Along these lines, unemployment may decrease, as this has different favorable circumstances, for example, lower government using on profits and less social issues. However, this phenomenon includes a number of different expenses. Firstly, if economic growth is unsustainable and is higher than the long run pattern rate, inflations are liable to be seen. An increase in economic growth could prompt an equalization of issued installments. In case the expanded customer expenditure causes further development, there will be an increase in the import sector.
To gain market share a lower price is set and once it is established a higher price can be set. Cheaper prices can get them higher sales and that recover the cost as business benefit for bulk buying. Advantages and disadvantages of using this strategy (analysis): Organizations use this strategy to gain customers and increase their sales. Another advantage of this strategy is it can also reduce competition as weak competitors might withdraw. The disadvantages include if they plan to increase the price customers would switch to another company so it is harder to increase prices.
Consumer income Consumer income is in the wider field of economic factors that affect the sales level of the enterprise. Consumers with high income are likely to possess the power and the ability to purchase products from the company in large quantities. Often, individuals with higher income have flexible regarding purchases considering that they have enough financial power to use on basic needs and to save. As a result, such individuals are expected to buy the company products in bulk or more frequently irrespective of the price of the products. On the other side, low-income earners are not expected to purchase the company products in bulk or frequently.
6.1.2 Price Price is the value or amount that customer pays to buy a product. For instance, for our Star Lab ice cream shop, we need to consider the cost of production of our ice cream, price of our main competitor and our potential customers demographics in order to succeed this competitive market. (C. Breidert, 2007, p.9) 184.108.40.206 Pricing Strategy Pricing strategy that can be used by our company such as penetration pricing, cost-plus pricing, value based pricing and more. But we think that market penetration pricing is the best pricing strategy to be used by our business. Market penetration pricing is about setting a lower price on our product with aim to attract customers to buy our product because of the cheaper price compare with other competitor.
DEMAND CURVE Demand is defined as the different quantities people are willing to buy at different prices. As the price of good increases the demand decreases and vice versa. The law of demand states shows an inverse relationship between price and quantity demanded. The demand curve shows the relationship between the quantity of a good a consumer is willing to buy and the price of the good. The equation for that shows the relationship between the quantity demanded and price is as given below: QD = f (P) QD : Quantity demanded P : Price of the commodity.
Cooper and Kaplan (1991) discuss that having an ABC costing system could have a financial gain for companies. Managers decision are critical, especially if the strategy is to earn profit. The ABC-costing system could point managers to decision that would enable the company to make more profit. The price of products should be reconsidered. In some cases, for the company to be copmetitive, prices will have to be dropped for products that are produced in large batches and in other cases the price should be increased for more specialized products that demand more (Cooper & Kaplan, 1991).
CHAPTER 2 LITERATURE REVIEW INFLATION (InvestorWords, 2015) stated that inflation is the increase in the general price level of goods and services in economy, normally caused by excess supply of money. Inflation usually measured by the Consumer Price Index (CPI). When the cost of producing goods and services goes up, the purchasing power of dollar will decrease. A customer will not be able to purchase the same goods and services as he/she previously could. Inflation rate of 1-2% per year are acceptable and even desirable in some ways (Investopedia, 2015).
Web. Retrieved from http://economics.about.com/od/economics-basics/ss/The-Circular-Flow-Model.htm When the demands of the consumer for the goods/services increases, the market price will increase as consumers will compete to purchase them. This will persuade businesses that seek profit to increase the production of the goods/services. If the supply of these goods /services begins to exceed the demand, the market price falls and the production of these goods/services reduced. This will affect the profits of the manufacturers, but production will still continue even for smaller profits.
To increasing potential sales existing customer zealong has to improve their quality, product variety, packaging style, supply chain etc. by doing this zealong can increase their sales in existing market. Because, it’s a human nature that after sometime everyone want something new. 2. “Existing product for new
SOURCES OF MARKET POWER 1. ECONOMIES OF SCALE: Reduction in cost of production by an increase in production volume is Economies of scale. It is also referred to as diminishing marginal cost. Reduction in cost will help the firm to: • Drop its prices thereby increasing its demand • Charge the same amount and earn a higher profit A combination of the above two can also be considered. Spreading fixed costs over a larger production base is one way to generate operational efficiencies.