Pricing Strategy In A Competitive Business Environment

Project and Seminar Material for Business Administration and Management BAM

Chapter One

1.1 General Background Of The Subject Matter.

One element that is very important in any organization is price. Pricing is an important strategic issue because it is related to the product positioning. It also affects other marketing mix elements, such as product feature channel, decision and promotion.

In any organization after a product has been made, the next task for the executive is how to place on price n the products so as to get revenue from the capital invested in product and at the same time stand neck to make with competition. Price does not apply to goods only but also to the different service and commodities differ either because a product quality or the satisfaction enjoyed by the consumer. Specifically price can take any of these forms like rent paid to landlord, wages paid to workers, salary paid to executives, money paid on goods bought, commission on bonus, services etc. In essence, price according to Olukoye 1997 is the amount of money needed to acquire a given quantity of goods or services. Price can also be defined in another way as the market value of a product or services.

From the foregoing, it could therefore be said that price is the actual money as exchange fro the satisfaction enjoyed from a given product or services. The Economists may not fully accepts such definition of price simply because they believe that price can only be determined by the forces of demand and supply which is made totally agreed by the marketing executives. Through demand and supply are some of the major factors that determine price, the market still believes that there are some other factors that can influence price determination of a product, such as product, quality, company’s relation to product satisfaction, competition legal constraints and so on. Such factors should be taken into consideration before the price is set for a new product or existing ones.

Understanding the executives must take extra care in deciding with the task because any mistake in setting price for a commodity may lead to total rejection of that product in the market by the consumers, especially if the consumers are very sensitive to the price

Since price may determine the level of sales or quantity that can be purchased by the consumer in the market, business executives should take price setting as big task by handling it with reasonably care. This is very important especially in a competitive business environment.

Many organization in recent times that know how good it to set acceptable price for their product use this price to pursue different objectives depending on the one that each organization wishes to pursue at a particular period.

1.2 Problems Associated With The Subject Matter.

1. What are kinds of pricing strategies that will help in the actualization of the company’s corporate goals?
2. What are the factors that will determine the type of pricing strategy to be used?
3. What role does marketing play in the growth of an economy and how do pricing strategies assist in playing that role?
4. Will the choosing of a new pricing strategy not displace the already existing ones?
5. Does the changing of pricing strategy changes the markets beliefs and attitude?

1.3 Problem That The Study Will Be Concerned With.

The problem that this study will be concerned with is limited to the role of pricing strategies in the marketing of product inNigeriafor example cocoa. The research covers area, such as how price is determined by the top management before the actual price of the production.

It also covers the reaction of the consumers to any slight change in price, and also whether certain pricing strategies would be able to stand the test of time in a competitive business environment.

For the purpose of clarity and exemplification, the research uses the “Shell Petroleum Development Company (S.P.D.C)” as a reference point or case study. The research therefore gathers data from the work of marketing product of Shell Petroleum Development Company (S.P.D.C)

1.4 The Importance Of Studying The Area.

The importance of studying the area is as follows:

1. To find out the usefulness of pricing strategies in the actualization of a company company’s corporate objective (S.P.D.C)
2. To establish the invaluable role of pricing in the whole market program.
3. To show clearly to all marketer and laymen how firms employ the use of pricing strategies.
4. To see if changing from one pricing strategies to another will help the firm to achieve their co-operative objectives.
5. To find whether the selection of a new pricing strategies will be best alternative for better competition.
6. And to establish whether reversed pricing strategy can change the market belief and attitude towards their product.

1.5 Definition Of Important Terms

Pricing:

It is the amount of money needed to acquire a giving quantity of goods or services. It could be determined by executives, marketing department or sales management etc. It depends on the organizational structure that differs from one organization to another.

Party Pricing:

This essentially means setting price at or near competitive level. Generally, this pricing will be employed if a firm prefers to compete n a non-price basis, because it is easily matched by competitors, price is seldom the best attribute to use in attempting to complete.

Oligopoly Competition.

This is a market that comprises of few sellers who are highly sensitive to other’s pricing and marketing strategy.

Trade In Allowance;

Are price reduction granted for turning in all items when buying a new one.

Quantity Discount:

Is the amount that middlemen sold to their cost to determine the price of goods they sell. It is usually expressed as a percentage.

Pricing Strategy In A Competitive Business Environment

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