products and smaller companies tend to have larger fixed costs than bigger companies. Therefore, A Couple of Squares must maximize profits in order to ensure that they will stay in business. A profit-oriented pricing objective is also useful because of A Couple of Squares’ increased sales goals. A Couple of Squares increased their sales goals due to recent financial troubles. Maximizing profits is the easiest way to meet these sales goals due to the fact that A Couple of Squares has limited production capacity. The last key consideration favors a profit-oriented pricing objective because A Couple of Squares offers a specialty product. A specialty product often has limited competition, therefore can be priced on customer value. Pricing at customer value will maximize profits as well as customer satisfaction. A Couple of Squares’ lack of production capacity, increased sales goals, and specialty product favor a profit-oriented pricing
Is the current economic environment forcing managers into a difficult position? The slowing of the general economy or industry-specific economic conditions decreases sales while increasing bad debts and obsolete inventory. The operating performance decline is amplified by the reversals of prior-period accruals based on recent experience. The original accounting estimates were made under very different economic conditions. As the economy or industry slows, managers may find it increasingly difficult to meet the earnings objectives set during the boom times.
Calculating the right price for a product can be difficult, mostly because it will affect Calibrated’s bottom line. Increasing the price of a product to maximize profit can induce several risks to a company. For example, making a change to the fixed or variable costs, the number of units sold will have an impact on the company’s profitability. Increasing the unit cost of a product and decreasing the number of units sold will have a negative impact on the
There are four key factors in the marketing mix, which includes product, place, promotion and price (Worth). Product, which includes tangible and intangible qualities, is the simplest factor and plays a fundamental role in the marketing mix. Secondly, place, is also a significant variable in the marketing mix because the convenience of the location decides the popularity of the product. Thirdly, promotion influences the visibility of the product. Through advertisements, brochures, and other efforts, promotion helps to raise the public’s awareness on the product. Finally, the price is the most straightforward factor in the marketing mix, which directly relevant to the exchange in the market place. The cost-oriented pricing is the mostly common
Another thing that takes into account for a product success is positioning, how the customer think of the products. A good positioning strategy will not just make the customer knows about the product but will also appeal and attract more customers. An alternative pricing approach need to be prepared if the customer doesn’t like on the pricing of the product or the company want to increase their profit.
With all due respect to the policy commission board. In the column of your highest rank, as a senior college student, I will be mentioning some problems and most important crisis that today’s higher education is facing. Hundreds and thousands of books have been published and going to be published in the future that shed light on the crisis of higher education, but did any of these books change the higher education the way we look today? College is as old as this country is, and been around for about centuries now, and the higher education crisis goes back all the way from searching for Utopia to present day. Respected policy commission board, what has changed? Colleges became more and more as corporate businesses, Students became as consumers, administration took over faculty, money turned these institutions in to greed, presidents start worrying about their pockets and dramatic shifting of cost to attend today’s college became almost impossible to ignore. However if it’s a liberal arts college, a four year typical college with dorms or it’s a two year vocational school, all institutions share a common problem and that is the greed of money.
Pricing is an important aspect of every business. Chief Financial Officer’s (CFO) use pricing to create financial projections, establish a break-even point, and calculate profit and loss margins (Power Point, 2005). It is the only element in the marketing mix that produces revenue. Price is also one of the most flexible elements of the marketing mix as it can be changed very quickly. This is usually done to beat competitor prices in an attempt to fix the product’s market value position very low (Anderson & Bailey, 1998). After all, high prices make it difficult to become the market share leader. The leading US retailer, Wal-Mart, is an expert at low product pricing as evident in 2004 with $250 billion dollars in sales to their 138 million weekly shoppers. However, they are also responsible for reducing prices so low that it drives specialty stores out of business. This is the effect Wal-mart has had on many toy stores and has almost closed the doors of the famous toy store Toys “R” Us Inc.
...trospective revenue of the company, rendering a price floor incapable of increasing revenue, which is the goal from the beginning.
Every company has some kind of Revenue and they all have costs that are associated with running the company. It is also true that if a company wants to increase their Revenue, their costs will increase too. It is every company’s goal to maximize revenue and either through Production or Services, and minimize cost. These things are easy to figure out, but actually identifying the production and figuring out how it will increase or decrease with change is very difficult.
Price is the values entirety that consumers trade for the advantages of having or utilizing the product or services. Different places and cultural have different spending culture. Therefore the price has to be relevant according to the product offer because it can reflect the image of a
Many organizations have maximized the use of cash on hand by effective cash management techniques and the use of short-term financing. This paper will discuss various cash management techniques and short-term financing methods used by organizations.
The rapid development of media and technology in the world market today has helped companies to sell their products and get in touch with their customers more easily (Rayburn, 2012). However the success of a company depends on many factors, not that only whether it has brilliant advertisement or marketing campaigns. The main aim of a company is to create shareholder’s value which according to Bender and Ward (2008), companies have to manage both well in a trading environment and financial environment in order to do that. Hence, the financial strategy can be seen as one of the most important factors in contributing to the business’s success especially to a large company such as Unilever as it is all about strategic decisions related to raising and manage the funds in the most appropriate manner.
...n the companies will have to decrease the price otherwise the product will not be sold at higher prices and the revenue would not be as large as companies would like to.
A benchmarking analysis against competitors is provided in excel. These data indicate that Primo was performing poorly against its three competitors in terms of day’s receivable and day’s inventory. The fact that day’s payable was 40 days versus 30 days for the credit terms offered by its suppliers, and much higher than for its competitors, helps explain much of the reason for complaints from the company’s suppliers about late payments. In the future, Primo might have limited access to supplier credit, and suppliers might ultimately refuse to sell to the company unless payment is made up front in cash. The data also indicate that the company was performing poorly against its competitors in every profitability metric displayed.