Proposal of be partnership between bakery and market Essay Example

  • Category:
    Marketing
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    1
  • Words:
    607

Pricing and profit strategy

Grandma Little Bakery offers a variety of products such as sauces, jam, traditionally handmade cookies made from quality ingredients with no artificial additives or preservatives. As a result of this, the prices of these products at the bakery will slightly be higher when compared to other conventional products. The pricing system will have to consider the farm’s investment costs among many other inputs. Nevertheless, product quality that is based on the organic standards and other post-production qualities are the paramount factors that will be used in determining the prices of the products on sale at the bakery (Lovelock $ Wirtz, 2010).

a product pricing strategy and policy should be. in an industry is, the more flexibleThe general feeling is usually that the more intense the competitionthe issue of competition will highly also be highly considered. , When adopting a product pricing strategy or determining the right price for the various production offer

For GLB and Harris farm to come set the prices, the following factors will be considered:

  1. Equipment, overhead, depreciation, marketing and operation costs

  2. Labour wages

  3. Competitors’ production costs and prices

  4. Profit desired

  5. Brand, quality, image and reputation of your products

  6. Demand, customer motivation, and priorities

According to the grocery inquiry report in Australia, an average Australian household spends at least 14 per cent of their net income on groceries alone (Barry, 2008). The report further states that the demand for organic food had doubled in the five years leading to 2010 mainly because people were more willing to spend to find out where their food was coming from. This explains why the pricing of some of the products that will be sold at GLB as shown in the table below have a high premium percentage when compared to conventional products (Post, 2012).

What will determine the profit sharing percentage or ratio to be used by the partners will be a number that the partners will have to agree upon. This means the partners will have to look at several factors and come up with a profit-sharing percentage that is mutually beneficial to both of them. For example, if the farm contributes $200,000 of capital, it will then have the biggest responsibility in the partnership. If Partner B contributes $50,000 of capital, it will then have a passive participation in the partnership. The partners can then agree that Partner A receives 80 percent of profits and Partner B receives 20 percent of profits, as per their contribution.

The pricing system as reflected in the table above shows that proves for the Grandma Bakery is ready to provide organic products that consumers will rarely find in other stores. Harris Farm has also committed to offer the freshest and best quality produce available at arguably fair prices thus this price strategy works with Grandma Bakery price. The net profit that the partnership makes annually for instance, is the difference between expenses and revenues made during that year. The partners will have to represent a share of this figure on their individual tax returns. Calculation of net profit will also help the partnership to evaluate on performance. The net profit figure will be used to calculate both partners’ return on investment by comparing the each partners net profit contribution to the value of its assets.

Reference List

Barry Y. August 29th, 2008. Comparing the cost of organic versus conventional produce.

ABC Hobart. Available at http://www.abc.net.au/local/stories/2008/08/29/2350525.htm

Lovelock C. & Wirtz J. (2010). Services Marketing: People, Technology, Strategy. 6th Ed.

Pp 312 – 416. Available at http://bschool.nus.edu/Marketing/Jochen%20papers/SM7_Cover,%20Contents%20%26%20Complaint%20Handling%20and%20Service%20Recovery.pdf#page=1&zoom=auto,18,791

Post E. December, 2012. Understanding Organic Pricing and Costs of Production. National

Sustainable Agriculture Information Service. Pp 2. Available at http://www.carolinafarmstewards.org/wp-content/uploads/2012/12/2-ATTRA-Understanding-Organic-Pricing-and-Costs-of-Production.pdf