M1 Market Pricing and Business Strategy: Part 2

Question 1

3 positions to market

Answer 1

lead, lag , lag lead

Question 2

Lead the Market

Answer 2

The company will consciously set its pay at year-end anticipated market level, not at the
current market levels.
• The company’s pay levels will then “lead” the market until the start of the next year. In other
words, the company will start the year ahead of its competition and remain there until the
end of the year, when market rates catch up.
• Viewed as a “pay leader”
• A company that leads the market may be better positioned to attract and retain more
experienced and/or higher performing employees by offering above market pay.

Question 3

Lag the Market

Answer 3

• The company will consciously set its pay equal to current market levels at the beginning of
the year.
• The company’s pay levels will “lag” the market as the year progresses.
• An organization that lags the market may experience greater difficulty in attracting and
retaining qualified employees. However, other reward elements, such as benefits offerings,
company culture, work flexibility or career development opportunities may offset belowmarket
pay.

Question 4

Lead Lag

Answer 4

• The company will consciously set its pay at mid-year anticipated market level.
• The company’s pay levels will “lead” the market in the first half of the year and “lag” the
market in the second half.
• Requires organizational flexibility and broad awareness of business strategy.

Question 5

4 stages of business life cycle

Answer 5

Start up
Growth
Mature
Decline

Question 6

Start up stage

Answer 6

The organization is new with few or no formal policies or procedures. The
organization’s focus is on obtaining capital, marketing products or services, initial sales
growth and cash conservation.

Question 7

Growth Stage

Answer 7

In this stage, the organization is highly focused on growing sales, increasing
distribution capability and determining how to efficiently produce products or services
to meet growing demand. Growth typically generates the need to begin standardizing
procedures through policy creation.

Question 8

Mature Stage

Answer 8

The mature stage is characterized by a focus on maintaining/increasing market
share, improving productivity and otherwise reducing cost of sales. Improvements to
products are more evolutionary than revolutionary. The organization typically has higher
levels of bureaucracy and greater amounts of cash on hand than at other stages.

Question 9

Decline

Answer 9

At this point, the organization’s revenues are declining. It must decide whether
to reinvest in current products, create new products or maximize profits with current
products as long as possible.