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Defend or Critique Your Firm’s Pricing Strategy, Essay Example

Pages: 3

Words: 942

Essay

The aspect of pricing cannot be solely based on the case of corporations being eager and willing to make the most of each and every product that they produce. In some cases that can be considered to be the main strategy or ideology of a company, but it may not be the only factor that is the cause of a company to exist. The aspect of pricing can be simply based on the development or enhancement of other intangible factors that relate to a company’s existence and continual growth.

Based on the ideology or principle of economics, all corporations aim to break even, regarding their cost of production and revenue generation. On this conclusion it can be determined that the pricing of commodities will be based on the aspect of companies seeking to develop or harness their revenue based on breaking even (Paull, 2009). However it is evident that the companies will seek gain more than that so as to maintain the continuity of the company (longevity). Therefore the pricing will be based on expansion strategies of the company, as well as establishing a cushion should the company experience a low period in sales (money that will allow a related company to cover its cost of production).

In some cases there is the element that will involve pricing the product based on market share. Setting a price of a commodity can be based on seeking to develop a large market share (number of consumers of the company’s product). This can be a beneficial factor in the long run, and it is an ideal strategy particularly for the companies that are seeking to establish themselves in a new market. The strategy can involve pricing their products lower than their competitors so as to increase the volume of their market and even increase sales and probably revenue in the long run.

Pricing may not necessarily be based on the cost of production, but it is a well known fact that the prime factor for a company is to recover the money invested in product production to provide the platform for progress of the company. no company will ever price their products lower than their production cost as all companies must break even, to say the least. In this case, cost can be considered to be a factor that facilitates the establishment of a price for a company. (Nagle, 2002)

Price is also affected by the market forces of demand and supply. Based on the established economic principles, the element of the market price is established at the point in which the supply and demand of the market meet. In this case it is a constant tug-of-war between the two factors that work in opposite of each other; meaning that demand will seek to buy at a low price while supply will want to supply at a high price. In this case it is evident that price can be determined as well as heavily influenced by these two factors of the market. (Poundstone, 2010)

In the case of Sto Corp, it is a corporation that is based on the factor of building construction, and it operates based on the consumer or customer requirements (Sto, n.d.). Based on the field and manner of operation, the company has a broad market that facilitates the ability for the company to subdivide their market and provide or offer different pricings for their services. This element has allowed the company to develop a large market volume, but their main focus is based on the high end of their target market where they set high prices for their service to wealthy customers.

This ideology is beneficial due to the fact that the company can deal as well as maintain wealthy clients who can spread their business opportunities to other wealthy individuals. The price of their service is complementary of the level of quality in which they provide to their customers. In this case it can be labeled as ‘Good value for money’.  (Sto, n.d.)

Their price strategy is also based on providing incentives for the clients or customers that they deal with. For instance, if the cost of a house is fairly high, they can offer discounts or they can build a part of the house for free as a bonus to the customer. Though the price of construction may be high, their strategy includes incentives that will allow the customer to be satisfied with the service that they obtain from their payment.

Pricing of a product or service is always worth it if the quality can justify the payment. In the case of Sto Corp, the high pricing is justified based on the final or finished product of their constructions. In a number of cases they provide low cost housing, but it is based on the level of price that will facilitate the level of quality of the construction of the building (Sto, n.d.). Therefore it can be concluded that the pricing strategy that Sto Corp adopts is based on the scale of quality. The more an individual will pay, the more the quality and vice versa. This strategy is fairly ideal for the corporation as it makes the customers pay more for a high level of quality, and in actual fact the quality justifies the high price. Therefore, the price strategy can be considered to resemble a ‘Two-way Street’, the parties involved benefit one way or another.

References

Sto (n.d.) Welcome to Sto, Sto Corp, retrieved from: http://www.Sto Corp.com/index.php/en/

Paull, John (2009) The Value of Eco-Labeling, VDM Verlag, USA

Nagle, Thomas, Reed. H (2002) The Strategy and Tactics of Pricing. Pg. 84-104, Prentice Hall, USA

Poundstone. W (2010) Priceless: The Myth of Fair Value (and How to Take Advantage of It) Hill and Wang, USA

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