Discussion:Pricing policy,Monopoly,Antitrust laws Assignment Help
Your consulting firm just granted an exclusive contract for Vanda Laye Corporate. You now must decide your pricing policy. The firm will encounter no fixed costs and all revenue is after taxes. As your firm has been granted an exclusive contract your pricing and output decision will be those of a monopolist. Analyze what a monopoly is and the effects it could have on the consulting firm.
Evaluate if any anti trust policies need to be put into place. How will your pricing policy be justified?
Explain the implication of increasing the price you'll charge Vanda Laye versus what is was previously charged.
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The current contract is for a corporate company Vanda Laye and the firm received the contract is an independent privately operated consulting firm. The current scenario is to fix the pricing strategy for the organization. As per the information available here with, the firm does not have any type of fixed costs in the organization, the costing will commensurate with the actual activities and the procedures performed for the sake of Vanda Laye. However since it is an exclusive contract, there is privilege assigned for the company to fix the pricing. It is more a monopolistic scenario.
Since the company is in a monopolistic situation, it has freedom to fix the pricing as it wishes, and there is considerable opportunity for the consulting firm to take up good margins from the business. However still thinking realistically the monopolistic advantage need to be utilized with strategic planning for long terms sustenance and continuation.
Following are some of the key in-sights possibly evident from the current situation,
Company can fix the prices as it wishes for the current organization. It can take up large profit margins from the opportunity. This will give immediate positive outcomes for the organization in terms of revenue growth. However the long standing implications of the strategy are not known. Vanda Laye may source some other consultancy for better and reasonable pricing that the current consultancy company. Also if the outcomes of the consulting firm are not upto the expectations of Vanda Laye, it is more likely that the contract of the company can be terminated(Zeuthen,2018). Monopolistic opportunity can have both positive and negative implications to the consulting firm as well. It is possible that when proactively reacted, the company can further strengthen its core capabilities to develop better relations with the clients and it can better strengthen the bond with Vanda Laye. At the same time, if the company became overconfident due to absence of competitors, the quality of the outcomes may come down and with time, its own standards of operations may get detoriated.
Well it is a sure case of price fixing by the company, rather than letting the market forces to let the price fixation. In any case, as long as the prices set by the consultancy firm are reasonable and if the quality of the service rendered is acceptable and as expected, there is no need for the company to succumb to the anti-trust laws. However still Sherman Anti-trust law(Sawyer,2019) can be applied in the current case to safeguard the interests of the consumer as well to protect the health market dynamics. The pricing policy now needs to be justified just by benchmarking the prices as per the market standards. Too high prices cannot be justified and antitrust law can be applied to restrict the same. However still reasonable scope for negotiating for better price(Spulber,2017) at the promise of better quality service is possible in the current scenario.
As discussed before increasing the price Vs the price usually Vanda Laye is being charged can have both the positive and negative implications. Negative implications may include the stakeholders of Vanda Laye can think of antitrust law to constrain the prices to safeguard themselves and their objectives. This can be detrimental to the consultancy organization. Positive implications for the consultancy firm, include better opportunity for the company to enhance their quality in services, further it is also possible for the organization to innovate new consumer services that can promote better satisfaction and better revenues to Vanda Laye. If operated properly, the opportunity can be a good advantage for consultancy firm for long term sustenance and business promotion.
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