Discuss the main factors affecting product pricing in the UK In theory, bug outlays of products are determined by many diametric factors within a firm. This will depend on the food market store grammatical construction and the firms objectives, whether this is to increase profits, maximize gross sales revenue, increase commercialize share or to provide earthly concern services. The grocery storeplace structure usually determines the firms objectives, for example a monopoly has the force to set a high toll level to maximize profits whereas arrant(a) competition must compete on no(prenominal) price factors therefore will sell at the tending(p) market price. Oligolopolies such as leading supermarkets (e.g. ASDA, Tesco, Sainsbury) do not normally compete on price as a descend in one firms price will be followed by other competing firms therefore all firms lose out and still the consumer gains, therefore prices are set to increase market share. Fig.1 In oligopo listic markets, there are forms of price wars. This is shown by the kinked quest thin in Fig.1. This leads to firms changing prices in order to give the axe and concur market share, due to this being one of their objectives as impertinent to profit maximisation.
For example, the UKs largest petrol retailer Esso announced price cuts to prepare just 1p per litre in order to moderate a high market share and market power. This is know as market share dodging, a short reign strategy as it little relation to the costs of employment sum that firms may even make a termination (shown by MC and MC1). This was confi rmed by Hall et al (1996) as a survey of 654! UK companies concluded that 65% of firms employ market-led pricing. This relates to vulturine pricing which sees firms sell products at minimal prices to maximise market share, maintain dominance and eliminate rivals.If you want to accept a full essay, order it on our website:
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