1. A manufacturing firm sells a product for less than its long-term price Describe how this...

1. A manufacturing firm sells a product for less than its long-term price

Describe how this scenario can come about. [8 marks]

Expert Solution

Often manufacturing firms, especially new firms sell products at less than the long term price in the market to penetrate the market. Apart from new firms even established firms also use such strategy to launch a new product in the market. Such pricing strategy is also known as penetrating pricing strategy. Such pricing strategy helps the manufacturing firms to penetrate the market and attract customers to the products of the manufacturing firms. Once the products are established in the market the firms increase the prices to make good the lost profits due to the pricing strategy. It is important to note that the penetration pricing strategy can be used as a pricing strategy as well as a marketing strategy. It depends on the overall objectives of the manufacturing firms to decide whether to use such pricing strategy and expectations of the management to recover the loss of profit in the future after increasing the prices in the long run.

Thus, a manufacturing firm can sell its products for less prices than the long term prices of such products.

ekkarill92 answered 1 year ago

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