Plan For Pricing Strategies
With rising costs, it is important that managers frame a compelling arrangement that allows the company to remain competitive in the market without affecting the brand’s quality or buyers’ perceptions. Inelastic markets normally do not see large fluctuations in sales when the costs of goods increase or decrease (Inelastic, n.d.). Within this condition, it is important to have a differentiated product in order to establish a brand within the market. Because of a shift in consumer demand, it is ideal to use new ingredients and fresh food in the products to appeal to more youngsters. This product differentiation may result in slightly higher-than-normal product costs; however, establishing the organization as a provider of low-calorie frozen food items will appeal to a substantial share of the market and attract consumers. Consumers normally perceive somewhat higher costs as an indication of the quality of the product they are obtaining. This is known as premium pricing (Pettinger, 2013). Because of the market’s inelasticity, slightly higher costs would not significantly influence the general purchasing of goods; however, this will result in a major contribution to the use of natural ingredients. Differentiation as an all-natural alternative in the low-calorie frozen-food market enables the organization to limit substitute products, thus further reducing market elasticity. Building the organization’s brand(s) and associating appropriate costs and distribution channels are vital to reducing price elasticity and targeting customers.
Pricing products is critical to reaching current and potential customers. Pricing decisions can have important consequences for an organization. These decisions are going to determine whether an organization is successful. As the industry of microwaveable low-calorie food is an elastic one, there is competition in the market to keep product prices comparable. While setting the price of a product, the company needs to do some research, analysis, and evaluation to avoid loss of revenue. Very low prices for the products might reduce the additional profits for the company. Conversely, a high product price may prevent customers from buying the product. Customers may feel as if the company is trying to take advantage of them. So, high prices may prevent interested customers from purchasing the product.
Advertising and promotion are key to any product and its consumers. Regarding microwavable low-calorie frozen food, it is essential to advertise the product in a manner that will promote variety, calorie content, and quality of taste. By appealing to consumers’ emotions and general sensibilities, the advertising will entice consumers to purchase low-calorie frozen microwavable foods. Targeting the desirability and benefits of the product will help distinguish it from its competition. For example, currently, on the Healthy Choice website, the company promotes a webpage featuring balanced culinary meal inspiration. Additionally, it goes on to state that, “Healthy Choice chefs have carefully crafted each new recipe, perfectly pairing the right ingredients to create a healthy and delicious meal” (Healthy Choice). This form of advertising makes Healthy Choice appear as if it is the only company that offers culinary inspiration and chefs who create meals with specific ingredients. Competing companies may have the same ingredients, but this form of advertisement attracts a specific type of consumer.
Predatory pricing is when a company sets prices low to eliminate the competition. This type of strategy drives out competitors and may bring dominance for the company among its competitors, and prices may later return to the market level once competitors have been weakened. Finally, penetration pricing is when a company introduces a product to the consumer at a low price in hopes of “gaining attention, loyalty, and market share of the customer base” (Grimsley). It is a promotional effort in which a company may increase the price of a product once it has been adopted by customers.
Governmental Policy Effects On Production And Employment
In the food industry, there are a few governmental organizations engaged in regulating the distribution, promotion, and production of products and services. One of the biggest policy-setting organizations concerning this market is the Food and Drug Administration (FDA). A part of the FDA that is responsible for helping ensure honest labeling, wholesomeness, sanitation, and food safety is the Center for Food Safety and Applied Nutrition (CFSAN) (FDA, n.d.). Changes in regulations regarding ingredients or labeling could greatly affect a company within the food industry. Sanitation is also a key point of the CFSAN and the FDA overall.
Foods that result in illness or even the death of a consumer are often traced back to the manufacturer. If the products are found to be contaminated with items such as bacteria, then the company is also at risk of large profit losses and legal proceedings because of the contaminated inventory. Take, for example, Blue Bell Ice Cream in 2015. After several individuals contracted Listeria monocytogenes after eating Blue Bell products, the FDA discovered a link to contaminated products within manufacturing centers. After the discovery of such contaminated products, multiple manufacturing facilities voluntarily closed; the company has since entered into an agreement that includes rigorous sanitation of facilities, revised production protocols, and extensive employee training. It was still unknown at the time when the affected production facilities could reopen or what overall costs and effects Blue Bell would face due to this problem. If the FDA or other governmental agencies choose to pass new regulations or guidelines for food production and distribution, then the company may see increased production costs. Regulations on imports and exports of goods could also affect production and the overall cost of the product.
Governmental Regulation Within Industry
In any market economy, the government has a significant role in providing quasi-public and public goods, promoting stability and growth, redistributing income, supporting and maintaining competition, and guaranteeing legal structures. To ensure the application of proper procedures and policies by all market-related companies, the government in any market economy has to maintain its role. There was a collapse of many financial systems during 2007-2009 that brought to light various regulations and policies that were not being implemented or maintained by the government within the market. To prevent the market structure from falling, the government must involve various agencies to ensure the strength and structure of the market.
Within a market, certain governmental authorities provide legal structures. To promote fair competition and prevent monopolistic practices, U.S. antitrust law includes the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914, which strengthened the earlier law by addressing additional anticompetitive practices. Programs such as Welfare and Medicaid are in place to redistribute income to citizens who fall below the poverty level or meet certain criteria to receive governmental assistance. Educational and judicial systems are public and quasi-public goods that are provided by governmental agencies to ensure the well-being of the overall public. Fiscal and monetary policies are implemented by government authorities to promote growth and stability within the market. If one segment of the government fails in such a market structure, then several others will also be affected.
Capital Projects Expansion
A capital project is “a long-term investment made to build upon, add or improve on a capital-intensive project. A capital project is any undertaking which requires the use of notable amounts of capital, both financial and labor, to undertake and complete. Capital projects are often defined by their large scale and large cost relative to other investments requiring less planning and resources” (Capital Project, n.d.). Expansion through capital projects greatly reduces a company’s short-term profit and is also likely to increase the company’s debt levels. This can result in losses or bankruptcy if the expansion does not perform as expected. The company must also be able to provide the required inputs for the specific outputs of expansion.
There are genuine complexities that arise in any expansion through capital projects. In light of a recovering economy, obtaining funds for a major expansion may be expensive. Financing costs can remain high depending on the financial conditions of the U.S. Therefore, higher borrowing costs can make the project seem more expensive. The organization ought to have an alternative source of funding available in the event of unforeseen circumstances. The company should also investigate tax rebates and tax credits as another option.
These types of incentives, when available under specific conditions, may reduce some of the financial burden on the company. When an organization expands, it needs to consider recruiting a new workforce to meet the demands of increased production, marketing, financial record-keeping, administrative requirements, and much more. The hiring process for any company can be extensive, but even more so for a company going through an expansion.
The company needs to recruit and use the staff needed to promote a positive image and vision and to follow the mission of the company. Capital projects must reflect the future of the company and the types of products the company hopes to offer to its present and future customers. A specific image and vision ought to be kept in mind when investing in capital projects. The location and size of a new headquarters building must represent the past, present, and future of the company. The image the company presents to its customers can influence their likelihood of purchasing its products. It is imperative that an expanding organization carefully plan capital projects and potential issues that can occur during its period of growth.
Convergence Between Stockholder And Manager Interests
Stockholders are stakeholders in a public organization. Stockholders “can benefit if the organization does well;” this additionally means that if the organization does not perform well, then the investor will suffer a financial loss too (Shareholder, n.d.). A manager is characterized as a person who “has control or direction of an institution, business, and so on, or a part, division, or phase of it” (Manager, n.d.). Managers are used within a business to maintain quality, train employees, oversee financial information, and manage different parts of an organization. The principal objective of a manager is to protect the benefits of an organization with the goal of restoring returns on investors’ investments. Through organizational development, the needs of both groups can be addressed. Lower competitive rates can lead to the creation of additional business opportunities. Organizations may interact effectively with other organizations through mergers and expansion plans. With this, the net income of the organization will increase, raising shareholder value.
Offering stock to managers to make them stockholders makes them more invested in the success of the organization. Managers can set certain targets, and companies can offer rewards for meeting those targets. Alignment among executives and investors can help ensure an increase in the company’s income. Increased income can lead to an increase in the value of the organization. The more highly a company is valued, the more its investors benefit. Encouraging managers to increase income and setting clear targets can guide the entire process.
References
Capital Project. (n.d.). Definition of Capital Project. Investopedia. Retrieved from https://www.investopedia.com/terms/c/capital-project.asp
Inelastic. (n.d.). Definition of Inelastic. Investopedia. Retrieved from https://www.investopedia.com/terms/e/inelastic.asp
Pettinger, Tejvan. (2013). Pricing Strategies. Economics Help. Retrieved from https://www.economicshelp.org/blog/1021/business/pricing-strategies/
Shareholder. (n.d.). Definition of Shareholder. Investopedia. Retrieved from https://www.investopedia.com/terms/s/shareholder.asp
Federal Trade Commission. (n.d.). The antitrust laws. https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws
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