Big Drive Auto Scenario Pricing

Topics: Monetary policy, Inflation, Macroeconomics Pages: 1 (286 words) Published: January 27, 2011
Big Drive Auto Scenario pricing strategy
Operations and planning are important to all organizations, supplier', and customers around the world. Interest rates influence operations and planning, regarding Big Drives assets and liabilities. Low interest rates allow for competitive rates and services. Higher interest rates increase operations costs, reduce business, and lose customers. When costs are not passed onto the consumer, profits decline. The operation Costs are defined as the day-to-day expenses incurred in running a business, such as sales and administration, as opposed to production (, 2009). Yield Curve

Steep climbing curves are typically generated at the bottom of a recession. They come about when short-term bond rates are less than long-term rates. This shape is typical at the beginning of an economic expansion, after the end of a recession. These curves predict for investors a period of inflation, rising interest rates, and reestablishing demand (SmartMoney, 2009). Considering the recently deteriorated performance of GM, due to the recession, a brighter prediction with increased demand can be expected for Big Drive. Customer Demand for Products Interest rates and customer demand are inversely related. The higher rates are, the lower consumption is. When income is limited, customers spend less, resulting in reduced sales. Adjusting prices to overcome diminished consumer demand can be implemented. Attractive pricing strategies and creative incentives can help. Once the yield curve plays out, demand will increase and market will correct. Dependence on Monetary Variables other than interest rates, such as business cycles causes cyclical movements in the economy. During expansion, output and employment rise. A rapid rise in inflation may occur, due to the expansion cycle. Conversely, during a recession, decline in output of goods and services occurs.
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