In: Accounting
In 205-500 words Discuss the three influences on pricing decisions, as presented in the assigned reading for this topic. Which do you think is most important, and why?
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The three influences on pricing decisions are mainly caused by customers, competitors, and costs.
1. The customers can influence pricing through their demand for the product and services.It is the customer for whom the product is made or the service is given. The price that a company will set will make the customers decide about the quality of the product. Apple can sell its products at high prices because the customers think that it is of high quality whereas Samsung cannot sell its products at high prices because the customers do not think of it as a high quality company.
2. Competition affects price significantly. The company always tries to match the prices with the competitors and adjusts the prices more or less than the competitors. The company also needs to assesses how the competitors respond to changes in the prices.A company may try to decrease the price of its product in order to increase its control over the market and to increase the market share but the competitor can also do the same thing which may not give the benefit to the concerned company.
3. The cost has the power to influence the price through its effect on the supply. Cost of a company include cost of raw materials, selling and distribution overheads, cost of advertisement and office and administration overheads. It is the duty of the company to analyse costs before it sells its products. The main objective of the company is to get as much profit as possible and it may sometimes reduce the proices and thereby profits, if it can increase the profit in the long run.
The most important in all of the three cases is the cost component. It is because it is the cost of the product which is the first and the basic thing that any business will and have to analyse before stepping into any industry. The cost of the product along with the price will determine how much money(profits) will a company earn and for how long can it survive in the industry.