Presents the basic principles of pricing, including value pricing, price sensitivity, and price customization/discrimination. A rewritten version of an earlier note.
Swot Analysis of "Principles of Pricing" written by Robert J. Dolan, John T. Gourville includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pricing Principles facing as an external strategic factors. Some of the topics covered in Principles of Pricing case study are - Strategic Management Strategies, Pricing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Principles of Pricing casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, there is backlash against globalization, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, geopolitical disruptions, etc
Introduction to SWOT Analysis of Principles of Pricing
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Principles of Pricing case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pricing Principles, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pricing Principles operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Principles of Pricing can be done for the following purposes –
1. Strategic planning using facts provided in Principles of Pricing case study
2. Improving business portfolio management of Pricing Principles
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pricing Principles
Strengths Principles of Pricing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pricing Principles in Principles of Pricing Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Pricing Principles are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Pricing Principles has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Pricing Principles has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Pricing Principles has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Principles of Pricing HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Pricing Principles digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pricing Principles has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Effective Research and Development (R&D)
– Pricing Principles has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Principles of Pricing - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Pricing Principles in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Pricing Principles is present in almost all the verticals within the industry. This has provided firm in Principles of Pricing case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Training and development
– Pricing Principles has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Principles of Pricing Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Learning organization
- Pricing Principles is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Pricing Principles is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Principles of Pricing Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Sales & Marketing industry
– Principles of Pricing firm has clearly differentiated products in the market place. This has enabled Pricing Principles to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Pricing Principles to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Principles of Pricing Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Pricing Principles has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pricing Principles to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Principles of Pricing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Principles of Pricing are -
Slow to strategic competitive environment developments
– As Principles of Pricing HBR case study mentions - Pricing Principles takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Principles of Pricing, in the dynamic environment Pricing Principles has struggled to respond to the nimble upstart competition. Pricing Principles has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Pricing Principles is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Pricing Principles needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pricing Principles to focus more on services rather than just following the product oriented approach.
Aligning sales with marketing
– It come across in the case study Principles of Pricing that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Principles of Pricing can leverage the sales team experience to cultivate customer relationships as Pricing Principles is planning to shift buying processes online.
High cash cycle compare to competitors
Pricing Principles has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Pricing Principles, firm in the HBR case study Principles of Pricing needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Pricing Principles products
– To increase the profitability and margins on the products, Pricing Principles needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Pricing Principles has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Slow decision making process
– As mentioned earlier in the report, Pricing Principles has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Pricing Principles even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Pricing Principles has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High operating costs
– Compare to the competitors, firm in the HBR case study Principles of Pricing has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Pricing Principles 's lucrative customers.
Opportunities Principles of Pricing | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Principles of Pricing are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pricing Principles can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Principles of Pricing, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pricing Principles to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Pricing Principles to hire the very best people irrespective of their geographical location.
Using analytics as competitive advantage
– Pricing Principles has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Principles of Pricing - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pricing Principles to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Pricing Principles to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Pricing Principles has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Pricing Principles can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Pricing Principles can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Pricing Principles can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pricing Principles in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Pricing Principles has opened avenues for new revenue streams for the organization in the industry. This can help Pricing Principles to build a more holistic ecosystem as suggested in the Principles of Pricing case study. Pricing Principles can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Pricing Principles can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Principles of Pricing suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pricing Principles can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pricing Principles can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Pricing Principles can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Principles of Pricing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Principles of Pricing are -
Regulatory challenges
– Pricing Principles needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Pricing Principles needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
Environmental challenges
– Pricing Principles needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Pricing Principles can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Stagnating economy with rate increase
– Pricing Principles can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Pricing Principles demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Pricing Principles
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Pricing Principles.
High dependence on third party suppliers
– Pricing Principles high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pricing Principles in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Pricing Principles has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Pricing Principles needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Pricing Principles business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Pricing Principles will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pricing Principles with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of Principles of Pricing Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Principles of Pricing needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Principles of Pricing is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Principles of Pricing is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Principles of Pricing is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Pricing Principles needs to make to build a sustainable competitive advantage.