Harvard Business Review: The Case of the Pricing Predicament #1

Write a paper using Occidental Aerospace and Standard Machine Corporation as your examples, and explain pricing objectives .

Discuss price elasticity
Discuss the total cost of this transaction
Finally, explain which of the three choices presented by Scott Palmer you would choose and why.
Include at least two scholarly references

ANSWER

THE CASE STUDY OF THE PRICING PREDICAMENT.

Occidental aerospace and standard machines corporation is an organization from which Joanne baker works is looking upon purchasing a new and more aggressive competitive bid policy for the department which will apply to the acquisition of a computerized milling machine for the occidental new training center (Linhart, 2014).  Three people have contributed to the success of this pricing predicament namely Joanne Braker, Scott Palmer, and Tony. The participants have used various pricing models methods to come up with the best standard fixed policy namely, for occidental only, the standard will rechristen 1052 as the 1052X, the standard which will bundle the 1052 service package to legitimize the $407 000 charges, and lastly modified combination of the first two alternatives which will as well cost $ 407 000.

Joanne Barker and Scott palmer are trying to come up with the best pricing model for purchasing departments a new and more aggressive competitive bid policy that will apply to the acquisition of a computerized milling machine for the occidental new training center.  Scott has submitted his $429 000 proposals with a lot of confidence and has bragged to his regional sales manager that his manifesto is “in the bag,” nevertheless after two weeks of unanswered phone calls, he feels that his idea has been ignored and decides to communicate again Joanne has told him that his bid is high above the competitors. Joanne is further arguing that as innovators they can’t go ahead of the curve by setting higher prices than other firms.

After a long discussion Joanne, Scott, and tony have come to agree that the total cost for purchasing the bid policy should be $407 000 and not $429 000 as this price is far much high compared to that of the competitors where Scott. There are other price reductions measures of price reductions to make a difference of 5% (Nevo, 2013). There may still be a 2% and 3% price gap. Good enough! They would have still sold it on the idea that standard management can find itself in cost reductions and not affecting their performance.

In conclusion, would consider the second compromise on standards fixed price policy. Scott came up with some workable alternatives for handling the Occidental bid. The standard will bundle the 1052 service package to justify the $407000 price. This will mean eliminating the normal one week of onsite operator training and reducing the time troubleshooters will remain at the facility installing from two weeks to one. As well as it can trim the six months’ service period to two months. According to tony, it has the best equipment, services, and training.  On the final point, Scott tony and Bob Davis need to coordinate their efforts to educate senior management that standard is facing the same competitive pressures as Occidental. This was the time to install cost-reductions programs. These programs should be intern reflected in the pricing. The standard should be prepared sale tactics and selling strategies that that will develop continuous business, not just look at customer’s order by order. If it’s done well the long-established, fixed price policy can remain a major positive selling tool for Scott and his colleagues at the standard machine.

Reference

Linhart, M. S. (2014). Up To Date and Progressive Winchester and Frederick County Virginia, 1870–1980 (Doctoral dissertation, George Mason University).

Hendel, I., & Nevo, A. (2013). Intertemporal price discrimination in storable goods markets. American Economic Review, 103(7), 2722-51.