VILNIUS GEDIMINAS TECHNICAL UNIVERSITY

FACULTY OF BUSINESS MANAGEMENT DEPARTMENT OF FINANCE ENGINEERING

COURSE PROJECT

Organizing the pricing strategy of CJSC Ingman ledai

Student: Laurynas Kolka, Mvfu-10/1 Academic supervisor: Indr Lapinskait

Vilnius, 2013
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CONTENT
CONTENT ........................................................................................................................................... 2 1. 2. INTRODUCTION ........................................................................................................................ 3 THEORETICAL ASPECTS OF PRICING ................................................................................. 4
1.1 1.2 1.3 1.4 1.5 1.6 1.7 2.1 Price concept..................................................................................................................... 4 Pricing methods ................................................................................................................ 5 Factors that influence pricing decisions............................................................................ 7 Price policy and its objectives ........................................................................................... 9 Price strategy and its objectives ..................................................................................... 11 Pricing in different types of market ................................................................................ 12 System of discounts ........................................................................................................ 14 Company profile and brief description ........................................................................... 15

2. PRACTICAL PART ...................................................................................................................... 15

1.1.1. Company's legal form of organization ...................................................................... 16 1.1.2. Company commercial - economic activity description ............................................. 16 1.1.3. Product market analysis............................................................................................ 17 2.1 Industry and market definition ....................................................................................... 17 Companies pricing methods ........................................................................................... 18 VIVA vanilla ice cream EXW price calculation ................................................................. 18 Product sales to the consumer pricing ........................................................................... 20 Break-even pricing method............................................................................................. 21 Optimal price level determination .................................................................................. 23 Existing enterprise pricing strategy for discounts ........................................................... 32

3.

VIVA ice cream price determination of 100 pcs ........................................................................ 18

3.1 3.2 3.3 3.4 3.5 3.6

4. 5.

CONCLUSION .......................................................................................................................... 33 REFERENCES ........................................................................................................................... 34

1. INTRODUCTION

Pricing problems in the economy have always been quite complicated and insufficiently researched, and the price - a very important social and economic relations element. Pricing control all the production and marketing process. In addition, the specific price at a given moment depends on the level of the means of production, market development, and its segmentation from intermediate and final consumption, on the number and type of agents active in the market. Thus, the pricing is the price-forming as well as psychological, social, political, market and other factors synthesis. This production of operating a combination of setting the price level dynamics and relationships, selecting relevant pricing strategy. Pricing - a complicated process, so it is very important to make the most of exploring it. So in this work i will explore pricing in the individual company. This paper work aim: to analyze the pricing system of CJSC Ingman ledai. The goals of this work : Access to the pricing terms; Define the price and its methods; To review pricing policy, strategy and discount scheme; Identify pricing in different market types; Describe the selected company, the market in which it operates; Identify the selected product pricing for the enterprise; Calculate the selected product price in four methods; Describe the company's marketing strategy; Working methods : Pricing theoretical analysis of the literature; Theory and practice compliance;
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 Pricing systems in the enterprise analysis.

2. THEORETICAL ASPECTS OF PRICING

1.1 Price concept

In market economy, price is one of the most important parameters that directly affect the company's financial condition. Therefore, evaluating the price, the manufacturers seek to meet the requirements of manufacturers and consumers. The quickest and most effective way to get the maximum profit company - the right pricing. Properly the price can increase profits faster than that made by growing sales. Price has quite a number of definitions. It is not only the amount of money you pay. According to the marketing, the price is the value that the user pays for exchange for his needs. Price - This is the monetary value of the expression. Value for money - an important indicator of the company's activities and the economic means of the company objectives. The most common can be said that the literature price is treated as a key element of the company's policy, which regulates the company's sales volume. In the market economy prices perform the following functions: accounting and control of the aggregation; payment and income generation; resource allocation; different economic systems contractors promotion; supply and demand adjustment.[1] Price - variable factor directly acting revenue. Therefore, it is often viewed with caution. In order to meet all of its functions, the price of the company has also adjusted to the demand for the goods to be assessed and increased satisfactory.

1.2

Pricing methods

The company, considered the demand, costs and competitors' prices and selects one of the possible methods of pricing. The price set by several methods. The literature distinguishes several main methods of pricing:: The method focuses on the cost: o The cost plus mark-up - calculating the costs measured variables and fixed cost of goods. The mark-up is understood as the profit margin per unit of product. This pricing method is rather popular. It is favorable to the manufacturer. Manufacturer for each product produced and sold gets the desired profit. On the other hand, the company ignored the demand. It may happen that the price of goods not in demand. Targeting only the cost means that the price is not used as an active commercial instrument. Such pricing policy reduces the company's freedom of action in the market. Company may be out of the market because of the one-sided approach will not lead pricing options to determine the most favorable prices for the company. Therefore, setting the prices need to rely on factors, including the demand. o Finding the break-even point

From this graph can be performed loss analysis. If the company will produce and sell goods in a quantity less than Q1, it will suffer a loss. Point A is called a turning point. This means that the company cover the overall cost of production income, it has to sell at least Q1 quantity of

goods. In order to obtain a certain amount of the set p profits, the company has a number of products sold in Q2. This chart does not show the goods demand elasticity, ie show sales volume dependence of the sales price level. For this analysis would be more accurate, the company must be at least approximately to examine the various price levels affect sales volume and the basis for establishing the price. o Based on variable costs - in this case, fixed costs, we can say quite ignored in determining the price and the cost basis of collected variables: the price is determined such that the product exceeds the variable costs or, in other words, the variable costs added bonus of a certain size. Fixed costs are generally not be allocated between the goods produced by the company. They are charged to the profit from the sale of all the company's products. If you have received a profit does not cover the fixed costs, the company incurred a loss. Changing commodity prices and sales volumes, it is possible to calculate the different profit values. This allows you to decide how to determine the purchase price depending on demand. [7] Method focused on demand: Organization in determining the purchase price method is not based on the cost of production, and the perceived value of the product by the consumer. Price level is determined by the basis of the consumer receives, perceives a product for the value it provides to its imagination. User rating depends on the subjective psychological satisfaction through the consumption goods. These estimates are reflected in the demand of consumers. So when the price based on the existing level of demand. In determining the cost method, your product compares to similar competitors' products. In view of the comparable product quality, service, design differences, the company set a higher or lower price than the competitors. In this case the company changes its product price depending on demand. Product demand increases, the company price increases and demand reduction 6

reduces. Costs are only limiting factor indicating whether the firm will planuojamj profits when it identifies the level of demand for money. [7]

The method focused on the competition: The method to set prices, the company mostly relies on its competitors. The company prices its product set at a level which identified counterparts for their products by its competitors, or your company products price is set a little higher or lower than competitors. In determining the price of their products, the company focuses on the current market levels. It does not change their prices as competitors does not change the price of their products, changes its price, on the basis of competitors' price changes. The company does so regardless of whether the changes in their demand for goods, or changing product cost. It simply mimics the actions of competitors, without attempting to maintain a constant relationship between the price its cost.[7]

1.3

Factors that influence pricing decisions

All of the foregoing techniques aim - to narrow price range, which will determine the final price. But before the company must evaluate additional factors. In determining the price takes into account the psychological factors. Assessing the price the user unknowingly pays more attention to the first digits of prices. At least it seems important for the fractional part of the price. Therefore, a much more common price "8.98", "49.95" instead of "10" and "50." The first two-time prices for consumers unknowingly significantly reduced, so the goods sold at prices much more. Unrounded prices for consumers more enjoyable because, together with the product he gets return. In addition, the rounded price to the consumer can seem like a discount.

In addition, users decide on the price of the product quality. Perfume bottle can be flavored with a value of 30 . However, some buyers paid for by $ 100 because the price reflects something special. In determining the price to take into account the distribution channel participants. Producers to sell goods to intermediaries lot depends on what concessions it can offer. Most often made of these types of discounts: functional, quantitative, payment and seasonal. Functional discounts agent compensates for the distribution and promotion costs. Quantitative basis for the calculation of discounts - agent purchased items. These concessions purpose - to encourage dealers to buy more products from the same company. Payment discounts encourages for early payment of the company bill for goods delivered. Seasonal discounts are made for goods bought in a certain season. If such goods are manufactured or less evenly throughout the year, off-season the company sells these products to intermediaries at a discount. In determining the price we'll have to evaluate and competitors. Price - the easiest and most likely be replaced by the element of the marketing mix. Therefore, it is easy to adapt to the competitive situation. The price can be determined by alignment to the company's leadership, or the average price level. Sometimes the price regulation justifies aggressive, that is to say directly against competitors. In some cases the discriminatory prices. This will be the case when a company sells goods at different prices, even though they cost the same. Discriminatory prices can be several kinds of: Price of a particular group of users. Different users for the same product or service pays a different price. (Museums often applies a discount to students or the elderly). Price depending on the product model. Different models of the same product, regardless of the cost of goods, price has its variations.

Price, depending on place. Different locations determined at varying prices, although the cost of the same. (Ticket prices at the theater depends on what place in the hall the most viewers.) Price, depending on the time. Price varies depending on the season, month, week, day and even hour of the day. (Utility price) Some companies offer a variety of goods to accessories. In this case, the company establishes additional commodity prices. For example, a car buyer may request electrically operated windows, fog lights, control panel. Price setting is influenced by state regulation. In different countries, it varies. However, there are several typical regulatory trends. One of them - price fixing regulation. In most cases prohibited by the horizontal lock - Agreements between competitors to maintain a certain price level. In some cases, regulated and vertical lock - on the manufacturer's agent in the prices. It is also forbidden to sell goods at a price lower than the cost of. Even in the literature can be found in the following more general factors: Outer: o distribution channel participants; o competitive environment; o legal and economic factors. Inner o product strategy; o marketing mix strategy; o costs;
o

and organizational factors (which makes the final decision?). [1;3]

1.4

Price policy and its objectives

Price objectives this is the most general objectives that your company wants to achieve prices of goods. [3] Price policy This is the leadership of the company pricing practices. It is based on the main principles and rules which the company uses to get maximum profit and to ensure competitiveness in the market place. [1] The main purpose of the pricing policy can be: Care to survive. The problem and purpose of the company arises when the market justifies many manufacturers, high competition, or frequently changing needs of consumers. To provide your company work and sell goods, manufacturers are forced to set low prices, hoping buyers benevolent response. The price can be reduced as long as it also covers the costs of, or until the cover variables and at least part of the fixed costs. To maximize profit. The company that produces luxury goods seek to maximize profits. Taking into account the different price levels, it assesses the demand and the cost and the price, which guarantees maximum profit. This objective may choose a monopoly position in the market an undertaking. Increase sales. The company, which aims to increase sales by striving to sell goods or sell them for more than its competitors low prices. The target chosen orientation of production company. Maintain competition. If your business objectives and competitive, that does not mean that the price will be a key competitive tool. In most cases the company is not worth reduce price while "killing" competitors, as it reduces its own profits and allows them to compete in other ways (for example, modification of the product, stepping up advertising, etc.). Introducing into the market a new product, the price is often compatible with other companies of the quality goods at prices like "the face" competition. To take leadership of quality. The company can ask ourselves the objective that its products are of the highest quality on the market. Usually this is associated with a high price, since one has to bear all the costs of studies. [4;5]

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1.5

Price strategy and its objectives

Companies seeking to profitably sell their products and compete in the market is not enough to know only the pricing methods. It has to be clear its objectives, assess the market situation and the factors that affect pricing. All things considered combined into a single circuit, planned pricing strategy. In addition, the pricing strategy must be linked to other elements of the marketing mix - product, distribution and promotion. Pricing strategy must be closely related to the marketing strategy. Marketing strategy in each case provides the potential pricing strategy. Pricing strategy - a way in which a firm seeks to achieve its policy objectives underlying price. Substantially all of the pricing strategy is divided into two groups: the application of new and existing products in the market. New products are two pricing options: apply "skimming" strategy - the company in order to get maximum profit, sets higher commodity prices and profits as skim layer by layer. This strategy is suitable when sold new products, highly satisfying consumer needs. In addition, users must be willing to buy a product, that the high price. Market share should include segments of customers are not very price sensitive. It remains to be that competitors would not be able to easily penetrate the market and reduce costs. The company, nugriebusi cream, start to lower the price, and at the same time expand their customer base. to apply penetration strategy - some companies rather than established high prices in order to gain a small but profitable market segments, sets new low commodity prices and rapidly trying to penetrate the market and attract more customers, gain a significant market share. Some conditions are favorable for low prices. That low prices encourage expansion of the market, consumers need to be sensitive to prices. Production and cost of sales to decline with increasing output.[4] Using a penetration strategy, the company have a problem: they fail to take significant market share or the market as a whole appears to be less than expected. However, in this case, the company has the potential to change the price: it is to reduce or increase it. By reducing the price of each item falling profits. In this case, a company wanting to reduce absolute income can
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increase sales. Users of the increased price of the product reacts negatively. Decided to keep the price of goods has increased sales of other marketing tools: advertising, through private sales, etc.. In the first case, to more innovative products, while the second strategy is more acceptable to the strong competition. Existing market prices options strategies: Price and quality strategy: In determining the price has to be aware of the price and the quality is ranked product. The competition-oriented strategy: Some firms set their prices for goods less than the nearest competitor. They seem to lower the price to attract more consumers. However, what often happens is that the user of such goods as something of competing analogies. The company, through the competition-oriented pricing strategies should include all potential competitors response. As a company has to respond to competitors' price changes? First, it must respond to the following questions: o Why competitor changed products price ? o Has it been done in order to gain a bigger market share, or sell any excess, or to adapt to changing prices? o Does the competitor price change is temporary or permanent? o How did the company profits and market share, if it will not take any measures? o

1.6

Pricing in different types of market

Pricing method and its regulatory options is highly dependent on the competitive situation. In the current economy are intertwined wide range of market types, the basic literature defines as: perfect competition, monopoly, oligopoly, monopolistic competition. Each of these operating companies have different pricing:

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Perfectly competitive market is characterized by the fact that there are many producers and consumers. There is also the absolute freedom of entry and exit. Are produced typical and uniform quality products. Perfectly competitive market, firms and customers have detailed information about prices, products, profits, and technology. For this reason, no market participant can not influence the market price formation. In other words, the company is the price benefit. Therefore, for example, to use a pricing strategy as a 'low-cost' does not pay for the entrance to the market is free. [1;3] Monopolistic market all production is concentrated in the hands of a single manufacturer. This market solutions are the individual producer prices in the market. This means that the company is able to control a monopoly in their sales prices, changing levels of supply. Therefore, a company a monopoly can only wish to apply what pricing strategy, but its output will be purchased, as it is the only manufacturer of that product. Monopolistic market the company is practically insurmountable for new businesses because there are barriers to entry.[1] Oligopoly - a market in which all the products are identical or close substitutes for products supplied by small firms, but at least some of them are high. Enterprise solutions can change the output and influence market prices. Oligopolistic firms wishing to protect themselves from potential competitors entering the market, creates a variety of obstacles. Company uses product differentiation (produces several models of the same product for different groups of users, taking into account the fact that new firms entering the market will produce close substitutes). The old firm of advertising, it is the increased advertising costs. This makes the new plants will also increase the cost of advertising, but as a new company producing a small volume, it is the large increase in average overall costs. And it becomes a disadvantage because incumbents average total costs are lower. As a barrier to the prevailing oligopolistic market, firms can use prices. When you enter a new business, they can reduce the prices of products they hold such until the new firm into bankruptcy. The most oligopolistic market dictates the price leader, and other firms in order to survive in an oligopolistic market has to adapt to the prices and choose the appropriate pricing strategy. [1;3] Monopolistic competition in the market - a market in which many firms producing close substitutes. This market is characterized by a sufficient number of producers who are not large,
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easy to overcome entry barriers. Monopolistic competition, firms compete not only on price but also on quality of products, advertising, sales conditions. Therefore, many companies a lot of attention to brand and product brand. Since products are differentiated, then a large number of firms in the market, manufacturers can poorly affect your production cost. Therefore, companies can use a variety of pricing strategies, as well as "cherry picking" and low prices, and the price quality and others. Users will select those firms products that most meet their needs.[3]

1.7

System of discounts

Price discount system can be useful and flexible company's marketing policy. Discounts are different. And its commercial nature, the discount can be of two types: 1. Target discount; 2. Tactical discount.[4] Target discounts are formed overhead expense. This type of discounts can be attributed to firms that produce a product which is organized in its trade promotion, which sets out the trade in goods trading firm. It saves your company manufacturer dealer funds on behalf of firms to advertise. Therefore, under the economic substance of which is equivalent to the trade discount. Tactical concessions combines economic resource - the profit. This type of discount is to create additional incentives that buyers would decide to buy. There are awarded 6 main types of tactical concessions: 1. Quantity discount. 2. Seasonal discount. 3. Discount for prompt payment. 4. New product sales promotion discount. 5. Discount for set of products. 6. Discounts to loyal customers.[1] Quantity discount - the standard selling price reductions, which the buyer is guaranteed, if the goods are bought more for the size of.
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Seasonal discount for goods with a strong demand fluctuations in individual seasons. These discounts is to encourage customers to purchase goods until next season, a new beginning of the season or the whole season. This is because, as seasonal discounts increases the active sales of seasonal goods helps manufacturers reduce the seasonal fluctuations in capacity utilization. Discount for prompt payment is applied when the buyer pays for the goods before the agreed contract. Discount for set of products - the standard price reduction, the purchaser is guaranteed, when he buys a product with the company's other complementary goods. This product is based on the fact that the price of each set is lower than buying these products individually, even within the same firm. Discount to loyal customers are given when they are long-term firm buys goods on a regular basis. [1;4]

2. PRACTICAL PART
2.1 Company profile and brief description

In spring 1992, the Lithuanian company "Vega and the Finnish Ingman Foods Oy Mazeikiai founded a joint Lithuanian and Finnish company CJSC Ingman Vega. Controlling stake - 80% of the shares - owned Finnish Ingman Ice Cream Oy Ab, which brings together ice cream production plants in Finland, Sweden and Lithuania. So CJSC Ingman ledai office is in Mazeikiai. 2000 - 2001 was conducted in the reconstruction of the company. Since 2001, the company has a HACCP quality control system, which gave the right to export manufactured products to the European Union countries.

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2003 - 2004, was carried out in the reconstruction of the company. The majority of the investment for new plant construction, process automation, product storage areas increase, logistics center construction. CJSC Ingman ledai since 2004 its reconstruction has become one of the most modern and biggest ice cream and wafer cupsmanufacturer in the baltic countries, the production capacity was - 20 million liters of ice cream per year. The company has expertise in manufacturing products with private labels and was ready for various projects. CJSC Ingman ice cream production is traded in the Baltic countries. Latvia and Estonia trading is carried out through the Finnish Group companies SIA Ingman Saldjums and Ingman Jtised AS. Company sales branches in Vilnius, Kaunas and Palanga Maeikiai. The company also trades in other frozen foods-vegetables, berries, potatoes, dumplings and so on. And is the only brand 'D' Aucy (frozen vegetables and berries) in Lithuania. CJSC Ingman Ice Cream is recognized Lithuania's ice cream market leader with over fifteen years of successful business experience, bringing together a team of competent professionals engaged in rigorous product quality control, separates great attention to new product development and satisfying consumer needs.
1.1.1. Company's legal form of organization

The company concerned is a closed joint stock company, therefore the company is a limited liability entity, due to the company's assets are separate from the assets of the shareholders. Closed joint-stock company shares may not be distributed or sold to the public unless otherwise provided by other laws.
1.1.2. Company commercial - economic activity description

The activity classification CJSC Ingman ledai is engaged in manufacturing of ice cream.
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The Company has implemented an investment policy helps to ensure product quality. Since 2001, the company has a HACCP quality control system. In 2005, the company has adopted and annually updated to ISO 9001: 2000 and BRC Global Standard-FOOD quality management system. UAB Ingman Ice Cream was the first meal. ice production in the Baltic countries, corresponding to the BRC standard.

1.1.3. Product market analysis

CJSC Ingman ledai most of the ice cream exports - 35% - exported to Latvia, 29% - to Finland - 22% in Estonia. Lithuania company offers its products to various stores, databases, shopping centers, cafes. The company also has its own stores that sold at lower prices than the market price. My company strives to produce products that it requires demand and the output is sold to realize it through various channels. 2.1 Industry and market definition

UAB Ingman ledai - the food industry, which depends on ice cream production branch. The company operates oligopolistic market conditions. This means that all manufacturers of this industry will react to other firms' price and output changes as a few large companies control the majority of sales in the market. In order to successfully organize their activities in a profitable way achieve the strategic objectives of the company to focus on the current situation of the market, know your key competitors and their services, knowledge of the composition of the food market. Production of ice cream market:

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JSC "Klaipdos pienas" 7% CJSC "Kraiten" 18%

Others 5%

CJSC "Ingman ledai" 30%

CJSC "Vikeda" 20% JSC "Pieno vaigds" 20%

From the graph we can see that a total of five major competitors. CJSC Ingman ledai sharp competition, occupies 30% market share in Lithuania. It is the 2008 leader in the manufacture of ice cream. JSC Dairy stars and CJSC Vikeda, producing DADU ice cream, takes in 20% of the market. "Kraitene - 18%, SC Klaipeda milk" - 7%, and other companies - 5%. All mentioned company exports its products to EU countries and not only. It should be noted that the ice cream manufacturing companies dominated by fierce competition, companies regularly lasted reconstruction, to preserve the traditional flavor of news to increase the range. Therefore, the entrance to the market rather complex.

3. VIVA ice cream price determination of 100 pcs

3.1 Companies pricing methods

In reality, we won't find company which is perfect use of one method to determine the price of the product. CJSC " Ingman ledai" set prices taking it to the competition. This strategy is characterized by businesses that operate in an oligopolistic market.

3.2

VIVA vanilla ice cream EXW price calculation

The table below shows how the formation of the price of each of the cost elements, as well as a percentage of the specific amount of the relative weight of price.

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Table 1 EXW price calculation

Nr. 1

Prices element name 2 Variable costs Raw materials, parts (material consumption rate of material x unit price) Cream ( 1 kg 5 Lt ) 9 kg 5 Lt

Price, Lt. 3 88,41 60 45 4 2 9

Comparati ve weight % in price 4 89,44% 57,3% 42,98% 3,82% 1,91% 8,59%

1. 1.1.

1.2.

Sugar (1 kg - 2 Lt) 2 kg 2 Lt Butter (0,2 kg - 1 Lt) 0,4 kg 1 Lt Eggs (10 vnt. - 3 Lt) 30 vnt. 3 Lt

1.3.

1.4.

2.

Direct labor costs (labor cost rate x average salary) 2 hours 5 Lt Equipment used in the operating costs (equipment 10 11,31%

3.

installation work hours hourly labor cost) 0,3 hour 51 Lt 15,3 3,1 0,01 17,31% 3,51% 0,01% Social insurance (30.98% of salary) Contributions to the guarantee fund (0.1% of salary)

4. 5.

Fixed costs
6. 7. 8. 9. Administrative costs (where 70% of salary)

13,06
7

1,47%
0,79% 0,41% 0,007%

Transport costs (where 6% of the materials cost) 0,06 60 Lt Packaging costs (where 0.1% of the materials cost) 0,001 60 Lt Storage costs (where 4% of the materials cost)
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3,6 0,06

0,04 60 Lt 10. 11. 12. 13. Product cost (variable cost + fixed cost) The mark-up (cost accessory) (where 10% of the cost) NET price VAT (21% of the created product) 0,21 (The net price - raw materials, parts value) 14. Final (gross) cost of the product

2,4 101,47 10,15 111,62

0,27% 90,91% 9,09% 100,00%

10,84 122,46

We get that 100 units of ice cream sales price including VAT is 122.46 Lt. From the table we can see that the highest relative weight of variable costs, which constitute 89.44% of the price. The variable costs include the material with the highest relative weight of the cream 42.98%, as well as variable cost without a significant proportion of materials used in the Howling equipment operating costs - 17.31% and direct wages, which accounts for 11.31% of the price. Regular cost is only 1.47% of the price.

3.3

Product sales to the consumer pricing

Nr. 1. 2. 3. 4. 5. 6.

Prices element name List price (purchase price of the product EXW) Volume discount (here 6% of the list price) 0,06 122,46 Lt Skonto discount (here 2%) 0,02 (122,46 7,35) Product purchase cost (here 1.6%) 0,016 (122,46 7,35 2,3) Product purchase price Fixed (overhead) costs (in this case 10% of the purchase price)
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Value, Lt. 122,46 (7,35) (2,3) 1,8 114,61

Comparativ e weight % in price 75,88% (4,55)% (1,43)% 1,12% 71,02%

0,1 114,61 7. 8. 9. 10. 11. Cost of sales (savikaina) The mark-up (cost accessory) (where 28% of the cost) Net price VAT (21% of the created product) 0.21 (Net Price - list price(kainoratin)) Final (gross) cost of the product

11,46 126,07 35,3 161,37 8,17 169,54

7,1% 78,12% 21,88% 100,00%

We get that 100 units of ice cream consumer price including VAT is 169.54 Lt. From the table we can see that the highest relative weight in calculating the cost of this method of list price 75.88% of the minus or plus discounts and expenses, get the goods at cost of 71.02%. It is also a considerable weight of the price mark-up.

3.4

Break-even pricing method

CJSC Ingman ledai in the month sold 11 units of VIVA ice creams (1 unit 100 packages) total of 1100 servings of ice cream. 100 pieces cost is 101.47 Lt (Table 1). The production efficiency of 20%. It should be set to one of vanilla ice cream VIVA price. BPK = 143,66 Lt = (13,08 11) VKK = 88,41 Lt BKK = 972,51 Lt = (88,41 11)

Calculate the primary cost: S = BPK + VKK Q = 143,66 88,41 11 = 1116,17 Lt

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Calculate the amount of profit (A): A = S a = 1116,17 0,2 = 223,23 Lt Comprehensive income: BPj = S + A = 1116,17 + 223,23 = 1339,4 Lt Knowing that BPj Q, P = BPj / Q = 1339,4 / 11 = 121,76 Lt

In order to achieve 20% efficiency to determine the price of 121.76 Lt for 100 units, and one unit is expected to cost 1.22 Lt. Sold 11 packs of 100 pieces it will result in profit 223,23 Lt. There, where the areas of general revenue and general cost line is the break-even point. It is also necessary to calculate the break-even point in units and value:

Qnt

BPK P VKK

Qnt

143 ,66 4un..100 pcs.( sum ~ 400 pcs) 121,76 88,41

BPK P VKK

BPjnt P

BPj nt 121,76

143 ,66 524 ,5Lt 121,76 88,41

Break-even point, 1 pav.

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1600 1400 1200 1000 800 600 400 200 0 0 2 4 6 8 10 12 14 Q (100 pcs.) Lt

Break-even point
BKK BPK BK BPj

1pic. Break-even graph

3.5

Optimal price level determination

The optimal price is the price that guarantees maximum profits. A lower or higher price than the optimal lower total profits. Using this method, first collected information on costs, prices and demand. To develop a number of behavioral options. Determine the price at which profit is maximum. Description of the model. Prices and willing and able to buy in quantity interdependence can be expressed by the equation:
Q a b P

[1]

Q sales volume; P price; a and b coefficients showing price and sales volume dependence. The coefficients a and b can be determined using the least squares method, or by choosing EXCEL program Tools Data Analysis Regression.
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Calculating the coefficients a and b are the least squares method solves equations: Q = an + b P (QP) = a P + b P2 n number of members in line. Comprehensive income is calculated: BPj = P Q [2]

Costs are expressed as:

BK BPK VKK Q

[3]

BK general costs; BPK general fixed costs; VKK average variable cost. Profit is calculated: = BPj BK BPj gross income. These four equations of the complete pricing model, which can quickly calculate the level of profit. It is the only one controlled by the size - the price. Demand and costs - fixed sizes. At any given demand and cost levels, selecting the most profitable price. Optimal price under this method to determine: from a table (approximately);
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[4]

from the chart (approx.); using the Weinberg formula (the exact price).

Weinberg formula to calculate the optimal price:

Po VKK a 2 2b

[5]

Po optimal price; VKK average variable cost; a coefficient; production sales when P = 0; b coefficient; demand line deflection.

Model adaption Chosen to identify (the same as in the previous tasks) the price determined by the company to obtain the maximum profit. For calculation using this data: Q-demand p- price(100 pcs.)
Table 3 Ice cream demand , pcs. /week.

Price (p), Lt 140 130 120 110

Demand, pcs. (Q 100) 5 8 11 14

25

100

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General costs incurred by a firm: Fixed costs, Variable costs Lt per week. Lt/100pcs. 130,6 88,41

Variable costs are taken from the EXW price calculation. In this case, they include: materials used + direct wages + equipment operating costs + direct labor + social security contributions. so: VKK = 60 + 10 + 15,3 + 3,1 + 0,01 = 88,41 Lt / 100 pcs. Fixed costs are associated with time, i.e., taken time costs rather than production units spread fixed costs. BPK = 143,66 Lt ( = 13,06 11) per week. To determine the coefficients a and b, solve the task by the least squares method:
4 lentel. Duomenys maiausi kvadrat metodo realizavimui

P, Lt 140 130 120 110 100 p=600

Q 100

Qp

5 8 11 14 17 Q = 55

700 1280 1320 1540 1700 Qp = 6540

19600 16900 14400 12100 10000 p = 73000 n=5

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Coefficients a and b are calculated by the least price approach: Q = an + bp Qp = ap + bp

55 = 5a + 600b 6540 = 600a + 73000b a = (55 - 600b) / 5 a = 11 - 120b 6540 = 600(11 -120b) + 73000b b = -16,67 a = 11 + 120 * 16,67 a = 2011,4 After inserting the estimated coefficients a and b into the equation we get vanilla ice cream VIVA demand equation: Q = 2011,4 16,67p According it we calculate sales volume Q 100 by different prices p(80, 90, 100, 110, 120, 130, 140, 150, 160) Q1 = 2011,4 - 16,67 160 = -656 = 0 pcs.; Q2 = 2011,4 - 16,67 150 = -489 = 0 pcs.; Q3 = 2011,4 - 16,67 140 = -322 = 0 pcs.;
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Q4 = 2011,4 - 16,67 130 = -156 = 0 pcs.; Q5 = 2011,4 - 16,67 120 = 11 pcs.; Q6 = 2011,4 - 16,67 110 = 178 pcs.; Q7 = 2011,4 - 16,67 100 = 344 pcs.; Q8 = 2011,4 - 16,67 90 = 511 pcs.; Q9 = 2011,4 - 16,67 80 = 678 pcs.

Proceeds from sales are calculated by the 2nd formula: BPj1 = 160 0 = 0 Lt; BPj2 = 150 0 = 0 Lt; BPj3 = 140 0 = 0 Lt; BPj4 = 130 0 = 0 Lt; BPj5 = 120 11 = 1320 Lt; BPj6 = 110 178 = 19547 Lt; BPj7 = 100 344 = 34440 Lt; BPj8 = 90 511 = 45999 Lt; BPj9 = 80 678 = 54224 Lt.

Production costs are estimated by a 3rd formula:

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BK1 = 143,66 + 88,41 0 = 143,66 Lt; BK2 = 143,66 + 88,41 0 = 143,66 Lt; BK3 = 143,66 + 88,41 0 = 143,66 Lt; BK4 = 143,66 + 88,41 0 = 143,66 Lt; BK5 = 143,66 + 88,41 11 = 1116,17 Lt; BK6 = 143,66 + 88,41 178 = 15854,12 Lt; BK7 = 143,66 + 88,41 344 = 30592,06 Lt; BK8 = 143,66 + 88,41 511 = 45330,01 Lt; BK9 = 143,66 + 88,41 678 = 60067,96 Lt.

Profit is calculated by 4th formula: 1 = 0 143,66 = - 143,66 Lt; 2 = 0 - 143,66 = -143,66 Lt; 3 = 0 - 143,66 = -143,66 Lt; 4 = 0 - 143,66 = -143,34 Lt; 5 = 1320 1116,17 = 203,83 Lt; 6 = 19547 15854,12 = 3692,88 Lt; 7 = 34440 30592,06 = 3847,94 Lt; 8 = 45999 45330,01 = 668,99 Lt;
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9 = 54224 60067,96 = -5843,96 Lt;

Calculation results showed in this table. Tabale 5. Expected sales of the company, revenues, costs and profits. Price (P), LT Sold products quant.(Q100) 1 2 3 4 5 6 7 8 9 160 150 140 130 120 110 100 90 80 0 0 0 0 11 178 344 511 678 0 0 0 1320 19547 34440 45999 54224

Nr.

Sales volume Income from sales (BPj) 0

General costs (BK), Lt

Profit or loss (), Lt

143,66 143,66 143,66 143,66 1116,17 15854,12 30592,06 45330,01 60067,96

-143,66 -143,66 -143,66 -143,66 203,83 3692,88 3847,94 668,99 -5843,96

Purpose of the method - to set a price that maximize profits. So, the results of the calculation, and we see that the objective has been achieved. In this case, the maximum profit ( = 3847.94 Lt) is obtained when sold in 344 VIVA vanilla ice pack (pack of 100 pcs. ice cream) 100 lt for one box of ice cream. Thus, the approximate optimal cost is 100 Lt for 100 servings.. According to Table 5, the data charted in sales and general cost-price schedule, which also allows to estimate the size of the optimal price. The difference between the total revenues and total costs are gross profits. So, when the vertical distance between the total revenues and total costs are the highest, the level of the price and the optimal price is.
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Plotting a graph of the calculated data (2 pav.)

70000 60000 50000 BPj, BK 40000 30000 20000 10000 0 0 50 100 Price 150 200 BK (BPj)

2 pav. Revenues and general costs dependancy from price

Price determined graphically is not accurate, so in order to accurately determine the optimal price formula is applied Weinberg (5th formula).
Po 88,41 2011 ,4 104 ,54 Lt . 2 2 16 ,67

Qo = 2011,4 + (-16,67) 104,54 269 pcs.; BPj = 104,54 269 = 28121,26 Lt; BK = 130,6 + 88,41 269 = 23912,89 Lt; = 28121,26 23912,89 = 4208,37 Lt.

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So, if the above condition, the company in order to maximize profit, 100 pcs. ice cream sales price of 104.54 Lt per week and sold 269 units. ice cream for it will receive 28,121.26 Lt gross income and earn 4208.37 Lt profit.

3.6

Existing enterprise pricing strategy for discounts

Currently, CJSC Ingman ledai took the largest Lithuanian production of ice cream market. Each year, the company achieves even better results. Fierce competition among firms causes the production of ice cream to improve, improve quality, deliver the news. As organization operates in an oligopolistic market, it can not ignore the competition. This is the main strategy of the company for price fixing. But as we know, in reality companies not just one strategy, they are few. It is easy to see from the company's history, the company Ingman ice cream adheres to high quality standards. This is one of the strategies - price and quality strategy. The company takes the average price - a high quality strategy. Company's pricing behavior:

When a company spends news, its price is usually high, but after a while it becomes lower. That way the company wants to get excess profits "skimming the cream".

Manufacture of ice cream is seasonal production. In the summer people to freshen up the heat a lot more eats ice cream. At that time, the price of ice cream rises, and vice versa in the winter - dropping.

CJSC Ingman ledai discounts are up to 10 percent. The company usually offers discounts for regular customers, paying attention to the size of the order. If the order of about 100 liters of ice cream, a discount of 10 per cent. When booking a small but steady customer is buying a discount of 5 to 10 percent. With discounts CJSC"Ingman ledai seeks this goals :

increase the turnover of goods; to increase customer loyalty.

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4. CONCLUSION

During examination of the theory and the theoretical result of the task, I found that CJSC Ingman ledai price fixing have impact on the market, its competitors, and its overall cost. There is no one specific indicator of the oriented company. The price depends on the method of determining the results of the company ie they gain market share and what it will take. After organization analysis I have identified: 1. The company's goal - a long time to get profits and increase turnover. It provides

eco-friendly and high-quality production average prices, rapid response to customer needs. This is a high quality mid-price strategy. Some sources even call it a medium price strategy (neutral pricing). 2. Although CJSC Ingman ledai is a Lithuanian ice cream market leader, setting

prices, forced to take into account the prices of its competitors. Because it operates in an oligopolistic market, where there are still a few large competitors with prevalence of fierce competition. This strategy is, and then focused on the competition. Yet take into account the overall costs. As we can see, there's agree and pricing method, based on the general cost. 3. 4. 5. 6. EXW ice cream price (100 pcs.) 122,46 Lt. Method of sale to the customer price (100 pcs.) - 169,54 Lt. Break-even method (100 pcs.) 100 Lt Optimal price level (100 pcs.) 104,54 Lt.

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5. REFERENCES

1. A. Bartkien, Rinkos kain politika ir kainodara. Vilnius: Valstybinis leidybos centras, 1993. 2. A. Mieinskien, Kainodara. Paskait konspektas. 2009m. 3. J. Rastenis, Kainodara: mokomoji knyga. Kaunas, KTU, 2000. 4. L. Bagdonien. R. Hopenien, Paslaug marketingas ir vadyba. Kaunas: Technologija. 2004m. 5. http://www.verslobanga.lt/lt/patark.full/3c22d8507dabd 6. www.ingman.lt 7. V. Kutut, Techninis normavimas ir kainodara. Vilnius: Technika. 2006. (pricing)

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