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Product Pricing Component Essay

Executive Summary

The Starbucks Company is engaged to the manufacturing of coffee products. It’s products growth has been through a small business activity framed on regional diameter in United States, but has now developed to been a fully-grown global company. The company is engaged with manufacturing, distribution and selling of coffee related products with composites of whole grains. Currently, it has been involved in the manufacturing of coffee-drink preparing equipments. The product output of the company has even provided various economic advantages in which case it has been able to adequately compete in the global market for coffee products which is highly competitive. Through its operational activities, the company has a well formulated and figured corporate social responsibility which is a product of the commodity trade relations with its customers, workers and raw coffee suppliers. (Morris, Gene, 1990, 69)

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However, the coffee products by Starbucks Company for this research paper is seldom a benchmark is describing the relative scope of viability which the product has in the market. The same product is a compound of various economic and market conditions that seek to define the manner of its consumption through quantity demand in respect to the cost of demand which is also a component of many cost variables.

Individual Product Pricing

Starbucks is currently an international company allied to the manufacturing, selling and distribution of coffee products across the world. It is competitively growing and capturing the capacity of the biggest coffee company across the globe. The demand for its coffee products which include roasted, whole grains, powder coffee, above others is subjectively a basic factor which define the product utility. However, its product utility is largely strong across the globe providing a high competition to both substitute and complements from other competitors in the general global markets. (Green, Walls, 1996, pp.1)

Elsewhere, the product market for the commodity is highly competitive with coffee product diversification and change in product output by the different competitors in the global imagery to provide a strong competitive advantage. (Smith, Frieder, 1998) Perhaps however, coffee output of the company is the most appropriate product which increases the utility of the company’s output in the global market.

The company product (coffee) is fundamentally highly demanded in the market. It provides a higher market competition for the product substitutes. (Adrin, Dupre, 1994) Generally, coffee products by the company however meet the challenge of complimentary and substitute goods. Both complimentary and substitutes compounds close substitutes as well as compliments. Such include other coffee products of the same nature which include roasted, whole grains and powdered coffee, tea products, chocolates, cocoa above others.

The aspect of substitutes and complimentary products define the nature in which the product pricing for the company is structured. Generally, such market is perfectly competitive with the facets of demand and supply operating to define the scope of product price and quantity. (Adrin, Dupre, 1994, pp.1)Generally, pricing by the company is a component with compound variables of the competitive imagery of the company.

Coffee products by the company is price inelastic for its demand. Through such price inelasticity of demand, the relationship of the demand is that it increases or decreases with change in price appropriateness. This is due to the nature of the market in which the changes in the product price by the company is absorbed by the substitutes and complimentary products in the markets. When there is an increase in its price, the product consumption is lower because consumers turn to close substitutes and compliments. Either, lower product price imply higher consumption through attraction in consumption from other substitutes and compliments. (Bob, Newport, 1999, pp.74)

The subject of consumer demand and product price is a broad component which is defined and determined by many factors. Firstly, the demand structure is a component of the price of other close substitutes and compliments. Either, the same demand and price are determined by the income of the consumers in which case when the income increases the demand also increases and vice-versa. Price also changes with change in consumer income. Either, the cost of product implies higher price hence lower demand.

Since the market is competitive, stability in the company’s revenue can only be through the incorporation of various strategies that increase demand at the most appropriate price margins. However, high product quality would help to provide high competition hence higher demand at profitable prices. (Adrin, Dupre, 1994, pp.1) The subject of costing in the manufacturing, distribution and selling process is an important component that define the scope of product pricing hence determining its demand. However, the same costing parameters should be in the most optimal levels to ensure the most profitable operational standards. Since product consumption is a basic component of the level of market competition, tools for strategic management that provide competitive advantage is important in helping to compete in the market. (Varley, 2001, pp.93)

Product cost

The costing parameter is an important component that defines the scope of activity and functionality of the company. Costing is a broad phenomenon that even affects the levels of competition and product pricing by the company. Usually, the cost component is a broad variable capturing the many costing stakeholders which may be both fixed and variable costing. However, the subject of costing to Starbucks Company is an important aspect whose control is through costing management that seeks to provide tools for optimal costing. Like any other management activity, optimal costing seeks to provide the appropriate product costing structures which seek to ensure a stable state of operational advantage in the highly competitive market. (Varley, 2001, pp.87)

The broad array of product cost is affected and determined by various fundamental factors which are significant in the production and distribution process of the company’s products. Generally, costing is determined by the scope of costing variables in the market which captures the diverse sources of costs. Usually, such sources are both fixed and variable.

The nature and state of costing variable is a basic factor aimed at providing competitive advantage to the company in the global market. The level and margin of revenue and profit is an important component in defining the scope with which the company evaluates its costing parameters. (Green, Walls, 1996, pp.1) Any requirement to modify its earnings compounds the level of autonomy with which the product manufacturing and distribution costs are evaluated to provide the most appropriate revenue objectives.

Elsewhere, costing is a subject rendered and provided by the level of cost of production inputs and processes. (Adrin, Dupre, 1994, pp.1)Either, the impact of market competition is statutory in defining the scope with which the costing is developed to provide the most adequate costing tool. Due to the competition scope of the market, the costing parameters are important components in describing the level with which optimal costing is provided. Also, the subject of costing is an independent variable to various market risks and uncertainties which compound both political risks and also market risks. From the autonomous changes in the scope and nature of the political (legal) structures and various external shocks in the market cost of inputs resources, the company’s costing parameters have changed to capture the need for diversity in such a costing scope. (Green, Walls, 1996, pp.1)

Elsewhere, the impact of technological development is an important feature in defining the scope of costing and hence revenue earnings by the company. The company has and is undergoing through various technological developments which involve process control, management tools, production methods, human resource development, changes in product quality and quantity, above others. (Nicholus, Parlov, 2006, pp.1)Generally, technological development is an important factor in defining the scope with which the level of costing is defined.

Indeed, technology has ensured grounds for optimal costing. Through technological advancement, total costs of production and distribution of coffee products have been reduced the broad application of cost efficient methods of technological pursuit that provide grounds for high quality and quantity products. Hence therefore, average total cost of company’s activities has also been minimized. (Smith, Frieder, 1998, pp.1)

Market structures.

The market of operation for coffee products by the company is perfectly competitive where aspects of demand elasticity’s and the compounds of product demand and supply helps to give a shape to the nature of the quantity of commodities and prices in the market. Through the effects of the hidden hand of competitive market structure, the many competitors in the market competes adequately in the product supply against its demand to provide an equilibrium product amount and price for the products.

Either, the competitive nature of the market is highly important in defining the fundamental scope with which the commodity pricing is scheduled. The demand and supplies factors are the basic market forces which interact considerably to provide a stable state of equilibrium in the product price for the different coffee products, substitutes and compliments. The choice of success in such a market by the company has however been through corporate management and strategy control in which case the company is able to enjoy a competitive advantage. (Smith, Frieder, 1998, pp.1)

However, pricing is not a price factor only but a compound of other non-price strategies which are employed to provide a competitive advantage to the company. However, higher sales have been provided through higher quality of products which helps to provide higher competition in the market. Either, through product diversification and market expansion through research and marketing, the company is able to embrace high levels of output sale.

Also, higher sales is a compound of the high quantity at lower prices which is produced at a highly cost effective method of production through high process control management of technological and corporate management pursuit. Greater scope in sales is provided by its management process which provides tools for a greater scope of expansions into the market. Foreign marketing has been a basic tool for providing exploitation of the broad global market. (Bob, Newport, 1999, pp.54)

However, the choice of remaining in such a competitive edge at the market is implied by the level with which the company would compete in the market. This is however a component that can be defined in terms of product output and the cost of having such products in the market. Generally, quality of output is an important component in describing the state of competition. (Bob, Newport, 1999, pp.66)

Higher quality would seldom help to provide such competitive advantage. Either, the costing schedule for its production autonomy is equally an important component in describing the level with which the product output would compete in the market. Higher costing values would imply higher cost of production which reduces the levels of competition for the company at the market which is highly competitive. (Bob, Newport, 1999, pp.67)

Economic forecast.

Generally, the demand and pricing aspects of the company’s products in influenced by factors operating at both macro and microeconomic capacity within the economy. At one level, the state of inflation is an important compound in determining the scope with which the product would be consumed and priced. Either, this is an important component in describing the cost of production of these products. When inflation is high, demand is low and prices are high. Either, the cost of production is high. Elsewhere, the states of aggregate demand and aggregate supply in the entire economic situations are also an important concept in defining the scope with which the demand for the coffee products would be. (Nicholus, Parlov, 2006, pp.1)

A decrease in aggregate demand in the economy would imply a relative decrease in the demand of the coffee products. Individual incomes within the economy would also affect the level of demand for the product. When income increases, the demand also increases. Since, government spending would reduce cost of production and increases in money supply in the economy, the level and states of government spending remains an important component in defining the scope of demand. Elsewhere, cost of production is determined by the cost of the resource inputs in the production process. Changes in the resource input cost would be defined by state of economic stability in the market. (Varley, 2001, pp.51)

Usually, the above factors are reflected by the states of economic stabilities which may be explained in terms of the level of economic development and growth, the level of inflation, changes in the GDP structure and the states of country’s purchasing power. When these are favorable, the economic conditions are also favorable in providing higher demand at a lower cost of production and hence higher competition. However, the markets of operation for the Starbucks Company has been characterized by strong economic orientations, which also provide a feasibility scope for greater economic autonomy that, provide higher product demand.

However, the favorable strength in such economic forecast is build at a confidence developed from fundamental relationship of the economy in the past. If the same trend is to follow, the future is even strong. (Morris, Gene, 1990, pp.46)

When the economic situation is favorable, the state of income elasticity of demand as a strategy for pricing would be favorable. This is because greater economic activity would imply greater income supply with more consumers willing to consume the product and hence better prices from such an increasing state of demanded.

Adrin, M & Drupe, K. (1994) The Environmental Movement. A Status Report and Implications for Price. SAM Advanced Management Journal, Vol.59, 1994, pp.1
Bob, J & Newport, R. (1999) Managing New Product Innovation: Proceedings of Congress of the Design Research Society. Taylor & Francis, pp.66, 67, 74
Greene, W & Walls, G (1996) delegating Pricing Authority in Authority in Mature Industries. Review of Business, Vol. 18, pp.1
Morris, M & Gene, M. (1990) Market Oriented Pricing: Strategies for Management. Westport, CT: quorum Books, pp. 46, 69
Nicholus, M & Parlov, O (2006) The Circular and Cumulative Structure of Administered Pricing. Journal of Economic Issue, Vol.40, pp.1
Smith, S & Frieder, L (1998) Product Pricing Risk. ABA Banking Journal, Vol.90
Varley, R. (2001) Retail Product Management: Buying and Merchandizing. London: Routledge, pp.51, 87, 93

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