1. Contribution is calculated based on price and costs. Often, we treat these variables as fixed. What are the implications of treating uncertain variables as fixed?
Some of the implications of uncertain variables could be payroll. You would have to have some baseline of how much you would be paying out every week. Someone may be out sick and you don’t replace the hours or you replace the hours with another employee that has a wage
Running an advertisement in the newspaper that you have changed to size that you want to put in the paper that would change the price either way it could be more or it could be less.
If you have delivery service than there would the price of gas changes from week to week. You would have to budget a little high if you are to come out even.
2. What are examples of conflicting motivations that might lead well- meaning managers to undercut a stated pricing strategy?
Some of the conflicts could be personal when someone comes into the store that the manager knows and gives them a good price break and that could turn into more than once and keep on going.
There also could be a computation between store manages that work for the same company. One may cut the price so the customers come to his store and adds volume to his store but in the token hurting the store the profit margin.
If a store manager has an ego problem of always wanting to be the best and showing everybody up to be the best. He may do whatever it takes to make himself feel better although he may not even know it or believe it.
Pricing Striates 3 ...
... middle of paper ...
...mental cost of doing business is a variable and can’t be determined until the company put it out into the market to see if the item is going to sell and any revenue.
It all comes down to how much overhead the business has if said company has two thousand dollars overhead the business must set pricing to meet the overhead to cover the cost of daily business. If the business keep on the same pricing strategies and wasn’t getting enough revenue then the business would have to close or do drastic change in liquidating some assets to free up some money to stay in business.
chapter 10. (n.d.). In The Strategy And Tactics of Pricing (p. 183). (Reprinted from The Strategy
And Tactics of Pricing, Fifth ed., p. 183, by T. T. Nagle & J. Zale, 1987, New Jersey: Prentice
In The Strategy And Tactics of Pricing
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