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Are you familiar with pricing optimization, price elasticity, inventory management, competitive intelligence? Give examples.
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a) Price optimisation is generally defined as a process whereby firms use mathematical analysis to determine the best price that will help the company achieve its objectives. It is the use of mathematical tools to try and predict how customers will react to different prices. The company in this case will rely on surveys, historical and competitor's prices and other various data sources to anticipate and hence come up with the best price to achieve business objectives like Break even pricing. b) Price elasticity known as price elasticity of demand is the rate at which the desire for a certain good or service is influenced by changes in its price. The general understanding is that once the price increases people tend to consume less of the product. It comes in the form of elastic and inelastic demand. For example salt has an inelastic demand as changes in its price wont affect the quantity demanded. On the other hand pizza has an elastic demand as the higher the price the less the quantity demanded. c) Inventory or stock is the quantity of goods held up for resale. Inventory management is a systematic approach to place, order, manage storage and dispatch the company's inventory. The objective is to maintain a balance between restocking lead time, costs of holding and moving inventory , the asset management, valuation of inventory, future price forecasting, the space available, holding costs , physical quantities and the reduction of defective goods. In a case where a balance of all these components is achieved then optimal inventory level will be reached hence allowing for a smooth supply into the market. d) Competitive Intelligence This is a legal business practice that involves the systematic collection and analysis of information using a recognized system from different sources to aid in the executive strategic decision making. This information includes prices, products, new market developments, consumer trends and reactions as well as competitor activities . The information will then be used to help management make better decisions. The concept focuses on the external market and in other words it is defined as the systematic detection of risks, anticipation of opportunities and preparation for any form of market reaction. Rather than it being competitor focused as wrongly perceived, CI focuses on the whole external business environment including the macroeconomy
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