Price your value properly/accurately to gain profit
Must have pricing strategy to avoid killing a product
We are in a “knowledge based economy”
Our product must provide complete information before entering the market
( Price e.g.) * To illustrate basis of pricing strategies for “knowledge based” products & services: p.g 58 text book.
PROFITS = ( P - V ) Q – F
P price per Unit of the Product
V price per Unit Variable Cost
Q total number unit sold
F fixed cost
C C C C
* To illustrate basis of pricing strategies for “knowledge based ” products & services: p.g 58 text book . FIRM A FRIM B R & D (Fixed Cost) $500 million $500 million Variable Cost $5 $5 Price per Unit $200 $200 Market Share 80% Market Share 20% Knowledge based - software – IT - content
Assets under financial statement Tangible - plants, equipment, cash reserves, PC, servers Intangible - patents, copyrights, reputation, brands, programmers. Ability of firm to turn its resources to a customer values & profits. Integration of more than one resources.e.g. APPLE experience. Core competencies: firm able to offer better value than other competitors . Advantage to the firm. Honda offers outstanding engines.
The ability of the firm to sustain its competitive advantage from its competitor.
How the firm uses its resources & strategies to stop competitors from gaining market share.
Uses 3 strategies:
Sustainability strategies BLOCK STRATEGY -Firm puts barriers around its product market space. -Uses Intellectual properties rights. -This strategy works only if, company has unique capabilities - Easier in the internet era uses reverse engineering. RUN STRATEGY -Thinks that blocking strategy fails. therefore, this strategy must change some of its components & linkages /b-model or maybe sometimes create a new business model to offer customer better value. -Gives first mover advantage -Example DELL TEAM-UP STRATEGY -If you can’t beat em’. Join em’ -nothing else works. -thro’ strategic alliances, joint venture acquisition, equity position. -allows sharing of resources it does have. - promotes knowledge transfer -creates ‘win-win situation’