София 1700, Студентски град “Христо Ботев”,
Approved by:
Adopted by a decision of the Faculty
„International Economics and Politics”
Protocol № /
Dean
Prof. A. Vassileva, PhD
CURRICULUM
Academic subject:
PRICE AND PRICING POLICY
В63830
О0767
Subject code:
Educational and qualification
degree:
Status of the course
Field of higher education:
Professional:
Specialty:
Faculty:
Department:
Total student academic load
(average classes per course):
Non-contact student academic
load
Credits:
Lecturer of the course:
3.
3.8.
3.8.30
Bachelor of Arts
Optional
Social Sciences, Economics and Law
Bachelor of Economics
International Economic Relations
International Economics and Politics
International Economic Relations and
Business
30 / 0
70 hours
4
Associate Professor Elka Micheva, PhD
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ANNOTATION
1. Background of the discipline
The “Price and Pricing Policy" subject has been taught since 1998. However, the
subject-matter has been taught in the specialty under other names since the early
1990s. The course was established as a special and compulsory discipline in the
“International Markets and Prices” specialization for the first time in the curriculum of
2005. Thus, it has become a logical continuation of the training in prices at the company
level.
The theoretical foundations of pricing (basic laws and terminology) are acquired
in the mandatory university courses "Fundamentals of Microeconomics”, “Marketing”,
and “Basics of Accounting”. They are inbound links from the "first round". The subject
“Price and Pricing Policy" has, however, inbound links from the "second round" which
comprise the courses “International Marketing", "International Pricing Practices", and
“International Financial Management”. They are taught in parallel in the seventh
semester. This allows the lecturer in “Price and Pricing Policy" to make logical
connections to other disciplines and also to outline the differences in the focus and the
aspects of learning some overlapping concepts or issues. Thus, the interdisciplinary
approach in teaching is applied in practice.
2. Course content
The “Price and Pricing Policy" course provides knowledge of the philosophy and
practice of pricing in industrial companies under different market structures in terms of
the level of competitiveness.
Administrative prices, otherwise known as the theoretical and analytical models
of pricing decision-making that firms apply, reflect primarily their business interests,
capabilities, and market positions. They become real prices only after going through the
assessment of the market.
Each firm, guided by its strategic and tactical goals, decides which factors (costs
and profit or buyers and competitors) will be the key elements in its pricing. What the
"algorithm" for defining the prices should be is a matter of highest complexity to the
corporate management.
The formula for success in corporate pricing is "both from the costs and the
market”. It is only when the company price embodies a good balance between business
interests and market realities, that it is reasonable in the eyes of consumers and
profitable to the company.
Various pricing methods – cost- and market-oriented – can be reliable analytical
tools for developing relatively realistic options for sales prices but only when they are
used in combination and complement each other.
In addition to the philosophy, methods, and practices of determining firm prices,
the course teaches also subjects that are poorly developed in the specialized scientific
literature. They include transfer pricing and the pricing of intermediate goods.
The study of pricing policy and the price mix is distinguished by the author’s style
from the numerous writings on the subject that exist in marketing literature.
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In the short description of the course content it should be emphasized that all the
topics of the "Price and Pricing Policy” course are discussed on market and company
level. Thus, they provide understanding of the relations and constant mutual transitions
between the corporate and market principles in pricing.
3. Language of teaching: English
CONTENT OF THE CURRICULUM
LECTURES
№
ТOPICS
Academic
load
1.
Sector pricing and value basis of the company prices: concept
of objectively determined reproductive level of company prices in a
specific industry; the role of intra-sector competitive pricing; forming
of sectoral structure of costs; structural elements of medium-sector
costs; branch structure of the price.
3
2.
Place and importance of prices in the company management:
the "price-revenues", “price-functionality-quality”, and “pricebeneficial effect" dependencies as price-formation benchmarks for
companies in market conditions; absolute and relative price level as
a priority of corporate governance as a priority; market culture of
companies in the pricing (the relation "company-market”);
adjustment of company prices to market realities; types of business
rebates.
3
3.
The four main issues of corporate management of prices: the
effect of the three "C"; single price or different prices for different
market segments; price has to cover the costs plus the profit;
determining the optimal level of corporate activity in balancing the
additional costs and revenues.
3
4.
The cost approach and cost-based pricing as an economic
practice: the cost basis of pricing for companies from different
industries; types of costs and features of their dynamics at different
scales of activity; costs as a critical economic parameter; conditions
for normal reproduction and profitability; analysis of the critical point
(BEP) and marginal analysis and its application in corporate pricing;
individual costs as the basis of the company price; in which cases
and under what market structures is possible to implement such
pricing basis?
3
5.
Cost-based pricing methods: cost-based price under the formula
"cost plus"; method of direct costs; "contribution margin" and the
3
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definition of lower and upper limit of the price.
6.
Other company criteria and approaches in determining the
company price: the principle of pricing "from the profit" and its
peculiarities; the distinction between the concepts “common,
marginal and target profit; the formula of the price with a target profit;
determining of profitability, which is contained in the sale price of the
company; prices with "target" profit on sales; on investments and on
assets.
3
7.
Market-oriented approaches and methods of company and
sector pricing: method of current prices of the competition;
parametric pricing; pricing based on international comparisons of
quality of competing products; pricing "from demand"; “consumer
evaluation” and “effective use for the consumer” as price bases;
application in pricing practices of companies.
3
8.
Nature, approaches and methods of transfer pricing: general
formula for pricing in intra-company exchange; alternative solutions
for the transfer price in full and part-load capacity and in the
presence of a competitive market; transfer according to contract
market price; contractual transfer price and exchange rate; transfer
prices on cost basis; transfer pricing with two bases.
3
9.
Pricing of intermediary products: pricing mechanism for external
cooperation links of industrial companies; formation of prices for
cooperative inter-company supplies, in accessories for general
purpose; special pricing parts and assemblies; pricing practices in
the system of sub-supplies; pricing methods employed by
government contractors.
3
10.
Pricing policy as a management instrument in marketing:
nature, characteristics and content of the pricing policy;
management aspects - price targets, choice of pricing strategy,
pricing decisions; price mix as a marketing tool for market impact
and adaptation; price coordination in the marketing mix.
3
METHOD / TEACHING STRATEGY:
The teaching is done by complementing and illustrating the lectures with
transparencies, slides, and online sources; students are assigned practical and
individual tasks for a better understanding of selected issues from the problem scope of
corporate pricing on an international scale.
Necessary resources for the training process are: board and marker, overhead
projector, video, computer with Internet connection.
INDEPENDENT WORK
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Students are assigned homework and different tasks in the process of training.
EVALUATION METHOD
The final grade is determined on a six-point scale, the minimum score for
successful completion of the training is Medium / 3 /. The grade compliance with the
European system of credit transfer is as follows:
Excellent /6/
Very good /5/
Good /4/
A
B
C
80%
75%
70%
Credits are awarded as provided for in the plan
Fair /3/
D
Poor /2/
E
60%
FX
F
No credits awarded
50%
The assessment is based on a comprehensive final evaluation, which includes
the results of the final test, practical and individual task presence (relating to
participation) and the regulations for a maximum of 3 absences (with justification) in the
course of the semester.
Comprehensive final assessment is structured as follows (in percentages):
• 60% the result of the examination test;
• 10% attendance associated with participation;
• 20% practical task (p. 10);
• 10% individual task/test.
This structure of the final assessment is valid for all test sessions (regular,
supplementary, liquidation). For more than three absences a penalty applies of
decreasing the final assessment with the 0.5 points.
EXPECTED RESULTS FROM THE COURSE
The "Price and Pricing Policy” course provides methodological and practical
knowledge about:
 sectoral pricing as a value criterion of each company price;
 classification of pricing methods based on company and market-oriented criteria;
 essential features and technique of each company pricing method and also the
possibilities and limitations of its application under various market conditions;
 analytical applications of BEA (the method for determining the critical values of
revenue and expenditure) and marginal analysis to find the optimum activity and
to maximize the income of the company;
 specifics of pricing in intra-company vertical cooperation connections and in
intercompany cooperation in the system of sub-supplies between companies
producing final products and manufacturers of accessories.
During the course students acquire the following skills:
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




to distinguish the types of costs according to their dynamics in different volumes
of production and sales activity and to understand the differentiated approach to
their use as the value base of the company price;
to identify the boundaries of the use of price elasticity of demand and supply in
company pricing and to make a connection between this analysis and the
volume and dynamics of profit in different selling prices of production;
to solve problems related to the evaluation of various pricing alternatives by the
break-even analysis (BEA);
to determine the field of alternative pricing solutions by finding the upper and
lower limits of the company price for the purposes of contract pricing;
to make sectoral international price comparisons by the consolidated structural
elements of the price of a particular type of sectoral, respectively, company
products.
Knowledge and skills acquired during the “Price and Pricing Policy” course are
indispensable for enhancing the literacy about prices, which is traditionally the largest
weakness in the preparation of our students.
THE COURSE IS ALSO TAUGHT IN:
Some parts of the course “Price and Pricing Policy” are taught in all universities
in EU in such disciplines as: “Engineering Economy”; “Managerial Accountaning”; “Cost
Management” and “International Marketing”.
TOTAL STUDENT ACADEMIC LOAD
Type of classes/academic load
Lectures
Seminars
Laboratory training
Practical training
Term paper
Final thesis
Individual assignment
Interim exam/test
On-going assessment
Exam
Total
Overall
student
academic
load
30
writtten
30
Student academic
load, average
classes per week
Student noncontact
academic load
Total
2
70
100
2
70
100
RECOMMENDED BIBLIOGRAPHY
А. BASIC
Vohra, R., L. Krishnamurthi, 2012, “Principles of Pricing: An Analytical Approach”
Cambridge University Press;
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Shulman, J. S., 2011, “Transfer pricing in the multinational firm”, Nabu Press;
Bertini, M., J. T. Gourville, “Rethinking the Way Prices Are Set Can Expand the Pie for
Everyone”, Harvard Business Review, June, 2012;
Cooper, R., 1995, “When Lean Enterprises Collide (Competing through confrontation)”,
Harward Business School Press, Boston: Mass;
Nakamura, E., J. Steinsson, “Five Facts About Prices: A Reevaluation of Menu Cost
Models”, The Quarterly Journal of Economics, November, 2008;
Porter, M., 1980, “Competitive strategy: Techniques for analyzing industries and
competitors”, New York: The Free Press;
The Economist, “Comparative Advantage: The Boomerang Effect”, April 21-st, 2012.
B. ADDITIONAL
Fabiani, S., C. S. Loupias, F. M. M. Martins, R. Sabbatini, 2007, “Pricing Decisions in
the Euro Area: How Firms Set Prices and Why”, Oxford University Press;
King, E., 2008, “Transfer Pricing and Corporate Taxation: Problems, Practical
Implications and Proposed Solutions”, Springer;
Nagle,T., J. Hogan, J. Zale, 2011, “The Strategy and Tactics of Pricing: A Guide to
Growing More Profitably”, Prentice Hall;
Smith, T. J., 2011, “Pricing Strategy: Setting Price Levels, Managing Price Discounts
and Establishing Price Structures”, South-Western College Pub;
Thoihen, S. H., 2009, “Essays on Price Competition and Firm Strategies in Oligopolies:
Pricing
and
strategies
in
markets
with
switching
costs
and
strategic
complementarities”, VDM Verlag.
PREPARED BY:
Associate Professor Elka Micheva, PhD
HEAD OF DEPARTMENT:
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Associate Professor Ivan Stoychev, PhD
DEAN:
Professor Antoaneta Vassileva, PhD
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