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Pricing and business strategies of rival firms and its impact on the
working of the given firm.
Aggressive sales promotion policies adopted by rival firms in the
market.
Without inducing the workers to demand higher wages and salaries
leading to rise in operation costs.
Without resorting to monopolistic and exploitative practices inviting
government controls and takeovers.
Maintaining the quality of the product and services to the customers.
Taking various kinds of risks and uncertainties in the changing
business environment.
Adopting a stable business policy.
Avoiding any sort of clash between short run and long run profits in the
business policy and maintaining proper balance between them.
Maintaining its reputation, name, fame and image in the market.
Profit maximization is necessary in both perfect and imperfect
markets. In a perfect market, a firm is a price-taker and under
imperfect market it becomes a price-searcher.
Cyert and March explain how complicated decisions are taken in big
industrial houses under various kinds of risks and uncertainties in an
imperfect market in the background of limited data and information.
The organizational structure, goals of different departments,
behavioral pattern and internal working of a big and multi-product firm
differs from that of small organizations. The various kinds of internal
conflicts and problems faced by these organizations. They also explain
how there are certain common problems faced by similar organizations
in an industry and their effects on internal working of each individual
organization and their decision making process.
Prof. Boumal has developed two models. The first is static model and
the second one is the dynamic model.
The model is applicable to a particular time period and the model does
not operate at different periods of time.
The firm aims at maximizing its sales revenue subject to a minimum
profit constraint.
The demand curve of the firm slope downwards from left to right.
The average cost curve of the firm is U-shaped one.
Answer: - Pricing policy refers the policy of setting the price of the
product or products and services by the management after taking into
account of various internal and external factors, forces and its own
business objectives. Pricing policy basically depends on price theory
that is the corner stone of economic theory. Pricing is considered as
one of the basic and central problems of economic theory in modern
economy. Fixing prices are the most important aspect of managerial
decision making because market price charged by the company affects
the present and future production plans, pattern of distribution, nature
of marketing etc. Above all, the sales revenue and profit ratio of the
producer directly depend upon the prices.
Hence, a firm has to charge the most appropriate
price to the customers. Charging an ideal price, which is neither too
high nor too low, would depend on a number of factors and forces.
There are no standard formulas or equations in economics to fix the
best possible price for a product. The dynamic nature of the economy
forces to raise and reduce the prices continuously. Hence, price
fluctuates over a period of time.
In economic theory, generally, we take into account of
only two parties, i.e., buyers and sellers while fixing the prices.
However, in practice many parties are associated with pricing of a
product. They are rival competitors, potential rivals, middlemen,
wholesalers, retailers, commission agents and above all the
Government. Hence, we should give due consideration to the influence
exerted by these parties in the process of price determination.
The various factors and forces that affect the price are divided into two
categories.
Thus, multiple factors and forces affect the pricing policy of a firm.
Price Stabilization:-
Peak season and off peak season services:- Hotel and transport
authorities charge different rates during peak season and off peak
seasons.
10. What do you mean by the fiscal policy? What are the
instruments of
fiscal policy? Briefly comment on India’s fiscal policy?
Answer: - There has been very fast and quick economic growth in
many countries of the world. There is a visible change in the pattern of
economic growth. In the name of quick economic development in a
very short period of time, there is fast depletion of all kinds of
resources and many types of resources may be exhausted in the near
future. There has been excessive and over-utilization of many
resources. Degradation and destruction of resource-base is
unpardonable. They have adverse effects on health, efficiency and
quality of life of the people. Hence, there is cry for environmental
protection in recent years. Unless concrete measures are taken in right
time, the man kind may have to pay a heavy price in the near future.
In this background, today economists are talking about the concept of
sustainable economic development.
Sustainable economic development seeks to meet the needs
and aspirations of the present without compromising the
ability of future generations to meet their own needs. It is felt
that sustainable development can be achieved only when the
environment is protected, conserved, saved and improved consciously
by the people in a country. The process of development will become
sustainable only when the stocks of various sources of resources, their
quantities represent a common heritage for all generations. Hence, all
out efforts are to be made to augment these resources in several ways
and means.
While estimating the national income of a country, under the new
system of accounting, one has to take into account of the total physical
volume of resources and their monetary value. The total depreciation
charges include the wear and tear of capital assets, depletion of
natural resources, various kinds of losses arising out of capital assets,
depletion of natural resources, various kinds of losses arising out of
environmental decay and degradation etc.
1. Water Pollution
2. Air Pollution
3. Soil Pollution
4. Deforestation
5. Loss of Biodiversity
6. Solid and Hazardous wastes
Thus, several factors have contributed for environmental degradation.