This paper will recommend pricing and non-pricing strategies, marginal cost and revenue, barriers o entry on the market, product differentiation, and ways to minimize costs for Will’s business. Pricing and Non-pricing Strategies Pricing and non-pricing strategies are key components to increase revenue for Will. Determining the Ideal production level Is also a crucial component In Increasing revenue. Two assumptions must be made so that the recommendations can be proposed. The first assumption Is that the price of the adulterer Is elastic or flexible In price.
Oftentimes, consumers are wary of new products so pricing the digitized at an affordable price without pricing too low where it will seem the product is cheap is important. Will must react to any fluctuations in the supply and demand with appropriate pricing. The second assumption is that Will has no competition and is therefore a monopoly market. A monopoly is a market structure that is the only seller of the product. Production levels. Will has to determine the correct levels of demand which will help define realistic production levels.
By using statistical data, forecasting, regression analysis, market research, and other business tools Will can determine the legislation between demand of the product and the price. Will
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Variable costs are defined as “a cost that In total Increases when the firm Increases Its output and decreases when the firm reduces its output” (McConnell. Bruce, & Flynn, 2009, p. 265). Will’s fixed costs include his rent books he uses that have a copyright. Will wants to improve his profits, revenue, and his business in general. Will has considered adding labor to the workforce to increase his production that will increase revenue. Because Will is still working from his garage, he may have to consider a more formal workspace to allow more production.
For Will to determine the price, “he will need to add all of his variable costs then divide by the number of units sold which will equal the cost per unit” (Hawthorne, 2012, Para. 3). The rule for minimization profit is marginal revenue is equal to marginal cost or MR.=MAC. When the MR. is a negative variable, the production of even one more item will naturally lower the profit. “Since marginal revenue is positive by desirably being equal to marginal cost we know that the price elasticity of the demand must exceed to create the harmony so that price is greater than or equal to marginal revenue” (Hawthorne, 2012, Para. ). Barriers to Entry Will’s business is a monopoly. Will holds a patent for the digitized that makes entry onto the market very difficult for others. This could be a very profitable venture for Will as long as he makes sound business decisions. Will must have a solid business plan with much research on the product, the markets, and on general business practices. Although Will is on a monopoly market, he could be his own worst enemy if he does not have the wisdom or knowledge needed to set the correct prices and bring in the revenue.
Product Differentiation Product differentiation is basically making Will’s product significantly different from the competition’s product and making it more eye-catching to the target market. Because Will is already in a monopoly, he already has an advantage by having such a unique product. Using branding and marketing can set Will’s digitized apart from any competitor. By letting the public know exactly how the digitized works and why the digitized is so unique will help with the product differentiation.
Minimize Costs Minimizing costs is important to any organization, especially to maximize their profits. Will should research and eventually buy technology that will reduce the cost of each book that must have the conversion and help the digitized to become mass- produced. At first, these items will have an initial higher cost but over time these items will help lower the costs of production. Another way to minimize costs is for Will to build his own website and do most of his own marketing until he is stable.