Question 1
According to economic theory:
• How would a manager determine the profit maximizing price for a product or service?
• Why is setting an appropriate price one of the most difficult decisions a manager makes?
• Why is a pricing policy important and what are some of the objectives of a pricing policy?
• How does a pricing policy help companies differentiate their brands from their competitors?
• Are there ethics involved in pricing and what are they?
Respond to this... To determine the profit maximizing price for a product or service, a manager must use the law of supply and demand then estimate. The manager needs to estimate the product at various prices, then subtract variable costs to get a contribution margin. Take the contribution margin and multiply it by the quantity demanded. Take the fixed costs and subtract them from the total and estimate profit. (Jiambalvo 2016)
Setting an appropriate price for a product can be challenging and one of the most difficult decisions for managers because a manager cannot predict the demand for the product. They can try a test market with customers at various prices, or ask several managers from different regions to come up with an estimate of demand for the product. The rule is that if the price of a product is too high, the demand will go down, and if the price is too low the demand will go up. The rule puts a lot of pressure on the managers making the pricing decisions.
Many companies have pricing policies in place. These policies are important because they help the decision makers stick to certain guidelines within the mission of the company. The managers can adhere to the pricing strategies and maximize profit while staying within the pricing policy.
Pricing policies not only help a company stay focused on their pricing objectives, but the policies help companies differentiate their brands from the competitors. The policies make sure the company keeps their prices within a certain range, not to fall below or go beyond where the reputation should have them.
There is a social responsibility when making decisions about pricing. Environment, ethics, legal, and maximizing profits should be a priority. The customer should also always be a focus. Meeting the customer's needs and expectations are essential.
Jiambalvo, J. (2016). Managerial Accounting, 6th Edition. [Bookshelf Ambassadored]. Retrieved from https://ambassadored.vitalsource.com/#/books/9781119227892/
Question 2
Harmonization is an important topic in the accounting profession as many accounting standard setting organizations attempt to harmonize or converge existing accounting practices and principles. Locate an article discussing harmonization or convergence of accounting standards. Briefly summarize the article. Do you agree or disagree with the article? Why must we distinguish between convergence and harmonization?
Respond to this... For this assignment I found an article from 2011 that discussed some of the major reasons supporters are pushing for harmonization of accounting principles. The article also discussed 4 major issues from the largest countries that are resisting changing including the US. Those issues include, integration problems, for example, in the US the Securities and Exchange Commission dictates that publicly traded companies follow GAAP. A second reason for resistance is the negative effect on US small businesses. US small businesses already pay, as a percentage of revenue, more on regulatory compliance than do large corporations. A third topic discussed in the article was the idea of International Sovereignty Issues, the fact that each country has their own individual laws and codes and in the US each state has their own laws, such international codes would be against the constitution. Finally the article discussed licensing and enforcement. Accountants and tax lawyers would have to have different certifications and the issue with enforcing such certifications.
It's difficult not to agree with the arguments made in the article. It brings up four points that are all true. However, I have to believe that the positive affects of harmonization have to outweigh the struggles that will no doubt be encountered in accomplishing this enormous task.
Question 3
The key components of corporate strategic direction include moving an organization forward, maintaining stability, and reversing any sort of organizational decline.
With that in mind; what are some steps you should consider when taking control and trying to move an organization forward. Take a look at some of the current fastest growing companies with the top job growth and explain their approach to what made them an immediate success.
Respond to this... One of the most iimportant factors I think a company should consider when trying to move an organization forward is How are you going to finance it?" Some options for this are and SBA loan fro ma lender, business cash advance, taking out a line of credit (credibility.com, 2015), or offering a sale of part of the company (equity financing)(lAbbott, 2016) like the company I will be mentioning.
The next step is trying to decide how the funding is going to be used such as advertising, equipment, inventory, real estate or employees.
When one looks to manage their inventory supply to create growth they will want to look at the possibility of purchasing goods in the manner where maximum profits can be earned through their use. It does a business no good to save money by purchasing in bulk if they lose the potential for profit by paying interest rates on the purchase (this is why I mentioned how financing was going to occur). A reason to consider ordering in bulk besides saving cost is how often the products needed for possible manufacturing can occur. Some suppliers only bring possible inventory that may be needed twice a year to the United States. When a company properly invests their time and resources into inventory management they are taking steps towards moving forward (scdigets.com, n.d.)
I am not sure how to take care of the growth part, but here it is. As a fisherman I can honestly say the fishing world is exploding right now for a product called Line Cutterz. Social media is lit up on this product due to national attention received from being on the show Shark Tank last November. On the show, 33% of the company equity was sold to advance the company forward.
This is the part that can be attributed to their immediatee success as they are running back ordered on some products and are expanding into clothing (one of the sharks was against this). I personally think this is a great move as fisherman will be advertising and Line Cutterz will be making money at the same time.I follow many below radar fishing groups and it is a lot of fun. I think the risk this company took will pan out.
References
Abbott, E. (2016, November 18). Shark Tank: Line Cutterz Reels In $120,000 Offer from Daymond. Retrieved February 13, 2017, from https://www.business2community.com/entertainment/shark-tank-line-cutterz-reels-120000-offer-daymond-john-01710185#OrYho6zE0T5T8fo1.97
Five Strategies for Improving Inventory Management. (2011, June 2). Retrieved February 13, 2017, from https://www.scdigest.com/assets/reps/exec_brief_network_inventories.pdf
Funding small business growth 5 things to consider. (2015, August 3). Retrieved February 13, 2017, from https://www.credibly.com/trending/funding-small-business/