Can You Explain How Prices Are Set To Reflect An Organisation's Objectives And Market Conditions?


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Connor Sephton answered
Prices are always established with an organization's objectives or goals and market conditions in mind.

Management decides the marketing strategy, sets the organizational goals and objectives, and decides on what product lines and services are worth pursuing. For this reason, prices are always subject to the character and beliefs of those who lead the organization.

Prices are also established based on an organization's goals and the market conditions at any given time in the business's operations. Companies examine the market and look at the way certain products are performing. This is how they determine if a product is going to be included in their own product lines or services that they offer. This is also how they decide if they are going to continue to produce a particular product.

Products that don't perform well are often discontinued. Sometimes, prices may be lowered, but this is difficult to do if production costs are still high. A business that cannot see a profit or a sufficient profit on a particular product will simply discontinue it rather than lower the purchase price and lose money on production. 

Businesses also look at market conditions in terms of competitor performance and pricing in order to set their own success measures. This is why you will see many businesses producing similar products and pricing those products very similarly as well.

Businesses that are well established with easily recognizable names are often the ones to set the standard prices within the market. Businesses that are not as recognizable and can't as easily gain new customers have to set lower prices in order to attract people to purchase their products. If businesses wish to increase sales and win customers from competitors, they have to produce good products and price their items lower than the competition. This is just one of the many ways in which prices are set by an organization's objectives and market conditions.

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