3D printing could just change the way we look at things, it could also change the way companies manufacture products. Just think of the possibilities that this could open, and the industries that 3D printing could bring to an end! Imagine this, a 3D printer at home, an item that you like online, you purchase the item, download it, print it, and that’s it. You don’t have to drive somewhere to get it, you don’t have to wait for it to ship. Isn’t that going to save you money? isn’t it going to change the way companies work? isn’t it going to change the way companies price their items?
Acoording to this article in HBR, “As applications of the technology expand and prices drop, the first big implication is that more goods will be manufactured at or close to their point of purchase or consumption. This might even mean household-level production of some things. (You’ll pay for raw materials and the IP—the software files for any designs you can’t find free on the web.) Short of that, many goods that have relied on the scale efficiencies of large, centralized plants will be produced locally. Even if the per-unit production cost is higher, it will be more than offset by the elimination of shipping and of buffer inventories. Whereas cars today are made by just a few hundred factories around the world, they might one day be made in every metropolitan area. Parts could be made at dealerships and repair shops, and assembly plants could eliminate the need for supply chain management by making components as needed.”
Also, the idea of a do-it-yourself manufacturer is really coming to the forefront. Similar to the way the Internet leveled the playing the field, solving the challenges of reach and enabling everyone to play, that’s what is happening with manufacturing today. you don’t need all of the capital involved in the creation of things anymore. You now have the opportunity at a small scale, even as a hobbyist, to do it yourself, and to do it fairly eloquently. With 3D printing being applied to materials ranging from chocolate to cells to concrete, and being used by corporations, departments and consumers, organizations need to understand how the future of 3D printing manufacturing technology can be used for a for competitive advantage – before their competitors do. According to CSC, a global leader in providing technology enabled business solutions and services.
Consumers often make decisions based on what they hear or see. Brand awareness is a crucial factor in marketing exertions. Advertising play a huge role imprinting in people’s minds certain brands and what they stand for. With the huge selection of products today, inexperienced consumers use their brand awareness as a numerous choice method in buying products. As consumers, even when we are exposed to another brand that serves the same need, we tend to select the same old brand that we already know. Even if the new brand has a lower price, beacuse as a human nature, we tend to be risk averse and less likely to change. Lets take sports drinks as an example, PowerAde and gatorade, they both serve the same need, have the same flavors, personally i feel they both taste the same. However, Gatorade has a slightly higher price, but, some consumers prefer it on PowerAde. This is because they built an image in there minds that this product serves there needs in a better way. And it is not easy for them to shift to PowerAde.
The video below explains a very interesting fact about how colors can impact our willingness to pay. As human beings we are not all trained to deal with numbers. We tend to look at colors and visuals before looking at prices, and here is where company branding play a huge role. Taking cars as an example, a consumer’s willingness to pay increases if a car’s color is red. The human mind tend to send a signal that it is brighter and better, when in reality it is the same. Another factor that determines how we react towards certain products is advertising. When we watch the same commercial over and over and the brand name keeps on popping in front of our eyes, or we listen to the name very often, we tend to shift towards this certain product. Not because it is better, just because in our minds we created an image that this product is what we desire.
Moreover, brand awareness is also related to pricing, and consumers perception towards prices, specially when consumers are price sensitive. Pricing decisions are very important when launching a certain product. Consumers will link the price to this product, and will make decisions based on this fact. Changing the price later can be critical because of what consumers have perceived in there minds. Lets take chocolate bars as an example, in the 1970’s chocolate prices increased, firms found it hard to simply change the price on candy bars, because this will change there image in consumers minds. What they did is that they simply made chocolate bars smaller in size, selling them for the same price!
Why does success for any business differ from one country to another? And why is understanding the culture a key indicator to the success of a firm? Shopping behaviors differ from society to another, but can these differences influence store prices? Unfortunately they do, this is because price sensitive consumers search for lowest prices, thus, firms adapt there pricing strategy to meet these consumer demands. Lets take Walmart as an example, it is very successful in the US market, however, when it first expanded to China it wasn’t. This was due to many reasons such as having a different culture, labor, infrastructure, demand, suppliers and different competitive dynamics.
Chinese tend to be more selective in there purchasing for groceries than others. They search for lower cost and better quality. They also tend to spend a long time shopping at grocery stores and do not spend much money, while US consumers spend less time and more money. This is because Chinese consumers go to grocery stores on a daily basis, while US consumers go once or twice a week. Retailers’ pricing strategy is generally effected by the selectiveness of Chinese consumers. At start Walmart didn’t offer them what they were looking for, which resulted in losses. In this case, how should Walmart react? They must offer lower prices for a similar quality of goods to Chinese than Americans.
All this said I wonder how come Walmart offer lowest prices and all there marketing campaigns market to this factor, but at the same time Chinese consumers were sensitive to their prices? This is probably because of suppliers in the US, Walmart had a sufficient number of suppliers while in China they didn’t when they first started which made it harder for them to reduce costs, and easier for competitors to offer lower prices. However, after recognizing this, Walmart China managed to solve the issue and build a strong reputation in the Chinese market. Given all the considerations above, we can determine that building a successful competitive advantage in one country doesn’t mean it will succeed in the other. When expanding globally, the firm must add value to what if offer. This is done through understanding and analyzing economic, geographic and cultural systems. And this is what Walmart did, after realizing their mistakes; they managed to engage more in the Chinese culture. They understood the demand and applied cost reduction by having good interaction with retailers, which helped increase their local responsiveness in the Chinese market.
The video below explains differences between Walmart US and China, and how Walmart China managed to overcome some of these differences.
As consumers we believe that German cars are the most expensive and provide the best service among automobiles, and we are willing to pay the highest prices for them. We also believe or expect to have the most innovated products from the US. On the other hand, we expect to have low quality and non-expensive goods from China. But how do pricing strategies affect our outlook? And can we change these observations?
Success for any company is measured by its profit, and profit is restrained by its pricing strategy. Pricing strategies are very critical when entering any market. It is what demonstrates how the product is going to be presented and how consumers are going to recognize this product. It seems like China is approaching an economic to a penetration pricing strategy seeking a bigger market share. That’s why their products are seen as low priced and low quality. There production cost is low, because of low labor cost and the type of products developed. On the other hand, Germany is applying a premium strategy offering high quality and high prices seeking profit and reputation. They charge high prices because of their high labor costs and brand name. Whereas the US is impending a skimming strategy, presenting good quality and high prices for goods and services seeking profit. But how do these factors affect international pricing for goods and services?
In addition to the pricing strategies mentioned we have another important factor, which is the geographical factor. The geographical factor allows companies to implement these pricing strategies in three different ways. First, polycentric meaning the company charges one price for its product all over the world. This is seen mostly by companies that offshore to make sure there production cost is low. Chinese products would be a good example for this strategy. Second, ethnocentric strategy, where the company charges one price for its product, however, the markup is related to the country’s specific data. What affect the price of the product could be taxation, tariffs, price controls, and inflation… Finally, the geocentric strategy allows companies to set up a region price for the company’s products. Income levels, competition and customers’ culture mostly affect this strategy.
The crude oil price collapsed in the past couple of months to a 4 year low of approximately $74/barrel. This price drop raised many questions about who is behind this price drop? Is it just simple supply and demand? Or is there sides that are benefiting from this price ?
According to Bloomberg, Saudi Arabia is the country to blame for this price drop. “The world’s largest oil exporter is trying to protect its market share by keeping its production steady even as prices hit a four-year low. Energy producers in turmoil, such as Russia, Iran and Venezuela, stand to lose the most, U.S. shale drillers and other Saudi rivals will suffer and industrialized importing countries including Japan will get a boost from cheaper prices.” However, Saudi Arabia has a price of $93/barrel in it’s forecasted budget for 2014. Which means that any price lower than that might cause a deficit on the long run.
The break-even point for other gulf countries according to some reports are $75/barrel in Kuwait, $70/barrel in UAE, and $63/barrel in Qatar. However, these countries and others among OPEC are producing oil by the same pace exceeding the 30 million barrels/day ceiling by almost 700,000 barrels a day. This excess capacity can not be the reason behind the price drop, but there is some explanation to it. Countries like Algeria, Libya, and Iraq are back to production this year after the recent events that happened in each country. An article in MarketWatch included ” Analysts at Goldman Sachs said a cut in OPEC production to 29.5 million barrels a day or less would likely be sufficient to push Brent prices back to a range of $85 to $90 a barrel.” this article was published just two days before the “BIG MEETING” in the 27th of November.
The article goes on “The bad news for OPEC is that even if members do agree to a significant cut, it would only encourage U.S. and other North American producers to keep pumping, while also providing them with a further opportunity to hedge against future price falls, the Goldman analysts wrote.”
Although it appears that the US might not have any hand in this, Financial Times argues that there is a huge benefit to the US. The oil production suffered and will continue to suffer from this price drop, but lower oil prices will eventually benefit the US economy. Jason Bordoff, a former energy official with President Obama’s administration, now director of the Center on Global Energy Policy at Columbia University, said: “For the US economy and US consumers, lower oil prices are a great thing. They will create winners and losers in different places. There is a downside. But the upside is greater than the downside.”
The following video explains the geopolitical impact of oil prices falling below $90/barrel.