Control Over Prices Essay Example for Free

Control Over impairments EssayThe degree of understand everyplace costs which the companies whitethorn exercise varies widely with the competitive space in which they operate. Sellers operating under conditions of pure disceptation do not have either control over the impairments they receive. A monopolist, on the other hand, whitethorn fix prices according to his discretion. Sellers operating under imperfect contestation may have some set discretion. The marketer, thitherfore, needs to know the degree of pricing discretion enjoyed by him.Wal-Mart is selling varieties of items and one of these is Toys. It has got a honorable percentage of customers in the market but other competitors have also have their own lot and Toys R Us is quite close to it. Both the companies have their own approach of pricing the toys in the market. The approach is whether WalMart should use the loss leader pricing indemnity to stay comfortable in the market. complete(a) competition is said t o exist when (i) there ar a stupendous chip of buyers and sellers, (ii) each purchasing and selling such a small quantity that their withdrawal from the market will not run the total demand and supply, (iii) the overlaps sold by sellers are homogeneous in nature. rases under perfect competition are determined by the forces of supply and demand. Prices will be fixed at a turn on where supply and demand are at equilibrium.In pure competition, all that the individual seller washbasin do is to accept the price prevailing in the market, i.e. the company is in the position of a Price Taker. If it wants to charge a higher price, buyers will purchase from other sellers. And it need not charge slight since it stop sell its supply at the going market price.Under monopoly, a single manufacturer has complete control of the entire supply of a certain product. The main features of monopoly are (i) there is that one seller of a take time officular good or service and (ii) rivalry fr om the producers of substitutes is so strange that it is almost insignificant. As a result, the monopolist is in a position to set the price himself. Thus, it is in the position of a Price Setter.Even in the case of monopoly, there are limits to the extent to which it can increase its prices. Much depends on the elasticity of demand for the product. This, in turn, depends on the extent of availability of substitutes for the product. In most cases, there is rather an infinite series of closely competing substitutes. Bigger organizations must take into scotch potential competition by alternative services. The closer the substitute and greater the elasticity of the demand for a monopolists product, the less it can raise its price without frightening a focussing its customers.Monopolies are forever and a day tending the break down due to many reasons (i)shifts in consumer demand, (ii) continuous process of innovations and technological developments steer to development of substitute s, (iii) lack of stimulus to efficiency provided by competition, (iv)entry of smart competitors.Loss leader pricing policy of Wal-MartIt is a type of strategy applied by the company where the item is sold below the personify price in an effort to balance other profit gross sales. It is just another way of promoting sales of the products which are slow moving or to counterbalance some other competitive satisfying.It is the market situation characterized by a few sellers each having an appreciable share in the total output of the commodity. In each of these industries, each seller knows his competitors individually in each market.Each company realizes that any transfer in his price and advertising policy may lead rivals to change their policies. Hence, Wal-Mart may consider the possible reactions of the other firms to its own policies. The smaller the number of firms, the more interdependent are their policies. In such cases, there is a strong tendency towards close collaborati on in policy determination both in regard to production and prices.Such type of industries are usually characterized by what is known as price leadershipa situation where firms fix their prices in a manner dependent upon the price supercharged by one of the firms in the industry,i.e.,Toys R Us, called the price leader. The price leader has lower costs and satisfactory financial resources, a substantial share of the market and a reputation for sound pricing decisions. Price leaders with the strongest position in the market may often increase their prices with the hope that competitors will deliver the goods suit. Price followers may also delay raising their prices in the hope of snatching a part of the market share away from the leader.Monopolistic competition is a market situation, in which there are many sellers of a particular product, but the product of each seller is in some way differentiated in the minds of consumers from the product of every other seller. None of the selle rs is in a position to control a major part of the total supply of the commodity but every seller so differentiates his portion of the supply from the portions sold by others, that buyers hesitate to shift their purchases from his product to that of another in retort to price differences. At times, one manufacturer may differentiate his own products.Wal-Mart sells toys of many steels. This differentiation of product by each manufacturer by giving it a brand name gives him some count of monopoly if he is able to create goodwill for his product and he may be able to charge higher prices thereof to some extent. Still, his product will have to compete with similar products of other manufacturers which puts a limit on his pricing discretion. If he charges too high a price, consumers may shift their committedness to other competing suppliers. One can find it out by going to the market, as a large number of toys are subject to a large degree of product differentiation as a means of att racting customer.As long as a consumer has an impression that a particular product brand is different and superior to others, he will be willing to pay more for that brand than for any other brand of the same commodity. The differences real or illusory may be built up in his mind by (a) advertising, and (b) his own experience and observation. The producer gains and retains his customers by (a) competitive advertising and sales promotion, (b) the use of brand names quite as much as by (c) price competition. yield differentiation is more typical of the present day economic system, than either pure competition or monopoly. And, in most cases, a firm has to pillow slip monopolistic competition. It tries to maintain its position and promotes its sales by either (i) changing its price and indulging in price competition, or (ii) intensifying the differentiation of its product, and (iii) change magnitude its advertisement and sales promotion efforts.Instead of the cost, the emphasis here is on the market. The firm adjusts it own price policy to the general pricing structure in the industry. Where costs are particularly difficult to measure, this may seem to be the logical first step in a rational pricing policy. legion(predicate) cases of this type are situations of price leadership. Where price leadership is well established, charging according to what competitors are charging may be the only safe policy.Normal pricing is not quite the same as accepting a price impersonally set by a near perfect market. Rather it would seem that the firm has some power to set its own price and could be a price maker if it chooses to hardihood all the consequences. It prefers, however, to take the safe course and conform to the policy of others.Prices of certain goods become more or less fixed, not by deliberate action on the sellers part but as a result of their having prevailed for a considerable period of time. For such goods, changes in costs are usually reflected in changes i n quality or quantity. Only when the costs change significantly the customary prices of these goods are changed. frequent prices may be maintained even when products are changed. For example, the new model of toy may be priced at the same level as the discontinued model. This is usually so even in the face of lower costs. A lower price may cause an adverse reaction on the competitors leading(a) to a price war so also on the consumers who may think that the quality of the new model is inferior. Perhaps, going along with the old price is the easiest thing to do. Whatever be the reasons, the maintenance of vivacious prices as long as possible is a factor in the pricing of many products.If a change in prices is intended, Wal-Mart must study the pricing policies and practices of competing firms and the behavior and emotional make-up of his opposite number in those firms.References Philip Kotler (2002) Marketing Management, Prentice-Hall, New YorkBeaumont, P.B.,(1999) Pricing Policies a nd Procedures, Sage Publications, London, .Flippo Edwin B., (1989) Marketing Management, McGraw-Hill, New YorkPurecell J.,Boxall P.,(2003) Marketing Development, Plagrave, Macmillan, New York.