Hewlett-Packard (HP) Pricing

HP Pricing
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HP Pricing
HP’s decision to cut the price
Pricing decisions may determine the success or failure of products in any competitive market setting. The decision to cut on prices by the company results from the influence of the competition in the market, and from the fact that it is a new company in the tablet market, attracting demand is only possible by reducing prices (Edwards & Ricadela, 2011). In this perspective, the dominance of Apple in the business may be the reason behind cutting the prices, despite the numerous advantages that their products offer, some that match those of rival companies like Apple. With the reduction in prices, customers are able to notice the products and they have sufficiently cleared the shops in most outlets offering the products (Gilster, 2011).
Decision made
Whether the decision to reduce the prices was good or not depends on the net gains that could be made from the sales and the sustainability of such a strategy. It would be plausible to note that the sales were very high of the tablets even in the markets where the product was not very established. However, the profitability and sustainability of the idea are highly questionable. The Web OS technology being employed as well as the past of the tablet used to assemble the devices are very expensive, and it beats logic how the price could recover the cost of manufacture and still make profits for the manufacturer (Marlow, 2011). To this end, pricing decisions should be made on the value of the product, affordability and profitability. However, HP has overlooked the last criteria and the decision may not be sustainable.
Recommendation
The value of the tablet is evidently high and may equal that of its competitors in the market. Some of its features, like the touch pad, memory capacity and speed equal those of the iPad, and it is plausible to state that the customers would value the features equally. In such a case, HP has managed to create a good name for its other products (Perenson, 2011) and most of them have performed quite well in the market. Instead of using price cuts, the company could instead embark on marketing strategies to make the product popular and show the consumers what value the products have over their competitors. The pricing strategies do not always work, and basing policies on price cuts could lead to high sales, but meager profits that cannot sustain further production. In instances where the prices are set too low and they do not succeed in the market, significant losses and failure could be experienced and that is the case that happened to HP, which recorded very low sales and had to recall their products from the market (Marlow, 2011).
Initial pricing of the tablet
The price in the beginning was not too high and pricing it along its main competitors like Apple could have worked and improved sales margins. However, the justification of lower prices was based on the high demand in the market, although most of the clientele were contented with the product. To sustain this demand, it would have been wise t...