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    Important Factors Related to Pricing Decisions

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    What factors should be considered in price setting? Which is most important? Why?

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    Solution Preview

    The best way to approach this question is to consider the differences between pricing for a domestic market and pricing for a domestic market. It is also important to consider whether the pricing strategy must account for production in different parts of the world - with different and varying resource and input costs. In other words, if your product is always produced domestically and sold and shipped internationally, the cost/price structure might be structured in one way.

    For example, let's assume, for simplicity's sake, that I am Company A and I make a widget called "X". I have just ONE domestic production facility, and I don't ship my product outside my home country. Because I know how much I pay my employees at my single production facility and because I source all my product inputs domestically, I also know how much it costs me to produce each widget. I also know what kind of profit margin I need to be able to ...

    Solution Summary

    Approaches to pricing of product vary with manufacturer and market. Even if "price" is based on 'what the market will bear', price must account for underlying variables such as (at a minimum) cost of production, desired profit margin, and local or market specific variables.