Pricing Analysis

Prepare an evidence-based business report (3-5 pages) that explains how market conditions should impact a manufacturer’s pricing and marketing decisions.

Introduction

In this assessment, you will serve as a consultant to a manufacturer struggling to position a product in the marketplace.

There are three primary ways that a company can price its product or service within a market: cost-plus pricing, markup pricing, and competitive pricing. Under cost-plus pricing, a firm determines its total costs and then adds in a profit margin percentage to determine the final price for the company’s product or service. Markup pricing is similar to cost-plus pricing. With markup pricing, a set dollar amount is added to the total cost of a product or service to get to the final price. With competitive pricing, a company sees what its competitors are charging for a product or service and prices its product or service at the same price.

Competitive pricing is commonly used for commodities. The price of a company’s product or service will ultimately be determined by the intersection of the upward sloping supply curve and the downward sloping demand curve to get to an equilibrium price. If a product or service is priced too high, the demand for the product will not be there until the price declines to the equilibrium price. If a product or service is priced too low, there will not be a sufficient supply of the product until the price increases to the equilibrium price.

Scenario

You are an economic analyst specializing in pricing and marketing at a consulting firm that advises a variety of manufacturing companies. For this assessment, choose one (not both) of the following clients to advise:

1. A domestic car manufacturer is preparing to launch a new midsize sport utility vehicle, and they have requested detailed advice to help them situate the new car within the existing SUV market. They have requested an evidence-based analytical report that explains how market conditions should impact their pricing and marketing decisions.
2. A computer manufacturer is preparing to launch a new extra-light notebook computer, and they have requested detailed advice to help them situate the new notebook computer within the existing personal electronics market. They have requested an evidence-based analytical report that explains how market conditions should impact their pricing and marketing decisions.

Your Role

You are an economic analyst specializing in pricing and marketing at a consulting firm that advises a variety of manufacturing companies.

Requirements

Address the following in your business report:

1. Explain the impact of supply, demand, equilibrium, and elasticity on individual, firm, and market behavior.
2. Apply principles of producer theory to answer the client’s pricing question.
3. Analyze the impact of competition on markets as relevant to the client’s financial decision making.
4. Analyze the impact of economic conditions on how organizations buy, sell, price, and supply goods offered to the market.
5. Explain how regulatory considerations might impact the client’s business strategy.