Pricing Strategies & Organisational Structures
Published on: Mar 4, 2016
Transcripts - Pricing Strategies & Organisational Structures
PRICING STRATEGIES AND ORGANISATIONAL STRUCTUIRES BY EDISON McKENNA
PART 1 $ Y = £ PRICING STRATEGIES
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.
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
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.
ORGANISATIONAL STRUCTURES PART 2 Chain of Command Supervision Labour Costs Span of Control
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
FLAT STRUCTURE : Since many workers report to one manager, this method has a wide span of control but a short chain of command. <ul><li>ADVANTAGES: </li></ul><ul><li>- Few management levels </li></ul><ul><li>Faster communication </li></ul><ul><li>Quick decision-making </li></ul><ul><li>DISADVANTAGES: </li></ul><ul><li>Greater workload for managers </li></ul><ul><li>Fewer promotion opportunities </li></ul><ul><li>Employees must multi-task, so more training is required </li></ul>
MATRIX STRUCTURE : Organisation is divided into different divisions (Mainly for products or countries), each with its own department for marketing, Finance, Human Resources, etc. Employees may report to 2 or more managers at one time. <ul><li>ADVANTAGES: </li></ul><ul><li>Increased experience for each division </li></ul><ul><li>Different levels of expertise </li></ul><ul><li>Motivated workforce due to more responsibility </li></ul><ul><li>Tackles complex problems </li></ul><ul><li>DISADVANTAGES: </li></ul><ul><li>Problems with co-ordination </li></ul><ul><li>High labour costs due to different divisions </li></ul><ul><li>Confusion regarding who reports to whom </li></ul>
ENTREPRENEURIAL STRUCTURE : <ul><li>ADVANTAGES: </li></ul><ul><li>Very quick decision-making </li></ul><ul><li>Staff know who boss is </li></ul><ul><li>Manager can make decisions without consulting staff </li></ul><ul><li>DISADVANTAGES: </li></ul><ul><li>Difficult to use in large businesses </li></ul><ul><li>Manager has gargantuan workload </li></ul><ul><li>Demotivated staff due to lack of involvement </li></ul>Organisation in which all decisions are made by the one or few people who run the business. Mainly used in small businesses as the workload of the boss(es) would become unmanageable if the company was too large.