Finance Department and Feasibility Studies

Study Notes

Maximize profits by ensuring sufficient capital for operational efficiency.
Controls all financial matters, including income, expenditure, pricing policies, and investments.

Investigate the potential benefits of specific activities or projects.
Evaluate the investment of time and resources to determine if they will yield desirable results.
Consists of five common factors:
- Technology and system feasibility.
- Economic feasibility.
- Legal feasibility.
- Operational feasibility.
- Schedule feasibility.

Target in Canada:
- Attempted expansion in 2013.
- Faced logistical issues, pricing errors, and a lack of understanding of Canadian consumer preferences.
- Closed all Canadian stores within two years.
Shoprite in Nigeria:
- Despite success in South Africa, the expansion into Nigeria faced challenges.
- Economic instability, political uncertainty, and competition from local retailers impacted the business significantly.
- Eventually exited the Nigerian market.

Objective: Expand reach and promote sustainable fashion.
New Line: Eco-friendly clothing and accessories made from recycled materials.
Alignment: Growing consumer demand for sustainable products and Mr Price's commitment to environmental responsibility.
Target Audience: Wide range of customers with a variety of styles, including casual, activewear, and formal attire.

Fixed Costs: Costs that remain constant regardless of production volume (e.g. rent, salaries).
Variable Costs: Costs that change directly with production volume (e.g. raw materials, direct labor).
Semi-Variable Costs: Costs that have both fixed and variable components (e.g. utilities, transportation).

Cost-Based Pricing:
- Uses the cost of the product as the basis for determining the selling price.
- Adds a profit margin to the cost price to determine the selling price.
- Formula: Selling price = Cost price + (Profit margin x Cost price).
Demand-Based Pricing:
- Uses consumer willingness to pay and demand levels to set the selling price.
- Pricing strategies like auctions and price adjustments for high-demand items.

Competition-Based Pricing:
- Compares prices to competitors.
- Prices can be set equal to, above, or below the market price.
Combination Pricing:
- Utilizes a combination of different pricing techniques to determine the selling price.
Psychological Pricing:
- Plays on consumer psychology to influence purchasing decisions.
- Examples include rounding prices, using odd numbers, and using prestige pricing.
Promotional Pricing:
- Uses promotions to attract customers and increase sales.
- Examples include discounts, coupons, and buy-one-get-one-free offers.
Penetration Pricing:
- Sets a low initial price to gain market share quickly.
- Typically used for new products or when entering a new market.
Bait Pricing:
- Advertises a product at a very low price to lure customers.
- Once the customer arrives, the product is not available, or they are offered a more expensive alternative.