Discuss the Main Factors Affecting Product Pricing in the Uk

Over the years, firms have increasingly been maximising shareholder value. However, Steve Denning, a former director of the World Bank, author of six leadership and management books and columnist for Forbes, disagrees. His article “The Origin of the ‘World’s Dumbest Idea’: Milton Friedman”, was published on June 26, 2013 on Forbes, debates against Friedman’s argument that the social responsibility of corporations is to make money for its shareholders. The main issue here is whether the maximisation of shareholder value as the guiding principle of executives is detrimental to the corporation. Although Denning has exhibited valid points in his argument, his lack of citation, biased view on most arguments and his tone has dampened the credibility

1) An Oligopolistic market structure is a structure where very few large businesses sell a particular standard Good or differentiated Good, and to whose market entry proves difficult. This in turn, gives little control over product pricing because of mutual interdependence (with the exception of collusion among businesses) creating a non-price competition meaning they are the ‘price setters’. A good rule to help classify an

In their theories of how a business should operate, R. Edward Freeman and Milton Friedman hold virtually opposite beliefs as to what businesses’ responsibilities should be. In favor of the Stakeholder theory, Freeman believes that any person or organization that has a “stake” in the business should also play a role of participation in the business’s actions and decisions. In the other corner of the ring stands Milton Friedman, who holds the belief that said business is only responsible for those that actually own stock in the business – the owners, or stockholders.

Barriers to entry - Sunk cost, technology, economies of scale, limiting pricing and brand loyalty of incumbents can all be barriers

In all three degrees of price discrimination firms are able to make more profit and eliminate any excess capacity they may have. Firms are able to do this by charging higher prices to those consumers with a more price inelastic demand for their product. The firm is reducing the welfare of these consumers by changing them at the maximum price they are willing to

This is also linked into the behaviour of the buyers in the market. Buyers are also price takers because they can purchase as much as they wish without influencing the market price. The final assumption is important when considering the long term equilibrium price of a firm in perfect competition. This assumption is that entry into the market is free and that there are no barriers to entry. Any costs incurred are incurred by all of the suppliers; an entrant will pay no additional cost for entering the firm.

Can business thrive by profit alone? Barry (2000) described Milton Friedman’s short essay, in the 1970’s, as extremely controversial, in which he denied that corporate executives had any moral duty to relax the conditions of profit maximization on behalf of the wider interests of society. This example of the “bottom line” of business has been demonstrated within the past couple of decades by publicly criticized companies, for fraudulent activities, such as, Enron, WorldCom, and HealthSouth along with many others. These company executives were willing to sacrifice the vast majority and greater good of society for profit gains. This mindset left many of loyal investors, consumers and employees without a sound stabilized future. There are also many businesses that produce a high yield on their investments;

pricing closely, as being out of step with the market can cause dramatic market share changes in a

Price discrimination can be defined as when the same good or service is sold at different prices to different consumers. If we look at this definition of price discrimination, for an example, we can show that price discrimination can be seen in the entrance tickets of parks such as Universal studios; this is due to the fact that there are discounts for children and senior citizens. (Phlips L. , 1983) However, this can be seen as not being discriminative at all due to the fact that if the price difference full reflects the difference in the cost of carrying the good from the seller’s location to the buyers’ location.

Competition within the industry as well as market supply and demand conditions set the price of products sold.

Friedman argues that the only responsibility a business has to society is to act in its own self-interest to create revenue and remain successful in the economic system (158).Created to make a profit by providing a task or service, a business must “use its resources and engage in activities designed to increase its profits” (Friedman 164). A business could use any tactic to gain a profit as long as they remained “within the rules of the game” (Friedman 164). The rules implied that no deception or fraud could take place while the corporation obtained their profit.

Firm need to ensure they are aware of several factors of their business before proceeding with the strategy of price discrimination. Firms must have control over the changes they make regarding the price of their product by which they can gain profitability depending on the amount of sales made. The price can be increased or decreased at any point depending on the fluctuation of the rate of buyers and consumers. Price discrimination strategy is not feasible for all firms as there are many consequences that the firms may face due to the action. For example: if a firm sells a product to their customer for a cheaper price and that customer resells the product demanding a higher price from another buyer then the chances of the firm failing to make a higher profit is predicted because they could have sold their product at a higher rate than the re-seller and made further

Bertrand oligopoly pricing is key to be most profitable. As one company cuts prices another

Milton Friedman’s shareholder theory has had a broad range of consequences for HRM ethics. The main consequence being that if management are only answerable to owners and shareholders, and must do as they wish, management’s quest will almost always be to maximise profit. Organisations that are constantly trying to maximise profits are often constricted by short-termism. Short-termism refers to the excessive focus of some organisational leaders on

b) In a monopolistic competition structure, although there are numerous firms, they carry different products. Due to product differentiation, each company is able to somewhat control their own pricing.