DEBASHRITA SARKAR B-38,SIMS MANAGING ECONOMIC VOLATILITY TOPIC : EFFECT OF RECESSION ON GLOBAL PRICING ON MOBILE INDUSTRY DEFINITION OF RECESSION

: In economics , a recession is a business cycle contraction, a general slowdown in economic activity. Macroeconomic indicators such as GDP, employment, investment spending, capacity utilization, household income, business profits, and inflation fall, while bankruptcies and the unemployment rate rise. Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation. FACTS ABOUT MOBILE INDUSTRY : TWO of the worlds leading cellphone manufactures have projected that the effects of the global recession will continue to plague the players in the industry for some time. Nokia and Sony Ericsson, which released their results for the first second quarter of 2009 on Thursday, where they revealed losses in income and drop in volumes shipped, expect the setback to continue in the current quarter. Nokia continues to expect 2009 industry mobile device volumes to decline approximately 10 percent from 2008 levels. Nokia now expects its market share in mobile devices to be approximately flat in 2009, compared with 2008. This is an update to Nokias earlier target to increase its market share in mobile devices in 2009, the company says in a statement. The sentiment comes after Nokia released a set of results that showed the company, which is the worlds biggest manufacturer of mobile phones, said net sales in the second half of 2009, net sales of EUR 9.9 billion were down 25 percent year on year while it shipped 103.2 million in the period, a 15 percent decline from the corresponding the year. On the other hand, its rival, Sony Ericsson, said units shipped in the quarter were 13.8 million, a decrease of 43 percent year-on-year and a sequential decrease of 5 percent. Sales for the quarter were Euro 1,684 million, a year-on-year decrease of 40 percent. The company attributed this to challenging market conditions, which it forecasted to persist in the current year.

Sony Ericsson maintains its forecast that the global handset market for 2009 will continue to contract by at least 10 percent from around 1,190 million units in 2008. Mobile phone companies have not been spared the effects of the global economic recession as consumers cut on their spending. SELF ANALYSIS : In Order to increase the market share pricing plays a vital role .The following are the Dos and Donts as far as pricing is concerned: Do: Define the value you offer to the customers : Any knowledge of the value you deliver to your customers gives you greater control over, and confidence in, your pricing. Interview your customers to find out how they view your products and services. Create a range of low- to high-value offerings. Bundle your products and services-and establish price accordingly--which enables you to appease both cost-conscious and value-conscious customers without cutting prices. Control company costs and reduce inefficiencies. Streamlining your company's processes and expenses is good for business in any economy. Reducing prices to generate more sales will not improve your business in the long term. Invest in innovation to offer something unique. Funnel funds into R&D so you have new products and services that give you negotiating flexibility with customers and sales growth. Innovation gives you an edge when customers are seeking something new to lift up their own financial prospects during an economic downturn or when coming out of one.

Dont: Discount your products or services in order to compete. Getting into a price war with your competitors--without adjusting the value of the product or service--will just send you and your competition swirling into a downward pricing death spiral where no one wins. Reduce prices on your high-value products and services. During a recession, a better strategy is to keep high-value products priced appropriately, but focus on selling more low-value products and services. When cost-driven customers threaten to take their business elsewhere, confidently point out the unique value your product and service offers, which justifies the price you charge