Understanding the Market — Entrepreneurship STD 11 Commerce — Question

The factors that influence the pricing decisions of any enterprise can be categorized into two:

1. Internal Factors.
2. External Factors.

Internal:
"Every enterprise believes strongly in the basic philosophy on pricing that certain costs of manufacturing and marketing must be recovered through the price. Thus the entrepreneur's pricing decisions have to be consistent with this philosophy. The pricing strategy usually gets affected by following internal factors:

1. Corporate and marketing objectives of the firm.
2. The image sought by the firm through pricing.
3. Cost of manufacturing and marketing.
4. The uniqueness & utility of the product i.e. the extent of distinctiveness of the product and extent of product difference practiced by the firm.
5. Price elasticity of demand of the product.
6. Other elements of the marketing mix of the firm and their interaction with pricing.
7. Use pattern and turn around rate of the product.
8. Composition of the product line of the firm.

External:
Business does not live in isolation. The environment in the form of sum total of all forces and things external to business firms viz. (legal, technological, political, economic, social etc forms the external crust,) government, consumers, competitors, society, suppliers etc effects the survival, growth and enterprises functioning. All these factors either appreciate or disapprove the acts, policies, objectives and functioning of the enterprises. Thus enterprise cannot dare to either ignore or defy them. Thus, external factors which exercise influence on pricing are:

1. Market characteristics.
2. Nature of economy.
3. Nature of competition.
4. Bargaining power of major consumers.
5. Bargaining power of major suppliers.
6. Competitors pricing policy.
7. Government controls/ regulations on pricing.
8. Societal or social considerations.