Question

* Excelsior Corp. Launches a new hand-held personal digital assistant (PDA) for busy corporate executives. The initial retail price is set at 699. One year later, in an effort to reach a broader market, the price is lowered to 299. Which of the following describes the pricing strategies used by Excelsior Corp?

A. Penetration strategy followed by skimming strategy
B. Penetration strategy only
C. Skimming strategy only
D. Skimming strategy followed by penetration strategy
E. Penetration strategy followed by cost-based strategy

Answer 1

Option D Skimming strategy followed by penetration strategy

Step-by-step explanation:

The reason is that the when the product was new in the market, it was reflecting the high quality which was due to newest technology so the company set a high price to reflect a high quality product and this strategy is skimming strategy. When the competitors entered the market the company set a lowest price to increase its profit by satisfying the needs of customers at large. This bulk production gave economies of scale to Excelsior Corp. so the company set a lowest price to compete internationally as well as domestically. So the lowest price charged to customers due to economies of scale (Competitive advantage) is penetration strategy.

So the right answer is option D.