Organizing the pricing strategy of a company
“Underwear of men, Calvin klein sole proprietorship”
Contents :
1
Introduction.................................................................................................................
work.
On this case, paper work will be divided in main two parts. At the first part , I will try to
explain basic of liter...
it could cause serious problems for sales and cash flow.
So pricing is important. The bad news for entrepreneurs is that p...
1.3.1 Cost-based Pricing
Cost-based pricing puts the emphasis on establishing a cost basis for the product or service.
Tak...
Penetration pricing can be a really successful marketing strategy when applied correctly. It
can often increase both marke...
primary product. By using PLP, some individual products may not make profits, but the goal
is for the product line as a wh...
after it's broken down. So, where was the value?
The value cannot be in any of the parts or in any of the materials, or in...
of marketing strengths, weaknesses, opportunities and threats and their impact on the
organization. Employs cross impact a...
For this course work , I have choosed the company which has specialisation about Men's
underwearthe legal form of this com...
1
2
3
4
Variable costs
Cotton ( Packet of cotton )
Silk
Leather
Wage (hours spent x average wage)(1h x
30Lt
5Lt
6Lt
9Lt
...
5.
Constant (value) expenses (14%
purchase price)
21.71Lt
10.78%
6.
Cost of product
176.76Lt
87.72%
7.
Markup 14%...
Table shows the figures of excepted future sales,in other words forecasting.Using these number i
will draw a break even gr...
B r e a k -E v e n A n a ly s is
2500000
SA LES
F IX E D
TO TA L CO STS
B E U a p r o x .= 3 3 0 7
2000000
1500000
10...
In this part I present how to graph of break even changes in a proce and variable costs of already
estimated break even da...
promotional discount type.
Also if the selling is not going well, there is other type of discount like when somebody is
bu...
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Organizing the pricing strategy of a company

Organizing the pricing strategy of a company
Published on: Mar 4, 2016
Published in: Education      
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Transcripts - Organizing the pricing strategy of a company

  • 1. Organizing the pricing strategy of a company “Underwear of men, Calvin klein sole proprietorship” Contents : 1
  • 2. Introduction.......................................................................................................................................... 2 1.Theoretical aspects of pricing............................................................................................................2 1.2 The definition of price................................................................................................................. 2 1.3 Methods and strategies of pricing................................................................................................3 1.3.1 Cost-based Pricing................................................................................................................. 3 1.3.2 Value-based pricing................................................................................................................3 1.3.3 Competitive Pricing............................................................................................................... 3 1.3.4 Product line Pricing............................................................................................................... 3 1.3.5 Affordability based Pricing....................................................................................................3 1.3.6 Penetration Pricing.................................................................................................................3 1.3.7 Differentiated Pricing.............................................................................................................3 1.3.8 Psychological Pricing............................................................................................................ 4 1.4 Pricing objectives.........................................................................................................................4 1.4.1 Market penetration ................................................................................................................4 1.4.2 Market skimming ..................................................................................................................4 1.4.3 Target rate of return................................................................................................................4 1.4.4 Price stabilization ..................................................................................................................4 1.4.5 Meet or follow competition................................................................................................... 4 1.4.6 Market share.......................................................................................................................... 4 1.4.7 Profit maximization............................................................................................................... 4 1.4.8 Cash flow............................................................................................................................... 4 1.4.9 Product line promotion.......................................................................................................... 4 1.4.10 Survival................................................................................................................................4 1.5 Break-Even Analysis. Variable and fixed costs........................................................................... 5 2.Practical part......................................................................................................................................5 2.1“CalvinKlein“ company and performance....................................................................................5 2.1.1 Global market and products...................................................................................................6 2.1.2 Geographical division............................................................................................................7 Table 1. Geographic distribution of consolidated beer volume in millions of hectolitres..............7 2.1.3. Regions overview................................................................................................................. 8 2.1.4 Global competitors and market shares...................................................................................8 3.The principles of pricing of CalvinKlein’s products.........................................................................9 3.1The identification of pricing method............................................................................................ 9 3.2The calculation of a selling price of BtoB under EXW conditions..............................................9 3.3The calculation of a selling price of the same product to the end-user (customer)....................15 3.4The calculation of a price using a break-even method............................................................... 15 3.5The break-even analysis with a change in price.........................................................................20 4.„CalvinKlein“ pricing strategy for discounts.................................................................................. 21 Conclusion..........................................................................................................................................21 References:......................................................................................................................................... 22 Introduction For the beginning, i have choosed to analyse sole proprietorship men's underwear producter company. On this paper work, I would like to inform about pricing strategy, what is price itself, from what part the price consist and other material needed to understand the aim of 2
  • 3. work. On this case, paper work will be divided in main two parts. At the first part , I will try to explain basic of literature step by step and analyse the terms which are used during paper work.And also I will also provide dictionary of the terms and expressions. The second part of the work is a practical part. In this particular part the selected company will be analyzed by the given structure: Description of the analyzed company. A brief description of the industry (market) in which the company operates. The principles of pricing of analyzed company’s products. Existing company’s pricing strategy for discounts and pricing features. In order to increase the efficiency of the work I have determined goals and objectives. Goals: To understand pricing strategy To find out the parts price consists of To get information about pricing methods Objectives To get useful information on pricing To make the analysis of the selected company To provide needed calculations Terms used in this paper work Price - quantity of payment requested by a seller of goods or services. Value - the monetary worth of goods, products or services. Fixed costs - a cost that does not change with an increase or decrease in the amount of goods or services produced. Variable costs - a corporate expense that varies with production output. Variable costs are those costs that vary depending on a company's production volume. B to B (B2B) - describes commerce transactions between businesses, such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer. EXW - a trade term requiring the seller to deliver goods at his or her own place of business. All other transportation costs and risks are assumed by the buyer THEORETICAL PART On this part, I am going to explain items which will be during this project terms.my duty will be make the terms make clear as much as I can do during analysing the company. Price • The money charged for a product or service • Everything that a customer has to give up in order to acquire a product or service • Usually expressed in terms of £ The price a business charges for its product or service is one of the most important business decisions management make. For example, unlike the other elements of the marketing mix (product, place & promotion), pricing decisions affect revenues rather than costs Pricing also has an important role as a competitive weapon to help a business exploit market opportunities. Pricing also has to be consistent with the other elements of the marketing mix, since it contributes to the perception of a product or service by customers. Setting a price that is too high or too low will - at best - limit the business growth. At worst, 3
  • 4. it could cause serious problems for sales and cash flow. So pricing is important. The bad news for entrepreneurs is that pricing is a really tough to get right. There are so many factors to consider, and much uncertainty about whether a price change will have the desired effect. The law of demand states that, for nearly all products, the higher the price the lower the demand.In other words, sales will fall if prices are put up. However higher prices can also mean higher profits. Price theory In general terms price is a component of an exchange or transaction that takes place between two parties and refers to what must be given up by one party (i.e., buyer) in order to obtain something offered by another party Yet this view of price provides a somewhat limited explanation of what price means to participants in the transaction. In fact, price means different things to different participants in an exchange: Buyers’ View– For those making a purchase, such as final customers, price refers to what must be given up to obtain benefits. In most cases what is given up is financial consideration (e.g., money) in exchange for acquiring access to a good or service. But financial consideration is not always what the buyer gives up. Sometimes in a barter situation a buyer may acquire a product by giving up their own product. For instance, two farmers may exchange cattle for crops. Also, as we will discuss below, buyers may also give up other things to acquire the benefits of a product that are not direct financial payments (e.g., time to learn to use the product). Sellers’ View- To sellers in a transaction, price reflects the revenue generated for each product sold and, thus, is an important factor in determining profit. For marketing organizations price also serves as a marketing tool and is a key element in marketing promotions. For example, most retailers highlight product pricing in their advertising campaigns. Price is commonly confused with the notion of cost as in "I paid a high cost for buying my new plasma television." Technically, though, these are different concepts. Price is what a buyer pays to acquire products from a seller. Cost concerns the seller’s investment (e.g., manufacturing expense) in the product being exchanged with a buyer. For marketing organizations seeking to make a profit the hope is that price will exceed cost so the organization can see financial gain from the transaction. Finally, while product pricing is a main topic for discussion when a company is examining its overall profitability, pricing decisions are not limited to for-profit companies. Not-forprofit organizations, such as charities, educational institutions and industry trade groups, also set prices, though it is often not as apparent . For instance, charities seeking to raise money may set different 1“target” levels for donations that reward donors with increases in status (e.g., name in newsletter), gifts or other benefits. While a charitable organization may not call it a price in their promotional material, in reality these donations are equivalent to price setting since donors are required to give a contribution in order to obtain something of value.g 1.3 Methods and strategies of pricing “Value-based pricing and cost-based pricing are two most common strategies companies use to promote goods and services. Setting the right prices is key to effective marketing as well as to long-term profitability. Both of these approaches have strengths and weaknesses relative to the other.“ ( Business & Interpreneurship http://yourbusiness.azcentral.com/differences-betweenvaluebased-pricing-costbased-pricing-12515.html ) 1 4
  • 5. 1.3.1 Cost-based Pricing Cost-based pricing puts the emphasis on establishing a cost basis for the product or service. Taking into account production or acquisition costs, as well as fixed costs from operations and marketing, we come up with a per-item cost basis. From there, we can determine an ideal markup for pricing. With some industries or products, profit margins are relatively high, while in others, margins are low but demand is high. 1.3.2 Value-based pricing Value-based pricing is an approach in which we establish prices based on the amount we believe customers are willing to pay for products and services. For example, if our customers generally believe a product is worth 50 Euros, that is what we charge for it. This strategy often is tied to a business and marketing approach focused on a reputation as a value-oriented provider with a combination of product benefits and affordability. The major benefit of a value-based pricing model is the ability to set prices that you know will attract buyers. The other pricing strategies are: 1.3.3 Competitive Pricing This type of pricing means setting the price of a product or service based on what the competition is charging. “Competitive pricing is used more often by businesses selling similar products, since services can vary from business to business while the attributes of a product remain similar. This type of pricing strategy is generally used once a price for a product or service has reached a level of equilibrium, which often occurs when a product has been on the market for a long time and there are many substitutes for the product.“ ( Competitive pricing http://www.investopedia.com/terms/c/competitive-pricing.asp ) 1.3.4 Product line Pricing This is a pricing strategy which is used to sell different products in the same product range at different price points based on features or benefits. This type of pricing is used when a primary product is offered with different features or benefits, essentially creating multiple "different" products or services. For example, a car could be the primary product. It could come standard, with a sunroof and navigation system or fully stocked with all the features and add-ons. Each product would be priced accordingly in such situation. “The goal of product line pricing is to maximize profits. The more features offered, the more consumers will pay. The goal is to draw enough interest in the primary product that the upgraded product will be sold (at a greater price) based off the interest in the "basic" primary product. By using PLP, some individual products may not make profits, but the goal is for the product line as a whole to turn a profit.“ (What is a Product line Pricing strategy? http://www.ehow.com/facts_6003881_product-line-pricing-strategy_.html ) 1.3.5 Affordability based Pricing “The affordability based pricing is relevant in regard of necessary commodities, which meet the basic requirement of all sections of people.“ (Affordability based Pricing, Marketing management http://www.expertsmind.com/questions/affordability-based-pricing30117965.aspx ) Idea of this type is to set prices in such a way that all sections of the population are in a position to buy and consume the products to the required extent. 1.3.6 Penetration Pricing Penetration pricing is a marketing strategy used by firms in order to attract customers to a new product or service. Penetration pricing is based on the practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors. The reasoning behind this strategy is that customers will buy and become aware of the new product due to its lower price in the marketplace relative to the rivals. 5
  • 6. Penetration pricing can be a really successful marketing strategy when applied correctly. It can often increase both market share and the sales volume. Additionally, the high sales volume can also lead to lower production costs and higher inventory turnover, both of which are positive effect for any firm with fixed overhead. “The chief disadvantage, however, is that the increase in sales volume may not necessarily lead to a profit if prices are kept too low. As well, if the price is only an introductory campaign, customers may leave the brand once prices begin to rise to levels more in line with rivals.“ (Penetration pricing http://www.investopedia.com/terms/p/penetrationpricing.asp ) 1.3 Methods and strategies of pricing “Value-based pricing and cost-based pricing are two most common strategies companies use to promote goods and services. Setting the right prices is key to effective marketing as well as to long-term profitability. Both of these approaches have strengths and weaknesses relative to the other.“ ( Business & Interpreneurship http://yourbusiness.azcentral.com/differences-betweenvaluebased-pricing-costbased-pricing-12515.html ) 1.3.1 Cost-based Pricing Cost-based pricing puts the emphasis on establishing a cost basis for the product or service. Taking into account production or acquisition costs, as well as fixed costs from operations and marketing, we come up with a per-item cost basis. From there, we can determine an ideal markup for pricing. With some industries or products, profit margins are relatively high, while in others, margins are low but demand is high. 1.3.2 Value-based pricing Value-based pricing is an approach in which we establish prices based on the amount we believe customers are willing to pay for products and services. For example, if our customers generally believe a product is worth 50 Euros, that is what we charge for it. This strategy often is tied to a business and marketing approach focused on a reputation as a value-oriented provider with a combination of product benefits and affordability. The major benefit of a value-based pricing model is the ability to set prices that you know will attract buyers. The other pricing strategies are: 1.3.3 Competitive Pricing This type of pricing means setting the price of a product or service based on what the competition is charging. “Competitive pricing is used more often by businesses selling similar products, since services can vary from business to business while the attributes of a product remain similar. This type of pricing strategy is generally used once a price for a product or service has reached a level of equilibrium, which often occurs when a product has been on the market for a long time and there are many substitutes for the product.“ ( Competitive pricing http://www.investopedia.com/terms/c/competitive-pricing.asp ) 1.3.4 Product line Pricing This is a pricing strategy which is used to sell different products in the same product range at different price points based on features or benefits. This type of pricing is used when a primary product is offered with different features or benefits, essentially creating multiple "different" products or services. For example, a car could be the primary product. It could come standard, with a sunroof and navigation system or fully stocked with all the features and add-ons. Each product would be priced accordingly in such situation. “The goal of product line pricing is to maximize profits. The more features offered, the more consumers will pay. The goal is to draw enough interest in the primary product that the upgraded product will be sold (at a greater price) based off the interest in the "basic" 6
  • 7. primary product. By using PLP, some individual products may not make profits, but the goal is for the product line as a whole to turn a profit.“ (What is a Product line Pricing strategy? http://www.ehow.com/facts_6003881_product-line-pricing-strategy_.html ) 1.3.5 Affordability based Pricing “The affordability based pricing is relevant in regard of necessary commodities, which meet the basic requirement of all sections of people.“ (Affordability based Pricing, Marketing management http://www.expertsmind.com/questions/affordability-based-pricing30117965.aspx ) Idea of this type is to set prices in such a way that all sections of the population are in a position to buy and consume the products to the required extent. 1.3.6 Penetration Pricing Penetration pricing is a marketing strategy used by firms in order to attract customers to a new product or service. Penetration pricing is based on the practice of offering a low price for a new product or service during its initial offering in order to attract customers away from competitors. The reasoning behind this strategy is that customers will buy and become aware of the new product due to its lower price in the marketplace relative to the rivals. Penetration pricing can be a really successful marketing strategy when applied correctly. It can often increase both market share and the sales volume. Additionally, the high sales volume can also lead to lower production costs and higher inventory turnover, both of which are positive effect for any firm with fixed overhead. “The chief disadvantage, however, is that the increase in sales volume may not necessarily lead to a profit if prices are kept too low. As well, if the price is only an introductory campaign, customers may leave the brand once prices begin to rise to levels more in line with rivals.“ (Penetration pricing http://www.investopedia.com/terms/p/penetrationpricing.asp ) What is value? There is many terms of about what is value. And in real meaning what is value? I've been thinking about a variety of things. One of the things that I come across a lot is this idea of big data, or the use of data. Whether it's just hype, or whether it's going to be something deeper, something useful. There's a big promise on our newfound ability to collect large amounts of data and I can illustrate that through a few examples. I think that our ability to collect data is opening an increase in resolution that is unprecedented. We are able to see systems that we have looked at many times before. But we're able to see them in much more detail, and my belief is that increase in detail is not cosmetic. The idea of "what is value, what is money" is an idea that obviously a lot of people have thought about before. Adam Smith, in "The Wealth of Nations," basically goes to the idea that labor is behind the generation of wealth. That's an idea that is echoed later by Marx. One example that I like very much to try to make a distinction between those approaches and other approaches is that of an F-22 jet fighter. This is an example from my friend Francisco Claro. The idea is that an F-22 fighter is actually quite an expensive machine. You need to have a lot of money to buy an F-22. An F-22, being a very expensive machine, is also a very complex machine. It has a lot of parts, and there were a lot of people with a lot of different types of expertise that went in to generate that machine. If you take the price of an F-22 and you divide it by its weight, you get that, per pound, cost something between silver and gold. It's that expensive! . Now, take your F-22 and crash it against a hill, or crash it against the ocean, blow it up into tiny little bits and pieces. How valuable it is now? It's probably way less valuable than silver. It's probably almost worthless 7
  • 8. after it's broken down. So, where was the value? The value cannot be in any of the parts or in any of the materials, or in anything other than the complexity of how these things come together. So actually, value is set by the property of organization. It's more of an entropic, or anti-entropic more precisely, idea of value. Developing pricing programs On this part, I will try to explain why its important to choose to right pricing strategy.what a company suppose to do for a good , right pricing strategy and which steps must followed.Which materials are needed to use . Price objectives The company before set the price , they should decide what should be the avarage price of products. Examples of Twenty-One Pricing Objectives Target return on investment Target market share Maximize long-run profit Maximize short-run profit Sales growth Stabilize the market Convey a particular image Desensitize customers to price Be the price leader Discourage entry by new competitors Speed exit of marginal firms Avoid government investigation and control Maintain loyalty and sales support of middlemen Avoid excessive demands from suppliers Be regarded as fair by customers Create interest and excitement for item Use price of one product to sell other products in line Discourage others from lowering prices Recover investment in product development quickly Encourage quick payment of accounts receivable Generate volume so as to drive down costs Objectives should be countable , if they wouldnt be , it would be quite hard to understand to measure of them. Establishing a strategy Corporate planning involves setting down overall corporate financial goals and using these as the basis for setting goals in the various functional areas of the business. In the case of marketing, strategies aimed at achieving stated goals and objectives are based on an analysis 8
  • 9. of marketing strengths, weaknesses, opportunities and threats and their impact on the organization. Employs cross impact analysis to assess the impact of environmental variables - such as technology, economy, customers and competition - on the strategic business units of an organization. It can be extended to look at the impact on future or potential businesses as well. The technique helps to identify various threats and opportunities which surround the organization. Types of pricing strategies Pricing strategies are separated into two groups: cost-based and market-based. The market-based strategies tend to focus either on the competition, customer demand, or both. Of these two groups cost-based approaches are much more prevalent in business than are market-based approaches. Cost-Based Strategies Mark-up Variable and fixed costs per unit are estimated, and a standard markpricing up is added Target return Variable and fixed costs per unit are estimated. A rate of return is pricing then taken times amount of capital invested in the product, and the result is divided by estimated sales. Market-Based Strategies Floor pricing Charging a price that just covers costs. Usually in order to maintain competitiveness in the market. Penetration Charging a price that is low relative to a) the average price of major pricing competitors, and b) what customers are willing to pay. Parity pricing Charging a price that is roughly equivalent to the average price (going rate) charged by the major competition. Premium The price charged is intended to be high relative to a) the average pricing price of major competitors, and b) what customers are willing to (skimming) pay. Price Usually involves a leading firm in the industry making fairly leadership conservative price moves, which are subsequently followed by other pricing firms in the industry. This limits price wars and leads to fairly stable market shares. Stay out The firm prices lower than demand conditions require, so as to pricing discourage market entry by new competitors. Bundle pricing A set of products or services are combined and a lower single price is charged for the bundle than would be the case if each item were sold separately. Value-based Different prices are set for different market segments based on the pricing value each segment receives from the product or service. (differentials) Cross-benefit Prices are set at or below costs for one product is a product line, but pricing relatively high for another item in the line which serves as a direct complement. (e.g., certain brands of cameras and film) PRACTICAL PART At this area, it will be practical analyse of the company and there will be some calculations about the way of running company. Description of the analyzed company 9
  • 10. For this course work , I have choosed the company which has specialisation about Men's underwearthe legal form of this company is sole proprietorship. A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of business entity that is owned and run by one individual and in which there is no legal distinction between the owner and the business. This company products cotton men underwears which styled as boxer and top shirt. The producs are based in different clours and quality. The products are friendly for nature and no side effects for human body like cancer or antidoxt. 2 A brief describtion of the industry (market) in which the company operate After my research of market, about men underwear, there is several brands which are products such various types of men underwear. The most bigest competitors in market is calvin klein, they are fanchy and quite popular around the world.But I am planning to choose to use being economical way and sell the product. The principles of pricing of analyzed company’s products The identification of selected product’s pricing method in a company From possible pricing strategies I have selected cost-based strategy. Particularly, mark-up pricing, where variable and fixed costs per unit are estimated, and a standard markup is added. The mark-up is frequently either a percentage of sales or of costs. Calculating price for the product is very important, because price is one of the major managerial tool. To choose the right price is also important because of the costs that company incur during the production of the product. If we choose price that does not include all the costs we will incur loss and the firm will not be profitable. I will calculate EXW price of the chair being produced by UAB”Calvin Klein“. I will present the calculation of the price in the table 1 below: Value (Lt/Eur) Specific weight % in a price No. Names of the price’s elements 10
  • 11. 1 2 3 4 Variable costs Cotton ( Packet of cotton ) Silk Leather Wage (hours spent x average wage)(1h x 30Lt 5Lt 6Lt 9Lt 24% 4% 5% 7% 5 9Lt) (1 boxer takes 1 hour to produce) Machinery maintenance (hours spent x price 15Lt 12% 2.78Lt 67.78 2% 54% 40.67Lt 3.39Lt 1.36Lt 1.01Lt 46.43Lt 114.21Lt 11.42Lt 125.63Lt 26.38Lt 152.01Lt 32% 2.% 1% 1% 36% 90% 10% 100% 21% 121% of machinery for 1h) (1h x 15Lt) Social insurance (30.98% from wage) Total variable cost Fixed costs Overhead Transportation (5% from fixed cost) Packing (2% from fixed cost) Storing (1.5% from fixed cost) Total fixed cost Cost of product (Variable costs + Fixed costs) Mark-up (10%) Price (net) VAT (21%) Final price (bruto) 6 1 2 3 4 Table 3. The calculation of selling price of BtoB under EXW conditions Table 4. The calculation of selling price for a customer of the same product The calculation of selling price for a customer of the same product No. Names of the price’s elements Value (Lt) Specific weight % in a price 1. List price (product buying price under EXW conditions) 152.01Lt 75.46% 2. Volume discount (6% from list price when buying more than 20 boxers) -9.12Lt -4.53% 3. Products purchasing expenses (8%) 12.16Lt 6% 4. Product purchase price 155.05Lt 76.94% 11
  • 12. 5. Constant (value) expenses (14% purchase price) 21.71Lt 10.78% 6. Cost of product 176.76Lt 87.72% 7. Markup 14% from cost of product 24.75Lt 12.29% 8. Price (net) 201.51Lt 100% 9. VAT (21%) 42.32Lt 10. Final price (bruto) 243.83Lt Discount is calculated from the EXW price. Then product purchasing expenses are calculated from the discounted price (list price-volume discount). And then we get product purchase price, to this figure we add 8% markup, after this we finally get the net price of the product. And then we calculate the total price including VAT. We cannot just simply apply 17% we need first to subtract EXW price from the net price and then calculate 16% of that amount and add it to the Net price, because VAT cannot be calculated twice, it is against the laws. The calculation of a price with the break-even method When the expenses cover the point it calls breakeven. The company tries to sell their products to cover their breakeven. To compute a company's breakeven point in sales volume, you need to know the values of three variables. Those three variables are fixed costs, variable costs, and the price of the product. Fixed costs are those which do not change with the level of sales, such as overhead. Variable costs are those which do change with the level of sales, such as cost of goods sold. The price of the product has been set by the company through looking at the wholesale cost of the product, or the cost of manufacturing the product, and marking it up. In order to calculate your company's breakeven point, use the following formula: The calculation of a price with the break-even method Time Month Unit Start Assumptions Units Unit Unit Variable increment price Cost Total Fixed Costs 0 1500 152.01 67.78 278580 12
  • 13. Table shows the figures of excepted future sales,in other words forecasting.Using these number i will draw a break even graph which will give more precise view of the amount of units needed to sold in order to cover the costs of production and from which pointh there would occour loss or profit in a company performance VARIABLE COSTS UNITS SALES CONTRIBUTION MARGIN 0 0 0 0 1500 228015 101670 126345 3000 456030 203340 252690 4500 684045 305010 379035 6000 912060 406680 505380 7500 1140075 508350 631725 9000 1050 0 1200 0 1350 0 1500 0 1368090 610020 758070 1596105 711690 884415 1824120 813360 1010760 2052135 915030 1137105 2280150 1016700 1263450 FIXED 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 NET TOTAL COSTS INCOME 278580 -278580 380250 -152235 481920 -25890 583590 100455 685260 226800 786930 353145 888600 479490 990270 605835 1091940 732180 1193610 858525 1295280 984870 The Graph 1 shows the break-even graph and point.The break even point is where the total costs and sales intersect.The gap to the right from the break even pointh shows 13
  • 14. B r e a k -E v e n A n a ly s is 2500000 SA LES F IX E D TO TA L CO STS B E U a p r o x .= 3 3 0 7 2000000 1500000 1000000 500000 0 0 2000 4000 6000 8000 10000 12000 14000 16000 U N IT S The break-even analysis of sales changes, when the price from estimated breakeven method changes in 10% and the variable costs varies corresponding by 5%. Prices change interval is 2% and variable costs change is 1% VARIABLE COSTS UNITS SALES CONTRIBUTION MARGIN 0 0 0 0 1500 250815 91500 159315 3000 501630 183000 318630 4500 752445 274500 477945 6000 1003260 366000 637260 7500 1254075 457500 796575 9000 1050 0 1200 0 1350 0 1500 0 1504890 549000 955890 1755705 640500 1115205 2006520 732000 2257335 823500 1433835 2508150 915000 1593150 14 1274520 FIXED 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 27858 0 NET TOTAL COSTS INCOME 278580 -278580 370080 -119265 461580 40050 553080 199365 644580 358680 736080 517995 827580 677310 919080 836625 1010580 995940 1102080 1155255 1193580 1314570
  • 15. In this part I present how to graph of break even changes in a proce and variable costs of already estimated break even data ccurs. Let us suppose,the unit price increases by 10% and the variable unit costs increase by 5%. With these changes I come up with the assumptions below In the graph 2 the results of changes in price and variable costs is seen.With the price increase in 10% and variable costs per unit increase in 5% the break even point went downward and shows that company should order cover all production costs.Any additional unit sold will simply result in companys profits. Comparing the break even grap before and after changes the result shows that if companys variable cost increase and unit proce increase the amount of units needed to be sold in order to cover production costs decreases.Any other change in price or costs would results in a change of break even point Discount Existing company‘s pricing strategy for discounts, pricing features and so on On this part , I want to write about pricing strategy of the boxer company for discount . For the beginning, discount can be a usefull strategy to increase populartion of costumers for the product. But if there wouldnt be strong control, it could turn dangerous for company's future.Between of various types of discounts , most acceptable one is 15
  • 16. promotional discount type. Also if the selling is not going well, there is other type of discount like when somebody is buying the product , the next is for free or cheaper. Conclusion After my course work, I have improved my skills about strategy of pricing and and also I have gained my knowledge about calculation about pricing. Also , I have skill to choose suitable pricing strategy for a company. It will be important for me to understand in my business life to understand pricing strategy and find out parts price consists of and to get information about pricing methods. References 1) “Market-Oriented Pricing: strategies for management” Michael H. Morris and Gene Morris, 1990, United States of America; http://www.tutor2u.net/blog/index.php/business-studies/comments/qa-what-is-price-andwhy-is-it-so-important-in-the-marketing-mix http://www.definitions.net/definition/value http://www.enotes.com/homework-help/what-pricing-marketing-37801 http://www.csun.edu/~jds29757/BUS497A/BSG_PlayersGuide.pdf 16