Pricing Strategies and Market Analysis: Business Development Report

This report provides a comprehensive analysis of pricing strategies and market dynamics, crucial for business development. It delves into the factors influencing pricing decisions, such as market structure (perfect competition, oligopoly, monopoly, and monopolistic competition), demand elasticity, and the impact of marginal cost and revenue. The report also explores the significance of macroeconomic indicators, particularly GDP per capita, wealth distribution, and GDP growth rate, in assessing market potential. Currency fluctuations and the presence of competitors are also considered as vital elements. The report highlights the characteristics of a favorable market, emphasizing the importance of a medium to high GDP per capita, a substantial middle class, and stable economic conditions for business success. This analysis provides valuable insights for businesses seeking to optimize their pricing strategies and make informed decisions about market entry and expansion.

Question 6
With regards to fixing the profit maximising price, a key factor to be considered is the type of
market strcuture in which the firm exists. For instance ifthe given firm is in a perfectly
competitive price, then there is no pricing power available with the firm. As a result, the price
would be decided by the indsutry dynamics of demand and supply. All the firms would have
to sell at the market equilibirum price which would yield the maximum benefit. With regards
to other markets where the firm does have pricing power and hence needs to take pricing
decision, the underlying criterion is that output and price should be based on the point where
marginal cost and marginal revenue are equal.
Additionally, the industry dynamics and nature of demand would also drive pricing decision.
For elastic demand ofgoods and services, usually increase of price leads to lower profits as
the overall revenue is lowered. On the other hand, if the demand is inelastic, then increase in
price would have a positive impact on revenue as well as profits. Also, theprofitmaximising
price would be driven by the nature of indsutry. Typically, in case of oligopoly, there is a
mutual dependence between firms and hence pricing decisions to maximise profits wouldto
an extent be driven by the pricing choice made by the competitors. Similarly in case of
monopoly, there is no competition and hence profit maximisaiton can be achieved at MR-
MC. In case of monopolistic competition, non price based competition is dominant which
allows the firm to increase price without adversely impacting the profit.
Thus, the pricing decision for the friend’s firm would be driven by the nature of industry
along with its structure. Typically, in products and services which are unique and hence have
low competition, higher price can be charged with a boost to profitability. However, in highly
competitive markets, it makes economic sense for the firms to charge the price as indicated
by MR=MC.
Question 7
It is known that the given product is a high end product and hence would be priced
accrodingly. As a result, one of the key macroeconomic indicators of interest for potential
markets would be the GDP per capita. Also,the wealth distribution is significant so as to
estimate the potential size of the market since people with a certain income level would be
possible targets for the company. The GDP grwoth rate in the recent times would also be a

useful measure for future business potential. This is pivotal since a higher GDP growth rate
would imply that going forward the potential target market for the company and its products
would enhance. On the other hand, for a country which has a low GDP rate, the market size
would potentially remain stagnant. The currency fluctuation is also a relevant parameter of
interest.
This is required to ensure that the business earnings in the new market are not highly volatile
based on the fluctuations in the currency. Further, the entry mode for business would also be
decided by the same. The presence of direct competitors of the company in the underlying
market may also be a useful information. This is because presence of a competitor would
indicate that the market has potential and the firm should aim to sell its products in that
market.
A good market for the company would have several attributes. The GDP per capita would be
medium to high. This would implythat the country is developing or developed since these
countries could afford the products sold by the company. The wealth distribution would
enable the company to understand the precise size of the market. The presence of a large and
aspiring middle class like that prevalent in developing countries would be highly positive for
the company. Also, high GDP growth and currency fluctuations would imply that long term
business prospects are favourable for the company.