The Role of Accountants in Pricing Strategy Formulation

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Category: Accountancy, Banking & Finance, Business management

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The Role of Accountants in Pricing Strategy Formulation

ABSTRACT

In any flourishing business today, pricing has been their key function. This is so because the rate with which modern business is growing coupled with the worldwide inflationary trends, more dimensions will be added to the problem of pricing. In any market economy where goods and services are traded, pricing is very crucial as the prime mover of traded, for instance, pricing ration out scarce good. This is a rise in price of good indicates that the good is in relative short supply. Pricing can be used to discourage unnecessary pressure on some commodities, this is price serving as a mater or gauge. Price indicate the direction of want and also pricing as a means by which factors of product are awarded and as a result, many professionals in business are beginning to play major roles in pricing decision and pricing strategy formulation. The objective of this research is to investigate whether accountants have any contribution in pricing strategy formulation with particular reference to selected manufacturing firm in Onitsha. The problems staring the business world in face which the researcher has taken upon, herself to provide answers are: A) Is pricing strategy formulation a management problem? B) Does accountants have any role to play in pricing strategy formulation, if yes to what extent? C) What measure can the accountant adopt in solving the problem of pricing strategy formulation since if poses across department problem. The depth of the study is to find out answer to the above questions. In conclusion, since pricing strategy formulation poses inter-department problem on whose right is to take pricing decision, it was shown that accountants are important in resolution of the problem of pricing strategy formulation in a decision making process involving consideration of company law, taxation, labour agreements and trades regulation in business operations, therefore the accounts need not to be confined to financial information contained in ledger account only.

 

 

 

TABLE CONTENTS

Title page                                                                     i

Approval page                                                               ii

Dedication                                                                    iii

Acknowledgement                                                         iv

Abstract                                                                       v

Table of contents                                                           vi

CHAPTER ONE

1.0 Introduction                                                            1

1.1 Background of the study                                            1

1.2 Statement of the problem                                          3

1.3 Objective of the study                                               4

1.4 Research questions                                                   4

1.5 Significance of the study                                            5

1.6 Scope of the study                                                    5

1.7 Limitations of the study                                             6

1.8 Definition of terms                                                    6

CHAPTER TWO

2.0 Literature review                                                      8

2.1 Introduction                                                            8

2.2 Definition of pricing                                                   9

2.3 Pricing strategy                                                        10

2.4 Formulation for pricing strategy                                  11

2.5 Pricing strategies adopted by companies                      12

2 6 Theories and models relevant to the research                13

2.7 Current literature based on the variables of the models   14

2.8 Summary of the chapter                                            18

CHAPTER THREE

3.0 Research Design and Methodology                              20

3.1 Introduction                                                            20

3.2 Research design                                                       20

3.3 Sources/method of data collection                               21

3.4 Population and sample size                                         24

3.5 Sampling techniques                                                 26

3.6 Validity and reliability of measuring instrument              28

3.7 Method of data analysis                                             29

 

CHAPTER FOUR

4.0 Data Presentation and Analysis                                   30

4.1 Introduction                                                            30

4.2 Presentation and analysis of data                                30

4.3 Interpretation of results                                             55

CHAPTER FIVE

5.0 Summary, Recommendation and Area for

Further Research                                                           56

5.1 Summary                                                                56

5.2 Recommendations                                                    58

5.3 Areas for further research                                          60

Bibliography

Appendix

Questionnaire

 

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Pricing is one of the elements of the marketing mix in any market economy, where goods and services are traded, price is the watchword. It is one variable that is crucial to both seller and buyer.

According to Kalu 2012 any commodity that has the capacity to satisfy human wants is said to possess utility. The power of such utility or of the goods possessing if to command other goods in the normal or regular exchange is its vale

According to Clarke 2013 price seller’s views pricing as the incredible three-headed monster, he went further to say that each one is independent of the other. One of the heads is concerned with marketing and views pricing as a tool for gaining entrance to the market improving market penetration and positioning product in the market.

The second head is that of the accountant who thinks solely of the units cost and contributions. This head has a fine eye for design and calculates cost for each component of every product.

While the accountant sees himself as the custodian of profit and in ever suspicions of price cutting measures of marketing. He believes that salesmen lack courage and so need to become firm if profit margins are not to be crowded.

The third-head according to him is that of micro economist. He is sometime referred to as price theorist who is devoted to the study of the determinants and dynamic of price under various market structures. He is mostly concerned with demand and supply curves and theoretical models.

In practice however, the heads ignored him completely, his literature has an air of unreality more akin to academic than to the pressing affairs of business life. The first two heads does not understand the pressured words marketing and accounting and his approach is too theoretical to be for practical use.

1.2 STATEMENT OF THE PROBLEM

The problem of this study is to investigate on the role accountant’s play in pricing strategy formulation in selected firms in Anambra State. Beside, this work focused on finding whether the accountants plays a vital role in pricing strategy formulation or not and if yes, to what extent is he directly involved.

According to Thompson 2014, Pricing strategy can be thoughts as an interconnected web of actions, decision and plans, which are formulated and pursued by all levels of management, hierarchy in order to attain a justifiable selling price per unit of output provided by a firm.

It is glaringly clear that pricing strategy formulation poses a cross departmental problem and is not in the background of this study. The accountant is important in resolution, is a decision problem and the accountant being involved in production relevant information for decision making has a major role to play in pricing decision. He is concern with application of his professional skill and relevant information available to him to help the management to formulate an acceptable pricing strategy, which does not, over role all objectives of the firm.

1.3 OBJECTIVE OF THE STUDY

The purpose of this study

  1. To examine the role accountants play in pricing strategy formulation.
  2. To ascertain whether pricing strategy formulation possess a cross-departmental problem.
  • To examine how accountants would fashion their accounting system in terms of pricing.

1.4 RESEARCH QUESTIONS

  1. What roles does accountants play in pricing strategy formulation?
  2. Does pricing strategy formulation possess a cross-departmental problem?
  • How does accountants fashion their accounting system in term of pricing?

1.5 SIGNIFICANCE OF THE STUDY

The study will be beneficial to organization as it would provide information on pricing strategy formulation.

The study will be beneficial to researcher/scholars who want to carry further research on the topic.

The study will enable the researcher fulfill the necessary requirements for the award of national diploma (OND) in Accountancy in Federal Polytechnic Nekede.

1.6 SCOPE OF THE STUDY

This research project covers only on some selected firms in Anambra state. Though this does not represent a good estimates of manufacturing firms but the choice has been necessitated by the location of the firm therefore, this project is only limited to the role of accountants in pricing strategy formulation.

1.7 LIMITATIONS OF THE STUDY

There are many constraints to be the completion of this research work but for the purpose of this study, the following factors should be considered.

The major factor that constraints the extent of the study carried out on this project work is time factor.

1.8 DEFINITION OF TERMS

  • Accounting: The world “accounting” in this project means the financial or management accountant who is involved in decision making and who is assumed to be the top management level.
  • Competitive Market: One could say the market is a competitive one if it has the following characteristics as was defined in economics.
    • The product of one seller must be identical in the opinion of the purchases to the product of other sellers.
    • Market participants whether buyers or sellers cannot influence individually, the market price of the product by their actions.
  • Economic Order Quantity (EOQ): This is the quantity of inventory at the point where inventory ordering cost and caring cost is at minimum.
  • Firm: A firm is used synonymous with company throughout the whole of this project.
  • Locality: The locality here refers to Onitsha and its envir0nment.
  • Price Setters: This is referred to those who take pricing decision in a company.
  • Penetration: This is an approach that is based on the assumption that if you can produce a similar product to your competitors then you will take away some or his entire market share.
  • Selling Price: This is referred as the setting or unit product of a company. It is different from cost per unit of input used in production process.
  • Skimming: This is recognition that in almost all markets, there is “hardcore” of demand for whom the product is question has a particular importance.