Forums Accounting Managerial Decision Making and Pricing Decisions

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    Ayush Nair

    Managerial Decision Making and Pricing Decisions

    Ayush Nair

    The process of Managerial Decision Making

    a) Establishing objectives- Organization must define its goals and objectives that they want to achieve in the future.

    b) Identify Alternatives- Management must identify all the alternatives that are available to achieve the objectives. They must not go for the right answer in this stage but should list down the possible alternatives of achieving an objective.

    c) Exploring Alternatives- After identifying the alternatives, in this stage management must evaluate the alternatives on the basis of feasibility, risk, impact and benefit.

    d) Selection of Alternatives- Management must rank alternatives after the evaluation and must choose the one with the higher ranking.

    e) Keeping a check- Process doesn’t end with just selecting an alternative. Management must keep a check on the decision and must make necessary actions to keep the deviation away.

    Pricing Decisions

    a) Strategy- If a company has an objective of maximizing profit, it will tend to keep a higher price whereas a company with social maximization objective will keep low price.

    b) Cost-Based Pricing- In this method, a markup value is added in the cost. It makes sure that the cost of the product is fully recovered.

    c) Value-Based Pricing- Value-based pricing is a pricing method wherein prices are set based on the buyer’s perceived value.

    d) Competition Based Pricing- In this type of method, the organization will take into account the prices that are set by the competition for the given product and on this basis; it will keep the price of the product.
    e) Penetration Pricing and Price Skimming- Penetration pricing involves setting low prices with the intention of quickly introducing a new product to the market. Price skimming involves setting high initial prices to make huge profits in the early stages of the product’s life cycle.

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