Reference no: EM131225635

Choose an organization with which you are familiar or choose to research. If possible, base your answers either on your direct experience, on your estimations for this company and product, or on published documents. Do not use surveys or interviews. However, if you wish to draw on answers to questions that you have posed to your management in the category of need-to-know for your job duties, then that would be OK as long as you do not reveal company confidential information of a private business. For a private-industry business, you can certainly use publicly available sources; otherwise, if the information is company confidential or you have doubt about it, then do not identify the organization. Question 1. How is contract price determined between buyer and seller, more specifically: What factors are considered in negotiating the contract price? Do you estimate that these factors include any direct pricing interventions by sources external to buyer and seller; if so, what would they be? Hint: As an example of “direct” pricing intervention, consider that, on a recent car rental price quotation, out of a total price of $714.43, payment of $488 went to the car rental company; the rest, $226.43, went to external parties to pay a concession recovery fee, a domestic security fee, an energy recovery fee, a transportation facility charge, a vehicle license fee, and a tax. These are examples of direct pricing interventions by government into the private sector; such things as the cost of regulation on the car rental company, their corporate taxes, their employees' individual taxes, and the various taxes and regulatory burdens on their suppliers, their suppliers' suppliers, etc., are examples of indirect pricing interventions. In this example, the extent of the contract pricing component due to direct interventions was $226.43/$714.43 or approximately 32% of the total paid by the buyer. Question 2. Which performance-based metrics does that organization typically use in its field of business to evaluate/measure performance of the product it is selling or buying? Does the seller of that product typically price to performance alone (except for interventions)? If so, what are any significant interventions such as in the car rental example above that affect the price? If not, what are other pricing factors?