PRICING DECISION

Price is an important element of the marketing mix. It can be used as a strategic marketing variable to meet competition. It is also a direct source of revenue for the firm. It must not only cover the costs but leave some margin to generate profit for the firm. However, price should not be so high as to frighten the customers. Price is also an element which is highly perceptible to customers and significantly affects their decisions to buy a product. In general, price directly determines the quantity to be sold.  

DETERMINANTS OF PRICING

Pricing decisions are usually determined by demand, competition and cost. We shall discuss each of these_, factors separately. We take demand first.

Demand

The popular ‘Law of Demand' states that "higher the price; lower the demand, and vice versa, other things remaining the same’’. In season, due to plentiful supplies of certain, agricultural products, the prices are low and because of low prices, the demand for them increases substantially. You can test the validity of this law yourself in your daily life. There is an inverse relationship between price and quantity demanded. If price rises, demand falls and if the price falls, the demand goes up. Of course, the law of demand assumes that there should be no change in the other factors influencing demand except price. If any one or more of the other factors, for instance, income, the price of the substitutes, tastes and preferences of the consumers, advertising, expenditures, etc. vary, the demand may rise in spite of a rise in price, or alternatively, the demand may fall in spite of a fall in price. However, there are important exceptions to the law of demand.

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MARKETING MIX

MARKETING MIX

 

The marketing mix consists of the following four major activities usually referred to as elements of Marketing mix.

1. Product: activities relating to the product, service or idea to be offered.

2. Price: activities relating to the price to be charged for the product, service or idea.

3. Promotion: activities relating to promotion (advertising, personal selling, sales promotion and publicity, called promotional mix) of the product, service or idea.

4. Place: activities relating to distribution of the product, service or idea (physical distribution and channels of distribution).  

Sometimes marketing research-the systematic gathering of information to solve marketing problems, is also included in marketing mix.  

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M & A AND STEPS IN M & A

WHAT IS M & A ? WHY M & A ? STEPS IN M & A DEAL ?

 

 

MERGERS AND ACQUISITIONS (M&A) 

Mergers and acquisitions and corporate restructuring - or M&A for short - are a big part of the corporate finance. One plus one makes three: this equation is the special alchemy of a merger or acquisition. The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies -at least, that’s the reasoning behind M&A. This idea is particularly attractive to companies when times are tough. Strong companies will act to buy other companies to create a more competitive, cost-efficient company. The companies will come together hoping to gain a greater market share or achieve greater efficiency. Because of these potential benefits, target companies will often agree to be purchased when they know they cannot survive alone.

 

A corporate merger is essentially a combination of the assets and liabilities of two firms to form a single business entity. Although they are used synonymously, there is a slight distinction between the terms ‘merger’ and ‘acquisition’. Strictly speaking, only a corporate combination in which one of the companies survives as a legal entity is called a merger. In a merger of firms that are approximate equals, there is often an exchange of stock in which one firm issues new shares to the shareholders of the other firm at a certain ratio. In other words, a merger happens when two firms, often about the same size, agree to unite as a new single company rather than remain as separate units. This kind of action is more precisely referred to as a “merger of equals.” Both companies’ stocks are surrendered, and new company stock is issued in its place. When a company takes over another to become the new owner of the target company, the purchase is called an acquisition. From the legal angle, the ‘target company’ ceases to exist and the buyer “gulps down” the business and stock of the buyer continues to be traded.

 

 In summary, “acquisition” is generally used when a larger firm absorbs a smaller firm and “merger” is used when the combination is portrayed to be between equals. For the sake of discussion, the firm whose shares continue to exist (possibly under a different company name) will be referred to as the acquiring firm and the firm’s whose shares are being replaced by the acquiring firm will be referred to as the target firm. However, a merger of equals doesn’t happen very often in practice. Frequently, a company buying another allows the acquired firm to proclaim that it is a merger of equals, even though it is technically an acquisition. This is done to overcome some legal restrictions on acquisitions. 

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