1406

Problem

The XYZ Manufacturing Corporation has experienced a rather large decline in sales for its component parts. Mary Vantage, vice president of marketing, believes that a 10 percent price cut may get things going again. What factors should Mary consider before reducing the price of the components?

Step-by-step solution

Show all steps

Step 1/3

MV is vices president of XYZ manufacturing which is based in USA. There has been a decline in the sales of component part of the company. The vice president of the company has decided to cut the price of the product by 10 percent in order to revive the sales.

Step 2/3

Following factors should be considered by MV before taking the decision of price reduction of components part:

• In case the price of the components parts is reduced by 10 percent then would the product be accepted by the customers and penetrates into the market. The VP should also consider the fact that whether the customers would be able to pay for the reduced price.

• Competitor pricing for the same type of product is also an important factor in making such decision.

• Pricing of alternative product is also an important factor in making such decision.

• It should also be considered that whether the company has recovered the development cost of the product.

• The company should also take into consideration the fact that the company has acquired the production efficiency.

Step 3/3

Once following things are taken into consideration, the company can move forward and take the decision of reducing the price of the product.