Case price like a retailer, not a widget-maker 53 parker

  • Case price like a retailer, not a widget-maker 53 parker Hannifin corporation is a leading manufacturer of component parts used in aerospace, transportation, and manufacturing equipment. the company makes several hundred thousand parts—from heat-resistant seals for jet engines and components used in the space shuttle to steel valves that hoist buckets on cherry pickers. when Donald Washkewicz took over as chief executive, he came to an unnerving conclusion: the pricing approach that the company had followed for years was downright crazy. for as long as anyone at the company could recall, the firm used this simple approach to determine the prices for its thousands of parts: company managers would calculate how much it cost to make and deliver each product and then add a flat percentage on top, usually aiming for around a 35 percent margin. across divisions, many managers liked this cost-plus approach because it was straightforward and gave them broad authority to negotiate prices with customers. discussion 
  • questions1. describe the process that you would follow in performing an audit of the firm’s product line to identify those products that represent the best and worst candidates for profit-margin expansion.
  • 2. provide a set of specific pricing guidelines that managers should apply as the traditional cost-plus approach is phased out and a value-based approach to pricing is implemented.