Prepare a pricing strategy to be followed by VHIL based on various contradictory reports received as regards gaining foothold in an African Country.

Pricing strategy for automated tunnelling machinery in the African Market: It is stated by two market research firms that this product is a unique product and has no such competitor in the African market. This would mean that VHIL has abundant scope for making the product prominent besides earning huge profit margin. If the market report is correct, the product is first of its nature, the 'skimming pricing' would be the most appropriate pricing strategy.If the product has to gain foothold in the market by making the public or the users to be aware of its availability, it is an evolutionary product and by means of mega advertisement demand can be generated and market hold could be achieved. The price can be determined by taking cost-benefit, competitor and demand for the product into account.If the market already has players or potential entry of other machinery manufacturer, the company has to adopt either a cost based pricing or mark up pricing to play cautiously in the market.If the market information is that the tunnelling machinery is a Me-too product, the company has to resort to penetration pricing to gain foothold in the market as in this case market price is determined by competitive forces for a successful product.All the above strategies could be pursued either by incorporating a subsidiary company or by means of joint venture with a local player subject to due diligence. ALTERNATIVE VHIL should adopt a flexible and carefully planned pricing strategy while entering the African market because the market research reports provide mixed opinions. Some reports suggest that there is no similar high-end tunnelling machine available in the market, while other reports indicate that customers are conservative and strong competitors already exist. Therefore, the company should not depend on only one pricing method and should design its strategy according to market conditions and customer acceptance. Since automated tunnelling machinery is a highly advanced and expensive product used in large infrastructure projects, customers may hesitate to make huge upfront investments. Therefore, instead of only selling the machinery, VHIL can also offer the machines on lease through a subsidiary company. Leasing would reduce the financial burden on customers and help the company generate regular long-term income. It would also help the company attract customers who may not be willing to purchase the machinery immediately. In the initial stage, VHIL may adopt a penetration strategy by offering the machinery at comparatively attractive prices or with flexible payment terms to gain entry into the market and build customer confidence. This would help the company establish its presence and increase acceptance of the product. However, the company should avoid very low pricing because the machinery represents advanced technology and premium quality. Extremely low pricing may negatively affect the premium image of the product. Once the product gains market acceptance, VHIL can gradually shift towards value-based pricing. Under this approach, the company would charge prices based on the benefits provided by the machinery such as faster project completion, better efficiency, lower labour requirement and advanced technology. Infrastructure companies usually focus more on long-term cost savings and project efficiency rather than only the initial purchase price. If the product is viewed as a “Me-too” product because of existing competitors, VHIL may adopt competitive pricing by keeping prices comparable with market players while differentiating itself through better after-sales service, maintenance support, spare parts availability and operator training. Such additional support services can improve customer satisfaction and create competitive advantage. The company should also follow geographical pricing depending upon local conditions in different African countries. Pricing may vary based on transportation cost, import duties, economic conditions and infrastructure development of each region. Entering into a joint venture with a local player can further strengthen VHIL's pricing strategy. A local partner would have better knowledge of customer preferences, government procedures and local business practices. This would help VHIL reduce market entry risk and operational costs. Due to lower setup and marketing costs, the company may be able to offer more competitive pricing. A local partner would also improve customer trust and acceptance, especially in conservative markets. The joint venture can also help VHIL share costs relating to marketing, servicing and distribution. This would reduce the financial burden on the company and provide greater pricing flexibility. Further, local partners may help in obtaining government projects and local business opportunities more easily. Considering the contradictory market reports, VHIL should initially enter the market gradually through pilot projects, selective leasing arrangements and strategic partnerships instead of making large aggressive investments immediately. Based on customer response and market acceptance, the company can later modify its pricing strategy. Overall, VHIL should adopt a combination of penetration pricing, value-based pricing, competitive pricing and leasing-based pricing along with a joint venture approach to successfully establish its presence in the African market.