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Questions and Answers

What is the formula for calculating the break-even point?

Total fixed costs + total variable costs

Total fixed costs / (unit selling price - unit variable costs) (correct)

(Unit selling price - unit variable costs) / total fixed costs

Total fixed costs - contribution margin

Which of the following factors does NOT typically affect pricing decisions?

Target market characteristics

Operating expenses

Employee performance (correct)

Competitors' pricing

How does demand typically respond to price increases?

Demand typically remains the same

Demand doubles

Demand typically decreases (correct)

Demand always increases

What is a primary goal of mark-up pricing?

To cover costs and ensure a desired profit Signup and view all the answers

What is the intention behind penetration pricing?

To quickly achieve market acceptance by setting lower prices Signup and view all the answers

Which pricing strategy reflects characteristics of targeted customers?

Variable pricing Signup and view all the answers

Which formula is used to calculate markup as a percentage of selling price?

Markup / Selling Price × 100 Signup and view all the answers

What is one consequence of using a penetration pricing strategy?

Discouragement of new competitors in the niche market Signup and view all the answers

What is a hyperlink?

A click-enabled element that connects to other documents or websites Signup and view all the answers

What is the primary purpose of a blog?

To provide an online journal of experiences and opinions Signup and view all the answers

What percentage of consumers in South Africa use smartphones to access the internet?

81.6% Signup and view all the answers

What does the term 'app' refer to?

A small, specialized software program Signup and view all the answers

What is one of the 'do's' of social media marketing?

Tell stories to personalize your brand Signup and view all the answers

Which of the following is NOT a recommended practice in social media marketing?

Expecting customers to be perfect Signup and view all the answers

When creating content for mobile devices, what is an important consideration?

Websites must be reformatted for smaller screens Signup and view all the answers

What is a common pitfall to avoid on social media?

Promoting your product too aggressively Signup and view all the answers

What is the role of an Export Management Company (EMC)?

To act as the export department for multiple producers and manage their business dealings Signup and view all the answers

How does an Export Trading Company (ETC) operate?

Acts as the export department and can operate under its own name Signup and view all the answers

What is a key responsibility of an Export Agent?

To purchase products from manufacturers and sell under its own name Signup and view all the answers

What distinguishes a Piggyback Marketer?

They distribute another business's products or services Signup and view all the answers

What is a critical feature of an irrevocable letter of credit?

It guarantees payment only if financial conditions are met Signup and view all the answers

What advantage does a letter of credit provide to exporters?

Offers security that payment will be made only after ownership proof is released Signup and view all the answers

How do private banks support exporters?

By issuing letters of credit and facilitating foreign transactions Signup and view all the answers

Why is understanding different financing sources beneficial for businesses looking to export?

It helps them to view foreign markets more favorably Signup and view all the answers

What is the primary assumption behind price skimming?

Certain customers will pay premium prices for prestige items. Signup and view all the answers

In which scenario would price skimming be most effective?

The company needs to recover start-up costs quickly. Signup and view all the answers

What characterizes follow-the-leader pricing?

Utilizes a competitor's pricing strategy as a model. Signup and view all the answers

How does variable pricing primarily differ from standard pricing?

It adjusts prices based on customer knowledge or bargaining strength. Signup and view all the answers

What is the main advantage of price lining?

It simplifies the selection process for customers. Signup and view all the answers

Which aspect is essential in two-part pricing decisions?

Determining a standard list price and price concessions. Signup and view all the answers

What does optional product and service pricing involve?

Providing a standard price and optional add-ons for an additional cost. Signup and view all the answers

Which strategy is best for small businesses operating in competitive commodity markets?

Following the pricing lead of larger competitors. Signup and view all the answers

Why is personal time management crucial for small business owners?

It minimizes energy diffusion and enhances work performance. Signup and view all the answers

Which of the following best describes the impact of time pressure on small business owners?

It can lead to inefficient work performance. Signup and view all the answers

What should be the first priority in a manager's schedule according to time management strategies?

Critical activities that are urgent and important. Signup and view all the answers

Why might small business owners hesitate to delegate tasks?

They may not trust others to complete tasks correctly. Signup and view all the answers

What role do mentors and professional business advisors play for entrepreneurs?

They offer assistance and reduce feelings of isolation. Signup and view all the answers

Which type of activities should be scheduled last according to the outline on time management?

Not urgent and not important distractions. Signup and view all the answers

What is one consequence of a small business owner being 'too busy'?

They miss opportunities for improving business practices. Signup and view all the answers

How can interruptions affect a small business owner's daily work according to effective management strategies?

They can distract from completing important tasks. Signup and view all the answers

What is the primary focus of break-even analysis?

Determining profitability levels Signup and view all the answers

Which pricing strategy involves setting a low initial price to quickly gain market share?

Penetration pricing Signup and view all the answers

What is a significant factor affecting the decision to offer credit to customers?

Customer’s credit history Signup and view all the answers

What does the term 'variable pricing' refer to?

Adjusting prices based on demand fluctuation Signup and view all the answers

What is the primary benefit of implementing a price lining strategy?

Simplifying customer choices Signup and view all the answers

What essential factor should be considered when evaluating credit applicants?

Applicant's employment history Signup and view all the answers

Which advertising objective focuses on increasing brand awareness among consumers?

Informative advertising Signup and view all the answers

In the context of selling on credit, what is a major benefit for businesses?

Increased cash flow Signup and view all the answers

What is a primary challenge faced by global businesses?

Political risk in foreign markets Signup and view all the answers

Which of the following terms refers to a pricing strategy that gradually raises prices to attract consumers willing to pay more?

Price skimming Signup and view all the answers

What is the main purpose of promotional planning in small businesses?

Create awareness and stimulate demand Signup and view all the answers

Which option best describes 'international strategic alliances'?

Collaborations between businesses to leverage strengths Signup and view all the answers

What is a significant consideration when selecting an appropriate pricing strategy?

Understanding the target market's behavior Signup and view all the answers

What does 'advertising frequency' refer to?

How often a target audience sees an ad Signup and view all the answers

Study Notes

Break-Even Point

The break-even point is calculated by dividing fixed costs by the difference between the selling price per unit and the variable cost per unit.
Fixed costs are expenses that do not change with the volume of production.
Variable costs are expenses that change with the volume of production.

Factors Affecting Pricing Decisions

Demand is often a key factor in pricing decisions.
The price of competitors can influence pricing decisions.
The number of customers in the target market is an important factor.
Production costs must be factored in when setting prices.
Customer perception of value is significant.

Demand and Price Increases

Demand typically decreases as prices increase.
This is due to the law of demand, which states that as price increases, quantity demanded decreases.

Mark-Up Pricing

The primary goal of mark-up pricing is to ensure profits for the business.
This is done by adding a fixed percentage to the cost of goods sold.

Penetration Pricing

The intention of penetration pricing is to gain market share quickly.
This is achieved by setting a low initial price, aiming to attract customers and discourage competitors.

Targeted Customer Pricing Strategies

Value pricing: Emphasizes the value proposition to customers rather than a low price.
Premium pricing: Targets a niche market with a high price, reflecting high quality and exclusive features.
Competitive pricing: Aligns prices with those of competitors to stay competitive.

Markup Percentage Formula

The formula for calculating markup as a percentage of selling price is: (Markup / Selling Price) x 100.

Consequences of Penetration Pricing

It can result in lower initial profits for the business,
It can attract price-sensitive customers,
It can make it difficult to increase prices later.

Hyperlink

A hyperlink is a clickable link that connects to a specific website, document, or other online resource.

Blog Purpose

The primary purpose of a blog is to share information, thoughts, and experiences on a specific topic.

Smartphone Internet Usage in South Africa

A significant percentage of South African consumers use smartphones to access the internet.

App Definition

The term "app" refers to a software application designed for use on smartphones, tablets, and other mobile devices.

Engage with your audience and respond to comments and questions.
Use high-quality images and videos.
Post consistently and share valuable content.

Posting the same content across all platforms without adapting it to the specific audience.
Focusing solely on promoting your products or services.
Ignoring negative comments and feedback.

Mobile Content Considerations

The content should be optimized for smaller screens.
The content should be easily accessible and engaging on mobile devices.

Over-posting and overwhelming your audience.
Engaging in negative or confrontational behavior.
Not monitoring your brand reputation on social media.

Export Management Company (EMC) Role

Provides export services, such as market research, customer identification, and logistics management.
Acts as an intermediary between the exporter and international buyers.

Export Trading Company (ETC) Operation

Focuses on buying and selling products for export.
May handle distribution, marketing, and financing tasks.

Export Agent Responsibilities

Handles export documentation and procedures.
Facilitates communication between the exporter and overseas buyers.

Piggyback Marketer

A retailer that sells products in a larger retailer’s store, often with a separate section.
Uses the larger retailer's customer base for access to new consumers.

Irrevocable Letter of Credit Feature

A critical feature is that the bank issuing the letter of credit is obligated to pay the exporter if the buyer meets specific conditions.

Letter of Credit Advantage for Exporters

Provides a reliable means of payment, reducing risk for the exporter.
Ensures the buyer's financial commitment and the availability of funds upon meeting conditions.

Private Bank Support for Exporters

Offer trade finance services, such as export credit insurance, working capital loans, and letters of credit.
Support exporters in managing financial risk and accessing capital for international operations.

Understanding Financing Sources for Exporters

Provides access to tailored financial solutions.
Enables exporters to optimize cash flow and manage financial risks effectively.

Price Skimming Assumption

Consumers are willing to pay a higher price initially to gain early access to a new product or service.

Price Skimming Effectiveness

It is most effective when a new product or service is highly differentiated with a strong brand and limited competition.

Follow-the-Leader Pricing

A pricing strategy where a company sets prices based on those of its competitors, often the leading company in the market.

Variable vs. Standard Pricing

Variable pricing offers different prices for the same product or service based on factors like time of day, customer demographics, or purchase volume.
Standard pricing uses a fixed price for all customers.

Price Lining Advantage

Simplifies the pricing process for businesses and customers.
Creates price tiers for different product offerings, catering to diverse customer needs.

Two-Part Pricing Essential Aspect

Identifying the appropriate fixed-price and variable-price components to maximize profitability.
The fixed price covers fixed costs, while the variable price covers variable costs and generates profit.

Optional Product and Service Pricing

Involves offering additional products or services at a premium price to customers who want enhanced features.
Examples include extended warranties, upgrades, or premium support packages.

Small Business Commodity Market Strategy

A cost leadership strategy is best, focusing on offering competitive prices and ensuring efficient cost management.

Personal Time Management for Small Business Owners

It's crucial for maintaining business efficiency, managing workload, and balancing personal life with entrepreneurship.

Time Pressure Impact on Small Business Owners

Can lead to stress, burnout, and decreased productivity.
Can impact decision-making and hinder growth.

Time Management Priorities

Urgent and important tasks should be prioritized first.
These tasks demand immediate attention and contribute significantly to business goals.

Delegation Hesitation for Small Business Owners

Fear of losing control,
Concerns about competence of employees,
Difficulty in relinquishing responsibility,
Lack of trust in employees.

Mentors and Advisors for Entrepreneurs

Provide guidance, support, and networking opportunities.
Offer valuable insights, expertise, and industry connections.

Last Scheduled Activities

Activities that are not urgent or important should b scheduled last.
These activities can be delegated, postponed or eliminated.

Consequence of Being 'Too Busy'

Can lead to missed opportunities, poor decision-making, and declining business performance.

Interruptions Impact

Interruptions can disrupt workflow, reduce focus, and decrease overall productivity.
Effective time management strategies can help minimize interruptions by setting boundaries, prioritizing tasks, and creating a dedicated workspace.

Break-Even Analysis Focus

To determine the point at which revenue equals expenses, signifying that the business neither makes a profit nor incurs a loss.

Low Initial Price Strategy

Penetration pricing sets a low initial price to rapidly gain market share and establish a foothold in the market.

Credit Offering Consideration

The creditworthiness of customers is a significant factor, assessing their ability and willingness to repay debts.

Variable Pricing Meaning

Setting different prices for the same product or service based on factors like purchase time, customer group, or purchasing volume.

Price Lining Benefit

Streamlines pricing for businesses and simplifies product choices for customers.
Creates price tiers for different product offerings, catering to diverse customer needs.

Credit Evaluation Essential Factor

The applicant's credit history and credit score are essential indicators of their financial reliability and ability to manage debt.

Awareness Advertising Objective

To increase consumer awareness and knowledge about a product or service, building recognition and interest.

Credit Sale Benefits for Business

Increase sales by offering flexible payment options to customers.
Can help attract customers who may not be able to afford the full purchase price upfront.

Global Business Challenge

Navigating diverse cultures, languages, and legal systems.
Adapting business practices to international standards.

Gradual Price Increase Strategy

Price skimming involves gradually raising prices to attract customers who are willing to pay a premium for a new or exclusive product.

Promotional Planning Purpose for Small Businesses

To create and execute effective marketing campaigns that attract customers and boost sales.

International Strategic Alliances

A collaborative relationship between two or more companies, based in different countries.
Aim to achieve mutual benefits and leverage each other's resources and expertise.

Pricing Strategy Consideration

The target market and customer segmentation are crucial factors, considering the needs, desires, and buying behavior of the intended audience.

Advertising Frequency

Refers to the number of times an advertisement is shown to a particular individual or group within a specified period.
Optimizing frequency is critical to ensuring impactful exposure without creating advertising fatigue.

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