DETERMINATION OF FLOOR PRICE IN EXPANDING MARKET FOR ROTATING EQUIPMENT INDUSTRY

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Sulaiha, Siti and Tjendrasa, Kin and Daryanto, Wiwiek Mardawiyah (2020) DETERMINATION OF FLOOR PRICE IN EXPANDING MARKET FOR ROTATING EQUIPMENT INDUSTRY. International Journal of Business, Economics and Law, 21 (1). pp. 77-87. ISSN 2289-1552

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Abstract

Demand for rotating equipment services likely to remain steady over the next few years because strongly supported by the growth of oil & gas and power generation industries. PT. SI as a rotating equipment services company has demanded to increase shareholder value by growing up the business. Workshop expansion for servicing large rotating equipment is one of the ways to grow the business and it needs additional capital investment. Expansion facility to enlarge capabilities creates another challenge, that is the uncertainty of expected economic return from additional business and how to set a minimum price (floor price) as a reference price that will be used as a marketing guideline for pricing strategy within an additional capital investment. High threat from the analysis of the business issue related to the pricing. Selling price is the most important factor for marketing in the rotating equipment services because it is a weapon to negotiate with the customer in the last stage of bidding when dealing with the service. Determination of the selling price needs reference price, in this case, means the lowest price (floor price) of the service can be sold for. The determination of the floor price using the NPV calculation method is integrated with the terminal value in the end year of the projection when the NPV value equal to zero. This method is differed from the existing that only used historical data and not include target volume sales as an important factor to set the floor price and by determining a budget plan for other factors, the company can encounter the possibility of the costs swells and do cost efficiency. This method can keep the company grow the business with additional capital investment without losing money but can match the market at a competitive quote.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Research And Community Empowerment > Journals
Depositing User: Dr. Wiwiek Mardawiyah Daryanto
Date Deposited: 17 Nov 2020 08:50
Last Modified: 21 Dec 2021 07:36
URI: http://repository.ipmi.ac.id/id/eprint/946

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