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Word Count: 2,166
Determining the price and Value of a product or service can be an endless task especially within a rapidly changing marketplace This very reason was the principal motivator in the development of new ways to determine value of goods to the customers and to the manufacturers and suppliers From the 1920s the accountancy profession used rigidly4 structured accounting systems that ceased to evolve and adapt over the years of rapid change and Development in the 60 years it took for a noticeable change in practices to arise The Initial system to combat these methods to determine the worth of any given product or service was that of cost accounting There have been other methods used in recent years which can be more flexible and more efficient however these shall be covered in more depth later Apart from cost induced pricing methods there are pressing external influences that must be taken into consideration before determining whether cost accounting or any other forms of quantitative approach is deemed applicable in todays market Porter 1980 offers a model Figure 1 which suggests the importance of pressure from five competitive forces Figure 1 the 5 forces model Porter 1980 Rivalry between existing competitors - The intensity of rivalry between existing competitors may be linked to determinants such as the number of competitors marketing power brand identity product differences and cost structure The rivalry will extend to the seeking of new markets and new products The threat of new entrants - The threat of new entrants will be affected by determinants such as the barriers to entry and the expected reaction from existing firms New entrants will incur high capital costs of entry plus experience costs of developing expertise and the costs of brand identity development The threat of substitutes - The threat of substitutes may be determined by the level of innovation of existing producers the ability of existing compet itors to finance
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