Pricing Case Study Analysis

Introduction:

The CPCL (Canadian Product Corporation Limited) is a producer of small household appliances with one manufacturing plant within Canada, which provides its services to all over the country. CPCL is a well-known and reputable company in Canada that directly sells its small household items to departmental stores. Currently, CPCL wants to begin manufacturing and marketing for a newly developed and researched product called cordless steam iron. To evaluate the performance of cordless steam iron, the company has formed a separate division for its production and distribution.

Apart from it, CPCL’s two close competitors have recently announced the launched of their own branded cordless steam iron at the price of 28 dollars each. A normal pricing strategy which is followed by the company is full absorption cost plus a 100 percent mark-up on the cost to gain reasonable returns from the investment. The production of a new cordless steam iron with the sales volume of around 350,000 units in a year, would lead to the price of 31.5 dollars each.

The president and senior executives of CPCL are not considering the sufficient and adequate implementation of this strategy, because these implications are not considered up to the mark, according to the top and senior executives of CPCL. That is why the president and senior executives of CPCL are considering two more proposals, such as: the variable product cost plus 200 percent mark-up on that cost and the price of 27 dollars each for cordless steam iron in order to undercut the competition.

Situational Analysis:

SWOT Analysis:

Strength:

  • CPCL –Canadian Product Corporation Limited is a small butwell-established organization of household appliances.
  • It significantly provides its services through the entire region of Canada.
  • CPCL tends to be an expert in terms of driving its services directly to the department stores despite the involvement of any indirectdistribution network.
  • The organization mainly involves the evaluation of the product performance before its launch.

Weakness:

  • CPCL has only one facility for the manufacturing of the product, which is responsible for providing the services all over Canada.
  • The product offering by CPCL lacks product diversification to attract a new consumer base.
  • Due to limited product offerings and small-scale operational process, the organization does not have the capability to generate larger profits.
  • CPCL lacks any specified strategic approach to gain the market share and to increase the consumer base.

Opportunities:

  • Due to the emerging economies and an increase in the use of appliances; there is a significant opportunity to expand the services outside Canada.
  • Product and service expansion would significantly result in grabbing the attention of a large consumer base successfully.
  • The provision of attractive schemes keeps the buyers engaged and compel them to visit the stores again for shopping.
  • Product Innovation and investment in R&D would significantly result in the development of brand awareness and higher revenue growth.

Threats:

  • Due to an increased cost of raw material; the management of all the operations seems quite difficult.
  • Due to low revenue generation, the intention of the establishment of production and distribution network might lead to increased debt.
  • Increase in the competition due to leading organizations with innovative approaches and technological use of competitors, such as: LG, Whirlpool, Samsung and etc.
  • Lack of distribution channel and product diversity might switch the interest of consumers,resulting in the loss of the consumer base. (Kazmi, 2008)

PESTE Analysis:

Political:

The political environment of Canada is stable,which positively impacts the growth of business in any industry. This is mainly due to the maintenance of good relationships throughout the state and across the world. On the other hand, the implementation of the standard sets for test procedures, energy efficiency, and environmental safety concerns tend to serve as an entry barrier.

Economic:

Consistent increase and a slight decrease in the unemployment rate in Canada resulted in a higher cost of capital particularly for the manufacturing corporations due to the increase in the interest rates. Thus, because of an increase in the cost of production at the stage of maturity of industrial growth, the operating profits are expected to shrink the industry as a whole. This might inhibit a large number of consumer base to purchase high-priced products. Despite the fact that Canada tends to be a grooving market with the educated population who is well aware of what they need to purchase.

Social:

Due to the increase in the income level of the residents of Canada; the living standard among the Canadian population has been significantly revolutionizing with respect to the time. The demand of costly but stylish and featured products has increased,enforcing the manufacturers to come up with smart, innovative but compactableproducts with more focus on their uniqueness and quality.

Technological:

The heavy investment by other market-leading organizations in Canada is increasing in terms of bringing improvement in efficiency and effectiveness of the processes. Additionally, the introduction of e-commerce trade has been revolutionizing the way of business in order to bring a reduction in production cost as well as the production of innovative products to gain a core competency.

Environmental:

The environmental concerns have increased, which mainly involves the occurrence of air pollution as a major issue. Due to this reason, there are a number of initiatives that have been taken by the government of Canada for decreasing the emission of greenhouse gases, such as carbon dioxide, leading to climate change. Therefore, for the significant economic growth of the business, each organization is responsible to invest more in terms of adapting environmental friendly process for product manufacturing. (Charles Hill, 2009)…………………………….

 

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