Market-based pricing implies a strategy where an organization analyses or evaluates the value of similar or comparable products that are in the market. Therefore, it is important to put into consideration, only the products that are comparable or similar to the product that is being offered. Cost-based pricing refers to the approach an organization is responsible for determining the selling price of a product. In the process of establishing the selling price of the underlying product the company puts into account the cost of generating the product and the element of profit. For instance, VectorCal being the only company offering the underlying product it embraces the approach of cost-based pricing in establishing the selling price of its products. It is notable that in start-up organization aspects, elements, and factors of semi-variable, allocated, and indirect costs are put into consideration. Therefore, it is important to consider all the necessary factors that enhance development, growth, and prosperity of a start-up company.
Allocated costs that are in line with a start-up organization include; project management costs, sales costs, and fabrication costs. Therefore, it is perceptible that allocation costs are associated with particular process or operations of an organization. Semi-variable cost entails both fixed-cost element and a variable-cost constituent, and it aids in projecting financial performance at different levels of production. Types of indirect costs include salaries, accounting, office expenses, rent, utilities, telephone expenses, and administrative expenses. It is apparent that indirect costs are not directly associated with the product, but they are imperative in facilitating proficient production within the company (Jurievich, 2012). Consequently, it is important to note that the underlying costs are vital in a start-up company, due to the fact that they aid in ensuring effective operations of a start-up organization. Furthermore, they boost development and growth of the new organization. Therefore, it is important to critical analyze the underlying costs in order to establish a clearly defined approach to the start-up company.
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Semi-variable cost refers to a cost that comprises of both fixed and variable constitutes. Under this category, it is notable that costs are fixed up to a particular level of consumption or production and they are deemed variable after the level is exceeded. Hence, the company has to cater for a set amount in order to maintain or enhance minimum operations for a fabrication line, in terms of facility rent, staffing, and machinery depreciation. Therefore, it is apparent that the semi-variable costs will influence VectorCal, as the organization has to factor in specific amounts in order to ensure efficient minimum operations. Allocated costs refer to the cost stipulated for particular process; hence, they influences the organization as they aid in establishing the capacity of the company (Oliver, 2014). Indirect cost is not direct to cost object, but it facilitates production. Therefore, it influences the activities or operations of the company that are in line with production.
The management of an organization is keen on how future events will unfold. This is due to the fact that they use the knowledge in making decisions in respect to their products in order for them to meet future demands and be competitive in the market. Consequently, the idea or aspect of forecasting is instrumental within the organization. In the process of forecasting it is important to put into account the following factors technology, demand, and economy. The major methods of forecasting include; straight-line, moving average, simple linear regression, and multiple linear regression. The shortcoming of straight line approach that the company embraces is that the historical data may not depict a true picture of an underlying trend due to events that distort or alter normal business undertakings (Gor, 2009). Furthermore, in the long-term dealings more data is required to increase the degree of accuracy and for a new enterprise the data is likely to be unavailable; thus, making the approach unreliable.
My start-up company of drone navigation system is “Smart Supplier Limited’. Smart Supplier Limited was founded in 2018 by John Derricks. The mission of this company is to produce and supply quality products with international standards that meet the ever changing demands of our market. The vision of the organization is to be the leading supplier in drone navigation equipments global. Our main client is the government due to the fact that it is the heavy consumer of our products. Therefore, our approaches and strategies have to meet the demands of the government in regard to our products. The organization has acquired high skilled staff that is highly motivated towards the main objectives of the organization. Our products are of high quality and they are well-designed in order to cope up with the changing needs in the market. Furthermore, they are modernized and advanced in order to be up-to-date. The organization has put in place market based approaches that analyzes the current trends in order to design and redesign products.
In conclusion, it is apparent that in the start-up company allocation, indirect, and semi-variable costs are critical. Therefore, aspects that are associated with the underlying costs have to be analyzed critical in order to undertake the right decision. The study also, indicates criterion an organization has to undertake in establishing the best pricing strategy. Also, it ventures into the aspect of forecasting, depicting the various methods of forecasting that companies do apply. In addition the study discusses the practicality of establishing, building, and developing a new organization in the competitive environment. Therefore, the study has ventured into necessary factors in the production and market industry.
References
Gor, M. R. 2009. Industrial Statistics and Operational Management: Forecasting Techniques: retrieved from: http://nsdl.niscair.res.in/jspui/bitstream/123456789/829/1/CHAPTER- 6%20FORECASTING%20TECHNIQUES-%20Formatted.pdf
Jurievich, A. P. 2012. Marketing Plan for E-commerce Start-up Company: retrieved from: https://www.theseus.fi/bitstream/handle/10024/52007/Panin_Alexey.pdf.pdf?sequence=1
Oliver, L. 2014. Basic Cost Concepts for Decision Making: retrieved from: https://www.obalearn.com/wp- content/uploads/2015/04/M1_CostOverview_Transcript_17mar15.pdf
