Like Coase indicates, if market transactions were cost-free, all that would be substantive are the rights of the parties. If these are delimited properly, the result of the bargaining would be simple to predict. And here resides the difference between Coase’s point of view and the one Pigou defends . Market transactions are not free. In fact they are quite costly, so the parties involved will take into account how much they value the activity they are doing, from an efficiency economic view.
Microeconomic theory specifies that economic agents (mainly consumers) aim at maximizing utility given that they operate a fixed budget. Under the condition of utility-maximizing subject to fixed budget, the consumer must choose a commodity that best gives him the highest satisfaction. Economists rely on the concept of preferences and utility-maximization models to explain WTP. Conversely, people are able to buy fewer products if their income decreases or the price of goods increases. Yet as a general principle, people tend to buy goods and services that offer them the highest utility, or satisfaction, per dollar spent.
This theory claims that three independent satisfaction factors influence customer satisfaction in different ways (Kano, 1984). First, basic factors (dissatisfiers) are minimum requirements for satisfaction. Failure to fulfill the minimum requirements causes dissatisfaction, whereas fulfilling or exceeding them does not necessarily lead to satisfaction. Next, excitement factors (satisfiers) increase customer satisfaction if delivered but do not cause dissatisfaction if not delivered (Matzler and Sauerwein, 2002). Moreover, performance factor (hybrids) lead to satisfaction if performance is high while it causes dissatisfaction if performance is low (Fuller & Matzler, 2008).
In economics law of supply and demand states that all things being equal, is the price of something increases the demand will drop. This is generally true, however, in a few special cases, demand reaches a point where it will not change regardless of price movement. Examples of inelastic demand include the least amount of inferior quality (low-cost) food that is required to sustain a population. Insulin is one of the good examples of inelastic demand. Prices may increase for this product; customers will not hesitate to engage in a transaction, especially when it involved a matter of life and death.
Such occurs in the lower portion of the demand curve. If the demand is perfectly inelastic, quantity does not change at all. Thus A perfectly inelastic demand is vertical, for example consumers occasionally see certain items as necessities which then makes the demand for these items to become inelastic , because regardless of the change in prices these items are essential to our wellbeing thus consumers have to purchase those items for instance oil . Oil is inelastic on the grounds that it is an ordinary item which in economic terms its seen as a normal product, if the value goes up the customers will at present need to purchase it on the grounds that there are few substitutes, for example, the gas and the efficient power vitality, and the oil is need for the buyers. Be that as it may, any expand in the cost of oil won't prompt reduction in the utilization in substantial amount.
Therefore, the final optimal network will choose key suppliers who have the lowest operational costs, without considering the quality failure cost from the defective components received from the suppliers. Thus, choices made solely on production cost may sacrifice quality and lead to additional quality failure costs or corrective action costs in the next stages of the supply chain. Fayard et al. (2012) contributed to an understanding of the ability to manage inter-organizational quality cost that gives organizations an advantage over their competition. Moreover, Castillo-Villar et al.
The first concept of marketing is the production concept, which is manufacturing low-cost products in vast quantities instead of products that meet the customer requirements; in other words it is the customers themselves who prefer the products which are available in inexpensive costs. The second concept of marketing is the product concept, the idea that the quality of product is what really matters, in addition to the fact that it will be sold without great advertising or marketing; it is also proven through experience and examples that the consumer will remain loyal to the good product which meets his/her requirements. Third the selling concept, which believes that if the customer is not moved or motivated by a stimulus to buy a company’s product then the customer would not buy the company’s product; so the company needs to aggressively create advertisements that will push their sales up. Unlike the other concepts, the fourth concept which is the marketing concept mainly focuses and cares for the needs and wants of the customer or in other words, the buyer. This concept is the best concept of the five main concepts of marketing because this concept fulfills any company’s goals if only performed in the right way; it can also give a company’s product an advantage over the competitor’s products.
49-50). Furthermore, this simply put, signifies that in a situation where perceptions are higher than expectations the service will be considered excellent. Meanwhile, in a case where expectations equal perceptions then the services are classified to be of good quality but where expectations are not attained, the services are termed to be of poor quality and in a situation where the perceptions matches expectations there is an expression of being indifferent or neutral (Parasuraman et al., 1985). While “Fairness or equity of the exchange over time affects the consumer‟s usage of services”, Bolton et al., (1999, p. 171) suggest the role of price in customer satisfaction, while Goode et al., (2005, p. 755) suggest age, peer opinion, product quality, expertise, brand perception among others as important factors that determine customer satisfaction but, it is complicated establishing this relationship between service quality and customer satisfaction. Service quality is a social construct and the variation of results of studies
The bases of differentiation, however, cannot be overlooked, if a product suffers a negative perception in terms of quality comparable to those of competitors, a cost leader may be forced to discount prices well below competing products to gain sales, nullifying the benefits of its favorable cost position (Peattie and Peattie, 1994). Proximity, as it applies to differentiation means that the price discount required to obtain an acceptable market share does not offset a cost leader’s cost advantage, and therefore the cost leader will earn above-average returns. According to Porter (1998), the strategic logic of the cost leadership usually requires that a firm be the cost leader, and not one of several firms jostling for that position. The strategy is largely dependent on preemption, unless major technological change allows a firm to radically change its cost position. The theme that runs through the entire strategy is low cost compared to competitors, although it cannot be achieved to the detriment of quality and high service standards.
Some items need minor modification, other need major ones. Calantone , Cavusgil, Schmidt and shin (2004) debated Standardization/adaptation of products/ services offerings. They elucidate Standardization as presenting the same products/ services in the same market. The advantage of Standardization is the lower cost due to economies of scale and experience which is collected from introducing the same products/ services in multiple countries, The introduction of the identical products/ services can be unfavorable in the legal environment , climates, levels of markets, technological development, competitive and cultural factor 's. According to calantone, Cavusgil, shmidt and shin (2004) Consumers in different countries have unlike requirements and usage conditions, they stated that standardized products/ services may not be accepted by