Agroindustrial project analysi

THE MARKETING FACTOR 47ssl's may need governmental assistance to design the initial product.Market research should continue throughout the life of the productso that the product's design can be modified to fit consumers'changing needs.Analysts should recognize that consumers' preferences are notalways in the consumers' interests. For example, polished whiterice is treated with talc and glucose because consumers prefer whiterice with luster. But the talc and glucose coating must be washedaway prior to consumption, a process that depletes the rice ofvitamin B. Moreover, talc contains asbestos, which may be carcinogenicif ingested in sufficient quantities. For nutritional andeconomic reasons, the preference for treated white rice should bediscouraged.PricingA firm should choose its pricing strategy according to its competitiveenvironment and market segment. The following pricingstrategies are the most common.COST-PLUS PRICING. In cost-plus pricing, the firm adds a marginto its costs for nonmanufacturing costs and profit. For example,if a pair of shoes cost $6 to produce and sells for $10, the markupis 40 percent ([selling price - costsl . selling price). As a percentageof costs, the markup is 662/3 percent ([selling price -cost] - cost).8 A more refined approach is to calculate a markupthat will generate a selected return on investment at an expectedsales volume. The cost-plus strategy is feasible when there is littleor no competition-for example, in regulated utilities or foodstaples, whose prices are determined by the government.PENETRATION PRICING. Penetration pricing is the setting of pricesat levels lower than the competition's in order to enter an existingrnarket. Pricing is used to overcome barriers to market entry orto reach a market segment that would be excluded at higher prices.This strategy is intended to capture a larger market share andestablish a firm market position.8. The markup on a cost basis may be derived from the markup on theprice basis as follows: price-basis markup - [100 percent - price-basismarkup].