Pricing and Profitability Management: Airsec Company - Case Study Example

Aims and Objectives

Notably, three researchers, who specialized in the field of engineering, started the Company. They embraced high technology in combining Unmanned Aerial Vehicles (UAV), also referred to as the miniature drones, with the advanced technology application for security purposes. Encouragingly, their initiations were lucky, and they improved the findings through incorporating camera system, capable of covering images both during the day and at night. Besides, the introduction of real-time Wi-Fi enhances linkages to numerous receivers such as cellular phones.

• One of the prime aims of the Company is to become the dominant firm in delivering quality services in the entire security industry in the United Kingdom (UK) market in the year 2017.
• We seek to improve on the market tactics that ensures increased sales revenues over a given period, preferably, five years from the base year 2015. The appreciation revolves around 10% and with a proportionate downfall of the operational costs by 5%
• We intend to crave at an increase in profit margins by an average of 3% annually over a notable period of five years. After that, we will maximize on the innovations that focus on the proper training of human resource to compete favorably in the market and serve various positions in the Company.
• It is our prime duty to impose workable strategies, trying to incorporate the leading technology in the security sector by increasing the staff training budget by 10% annually. For this reason, our management intends to cut down the operational costs to suit the budget requirements by applying latest technology.
• We aim at introducing counteractive measures, which are efficient and user-friendly in reducing environmental pollution. We will encourage the recycling of 80% of the waste products by 2018, which will reduce the environmental impacts such as lowering instances of infection from pests.
• We will engage in community commitments, especially the local society. Practically, we intend to increase the "Community Involvement Budget" by 2% every year for five years (Gersher, 2014).

Mission Statement

Our mission is to emerge as the market principal in quality service delivery in the security industry by focusing on advanced technology in our operations in the United Kingdom. Moreover, we intend to enhance our market tactics to ensure increased sales revenues over a given period. It is also our duty to initiate a positive relationship with both suppliers and market, especially in the UK and India. We also intend to lead advanced human resources to meet the market demand through training of our employees to create global competitiveness in the area of expertise.

Pricing Strategies

Regardless of the pricing strategies for use at AirSec, each pricing technique poses with it merits and demerits. However, before making a conclusion on which approach augurs well with the operations of the firm, it is advisable exploring the use of different pricing techniques. These techniques include price penetration, predatory pricing, skimming the market and market pricing among many other approaches. Nevertheless, the pricing strategies play a significant role in determining the market structure, which consequently decides on the number of customers served by the Airsec Company. One of the pricing strategies is the penetration pricing. The plan is advantageous since it involves low price for the goods and services, enabling market entry immediately and increase in market shares. Nonetheless, the program experiences a notable number of disadvantages in the industry. First, it does not reimburse the costs incurred such as research and development. The second limitation is that of the revenue loss due to a possible low selling price for the commodities by AirSec Company. The third issue revolves around the inefficiency of its use when concentrating on the products with short life cycle such as the fashionable clothing. The marketing and sales executives pricing decisions have a potential possibility of highly being influenced by the orientation of their customers (Smith, 2011).

The second pricing strategy involved is the destruction or the predatory pricing. Primarily, the first advantage is that of the natural elimination of competitors through lowering the products' prices. Secondly, the method can lead to customers changing their purchasing habit by considering the goods produced by the entrant firm. Equally, the methods suffer some drawbacks that include further initiation of another leeway to maintain the consumers since the price has an interim influence on them (Meehan, Simonetto, Montan, & Goodin, 2011).

The third issue regarded as the pricing strategy is the market pricing. The plan encourages similar prices to those of rival firms. The drawbacks include small profits resulting from increased production costs. The fourth strategy concentrates on the market skimming. Practically, the method tends to initiate high prices because clients are willing to buy the products. Moreover, the launching of the outputs is accompanied by the critical promotional campaign to highlight the product knowledge, thereby renewing the customers' tastes and preferences for the old products. It also facilitates the sales volume of a product that is out of fashion. However, the strategy falls short of the reduced profits on each product and the associated risk of low sales due to a possible indented image of the goods and services. An organization should not rely on any distinct perspective that is external or internal to meet pricing tasks (Meehan et al., 2011).

In contrary, the fifth pricing policy is the discrimination pricing. The policy applies imperfect market situation, whereby the clients charged different prices for different market coverage and at a different time of the day. The pressing limitation is the small revenues resulting from the low purchasing powers by the clients. Pricing is an incredibly complex undertaking to be done correctly; hence, it calls for a collection of skilled practitioners to analyze the organization through a unique lens (Meehan et al., 2011).

Lastly yet importantly, the six policy embraced by the company is the price war. It enhances the popularity by continually lowering the price to outshine the competitors, thereby having a competitive advantage over them. Evidentially, the pricing strategy may cause the eventual closing of the business because of the escalated costs of production and consequently, the distribution costs and limited flow of information. The marketing and sales executives pricing decisions have a potential possibility of highly being influenced by the orientation of their customers (Smith, 2011).

Alternatively, the appropriate method that the organization should focus on in the United Kingdom's market is the market pricing strategy. Principally, the plan ensures that the already established market fetches maximum profits for the Company due to business sustainability and understanding market dynamics. The approach allows for a market mix, which facilitates the balancing of revenue usage and the ultimate goal of market supremacy. An organization should not rely on any distinct perspective that is external or internal to meet pricing tasks (Meehan et al., 2011).

On the other hand, India being the new market, the viable strategy includes the penetration pricing. As such, the method intended to attract new customers in the region, who are willing to experiment launched products in the market. The Company relationship with its competitors is possible, hence, can obtain professionals from already existing market structure. The method fits well in the market since customers are cost sensitive while purchasing the products.

Table 1. Strategies for micro-marketing pricing

Source: Montgomery (1997).

Benchmarking

Benchmarking entails identification of standards that employees ought to meet in ensuring delivery of high-quality services that distinguish a firm from the rest. In the case of AirSec, there are various approaches are used. They ensure that the management can use to shop floor assembly workers give their best at the firm. Among them is assigning a group of employees targets to meet within a specified period. After assigning targets, the management should check for the accomplishment of the task if it complies with the stipulated standards in terms of quality. One of the standards includes the ability to assign the particular group of labor to meet a given target within a specified period. It is the obligation of the leadership to monitor the progress of the assigned task. The task must coincide with the set objectives of the firm, especially, the desired quality of service provision. Eventually, the administrators should evaluate and emphasize the need for coordination by all the employees in conducting the task. Then, the initial specific number of the staff assessed with an aim of getting the highest percentage of employees meeting the set target of the benchmark, say 80% (Lynch, Haltiwanger, & Mackie, 2007).

Another way of determining the parameter is through evaluating the expectations of the employees concerning coordination and effectiveness of making the use of organizational resources by each in the business. The management can make the conclusion regarding the compliance concerning budgetary allocations and the customer requirements. The manager must intervene through encouraging the proper use of the Company's resources in case the staff uses the resources efficiently. Besides, they must pinpoint the disadvantages relating to the misuse of the resources. However, in the event of the floor staff, it is the humble duty of the manager to design appropriate standards of operational procedures and the qualified humanity for the remuneration identified that facilitates the commitment to duties. Hence, the underlying programs are encouraged by the benchmark, which defines the operational area as a necessity by the firm to lower the misuse of the organizational resources. Finally, the criterion determines the guidelines of the Company in addressing the needs of the floor workers who are capable of meeting the Company's requirements and ways to facilitate the competition among the staff (Lynch et al., 2007).

The results obtained are used in the grading system of the employees and the benchmark arising from the comparison of both the external and internal expectation that determines the primary goal of the organization of profit measurement. Another importance of the reference is the determination of the cleaning standards by the management. Finally, it measures the levels of coordination of the floor staff members and meeting the set goals by the firm. Lastly, it helps in the selection process of competent employees to conduct the cleaning activities in the organization. The company can reduce many challenges faced by the most Companies, thereby increasing the chances of making more profits (Lynch et al., 2007).

Table 2. The matrix of different forms of benchmarking

Source: Kyrö (2003).

Barriers to International Trade

For business, exportation brings with it some complexities and as such, AirSec is no exception in choosing to deliver commodities in India. One of the likely challenges that AirSec will encounter in its activities is facing the difficulty in understanding the behaviors of consumers in the region, whose attitude differs from that of users in the UK. Organizations are initiated with the primary aim of being the market leader that consequently results to escalated profit margins. Individual firms embrace competitive methods in the provision of goods and services to counteract the influence of competition brought about by the rival Companies. Many issues arise due to involvement in international trade with the Indian community. One of the drawbacks likely to occur is to understand the consumer behavior in the region. The consumer behavior in Indian society varies to those of the UK, which leads to focus on strategies and conduction of market research that will ensure Airsec meets the target of market dominance. The second challenge revolves around the pricing strategy that may not work actually in the area that restricts the conduct of trade for some reasons. An example is the case of export that might have little turnover due to massive tax imposition on service delivery.

The third difficulty is the market penetration as the government puts less effort on foreign firms than the local. On the other hand, the market fluctuations may result in barriers in reaching local consumers, which affects the extent of market coverage. In the UK, the customers are more sensitive to price changes as compared to India. The Company should focus on the delivering durable goods at a fair cost while still struggling to act in agreement with the decree of the land. Similarly, the demanding Indian constitution to comply with local legislation that encourages the growth of infant industries in the region tends to slow down the rate of market spread. Besides, the crucial coordination process that involves product delivery to the customers such as the exportation of consumable products may delay, thereby reducing the profit margins. The fourth issue is that of the inaccessibility of some regions might inhibit the delivery of property at the right time. The bottleneck procedures initiated by the Indian government may reduce the effectiveness of the flow of exports to the country.

Equally, the business is more likely to suffer from unpredictable inclement weather conditions, and the workforce may not have adequate knowledge about the market fluctuations. Hence, the efficiency in service delivery may face a significant challenge, and the consumers may have less confidence in the business operations. Another point about the service provision in the foreign market is the possible acquisition of services from cartels. The need to acquire skills from local laborers in India can cause a reduction in business activities by the organization and even incur losses due to corrupt deals to get land or other productive assets. Lastly, the Company may face a challenge of losses that lowers the profitability of the organization through the limited knowledge about the market requirements. The firm also may find resource acquisition and meet government tariffs much expensive; therefore, market dominance being an alternative to service delivery (Levine, Locke, Searls, & Weinberger, 2000).

Table 3. International Trade Social Network and Business

Source: Rauch (2001).

Functional Areas

The possible risk to such scenario is the loss of customers by the suppliers, as clients will lose trust in the functionality of the devices. The firm may also face problems one of which involves the possible lawsuits for such acts. Another issue is that of escalation of the production costs resulting from embracing the new technology in the operations of the business. The third repercussion is the incurred expenses from the compensation of the damaged items (Zuniga & Dini, 2013).

Other negative results of risks due to damages of the elements compound both the short-term and long-term effects. The short-term influence includes the decline in the profit margins while the long-term concentrates on the imposition of sustainability problem because of the indented business image (Zuniga & Dini, 2013).

The Company made an irrational decision of engaging in investing an additional cost of 1550 pounds in producing UAV. Hence, the Company should conduct advertisement procedures in encouraging the public relations. Further, the firm needs to impose compensation structure for staff members to take care of unplanned expenses. The company will also have to adjust the compensation structure for employees to cater for the unplanned expenses that threaten the survival of the business. The company will conduct extensive research to establish the cause of the problem, after which, the administration will apologize to the people for the inconvenience (Gersher, 2014).