Price Management Assignment: Competitor Analysis and Elasticity

This assignment solution addresses key concepts in price management, including competitor analysis, break-even sales calculations, and price elasticity of demand. The solution analyzes how competitors might respond to a price increase by Apex products, considering their stances and market dynamics. It calculates break-even points under different pricing scenarios and determines the impact of price changes on sales volume using the price elasticity of demand formula. The assignment also explores pricing strategies for innovative products, evaluating the suitability of price skimming and penetration pricing. The provided calculations and analyses offer insights into how different factors influence pricing decisions in a competitive market, making it a valuable resource for students studying marketing and pricing strategies. The solution uses the Harvard referencing style to cite the sources.

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Price management

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Table of Contents
Question 1..................................................................................................................................3
a).............................................................................................................................................3
b)............................................................................................................................................3
c).............................................................................................................................................3
d)............................................................................................................................................3
Question 2..................................................................................................................................4
a).............................................................................................................................................4
b)............................................................................................................................................4
c).............................................................................................................................................4
d)............................................................................................................................................4
Question 3..................................................................................................................................5
a).............................................................................................................................................5
b)............................................................................................................................................5
c).............................................................................................................................................5
d)............................................................................................................................................5
References..................................................................................................................................7

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Question 1
a)
The competitors who have a cooperative stance towards the company are in favour of all the
decisions which are taken by them as the same will also be benefitting them. Due to this they
will be agreeing to the price increase made by Apex and will be taking advantage of the same
in their business also (Wu, 2014). On the other hand, the aggressive competitors are given the
direct challenge with the price increase and so they will try t be against the decision of the
company and will undertake such actions by which this can be changed or they can stand it in
a positive manner by themselves taking such actions which will affect the Apex company in a
negative manner.
b)
The stance of competitors will be affecting the decision of Apex as they are in the same
market and if their stance is not considered then it may affect the position and performance of
the company adversely in the coming period. The competitors might take such actions which
will affect the profitability of the company in an adverse manner.
c)
In the determination of the response of competitors, there will be consideration of various
aspects which include the relative size of the competitor, degree at which differentiation in
the brand is involved, the deviations involved in the cost of the product and goals of the
competitors (Chen and Miller, 2012). All the required information will be collected from the
market such as pricing and advertisements. In addition to this, the trade publications and trade
associations will be considered as the accurate data is available from them.
d)
The Apex company will be providing information about the change in the price value
together with the reason for the same. This information will be provided with the
announcement made and can also be made by the direct message.

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Question 2
a)
Break even sales = Fixed cost/contribution
= $60000/0.6
= 100000 units
b)
Contribution = Selling price – variable cost
= 4-1.6
= 2.4
Breakeven sale = 60000/2.4
= 25000 units
c)
In both the cases the sales level for the company will be different as with the selling price of
$2.2 the breakeven sales is 100000 units which shows the company will be required to sell
minimum these units to recover the cost incurred. With the selling price of $4 only 25000
units will have to be sold by the company to recover the fixed cost and after that profits will
be made.
d)
The pricing for the innovative product shall be made on the basis of price penetration or price
skimming method. The skimming approach is used to recover the cost first and then decline
the price or the penetration price can be used to capture the market with the low prices in the
starting. With the riskiness of the product the skimming approach is better.

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Question 3
a)
PED = % change in quantity/% change in price
PED = ((6-4)/4)/((180-200)/200)
PED = 0.5/-0.1
PED = -5
b)
PED = % change in quantity/% change in price
PED = ((0.95-1)/1)/((1.1-1)/1)
PED = -0.05/0.1
PED = -0.5
c)
PED = % change in quantity/% change in price
PED = ((2.2-2)/2)/((1.20-1.5)/1.5)
PED = 0.1/-0.2
PED = -0.5
d)
Point B to C
PED = % change in quantity/% change in price
PED = ((2600-2800)/2800)/ ((80-70)/70)

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PED = -0.07/0.14
PED = -0.5
The PED in this case is inelastic as percentage change in quantity is less than price change.
Point D to E
PED = % change in quantity/% change in price
PED = ((2200-2400)/2400)/ ((100-90)/90)
PED = -0.083/0.11
PED = -0.75
The PED, in this case, is inelastic as a percentage change in quantity is less than the
percentage price change.
Point G to H
PED = % change in quantity/% change in price
PED = ((1600-1800)/1800)/((130-120)/120)
PED = -0.11/0.083
PED = -1.33
The PED, in this case, is elastic as a percentage change in quantity is more than price change.

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References
Chen, M.J. and Miller, D. (2012) Competitive dynamics: Themes, trends, and a prospective
research platform. The Academy of Management Annals, 6(1), pp.135-210.
Wu, J. (2014) Cooperation with competitors and product innovation: Moderating effects of
technological capability and alliances with universities. Industrial Marketing
Management, 43(2), pp.199-209.

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