Pricing and Distribution in Marketing Decisions - Research Paper Example

In reference to Blue Mountain Coffee Company and Starbucks Coffee, pricing and distribution strategies will help them acquire these useful utilities for their efficient functioning. This paper aims at contrasting the pricing and distribution strategies of these two products. Though the two companies produce the same products, they are not competitors because they serve different markets. Pricing Strategies The worst mistake that can easily collapse a company lies in decision making that concerns pricing strategies.

Wrong pricing decisions are almost a guarantee on damaging the company as well as eroding services tot the community and customers (Florissen, et. al, 2001). In many cases, manager’s cut-off prices so as to fend off new market rivals and then, they launch price wars that are full fledged hoping to compete attackers and hence emerging victorious. At any rate, this is just hope because reality is normally very different. For example, Blue Mountain Coffee Company that mainly specializes in exporting its products bases its decisions on pricing in reference to international market prices.

In pricing, companies should take into account the competitor’s prices, cost to serve, switching rates, and customer value in order to ensure profitability. By evaluating these four factors, the two companies can make more reasonable decisions on their pricing decisions in increased competition faces. Instead of blindly undercutting attackers, the companies can safely charge commercial accounts and private customers a premium that will secure their business, do away with costly price wars, as well as preserve the market.

To compete against its rivals, the company has established higher prices for its products because they are high in quality and hence, they have won consumer loyalty and captured a wide market in Japan. On the other hand, Starbucks Coffee, that mainly targets the local market, sets prices that will help it acquire a larger market share in the local market than its competitors. Price reduction for its products is however profitable only in the short run but in the long run, they lead to heavy losses.

Good pricing strategy should ensure that the company gets enough profits and is also able to meet its costs. Therefore, though price reduction is important in trying to capture the market or compete out rivals, such decisions should be carefully sought. As Bertini & Luc explains, reducing prices below the cost of production is very risky to the company as it can easily collapse the entire business. Cutting prices means that a company will have to work harder for less because you have to sell more units of the product for the same revenue.

However, cutting prices only increases profits when you produce more units and increase sales (Bertini & Luc). Product Distribution Starbucks distributes its products to local consumers while Blue Mountain Coffee Company distributes its products to an international market in Japan. Anonymous explains different modes of product distribution. For Starbucks Coffee, which distributes its products locally, the coffee can be sold to large scale wholesalers, who then sell it to Retailers. The retailers sell it directly to consumers or to small scale retailers who then sell it to consumers (Anonymous).

However, the distribution mode for Blue Mountain Cof