21. Why are pricing decisions so important?

It is very important to choose the right pricing strategy.

1) Penetration pricing: Price way low to enter the market.

Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower than the eventual market price. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume.

2) Personalized pricing: Firms charge different prices to different consumers.

Many companies use personalized pricing to sustain competition, to remain in business, and to grow their business.

3) Market pricing: Pricing at the same level as the competition.

A firm has to assess how its product relates to a competitive product and set its price at a comparable level to stay competitive. For example, most agricultural commodities are sold in markets where price has been established by broad market forces. 

4) Cost-plus pricing: The cost of production plus a designated percentage is cost-plus pricing.

This method is useful in situations where costs are not known in advance. An example would be custom orders in the initial stages of developing a new product. For example, a group of friends of mine opened a company named InfoTech some time ago. They provide different IT services. As they explained to me, often it is very difficult to set a price at the beginning of the project, since projects sometimes are very different and additional details are reviled only in the middle or at the end of the project. So, first they calculate approximately what the price should/could be in order to cover all expenses and add  money on top of it.

5) Loss leaders: A company loses money on one service but earns on a related product.

This strategy is often implemented as a part of a promotion campaign. The intent of this practice is not only to have the customer buy the (loss leader) sale item, but other products that are not discounted.

One example is HP inkjet printers that are often sold to retail customers below their true value, at a price which seems to be affordable to most consumers. However, consumers have to pay the regular price for ink cartridges. It is ink cartridges, not the printers that generate high profits for the HP.

22. What are the fundamentals of the supply chain management?

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23. What are the current issues related to logistics?

Logistics is the management of the transport and storage of goods. There are several factors that affect logistics. These issues need to be anticipated, prepared for and taken advantage of for a company to be successful in today’s market. They are

External:

•Globalisation

•Technology

•Workforce 2000

•challenging nature of the work force

•Environmental concerns

Internal:

•Customer service and quality

•Third party networks

•Supply chain management

•Changes in management and organization style

Listed below are some of the steps that could be followed to mitigate the above mentioned issues:

Performance:

•Better service for customers

•Improved productivity

•Assess just in time and quick response needs

System structure:

•Better relationship with vendors, customers and third parties to more effectively manage the supply chain

•Better relationship within and across the organization

Technology integration:

•Better information systems that connect functions and organizations

•Combine information and material handling systems for increased efficiency and effectiveness.