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Bpp exam kit (131. RB co) question (b)
Sir the answer script has suggested for Market skimming and Penetration pricing as alternative
i understood the logic behind the penetration pricing but i can’t see any logic behind choosing market skimming as alternative, as in the passage it has been stated that “cost are in line with budget but profit are declining” which means company is losing market share on the other hand competitor are responding to our price by undercutting their price in order to gain more market share. So in such circumstance using market skimming wouldn’t it be to risky
Sir can you plz explain this to me?????
ooooo and another thing, can i use marginal cost plus pricing instead of market skimming in question (b).would it be logical?????
I am sorry but I do not have the BPP Revision Kit with me because I am away on vacation until October 12.
From what you have written it does seem that market skimming is not really appropriate. I certainly wouldn’t suggest cost plus pricing on the wording as you have typed it.
Sir question has asked me to suggest two alternative.i don’t see any other alternative except “marginal cost plus pricing” and in the passage company used “cost plus pricing” which includes overhead using absorption cost.
If the company is losing market share because competitors are undercutting their prices, then although they will obviously need to charge over the marginal cost to be profitable, using cost plus pricing does not seem such a good idea.
I will look at the exact question when I return from vacation.
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