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Frozen Food Statistics
The industry is quite a competitive one. There are a number of large firms in operation that already hold an enormous share of the overall market. Take for example Lean Cuisine and Stouffers. Lean Cuisine corners a healthier market, by covering lower calorie frozen food options and single serve dinners that appeal to those who are on a diet, but still do not have the time to prepare their own foods. Another major competitor here is Stouffers. This firm is much larger and therefore targets a more diverse demographic. It has its own diet options, but also caters to younger demographics and those who enjoy comfort foods but do not have the time to prepare them.
As seen in the last assignment, it was recommended that the firm cut its prices in order to increase overall demand. By cutting prices, the firm has the potential to increase its market share in the market environment. Yet, the firm has to be careful as to what price points to choose, as cutting prices too drastically would negatively impact the supply available, meaning that the firm would sell out too fast. Stock outs are expensive and can become a serious issue in regards to the ability of a firm to capture the potential market share. According to the research, "Stockouts negatively impact your organization's revenue and put money in its competitors' pockets" (Dominick, 2012). Essentially, if the firm chooses to price its products too low, it may result in negative impacts because it could have the potential to cause the firm to stockout. With no inventory to meet demand, the firm would ultimately loose out on sales, with potential customers turning to the firm's competitors to meet their demands. This is ultimately a behavior that would cost the firm nearly as much as pricing the product too high, which would also loose sales to competitors.
Ultimately the optimal price for this particular firm would be between $200-$300. As seen in the following Supply and Demand curve, this would be an appropriate optimal price that would increase demand and ultimately market share, without having the risk of stockout potentials. Avoiding stock outs is just as crucial as avoiding pricing products too high. Thus, pricing the product at around $250 to $275 would be the ultimate optimal price point for the product given the strategic goals of the company.
Sticking to similar pricing points in the event of changing markets would require greater flexibility. As the market environment a change, the firm needs to have a flexible that allows it to adjust pricing by the changes in the market environment. Here, the research suggests "a flexible pricing strategy allows a business to quickly adjust pricing as necessary to accommodate a changing business climate or to overcome competitive challenges," (Roltgen, 2013). Thus, in order for the firm to take advantage of the benefits of a flexible pricing strategy, it needs to constantly be evaluating the costs and factors in the market environment. This requires ongoing analysis of costs vs. demand factors in order to ensure that the set price point is appropriate at any given time. When the evaluation shows there is need for a change in pricing, the firm can then make the necessary adjustments in order to stay above the competition and to generate continually growing sales numbers.
There are a number of factors that would create the need for the firm to adjust its marketing and operating strategies. First and foremost, the entrance of other competitors into the market environment could cause a serious need to adjust strategies. If a competitor has a much lower pricing strategy, as in the event of a price cutting strategy, it may force the firm to have to lower prices beyond what they are comfortable doing in order to stay strong against this new incoming competition. A strong new competitor that can produce more than what the firm can ultimately force the firm to have to renegotiate variable costs and the costs of materials in order to be able to compete with the production.
Additionally, there is the constant issue of changing technology. Here, the research suggests that "innovations in technology can force a business to change just to keep up" (). When a competitor implements new and more productive technology, it would be important for the…[continue]
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