Topic: Marketing Mix
Leather Manufacturer ltd. is manufacturer of leather handbags in Lahore. Its management is aiming to increase profits by implementing different strategies. Mr Ali; the advisor of Leather Manufacturer ltd. suggested the reduction in current prices of leather handbags to boost the sales which may cause increase in company’s profits. Moreover research and development cost has already been recovered at this stage.
Being a business student you are required to enlist aspects/information which are necessary to keep in consideration before taking the decision of reduction in current price.
Note: List at least four valid points in bulleted form
1. Your discussion must be based on logical facts.
2. The GDB will remain open for 3 working days/ 72 hours.
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plz koe ye bta day k is may jo necessary steps likhny hain wo positive aur negitive dono may likh skty hai kya ya srf positve steps hi likhny hain. i mean to say k reduction of prices sy company ko kya nuksan hoga kya wo bhi hum mention kr skty hai ya nhi plz rply.
aoa, dear you can write down positive and negative as well
mostly cases main loss hota hai is ka
reduction in price with respect to competitors may increase the sale if the company develop a good marketing strategy to awareness among the customers about the quality of product remained satisfactory.
1. Value Analysis (VA)
2. Value Engineering (VE): The function of the product or service to be studied, the lowest life-cycle costs, by excluding, simplify, change, alternative and other methods to achieve lower costs.
3. Negotiation: Negotiation is the buyers and sellers for their own goals, to reach a mutually accepted agreement process, which is also the procurement staff should have the basic skills.
4. Target Costing: Management Guru Peter Drucker (Peter F. Drucker) mentioned in the article âýýFive deadly business sinsâýý, the third fatal mistakes business is cost -driven pricing.
5. Early Supplier Involvement (ESI): This is in the product design stage, choose to transfer partnerships with suppliers and new product development team triple. By way of early supplier involvement, the new product development team put forward performance specifications requirements for suppliers, using the expertise of suppliers to reduce costs.
6. Leveraging Purchases: The demands of business units different departments, to focus on expanding purchases, then increase the bargaining power of the methods based. Avoid their procurement, resulting in different business units within the organization, to buy the same parts with the same suppliers, but prices are different. At the same time they donâýýt know the circumstances of each other and the circumstances, so they lose many opportunities for savings in procurement.
7. Consortium Purchasing: It occurs mainly in the procurement of non-profit business, such as hospitals, schools, etc., Through the integration of the demand for the different purchasing organization, in order to obtain better quantity discount prices.
8. Design for Purchase (DFP): The strategy - make or buy? In product design stage, the use of third-party factory standard process and technology, and the use of industry standard parts, to facilitate ease of obtaining raw materials, thus, not only greatly reduces the necessary technical support made, but also reduce the production cost.
9. Price and Cost Analysis: This is the basic tool for professional buyers, to understand the basic elements of cost structure, it is very important for buyers, if purchases do not understand the cost structure of goods bought, it can not be understanding of the items bought for the fair and reasonable price, but also lost many opportunities to reduce procurement costs.
10. Standardization: Implementation of standardized, a common design / specifications for different products, projects, fixtures or components, or reduce the number of custom projects, economies of scale capacity, to reduce manufacturing cost.
In our efforts to reach our business targets, we need a larger
procurement cost reduction.
We want to enhance our procurement competitiveness.
Recently, the role played by the procurement function in the profit strategy is greatly
increasing, and we believe that more companies than before are trying to realize large cost
reductions in this area. On the other hand, haven’t you ever thought that “Our procurement
cost reductions aren’t going as well as we had thought”, or “I feel we may be reaching the
limit of cost reductions possible in our regular annual cost reductions”?
In order to realize large cost reductions, it is important to consider the procurement
marketplace environment change, and to implement measures that are different from those
used previously or those that could not previously be implemented.
The four important factors in price determination are “purchasing methods”, “manufacturing
methods”, “specifications”, and “procurement policies”, and for cost reduction it is necessary
to “change something” for each of the price factors. JMAC has further broken down these
four points into details as the “CR50 Viewpoints”, and uses this to support the development
of appropriate cost reduction measures while considering the company’s product
characteristics and purchasing characteristics.
Features of procurement cost reductions by JMAC
JMAC believes that the following six points are important for large scale procurement cost reductions. Through
conducting cost reduction activities, it is possible to enhance the level of each point and to realize a major cost
- The individual procurement target prices necessary to achieve the overall business targets are clarified.
- The progress and the method for the targets are always visually managed.
Procurement assessment capability
- The procurement price is assessed according to the details such as the rate, yield, and man-hours.
- Measures are developed for closing the gap between the target price and the estimated price, and logical
negotiations are implemented.
Procurement information capability
- When conducting cost reductions, new procurement candidate suppliers are constantly searched for, and estimates
are requested and assessed.
- When searching for new procurement candidate suppliers, organizations inside and outside the company are fully
utilized, and information is collected from the global marketplace.
* Working closely with customers, JMAC conducts activities to achieve the targets, such as gaining an
understanding of the current situation, arranging issues, investigating promotion procedures, establishing and
implementing action plans, and confirming the results. (JMAC does not, in principle, directly introduce actual
suppliers for procurement purposes.)
Results of procurement cost reductions
Procurement Cost Reduction Program
Procurement competitiveness strengthening for business target achievement
- Background: Required to achieve new
product targeted cost
- Aims: Realize the above requirement
together with enhancement of next
product development foundation
- Organization: Business divisions crosssectional
-New product target cost reduced 20% (Assessment; 12%,
- Reorganization of cost development mechanism
Office and home electric company F
- Background: Product cost
- Aims: Global supply chain
- Organization: Head office purchasing
-Procurement cost reduction 11% annually
- Building of sourcing DB
- Building of structural education system and global buyer
Automobile parts (functional products) company B
(Production bases in Japan, U.S., Europe, South Asia, and various countries in Southeast Asia)
plz can anybody tell me k kya hum negitive may bhi likh skty hain kya???
Not relatted to Current GDB
Please just take idea, dont copy past..!!!
Solution: Before reducing the price of product we will keep the following aspect in consideration for better results.
The first factor which is required or necessary to be considered is the quality of the product i.e. handbags. It means if price of the bags reduced then it should be keep in mind that quality of product should not effect. It should remain the same as earlier.
Management should calculate the actual cost being caused in manufacturing handbags as it is the basic tool for professionals. The reduced price should be accepted and well acknowledged by the customers. Hence the price and cost analysis should be considered before reducing the price of the product.
The leather handbags current price & value should be compared with the competitors offering same product. It will help in forecasting sale of the product easily.
Another important factor is the promotion of the product which should be keeps in mind before reducing the price of the product. The marketing channels should be selected for the product promotion as either it should be published via web, TV, banners etc. The expenditure on the promotion of the product should also be considered.
Consider product requirements are also necessary before taking decision to reduce the price. The price reduction during special occasion i.e. Eid festivals/Christmas, Cultural festivals, Weddings etc should increase the sale of product.
The profit margin after reducing the price should be consider and calculated to avoid the loss. Further estimated profit should also be calculated.
Before reducing the price the targeted customers should be selected or to increase the sale of product some markets/area can be specify for better results.
If sale of the product increases then extra resources will be required to manufacture the product. This aspect should also be consider and calculated for timely availability of the product.
Packaging and new price tagging cost should also be consider and also special measures & arrangement to be taken.
Lastly, it should also be keep in mind before reducing the price that if large amount of quantity is produced and it did not get the expected results or sale target. It will ultimately influence the profit margin.
Best Regards-M.Iqbal Khattak
good effort mr. khattak
good effort muj say tu just 6 points he baney thay .