SETTING THE PRICE

When develops a new product or introduces regular product into new distribution channel or geographical area. It is a six step procedure.

STEP 1: Selecting the Pricing Objective

Each firm operates with some objectives and sets its products price which aligns with its objectives.

Survival.

When intense competition exists, or consumer wants changes. Price only covers variable cost and some fixed cost and company stays in business. It is a short-run objective.

Maximum Current Profit.

Tries to produce maximum current profit or cash in-flows by estimating the demand and cost. Difficult in the long-run because of marketing-mix variables, competitors, and legal constraints.

Maximum Market Share. Market-penetration pricing. Mass production involves. Higher sales volume leads to lower unit cost and higher long-run profit. Benefits can be achieved:

(1) When the market is highly price sensitive and low price stimulates market growth.

(2) With mass production cost of production and distribution will decrease.

(3) Competitive advantage. Low price discourage actual and potential competition.

Maximum Market Skimming. Market-skimming-pricing. Monopoly. Higher price in the start and then low. In 1990 Sony introduced High Definition Television (HDTV) at $43,000. In 1993, 28" was of $6,000 and in 2004; 42" was in $1,200. Condition must exist:

1. High current demand.
   
2. Low unit cost at small volume.
   
3. High initial price will discourage competition.
   
4. Superior product image.
   

Product-Quality Leadership. Making the brand high quality and affordable by creating value and setting just high enough prices.

Other Objectives. Nonprofit or public organizations have different objectives, like nonprofit hospital aim to full cost recovery, or social agencies set a price according to client income.

STEP 2: Determining Demand

Price and demand has an inverse relationship. If price is high demand level will be fall and if the price is low demand will be ultimately high.

Price Sensitivity.
People have different price sensitivities. Customers are more prices sensitive to products that cost a lot or are bought frequently and less sensitive to low-cost items or items that buy infrequently. Companies prefer less price sensitive customers.

Estimating Demand Curves.

• Statistical analysis by statistical techniques gathering data from past prices, sale volumes.
  
• Price experiments by charging different prices for a product to see how sales affects.
  
• Surveys can explore what price consumer will accept.
  

Price Elasticity of Demand. Need to know the change in price brings how much change in demand.

 

 

 

 

 

 

STEP 3: Estimating Costs

Amount incurred on producing, distributing and selling the product

Types of Cost and Level of Production.

Management should know how costs vary with the different levels of production.

• Fixed cost that does not vary with production.
  
• Variable cost varies with the level of output.
  
• Total Cost = sum of fixed and variable costs for given level of production.
  
• Average cost = Total Cost / No. of Units Produced.
  

Accumulated Production.

With time experiences the production techniques become better, the methods improve and average cost falls with this accumulated production experiences. It is called the experience curve or learning curve. Some chains have different learning curves so profits. Activity-based cost (ABC) accounting should be used to estimate the real profitability.

Target Costing.

Set a target cost to be achieved through production scale, experience, and efforts by designers, engineers, and purchasing agents by reducing the current cost. Cost elements---design, engineering, manufacturing, sales---must be examined to bring down cost in target cost range.

SWOT Analysis

			Project on
			SWOT		Analysis

 

SWOT analysis is an important key step in strategic management process. It is an analysis of organization's strengths, weaknesses, opportunities, and threats. Strengths - Any activities the organization does well or any unique resources that it has. Weaknesses – Activities the organization does not do well or resources it needs but does not posses. Opportunities – Positive trends. Threats – Negative trends.

In the light of SWOT analysis it is easy to evaluate the any organization's current missions and goals and easy to evaluate whether they need any modification or not. Also the overall direction can be observed and if necessary changes can be made.

Introduction

Mobilink is the market leader in providing state-of-the-art communications solutions in Pakistan. Mobilink started operations in year 1994 and now it is a biggest cell phone family in Pakistan. It provides coverage in more than 400 cities and towns nationwide including northern, central and southern regions of Pakistan. It deals in JAZZ prepaid service and indigo post-paid cellular service. Its competitors are UFone, Paktel, Insta phone, Telenor, and Warid Telecom.

Strengths

Financial Strength. This has involved an investment in the company of more than US$ 1 Billion including assets, network, equipment, and so on.

Skilled Management Team. Staff Mobilink with world class Professionals and ensure that the right systems are in place to encourage them to develop to their full potential.

Product Categories. Its product lines are both pre-paid and post-paid. Other servers have yet only prepaid, so it is generating revenues rapidly.

Competitive Advantages. Due to its positive market image it had captured a major portion of market demand and suddenly become the biggest cell phone family.

Lower Cost. The cost it is bearing is lower because it is being operated at a very large scale.

Market Image. For last five years it has developed a very positive image through its activities and operations by doing what we say and saying what we do.

Weaknesses

Facilities Obsolete. Some of the features desired by the consumers are not yet given by committed. Such as GRPS service has been launched.

Lower Profitability. Although is operates on large scale so its cost is lower than others, yet it is taking low profits to get competitive advantages.

Lack of Management Departments. It still needs more management departments to handle wildly growing organization.

Services Diversification. Its products categories are both per-paid and post-paid so there is a little diversification of the features, billing methods, franchising and controlling them.

Opportunities

Global Market. Recently it has extended it IR (international roaming coverage) in Jordon, Nigeria, UK Japan, Cambodia, Hong Kong, Germany and many other countries. It has the aim to roam the world by its promotions.

Internet Advertising Growth. It can be grow up more in international business by marketing itself via internet on world's popular domains, e-mail servers.

Increasing Demand. Fashion, Trends are changing rapidly. Now the cellular phone become more affordable in out country, so the demand of the cellular services will ultimately increase.

Market Growth. Hence, the voice communication technology is spreading widely then. Continuously more and more people are taking interest in it. It can occupy a big share of growing market with its strategies.

Under-Establishing Competitors. Although there are many other companies which are competing with Mobilink, but more of them are yet new in the market and under establishing. These companies can't get competitive advantages. Mobilink has the opportunity to compete them because it is well established.

Threats

Government Restrictions. It is a multinational company being operated in Pakistan. It pays tariff to government. As being a outsider company government imposed some service and production restrictions on it also.

Production and Services Limits. Because it is a multinational company and it has to pay tariff to government to operate in Pakistan it has no privileges to render unlimited services.

Increasing Competition. Because of the population growth and the profitability in voice communication industry there are many competitor are being raised gradually.

Rapidly Changing Trends. The necessities and trends are changing with great speed. These changes might cause the absolution of the old technology. May some other time there will be a better system get connected with outside world.

Substitute Products. There are many other substitutes in voice communication technology such as PTCL land line phones or wireless phones.

D E C I S I O N - M A K I N G

    A decision is a choice from two or more alternatives. Making good decisions is something that every manager should have. Decisions have a major influence in organizational success or failure. Top-level managers make decisions about their organization's goals, middle and lower-level managers make decisions about setting production schedules, handling problems and employee hiring and firing.

D E C I S I O N - M A K I N G P R O C E S S

    Decision making process is a set of eight steps that are following:

    STEP 1: IDENTIFYING A PROBLEM

The decision-making process begins with the existence of a problem. A problem is a discrepancy between an existing and a desired state of affairs.

    STEP 2: IDENTIFYING DECISION CRITERIA

Once a manager has identified a problem that needs attention, the decision criteria important to resolving the problem must be identified. That is, managers must determine what's relevant in making a decision.

    STEP 3: ALLOCATING WEIGHTS TO THE CRITERIA

The decision maker must weight the items in order to give them the correct priority in the decision. A simple approach of allocating weights is to give the most important criterion a weight of 10 and then assign weights to the rest against that standard.

    STEP 4: DEVELOPING ALTERNATIVES

Then the decision maker should list the variable alternatives that could resolve the problem. In this step the manager doesn't has to evaluate the alternatives. He only has to list out them.

    STEP 5: ANALYZING ALTERNATIVES

Once the alternatives have been identified, the decision maker must critically analyze each one. Each alternative is evaluated by appraising it against the criteria established. From his comparison, the strengths and weaknesses of each alternative become evident.

    STEP 6: SELECTING AN ALTERNATIVE

The sixth step is the important act of choosing the best alternative from among those considered. We have determined all the pertinent criteria in the decision, weighted them, and identified and analyzed viable alternatives. Now we merely have to choose the alternatives that generated the highest score in previous step.

    STEP 7: IMPLEMENTING THE ALTERNATIVE

Although the choice process is completed in the previous step, the decision may still fall if it isn't implemented properly.

    Implementation involves conveying the decision to those affected by it and getting their commitment to it.

    STEP 8: EVALUATING DECISION EFFECTIVENESS

The last step in decision-making process involves appraising the outcome of the decision see if the problem has been resolved. Did the alternative chosen and implemented accomplish the desired results?

If the problem still exists then the manager would need to carefully assess what went wrong. Was the problem incorrectly defined? Were errors made in the evaluation of the various alternatives? Was the right alternative selected but poorly implemented. It might even require starting the whole decision process over.

D E C I S I O N - M A K I N G S T Y L E S

    Four decision making styles are evident: directive, analytical, conceptual and behavioral.

• Directive style. People using the directive style have tolerance for ambiguity and are rational in their way of thinking. They're efficient and logical. Directive types make fast decision and focus on the short run. Their efficiency and speed in making decisions often results in their making decisions with minimal information and assessing few alternatives.
  

 

• Analytical style. Decision makers with an analytical style have much greater tolerance for ambiguity than do directive types. They want more information before making a decision and consider more alternatives than a directive-style decision maker does. Analytical decision makers are best characterized careful decision makers with the ability to adopt or cope with unique situations.
  

 

• Conceptual style. Individuals with conceptual style tend to be very broad in their outlook and will look at many alternatives. They focus on the long run and are very good at finding creative solutions to problems.
  

 

• Behavioral style. Decision makers with behavioral style work well with others. They're concerned about the achievements of subordinates and are receptive to suggestions from others. They often use meetings to communicate, although they try to avoid conflicts.