Wednesday, February 27, 2019
Master of Business Administration Essay
Pricing polity refers to the policy of shot the de statusine of the result or products and services by the management after taking into account of various internal and remote factors, forces and its own trade objectives. Pricing Policy basically depends on wrong theory that is the corner st maven of economic theory. Pricing is considered as wholeness of the basic and central problems of economic theory in a upstart economy. Fixing prices are the most important aspect of managerial termination making because food market price charged by the company affects the fork out and future production plans, pattern of distribution, nature of marketing etc. largely speaking, in economic theory, we take into account of simply twain parties, i. e. , buyers and sellers enchantment fixing the prices. However, in practice many parties are associated with set of a product. They are rival competitors, potential rivals, middlemen, wholesalers, retailers, commission agents and above all the Govt. Hence, we should ap blame due consideration to the influence exerted by these parties in the process of price determination. Broadly speaking, the various factors and forces that affect the price are divided into two categories.They are as follows I External Factors (Outside factors) 1. Demand, supply and their determinants. 2. Elasticity of take up and supply. 3. Degree of competition in the market. 4. Size of the market. 5. Good will, name, fame and reputation of a theatre in the market. 6. Trends in the market. 7. Purchasing agency of the buyers. 8. Bargaining power of customers 9. Buyers behavior in respect of particular product II. Internal Factors (Inside Factors) 1. Objectives of the theatre. 2. takings Costs. 3. Quality of the product and its characteristics. 4. Scale of production. 5.Efficient management of resources. 6. Policy towards serving of utilitys and dividend distribution. 7. Advertising and sales promotion policies. 8. Wage policy and sales turn over policy etc. 9. The stages of the product on the product life cycle. 10. Use pattern of the product. Objectives of the Price Policy A firm has multiple objectives today. In spite of several objectives, the ultimate aim of any business concern is to maximize its benefits. This is mathematical when the returns exceed be. In this context, setting an ideal price for a product assumes greater importance.Pricing objectives has to be established by top management to ensure not only that the companys profitability is adequate but in addition that set is complementary to the list strategy of the organization. While formulating the pricing policy, a firm has to consider various economic, social, political and other factors. The Following objectives are to be considered while fixing the prices of the product. 1. Profit maximization in the short term The primary objective of the firm is to maximize its profits. Pricing policy as an instrument to achieve this objective should be for mulated in such a way as to maximize the sales revenue and profit. maximum profit refers to the highest possible of profit. In the short run, a firm not only should be able to recover its fall costs, but also should get excess revenue over costs. This will build the morale of the firm and instill the spirit of confidence in its operations. 2. Profit optimization in the commodious run The traditional profit maximization dead reckoning may not prove beneficial in the long run. With the fillet of sole motive of profit making a firm may recourse to several kinds of unethical practices like charging exorbitant prices, follow Monopoly Trade Practices (MTP), suppressive Trade Practices (RTP) and Unfair Trade Practices (UTP) etc.This may lead to reverse from the people. In order to over- come these evils, a firm instead of profit maximization, and aims at profit optimization. Optimum profit refers to the most ideal or desirable level of profit. Hence, earning the most reasonable or optimum profit has become a part and parcel of a sound pricing policy of a firm in recent years. 3. Price stabilization Price stabilization over a period of time is another(prenominal) objective. The prices as far as possible should not fluctuate in any case often. Price instability creates uncertain atmosphere in business circles. sales plan becomes difficult under such circumstances. Hence, price stability is one of the pre requisite conditions for steady and persistent growth of a firm. A electrostatic price policy only toilette win the confidence of customers and may add to the good will of the concern. It builds up the reputation and image of the firm. 4. liner rivalrous situation One of the objectives of the pricing policy is to face the competitive situations in the market. In many cases, this policy has been except influenced by the market share psychology.Wherever companies are aware of specific competitive products, they seek to match the prices of their products with those of their rivals to poke out the volume of their business. Most of the firms are not merely interested in meeting competition but are wounding to prevent it. Hence, a firm is always busy with its counter business strategy. 5. Maintenance of market share Market share refers to the share of a firms sales of a particular product in the total sales of all firms in the market. The economic strength and advantage of a firm is measured in terms of its market share.In a competitive world, each firm makes a successful campaign to expand its market share. If it is impossible, it has to wield its existing market share. Any change state in market share is a symptom of the poor carrying into action of a firm. Hence, the pricing policy has to assist a firm to maintain its market share at any cost. Ques2. Explain the important features of long run AC skid. Ans coarse run AC squirms Long run is defined as a period of time where adjustments to changed conditions are complete. It is actually a period during which the quantities of all factors, variable as easily as fixed factors can be adjusted.Hence, on that point are no fixed costs in the long run. In the short run, a firm has to carry on its production within the existing embed capacity, but in the long run it is not tied up to a particular countersink capacity. If demand for the product increases, it can expand turnout by enlarging its plant capacity. It can construct new buildings or hire them, install new machines, employ administrative and other indissoluble staff. It can make use of the existing as well as new staff in the most efficient way and there is lot of scope for making indivisible factors to become divisible factors.On the other hand, if demand for the product declines, a firm can bang down its production permanently. The size of the plant can also be reduced and other expenditure can be minimized. Hence, production cost comes down to a greater extent in the long run. As all costs are variable in the long run, the total of these costs is total cost of production. Hence, the distinction between fixed and variables costs in the total cost of production will disappear in the long run. In the long run only the average total cost is important and considered in taking long term make decisions. Important features of long run AC thread 1.Tangent curve Different chemise curves represent different operational capacities of different plants in the short run. LAC curve is locus of all these points of tangency. The SAC curve can never cut a LAC curve though they are tangential to each other. This implies that for any given level of output, no SAC curve can ever be below the LAC curve. Hence, SAC cannot be trim than the LAC in the ling run. Thus, LAC curve is tangential to various SAC curves. 2. envelope curve It is known as Envelope curve because it envelopes a chemical group of SAC curves appropriate to different levels of output. 3. Flatter Un determine or dished curve.The LAC curve is also U shaped or dish shaped cost curve. But It is less pronounced and much flatter in nature. LAC gradually falls and rises due to economies and diseconomies of denture. 4. Planning curve. The LAC cure is described as the Planning Curve of the firm because it represents the least cost of producing each possible level of output. This helps in producing optimum level of output at the nominal LAC. This is possible when the entrepreneur is selecting the optimum scale plant. Optimum scale plant is that size where the stripped-down point of SAC is tangent to the minimum point of LAC. . Minimum point of LAC curve should be always lower than the minimum point of SAC curve. This is because LAC can never be higher than SAC or SAC can never be lower than LAC. The LAC curve will touch the optimum plant SAC curve at its minimum point. A rational entrepreneur would select the optimum scale plant. Optimum scale plant is that size at which SAC is tangent to LAC, such that both the curves have the minimum point of tangency. In the diagram, OM2 is regarded as the optimum scale of output, as it has the least per unit cost. At OM2 output LAC = SAC.