Business Case Study Analysis — Question 6
Answer to Question 6
Pricing the takeout portion as suggested by both Frank and Robert would need one to consider among other things, the target market, the cost of producing the two different sets of portions, and their profit objectives. Competition and the image and reputation of the business may also be considerations to be made (University of Canberra 2016, p. 436). Frank’s idea seemingly will not drive up the costs of operations in the takeout business since customers will order from the menu. Robert’s idea is on the other hand more complex and would drive the costs up. Based on the differences between the two suggestions and considering the profit motive of the business, I would use a cost-based pricing strategy. Cost-based pricing bases the sales price of the product on the cost incurred to produce the same product (Herman 2015, p. 16). Consequently, the pricing strategy for the takeout food items as conceptualised by Robert would cost the customers more, thus covering the costs incurred by the takeout business. Depending on the acceptability of the higher price on food items prepared using Robert’s idea, I might consider value-based pricing in future, where customers could be encouraged to consider the higher price as the cost they need to pay for the higher value of their chosen food items. When customers deem a product as higher in value than the price they have to pay, they get the impression that the net benefits from such a product is higher, thus making it easier for them to pay (Sarokolaee, Taghizadeh & Ebrati 2012, p. 78).
Sarokolaee, MA, Taghizadeh, V & Ebrati, M 2012, ‘The relationship between target costing and value based pricing and presenting an aggregate model based on customers’ expectations’, Procedia Social and Behavioral Sciences, vol. 41, pp. 74-83.
Herman, T 2015, Pricing strategy for products in the health fast food sector in Stockholm (Master of Science thesis), Stockholm, viewed 14 September 2016, <http://kth.diva-portal.org/smash/get/diva2:823017/FULLTEXT01.pdf>.
University of Canberra 2016, Small business management in the 21st century, University of Canberra, Canberra.