The first step in the forecasting game plan is to project sales and other operating activities....

The first step in the forecasting game plan is to project sales and other operating activities. Sales numbers are determined by both a volume component and price component. Projecting prices depends on factors specific to the firm and its industry that might affect demand and price elasticity. For the following types of firms, discuss whether it would be likely that the firm would be able to raise future prices:

a.	A firm in a capital-intensive industry that is expected to operate near capacity for the near future.
b.	A firm in an industry that is expected to experience numerous technological improvements.
c.	A firm with products that are transitioning from the growth to maturity phase of the product life cycle.
d.	A firm that has established a well-known brand name and image.

Solutions

Expert Solution

Whether the firm can increase the future prices?

A. Since the firm wants to operate at full capacity, price increase might not be possible as firm might not be able to sell the whole production. However, if the demand exceeds the supply, firm might consider increasing the prices.

B. As the industry is such there are numerous technological improvements, firm needs to keep on improving the product so as to be relevant in the industry. If the firm is the front runner in the technological improvement, firm may charge a premium for the products. However, if they are a laggard, it might choose to keep the prices reasonable.

C. As in the maturity phase, the demand of the product in increasing but at a reduced rate. In such a industry the players might be price competitive in order to gain as high market share as possible. Hence increasing price in such business cycle might be a disaster decision.

D. This firm has established a well known brand image and name. Due to special brand image the firm may charge a premium for the product. The demand shall not be so price sensitive due to brand image.

jeff jeffy answered 1 year ago

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