Pricing and Firm Objectives
In microeconomics, the purpose of every business is to make a profit. In business strategy management, this profit motive is often opposed by organization goals that bend towards social welfare or the firm's reputation. Read the section on the firm's pricing objectives. Can you identify a business that appears to promote a non-profit business goal, such as being a "green" organization?
The Pricing Framework
Before pricing a product, an organization must determine its pricing objectives. In other words, what does the company want to accomplish with its pricing? Companies must also estimate demand for the product or service, determine the costs, and analyze all factors (e.g., competition, regulations, and economy) affecting price decisions. Then, to convey a consistent image, the organization should choose the most appropriate pricing strategy and determine policies and conditions regarding price adjustments. The basic steps in the pricing framework are shown in Figure 15.2 "The Pricing Framework".
Figure 15.2 The Pricing Framework
