Discusses major influences on pricing, market structures, and common pricing methods.
Overview of chapter content covering:
Pricing influences
Types of competitive markets
Cost-based and demand-based pricing methods
Perfect Competition:
Many sellers, similar products, easy market entry/exit, market participants earn moderate profits.
Example: Apple industry with many identical producers.
Monopoly:
Single seller, no differentiation, high barriers to entry, profit maximization for the seller.
Example: Canada Post monopoly on domestic letters.
Oligopoly:
Few sellers, interdependent on pricing, can sell similar or different products.
Example: Canadian cellphone carriers.
Monopolistic Competition:
Many sellers, product differentiation, few barriers to entry.
Example: Fast food industry.
Short-Term Decisions: Focus on variable costs; example includes special orders.
Long-Term Decisions: Incorporate fixed costs and requires a strategy for stability and predictability.
Market structure impacts pricing strategy:
Number of competitors.
Customer influence on prices.
Product differentiation.
Market entry barriers.
Stages of Product Life Cycle:
Development: Costs incurred without revenue.
Introduction: Slow sales rise.
Growth: Rapid increase in sales.
Maturity: Sales plateau.
Decline: Sales loss; management strategies to extend maturity stage.
Emphasis on costs in setting prices.
Common Strategies Include:
Life-cycle Costs: Prices set to recover costs over the product's life.
Target-Based Pricing: Set a target selling price and work backward to target costs.
Variable Product Costs: Set prices based on variable costs plus a markup.
Full Absorption Costs: Covers all costs, suitable for financial reporting.
Focuses on perceived value and demand influences:
Strategies:
Predatory Pricing: Set prices below costs to drive out competitors (illegal).
Penetration Pricing: Low initial price to gain market share.
Price Skimming: Set high prices initially for early adopters; lower over time.
Price Bundling: Combined pricing for multiple products to create value.
Peak-Load Pricing: Higher prices during peak demand periods.
Loss-Leader Pricing: Sell at a loss to stimulate sales of other products.
Value-Based Pricing: Setting prices based on perceived value and competitive landscape.
Reverse Engineering: Analyze competitors' costs to inform pricing decisions.
Considerations for Non-Profits and Public Sector: Pricing to cover costs versus profit generation.
Discusses key pricing strategies relevant to management accounting, influences on pricing, and systematic approaches for pricing decisions.
Example scenarios analyzed for product life cycles, market structure, and pricing strategies.
Svelte Co. example in clothing manufacturing focused on competitive pricing strategies based on market influences.
Management Accounting-Chapter 15&16
Discusses major influences on pricing, market structures, and common pricing methods.
Overview of chapter content covering:
Pricing influences
Types of competitive markets
Cost-based and demand-based pricing methods
Perfect Competition:
Many sellers, similar products, easy market entry/exit, market participants earn moderate profits.
Example: Apple industry with many identical producers.
Monopoly:
Single seller, no differentiation, high barriers to entry, profit maximization for the seller.
Example: Canada Post monopoly on domestic letters.
Oligopoly:
Few sellers, interdependent on pricing, can sell similar or different products.
Example: Canadian cellphone carriers.
Monopolistic Competition:
Many sellers, product differentiation, few barriers to entry.
Example: Fast food industry.
Short-Term Decisions: Focus on variable costs; example includes special orders.
Long-Term Decisions: Incorporate fixed costs and requires a strategy for stability and predictability.
Market structure impacts pricing strategy:
Number of competitors.
Customer influence on prices.
Product differentiation.
Market entry barriers.
Stages of Product Life Cycle:
Development: Costs incurred without revenue.
Introduction: Slow sales rise.
Growth: Rapid increase in sales.
Maturity: Sales plateau.
Decline: Sales loss; management strategies to extend maturity stage.
Emphasis on costs in setting prices.
Common Strategies Include:
Life-cycle Costs: Prices set to recover costs over the product's life.
Target-Based Pricing: Set a target selling price and work backward to target costs.
Variable Product Costs: Set prices based on variable costs plus a markup.
Full Absorption Costs: Covers all costs, suitable for financial reporting.
Focuses on perceived value and demand influences:
Strategies:
Predatory Pricing: Set prices below costs to drive out competitors (illegal).
Penetration Pricing: Low initial price to gain market share.
Price Skimming: Set high prices initially for early adopters; lower over time.
Price Bundling: Combined pricing for multiple products to create value.
Peak-Load Pricing: Higher prices during peak demand periods.
Loss-Leader Pricing: Sell at a loss to stimulate sales of other products.
Value-Based Pricing: Setting prices based on perceived value and competitive landscape.
Reverse Engineering: Analyze competitors' costs to inform pricing decisions.
Considerations for Non-Profits and Public Sector: Pricing to cover costs versus profit generation.
Discusses key pricing strategies relevant to management accounting, influences on pricing, and systematic approaches for pricing decisions.
Example scenarios analyzed for product life cycles, market structure, and pricing strategies.
Svelte Co. example in clothing manufacturing focused on competitive pricing strategies based on market influences.