3. PENETRATION PRICING PREMIUM PRICING Penetration Pricing (Don’t Laugh!) involves a business setting prices below those of their competitors’, and once the product is popular enough, prices are raised in order to make more of a profit. This is mainly done by firms which enter a market in which their competitors already sell similar products. Premium Pricing is when a product is sold at a higher price in order to create an image of luxury or superior quality compared to its competitors. Examples of this are Ferrari and Gucci.
4. DESTROYER PRICING Destroyer Pricing is when a firm sets their prices so low that making a profit borders on impossible, forcing their competitors to do the same if they want any chance of their products being sold. Weaker competition will (hopefully) be eliminated and forced to leave the market, then prices are raised back up. This method of eliminating competition, illegal in many countries, is used only by large companies which can afford to make losses until the dirty deed is done. Competitive Pricing involves businesses setting similar prices to their competitors to avoid price wars, and instead compete using other non-pricing factors such as Advertising. An example of this is fast food outlets. COMPETITIVE PRICING
5. PRICE DISCRIMINATION LOSS LEADERS MARKET SKIMMING Some products are advertised (Eg: In window displays) at low, unprofitable prices to tempt customers into the store. Hopefully this will lead to them also buying the firm’s normally priced products, so a profit is still made. Market skimming is a method primarily used by electric companies selling new home entertainment products. The product is launched at a high price to make a large initial profit. Once competition enters the market, the firm reduces the price of their product. Price Discrimination is when a firm charges different prices for the same product or service depending on the time of day/year it is used, or how often it is used. For instance, BT charge different prices for calls at different times.
7. TALL STRUCTURE : This method of structure boasts a narrow span of control, but a long chain of command as few people report to a single superior. ADVANTAGES: -Easier to supervise staff -Roles within company are clearly defined -More opportunity for promotion -Manageable workload for employees DISADVANTAGES: -Slow decision-making -Workers have little freedom or responsibility -Many levels of management -High Labour Costs
