Question 2
A} TT foods cannot ignore the cost of production or buying an
ingredient when it comes to setting a selling price. In the longterm, the business will fail if it sells for less than the cost, or if its
gross profit margin is too low to cover the fixed costs of the
business therefore the firm has to suffer the loss. But the cost of
production can be reduced, by co-ordinating the activities of
production properly and effectively, TT foods can then reduce the
price accordingly.
Competitors has a huge impact on pricing decisions. The relative
market share of competitors influences whether TT foods can set
prices independently, or whether it has to follow the lead shown by
competitors. TT foods should be able to anticipate reactions of
competitors to its pricing policies and moves. Competitors can negate
the advantages that a company might be hoping to make with its
pricing policies. TT foods might reduce its price to gai more market
share. But not all competitors are the same, their approaches and
reactions might be different to TT foods thus forcing them to change
the pricing of the ready-made meals, so TT foods must study its major
competitors and find out their objectives and cash positions before
taking any actions.
Advantages
Disadvantages
B} TT foods can buy any ingredients they need in order to make the
ready meals and it is easier to locate wholesale shops and suppliers.TT
foods can negotiate the best deal possible and build a friendly
relationship with the wholesaler. This will help them to even purchase
on credit and this will make TT foods cash flow more free.it also saves
a lot of money buying in bulk as you avail huge discounts on the price.
In this way it will help to lower their production cost. The potential
downside of buying from a wholesaler is storage space to put all the
bulk purchases. If the ingredients need must be refrigerated or frozen,
TT foods need to adequately judge the space they have available.
When buying in bulk TT foods will have to make sure that the items do
no expire otherwise, they will face a big loss.TT foods may also not
have enough money to the wholesaler upfront.
When buying from a farm, TT foods is supporting the local farmers
and the product from a local farm could just taste better. It is freshly
delivered from the farm. Farms may have a variety of goods and TT
foods can exactly see what the local farms are producing.TT foods can
meet many more vendors as well and by supporting them they are also
supporting their local economy. Local foods/ingredients are typically
more expensive. Especially farmers who produce in smaller quantities
typically incur higher costs associated with the production. Some use
organic or higher quality of materials that are more costly at the onset.
The cost is also high as farms will have to pay more for skilled workers
Growing their own food has many health benefits: The customers will
eat more fresh fruits and vegetables. TT foods can decide what kinds
of fertilizers and pesticides come in contact with their food. It also lets
them control when to harvest the food. Sure, it’s very beneficial to
grow their own vegetables and ingredients. But who has time for
growing vegetables to spare? There might be no time for them as
their demand will increase. Therefore, TT foods need to start
growing their food, only if they can spare time with it. When
working in the Garden, they might also face some injuries. It’s as
normal as anything.
Conclusion:
If I was the one of the directors at TT foods, I would have chosen
to buy the ingredients /foods from a wholesaler as it will save them
a lot of time from cultivating and reduce any risks from buying from
a local farm as natural disasters can ruin their plantation. Buying
from a wholesaler will also allow them to save money as they will
get a discount on bulk buying reducing the average cost per
product and can set the price at a lower price than their
competitors, therefore getting more sales and demand. It will also
help them to build a good relationship with the wholesaler and
potentially making a partnership in the near future.