Name: GARGEE MITRA

Roll No.: PGDSCLM-17 Year: 2022

Paper: 201 (Module-I)
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Question No. 1:
A general awareness on seller’s pricing strategy and its impact will contribute significantly
on for preparation of Contract Negotiation
Answer:
Understanding pricing strategies is extremely important for a successful buyer while
preparation for Contract Negotiation. Several key variables can be identified and evaluated
in determining the seller’s pricing strategy and the conditions under which it is developed.
Knowing how to recognize these variables and integrate them into the buying process is a
challenging and demanding effort and can be used as an effective tool for a successful
negotiation.
A pricing strategy is a model or method used to establish the best price for a product or
service. It helps to choose prices to maximize profits and shareholder value while
considering consumer and market demand.
In short, a pricing strategy refers to all of the various methods that small businesses use
when setting prices for their goods or services. It’s an all-encompassing term that can
account for things like:
 Market conditions
 Actions that competitors take
 Account segments
 Trade margins
 Input costs
 Consumers’ ability to pay
 Production and distribution costs
 Variable costs
The approaches those are commonly used in determining price are:
 Cost-Plus (Penetration) Pricing
Applicable mainly for new product pricing with low margins above cost price for penetration
into the market.
 Demand (Skimming) Pricing
Involves high initial pricing in an attempt to achieve an almost instantaneous return on
investment.
 Rule-of-Thumb (Myopic) Pricing
A traditional way of pricing coping with uncertainties in the estimation of demand function
shapes and elasticities
 Buy-in (Foot-in-the-Door) Pricing
Pricing to recover variable costs and perhaps some fixed costs to the extent that a low
enough price is offered to beat the competition.
Use of Pricing Strategies in Contract Negotiations:
Regardless of the difficulty in preparing for contract negotiations, effective
buyers must be aware of the types of pricing strategies sellers are likely to employ, the
conditions under which these strategies generally surface, and the significance of this
knowledge in the buying process. The common pricing strategies and the principal variables
(both internal and external) that contribute to the development of the strategy are
identified for a successful negotiation.
The buyer should aggressively and continually pursue data helpful to assessing the external
variables affecting pricing strategy. Information concerning new versus mature products,
product differentiation, product life cycle, the competitive environment, product demand,
and industry capacity can all be obtained through careful attention to various industry,
trade association, financial, and government publications. Factoring each of these external
variables into the process which favours one pricing approach over the others allows the
buyer to draw conclusions regarding the seller’s proposed price.
Data on internal variables are more difficult to obtain and to assess. Data may be non-
existent or expensive to acquire. Several of these variables require the buyer to pay close
attention to “signals” provided by the seller during periods of buyer-seller interaction. Such
things as capacity levels, financial health, cost control, capital structure, expected rates of
return, internal accounting methods, and estimating methods are all areas in which the
seller may be unwilling overtly to supply enough information for the buyer to make
legitimate assessments. In the case of federal government contracts, data from many of
these areas must be provided as a condition of contract award. Regardless of the difficulty
involved, these variables are key to understanding seller pricing behaviour.
Pricing strategies are useful for numerous reasons. Choosing the right price for a product
will allows the buyer to maximize profit margins if that’s what you want to do. It is very well
understood that pricing strategies aren’t always about profit margins.
A generic traditional rule of thumb to remember when pricing products is that your
customer base won’t purchase your product if it’s set too high, but your business won’t be
able to cover expenses if you price it too low.
In Contract Negotiation, out of the four pricing strategies, penetration (cost-plus) pricing and
rule-of-thumb pricing are perhaps the easiest for a buyer to understand and to deal with.
They are also the strategies in which sellers are willing to divulge how costs were estimated
and to provide data supporting these estimates. Skimming and buy-in pricing are difficult to
detect and even more difficult to counter.
Matching the external and internal variables to these strategies becomes the important
step in determining buyer negotiation leverage and flexibility. It is also important to
understand that a change in one variable is generally not an isolated event, but that it can
modify the parameters of most other variables leading to significant shifts in the pricing
approach.

Certainly, the buyer must have fairly good knowledge of the seller’s costs, the earnings
needed, and the competitive nature of the company’s markets.
Conclusion:
From the above, it is clearly evident that numerous factors have impact on the pricing decision
which becomes difficult to consider during negotiation. A buyer may not be able to investigate
and examine each of these factors. However, a conscious buyer with a general awareness of
these influencing factors shall consider during a Contract Negotiation.
Question No. 2:

Marketing Concept, Market Orientation, Relationship Management and Supply Chain

Management are not separate. Justify.
Answer:
For a sustainable business, it is important to understand the existence of strong cohesiveness
between marketing and supply chain management and to implement how the two fields
harmonize. The marketing and SCM fields are so broad and interconnected, that it can be
harder to think of how they differ, than how they relate.

When decisions and efforts from both functions unify together, organizations can pack a more
powerful punch in the results they pursue. They can satisfy customer demand triggered by
the company’s advertisements, and by making their products and services consistent,
companies can build long-term trust.

Marketing Concept:

 The Marketing Concept is preoccupied with the idea of satisfying the needs of the
customer by means of the product as a solution to the customer’s problem (needs).
 The Marketing Concept focuses on the needs of the buyer.
 The Marketing Concept represents the major change in today’s company orientation
that provides the foundation to achieve competitive advantage. It holds that the key
to achieving its organizational goals (goals of the selling company) consists of the
company being more effective than competitors in creating, delivering, and
communicating customer value to its selected target customers.
 The marketing concept rests on four pillars:
a) target market
b) customer needs
c) integrated marketing
d) profitability.

The marketing concept is based on increasing a company's ability to compete and achieve
maximum profits by marketing the ways in which it offers better value to customers than its
competitors. This concept is the one that puts the customer at the core of every business
activity to ensure impeccable customer service.
Marketing Orientation:

 Market orientation is generally regarded as the implementation of the marketing

concept.
 Market orientation is an approach to business that prioritizes identifying the needs
and desires of consumers and creating products and services that satisfy them.
Companies that have a market orientation consider the opinions and needs of
their target market as a critical component of their research and development (R&D)
for new products.
 Market orientation is a customer-centred approach to product design. It
involves market research aimed at determining what consumers view as their
immediate needs, primary concerns, or personal preferences within a particular
product category.
Relationship Marketing:

 Relationship Marketing is a strategy of Customer Relationship Management (CRM)

that emphasizes customer retention, satisfaction, and lifetime customer value. Its
purpose is to market to current customers versus new customer acquisition through
sales and advertising. When the competition is high, and the customers are aware, the
organizations cannot just rely on selling their products or services to them.

 The customers always look for the organizations which provide an added value or
advantage to them along with the product or service.
 Relationship marketing is more concerned about attaining the long-term vision
instead of fulfilling the short-term objectives.
 A few channels of Relationship Marketing are:
a) Know Your Customer
b) Customer Service
c) Customer Feedback
d) Surveys and Questionnaires

Supply Chain Management:

Supply chain management is the management of the flow of goods and services and includes
all processes that transform raw materials into final products. It involves the active
streamlining of a business's supply-side activities to maximize customer value and gain a
competitive advantage in the marketplace. Supply Chain Management integrates supply and
demand management within and across companies.

A Collaborative Approach

Considering the above concepts, it can be summarised that Marketing Concept, Market
Orientation, Relationship Marketing, and Supply Chain Management are interlinked and a
synergy exists among the above.

Marketing Concept has strong influences on the management of a firm, inter-firm

relationships, and the supply chain. The marketing concept, as a business philosophy, guides
firms to look for customer satisfaction at a profit in a collaborative manner.

Market Orientation helps the implementation of Supply Chain Management by providing

valuable market information on customers, competitors, potential supply chain partners, and
market environments; suggesting a model of information sharing and organizational learning
that contributes to the success of Supply Chain Management.

Relationship Marketing focuses on close inter-firm relationships such as partnerships,

strategic alliances, and joint ventures which increase inter-firm cooperation, one of the major
components of the implementation of SCM, including Vendor Managed Inventory, Cost
Reduction. It also helps achieve the objectives of SCM such as efficiency (i.e. cost reduction)
and effectiveness (i.e. customer service) through increased cooperation in close long-term
inter-firm relationships among supply chain partners.

Conclusion:

“Keeping Customer at the core of any action” is the mantra of any successful business
scenario. To create an impeccable customer service, marketing aims at developing,
maintaining, and enhancing multiple relationships in a supply chain. Hence, the role of
marketing through the concept of marketing, market orientation, and relationship marketing
is essential for the success of Supply Chain Management and an integrative framework exists
among these leveraging factors.