Pricing policy


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Pricing policy

  1. 1. Pricing policyThe margin on essential goods is low and is about 10%, but possibly losses arecompensated by mark-up on goods categorized as luxuries. Comparative characteristics of competitors prices The price of the goods, in KZT (VAT) DEVIATION Ltd.Product name "Metro TN"Ramstore JSC JSC TN"Ramstore" Cash & " «Stolichny» «Stolichny» Carry" Apples “Голден”, 252,94 265,10 279,05 4% 10%caliber 70., 1 kg.Milk «Домик вдеревне» 3,2%, 1 115,6 124,5 123,58 7% 6%packageBreadДалич 83,71 87,20 94,67 4% 13%800 g.Tooth paste «Новый 119,5 144,5 139,5 20% 16%жемчуг»Beer 144,5 147,4 184,37 20% 27%«Балтика 3», 0,5 l.Doctoral sausage 488,34 627,87 647,8 28% 32%«Кокент», 500 g.Dishwashing liquid 209,29 249,15 239,18 19% 14%«Pril», 400 ml.On the provided comparative analysis of the prices of the three stores, we could see the priceleadership of METRO. This is due to a high level of purchases from suppliers in comparisonto retail stores.Tools of price promotions: Price incentives, which mean selling goods at a special price. (Discounts, coupons, blue-light specials, anything that reduces the cost of an item.) Price reduction is used
  2. 2. to attract customers into the store and encourage making the first purchase of certain goods. You can give a discount as a percentage, you can deduct a certain amount, or you can just simply specify the new price with an explanation of the reasons for its decline. Reduced prices are also effective if you want in a short time to get rid of stale goods or create an attention to the particular brand brand. Service incentives, when retailer simplifies the buying process or offer free extra services. Supermarkets offer additional services, such as the ability to pay for cellular services, the availability of a watchmaker, etc. These services are not related to the specific store, but customers perceive these factors as carrying attitude towards them by the store. Additional services can facilitate the buying process, for example: staff helping customer to pack the goods and bring them to the car or electronic boards with the necessary information about location of department and the availability of goods.Retailers have a stock number of retail mechanics that they regularly roll out or rotate for new marketinginitiatives. Buy x get y free a.k.a. BOGOF for Buy One Get One Free Three for two Buy a quantity for a lower pricePurchase and sale of goodsWith the purchase of goods there is a process of harmonization of prices with the supplier. Toprovide customers with products for reasonable prices of "Metro Cash & Carry Russia" seeks topurchase goods in bulk, because it benefits the seller to sell their goods with a substantialdiscount.Selling price on the shelf formed by taking into account the prices of competitors. Especially forit "Metro Cash & Carry» monitors competitors prices and then adjust their own prices. Theprofitability of product sold is analyzing."Metro Cash & Carry" has a list of factors that influence on the process of selectinggoods( for purchase)- quality of the goods;- purchase price;-compliance with the requirements of buyers (especially professional);- size of the individual procurements;- conditions of payment;- conditions of supply;- delivery time;- reliability of supplier;- accuracy of delivery.
  3. 3. After analyzing the profitability of the sold product there is a process of adjusting the volume ofnext purchases. Adjusting process is divided on two methods.Method of increasing amount of procurement 1. Considering the demand for specific types of products for making decisions about their purchases. 2. Analyzing the demand for at least 12 months to take into account all possible types of seasonal variations. 3. Determining the sufficient volume of demand over the 12 months to create reserves for particular type of product. 4. Decisions are taken on the establishment of reserves depending on the number of orders for specific products rather than on the number of sold products.Method of reducing amount of procurement 1. Every month company analyzes the sales of goods that are not in demand 2. Goods which amount of reserves should be reduced is determining by sales statistics. 3. Creating criteria on the basis of which is determined the need to reduce or eliminate specific types of product reserves. 4. The share of slow selling types of products reduces to a minimum based on the data of stored product. The policy of procurement of products based on the ABC-analysis:The ABC analysis provides a mechanism for identifying items that will have a significant impact on overallinventory cost, while also providing a mechanism for identifying different categories of stock that willrequire different management and controls.The ABC analysis suggests that inventories of an organization are not of equal value. Thus, the inventoryis grouped into three categories (A, B, and C) in order of their estimated importance.A items are very important for an organization. Because of the high value of these ‘A’ items, frequentvalue analysis is required. In addition to that, an organization needs to choose an appropriate orderpattern (e.g. ‘Just- in- time’) to avoid excess capacity.B items are important, but of course less important, than ‘A’ items and more important than ‘C’ items.Therefore ‘B’ items are intergroup items.C items are marginally important. 1. Procurement of “A” items realizing from more reliable suppliers, than “C” items. 2. Company more closely control the physical storage of “A” items than “B” and “C” items, A items possibly placed in the most secured places."A" items subject to more frequent inspections for an accurate record.
  4. 4. 3. Forecasting the demand for “A” items carries out more carefully, than forecasting demand for the other group of items.LogisticsGoods must be in the right place at the right time, in the required quantity and qualityLogistics - source of competitive advantage LLC "METRO". This is because the companycomplies with the following rule: goods must be in the right place at the right time, in therequired quantity and quality.The companys logistics system consists of distribution centers - platforms, working with thefollowing product groups: non-food products, dairy products and frozen foods, fruits andvegetables.The company is also engaged in direct import of consumer goods. Imported goods are moving toa central warehouse. Company is using modern logistics technologies in processing products.Distribution Centers LLC "METRO" working on becoming the popular in Kazakhstan, theprinciple of cross-docking (receipt and dispatch of goods within the warehouse directly, withoutactually putting it on the storage area, using a transshipment platforms), which reduces the timefor delivery and costs for warehousing.Consolidation of goods to the fully loaded machine in the companys distribution centers and theuse of the principle of reverse logistics offer a good savings on transportation.Optimizing the use of motor vehicles reduces the damage to the environment by exhaust fumesof cars."METRO» logistics provides timely delivery of goods on the shelves, control over productquality at all stages of transport, decrease production costs by reducing the number ofintermediaries in the supply chain. "Direct delivery" - channel, in which the goods from the producer delivering to the trade centerof the company «Metro Cash and Carry», by passing warehouses and intermediaries. This typeof supply is characterized by a high speed of shipments, which is especially important for foodproducts with little shelf life, such as fresh meat and fish. manufacturer Buyer Consumer (supplier) (“Metro Cash and Carry”) The scheme of direct supply of goodsAdvantages of direct delivery: 1. All the concerns of sending goods supplier takes over. 2. The supplier ships the goods to many trading centers, thus minimizing the load of company warehouses.
  5. 5. 3. Exclusion of intermediaries from the supply chain, thus reducing the cost of goods.Disadvantages of direct delivery: 1. Supplier may not be available in the goods which the customer has ordered. In that case, occurring situations of unavoidable delays and delivery failures. 2. The quality of the goods may not meet the company expectations due to objective or subjective reasons, thereby causing a disruption in supplies. 3. At the stage of orders delivery may be problems "in transit", which also lead to disruptions in the supply and delays in the timing of order execution. Despite the disadvantages of direct delivery, this system is applying in many companies, in fact the responsibility, risk and cost of delivery specified by the contract, which gives certainty and stability to the company.Delivery through “cross-docking”Cross-docking - is logistics operation within the supply chain at which the shipment of goods tothe warehouse and its subsequent delivery to the recipient timely agreed in such a way, in orderto exclude the storage of goods in warehouse. As a result, the shipment delivered to the seller inthe shortest time period. The company creating order for different types of goods afterinformation is sending to one or more suppliers. In the order company noted the exact date ofdelivery - the day X. Supplier packages goods, part of the order, to the shipping container,pointing each unit of packaging with order number, and delivers it to the warehouse. Pallets ofgoods that come to the warehouse should be packed very securely, so that any access to theproduct has been completely eliminated. To meet this requirement, vendors often use stretchfilm, as well as special packing tape with the logo of his company with the seals and twine. Atthe same time warehouse employees are not responsible for the goods contained in a transportcontainer. The task of the stock - just check the integrity of the packaging film. All parts of orderare delivered to a warehouse in a single day, which we denote by X1. After delivering they arecompleted in a single unit. And then ready order is shipped to the buyer designated by the term -the day X. Cross-docking - a set of operations with orders, not with the goods. Order is notcompleted in a warehouse, it completed by seller of goods during shipping. This cansignificantly reduce the cost of its processing, and complete responsibility for the safety of thegoods delegate to the supplier.
  6. 6. Advantages of cross-docking: 1. Streamlines the supply chain from point of origin to point of sale 2. Reduces handling costs, operating costs, and the storage of inventory 3. Products get to the distributor and consequently to the customer faster 4. Reduces, or eliminates warehousing costs 5. May increase available retail sales space.Disadvantages of cross-docking: 1. Potential partners dont have necessary storage-capacities or an adequate transport fleet to operate Cross-Docking 2. Need of adequate IT-System 3. Additional freight handling can lead to product damageDespite the shortcomings of the system, such a channel is especially important for goodsmovement of most goods, both food and nonfood, such as household chemicals, textiles, forgoods with low shelf life. In most cases, providers are taking the decision to use cross-docking,focusing it on the variety of product and its shelf life. But not all products can be processed inthe system of cross-docking. The best is characterized by a high level of predictability,maximum demand and large amounts of transportation. These factors must be determined foreach product by analyzing the data of previous periods. In addition, cross-docking is ideal for: 1. Perishable products that require immediate shipment. 2. High-quality products that do not need a thorough quality check upon receipt. 3. Products equipped with a label and ready for sale. 4. Products for promotional activities and pre-promotion. 5. Products which has continuous and constant demand, such as consumer goods, for example milk or toilet paper. Manufacturer Distribution Buyer Consumer warehouse (supplier) (Ltd. «Metro Cash and Carry») The scheme of supply of goods through cross-dockingType of transport is based on the distance from the supplier to warehouse and geographicallocation, etc. Products from Asia, shipped by cars and airplanes, products from the Europebrought in ships, airplanes and by the rail, fresh products from Europe shipped by air.
  7. 7. Organizational structure of the company.Type of the overall organizational structure of the company "Metro Cash & Carry" is divisional.Divisional management structure is the most perfect kind of organizational structure of the hierarchicaltype. Divisional structure characterized by the full responsibility for the results of the activities byDepartment Heads. In this regard, an important place in the management of companies with a divisionalstructure is not occupied by the managers of functional departments, but by the managers of theproduction departments.Divisional level solve everyday problems, such as: - Forecasting of the market; - Increasing the share of sales; - Yhe study of the activities of competitors; - Providing reports of the results to the head, etc.Advantages of divisional structures The use of divisional structures allows the company to pay as much attention to a particular product, consumer or geographic region as small specialized company pays to a particular product, as a result company might respond more quickly to changes - occurring in the environment, adapt to changing conditions This type of management structure is oriented towards final results of the company activity(satisfaction the needs of a consumer, saturation a regional markets with variety of goods), reducing management complexities faced by senior managers Separating operational management from strategic, resulting in a top management focusing on strategic planning and management Transfer of responsibility for the profit to the divisions‟ level, the decentralization of operational decision-making, such a structure helps managers to pay attention to the problems of the market, improve communications Development of the latitude of thinking, perception and flexibility of enterprise management units (divisions).Disadvantages of divisional structures • Divisional management structures have led to an increase in the hierarchy, ( chain of command). They demanded the formation of intermediate levels of management to coordinate the work of departments, groups, etc. • Contrasting objectives of departments to overall objectives of the company, the divergence of interests of "uppers" and "bottoms" in a multi-level hierarchy; • The possibility of conflicts between departments • Inefficient use of resources, they cannot be fully utilized because of consolidating resources for specific subdivision, and increase maintenance costs due to duplication of
  8. 8. the administrative apparatus of the same functions in the units and the corresponding increase in staff quantity; • Difficulty in controlling from the top to the down, multi-level hierarchy within departments (divisions) • Possible limitation of professional development of subdivisions „specialists, because their teams are not as big as in the case of linear-functional structures at the firms‟ level.The organizational structure has several levels of management. The highest one includes ameeting of the Parties of the Company and general manager, and the lowest one - executors.The highest level of management making decisions regarding the strategic issues and challenges,control all subordinate units and providing general management of the company.Organizational structure meets the needs of the company, giving the opportunity for careergrowth, respecting the principle of unity of command, as well as an emphasis on the principle ofsubordination and delegation of authority, because it is so important for a such large company as«Metro Cash & Carry».The main body of the management of "Metro Cash & Carry" is the general meeting of players,headed by the CEO. The powers of governing bodies, as well as their composition andcompetence enshrined in the Charter of the organization.The structure of government is a meeting of the Parties of the Company and CEO. GeneralMeeting of the Parties shall be convened by the CEO (in accordance with Ltd «Metro Cash andCarry» Charter.)The Board of Directors of "Metro Cash & Carry Russia" includes the CEO, HR Manager, SalesManager, Customer Service Manager and Marketing Manager, Director of Development,Administration Department, Director of Procurement of food, Director of Procurement of non-food items. Each of them has several subordinate departments.Metro Shopping Centre has a linear-functional structure. 1. In the company «Metro Cash & Carry» there is a provision of the structural department, which includes: 1. General Provisions. 2. The main objectives of department. 3. Functions of department. 4. The organizational structure of the department. 5. Department‟s rights. 6. The relationship (service connections) with other departments. 7. Liability of the department.
  9. 9. On the basis of such Provision, together with the opening of the shopping center in 2009 was establishedthe Department of Human Resources SC "METRO». Department of Human Resources.Schedule of work in the department is 5/2 day from 9.00 to 18.00. But knowing the specifics ofthe business and the inevitability of non-normal working day, the company adds three moredays of vacation; vacation of the employee is 31 calendar days.Every two years company provides complete renewal of the staff. Either the employees goingup (vertical movement), or transferred to other shopping centers (horizontal movement), orchange the present job.The Department has the following organizational structure:. Head of the Department Department Operator CC-manager CC-manager CC-manager CC-manager CC-manager It is important to note the dual subordination of the department. Head ofDepartment subordinate by the Store-manager (Supervisor) TC METRO Cash & Carryand to the Head of Central Department of Human Resources, located in the centraloffice. Human Resource Management Ltd. "Metro Cash & Carry."Human Resource Management – activity realizing by admistrative staff, head of thedepartments and specialists of HR Department, aimed for improving organizationalperformance by improving the efficiency of its employees by psychological, legal, economicand other methods.
  10. 10. HR Management include:- Creating the system of HR management;- Planning of human resource management;- In the definition of human resources’ potential and staffing needs of the organization.The main staff of «Metro Cash & Carry» is more than 280,000 people.