Create a 6 page essay paper that discusses The Shoe Shop.
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The shoe industry, together with the apparel and accessories sectors posts increases in total turnover in the past year which shows the increasing demand and market for these products. The creation and operation of The Shoe Shop which will commence on January 2008 is another quest to provide products for this profitable market.
The price of shoes in London is highly dependent on the strategies employed by the different industry players (BFA 2007). Business organizations which employ differentiation and niche strategies enhance the image of their brands by putting a high margin in their shoe products. A good example of this is Russell and Bromley where a pair of women’s shoes can cost up to ‘200.00 (Russell and Bromley 2007). On the other hand mid-priced companies charge from ’40 to ’90 for a pair of shoes. Shoe manufacturers who are utilizing cost leadership strategies can price more competitively at less than ’30. Ben Sherman can price as low as ’15 for a pair of women’s shoes. These pricing strategies of the competitors in the market together with the survey conducted to determine the target consumers’ preferences become the primary bases of The Shoe Shop’s proposed pricing strategies.
The pricing strategy of a business organization is one of the key elements to its success and even mere survival in the industry where it operates (Kotler 2005). In this consideration, The Shoe Shop formulates its pricing strategy as a way to efficiently generate the maximum profit available. The main aim of the pricing strategy is to cover all the company’s efforts in production and other activities, provide ample margin for profits, build the hip image that the company desires, and generate enough demand by pricing competitively and at par with other industry players.
In order to determine the pricing strategy, the market research department of the shoe shop conducted a survey which is geared in appropriate rice for a pair of shoes. Considering the target market of The Shoe Shop, the survey was participated by both men and women whose age ranges from 18-35 years old. The market research department concluded that within this age range, consumers are very much concerned about their image and prefer products which express what is hip and trendy. They are willing to pay more for image but most will not spend more than ‘92.00 for a pair of shoes. Thus, with this consideration, The Shoe Shop will price a pair of shoes in its product line for ‘70.00.
III. Per Unit Cost Statement
The costs associated with the production and marketing of the company’s shoes generally has a variable and fixed component. The variable costs are direct materials and direct labor both of which can be directly traced to the individual shoes being manufactured. Even though the sizes and design of the shoes vary, the company’s direct material cost ‘27.25 for each pair. Direct labour is 1.25 hours and employees are paid ‘15.00 per hour of labor. In terms of indirect costs, The Shoe Shop pays a monthly overhead of ‘7,500. The manufacturing department together with other functional areas, is serviced by the administrative and marketing department.
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