Successfully reported this slideshow.
Your SlideShare is downloading. ×

pricing

Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Ad
Upcoming SlideShare
VALUE SYSTEM.pptx
VALUE SYSTEM.pptx
Loading in …3
×

Check these out next

1 of 15 Ad

More Related Content

Advertisement

pricing

  1. 1. PRICING BASED ON FIRM’S OBJECTIVE PRESENTED BY:- MUTAHIRA
  2. 2. WHAT IS A FIRM? • Firm is a business organization • That buys or hires factors of production • To produce goods and services • That can be sold at a profit. • Example:- Partnerships, private companies, state owned firms, multi-national firms etc.
  3. 3. OBJECTIVES OF FIRM PROFIT MAXISATION SALES MAXIMISATION GROWTH MAXIMISATION OBJECTIVES OF FIRM
  4. 4. 1. PROFIT MAXIMISATION • BUSINESS IF FOR PROFIT. Firm adopts mark up pricing. • Objectives of business is to generate largest amount of profit. • Plays crucial role in the production decision taken by the firm. • Efficiency of firm is measured in terms of profit generating capacity. • PROFIT= TOTAL REVENUE – TOTAL COST
  5. 5. 2.SALES MAXIMISATION • According to BAUMOL’S theory:- • ultimate objective of firm is sales maximization rather than profit. • sales volumes, and not profit determine market leadership in competition. Firm adopts competitive pricing. • Relates managers to maximizing sales. • Sales volumes are better indicators of firms position in market( e.g.. Monopoly)
  6. 6. GROWTH RATE MAXIMISATION • MARRIS proposed that:- Owners aim at profits and market share Managers aim at better salary, job security and growth. Growth rate of firm (G) Growth rate for firms product (Gd) Growth rate of capital supply to firm (Gc)
  7. 7. • Firms face two constraints:_ Managerial constraint Financial constraint Marris stressed on importance of human resources . Skills, expertise, efficiency and sincerity of managers are vital to growth of firm. Relates to prudence needed in managing financial management. 3 ratios(set the limit for the growth)
  8. 8. COMPETITIVE PRICING • Used mainly when product is homogenous . • Highly competitive market. • company tries to maintain its price more or less at par with its competitors price. Competition based pricing
  9. 9. Going rate pricing Entry deterring pricing Penetration pricing Types of competitive pricing
  10. 10. PENETRATION PRICING PROS CONS Setting low prices can be marketing tool raising brand awareness. A quick way to gain market share Entry to competitive industry Enables a firm to benefit from economies of sale Overtime, prices can increase and firm becomes more profitable. Selling at loss for few months Risky-if consumers have brand loyalty may not switch despite if low prices Might start a price war with existing firms cutting prices to discourage entry
  11. 11. EXAMPLES
  12. 12. ENTRY DETERRING PRICING • The price is kept low, thus making the market unattractive for other players. • If prevailing price is low, entrants with high fixed cost will not be able to enter the market at a price lower than this price. • Small players may not survive due to higher average cost( LIMIT PRICING) • FIRM EARNS ECONOMIES OF SALE. • EXAMPLE:-electricity rates in public sector units in INDIA.
  13. 13. GOING RATE PRICING • Prevailing market price is preferred. • Price is fixed by dominant firm. ( follow the leader) • Why? • To avoid price war. • Close substitutes( high cross elasticity) • Adopted at maturity stage of product.
  14. 14. GOING RATE PRICING 99-100 rupees
  15. 15. •Thank you…

×