Your company asked executives like yourself to comment on whether to increase, decrease, or make no changes to pricing. Please share your comments below.
Background
Cost: a reduction in production capacity and foreign exchange has resulted in an overall cost increase of 30%.
Government regulations: a regulatory change has reduced how many consumers can buy the product at any given time by 50%.
Consumer demand: sales dropped last year. They have recovered some.
Profitability: the profitability of products varies from -20% (some products are sold at a loss) to +80%.
Please share your thoughts below on what to do about pricing.
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Our pricing strategy is our commitment to the VALUE of our products for consumers and users. With that being said, yearly increases act as a means of proving how our products are consistently and exceedingly produced at a higher quality to create innovation, prestige, and status. We hold brand loyalty by allowing consumers to be part of so much more than a brand by purchasing, owning, or wearing our products that support an interest in global issues that are even bigger than the world of sports or athleticism. I recommend a 2% price increase.
I believe Coach-Cola should increase their price for the following 2 reasons.
First of all, the price for raw materials have increased all over the world. There’s also extra expenditures to deal with the pandemic.
Another reason is the inflation. For example, the price of a Big Mac Meal combo is $12.49 here in NYC, whereas it’s only $8.39 in West Lafayette, Indianan the place where I went to college for. I also checked the price in LA and it’s $11.34. If we compare these numbers with $5.99, the average price of Big Mac Meal before pandemic, NYC has increased for more than 108% in price and LA has increased for almost 90%. NYC has a much higher inflation rate because of the fact that the local government gave away trillions of dollars only to encourage citizens to take vaccine dope.
Therefore, It’s urgent for Coca-Cola to raise their price at least within America. I recommend them to increase the price by 8% in larger cities ( cities that have higher household income) and 3 % in small-size cities.
I am from L’Oreal team. For 2022 I recommend a total of 5% price increase. I separated the business of our company into 4 parts which are skincare, makeup, fragrance and hair products. Due to COVID 19, more people would like to spend time at home and need to wearing mask outside. Therefore the demand for skincare is increasing. For the part of skincare I would like to increase the price. Oppositely, the demand for makeup are decreasing, so the price will not change. Similar with the makeup, as people spend more time at home, the frequency of using fragrance is decreasing. I will not change the price of fragrance. For the hair products, from the annual report, I got that because of the lockdown of salons. People would like to take care of their hair at home, so more people start to spend money on hair products. Therefore, I would like to increase the price of hair products. Even though the price are increased we will keep and improve the quality of our products to keep customer loyalty.
Disney Team: I recommend that our company increase the pricing of our products. The first reason to increase the pricing is that global inflation is increasing. Many companies have raised the price of their products. It is reasonable for our company to increase product pricing. The second point is that although the government still controls the proportion of the number of people entering the park due to the epidemic, as the impact of the epidemic continues to decrease, people start to go out and have a revenge consumption mentality. Increasing prices for tickets and other products will not dampen the enthusiasm of most consumers. Price increase ratio :Tickets and offline products increase by 5%. Peripheral products and products that can be sold online increase by 10%.
As a L’Oréal team member, I am recommending a price increase of 7% for 2022, given that L’Oreal posted a 5% drop in net profit for 2020 due to the COVID-19 pandemic. I divided the sections of the companies based on their different categories, such as makeup, fragrance, skincare, and haircare. I am proposing an increase in skincare given that the use of masks has created a demand for taking care of your skin. Customer behavior has shown that they are more focused on having healthy skin than covering it with makeup. Therefore, I am proposing a decrease in the makeup department, specifically on lip products, due to the lack of demand. For fragrances, I propose maintaining the same range of pricing because, although it is projected to grow in the coming years, the demand for perfume has decreased across all regions due to the pandemic and the lack of necessity during this time. Lastly, I would increase haircare prices since there has been a growing demand for organic and natural products and it has become one of the primary concerns for consumers after the pandemic. This is due to people having to groom themselves during the lockdown. Overall, I believe my proposal to increase the pricing on these departments will benefit the company’s goals for the coming year.
I am from team Loreal, and I believe the pricing should be codetermined by internal and external factors. Based on 2021’s annual report, Loreal gained twice the beauty market growth, which is 16.1% higher than last year. Unlike other companies, each Loreal’s line serves its targeted audiences. For instance, Loreal’s luxe division products have loyal middle- or upper-class customers. They matter in the product’s quality and using feeling. Therefore, increasing price depends on updating products, or the cause of the epidemic would not affect customer’s purchase behavior. Most of the customers are still willing to pay for it. On the other side, the space for increasing prizes for Loreal’s fair products line is much lower than other lines. There are tons of substitutable products in a drug store. People prefer a reasonable price product. So, I recommend Loreal should try to keep the price of low-end products as fair as possible. Another factor that should be considered is customer demand. Skincare products’ need is much higher than makeup lines in 2021 due to the Covid period. A moderate increase in price in the skincare department is more acceptable.
I am apart of the Disney team and I recommend our company to increase our prices by 10% overall. When looking into the annual report for 2020, Disney had pretty revenue in media networks and direct-to-consumer, being Disney+ and other streaming services. There is high competition in this category, so I think Disney should increase their prices early on in the year in January to avoid being hurt by competitor’s pricing strategies, and we know Netflix increased its prices this year so in order to gain their subscribers we should offer a price higher than the current but also less than Netflix’s new price. Due to the pandemic, there are less people actually going out to large crowded areas such as amusement parks. In effect, Disney parks have been affected and have had fewer sales than 2019. Disney is still trying to recover from the lack of revenue in their parks and the only way to get back is by increasing the price, for which I would recommend by 10%. The demand for movies and stage plays and other studio entertainment is also less now. but may pick up by the end of the year with holidays as well as the hope for Covid-19 to be over. With that said, I would recommend an increase of 10% starting in November so it does not impact the less busier years. During that time of year, the demand is higher and also is consumer goods for children. Therefore, I would also recommend increasing the price of goods and licensed products by 10% starting in October to make sure it is in effect for Christmas gifts shopping. A 10% increase distributed in each category would be ideal and will aid Disney in reaching it’s fiscal sales targets for the upcoming year.
Since there is a reduction in production capacity and foreign exchange that has resulted in an overall cost increase of 30%. We would need to increase, but find a balance between a competitive pricing approach by setting a price based on what the competition charges and a value-based pricing by setting a price based on how much the customer believes NIKE is worth. Therefore if the production capacity and regulatory change has reduced how many consumers can buy the product at any given time by 50%. Nike would want maintain their target audience loyalty by not “sky rocking” the prices and later gradually increase based on income inflation in the regions. Keep in mind Nike’s biggest competitor is Adidas. In 2020, Nike was valued at $34.4 billion, while Adidas was valued at $12.07 billion. (source for value-https://www.start.io/blog/nike-target-market-analysis/) And if household incomes, do not increase with inflation of prices, NIKE is worse off, because consumers can afford to purchase less. Its better to carefully navigate an ever changing market climate.
I am a part of team L’Oreal and I propose a 6% price increase in 2022. As seen in 2021, the company continues to expand its products and partnerships, introducing new products that customers show strong interest in. L’Oreal is composed of makeup, fragrance, skincare, and haircare products. It is important to note that L’Oreal strongly focuses on the skincare and general health of consumers’ skin, as they introduce the partnership with Verily to advance precision skin health. This partnership will generally increase the sales of the brand’s skincare products and a moderate increase in prices for skincare will serve as an advantage for the company. The profit the company gains from an increase in price will allow L’Oreal to continue investing in new partnerships and projects for its consumers. The company has seen an increase in skincare sales, specifically Cerave, as they have focused on hiring influencers to promote the products. The profit from increased prices will also allow L’Oreal to expand its budget on influencers, which serves as an advantage to the company. As consumers gain strong exposure to L’Oreal’s skincare products, they will continue to purchase products related to makeup, fragrance, and haircare, as we have seen an increase in beauty growth for L’Oreal in 2021. As healthy skincare continues to be of strong interest to the company and consumers, I would propose L’Oreal increases their prices on skincare as a first priority, and slightly increase prices on makeup, fragrance, and haircare as a second priority. Consumers will continue to prove their brand loyalty as long as the brand slightly increases their prices and does not drastically increase prices.
I believe whether the company should increase, decrease, or make no changes to pricing depends on several different factors. For example, since the change in foreign exchange has led to an overall cost increase, it means the company is doing business in different countries. Therefore, it is reasonable for the company to find out the average incomes of customers and the inflation rate in each country. Based on these two criteria, the company can decide whether to increase, decrease, or make no changes to pricing. In addition, in the domestic market, since a regulatory change has reduced how many consumers can buy the product at any given time by 50% and the sales of the product have recovered, it is reasonable to enhance the price for the business to remain profitable. Otherwise, the company may not be able to remain its revenues due to the new government regulation. This is particularly the case for the products that are sold at a loss. The company should either increase the price of such products or stop producing such products and save the budget used to produce this product for other product that is more profitable.
I from the Pfizer team, in my opinion the company should increase the product price.Although pfizer made a big profit in 2021, their cost and expense are increasing.The surge in global demand for vaccines in 2021 presents a huge opportunity for the company.Because of covid19, the company’s capacity is increasing and the cost of revenue has tripled compared to the last three years. I think prices should be increased to maintain the original margins.They spend much more investment to achieve that profit.The profit rate in 2021 is the lowest one in the past 4 years. On the other hand, inflation rate and manpower cost are continuing to increase.With the increase of the cost, I think the price should be increased appropriately.
As a member of the 3M team I propose to increase the price of our products by 8%. From a cost perspective, raw material prices have skyrocketed due to the ongoing spread of Covid-19 and the February snowstorm season that led to supply chain terminals. However, from another perspective, looking at 3M’s annual statement for 2020, 3M’s profit of $1.62 billion exceeded expectations, thanks to consumers buying more of 3M’s products made to avoid coronavirus transmission. More importantly, inflation has been far faster than expected since the outbreak began, and for the benefit of shareholders and stakeholders, I suggest that 3M could give an 8% price increase to its entire product line to offset the pressure of inflation.
I am from the Pfizer team. I suggest my company to increase price by 8%. Currently, Pfizer is charging the US at a very low price, compared to what they usually get for a vaccine. Pfizer’s competitor, Johnson & Johnson and AstraZeneca both have pledged to sell their vaccines on not-for-profit basis during the pandemic. However, it is likely for Pfizer to charge a higher price after pandemic. The customer demand is also going to switch to other products after Covid ended.
I’m from the Disney team, I suggest Disney to raise their price. And 12% for their overall DMED bossiness, 15to 20% for the overall DPEP business. Due to the COVID 19, Disney have to limit the theme parks capacity followed by the local regulation. However, the demand don’t seem a downward trend. In Disney fiscal 2021 10-k report, DPEP revenue decline since the operation expense raise, but less customer we can hold on daily basis. To increase the benefit of DPEP we should definitely increase the ticket price so as resort and entertainment.
For DMED, we should raise our price as well, our main competitor in this segment are Netflix and HBO. Netflix price hike since 2014, while HBO maintain their monthly plan price at 15. Also, Disney have been doing really great once streaming the own distribution, the subscribers exceed the expectation. So, I believe it will be wise to increase the Disney+ standard price by 12%. So Disney can over come inflation but still cheaper than HBO and Netflix, as seizing the price advantage.
As a member of Disney, I am aware of the serious impact COVID-19 has had on our company. So here are a few ideas I have put forward.
– As a result of the social distance caused by COVID-19, it would be very beneficial for Disney to invest more in e-commerce, such as Disney+. The increased costs mean that the pricing of subscriptions would also need to be increased. Furthermore, Disney is interested in transitioning to e-commerce. Continued investment in media commerce will be a future trend for the company.
-The pandemic will be eased in the summertime. People will travel much more in the summer. So there could be seasonal pricing for theme park tickets. Prices go up three percent in the summer and down five percent in the winter. This type of pricing is a way to avoid congestion at Disneyland and the presence of a certain number of consumers.
-For Disney-affiliated products such as Disney restaurants or Disney toy stores, I think it would be appropriate to reduce them to five percent. With the advent of the pandemic, people are becoming more aware of the importance of health. So they don’t eat out as much as they should. In addition, they prefer to spend their money on enjoyment such as park amenities rather than Disney dolls.
As a member of the 3M team, I would recommend making no change to the current pricing. Based on the information gained, indeed due to the increase in production cost and reduced customer base, we will expect a drawback in revenue in the up coming year. But 3M as a company generating major part of revenue in protective gear and health care product, the market environment has changed dramatically due to COVID 19 pandemic. In the field of personal protection equipment, or PPE, 3M was the dominant player and the need of PPE spiked over our production capacity due to the pandemic. As a result of it, either through spontaneous business decision or government mandate, a number of competitors from other industries have joined the market. For example BYD, a Chinese battery and electric car manufacturer, joined market of PPE when the pandemic started. Now, almost two years later, they are even selling masks across the pacific and even in Costco. With that being said, 3M will face a substantially more competing market. Making no change to price is the best course of action for 3M to fight for market share while not losing too much in revenue.
As a 3M team member, I would recommend no price change on the consumer level. Sales from last year alone prove our value to the market and that consumers will always need us. I do suggest a 2% increase in B2B being that their sale did not do as well as the consumer sale. To make up for the loss, a 2% increase at the beginning of the year should make up for the lost numbers.
Company: L’Oréal
Background: L’Oréal is a French personal care company known for being the worlds largest cosmetics company. L’Oréal concentrates on many aspects of the beauty industry including haircare, skincare, and makeup. Some subsidiaries include Lancôme and Maybelline.
Cost: L’Oréals product costs range from affordable to luxury. With subsidiaries such as NYX and Maybelline being sold in drugstores on the affordable end and luxury brands YSL Beaute and Giorgio Armani Beauty being sold in stores like Sephora at higher price points.
Government regulations: L’Oréal complies with all government regulations whether it be the US, EU, or elsewhere.
Consumer demand: Despite sales dropping in 2020 due to the COVID Pandemic, they have steadily been increasing in the past year and a half with sales increases from 2020-2021.
Profitability: According to 2021s half year results the profitability was +20.7%
I would suggest L’Oréal increase their prices by 4% due to the drop in sales in 2020. Although some time has passed and profit has increased it still isn’t to where it should have been had the pandemic not occurred. This increase can give the company the boost it needs to maintain its status as a global ‘go-to’. After separating the company by skincare, haircare, makeup, and fragrance, it would be best to start the increase in skincare then haircare considering consumers place more importance on those products and will likely still purchase despite the increase.
There will be a 5% modest increase in pricing, especially in high-income countries. Because of the pandemic, there is a strong demand for mRNA vaccines and covid prescription medicines, but there is a limited supply. When demand is strong and supply is low, then prices get raised. However, compared to Moderna, Moderna still is getting more per shot than Pfizer’s. According to Pfizer’s annual report, there are many product developments in progress. Therefore, the increase in pricing will support investments that will allow Pfizer to continue to discover new medicines.
As a member of Pfizer, I would recommend my company increase price by 8%. Because Pfizer is a pharmaceutical company, the main purchasing power comes from the government rather than the individual sector. Even if the price rises under the influence of inflation, the impact on individuals will not be too large. Most of the economy is still borne by the government. It will not affect the people so much.
Due to the Covid-19 pandemic, there is currently global supply chain crisis. The cost of buying the raw material would be increase so the company should make up their cost by increasing their price. From economics perspective, the covid-19 pandemic still gonna continue to some time. With the government’s regulations on vaccination, the demand for products will continues to rise. The company need to increase the price to Invest in more efficient production and R&D.
I propose to increase prices for the Disney+ subscription, globally. Since Disney+ is expanding to 42 new countries with large amounts of new content which will be tailored to the country it’s for, customers will see the value in the subscription cost. From 2020 to 2021, we’ve also gained a 60% growth in subscriber count for Disney+, and a 66% growth for ESPN+, we can further capitalize on that by increasing the subscription cost by 10%. Another reason for this is the unpredictability of the pandemic regarding new waves and virus strains. Customers will be reluctant to unsubscribe as they go back to spending the majority of their time indoors periodically.
On the other hand, I propose a decrease in resort & vacation packages by 10%, and 5% for admission tickets to continue to incentivize customers to attend our parks. This should offer more protection for more vulnerable source of revenue. There has been a 99% increase in this section, and I believe that we can continue to see exponential growth if we can show park guests an abundance of people enjoying the parks.
According to the 2021 Annual Results, L’oreal is currently experiencing its best growth since 1988. There was revenue growth in all sectors of products sold such as skincare, fragrances, makeup, and hair care. The 1# growth contributor to revenue is America. I would recommend not rising prices as we are still in a pandemic that has been fluctuating the economy. The revenue has increased from €27.99Bn in 2020 to €32.28Bn in 2021. This showcases that the was in rise in demand from the consumers. Raising prices now when the economy can easily fluctuate by the ongoing pandemic can have a negative impact that will affect consumer behavior. They should invest in market research first to understand the increase of revenue before raising prices.
I think that Nike should increase the pricing by 5%. The supply chain issues were a challenge for Nike throughout the quarter. Harbor congestion and factory closures in the first quarter negatively impacted product flow to Nike stores, wholesale partners due to some COVID-19 related issues. Some factories remain closed due to government mandates related to COVID-19, resulting in a ten-week slowdown in production. As a result of these issues, Nike should rebalanced its forward-looking statement for it’s growth. The price increases will be necessary to offset the required transportation, logistics and air freight costs.
I think pricing should change with demand. 3M tripled its production of masks. The cost of making masks has come down partly because of the scale of production. And, because of the pandemic, masks are overpriced to make them unaffordable. This will exacerbate the pandemic. Therefore, the PPE and Health Care sector should not raise prices, but lower prices. The Pandemic also caused serious inflation, and the price of many raw materials rose very high. 3M has a very strong upstream and downstream supply chain that can offset some of the price increases.
I am from Nike team. I think Nike should increase 6% in prices.
Firstly, because of the current inflation at 8% which means cost increases then the prices will increase.Nike can use pricing change to mitigate the negative effect on inflation. Secondly, due to the covid, some Nike factories especially in Asian countries’ factories are closed due to the local government regulation. This cause Nike face shortage of their supply chain. It is necessary for Nike to increase their prices.
I am from the McDonald’s team, and I propose to increase the price. Due to global inflation, there has been a significant increase in the cost of labor as well as supply chain. McDonald’s has been increasing its menu prices little by little frequently since the inflation soars. It only raises the price slightly each time in order to see how consumers react. As a result, the majority of consumers accepted it and did not have any reaction. I recommend that the company maintain this pace, in order to keep its low-price advantage since other food and groceries are raising prices at a higher rate. It should also closely monitor consumer’s reaction in case they become dissatisfied. Another reason to increase the menu price is that the demand is likely to expand. Inflation may cause more people to consider fast food since they are cheap. Also, working people are living in a more and more fast-paced lifestyle. They will prefer to have food ready in a short time. The increase rate will depend on the inflation rate in the specific country. For example, in the U.S. where the inflation rate is 8.3% in 2022, I would suggest a price increase of 5%.
The Coca-Cola Company should increase its prices because the cost of raw materials has risen worldwide. A decrease in foreign exchange and production capacity has led to a rise in cost by 30%. In this regard, Coca-Cola Company should increase its prices and analyze a balance between value-based pricing and a competitive pricing model. This strategy will allow the company to set prices for its drinks based on rival charges and consumer demands.
At the start, the company should initiate no changes to its pricing. The United States has experienced a high inflation rate because the states provided trillions of dollars to encourage consumers to partake in COVID-19 vaccination. In this regard, Coca-Cola managers should evaluate how many customers can purchase drinks by 50% of the quantity produced after a change in production capacity. This approach will enable the firm to maintain consumer loyalty while gradually altering prices to match income inflation. Therefore, Coca-Cola should not increase prices without understanding the impact of government regulation.
Coca-Cola Company’s sales dropped last year, but the firm has begun recovering. In this regard, the enterprise should increase its prices the demand for its drinks is gradually increasing. Many people recovered from economic rescission due to the COVID-19 pandemic and started to attend entertainment programs. The situation implies that household income increases, which allows consumers to purchase maximum drinks. Coca-Cola Company should urgently increase its prices to meet the high beverage demand. The suggestion to raise prices will allow the firm to meet its current obligations.
Coca-Cola products’ profitability varies, forcing the firm to sell some beverages at a loss. The company should increase prices for drinks that have increased high demand to generate maximum profits. However, the firms should decrease beverage prices that cause losses to earn consumer loyalty and attract new customers.
Nike Team: I would propose an increase in price by 7%.
Inflation has increased this year, resulting in increased operating costs and many businesses have increased prices. Footwear, one of the leading products for Nike, has been increasing its prices due to inflation and is continuing to rise. By increasing price, it will not impact dramatically the demand since many of its customer pick Nike footwear for its quality. Due to covid, some factories overseas have been closed this year due to the mandates within those countries and some of those factories have started operating again. Nike has been doing well with profitability but was struggling with demand. Since covid restrictions have been lifting up all around the world, supply chain started to become less of an issue compared to 2020. Nike also invested a lot in digital which has helped a lot with their sales and communication with their customers.
This is Yanyun Liu from McDonald’s team. Overall the price has increased 3%. I think the current combo could stay the same since it’s not making a difference from the consumer side in consuming the products. The sides and fountain drinks can keep the same as well. All the main course like burger or salad increase 5%.
Because combo usually include drinks, burger and shade, for McDonald’s fountain drinks and fries cost less, so even the combo keep the same price, still can bring McDonald’s good revenue. And single item increase can bring more profit too. So, Customer choose either way can bring positive influence for McDonald’s revenue, and it’s acceptable for customers too. Because the combo is the same price.
For their seasonal product( other products not always on the menu) they can increase the price 5%. Since they are not always on the menu, so even they has different price, is reasonable for customers. They have higher chance to accept the differences.
I come from the Nike team. On a currency-neutral basis, I think Nike needs to increase its prices due to internal and external factors. Not all product categories need a price increase although, the price increase is mainly focused on the Men’s and the Jordan brand. These products would require a price increase of approximately 7%.
Firstly, in order to maintain our current margins, we will need to increase our pricing to some extent. Although we have been actively using the new ERP to help improve operational efficiency over the past year, there is no denying that we are facing more serious inventory pressure and logistics costs. The declining control of COVID-19 may increase our production, but our warehousing and logistics costs will continue to rise due to manpower shortages, bringing inevitable cost increases. Due to the negative impact of COVID on people’s income, we are investing more than usual in stimulating people’s demand. And as COVID will have a long-term debilitating effect on people’s income, we can be sure that investments on digital marketing and direct marketing will continue to grow in the future.
Secondly, it’s reasonable to increase the price of the Men’s and the Jordan brand. Because generally speaking, their unit sales of product decreased 4%, while higher ASP per unit contributed approximately 9 percentage points of revenue growth in different regions last year. Higher ASP per unit was primarily due to higher NIKE Direct ASP, the favorable impact of growth in our NIKE Direct business and a higher mix of full-price sales. We will need to increase the price of products due to the reduction in consumers as a result of future policies. Thus we think 7% is a reasonable range for price increases.
The Disney market is recovering from the coronavirus pandemic. At the same time, inflation is high all over the world. In order to meet the needs of maintaining enterprise survival and stimulating consumption at the same time, Disney can appropriately raise prices in items that customers are not too sensitive to. For example, Parks and Experience can increase the price by about 7%, and the flow of people will gradually recover and return to pre-pandemic levels in many countries. The price of products can be increased by about 5%, which is mainly reflected in the pricing of new products. The best-selling products can be upgraded and then the price can be increased. Price increases in Media and Entertainment are less noticeable to consumers and can be increased about 10%.
I propose Coca-Cola will increase their prices by 5% in the US.
The main reason is that inflation has reached a very high level. Grocery prices rose by 1% from May and 12.2% over the past 12 months. Both gas and food costs have been elevated largely because Russia’s war in Ukraine has disrupted global supplies of oil, wheat, corn and other commodities. Factors such as higher raw material and transportation costs have led to higher production costs for Coca-Cola.
Coca-Cola’s sales have also increased significantly since January 2022, the company attributed the strong growth to the continued recovery of restaurants, pubs, cafes and bars from the corona virus pandemic, a return to travel and tourism, and a resilient home-sales channel. total sales grew 11% from the prior year, surpassing $5.5 billion. Coca-Cola can slightly raise the price of its main product to meet the high demand of consumers.
I’m from L’Oreal team. From what I learned from Pricing, I think L’Oreal should increasing its’ increasing mainly focus on the skin-care products especially for the Luxe business segments. L’Oreal owned many skin care brands, but some of them are in consumer products business segment, some are in Luxe part. The reason I think Luxe segment should increasing price is because the price for consumer products brands are much lower than Luxe part. And most of the consumers are used to the cheaper price. And their target customer really care about the price. Some of them would stop buying them if we increase the price. But for Luxe products, the price is quite high like Helena Rubinstein and Amarni or YSl. The skin care products from them are really high. But their target customer don’t care about it. If we just increase a little bit of the price, they will stay buy it and our profit will be more.
Due to an overall cost increase of 30% and a change in the law that has reduced the number of consumers who can buy the product at any given time by 50%, McDonald’s is reporting not only lower sales but also higher costs. McDonald’s raised its prices in the U.S. by about 8% in the first quarter of 2022 compared with the same quarter a year earlier and reported lower order volumes and a 1% decline in transactions for the period. In the same year, McDonald’s still reported a 3.5% increase in U.S. sales. The decline in transactions and order volumes is mainly due to the behavior of low-income consumers, who are more value-sensitive, partly because of inflation and higher gasoline prices. This also makes consumers increasingly reluctant to drive to eat out.
To counteract this, McDonald’s must raise its prices to remain profitable. Since the regulation on sales could be overturned, McDonald’s should look for a more short-term solution and wait to see if the regulations are repealed and communicate this to its customers to make them understand the potential price increase. The price increase should be primarily on premium products, which are purchased by the less price-sensitive segment so as not to scare away low-income consumers. McDonald’s could also lower the cost of delivery to encourage people to order food so they don’t have to drive and spend money on gas. McDonald’s additionally needs to explain to consumers the cause of the price increases, preferably in a press release. The core message of the press release should be transparent about the reasons behind the price increases and emphasize that McDonald’s has to raise prices in order to continue to offer high-quality food. Based on the observation of the reactions to the last price increase, McDonald’s should, as said, carry the premium products for the price increase and not exceed the value of the last price increase of 8% especially not for the classic products.
In my opinion, it would be beneficial for McDonald‘s to raise its prices to maintain profitability. In order to cope with inflation and the pandemic, the company has already implemented a series of price increases between 2020 and 2022, with the 2022 price being 6% higher than in 2021. This increase includes a 4% rise in raw materials, labor, and competition costs. While price hikes are necessary, McDonald‘s needs to carefully consider the appropriate growth rate and how to explain it to consumers.
I believe McDonald’s should adopt the price increase strategy, averaging the price increase over two quarters, which completes the pricing gradually. This approach will prevent consumers from misinterpreting the sudden and significant price jump, which could lead to a loss of sales opportunities. Additionally, McDonald’s should explain to customers that the price increase is necessary due to rising costs, which will help them better understand the situation. By doing this, the company can maintain its profitability while still providing value to its customers.
In my opinion, JP Morgan does not need to raise its prices.Although interest rates in the US have been raised seven times in 2022 and consumers have been reduced by 50%, JPMorgan has not needed to adjust prices. The reason is that the financial products sold by JPMorgan are personalised and account managers will recommend the right financial products to customers based on different asset levels. If financial products were priced out of the reach of customers as a result of price adjustments, the number of consumers would be further reduced. And in the face of a competitive financial investment market and the many choices available to customers, doing everything possible to reduce customer churn is a key step.In addition, once the price of the product is raised, users’ expectations of the product’s profitability will rise. JP Morgan is likely to lose customers because the profitability does not meet expectations.
Due to the increase in interest rates in the united states and customer reduction, I believe that j.p morgen should not raise their financial services fees, mainly since the service fee prices depend on each client’s asset levels. Moreover, the increase in interest may lead to lower demand for J.P. morgen services unless they target a particular demographic. In contrast, others will target the general population.
Inflation is one of the factors affecting McDonald’s pricing decisions. When the total cost of goods and services in the economy rises due to inflation, the cost of materials, labor and other expenses may also increase. That could weigh on McDonald’s profitability as its expenses increase but prices remain the same. To maintain profitability and financial viability, McDonald’s may need to adjust prices to keep pace with inflation. However, McDonald’s pricing decisions are not based solely on inflation, other factors such as competition and consumer demand also play a role. Ultimately, McDonald’s aims to balance its pricing strategy with the need to remain competitive and provide customers with affordable, convenient food options.
I’m from Apple team. Reduction in production capacity, which is likely to have been caused by low consumer demand, has increased Apple’s overall costs. Other factors that are likely to have caused high costs include supply chain challenges and inflation. In fact, inflation in the US increased from 1% in July 2020 to 9.1% in May 2022 before declining to 3.7% in July 2023. High inflation is associated with a high cost of raw materials and reduced profitability. Firms that succeed during a period of high inflation tend to increase costs. For example, Unilever adjusted its prices upwards to cushion itself from high inflation in the UK. I believe that Apple should follow in Unilever’s footsteps by increasing its prices. The measure would allow the company to protect itself from high inflation and a challenging business environment. However, the company should justify the price increase by improving the quality of its products and services. In fact, apple should ensure that its products and services are unique and innovative. This is vital to ensuring that the target customers do not switch to competitor brands, such as Samsung and HP. In addition, the company should engage its customers and help them understand the change in prices.
I come from the Walmart group. When considering pricing for Walmart, the product category is the element that should not be ignored. Pricing for Walmart is a complex issue for Walmart having so many different categories of products selling in different countries. IMF reports that the global inflation rate is about to reach 8.8% in 2022, and the ILO Global Wage Report shows that Global wage gains lag behind inflation. Nominal wage adjustments in 2022 in many countries will not be large enough to offset cost-of-living increases due to the huge increase in inflation, and the low-income groups bear the brunt of rising inflation.
So after taking all the factors into consideration: Cost, Government regulations, Consumer demand and Profitability, I think that Walmart should increase the price of the furniture category and digital products and have the price of necessities slightly increased. I believe that all retailers would increase its price of necessities due to the increasing cost and increasing consumer demand, so a slight increase can make Walmart a profit without losing money and gain competitiveness against its competitors for a lower price and a better brand image.
I’m from Apple.
Inflation affects the purchasing power of consumers in a way that decreases their purchasing power and affects the monetary policies of governments, which undoubtedly has a bad effect on the world economy. Through the survey, the inflation rate in the United States stabilized at 3.7% in September and there is a gradual slowing down trend, but this also has a certain impact on Apple’s economy, so I suggest to increase the price and help the company to stabilize Apple’s economy by adopting a cost-saving perspective, for example, to reduce the material of the packaging box and improve the quality of the company’s service to ensure that the consumers are not affected by the increase in the price of the products. dissatisfaction of consumers with the price increases.
Disney should increase its prices as a result of global inflation, sales drop, and profitability consideration. The US along in 2023, has surged inflation 3.7% this year, leading to ticket price increases in Disneyland and Disney World. This is also said in line with other central theme parks. In addition, Disney’s streaming products are at loss (such as Hulu and movies), so they need the profit-making products to cover some loss. However, that is not to say all the ticket types should increase their prices. The most popular type, daily pass should remain the same while two-day pass or annual pass can increase prices to different extents. Besides, Disney can earn profit from other sides associated with the park entertainments, such as hotel services merchandise and food provision.
This is Apple team’s pricing decision
Current Situation The total cost has increased. The number of consumers decreased The demand also dropped.
Prediction: the change of government policy and consumer demand is hard to be predicted.
Analysis: From current situation, it is clear that increasing prices of Apple products is the most direct way to face the crisis. But it can be risky, especially when consumer demand is uncertain. It would be essential to consider price sensitivity and elasticity of demand If the demand is elastic, even a small increase in price could lead to significant drop in quantity demanded
Decision: So we decide to implement a moderate price increase, enhance communication to justify the price increase and assure quality and value to the consumers. For deal with future change, we also need to monitor market response closely, adjust the strategy based on consumer behavior, sales data, and any changes in the regulatory environment and explore cost optimization and efficiency improvement measures.
Apple gradually increased prices throughout the decade, especially starting in 2016 and 2017. Because 2017 is Apple’s 10th anniversary, Apple’s restart may already be in the strategic plan, but it may also be an external boost. In 2017, mobile phones have entered a glorious era of competition, with dual cameras, waterproofing, full screens, screen-to-body ratios, large memory, and AI artificial intelligence interaction emerging one after another. Innovation is no longer Apple’s exclusive advantage. However, most Apple users are very loyal and not so sensitive to price. Therefore, on the occasion of its tenth anniversary, Apple decided to develop to a higher level. Sales data naturally became less important, and the final net profit was the key. Apple’s product line is divided into premium version and regular version, with slightly different prices. The reason for Apple’s low prices in the U.S. market is its cooperation with operators, but in the global market, Apple’s pricing is that of a luxury brand. With the impact of the epidemic, chip shortages and overall price increases, the pricing of Apple mobile phones will also increase in response to market changes.
My company is Unilever.
In April, 2023, the core inflation rate in the United States was 5.5%. Inflation will have an impact on any company. First and foremost, raw material and cost increases brought on by inflation will have an impact on Unilever’s profits. In order to lock in the present pricing, I advise Unilever to renegotiate contracts with suppliers it previously trusted. I’m not recommend Unilever to look for lower-cost supply chain sources, because compared with other brands of the same type, Unilever has lower supply chain costs, so it should not lower the supply chain cost price. Second, the reduction in consumer spending power will be a challenge for Unilever. Since inflation will reduce consumers’ purchasing power, they will be keen to choose alternative and more affordable brands. In this regard, Unilever should strengthen brand loyalty and provide some promotional or discount activities to attract consumers. Third, Unilever is a global company, so inflation may lead to an increase in borrowing costs and affect the company’s expansion and investment strategy. Therefore, Unilever can optimize the financial structure to reduce the cost of capital.
Company: Walt Disney
Walt Disney has increased the price gradually after pandemic. The entertainment need from customers increase and that gives Disney chance to increase price, as a compensation for low customer volume during pandemic. The annual report shows that Disney even has 73% increase on sale from 2021 to 2022, bringing by Disney’s park, experience and product business, which is a noticeable improvement. At the same time, the new IP of Disney, Disney mermaid movie, also bring competitive advantage and priority for Disney’s streaming business. The exclusiveness increase Disney’s bargaining power on pricing. It is showed that Disney has 11% revenue increase from 2021 to 2022 on licensing.
Given the background situation provided, I think a one-size-fits-all approach to pricing is not advisable, we should consider different approaches based on the specific circumstances of each product. Firstly, in terms of cost increase, a 30% increase in production is undoubtedly a big hit to profitability. However, I don’t think increasing prices across the board can be the best approach, because it could deter price-sensitive customers. Therefore, we can consider that involve selective price adjustments for specific products with higher profit margins while keeping prices stable for essential and price-sensitive products. Secondly, regulatory changes limiting consumer access require a cautious approach to pricing. In this situation, for some products influenced by the reduced access, we can stabilize or even reducing prices slightly to retain market share and keep products accessible to existing consumers. And for products less influenced by the regulations, we can increase their prices duly. In addition, in terms of consumer demand, we consider that for products with strong demand, Unilever can consider moderate price increases, but be cautious not to overprice and drive consumers away. And for products that are still struggling in terms of demand, maintaining stable or even reducing prices might be necessary to stimulate sales. Finally, about profitability, products with negative profitability (-20%) should be evaluated carefully. It might be worth considering whether these products can be reformulated, optimized, or phased out, rather than addressing them solely through pricing changes. And for products with high profitability (+80%), maintaining the status quo or modest price increases can help support overall profitability. We should strike a balance between protecting profitability, complying with regulations, and responding to shifts in demand.
Disney team
Disney has the opportunity to increase pricing:
1. More and more visitors are willing to re-enter Disneyland after the pandemic.
2. Disney has been remarkably innovative with its traditional IP. Customers are willing to pay extra for a Halloween-themed Duffy Bear.
3. Disney’s streaming business has matured. Disney+ and Netflix have become the two streaming platforms with the highest market share. Disney+’s constant release of new movies, especially the Marvel series, gives Disney higher pricing power.
Naer
Given the challenges Microsoft faces, including increased costs, regulatory changes, fluctuating consumer demand, and varying profitability across its product portfolio, it is advisable for Microsoft to adopt a selective pricing strategy. For products with solid market positions and high profitability, such as Azure and Office 365, a moderate price increase is feasible. These products enjoy strong market demand and customers are less sensitive to price changes, making it possible to offset cost increases while leveraging Microsoft’s brand and technological advantages to maintain market share. However, for products with lower profitability or those in highly competitive markets, particularly in specific regions, Microsoft should proceed with caution. Addressing cost pressures through enhanced operational efficiency and cost structure optimization is preferable to risking market share loss through straightforward price hikes. Additionally, in contemplating price adjustments, Microsoft should augment the value proposition of its products and services by introducing new features and providing superior service, aiding consumer understanding and acceptance of any price modifications. In sum, Microsoft’s pricing strategy should be flexible and differentiated, carefully balancing cost considerations with market receptivity and competitive dynamics to ensure the company’s long-term competitiveness and profitability.
Reference:
https://www.microsoft.com/en-us/microsoft-365/blog/2021/08/19/new-pricing-for-microsoft-365/
https://www.data3.com/knowledge-centre/blog/heres-everything-you-need-to-know-about-the-microsoft-price-increase/
In 2023, Apple implemented its long-awaited iPhone price increase as smartly as possible, partly to extract more money from consumers without causing a price shock. The company raised the price of just one iPhone, the top model, the Pro Max, by $100 to $1,199, but the other three new versions remained unchanged. And even the new, more expensive phones now have twice as much storage, which Apple insists isn’t a price increase. The move fits the company’s model of needing to discount shoppers wary of inflation. Apple hasn’t made any major changes to its selling prices, but it’s looking for new ways to get shoppers to spend more. Special features such as a better zoom lens and a titanium frame are packed into the premium iPhone, luring shoppers to higher-priced products.
For LVMH, the overall prices have to increase due to inflation correction, currency fluctuation and rising labor costs, but it can adopt the selective price increase. LVMH’s commodity prices have been rising for a decade, in 2023 Louis Vuitton announces global price increase 3 times due to supply chain shortages and inflation. In 2022, LVMH increased price two times.
There are basically two types of price hike. Firstly, there is the Broad-based price increase – increase in prices globally. Secondly, there is the selective price increase only occur in a few countries, or for some of the categories. The prices are always making small adjustment thru out the years however it may only impact a certain range of products like accessories, shoes etc and not all the products. For example, in Jan 2023, LVMH executives signaled limited price hikes, mainly for leather goods, to reduce price gaps between the United States and Europe.
Pricing Adjustments for 2024
As we look to 2024, the global market conditions and financial outlook necessitate careful consideration of our pricing strategy. After evaluating the current landscape, including the rising global inflation rate (now at 6.8%), the significant 30% increase in production costs, and recent regulatory changes, I recommend we proceed with price adjustments in key markets.
North America – 10% increase
The North American market, facing a 30% increase in production costs, will require a price increase of at least 10%. Consumer demand has started to recover, but the profitability of our products remains uneven. . In this context, the price adjustment is necessary to maintain overall financial health and help with the impact of rising input costs, particularly given the sharp reduction in consumer purchasing power due to the regulatory constraints.
Europe – 7.5% increase
Europe, where costs have similarly increased, will see a price increase of 7.5%. Significant shift in consumer purchasing behaviors as a result of regulatory changes and currency fluctuations warrants a more measured approach to pricing. A 7.5% increase is aimed at ensuring that we stay competitive while balancing profitability across product lines.
Africa and Latin America – 0% increase
In Africa and Latin America, where inflationary pressures are less severe and consumer demand is more sensitive, we will maintain current pricing. These regions are still recovering from last year’s challenges, and a price increase would risk further cut in demand. Given the relatively lower impact of the cost increases here, we believe that maintaining stable pricing will support both consumer loyalty and long-term market share.
Asia and Oceania – 2% increase
In Asia and Oceania, a more modest 2% price increase is warranted. While inflation is impacting costs, we have seen stronger demand recovery here, and we expect a moderate increase to be well-tolerated by consumers.
Given the combination of rising production costs, regulatory constraints, and variable consumer demand, it is essential to implement targeted pricing increases by region. Our objective is to ensure that we protect profitability while remaining competitive in the marketplace.
For Tesla company , I recommend increasing prices for Tesla products. The 30% rise in production costs, driven by a reduction in capacity and foreign exchange fluctuations, necessitates an adjustment in pricing to sustain profitability. Continuing to sell at current prices, particularly for products already being sold at a loss, would only worsen financial challenges. Additionally, the recent regulatory changes have reduced the number of eligible consumers by 50%, which further supports the need for a price increase to offset the reduced sales volume. Although consumer demand has partially recovered, it may not be sufficient to cover the increased costs and the limitations imposed by regulations. Raising prices will help maintain revenue and signal the premium quality of Tesla’s offerings. Given the variability in profitability, with some products sold at a loss and others with up to 80% margins, it’s essential to adjust prices strategically. Products with negative margins should see larger price increases to at least break even, while more profitable products may only require moderate adjustments. Overall, increasing prices will help Tesla manage the rising costs, align with reduced consumer availability, and protect its profitability across the board.
Team Nestlé:
Due to inflationary pressure, I would suggest raising the price of any products that contain cocoa beans (i.e., chocolate and coffee) by 5%. First and foremost, cocoa beans are one of our indispensable resources, but we have been impacted dramatically since the pandemic. There are also other external factors causing our outputs to be unstable or limited, such as climate changes and raw material disruptions. To elaborate on these two points, we would be in a dilemma of whether to continue our business with previous supply chains or look for a new business partner based on our current circumstances. Lastly, in my opinion, increasing the prices by 5% is reasonable and still can compete with other competitors, because I believe these products are highly demanded by consumers.
Since the cost of production has gone up by 30%, I believe LVMH should increase prices moderately. Customers in LVMH’s luxury business, where exclusivity and fine craftsmanship are essential value propositions, may not be extremely sensitive to price rises and instead anticipate them. Preserving the distinctiveness of the brand while protecting profits can be achieved in part by passing on a portion of this cost rise through price increases. But, it’s crucial to take this step gradually to prevent customer resistance or backlash—especially in economies that are rebounding. There is also a situation of shortage of supply since rules have reduced the number of users who can obtain the goods by half. This scarcity may really support the exclusivity story in marketing for a high-end brand like LVMH. In this situation, raising the price might accentuate the products’ luxury status by reinforcing the notion that they are extremely desirable and unique. The disparity in profitability throughout LVMH’s product categories indicates that a targeted pricing strategy is required. Incremental price increases can improve earnings even higher for products with margins as high as +80%. However, price adjustments for products that sell for a loss (-20%) should be made carefully. In conclusion, I think LVMH should raise the price of high-margin, in-demand goods, especially where regulations allow for the manipulation of scarcity. In markets that are rebounding or where consumer demand is more price-sensitive, keep products at their current prices. Examine the product portfolio for any items that are losing money, and if they don’t fit with the brand’s upscale image, change their placement, price, or discontinue them.
As lululemon I would recommend leaving the price unchanged. The reality of our situation is mostly because of external sources which have affected consumers purchasing power. However, now that sales have mostly recovered it means that the consumers purchasing habits are about to bounce back to their previous ways. As a clothing brand for athleisure we have a variety of products for different activities. Now that the activities are coming back people are going to need (not want but need) new clothes meaning that leaving the prices unchanged will allow us to entice those customers back. If situation gets really dire then we can increase prices of our most luxury items like running shoes, outerwear, and high tech leggings.
Given the current situation, I would recommend a selective price increase for LVMH. With a 30% rise in costs, raising prices on high-demand items like leather goods and accessories can help cover these expenses without driving away customers. Since new government regulations limit how many products consumers can buy, a broad price increase could hurt sales further, so focusing on small increases in regions or products where demand is strong is a better approach. As sales have not fully recovered, cautious, targeted price hikes on luxury items can help balance revenue without discouraging customers. To improve overall profitability, prices should be raised on products currently sold at a loss or with low profit margins, while keeping changes minimal for high-margin products to maintain customer loyalty. In short, small, selective price adjustments in key areas can help offset rising costs while keeping demand steady.
According to the situation with higher costs, dropped sales, and even negative regulation from the government, Tesla needs to have an “Overall Price Increase” strategy. To offset the 30% cost increase, Tesla should implement a price increase between 10% and 15%, which can help to absorb a portion of the increased production and regulatory costs and avoid drastically increasing prices that could further hurt consumer demand.
Secondly, we can introduce a ‘Value Edition’ for price-sensitive consumers, for instance, Tesla could introduce some models with fewer premium features at a lower price point (around a 5% increase). This can attract customers who are willing to compromise on features for a lower price, helping to maintain sales volume even as prices rise on the standard models.
Thirdly, we can adjust it with the sales. Products with high profit (e.g., 50% to 80%): Increase prices by 8% to 12%. These products have some room to absorb cost increases without risking significant drops in demand. Moderately Profitable Products (e.g., 20% to 50%): Adjust prices by 12% to 15%. Products with Negative Profit Margins (e.g., -20%): For models currently sold at a loss, implement a 15% to 20% increase. This adjustment is necessary to bring these products closer to breakeven or profitability. If these products become too expensive, Tesla should also consider whether they need to be re-engineered or potentially discontinued.
Considering the 30% increase in costs and the 50% drop in consumer purchasing allowed by new regulations, I believe we should hold off on a broad price increase for now. Instead, let’s focus on a more tailored approach: we can selectively raise prices on our highly profitable products while finding ways to cut costs on those sold at a loss. It’s also crucial to communicate openly with our customers about any price changes to help them understand our reasoning. Additionally, we should explore targeted promotions to boost demand. This way, we can protect profitability while maintaining customer loyalty during these challenging times.
Given the current situation, I recommend a selective price increase for LVMH. With production costs rising by 30%, we can implement small price hikes on high-demand items like leather goods and accessories to help cover these expenses without alienating our customers. The new government regulations, which limit how many products consumers can buy, mean that a broad price increase could further hurt sales. Instead, we should focus on targeted increases in regions or product lines where demand remains strong.
I would suggest a price increase across all Tesla models as a 30% cost increase is very significant and necessitates price increases across the board.
I would increase the more expensive models at a higher rate as there is greater price elasticity for more expensive models. Historically, Tesla’s price increases are around 5% or lower. Given the significant cost increase of 30% I would recommend increasing the price of expensive models at a slightly higher rate of 10% and the less expensive models 5%-7%.
I would also adjust the price increases between countries. I would have slightly lower price increases (under 5%) for countries with struggling economies particularly affected by the supply chain issue.
As a member of the LVMH group, I suggest a price increase due to several key financial factors. The company’s net profit for the first half of 2024 was €7.3 billion, down 14% from €8.5 billion in the same period the previous year. Additionally, LVMH’s operating margin for the first half of 2024 was 25.6%, significantly higher than pre-COVID levels. Therefore, I believe the company should have a price raise, particularly in regions like the United States, which experienced the lowest sales growth among regions—just 4% last year. In contrast, regions like China saw a 31% growth, Japan 28%, and even Europe experienced 13% growth. For loss-making products, such as Wines & Spirits, I recommend a 30-40% price increase to offset cost increases and restore profitability. Moderately profitable products, such as Tiffany & Co. and those in the jewelry segment, should have a 10-30% price increase to counter the 4.1% inflation rate in the U.S. and maintain profitability. An adjustable pricing plan, focusing on specific items and regions, could be beneficial for the company’s overall financial growth in the upcoming year.
As the member of Lululemon, I recommend we can increase the price for the products . First, the net revenue of Lululemon in US decreased about 5% last year, however, it holds up to 79% in the whole sales for the year, as a result, we can increase for about 10-20% of the price for US market. Second, due to the increase of cost and the number of costumers decrease, we can set a more higher price(about 30-40%) in those market which have a tendency to have more sales and more consumers, like China the net revenue increased from 7.1% to 10%, which can have a ability to get in touch with more new consumers and expand the market in China.
For Meta, I would suggest a price increase under the given background. However since Meta operates in a highly dynamic tech and digital services market, the price change strategy should be carefully balanced across different business segments. Firstly, we could employ a price increase between 15-20% in our digital advertising services. Meta’s core digital advertising services are less price-sensitive due to high demand, especially for targeted ad space. It is also Meta’s core profitable segment, thus a moderate increase here is necessary and effective to absorb cost changes. Secondly, for our hardware products like Oculus VR, the price increase should not exceed 10%. Although these products are directly affected by production capacity and supply chain issues, we could not increase the price too much, for this business segment is mainly targeted toward individual customers that are much more price-sensitive. At the same time, there are lots of competitors in the same markets, and a large increase in price will lead to a decrease in product competitiveness.
In U.S., there is an inflation rate of 2.44%, therefore, as a member of the Walt Disney Company, I recommended that we have a price increase in Disney’s parks and streaming services under the given background. Disney had a strong brand loyalty, therefore increasing the price a little higher will not negatively impact consumer demand. First of all, I would suggest having a price increase of around 15% in Disney’s park tickets. Disney’s parks have the most loyal customers among Disney’s segments, and having a price increase is unlikely to impact demand negatively. The parks consistently deliver high-quality experiences, and given the inflationary pressures and increasing operational costs, such an adjustment would help sustain profitability while keeping customer satisfaction. Second, I suggest having no more than a 10% price increase for Disney+ membership. While streaming services have become more competitive, prices in this segment are more sensitive compared to parks, so having a slight price increase ensures that Disney+ remains attractive to current subscribers while balancing rising content production and operational costs.
Meta’s three main sources of revenue are advertising, their family of apps and their most recent innovations in the AR/VR space. It is my recommendation that Meta makes changes to prices in two main areas: Advertising and AR/VR. Because of their investment in AI to create more targeted and efficient ads, they must increase prices to match the level of investment and the improved level of service they will be providing. That being said, as reported by Bloomberg, many media buyers have been experiencing glitches in their Meta ads over the past year. Meta then has to be extremely sensitive to not increase prices so much so that buyers may be upset or unwilling to use Meta services anymore. In that sense, Meta can increase the prices in July as opposed to January to create less of an effect on the buyers and consumers. In terms of AR/VR, Meta should be steadily increasing the prices of their devices. Again, they are investing heavily into the R/D to create cutting edge technology and innovation in the AR/VR. This justifies a steady increase in the price levels of this product. Moreover, similar products on the market, such as the Apple Vision Pro are priced at over $3000 whereas Meta AR is under $1000 (around $849). In contrast to its competitors, Meta has a lot of wiggle room to increase prices. Meta should make changes in prices to these two main areas in order to generate more revenue.
I recommend Estée Lauder increase product prices by 10%-15%. The exact increase should be based on product profitability, with higher-margin products seeing a 15% rise and lower-margin products increasing by 10%.
Financial Impact:
1. Gross Margin Improvement: The price increase will directly offset the 30% rise in production costs, protecting gross margins. For products with +80% profitability, the price increase will significantly boost overall profit levels.
2. Impact on Sales: While short-term sales may experience a slight decrease, the price hike will reduce losses from low-margin products and ensure strong performance from high-margin products.
3. Net Profit Increase: With stable sales, the price increase will directly enhance profit per unit, leading to an increase in net profits. Estée Lauder’s price increase of 10%-15% will fully cover the 30% cost increase and increase net profit margins by 5%-8%.
4. Long-term Impact: This strategy will strengthen product profitability and improve the company’s financial stability over the long term, better positioning Estée Lauder to handle future market fluctuations and cost increases.
As Lululemon’s financial executive, we recommend rising the price of all products to different degree.
Losses brought by production cost and government regulations are unlikely to make up in a short time, and these losses hurt our profit significantly. There is a positive tendency that consumer demand is going up, which means we should hold on to our product advantages. As a high-end athletic brand, the target consumer of Lululemon are mostly the high-spenders who pursue prior quality to price.
Firstly, it is important to consider different consumer groups’ purchasing power. Therefore, for basic products like tank tops, simple leggings and socks , we will rise the price by 10%. For products more expensive like premium leggings and jackets, the price will increase 30%. It is worth mentioning that the top 5 best sold products will have a 25% price rising, since these products already have good reputations and their price elasticity of demand is low.
Huge differences are shown among profitability of different products, so we can also adjust prices based on profits. To be specific, for products making 50%-80% profit, we will increase their price by 20%, because the high demand will drive steady sales. For products making 20%-50% profit, we will increase their price by 12%; for products making 0-20% profit, we will increase their price by 8%; while for products showing a loss, we will decrease their price by 5% to drive as many sales as possible.
In these ways, we try to squeeze consumer surplus meanwhile maintain their loyalty.