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Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations: A Performance Appraisal of Some Selected Manufacturing Firms
Project / Seminar MaterialReference ID: PS-114-TM
This research work titled "Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations: A Performance Appraisal of Some Selected Manufacturing Firms" is dedicated to God for his enabling grace and to all computer enthusiasts who help to make life a pleasant experience.
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RESULTS AND DISCUSSION
SUMMARY, CONCLUSION AND RECOMMENDATION
The study was carried out to appraise Manufacturing Firms' Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations. In achieving this aim, the following specific objectives were laid out to find out the various factors that influence pricing decisions in selected firms and effectiveness of pricing policy in selected firms. Investigation revealed that firms undertaking unplanned ventures resulting in escalation and inability of firms to foresee shortage in resources or finance or personnel needed in the future operation of the firm. The research design used in this report is descriptive design, utilizing questionnaire method to obtain information from the respondents for this project. A total of 100 (one hundred) respondents were selected for this study to represent the entire population of the study. For null hypotheses were formulated and tested using the one-way ANOVA and the t-test statistical tools at zero point zero five (0.05) level of significance. Primary data were collected from the primary source which questionnaire was used as an instrument of data collection while secondary data were sources from textbooks, journals, newspapers and the internet were employed. The data were presented on a frequency distribution table and analyzed using simple percentage, while hypothesis was tested using chi-square test. This research will serve as a guide to firms in setting the most advantageous pricing policy giving its individual unique situation which will enhance profitability in the short and long run situation. It will help them to avoid choosing arbitrary prices without considering its distinctive situation and important factors. Based on the findings, it is recommended that pricing should be carried out by a joint effort between the top management and the sales personnel. Also, firms should establish an information and survey department in order to obtain such information as will be necessary in order to gain control over changing pricing situation, since the price setting environment is very dynamic.
Businesses today all face the challenge of how to maximize shareholders’ returns while also remaining competitive and relevant in a volatile and ever-changing market. The drive to maximize profits and retain a position in the market imposes a number of duties on managers. One of their major responsibilities is to make pricing decisions. The ultimate goal of any pricing decision is to enable an organization to achieve its objectives, and these may vary depending on the nature of the business. The use of various pricing practices as a management tool in steering an organization towards the achievement of set goals and objectives becomes more pronounced during the period of transition from a barter economy to a money-based market system. The use of the various pricing practices by management to improve their organization’s performance and sustainability is still very low in Nigeria.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Research hypothesis and questions, Limitation of the study and Definition of technical terms.
One of the most crucial operating decisions management must make is establishing a setting price for its products but this is quiet unfortunately that many firms are still mismanaging pricing causing lots of money and anticipated profit to be unexplored and wasted. However in explaining the importance of pricing, Egbunike (2007:83) sustained that setting the price for an organizations product or service is one of the most difficult, due to some number of variety of factors that must be considered. The primary decision arises in virtually all types of organization, just to mention but a few of them such as manufacturers set prices for their products, they manufacture, merchandising companies set prices for their goods, service firms set prices for such services as insurance policies, bank loans etc.
A company's survival and profitability depends upon its pricing decisions, thus price is the only element in the marketing mix that produce s revenue and thus ensures profit ability (kotler and keller 2006:475) Price adopted by firms must be able to cover all cost in the long run as well as to leave a profit margin to reward management.
The Price of a Product has a direct relationship with many operations of the firm's activities. A price decision will affect demand and this in turn affects the revenue generated by the firm. Similarly, a firm which makes profit has the propensity of attracting more new capital. This shows that the public has confidence in the ability of the firm to yield return to them. So, the performance of management is usually measured by the amount of revenue it generates to satisfy the share holders of the organization. It is evident that management has a big responsibility before them in setting and adopting the most advantageous pricing policy and the most effective profit plan for their firms, since prices are not set arbitrarily therefore management must focus on all the important factors in setting its price. Thus, it has become imperative to investigate the Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations.
Therefore, in Nigeria where the research was carried out, the activities that was conducted is to know the Manufacturing Firms Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations.
Investigation revealed that Profit plan are made in form of budget and they help firms to forecast the level of profit, cost and revenue, they intend to generate in order to gain competitive advantage. Unfortunately many firms still do not prepare these plans, thus, this has led firms undertaking unplanned ventures resulting in escalation and inability of firms to foresee shortage in resources or finance or personnel needed in the future operation of the firm. Where no plans exist, there will be no basis for firm to compare or evaluate their performance.
Based on the foregoing, the problem of this study is in three (3) folds.
Firstly, the failure of some firms to incorporate factors such as economic situation, level of competition, availability of close substitute, among others in their pricing decisions, may have resulted to the minding up of several small scale manufacturing firm (SSMF) in Nigeria.
Secondly, it has been shown in accounting literatures that profit planning is a potential tool for achieving profit objectives and efficiency which small scale manufacturing firms seems to ignore the use of profit planning ( or budget) in their operations. This has led to far reaching problem such as huge unforeseen operating cost as well as shortages in good financial and human resources.
Thirdly, and most importantly, the problem that stringated this study is the knowledge gap, that is, it looks as if small scale manufacturing firms are not aware that pricing policy and profit planning impact positively on profit performance.
The aim of the study is to appraise Manufacturing Firms' Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations. In achieving this aim, the following specific objectives were laid out as follows:
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
This research will serve as a guide to firms in setting the most advantageous pricing policy giving its individual unique situation which will enhance profitability in the short and long run situation. It will help them to avoid choosing arbitrary prices without considering its distinctive situation and important factors.
It will serve as a guide in choosing pricing strategy which strikes a balance between what the consumers wants to pay for a product and the price the firm is willing to sell; also this research will expose them (the firm) to the need for accounting information in carrying out this decision.
The research work will also be useful for the economy in the sense that if firms have substantial control over price setting, then their pricing behaviour can influence national output/income and hence community welfare.
Finally, the research work will be useful for those carrying on further research on this or related topic.
The scope of the research is focused on the Performance Appraisal of Some Selected Manufacturing Firms Effectiveness of Pricing Policy and Profit Planning in Nigerian Organizations using Crescent Spring Waters Awka and Winco Foam Limited Agu Awka, Anambra State as a case study.
During the course of this study, many things militated against its completion, some of which are:
Pricing Policy: It is a guiding philosophy or course of action designed to influence and determine pricing decisions. Pricing policies set guidelines for achieving objectives.
Profit Plan: The profit plan is the operating plan detailing revenue expenses and resulting to net income for specific period of time. It is the firm's optimal plan in the light of management expectation in future.
Cost: Expenses incurred to procure something which may be labour, material, facilities or resources
Efficiency: Ability to work or produce well, without wasting time or resources.
Effectiveness: Producing the intended result.
Fixed Cost: Cost that remains constant within a level of production; it does not vary with production.
Marketing Mix: The combination of the far primary element that comprises a company's marketing programme which are price, product, place and promotion (advertising).
Variable Cost: They are cost that varies with level of production. They are constant per unit but vary with total production.
Strategy: Strategy is a general statement of the vary in which an organization plans to achieve its objectives. The strategy contains the basic approach but not the details of how a firm plans to attain its objective.
This chapter focuses on the review of related literature. A literature review includes the current knowledge as well as theoretical and methodological contributions to a particular topic. It documents the state of the art with respect to the topic you are writing. It surveys the literature in the topic selected. In this research work the literature review includes the …