Foundations of Marketing essay
In order to determine the final selling price that Sports Depot charges for a SPI basketball, it is necessary to determine the selling price of Wholesale Supply that is the entry price for Sports Depot. It is known that SPI sells basketballs to Wholesale Supply for $8.00. It is also known that Wholesale Supply uses a 20% markup for basketballs. Knowing that the markup is calculated in relation to the selling price (Pride and Ferrell 331) and denoting selling price of Wholesale supply as X, it is possible to construct the following relationship: X / ($8 + X) = 0.20. This relationship means that markup constitutes 20% of the selling price for Wholesale Supply.
This equation can be rewritten as: X = 0.20 * ($8 + X).
X = 0.20 * $8 + 0.2 * X.
X – 0.2 * X = $1.6.
0.8 * X = $1.6
X = $1.6 / 0.8 = $2.
The value of markup used by Wholesale Supply is $2 and the selling price used by Wholesale Supply is $8 + $2 = $10. The percentage of markup used by Sports Depot is also 20%. It is possible to construct a similar equation for determining the value of markup and selling price for Sports Depot.
X / ($10 + X) = 0.20.
0.8 * X = $2. X = $2.5.
The value of markup used by Sports Depot is $2.5 and the final selling price charged by Sports Depot for a SPI basketball is $10 + $2.50 = $12.50. This answer applies to the situation when Sports Depot does add a markup to the selling price. There are cases when Sports Depot sells SPI basketballs at cost; in such cases, the selling price charged by Sports Depot is $10.
Status quo pricing objective is defined as the price objective aimed at maintaining current price levels or matching the prices of the competitors(Pride and Ferrell 333). If status quo pricing in this case means matching the prices of the competitors, Sports Depot can easily do this because current prices charged by Sports Depot are lower than the prices charged by competing retailers. Furthermore, the profits of Sports Depot will increase if the company chooses the match the prices charged by competitors.
If status quo in this case means maintaining current prices, Sports Depot can achieve such pricing objectives if it has enough resources to operate with low profits or no profit at all. Indeed, Sports Depot sells goods at lower prices compared to competitors’ prices, so the profits gained by Sports Depot are lower. It is likely that the company uses aggressive marketing strategy to increase its market share.
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