CHAPTER 3 Business Strategy Alignment

Pricing and business strategy are inexorably related. A firm’s business strategy is shaped by pricing information, analytics, and capabilities as well as many other things. Likewise, sound pricing strategies are constructed within the context of the firm-specific business strategy. And few decisions can impact corporate valuations as fast as a pricing decision.

Consider the firm’s business strategy and its implications on pricing: The choices of customers the firm will seek to serve, the resultant competitors that will also be seeking to serve those same customers from the same budget, and the corporate strategy for determining how the firm will serve its target customers better and more profitably both today and in the future. These strategic issues define the firm’s business strategy, and each of these fundamental business strategy elements impacts the firm’s pricing strategy.

Also, each of these strategic business issues is impacted by pricing information, analytics, and capabilities. Analysis on the preferences and willingness to pay by various potential market segments informs the choice of target market and adjacent selections. Information on a competitor’s pricing actions impacts the firm’s pricing and its price positioning. Capabilities in pricing, the development of which is itself a strategic business decision, impacts the firm’s reaction speed, price capture, and latitude for executing different corporate strategies. Moreover, ...

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