While carrying out the pricing decisions, a company has to take a comprehensive look at all its internal factors as well as the prevailing market scenario, economic policies and legal framework for the market and the product. Most of the companies begin pricing deliberations based on their own internal cost structures. Internal factors affecting the pricing decisions are basically the profit and cost factors. How the company arrives at the total cost of the product and how much profit is expected from the product makes. In general costs are divided in two components fixed costs and variables costs. Costs of labor, material, energy, supervision, R&D contribution, marketing, administrative, transportation, taxes, channel costs, factory overhead etc. are some of the internal cost components which form part of the pricing decision. On the other hand external factors affecting pricing decisions include the existing pricing strategy resorted to by the competitors/ alternative products, market profile, customer's buying power, geographical conditions, economic policies prevailing in the country/ market, legal provisions for carrying out business in the market, acceptability of the product in the market, number of competitors and their profit margins etc.
Tender Pricing: This type of pricing is based on actual costs of different sub tasks in producing the product. ...Show more