Pricing decisions as a management strategy

set decisions as a transport strategySupply and demand is an economic model of footing aim in a market place. It concludes that in a free-enterprise(a) market, price functions to pit the quantity demanded to the quantity supplied. This results in an economic equilibrium. The de confinesine decisions, deciding what to charge the customers may be based on the Marketing or toll and management accounting. Pricing is one of the most difficult decisions faced by organisations. It is possible for management to foresee a usefulness squeeze (Horngren, Datar Foster, 2003). Pricing decisions are based on what to charge for the harvests and serve wells organisations offer. These decisions gestate major impacts on the revenue an entity earns.This study is focused on set decisions as a management strategy. It leave hence discuss about be (subset of management accounting) and its influence in set. Major changes have occurred in the handicraft world in recent years, including de regulation, privatisation, the growing expectations of share holders and the impact of contendting technology (Atrill McLaney, 2009). These changes have led towards a fast changing and competitive environment, and this has radically changed the way that entities need to be managed. Managers must approach pricing decisions with care because of the large impact they infrastructure have on the profitability of business (Drury, 2008).Management must approach pricing decisions with care because of the signifi locoweedt impact they can have on the profitability of an entity. Managers consider ternary main influences on pricing decisions customers, competitors and be. Managers tend to see the pricing issues with the customers eyes. Any increase in price may cause customers to lour an entitys product and switch to its competitors. In the current business environment, understanding customers prices and product preferences are a competitive advantage to any entity. Management can p rice dynamically to respond to demand, to create demand, to reduce waste and to call on over stock immediately. The reactions of competitors influence pricing too. Many companies globally, have realised departments to search out information on its competitors financial performance, patents, technology and direct policies (Bhimani, 2008). nearly companies price products to exceed the production costs (Alan, 2002). The surveys and case studies give out that executives weigh customers, competitors and costs differently.Price taking and price makingMost entities need to make decisions about setting or accepting exchange prices for their products or services. An entity will have to accept the market price under few circumstances. If there are entities in an industry and there is little(a)sighted to distinguish their product or service from each other then the management needs to consider price taking. Entities in commodity markets can be quoted as examples. Any small entity oper ating in an industry where there are dominant entities that influence prices then small entities will have to accept those prices. In contrast, if the entity is selling highly customized or identify products then they can influence the prices and be a price setter. fourth dimension horizons Short rush a spacious and Long pass alongPricing decisions have twain short run and long run implications.Pricing decisions in short runShort run pricing decisions include pricing for a onetime special offer. This can be an opportunity where an entity will have to bid against its competitors. In such a situation incremental costs of undertaking the order should be taken into account. Product mix could be adjusted where the incremental sales revenue exceeds incremental short run costs and will provide a contribution towards fixed costs.Pricing decisions in long runLong run decisions could include pricing a product in a major market where price setting has considerable leeway. Long run time ho rizon is broadly speaking of a year or longer.Organisations are supposed to consider the long run implications since they commit their resources for a lengthy period of time. Long run decisions have a profound effect on the firms future stick (Drury, 2008). Pricing decisions are more prominent since that is how organisations earn their revenues. Target be and Life turn costing are two of the strategies used by organisations in pricing.Target costing is the estimated price for a product or service that potential customers will pay. In other words, firms determine the allowable cost for the product or service, given a competitive market price, so the firm can earn a desired profit (Target cost = Competitive price Desired profit).Firms have two options to cut down costs to the level of target cost. It could be either by redesigning the product or service and or by integrating spic-and-span manufacturing technology. While once managers focused only on manufacturing costs, they now side at cost upstream (before manufacturing Research and development and design) and downstream (after manufacturing marketing, dissemination and customer service) in the product life cycle to get a complete analysis of product cost and profitability.Another long term pricing strategy is Life cycle costing. Typically, product or service costs are calculated and reported for shorter periods, such as a month or a year. Unlike the typical strategies Life cycle costing provides a long term perspective.