Page 7 - Sales Proposal - Craft Wicker and Things Limited
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ECONOMICS
EXTENDING CREDIT
Most clients pay upon delivery of items. However there are a few institutions to whom credit terms are extended of up to 10 business days. Due to the excellent management of accounts receivables the company has been able to maintain relatively stable cash flow.
PRICING STRATEGY
Craft Wicker and Things has a simple pricing strategy from which the company enjoys several advantages. This simple pricing strategy affords straight-forward Return on Investment (ROI) tracking and more reliable sales forecasting.
In their pricing strategy, the company employs two revenue models: the production model and the mark-up model. The production model applies to goods manufactured by the company. In this model, the company incurs a set of fixed and variable production expenses (such as labour, materials, and equipment) to produce finished goods. Craft Wicker and Things then sells these finished goods at a price above the cost to produce a profit. Alternatively, in Craft Wicker and Things’ markup model, the company uses spreadsheets manipulated by formulae that facilitate the input of the purchase price and it generates the proposed selling price. Factors considered in the calculations are the exchange rate, shipping costs associated with clearing customs, expenses of the company and the price in the industry. The major players usually charge very similar prices.
