Textbook Notes (363,452)
Canada (158,372)
MGTA02H3 (361)
Chapter 7

Chapter 7

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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

Chapter 7 The 4 Ps - Price PRICING OBJECTIVES AND TOOLS Pricing is deciding what the company will receive in exchange for its product. Pricing to Meet Business Objectives Companies often price products to maximize profits, but they also hope to attain other pricing objectives. Pricing objectives are goals that producers hope to attain in pricing products for sale. Profit-Maximizing Objectives If prices are set too low, the company will probably sell many units of its product, but it may miss the opportunity to make additional profit on each unitand may in fact lose money on each exchange. If prices are set too high, the company will make a large profit on each item but will sell fewer units, resulting in excess inventory and a need to reduce production operations. Again, the firm loses money. To avoid the above two, companies try to set prices to sell the number of units that will generate the highest possible total profits. In calculating profits, managers weigh receipts against costs for materials and labour to create the product. But they also consider the capital resources that the company must tie up to generate that level of profit. Pricing for Ebusiness Objectives Many ebusinesses are lowering both costs and prices because of the internets unique marketing capabilities. Advantages: because the web typically provides a more direct link between producer and ultimate consumer, buyers avoid the costs entailed by wholesalers and retailers. Another factor in lower internet prices is the ease of comparison shopping. Both consumers and businesses can force lower prices by joining together in the interest of greater purchasing power. www.notesolution.com
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