Individual Assignment

Question 1: What is pricing policy? What are the internal and external factors of the Police ? A Pricing policy is a chain of rule, basics and procedures by which a corporation defines how it sets and manages the prices of its goods or services .It is a permanent answer to periodical question. A methodical process to pricing demands the decision that an individual pricing situation be generalized and codified into a policy cover-age of all the principal pricing problems. Policies should be tailored to different competitive situations. A policy approach which is becoming normal for sales activities is relatively rare in pricing. A pricing policy is developed with the purpose ensuring uniformity across an organization, demonstrates compliance with legal obligations, and clarifies principles with regards to the way in which .products and/or services are priced. Price determination is a very hard job as it is affected by a figure of factors. so, before deciding the price the marketer has to study the factors affecting the price. Factors affecting pricing policy are divided into two parts : Internal factors 1- Marketing objectives: The company must decide on its strategy for the product before setting prices. The company have to choose its market visibly and then marketing mix strategy. The company should be obvious about its objectives. If the company objectives are clear, it will be easy to decide the price. Common objectives of the company are survival in the market, profit maximization, market share leadership and product quality leadership. 2- Marketing mix : one of the key elements of marketing mix is price. Other elements of marketing mix also affect the pricing decision. So the marketer must keep in mind the marketing mix while setting the price. A company achieves the objective by price, which is one of the tools of marketing mix. The price, which is selected, must be related with product design, distribution and promotion decision. 3- Cost : The costs of the product—its inputs—including the amount spent on product development, testing, and packaging required have to be taken into account when a pricing decision is made. So do the costs related to promotion and distribution. For example, when a new offering is launched, its promotion costs can be very high because people need to be made aware that it exists. Thus, the offering’s stage in the product life cycle can affect its price. Keep in mind that a product may be in a different stage of its life cycle in other markets. 4- Organizational Considerations : Management should decide who within the company should set prices. Organizations handle pricing in a variety of ways. In a small firm, prices are usually set by top management rather than by the marketing or sales departments. But in a large firm, pricing is typically handled by divisional or product line managers. In the case of industrial markets, salespeople might be allowed for the negotiation with customers at certain price ranges. External factors 1- Market and demand : To decide the price the marketers should have total knowledge about the relationship between market and demand. Cost of the product is the lower limit of the price. While the market and demand set the upper limit of the product. Good pricing begins with an understanding of how consumers’ perceptions of value affect the prices they are willing to pay. Both consumer and industrial buyers balance the price of any product or service against the benefits of owning it. so, before setting prices, the marketer should understand the relationship between price and demand for the organization’s product. 2- Competition : Another factor affecting the company's pricing structure is competitors' cost and pricing. competition affects the pricing decision of the product. The marketer should know and study the activities of the competitor. For this sometime the companies go for price leadership, while other goes for low pricing decision to wipe off the competition from the market. The company matches the prices with the competitors and adjusts the prices more or less than the competitors. The company also assesses that how the competitors respond to changes in the prices. 3- Customers : Three important factors are whether the buyers perceive the product offers value, how many buyers there are, and how sensitive they are to changes in price. In addition to gathering data on the size of markets, companies must try to determine how price sensitive customers are. Will customers buy the product, given its price? Or will they believe the value is not equal to the cost and choose an alternative or decide they can do without the product or service? Equally important is how much buyers are willing to pay for the offering. Figuring out how consumers will respond to prices involves judgment as well as research. Question 2: Mention three crucial objectives of price policy? 1- Achieving a Target Return on Investments : The objective is to achieve a certain rate of return on investments and frame the pricing policy in order to achieve that rate. For example, the concern may have a set target of 20% return on investment and 10% return on investments after taxes. The targets may be a short term (usually for a year) or a long term. It is advisable to have a long term target. Sometimes, it is observed that the actual profit rates may be more than the target return. This is because the targets already fixed are low and new opportunities and demand of the product exceeding the return rate already fixed. 2- Price Stability : Price stability is a goal of monetary and fiscal policy aiming to support sustainable rates of economic activity. Policy is set to maintain a very low rate of inflation or deflation. Although this is a goal of most central banks, not many banks achieve this. Stability of prices over a period reflects the efficiency of a concern. But in practice, on account of changing costs from time to time, price stability cannot be achieved. In the market where there are few sellers, every seller wants to maintain stability in prices. Price is set by one producer and others follow him. He acts as a leader in price fixation. 3- Increasing the sales volume : sales expansion by giving discounts to customers. In the short run, an organization might be ready to bear losses by reducing the prices to increase the sales volume. For instance the hotel industry faces low demand during off–season; therefore, it prefers to decrease its prices and offers discounts to increase sales. A firm can adopt such a price policy which ensures larger profits. However, such enterprises are also expected to discharge certain social obligations also. Question 3: Mention the bases of price discrimination ? 1- There must be some imperfection of the market. If there were perfect competition, price discrimination would be impossible since the individual producer could have no influence on price. At least some degree of monopoly power is therefore necessary so that producers have some ability to make rather than take the market price. 2- The discriminating supplier must be able to split the market into separate sections and keep them separate, such that it is difficult to transfer the seller’s product from one sector to another i.e. there must be no ‘seepage’ between markets in the sense that goods can be bought in the cheaper market and re-sold in the dearer. Barriers between markets may be:  Geographical in that customers are separated by distance e.g. the international dumping of cheap goods, where goods are sold overseas at prices below those in the home market, and often below the cost of production e.g. the East European Communist block countries used to sell their exports to the West at lower prices than those prevailing in domestic markets to earn hard foreign currency.  Temporal in that customers are separated by time e.g. it may be cheaper to travel by train after 9.30am than before 9.30 am, and the two markets can be kept separate as ticket office staff will not sell the cheaper tickets until after this time  According to customer type so that customers are separated according to some easily identified feature of the customers themselves e.g. age, sex, income or occupation; examples of this would include cheaper theatre tickets for children, old age pensioners and the unemployed, reduced price rail travel for students and higher private physician consultation fees for those who are perceived as being able to pay more. 3- Price elasticity of demand in each market must be different; if this were the case, the discriminating supplier would increase price in the market with an inelastic demand curve, and reduce price where demand is elastic in order to increase total revenue and profits. If the elasticity of demand in each market was the same at each and every price, a common price would be charged in both markets as this price would represent the profit maximizing price in each market where MC = MR. You might wish to refer back at this stage to where we discussed the relationship between price elasticity of demand and total revenue. Question 4: Comment on the consequences of environmental degradation on the economy of a community ? The huge cost that a country may have to borne due to environmental degradation can have big economic impact in terms of restoration of green cover, cleaning up of landfills and protection of endangered species. The economic .impact can also be in terms of loss of tourism industry As you can see, there are a lot of things that can have an effect on the environment. If we are not careful, we can contribute to the environmental degradation that is occurring all around the world. We can, however, take action to stop it and take care of the world that we live in by providing environmental education to the people which will help them pick familiarity with their surroundings that will enable to take care of environmental concerns thus making it more useful and protected for our children and other future generations. Natural capital is often esteemed and understood most excellent at the local level, and local knowledge is essential for useful solutions. Communities and societies need to be active supporters of the conversion to sustainable development, alleging their rights and also fulfilling their responsibilities in terms of sustainable management of natural resources. Rural development schemes provide a strong opportunity to cumulative small inventiveness in several locations to improve natural capital on a comprehensive scale. These selfgoverning institutions and their capacities will be answers to greater effectiveness of regulatory and market instruments in ecosystem rejuvenation and perfection of natural capital .