Anticipation of Raising Prices when Selecting Pricing Strategies
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Anticipation of Raising Prices when Selecting Pricing Strategies
Global business environment undergoes rapid changes and economic volatility seen affecting industries and markets. Companies are experiencing the impact of such rapid changes that in return affect the labor, the production process, and the raw materials. Different factors may contribute to company anticipation for raising prices, and a company must have or develop a pricing strategy to respond to the expected changes (Belmans, De Jonghe, & Hobbs2011). This paper focus on the plan that managers in the low-calorie, frozen microwaveable food company could follow in response to the anticipated rise in prices through the pricing strategies. Effects of government policies on companies, and the need for regulations, complexities arising from expansion and the manner in which companies create convergence are examined.
If changes in pricing are forecasted, companies develop ways in which to respond considering their operations and performance. Raising prices has to be done in a way that would still make the low-calorie frozen microwavable food products have a position in the market and remain preferred (Hirshleifer, Hirshleifer, & Glazer, 2005). At the same time, the company has to identify ways and factors to consider in fighting back to such change it is expecting within consumer perceptions and expectations. Every company while selecting a pricing strategy will find the competitors, the market and trends, cost expenditure and the quality dispensable.
Unlike the usual pattern where pricing is by demand pressure, this case is different and requires a thought since the demand is not affected or changing. Competitors are in place with their unknown strategies and offerings while consumers are having their perception about the products. In the monopolistic competitive environment, customers are likely to turn to substitute products if the company raises the prices above its competitors offering the low-calorie food. The management, therefore, has to bring about changes that are considered healthy for the company and promptly (Harris, McGuigan, &Moyer, 2013). The demand elasticity of the products in the market must be found, and the consumer perception taken into consideration (Belmans, De Jonghe, & Hobbs, 2011). The change in the price should come with minimal or no effect on the quantity demanded. A differentiation is another appropriate approach that the company could engage to offer modified or products that are dissimilar to those of the competitors. This will reduce the competition, and the customers will unlikely change to other products since there will be no substitute product for the same value.
Therefore, the consumer perception has to be considered in the pricing changes and the value of the products such that the pricing does not cast doubt on the products. The management must set the pricing objective for their products, determine the effect on the demand and estimate cost implications (Belmans, De Jonghe, & Hobbs, 2011). Analyzing competitor costs, prices and offers are necessary to identify changes in demand, before setting a pricing method and lastly the price. Change in price can have a huge change in demand (Harris, McGuigan, &Moyer, 2013). The low-calorie market exists within a monopolistic competitive market and product differentiation well works as a strategy to eliminate substitutes and maintain demand.
Price elasticity of demand Ed = % Change in quantity demanded / % Change in price. Therefore, a change in pricing should not be accompanied by notable, or huge change in quantity demanded if the company is to maintain position (Belmans, De Jonghe, & Hobbs, 2011).
Effects of Government Policies on Production and Employment
Governments have their systems, and the companies can consider regulations that dictate markets and industries, some helpful others harmful. Such policies have effects either direct or indirect on company production and the employment. Regardless of whether they are designed for the low-calorie microwavable food products, the policies have substantial effects on quantity and quality of food availed in the markets and the consumer perceptions and expectations (Coglianese, Healey, Keating, & Michael, 2004). Government fiscal policies can come with increased taxes, and nominal interests charged impacts on labor and corporate incomes, and reforms that could see changes in consumption of products and the production and income of a company. The government policies have the capacity of influencing the performance of a corporation, which are reflected in labor and production process and ultimately the supply.
The increase in consumption is accompanied by a rise in employment since more work is required to produce the goods demanded. The reverse of this effect is right, indicating that equal response to consumption is reflective of the employment and the production rates (Wilensky, 2015). When policies impose costs on firms, such costs are turned to consumers by raising the product prices. Since policies affect the whole industry, consumers will respond by purchasing less since there are no cheaper substitutes in existence (Wilensky, 2015). Consequently, a unit of production will run little demanding less labor, and such reducing employment rates and loss of jobs. Policies on another hand may have positive effects that encourage innovation and increased consumption, which subsequently will lead to increased production.
Whether the Government Regulation to Ensure Fairness is Necessary
Government regulations are for the interest of their citizens and their administration. The food sector is critical, and quality and standards have to be ensured. Laws that ensure fairness are placed to eliminate unnecessary competition that may see harmful or substandard products arrive in the markets. The laws come about to ensure the enforcement quality and general standards that will ensure companies conduct their activities legitimately and in an orderly manner. The rules come in place to ensure citizen protection and the maintenance of moral standards and in providing a favorable environment for operations of all players.
\ Governments are involved in the market economy to ensure security, equality and justice through its established mechanisms. Policies provide regulated incomes and accountability as deserved, regulated growth and the government ability to control those operating in the industries and the markets within their jurisdictions. The food industry needs to be regulated to ensure quality and safety of the supplies to consumers. An example of government involvement in the similar market economy is where the government takes regulatory measures to control possible infection and spread of disease through the food produce. Consequently, the government regulatory focus is on reducing public health risks by ensuring compliance with standards put in place. Another example is if the government wants to control unfair competition that in return results for substandard products entering the markets. Setting regulatory measures and standards will ensure compliance with the established procedures and criteria that ensure products released to the market are of quality and meet the consumer needs and the standards of the government.
Complexities Arising from Expansion via Capital Projects
Companies can decide on expansion due to several circumstances both internally and externally and the trends in the industry and global economic environment (Wilensky, 2015). Carrying out expansion can be in different ways, as in mergers and acquisitions to improve business practice. In whichever way a company chooses, there are issues or a combination arising that the company would potentially face as it tries to improve its operations and productivity. A business, therefore, has to be prepared for the expansion and growth to avoid the company being overwhelmed and improve capacities in line with the expected changes. If the business is not willing to execute the expansion, there is a possibility of failure and this in return compromises the profit margins due to the market share and larger operation costs. Proper research and planning are necessary for containing possible complexities.
Initial investments to ensure smooth operations are undertaken in a manner recoverable from the future operation if strategically taken. This means that the expansion requires capital, and the source of the capital can be an issue. Maybe the food company has enough capital for the development, and if not, there must be such sourcing for the capital. Sourcing calls for proper adjustment of a business plan and marketing strategies to secure the capital required (Harris, McGuigan, & Moyer, 2013). It is upon the company to determine if the expansion process requires additional personnel and if so include such in their plan and budget for the future purposes. Plans should then be in place for acquiring other skilled personnel that will be of benefit to the firm in terms of its operations and efficiency.
The delegation of roles to the personnel and staff should be in a manner that is aligned with the expansion objectives to avoid conflict of interest. The structures and functions have to be changed, company culture infused, and customer issues considered in the process. Innovation, research and development are the ultimate actions a company can undertake to address complexities. Further, the modifications and improvements as necessary are made appropriately as per the company needs.
Creating Convergence in the Interests of Stockholders and Managers
Stockholders are the core of the company, and every decision by the management is often in line with their considerations. Managers’ interests often come in handy while decisions are made, which may be of benefit to an organization or cost some interest groups. In as much as the management has the administrative responsibility of the firm, the stockholders are the real owners of the company and in the event of any eventuality, they bear the cost that comes with it. The forces that create a convergence between the interest of the managers and the stockholders will make the managers tend to ensure maximizing the profit (Gordon, & Roe, 2004).
The event of company expansion will initiate the convergence of interests of managers and the stockholders as that requires expansion of the capital base of the enterprise (Gordon, & Roe, 2004). Managers need the capital base as an asset of development whereas the stockholders handle the money. Ultimately, the motivation of every corporation is on its profits, a mutual focus of the management and the company shareholders. Business expansion through mergers or acquisitions and venturing into new markets require the efforts of both the managers and the shareholders, which in turn reduces competition and enhances profitability (Gordon, & Roe, 2004). For instance, PepsiCo have acquired different food businesses to expand its base of activities and profitability shares. McDonalds, on the other hand, bought other fast food companies even outside the United States to ensure expansion and presence in new markets with differentiated products.