Economics concepts and applications

Corporate Finance

Economics Application

Goodwill obtained by companies by bidding lower than they can maximize profit from the contract has got implications to the buyer and the bidder. Normally, the criterion for selection has always been the lowest and the best bidder. This protects buyers from an obligation of hiring the lowest bidder no matter what. However, there are instances when the lowest bidders after landing a contract may fail to comply with the project deadline. They may also lack the resources to complete the contract that their have been awarded. This may prompt the companies to pump in more monies into this project. Goodwill obtained by bidding low normally result in lowball offers that is common in real estate market where offers are made that are less than fair market values or asking prices of commodities. However, low price bidding is a form of best value in traditional best value procurements where the government allows for trade off among non-cost factors like technical approach, management plan, and best performance (OECD, n.d.). The trade-offs allow the government to award contracts to the lowest price offeror (OECD, n.d.). It is used under circumstances when the government cannot realize any value from a proposal exceeding the government's minimum technical performance requirements for acquisition of commercial or non-complex services or supplies which are clearly defined and expected to be low risk (OECD, n.d.).

Part 2

Unlike Alka-Seltzer that relieves a patient from minor aches, pains, inflammation, fever, headache, heartburn, sour stomach, indigestion, and hangovers, Alka-Seltzer Plus TV advert "The Cold Truth" alludes that the product relieves cold symptoms fast (Adpharm, 2011). The cold symptoms relieved usually begin 2 to 3 days after exposure to a cold virus and can last from 7 to 10 days. The advertisement gives further directions on how the person suffering from common cold should conduct himself. To help the body of the common cold victim fight the common cold, he should rest in bed, drink plenty of fluids and gargle the medication with warm water. The advertisement further draws a parallel between Alka-Seltzer Plus and other cold pills (Adpharm, 2011). Alka-Seltzer Plus is said to work instantly since it doesn't take time to dissolve. It is alive with effervescence and breaks up ones worst cold symptoms fast. The cold pill, according to the advert, relieves nasal congestion, runny nose, headache and body ache, sore throat, and sinus pressure. The drug's facts labeling information contained within this advertisement are the most up-to-date and differ from product labeling of other cold pills that are in the market. The market niche which Alka-Seltzer Plus is supposed to penetrate also has other market players like Vicks NyQuil that is produced by Proctor and Gamble (Adpharm, 2011). According to the TV advertisement "The Cold Truth" Alka-Seltzer might have some competitive advantage over NyQuil because it also fights congestion which NyQuil doesn't (Adpharm, 2011). Product positioning has much to do with making a product fit into the market place and putting the product first in line in the minds of potential customers. Through positioning a product creates an image for itself. Alka-Seltzer is competitively priced because it is a medication that offers remedies to medical conditions that its competitors in the market like the Vicks NyQuil does not (Bhasin, 2011). The product is well produced and adheres to controls that have been instituted to ensure consistency. It quality claims are backed by customer friendly guarantees and this can be attested to by the fact that other than providing relief for cough, body aches, runny nose, sneezing and fever, something that Vicks NyQuil also does, it can fight congestion. Alka-Seltzer Plus does not contain a compound known as phenylpropanolamine which medical research shoes to be dangerous if consumed by human beings. Another strategy that Alka-Seltzer has strategically used to position itself in the market is the drug facts labeling information (Bhasin, 2011). The labeling information is the most up-to-date and differs from other product labeling including Vicks NyQuil that is its major competitor in the market. It would be imprudent to engage Proctor and Gamble in price wars bearing in mind that Alka-Seltzer is a new product in the market where Vicks Nyquil has been operating in. however, bearing in mind that Bayer has introduced a product that provides remedy to a condition that Vicks NyQuil hardly offers a relief for penetration pricing strategy would be the way to go to win clients who previously used NyQuil but got no relief from congestion. Penetration pricing strategy should be used over some period of time to ensure that the product gains foothold into the market. After the brand has had acceptance it would be prudent to discard the penetration pricing strategy and embrace quality positioning (Bhasin, 2011). Bearing in mind that NyQuil unfortunately makes people drowsy during daytime, Alka-Seltzer Plus strategically offers daytime and night time cold and flu relief remedies. This ultimately makes Alka-Seltzer a big fish in the small pond something that can lead to increasing the size of the pond. Finally, Proctor and Gamble are more likely to be irked by the Bayer's advertisement and revert into a powerful positioning strategy by making Vicks NyQuil a nigh time, coughing, sniffling, and sneezing medicine (Bhasin, 2011). This would make them own the night time cold remedy market.