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Pricing Strategy Essay

1998 words - 8 pages

Table of Contents
Introduction..............………………..………………………………...2
Pricing Strategy.............................…….………..…………………… 2
Non-price Barriers to Entry...……………..…...…………….……… 3
Ideas for Product Differentiation...……..………..……….………… 3
Markets………………….……………..................................………… 4
Profit Maximization.............................................................................5
Loss Minimization...............................................................................6
Conclusion..........................................................................................7

Introduction
Larson Inc. must be able to adapt to the economic changes in the market ...view middle of the document...

Larson Inc. would have a more competitive price by lowering the mark-up by 10%. This would still return a 25% mark-up per unit, and while this price will most likely not beat or even meet the foreign manufacturers, the high price strategy will be more profitable through effective branding and further research and development to obtain patents on new technologies.
The German division has suffered through an economic downturn as well, though not as severely as the American division. However, the mark-up on the German unit is already only 25% and therefore should not be lowered. This price is competitive without causing a price war, which would severely affect profits. The high price strategy will earn higher profit potential, with revamped branding and product development efforts, than utilizing a strategy that tries to out-price the new competition.

Non-price Barriers to Entry
Larson Inc. is in the unique position of producing a product that is useless alone. What good is a battery if there is not device for it to power? The potential for an electronics manufacturer to start producing their own batteries and bundle the products together is a concern. Larson Inc. should be proactive and make agreements with the companies whose products take Larson Inc. batteries. Like Intel Processors, select laptops could come equipped and label with Larson Inc. battery. Exclusive licensing agreements for bundled products would help secure Larson Inc.'s reputation in the electronics market. Larson Inc. does not want to be seen as a generic producer, but rather as a significant, reliable source of power for important devices. This would be best achieved by investing in further research and development to find longer lasting, more efficient batteries. This would also deter any more companies from joining the market, as they would have a considerably higher start-up cost.
Ideas for Product Differentiation
Larson, Inc.'s previous differentiation strategy in America has been lack-luster packaging, and little advertising. To build a strong brand image, which is necessary to facilitate the higher priced strategy, Larson Inc. must make their product a must have for the serious buyer. American buyers are quick to look at price, but when considering these batteries are for costly electronics, we must realize that quality is a major influence. Larson Inc. should emphasize the fact that these batteries are "Made in America", a statement that evokes thoughts of quality and craftsmanship. Since many f our competitors manufacture in China and other countries with lower manufacturing standards, this fact gives Larson Inc. a distinct edge. The branding effort should also rely on the German engineering in Larson Inc. products. Few countries have the same level of prestige concerning engineering as Germany. Once customers know that these batteries are "precision engineered" and "built by craftsmen" it will not be hard convincing them that a few extra dollars is money...

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