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Price Setting - Assignment Example

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Price Setting

In this case, it can be seen that the fast food industry is comprised of competition where players such as McDonalds also compete with KFC. It can be noted that KFC is a price taker since it cannot set its own prices that are above those charged on different product lines. Mohr (2008) posits to the effect that in a market that is characterised by perfect competition, price discrimination is possible where the same product can be sold at different prices. Essentially, the price marketing employed by KFC is market oriented since it is influenced by different market forces that obtain in the environment in which the organization operates. This point is supported by the “Chairman of the local Kentucky Fred Chicken (KFC) business who believes that poultry pricing should be left to market mechanisms,” (Poultry News, 2009). 2. The main challenges that are faced by KFC in its pricing mechanism are related to the aspect of competition and currency fluctuations in different global markets. According to Hu & xie (2013), the aspect of pricing plays a pivotal role on the performance of KFC in its operations. For instance, McDonalds is a renowned fast food restaurant in different parts of the globe and its prices also impact on the pricing mechanism that is employed by KFC. In some instances, KFC uses the strategy of price cuts in response to the price mechanism that is used by other competitors in the same industry. This strategy is very effective since it helps the company to retain its customers as

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well as to attract new customers for its products. However, the main challenge likely to be encountered in adopting this strategy is that losses can be recorded if the procurement price for chicken is higher than the revenue that will be generated after selling the final products to the customers. The other challenge for KFC is that it faces currency fluctuations in different parts of the globe where it operates therefore it cannot set uniform prices across different countries. Therefore, it heavily relies on the market mechanisms that exist at a particular period in a given country when setting the price for its products. Part 2 KFC uses exclusive distribution strategy in its operations. According to Kotler & Armstrong (2010), exclusive distribution is described as a situation where the producer only gives a limited number of dealers the exclusive right to distribute its products in their territories. Apart from distributing its products through company operated stores, it can be seen that KFC also uses franchisees to distribute its products to different customers. The company also uses licensees which can use its brand name to distribute various products to the targeted customers. This strategy is very effective since it helps the company to attract as many customers as possible in different territories where it would be operating. The company is visible and it is also present in many places which make it easy for the company to distribute various products to the targeted customers. The company also has drive through restaurants which are convenient for the customers who want take away. According to Hu & xie (2013), KFC’s performance in China is better than McDonalds as a result of the

Summary

Part 1 1. Price setting is often regarded as a complex multi step approach that takes into account various elements such as the external environment, demand for the product, competitors as well as internal elements like operating costs. As such, this paper seeks to evaluate the price mechanism that is used by Kentucky Fried Chicken (KFC), an international fast food restaurant that operates in more than 80 countries…
Author : adelemueller
Price Setting essay example
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