The Case of Pricing Predicament

The case of
PRICING predicament
Anurag Rajkumar
Prachi Gupta
Team 8 Jay Mundle
Dhruvika Nautiyal
Patrick Durairaj
Arman Jaiswal
Introduction
Product Competitive Bidding

Bids
Computerized Milling
Machine Standard
$429000
Occidental
Aerospace
Person Kakuchi
$390000
Scott Palmer : Standard Machine Corp
Sales manager
Managing accounts, sales transactions Akita
$400000
Tony Pena : Standard Machine Corp
Regional Manager Problem Statement: Occidental was under
the gun to cut costs as per new bidding
Joanne : Occidental Aerospace policies and Standard Machine Corp has
Procurement or Purchasing team fixed pricing policy.
Negotiation with suppliers
Market Situation The market in which Occidental Aerospace (direct customer)
operates is price-sensitive, indicating a degree of price
Occidental’s 20-year history of installing elasticity.
Standard's equipment due to its state-of-the-art
automation. Pressure Occidental is facing to reduce costs, implying that
their consumers are likely to be responsive to price changes.
The trust is built on Standard's consistent
delivery of quality, reliability, and service. Increasing cost pressures leading companies to adopt
competitive bid policies.
Occidental Aerospace is actively seeking more economical
options, reflecting a trend towards price competitiveness in
Standard Machine Corp employing a value-
their sector.
based pricing approach. This is indicated by
their policy of selling products at list price, The presence of global competitors, notably Asian
which is justified by the belief that their companies like Akita and Kakuchi, entering the
market with aggressive pricing.
products and services offer significant value to
the customer.
Occidental Aerospace is a significant account for Standard
This value includes high-quality machinery, Machine Corp.
comprehensive services like installation,
training, and provision of spare parts, which The trend towards price sensitivity among buyers,
even those with long-standing relationships with
are all factored into the pricing. suppliers.
Comparative Analysis
Standard Machine
Aspect Kakuchi Akita Limited
Corporation
Slightly higher than Kakuchi, lower than

Price Highest (Fixed-price policy) Lower than Standard
Standard
Technology & Good software on A71 model, expanding U.S.

Advanced, state-of-the-art Complex software, less user-friendly
Innovation presence
Customer Service & Excellent, including post-installation and Dubbed 'field circus', indicating potential
Improving in U.S. due to new field centers
Support training issues
Market Reputation Over 20 years of relationship with Occidental Not specified Growing presence, especially in U.S.
Emphasizes product quality, reliability, and a Offers a competitive bid and a potentially
Strengths Aggressive pricing strategy.
longstanding relationship. reliable alternative.
Fixed-price policy may be less competitive in a Concerns about software complexity and Concerns about reliability and training
Weaknesses
price-sensitive market. service quality. effectiveness.
Losing a significant customer if pricing is not May face challenges if customers prioritize May lose the bid if perceived as less reliable or
Risks
adjusted. quality and reliability over cost. responsive.
Point of Competitiveness
Akita Limited:
1. Competitive Pricing:
Standard Machine Corporation:
Submits a bid under $400,000, positioning itself as a cost-
effective alternative.
1. Product Quality and Reliability:
Offers basic equipment at a competitive price point.
Emphasizes state-of-the-art automation, reliability, and
2. Reliability (Perceived):
quality.
Scott raises concerns about Akita's reliability in a capacity
Offers unmatched performance in milling, grinding, and
crunch.
boring machines.
Poses questions about its ability to respond quickly and
2. Service and Training:
provide effective training.
Provides comprehensive service, training, and customer
support.
Kakuchi:
Highlights the benefits of thorough installation, training,
1. Aggressive Pricing:
and quick response to customer needs.
Submits a bid under $390,000, positioning itself as the most
3. Long-Term Relationship:
cost-effective option.
Boasts a longstanding, successful relationship with
Utilizes an aggressive competitive bid policy to win customers.
Occidental Aerospace.
2. Software Complexity:
Emphasizes stability, reliability, and the benefits of a
Concerns raised about the complexity of Kakuchi's software.
continued partnership.
Questions about the effectiveness of its training division and
service quality.
Analysis of Possible Compromises by Scott:
1. Rebranding and Minor

Modifications: 2. Adjusting the Service Package:
3. Combination of Rebranding and
- Rationale: Differentiate the - Rationale: Justify $407,000 by
Service Adjustments:
product for Occidental by modifying the service package,
- Rationale: Holistic approach,
rebranding as 1052X, changing reducing on-site training,
addressing product and service
control panel color, and making troubleshooter time, and the "free"
aspects simultaneously.
minor alterations. service period.
- Pros: Comprehensive solution,
- Pros: Perceived exclusivity, - Pros: Flexibility, maintains price
customization while maintaining a
customization without significant while adjusting perceived value.
competitive price.
production impact. - Cons: Risk of service quality
- Cons: Implementation complexity,
- Cons: May not fully address cost compromise, potential impact on
challenges in communication.
concerns, potential market reputation.
confusion.
Overall Analysis:
- Alignment: Strives to align with Standard's commitment to quality.
- Balance: Seeks equilibrium between cost concerns and value preservation.
- Communication: Effective communication crucial; implementation
feasibility requires consideration.
Recommendation
Cost Cutting
Straight Rebuy Modified Rebuy
Fixed Price Policy
Ship on time, Training and Overnight Installation
Decreasing Price: Bad Idea- Motivation:

1. Quality Leadership, Long Sales Cycle 1. Jaonna: Purchase
not cost.
Open Channel Beyond Joanne: Production, Quality, 2. Scott (Impatient):
2. Competitor following
suit. RnD and Top Management (20 years, Relations) Upcoming winter and
3. Other customers. rays of light
Last Resort: Offering a higher line of credit or giving trade discounts of

3-4% for early payments.
Recommendation 2
Refined Service Package Offering through Tiered Approach
To maintain Standard Machine Corp's integrity and value-based pricing and to sustain our
competitive advantage while addressing the needs of all customers, including Occidental
Aerospace, the company could:
Introduce Tiered Service Options: Create different levels of service packages that customers
can choose from, each priced accordingly. This would allow clients to select a service level that
fits their budget and needs.
TIER 1: Current Product with services

TIER 2: Refined Service Package Offering
Refined Service Package Offering

Reduction in on-site operator training from one week to a shorter, intensive session"
Adjustment of post-installation support from two weeks to one
Modification of the free service period from six months to two

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The case of

Product Competitive Bidding

Slightly higher than Kakuchi, lower than

Technology & Good software on A71 model, expanding U.S.

1. Rebranding and Minor

Decreasing Price: Bad Idea- Motivation:

Last Resort: Offering a higher line of credit or giving trade discounts of

TIER 1: Current Product with services

Refined Service Package Offering

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