Chapters 11,12,13 & 14 Key Points

1 Chapters 11, 12, 13 & 14 Key Points Krithika Campbellsville University Entrepreneurship Professor Jennifer Graham 12 th October 2022
2 CHAPTER 11: Pricing and Credit Strategies Entrepreneurs make the common mistake of ignoring the value and service quality to compete in the market by just focusing on offering products at low prices. Most companies are failing to follow their strategies by lowering the prices to compete with their opponents. While setting the price, an entrepreneur needs to think about the total cost of producing a product or service rather than strictly thinking about the cost of the product or service Entrepreneurs need to focus on improving efficiency to address the increased cost of raw materials associated with business Entrepreneurs need to increase the price incrementally instead of increasing the prices at a time to avoid resistance from the customers The most important lesson learned From the analysis of pricing and credit strategies, it is understood that companies always focus on offering the product or services at less price when compared with competitors. But in many scenarios, the customers are willing to pay more. For example, Starbucks offers coffee with a variety of flavours. Every day more than 4 million coffee drinks are sold even though the price is higher than in other coffee shops. By focusing only on the price, the majority of companies are failing to follow the strategies such as offering quality and innovative products to be competitive in the market. On the other side, when the price of a product is lowered, customers might suspect that the quality of the product is reduced which influences company sales in the future. While fixing the price for the product, entrepreneurs need to think from the customer side, that how much the target customer can pay. It is learned that luxury brand companies fix a high price for the products by using high-quality fabrics and adding some extra designs [ CITATION Nor19 \l 2057 ]. Whereas the products sold by
3 the local retailers have a huge difference. It is understood that the pricing of a product is fixed not only based on manufacturing but promotion, rents are also included under the cost. How you would utilize this lesson in your own work/life From the lesson learned, the pricing of a product depends on various factors like a company brand, the material used, and quality. Despite some companies offering products at low cost but quality is the major factor. I utilize the knowledge gained from the chapter to select the best product and check the quality difference. Before choosing the product with the low cost I ensure whether the company gives any warranty and place of manufacturing. CHAPTER 12: Creating A Successful Financial Plan Creating effective financial statements is highly essential to achieving the set business goals in reality Entrepreneurs when starting a new business need to maintain the reserve capital along with enough capital to cover the machinery, license cost, and other expenses until positive cash flows are generated The financial reporting system is essential to control the costs associated with the business operation when profits are declining Entrepreneurs need to focus on increasing the net profit on sales ratios to operate to sustain in the market Entrepreneurs need to calculate the breakeven point without leaving their salary as most entrepreneurs do The most important lessons learned
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