Cost Classification
It should be noted that the conceptual analysis of costs is based on comparison of different pricing models applied by the companies operating within similar business field. The manufacturing costs should be obligatory considered. The cost of manufacturing products of the navigation systems is very high. It may be explained by the fact that materials necessary for production consist of the unmanned, manned system, aircrafts, and space systems.
In process of manufacturing and monitoring of the system high-skilled staff is required. Moreover, manufacturers of the details required by the navigation systems receive overhead profits. The non-manufacturing costs are related to the administrative costs that indirectly aid the production. The right allocation of financial resources to manage the navigation system is necessary to fully convey the intent of the company. The determination of the inventory and maintenance costs is important as the consistent control over the system results in increased efficiency of the product performance. All the stages of launching navigation systems are related to labor costs.
Determination of costs after the start-up phase
In general, all business costs are usually divided into fixed and variable. The fixed costs are not associated with the volume of navigation work. Such costs include depreciation, wages and the maintenance costs of the navigation systems. These costs vary being dependent on the following factors such as technical characteristics of the system, the period of its operation, types and models.
The navigation company is forced to pay for constant uploading of data such as maps in order to provide consumers with accurate and relevant information. The fees for the databases and their updating are determined for a particular period of time. Therefore such costs are fixed. Getting access to the data provided by space aircrafts is associated with constant payments to the US budget in form of taxes or voluntary contributions. The model features of the navigation system strongly influences fixed costs expressed by the depreciation. Variable costs depend on the product life cycle. Some of these costs can be classified as semi-variable if such expenditures are necessary for the normal functioning of the navigation process such as payment for databases and maintenance of the system. The reasonable costs both fixed and variable in this case are natural and objectively necessary for normal functioning of system.
Allocable cost is cost to be consistently treated in like circumstances. At the same time it is based on benefits received although it has not been directly related to projected activities. Such costs include the cost of placing ads within the system associated with additional profits of the navigation company. Moreover the company may expend additional financial resources to implement specific options for the customers such as voice support in different languages or immediate video connection to the support desk.
Pricing Method
The launching of navigation systems in US is connected with some challenges associated with severe competition within the industry and high expenditures to enter the market. At the same time, the competitive advantage of the company may allow to apply pricing strategy for market penetration. Offering low prices of navigation services will result in acquiring the loyalty of the middle-class customers. The company may also introduce some programs for rich clients and corporations based on pricing at a premium. After some time the prices of the basic systems will rich the market equilibrium resulting in additional profits.
Keeping in mind specific market circumstances and vulnerability, it is better to use cost-oriented pricing approach. Such strategy will allow avoiding overpricing of product keeping close to the market leaders. The profits expected by the company will be balanced in conformity with important market factors. The pricing analysis shall primarily involve cost analysis and indirect expenditures.
References
Ackerman, M. (2014). Pricing of navigation systems. Information Technology and People, 4(2), 10-24.
Fedder, D. (2014). Macroeconomics. New York: Education Press.
Weick, K. T. (2012). Pricing Models. Thousand Oaks: Sage.
