Introduction
Pricing and competition are key concepts in the success of any company. Pricing helps in ensuring that the products produced by the company are being offered in the market at the most appropriate price, in consideration of all factors of production and the other competitors. Competition ensures that a company produces good products and that it’s able to keep up with other competitors in the market (Queens Government, 2013).
Basically, competition motivates a company to work smart so as to ensure that it produces quality goods that are attractive to potential consumers. It also makes a firm try and be creative so as to be able to produce unique products, which will differentiate it from other products in the market, hence making it easily noticeable. This, in turn, promotes product sales, hence higher profits for the company. In the modern business world, companies are investing heavily in product design and marketing due to the high competition which has been brought up by the entrance of many companies producing similar products in the market. This has actually resulted in the emergence of the competitive market structure where many companies are falling under.
Pricing
The presentation on the pricing business concept will involve establishing a favorable price for different products in the market, which are bringing a poor income to the company. The setting of these prices will be based on a buyer’s or customer’s point of view whereby, the price will not only be affordable to the consumers but rather will bring an income to the company. The following procedure will be used in establishing these prices:
- Evaluating the target market;
- Examining the price flexibility for the product;
- Assessing the distinctiveness of the product;
- Improving the existing channels of distribution and coming up with new ones;
- Analyzing the overheads and the cost of production of the product;
- Establishing the new and closing prices for the products.
The above procedures will be used to help the management in the boardroom ascertain a good flexible price both for the consumers and the company. It will enable the board to make intelligent decisions on competitive prices to retain the clientele base, while at the same time maintaining a high level of cash flow, liquidity, and profitability.
Before laying down the framework for intelligent decision-making on product pricing, the marketing department has a task to explore the wider market coverage and analyze the products for related products among the closest competitors. It will thus provide grounds for the establishment of an appropriate pricing threshold based on the prevailing market demands and projections of the future product profiles of the organization. The ultimate goal of product pricing is to establish a competitive advantage to occupy valuable business opportunities in the existing and the potential market (Nagle and Holden, 2002).
Competition
The competition, in this case, will involve analyzing all the competitors in the market, who deal with similar products. A brief statement about the competitors will be done, their products, and their marketing strategies (Dolan and Simon, 1996). Different individuals in the management team in the boardroom will be requested to review the different competitors, and the review will consist of:
- Pricing strategies;
- Distribution channels;
- Marketing strategies;
- Different products they offer.
The information found will be useful to ensure that the company stays ahead in the market and hence maximize the profit (Info Entrepreneurs, 2013).
The toothpaste market
The production of toothpaste involves all the factors of production and the allocation of resources. This additionally identifies with the law of supply and request, whereby the relationship between interest and supply is the generation and circulation of items. The toothpaste production would have to be largely increased as a measure to maximize profits in the company. The cases of toothpaste to be produced would have to be average to avoid an oversupply of the toothpaste, which will greatly affect the demand of the toothpaste if all factors are considered constant (Keat, 2011).
In cases whereby the CPI may choose to raise the prices of the toothpaste unilaterally, the company would end up creating a favorable market position for the competitors since the price given matched the price currently in the market in relation to other competitors. This would mean that the company would go at a loss by the fact that their product shoots up too high above the market price range for other similar products. In a bigger picture, it would bring both negative and positive impacts. The positive effect is the fact that some customers might consider the use of this product for some of these consumers believe that the higher the price of a product, the better the quality (Queens Government, 2013).
With this notion, the demand for toothpaste would rise, leaving a gap in the supply of the product by the company if all factors are held constant. However, specifically in this situation, the firm will operate at a loss since the situation doesn’t satisfy the law of supply and demand. The profit-maximizing level of output would definitely go lower because of the increase in the market price of the toothpaste. In this case, the profit-maximizing level of output should be held constant in consideration of the sales of the product by the company. The output level decreases or rather goes down due to the low demand of the product in the market as a result of the higher increase in the price of the toothpaste (Kotler & Keller, 2012).
CPI would definitely make a big adjustment in terms of sales if they were to advertise their products. Through advertising, the company would be able to lay a strong foundation for their customers and this would help strengthen the customers- producer ties. Through advertising, the company would be able to woo their consumers into buying the product by giving them free hampers for each purchase of their product in different outlets as a promotion for the product.
Advertising is a major marketing tool that brings about greater profit margins in a company and if explored well, it creates a lasting position of a company in the market (Economic Basis, 2013). In the event that the CPI was ready to consume the business sector, chances are that the cost of the toothpaste will definitely fall. Thereby, the profits would increase by a greater margin, leading to the toothpaste division expanding its production volume (Paul, 2009).
Colgate
Colgate toothpaste is a sub-brand of Colgate Palmolive, established in 1806 by its founder William Colgate. Colgate Company is one of the largest firms dealing with various consumer products, with a product line of different oral hygiene products such as toothpaste, dental floss, and toothbrushes. Colgate is well renowned for the best marketing strategies of its different products and rising above its competitor’s levels to become one of the leading brands of oral hygiene products (Colgate, 2013). In fact, Colgate Palmolive is one of the most successful companies in the world and has won many business awards.
The marketing strategies of this company are very diverse, and this has made the company effectively compete with business rivals in the market which is dominated by large multinationals. The company’s management is also very good and effective, which is another aspect which has kept the company at the top.
Colgate revenue and gross report
Colgate-Palmolive Company has revenues ranging from $16.7B to about $17.1B overly in the previous years. Basically, the profits of this company, The Colgate-Palmolive, have been rising annually, and this has greatly been influenced by the use of proper strategies by the company. These strategies have been employed in different aspects by the company, for example, product design, consumer relationship, and marketing. The company has also positioned itself well in the consumer product market, and this has made it effectively remain relevant in the market for all these years since its initiation many years ago. The following is a table presentation for the revenue and gross profit for the previous years (All the money in the table is in dollars).
From the financial reports, the operating income and the net income for the three years have been increasing from 2009 to 2012. If all factors remain constant, the management would expect the company to continue earning profits in incremental order.
References
Colgate. (2013). Colgate. Web.
Dolan, R.J., and Simon, H. (1996). Power Pricing. Illinois: The Free Press.
Economic Basis. (2013). Supply and Demand. Web.
Info Entrepreneurs. (2013). Understanding your competitors. Web.
Keat, P.G. (2011). Managerial Economics: Economic Tools for Today’s Decision Makers. London: Pearson.
Kotler, P., & Keller, L. K. (2012). Marketing Management. London: Pearson Education Limited.
Nagle, T., and Holden, R. (2002). The Strategy and Tactics of Pricing. London: Prentice Hall.
Paul, J. (2009). The Value of Eco-Labeling. Berlin: VDM Verlag.
Queens Government. (2013). Pricing products and services. Web.