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There are several factors a business needs to consider in setting the price:
• Competitors – a huge impact on pricing decisions. The relative market shares (or market strength) of competitors influences whether a business can set prices independently, or whether it has to follow the lead shown by competitors
• Costs – a business cannot ignore the cost of production or buying a product when it comes to setting a selling price. In the long-term, a business will fail if it sells for less than cost, or if its gross profit margin is too low to cover the fixed costs of the business.
• The state of the market for the product – if there is a high demand for the product, but a shortage of supply, then the business can put prices up.
• The state of the economy – some products are more sensitive to changes in unemployment and workers wages than others. Makers of luxury products will need to drop prices especially when the economy is in a downturn.
• The bargaining power of customers in the target market – who are the buyers of the product? Do they have any bargaining power over the price set? An individual consumer has little bargaining power over a supermarket (though they can take their custom elsewhere). However, an industrial customer that buys substantial quantities of a product from a business may be able to negotiate lower or special prices.
• Other elements of the marketing mix – it is important to understand that prices cannot be set without reference to other parts of the marketing mix. The distribution channels used will affect price – different prices might be charged for the same product sold direct to consumers or via intermediaries. The price of a product in the decline stage of its product life-cycle will need to be lower than when it was first launched.
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Business Studies Revision / Exam Coaching Workshops Coming Up:
Thursday 24 April 2014 - Birmingham
Friday 25 April 2014 - London (Stratford City)
Monday 20 January 2014 - London (Stratford City)
Tuesday 21 January 2014 - London (Fulham Broadway)
Wednesday 22 January 2014 - Bristol (Cribbs Causeway)
Thursday 23 January 2014 - Birmingham (Star City)
Friday 24 January 2014 - Manchester (Salford Quays)
Tuesday 25 March 2014 - London (Stratford City)
Wednesday 26 March 2014 - London (Fulham Broadway)
Thursday 27 March 2014 - Bristol (Cribbs Causeway)
Friday 28 March 2014 - Birmingham (Star City)
Tuesday 1 April 2014 - Newcastle (Metro Centre)
Wednesday 2 April 2014 - Leeds (The Light)
Thursday 3 April 2014 - Manchester (Salford Quays)
Post-Easter (BUSS1/BUSS2 Combined & BUSS4)
Monday 28 April 2014 - London (Stratford City)
Tuesday 29 April 2014 - London (Fulham Broadway)
Wednesday 30 April 2014 - Bristol (Cribbs Causeway)
Thursday 1 May 2014 - Birmingham (Star City)
Friday 2 May 2014 - Manchester (Salford Quays)
Try some of these superb starter activities for Business Studies:
- Anagram Countdown
- Beat the Teacher
- Budget Basket
- Memory Challenge
- Loop Cards
- I'm the Question
- Catchphrase - Say What You See!
- Consider All Possibilities (C.A.P)
- Teacher Talkabout
- Perfect Recall
- Pass the Buck
- What would you have invented?
- These are a few of my favourite things
- Set Your Students the 15 Word Challenge
- Topic Tennis
- What Why Depends - Developing Thinking Skills
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