One of the world’s leading car producing companies, Toyota has been enjoying a worldwide success not only due to the quality of its products, but also because of the pricing strategy that it has chosen when entering the global market. Though the change of the environment, in which the organization had to evolve, was drastic, the application of a customized pricing strategy leveled the process and quickly turned Toyota into one of the most recognizable and successful brands (Hammond 79).
When it comes to identifying the specific features of Toyota’s pricing strategy, one must mention that the organization incorporates two approaches in order to attain a maximum benefit. To be more specific, Toyota combines the low-price approach and the market share strategy in order to attain a maximum efficiency. Indeed, with the adoption of the specified approaches, it becomes possible for the company to display certain flexibility in adjusting its prices (Sallee 192).
The suggested approach could be criticized for its pandering to the target demographics. Indeed, by lowering the prices too much, Toyota may face the threat of losing a significant part of its revenues. With a well balanced approach towards the production and promotion process, however, it will be possible to introduce sustainability into the company’s pricing strategy.
As far as the company’s P/E ratio is concerned, it should be born in mind that Toyota is currently trading its shares for $ 114.54 per piece (“Toyota Motor” para. 1). Since the company has been earning approximately $ 11.52 per share over the past 12 months (“Toyota Motor” para. 1), Toyota’s P/E ratio will make 9.9%.
Though the approach that the Plexus Worldwide has chosen for its pricing strategy can be viewed as rather weird, it, in fact, allows for embracing a range of opportunities. According to the latest data, the company has managed to incorporate the principles of profit maximization into its current pricing strategy in order to obtain higher net revenue. By boosting its cost margins, the company is clearly maximizing its profits via the value based pricing. Moreover, the organization is evidently aimed at exploring the existing bundling option.
The latter can be viewed as a rather reasonable approach in the realm of tight competition (Lin and Chung 211). Seeing that the organization operates in the environment, where multiple options are welcomed by the customers, the bundling strategy creates premises for the company’s economic growth. The strategy in question, however, also has its problems; particularly, the threat of overall sales being lowered due to the excessive use of the bundle strategy can be expected (Aloysius, Deck and Farmer 663).
It should be noted, though, that the Plexus Company has been careful enough not to abuse the bundle strategy. Offering the customers only the necessary attributes of health and wellness supplements, the organization manages to collect impressive revenues. Indeed, as long as the customers feel that the company provides them with supplementary services, and comparatively cheap ones at that, they will return for new and more exciting experiences.
According to the official statistical data, the price per share in the company makes $38.52. The earnings per share, in their turn, have been quite consistent over the past twelve months and make $2.58 (“Plexus Corp.” para. 2). The current R/E ratio of the company will make 14.93.
Aloysius, John, Cary Deck and Amy Farmer. “Price Bundling in Competitive Markets.” Journal of Revenue and Pricing Management 11.6 (2012), 661–672. Print.
Hammond, Robert G. “Sudden Unintended Used-Price Deceleration? The 2009–2010 Toyota Recalls.” Journal of Economics & Management Strategy 22.1 (2013), 78–100. Print.
Lin, Hiu-Ling and Yan-Shu Chung. “Bundling Strategy and Product Differentiation.” Journal of Economics 108.3 (2013), 207–229. Print.
“Plexus Corp.” The wall Street Journal. 2014
Sallee, James. “The Surprising Incidence of Tax Credits for the Toyota Prius.” American Economic Journal: Economic Policy 3.2 (2011), 189–219. Print.
“Toyota Motor.” Yahoo Finance. 2014.