...Subject Code | |MM577 | | |Subject Title | |Marketing Economics | |Level | |5 | |Credit(s) | |3 | |Mode of Study | |Lecture |42 Hours | |Normal Duration | |1 Semester | |Pre-requisite(s) | |Nil | |Exclusion(s) | |Nil | |Consecutive Subjects | |Nil | |Assessment | |Continuous Assessment |100% | |Minimum Pass Grade | |Continuous Assessment |D | | | |OBJECTIVES ...
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...How to Price Spare Parts More Profitably: panies take full advantage of the opportunity spare part pricing offers. In fact, they deal with the complexity of pricing thousands of parts by resorting to standardized and undifferentiated “rule of thumb” customer complaints. This article was written by Richard Zinoecker, who is a Director at Simon-Kucher & Partners. He can be reached by e-mail at richard.zinoecker@simon-kucher.com. T he importance of after-sales business has increased steadily over the last few years. Market leaders such as Caterpillar have built a crucial competitive advantage for their business with new machinery. Additionally, they have demonstrated that it is possible to create a successful business model in the after-sales business. While the German premium carmakers Mercedes and BMW have faced harsh competition selling cars and are no longer immune to granting substantial discounts and incentives in their primary business, they have so far managed to cling to their competitive advantage in the after-sales business, an area that is much harder for new challengers to emulate. Spare parts make up the backbone of the after-sales business. Roughly two-thirds of the after-sales revenues of European engineering companies is generated with spare parts. In comparison to labor-intensive parts of the service portfolio, such as service contracts, training or refitting, spare parts have lower fixed costs because the workload is stable. Spare parts have the potential to generate...
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...consumption- something never offered before. TiVo to Consumers To TiVo consumers, the ability to control what they wanted when they wanted was a revolutionary way to watch TV. TiVo held many distinct features that made the television experience unique to their consumers. The electronic program guide (EPG) was the user’s interface with the device that let them find out which shows to watch. EPG allowed access to previews for shows that could be scheduled for recording, a video magazine, a set of network showcases, and an on-screen TV guide. Another popular feature was the season pass that allowed users to specify their favourite show so that TiVo would automatically record all the episodes. Consumers also had the option to thumbs up or thumbs down certain shows so subsequently, TiVo could suggest TV programs that may interest them, further enhancing the individual personalization of the system. Up to 62% of TiVo owners watched more TV with this service. A huge factor that facilitated its adoption within consumers was the ability to control TV at their fingertips. Consumers were in control of whether they wanted to pause or rewind what they were watching, even when it was Live TV. The ability to also fast forward through commercials was appealing. The concept...
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...2b. A = C > B 3a. Q = 5KLL w = 8 r = 15 MPL/MPK = w/r = 8/15 3b. rK = (15)(10) = 150 wL = 150 8L = 150 L = 18.75 4a. Q = 2KLLL K = 2 Q = 2(2)LLL = 4LLL At L = 1, Q = 4 At L = 2, Q = 32 At L = 3, Q = 108 At L = 4, Q = 256 MPL for 4th worker = 256 - 108 = 148 4b. This production function exhibits increasing returns to scale. 5a. AVC = ATC since AFC = 0 Price = 2.50 MC = 1.20 5b. No, they are not at a long run equilibrium, producers are benefiting for a surplus and in a long run more firms will enter the industry bringing the surplus to 0, pricing will be at P = MC. 6. Rule of thumb pricing P = MR = MC MR = P + P (1/E) = MC P = MC/ ((1 + (1/E)) C = 125 + 25Q MC = dC/dQ = 25 P = 25/((1 +(1/-3)) = 37.5 7a. P = 1100 - 2Q C=Q Total Revenue = P x Q = (1100 -2Q) x Q = 1100Q – 2QQ Marginal Revenue = dTR/dQ = 1100 – 4Q Marginal Cost = dC/dQ = 1 MR = MC 1100 – 4Q = 1 Q = 274.75 P = 550.5 7b. MC=1 MR = 550.5 Markup = (P – MC)/P = 0.9982 = 99.82% 7c. Profit = Marginal Profit x Q = 549 x 274.75 = 150995.125...
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...White Paper Rate Optimization: Enhancing Your Hotel’s Pricing Strategy For many hotels, developing effective pricing strategies remains a complex issue for revenue managers. Their goal, ultimately, is to maximize companywide revenue and profits while building strong hotel partner relationships within their marketplace. The emergence of rate optimization has made strides to demystify pricing practices and help revenue managers understand the demand characteristics of their products, understand the price sensitivity of demand and design a rate spectrum that is tuned to all these. This allows hoteliers to take full advantage of their business opportunities, ensuring that they are capturing the maximum revenue at all times through an optimized rate spectrum. Beyond the scope of regular revenue management practices such as selecting the correct overbooking, rate restrictions and best available rate, lies the challenge of selecting the correct rates to choose from in the first place. Rate Optimization is the practice of selecting the rates offered in a rate spectrum based on the historical price sensitivity of demand. The goal of rate optimization is to understand the demand characteristics of products and the price sensitivity of demand and define a rate spectrum that will capture the maximum revenue over time. Dr. Ravi Mehrotra President, IDeaS Revenue Optimization Price Sensitivity, or Elasticity of Demand The Price Sensitivity of Demand is a measure of the change in...
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...White Paper Rate Optimization: Enhancing Your Hotel’s Pricing Strategy For many hotels, developing effective pricing strategies remains a complex issue for revenue managers. Their goal, ultimately, is to maximize companywide revenue and profits while building strong hotel partner relationships within their marketplace. The emergence of rate optimization has made strides to demystify pricing practices and help revenue managers understand the demand characteristics of their products, understand the price sensitivity of demand and design a rate spectrum that is tuned to all these. This allows hoteliers to take full advantage of their business opportunities, ensuring that they are capturing the maximum revenue at all times through an optimized rate spectrum. Beyond the scope of regular revenue management practices such as selecting the correct overbooking, rate restrictions and best available rate, lies the challenge of selecting the correct rates to choose from in the first place. Rate Optimization is the practice of selecting the rates offered in a rate spectrum based on the historical price sensitivity of demand. The goal of rate optimization is to understand the demand characteristics of products and the price sensitivity of demand and define a rate spectrum that will capture the maximum revenue over time. Dr. Ravi Mehrotra President, IDeaS Revenue Optimization Price Sensitivity, or Elasticity of Demand The Price Sensitivity of Demand is a measure of the change in...
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...Winslow Taylor is a controversial figure in management history. His innovations in industrial engineering, particularly in time and motion studies, paid off in dramatic improvements in productivity. At the same time, he has been credited with destroying the soul of work, of dehumanizing factories, making men into automatons. What is Taylor's real legacy? I'm not sure that management historians will ever agree. Under Taylor's management system, factories are managed through scientific methods rather than by use of the empirical "rule of thumb" so widely prevalent in the days of the late nineteenth century when F. W. Taylor devised his system and published "Scientific Management" in 1911. The main elements of the Scientific Management are [1] "Time studies Functional or specialized supervision Standardization of tools and implements Standardization of work methods Separate Planning function Management by exception principle The use of "slide-rules and similar time-saving devices" Instruction cards for workmen Task allocation and large bonus for successful performance The use of the 'differential rate' Mnemonic systems for classifying products and implements A routing system A modern costing system etc. etc. " Taylor called these elements "merely the elements or details of the mechanisms of management" He saw them as extensions of the four principles of management.[2] 1. The development of a true science 2. The scientific selection of the workman 3. The scientific education...
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...would find great difficulty if trying to compete on pricing alone. So, it would be to the smaller retail shop to find other areas of competition such as convenience, shorter wait time, or a more personalized shopping experience. To assist in increasing the demand for a product or services the marketer must either promote new uses for the existing product or increase the consumer market. It is a good rule of thumb to always stay ahead of your competitors by being innovative and proactive in identifying available opportunities to introduced new products and services. It’s easy to cater to the needs of the consumer but it can also be detrimental to the company. If the company’s marketing strategies and product design is solely based on customer needs the company will limit themselves and thus operate with “binders”. The best practice is to operate with the marketing strategy of changing the rules of the game. When reading this chapter, it also reminded me of my current employer. My employer is trying to turn around the company’s image as it is perceived by several target markets within a 50 mile radius. As a result, they are eagerly and swiftly trying to compete with competitors that already of positive feedback in the areas of cardiology, cancer, and other medical breakthroughs. It’s like the example given in the book about Walgreens and Wal-Mart. Walgreens is not able to go head to head with Wal-Mart on pricing; however, it could compete with Wal-Mart on convenience...
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...Capital Asset Pricing Model (CAPM), which is a simplistic approach to cost of equity. Then lastly, the CAPM will be applied to a few companies and discussed. Three Models There are several tools available to estimate the rate of return. Three of these tools are capital asset pricing model, the dividend growth model, and arbitrage pricing theory. Although similar, each has their distinct differences. The first model is the capital asset pricing model. This particular model “describes the relationship between risk and expected return, and it serves as a model for the pricing of risky securities.” (Investopedia, N.D.) It goes on to say that if the overall risk outweighs the return, investors should disregard as this would be a loss. CAPM is calculated by using the following formula: “Required (or expected) Return = RF Rate + (Market Return - RF Rate)*Beta” (Investopedia, N.D.) As shown, this calculation factors in a beta rate. The rule of thumb is, the larger the beta rate, the more risk. If the market is up (bull), and there is a high beta, the payout will be high. However, if the market is low (bear), in conjunction with low beta, the risk is minimal resulting in a smaller loss. This model is pretty straightforward and is user friendly. Another tool that investors can use is the arbitrage pricing theory. Similar to the CAPM method, the arbitrage pricing theory also uses the beta as one of its factors. However, unlike the CAPM, the arbitrage pricing theory “separates...
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...Deep Smarts Situations Who is he? Another Situation Complex Situation Others could not diagnose Good Judgment Rapid Decision Is he Smart? Is he an emotional intelligent? Is he brilliant? Who is he? “Deep Smart” Smart” “Go To People” Dorothy Leonard & Walter Swap Authors William J. Abernathy Professor of Business Administration Emerita Harvard Business School Professor of Psychology emeritus and former Chairman of the Psychology Department of Tufts University Author: Dorothy Leonard • • • • William J. Abernathy Professor of Business Administration Emerita, joined the Harvard faculty in 1983 3 yrs of teaching at the Sloan School of Management, MIT Has taught MBA courses in managerial leadership, corporate capabilities, new product and process design, technology strategy and innovation management Also served as a Director of Research for the Harvard Business School and Director Journals Published of Research and Knowledge Programs for Harvard Business School's non-profit 36 organization, HBS Interactive Education Chapter Written – – – – M. A. Ph.D. M.A. B.A. Harvard University (Honorary), 1992 Stanford University, Stanford, CA, 1979 University of Virginia, Charlottesville, VA, 1968 Principia College, Elsah, IL, summa cum laude, 1963 • 20 • • Served as Board of Directors in – – American Mgmt Systems, Fairfax, VA – 1992-2004 Gannett Communications, 1997-99 Been in Advisory Boards of – – – – – Prod Dev & Mgmt Association...
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...Concept of Marketing Intermediaries The third P of the 4 Ps of marketing is place. Marketing intermediaries, also known as resellers, buy products to resell at a profit. Intermediaries include certain types of resellers such as wholesalers and retailers, who purchase products from manufacturers, then distribute them to consumers and other buyers. A channel of distribution includes the locations where sellers market their products to the final consumer. This could be a combination of institutions through which sellers deliver their product (i.e., wholesalers, retailers, agents). There are many marketing functions that are handled by these intermediaries, including buying, selling, sorting, financing, storage, and transportation. The conventional channels of distribution involve many methods of getting products to the final consumer. These methods may include distribution from the manufacturer directly to the consumer, distribution from the manufacturer to a retailer to the consumer, and several others. From a strategic point of view, the term "supply chain management" connotes a holistic, systems approach to viewing product distribution as an integral component of partnering with vendors, suppliers, and various intermediary marketers. When determining a channel of distribution plan for a company, the choice of channel may be influenced by the distribution coverage required, the degree of control the company desires, the total distribution costs, economies of scale, and channel...
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...Foods Inc. launching its pizza in the market. Analysis The bottom-line revenue to generate for the launch to be successful and the company to break even amounts to $45 million. Appendix mentions the calculations for both the options i.e. Pizza and Toppings and Pizza Only. Pizza and Toppings a) Pizza Units Calculation Consider the case of Pizza and Toppings. The case mentions that the penetrations would be in the range of 5%-25%. Assuming a penetration of 15% of total US households which is 95million. Number of Users (15% of 95 million) = 14,250,000 Definitely Buy = 30% Probably Buy = 57% The industry rule of thumb formula is used to arrive at the trial rate from the “Definitely Buy” and “Probably Buy” rates which is 80% of “Definite” and 30% of “Probable”. Therefore Weighted Trial = (80%) (30%) + (30%) (57%) = 41% Awareness (from Table D) = 60% ACV (from...
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...Discuss the main factors affecting product pricing in the UK (1000 words) Two surveys on the price-setting behaviour of UK firms published by the Bank of England in 1996 and 2008 concluded that the price, the amount of money expected, required or given for a certain level of output, was most often set as a result of market conditions. The same report however found that the second largest price differential was the objective of the specific firm surveyed, and thus product pricing in the UK can be seen to be determined primarily by the objectives of its firms, which are bounded by the differing market structures under which they operate. In the UK these dominant structures are monopolistic, oligopolistic and perfectly competitive, within which there are differing degrees of price setting ability and inter-firm competition, both of which influence the individual objectives the firms choose to pursue. As witnessed in recent years with the impact of the global recession however, all markets are vulnerable to external shocks to their product pricing. The classical theory of the firm assumes that they will pursue the objective of profit maximisation. As Milton Friedman put it in his 1970 article, ‘‘There is one and only one social responsibility of business - to use its resources in activities designed to increase its profits so long as it... engages in open and free competition without deception or fraud’1. Within a profit-maximising objective, the price charged will still be...
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...if your inventory carrying cost is 25% and your annual average inventory is $1M, then your annual cost of owning inventory is $250K. The rule of thumb for inventory carrying cost is between 20% and 30%. Inventory carrying cost is different for every business. It is not wise to use the industry average as your inventory carrying cost. Inventory carrying cost (Eq. 1) should be calculated for each business. inventory In order to compute the inventory carrying cost, we must break down the numerator in the above equation. The cost-of-owning-inventory-per-year (Eq. 2) includes four cost categories: Inventory Capital Cost, Inventory Service Cost, Inventory Storage Cost, and Inventory Risk Cost. inv carrying cost 1. Inventory Capital Cost Inventory Capital Cost is the expected financial return that capital could be expected to earn in an alternative investment of equivalent risk. In other words, it is the minimum financial return necessary to make a project worthwhile. The Weighted-average cost of capital (WACC) equation (Eq. 3) is commonly used to calculate the capital cost once the cost of debt and the cost of equity have been determined. WACC In the case of an inventory project, the most commonly accepted practice is to use the annual interest rate paid on debt as the cost of debt and the capital asset pricing model (CAPM) (Eq. 4) as the cost of equity. Screen Shot 2013 09 09 at 6.18.06 PM Companies typically use the rate from the US Treasury...
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...PROGRAMME STRUCTURE FOR ISBE (PG) |S No |Subject |Credit | |1. |Business Statistics |3 | |2. |Operations & Optimization Research |3 | |3. |Economics for Managerial Decision Making – II |2 | |4. |Management Information System & KM |2 | |5. |Human Resource Management |2 | |6. |Financial Management |2 | |7. |Executive Communication |6 | |8. |National Economic Planning – I (Presentation Only) |2 | |9. |National Economic Planning - II |2 | BUSINESS STATISTICS (As per University...
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