Simulation analysis: Quasar Computer Company
Market structures are market forms at a time relating to the level of competition. The four main market structures consist of perfect competition, where the marker is made up of many firms all of them producing similar or related products, monopolistic competition or competitive market in which many independent firms exist in the market and each of tem have a small share in the market share.
Oligopolies are a market structure in which a few firms exist in the market but they control more than 40% of the market. Monopolistic competition is characterized by a single firm in the market (Fellner, 2004).Price competition involves readjusting prices charged on products produced so as to increase the demand or decrease it for that product. Non-price competition bases on other strategies that are aimed at increasing the market share for a company. Quasar Company produces neurons and there are relatively fewer competitors in this industry.
It is therefore operating in an oligopoly market. There are a number of pricing strategies to be employed. Cost-plus pricing is a strategy in which a firm will charge prices based on the average costs used in production plus a certain percentage of profit mark-up.The other pricing strategy employed is application of predatory pricing is applied. This is where a firm deliberately charges very low prices on its products hence making losses in the short run so as to completely eliminate a rival firm from the market. This strategy is common in oligopoly markets.
In the long run, this strategy works well for the firm as it will be bring up prices for the products due to the monopolistic aspect hence gain more profits than the previous amounts made.The other strategy is limit pricing in which an already established, stable firm comes up with a new entry in which case economies of scale will act in the firm’s advantage. (Lipman, 2005). Offering discounts on goods also serves as an effective strategy. This involves the company reducing overall prices charged on the goods by a small percentage. This encourages customers to purchase a lit of goods since the customers will be encouraged to purchase more goods so as to get more discount.
These may be promotional discounts to increase sales or it may be cash, seasonal, quantity or cumulative.On the other hand, policies on advertising and on sales promotion form the better part of the non-pricing strategies. These include extension of opening and closing hours, extensive and intensive advertisement more explicit use of technology in sales. The company can also enter into curtails with other large companies. The company can also consider expanding its network by establishing more branches so as to reach more customers. An efficient and well trained staff in the organization is important in lifting the organization’s performance.
Pricing methodsCost-plus pricing applies where the company sets prices to be equal to the production cost for the product plus a certain profit margin. Target return pricing is a pricing strategy intended at gaining a set return-on-investment. Value-based strategy of pricing links the price charged on the effective value of the price to customer in comparison to the alternative products. Psychological pricing is set based on prices expected by customers hence common price points, signals regarding product quality and what is regarded by the customer as fair price are factors used in setting prices.Given that the company has been in operation since 2003, its customers would not expect a certain change in the price system (White, 2006).
The company has been in operation for long hence it ought to develop a new market strategy by after analyzing how its performance has been for the past six years, its target and position. It is important that Quasar Computer company. It should also re-estimate its demand curve so as to determine how the quantity of the computer demand has been varying with the price. The company’s price objective in this case would be to stabilize the product price.