Question

1. Describe the three types of pricing strategies (premium, penetration, meeting the competition)

2. what is meant by the concept of outsourcing tasks?

Answer 1

1. The three types of strategies are explained as follows:

PREMIUM PRICE STRATEGY - In premium price strategy, the company sets the price of a new product high in order to show the good quality and creates a perception in the mind of customers that the company is offering something of higher value and thus charging high prices.

PENETRATION PRICE STRATEGY - Under this strategy,the company sets a price below what is there in market offered by the competitors. The company sets a low price in order to attract more and more customers and increase the market share.

MEETING THE COMPETITION - This strategy is used when the firm decides to set a price according to what competitors are charging. This strategy looks at competitor's prices and used mainly in businesses which are selling similar products.

2. Outsourcing refers to giving out the non core activities of the business to some a company/individual who is outside the company. In outsourcing, company hires a third party to perform some of its tasks which were earlier performed by the company itself. This is done by the company in order to focus on its core activities and give the non core activities to the company who specialises in that task.