Introduction
State-owned company Dubai Aluminum Company Limited (DUBAL) manufactures and distributes aluminum-based products. For automatic applications involving engine cradles, wheel rims, subframes, and extrusion billets for building, transportation, forging, and industrial uses, DUBAL provides foundry alloys. DUBAL also offers a variety of aluminum components used in the aerospace industry, as well as in the production of computer hard drives, capacitors, and capacitor memory (Bearne, Dupuis & Tarcy, 2016). The corporation provides customer service in 46 countries across Asia, Africa, Australia, Europe, South and North America, giving a complete picture of its global operations. Dubai Aluminum Company Limited applies to cost-plus and value-based pricing techniques when setting prices for its products.
Cost-Plus Pricing Technique applied by DUBAL
Cost-plus pricing technique is applied by DUBAL when valuing its products. This particular approach was considered ideal for setting prices because it accounts all the input costs. The input cost includes the raw materials, labor costs, overheads and delivery cost. After all the costs are factored in the company adds the profit margin based on the international market situation because there are international policies that govern prices. Due to considerate pricing, DUBAL has been selling over 1.5 million metric tons every year since 2009 (Bearne, Dupuis & Tarcy, 2016).
Fluctuating Prices and Competitor Influence
The prices of raw materials and production cost fluctuate, thus DUBAL has been encountering some complication in deciding the prices due to the reason that there are competitors in the market, such as UC Rusal and Alcoa in Russia and USA respectively. The availability of the competitors contributes to the difficulties in determining prices because the source of raw materials and production cost differences among the producers thus prices of the finished products vary. Competitors in the market use cost-plus pricing technique, however, due to the variance in input costs the selling prices of the aluminum products vary. Hence, DUBAL has been applying value-based pricing particularly on its major clients, who buy DUBAL's products in bulk and have been loyal customers (Baines, Fill & Rosengren, 2017).
Value-Based Pricing for Major Clients
DUBAL applies the value-based price setting to when classifying prices for the customers, who make bulk and frequent orders. Quality of the products that are produced by DUBAL is majorly based on the customers' specifications and the recommendation from the quality assurance and the research department (Baines, Fill & Rosengren, 2017). Marketing research unit takes deep study regarding the quality and the prices of the aluminum products supplied by the key competitors. According to Baines, Fill & Rosengren (2017), aluminum in the second most consumed metal after steel and it is expected to be consumed highly in future. Thus DUBAL keeps on considering the quantity, quality and the prices of its products.
Conclusion
In conclusion, cost-plus and quality-based techniques have been the core pricing models that have been helping DUBAL maintain its market share considering stiff competitors. Marketing strategies are critical activities that require experts, who understand the international market, particularly for the aluminum products. Therefore, DUBAL has been investing in marketing strategies to ensure aluminum products market across the world is surveyed and analyze the market prices because economic conditions vary from one nation to another. Additionally, the capacity of the additional production, which has been implemented by DUBAL as a part of their strategic goals and generated by newly constructed green-field smelters, will put the corporation in a strong desire to achieve its strategic ambitions and at the same time contribute to regional and global trends in the aluminum industry.
References
Baines, P., Fill, C., & Rosengren, S. (2017). Marketing. Oxford: Oxford University Press.
Bearne, G., Dupuis, M., & Tarcy, G. (Eds.) (2016). Essential readings in light metals: Volume 2. Hoboken, NJ: John Wiley & Sons.
PKF International. (2016). Wiley IFRS 2016: Interpretation and Application of International Financial Reporting Standards. New York, NY: John Wiley & Sons.
