Compare and contrast price skimming and penetration pricing.
What will be an ideal response?
Price skimming is the strategy of charging the highest possible price for a product during the introduction stage of its lifecycle. A seller essentially "skims the cream" off the market, which helps a firm to recover the high costs of R & D more quickly. A danger is that a price-skimming strategy may make a product appear more lucrative than it actually is to potential competitors. A firm also risks misjudging demand and facing insufficient sales at a high price. Penetration pricing is the strategy of setting a low price for a new product. The main purpose of setting a low price is to build market share quickly in order to encourage product trial by the target market and discourage competitors from entering the market. A disadvantage of penetration pricing is that it places a firm in a less-flexible pricing position. It is more difficult to raise prices significantly than it is to lower them.
You might also like to view...
When the investor pays $100,000 to acquire 40% of a company's outstanding voting shares at a time when the fair value of the company's net assets are $175,000, the resulting goodwill amount is $30,000.
Answer the following statement true (T) or false (F)
Economists David Autor, David Dorn, and Gordon Hanson investigated the effects of trade with China on blue-collar American jobs. Which statement reflects their findings?
a. Blue-collar jobs are most affected in industries where China has a comparative advantage. b. Trade with China has resulted in widespread loss of blue-collar jobs across the U.S. c. Trade with China has not resulted in a loss of American jobs. d. American labor markets have been responsive and flexible in response to globalization and trade with China.
Which of the following would an accountant not need to know when conducting a compilation?
A. The accounting basis on which the financial statements are to be presented. B. A general understanding of the nature of the entity's business transactions and the form of its accounting records. C. The accounting principles and practices of the industry in which the entity operates. D. The accountant would need to know all of the other items listed when conducting a compilation.
Once promoted to a manager position, the first people to build a relationship with are:
a. your direct manager and direct reports b. your direct manager and the board of directors c. your support staff and your direct manager d. your manager colleagues and the board of directors