1.0 Introduction
1.1 Background of the Study
Cost analysis is an important input to pricing decision. The aim of cost analysis and pricing decision is to obtain prices, which will return on the capital invested. Cost analysis and pricing decision is a vital tool of management's eyes in solving its business problems to achieve the pre-determined goal of the organization.
Managers of most manufacturing companied faces difficulties in analyzing the cost and setting the price of their organization's product. Cost analysis and pricing setting is that field of business in which management truly, becomes an art. The relationship between costs and price is not only one of the most difficult decision for a business person to determine, but its final determination can have the importance of cost in price decision depends on the product in question the market structure, the consumer behavior and government regulations.
NOTE: The product produced are marketed and consumed. In production, there is a cost and in marketing there is a price while in consuming there is satisfaction, this completes the whole process.
According to Charles, Georej and Srikant (2002:422) wrote, “pricing decisions are management decisions about what to charge for the products and services that companies deliver” and cost analysis is the examination, ascertainment and classification of cost into its parts, according to how the amount in incurred in production, marketing and in the administration of the company's product.
Cost analysis enables a manufacturer to develop a product that the prospective customers wants” with the necessary quality to sell in a given price range as business must continually give consumers new and improved products in order to hold old customers and win new ones. In a nutshell, this work intends to carry out an appraisal of the impact of cost analysis and pricing decision in corporate growth.
Brief History of International Equitable Association Nigeria Ltd, Aba. (IEA)
IEA Nig. Ltd. Was founded on the 25th of February 1952 by Mr. P. B. Nicholas who was a Greek born industrialist the company was the called Nicholas soap industry and it started operation with an initial capital base of about twenty thousand pounds, (a staff strength of about twenty. The average production was 100 cartons of soap per day.
The main product then was the truck bar soap. In 1992, he sold foreign equity of the company to a British company called Brian Menro. They managed the company for two years within which the company's fortune hit the roof. They had high turnover profit after tax and the major brand names being produced then was the green truck bar, Artemis toilet soap, Palmolive soap etc.
In February 1995, Colgate-Palmolive a majority share in IEA LTD and made it a subsidiary of the multinational company and with the entry of Colgate the manufacturing process and machining was upgraded thus, increasing output and products. Depots were also opened in Kano, Lagos and Sokoto.
In 1998, the company posted a turnover of about two and half billion naira with a capital base of eight hundred million. By a combination of ill luck, distracted management system and poor understanding of the local market, the company lost its glory for the next two years. There was almost a company loss of market share and by the end of 1999; the turnover was struggling to reach two billion naira.
Because of this development, there was chaos as minority shareholders and a majority shareholder has a face off. Colgate left and the company was left in the hands of the minority shareholder. The minority shareholders could not perform up to expectation. Thus, resulting to the reselling of the company to Brian Munro by Colgate Palmolive. The company presently produces about 2000 tons of soap per month.
1.2 Statement of the Problem
The major problem confronting this study is to appraise the impact of cost analysis and pricing decision in corporate growth, to enable them meets their pre-determined goals. The basic reason for a firm's decision to produce and supply to the market a product depends on its cost of production and the price it set for the product to ensure that the business grow, expand and survive in the market. The way most manufacturing industry analyse their cost makes pricing decision of their product difficult as the price fixed for their product affects their customers negatively.
The following problems of the study are stated below;
- The pricing policies of the firm
- The environment in which the product is produced and sold.
- Cost of producing the product.
- Market structure including the number of customer.
- Government legislations and restrictions.
- The perception and quality of the product.
- Impact of the firm in controlling price and market share
1.3 Objective of the Study
The objective of the study is to appraise the impact of cost analysis and pricing decision in corporate growth with a view to ascertaining the extent to which this has affected the survival, growth and expansion of the most companies. To this end, specific objectives of the study are:
- To know how analysis and pricing decisions of a business cost empowers the firm to defeat competitors or survive competition.
- To verify how cost analysis enables the manufacturer to develop a product that prospective customers want, with the necessary quality to sell in given price range.
- To highlight the procedures that may be successfully employed to stabilize prices in order to create stable profit margin and build customers confidence.
1.4 Significance of the Study
This research work will go a long way in helping to achieve survivable, growing and expanded business that will be able to set price for its products, also to motivate customers into buying the products and thereby enabling the company to meet its pre-determined goals. As such, the work will make organizations increase their market share, make target returns on investment, maintain stable price and defeat competitive challenges.
More so, the study will be of help to managers of business companies to enable them make decision that will help in the effective operation and existence of their company as they meet their set goals. Besides, this work will be of immense help to the government in the formulation of business regulations and pricing of products and ensure adequate costing and pricing.
In addition, the study will to the already existing information on the subject and serves as a stepping-stone to further researchers in their work. Finally, the work will be useful to consumers who buy priced product to enable them know when price fixed on a product suits them.
1.5 Scope of the Study
Before the study will be successful; the researcher assumes that;
- All corporations analysis of cost of its produces.
- All corporations are manufacturing industries.
- The outcome of this study can be generalized, that is they are not only applicable in IEA but rather are obtained in the industries of the economy.
- The survival and growth of any organization depends pn its ability to analyze and cost its products.
1.6 Limitation of the Study
Being a student, having to combine this work and other academic works was constrained by time from further researcher. Alsom limited finances has made it impossible for the researcher to meet more respondent than she did and to visit other manufacturing companies.
Also, some respondents reached refused to provide all the information required for this study because they see it as an attempt to expose the efficiencies in their company while others see it as an attempt to obtain information for their competitors.
1.7 Definition of Terms
Some basic terms used in this study are defined below:
Cost:
Is the amount of money incurred in producing, marketing and administrating a product before it is bought.
Price:
It is the amount a buyer is willing to pay and a seller is willing to accept for a good or service.
Pricing:
Companies and litor (1980) defines price as the process of deciding that to charge for good pr service.
Decision:
It is a conclusion reached after all consideration. ANALYSIS:Is the process of considering something or examining it in order to understand it or to find out what it consists of.
Product:
Is a good, service that is produced by a manufacturer, which is capable of satisfying consumer need, or want.
IEA:
Represents International equitable Association.
Corporation:
An organization or group of organization that is recognized by law as a single unit.
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