Price reception of management - Innovative management

Price control reception

The producer or seller of innovation focuses primarily on the market, where price is the regulator of market equilibrium.

According to the classical expression, price is a monetary expression of the value (exchange value) of the commodity. The value of a commodity is labor embodied in a commodity. When the demand for a product coincides with its supply under the conditions of commodity-money relations, the price corresponds to the value. The price has two limits: the lower and the upper. The lower limit of the price is the cost of production of goods and the cost of circulation, i.e. costs associated with the sale of goods. The upper limit of the price is determined by the demand for this product.

Each economic theory gives its definition of the essence of the price.

Modern theory considers the price as a result of the functional interaction of a complex of pricing factors. The price of equilibrium equals, on the one hand, marginal utility, and on the other hand, marginal cost.

With regard to innovation, the price should be viewed as a complex economic category.

The price of innovation is a multifaceted, multidisciplinary economic category. This feature of this price is due to the diversity of the innovation itself. Innovation, acting as a market commodity, includes property (thing), property rights, materialized services, intangible operations. Therefore, the price of innovation includes the price of a thing, the rate of a currency or a security, the interest rates on banking transactions, the rates of various contributions.

It should be borne in mind that the cost of production and the cost of selling one unit of financial innovation is a very meager amount and prices are not taken into account. Here the decisive role belongs to the planned volume of revenue or profit, which, taking into account the results of marketing research, can be obtained from the sale of innovation.

The price reception of management in innovative management is a way of influencing the mechanism of prices for the implementation of innovation.

It includes two main elements:

• the pricing factors that are at the stage of innovation production;

• the price policy used in the implementation, promotion and diffusion of innovation.

These elements form the structure of price management reception. The structure denotes the interposition and connection of the components of a mechanism or phenomenon.

The structure of the price reception of innovation management is shown in Fig. 2.14.

The pricing factors in the production of a new product or operation are external and internal. The decisive role is played by external factors in relation to this economic entity.

External pricing factors reflect the influence of the external environment in relation to the producer or seller of innovation. These factors include the optimal (most realistically realized) demand of buyers for a specific innovation, the solvency of these customers, which makes it possible to establish the maximum level of demand for this innovation and take it into account when changing the various characteristics of innovation, etc.

Internal pricing factors reflect primarily the financial and production activities of the manufacturer of innovation or selling this innovation. These factors include the cost of individual types of products with proprietary forms, the seller's costs of selling innovation, the amount of revenue (or profits) that must be obtained from the implementation of innovation, etc.

A pricing policy is a system of basic principles and rules used to establish prices. The main provisions of the price policy of the economic entity are laid down in the Guidelines for the development of the pricing policy of the enterprise, approved by Order No. 118 of the Ministry of the Economy of the United States of October 1, 1997.

The pricing policy of the enterprise plays an extremely important role in the promotion and diffusion of innovation. It determines the goal that the producer or seller of innovation wants to achieve through the price mechanism.

Structure of the price reception of innovation management

Fig. 2.14. The structure of the price reception of innovation management

The price policy includes the following steps:

• Definition of the purpose of the price policy for a specific innovation;

• an estimation of demand for the given innovation in the given period of time and in the long term taking into account changes of conditions of an economic situation;

• analysis and assessment of the production and economic potential of the enterprise;

• study of the work of competitors, their prices, product characteristics, etc.

Studying the actions of competitors, the seller tries to find out what means (for example, the system of discounts, conditions that reflect the features of innovation, the system of benefits delivered to the buyer of this innovation, etc.) uses the competitor to sell their similar products.

The price policy is based on the action of external and internal factors.

The external factors of the price policy include changing the demand of buyers, their interests and habits, the activity of competitors' behavior on the market, changes in the economic policy of the state and in the policy of local authorities with respect to taxes, levies, rates and terms of rent, etc.

Internal factors of price policy include the desire not only to increase their income, how much to raise their image and rating (ie, work for the future), the enterprise's desire to evade prosecution in the monopoly on the market, its interest in increasing its share pa market, increase in the receipt of cash from the implementation of innovation, the desire to avoid bankruptcy, etc.

For example, a price market strategy for implementing an innovation can include the following directions:

• Do not reduce the price of a particular innovation below the total cost of its production, sales and the optimal level of profitability;

• Striving to ensure prices are lower than competitors' prices for a similar type of product;

• Targeting the prices of competitors;

• Increase in the number of innovations due to lower prices or better conditions for investment in them by innovation buyers, etc. [2].

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