Product and Pricing Strategy Essay Example
Preference for imported goods in many countries has created a chance for many firms to get involved in the exports ( Freund & Pierola 2010). This is due to the promised market abroad and to get a taste of international waters. This has been the case even in the energy sector, especially renewable energy sources such as wind power whose energy use has been on the rise in the past two decade.
Therefore, any product manufactured must of high standards with unique features that make it outstanding in the market. This will lead to customer being attracted to the product. This results to sales and hence profits generated. However, for this product to stay in the market, a good pricing strategy has to be used. This applies to both the existing and new products. This strategy therefore will help to manage the prices of the product under different circumstances such as foreign currency fluctuation and competitors.
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Renewable energy is energy that is generated from the naturally existing resources. This includes things like wind, sunlight, water and tides among others. The renewable energy is in the forefront of replacing the conventional energy due to its environmental friendly nature. It is the energy that is pollution free and do not have many negative impacts to the environment and to other living organism. The renewable energy is mostly used in power generation such as the electricity, heating such as the solar heating system and as fuel for transport purposes. However, generation of wind power is of the major concern in the study.
Wind energy is among the types of the renewable sources of energy. It involves use of wind turbines to convert wind into energy that is usable. This is the energy in form of electricity that is then used to run various machinery. Wind energy is generated by use mainly the stronger offshore wind where wind farms are installed with many wind turbines that are connected to an electric transmission network. The offshore winds are more effective when they have not entered the land for long distances. Wind power is very reliable and environmental friendly because of its clean nature and do not have a greenhouse effect( Devine‐Wright 2005).
Though wind energy is very useful, it is usually faced with variations, which makes it not achieve a hundred percent on consistency. This is because of the changes in wind directions in the region and the sizes of the generators in use. This is because less electricity, which may be inadequate, is produced when a small generator is used. However, several measures have been put in place to ensure that the supply is steady despite the variation on board. This is usually through adoption of techniques such as excess capacity storage among others.
It is noted that many countries prefer to import goods from abroad rather than using the locally manufactured goods. This is according to researches done from various countries that their imports doubled their exports. These have been attributed to the quality of good produced in the local industries. The low standards produced products has therefore been substituted by high standard manufactured goods from abroad. This foreign good are usually preferred at the expense of the locally manufactured goods. This is because of their durability and efficiency in their operations. Thus , this appeal to the foreign good by the locals has partially motivated the company to export some of its productions.
The product on offer or that is being manufactured are the components of a windmill that constitute wind turbines and generators. The wind turbines on offer are the offshore wind turbine and generators. The wind turbine new improved feature such as the direct drive, converter system, magnetic technology, pitch system and air-cooling. The benefits that make the product attractive include the lubrication free belt drive in the pitch system that reduces the level of maintenance (Hau & Von 2013). The external air cooling system and a converter system that is compatible with many grid operators around the globe.
The current products that are manufactured are mainly for the domestic purposes. However, the need to taste the international trade through export will require a change in the production process. This is in order to suit the demand in the importing country. This is because the target market being served in both countries is different.
The products that are being manufactured for domestic purpose are the large sized Turbines and Generators. However, due to the change of market there will be a change in production whereby the generators and the turbines for export will be manufactured in several mid sized forms. This is because the market in concern is not commercial in nature but rather it is domestic mainly focusing the upcoming Enterprises in the country of concern.
No major changes will be made on the product apart from change in size. This is because the product will still perform the same function even when abroad. The redesigning thereof will be to manufacture medium sized products that will be agreeable to the demand on that particular market. The only change that will be done is that of packaging and labeling. This will be done in order to comply with the regulations of the country of concern and also to provide the product with that special appeal.
The company has a capacity to provide 100 units of turbines a month though it is projected to increase in the next two years. This is after the plant expansion whereby the capacity is expected to double. In any market, seasonal variations are inevitable thus from the researches done on the market , the company will therefore be in a position to determine the peak season and the off-peak season. Thus, the company will undertake inventory management to ensure no stock-out in the peak season and also to avoid excess in the off-peak season.
Before launching the product, a number of researches on pricing in the country of export will be done. This will help us, the company, in understanding the market price of that given country. This will provide a blueprint for the company in planning its production after gathering enough information about the market of concern. This researches will be targeting the profitability and the connection between consumption and prices. Thus, our company wills sets its prices firstly based on the cost of production.
Pricing is a factor that determines the performance of a product in the market. This is because it is one of the element that attracts customer to buy the product. When the number of sales increases it, translate to increased profitability, which will ensure the survival of the product in the market. Wrong pricing may result to product performing poorly in the market. For instance, if the product is charged at a much higher price customers are likely not to purchase the product. Coherently , business will make losses if it charges a very low price for the product in offer. Therefore , various pricing strategies will have to be used to enhance the product positioning in the target market( Buxmann 2001).
Considering that the product is new in the target market, different kinds of pricing strategies will be used and Penetration pricing will be used to introduce the product in the market. Penetration pricing is the pricing strategy, where low prices than those of the competitors are charged on a product. This is usually done in order to attract customers and persuade them to purchase the product thereby increasing sales and the market share. This strategy usually makes the company to make losses initially but with time, profits are earned once the share market has been achieved. Therefore ,the company will seek employ the penetration pricing strategy will be used to introduce the wind energy products to the identified target market( Krishnan et al1999).
After the product have been established in the market by having a sizable measure of market share, then a change of strategy need to be factored in. a competition strategy may be adopted after abandoning of the penetration strategy. This is a strategy whereby prices of a product are set with regard to those of a competitor. This is price comparison with those st by the competitor. That is prices may be set above those of the competitor, below or at par with those set by the competitor. However, this may lead to price wars with the competitors, which may result to unhealthy price slashing which may cost the business a lot. Despite the risk involved, the next pricing strategy adopted will be competitor pricing. We will be closely monitoring the prices of our competitors and charging below their prices. This will help in attracting customers to buy our products. This will help our products to have a competing edge in the market.
While in the new markets abroad, our product will be faced with various circumstances that will affect its pricing. Some of the things that affect the pricing of a product in a foreign market are the fluctuation of the foreign currency. Under normal circumstances, any fluctuations in the currency exchange rate , the prices of goods tend to increase . Thus, our product is not therefore immune to such occurrences, which may pose a serious threat to the product. Thus, a comprehensive plan right from the point of production will be devised. This will require to cutting cost of production to enable the product to be lowly priced without affecting the profitability of the company largely( Anderson et al 1994).
There are other times when competitors may engage the price wars thereby dropping their prices. At this point, the company will also reduce its prices so that it will not lose the already acquired market share. This will be done on a temporally basis with other ways being sourced on how the business will operate at such an environment. This will be in a bid to protect the profitability of the business.
In conclusion, it is therefore necessary for a product to possess special characteristics that will attract customers and be of benefit to them. This will lead to increased sales thereby leading to a larger market share and hence more profits. Pricing strategy is very significant especially for a new product entering the market. This determines whether the product will survive in the market or not. This strategy therefore will help to manage the prices of the product under different circumstances such as foreign currency fluctuation and price wars engaged by the competitors.
Devine‐Wright, P. (2005). Beyond NIMBYism: towards an integrated framework for understanding public perceptions of wind energy. Wind energy, 8(2), 125-139.
Hau, E., & Von Renouard, H. (2013). Wind turbines: fundamentals, technologies, application, economics. Springer.
Krishnan, T. V., Bass, F. M., & Jain, D. C. (1999). Optimal pricing strategy for new products. Management Science, 45(12), 1650-1663.
Freund, C., & Pierola, M. D. (2010). Export entrepreneurs: evidence from Peru.
Anderson, E. W., Fornell, C., & Lehmann, D. R. (1994). Customer satisfaction, market share, and profitability: findings from Sweden. The Journal of Marketing, 53-66.
Buxmann, P. (2001). Network effects on standard software markets: a simulation model to examine pricing strategies. In Standardization and Innovation in Information Technology, 2001 2nd IEEE Conference (pp. 229-240). IEEE.
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