Continued from Part--1
Let us consider an analysis done with XYZ which is a multinational grocery store with millions of turn over every year, till now they have been using a traditional costing system which is used to cover their heavy sales. But because of the increased competition, globalization and also other factors challenges have been increased so therefore the best costing system would be Activity Based Costing which is also termed as ABC System. According to Dekker (2003) activity based costing revolves around the value chain analysis and also integrated cost evaluation. Sales data which is associated with supply chain is also an integral part of this.
XYZ as it is a very big organization which has got thousands of products s need to calculate the cost as a whole as it is very difficult to keep track of more than 30,000 products. Any kind of business which is maintaining these many thousands of products finds it very difficult to keep track of cost for each and every small product due to over head allocation. There are 2 divers in this type of costing which is volume based and the other is Non volume based .Activity based costing has been found as a best method of costing for XYZ as it helps the company to get the exact picture of cost of sales.
Yet another pricing policy which can be followed by XYZ is Competition based Pricing policy This is a policy where in the cost of the product is determined after the analysis is done on the competitors products which are currently competing n the present market. So the first and the fore most things is to analyze the competitors products and to calculate the price which is incurred in production .later on the prices are defined either High, low or similar with respect to the competitors products. In this case the Numbers of competitors also play an important role because if there are only few competitors and one such competitor decreases the price the others will soon respond and lower the price of their product too in order to be more competitive and win the sales .
In this pricing strategies the companies can have a flexibility to change their prices with respect to the competitors price It could be either Higher, lower or the same. Immediate change in the prices can be done with this policy and it doesn’t require accurate data so little effort is needed in setting up the price. As the company already has a clue on the distributors ability it can set the price by considering them so that it could be within the distributors range an can be very much welcomed by them as they also play a key role in the company’s prosperity.
Note:- Since the competitions are growing in every passing moments, the pricing advantage is one of the very crucial factors for any industry, especially the retail chains. The obvious reason for making a business a success is satisfying the customers with the price factor, while maintain quantity.