Credit swaps
The pricing strategy of Nike for Lebron X basketball shoes is not smart. The pricing strategy is insensitive to the people who cannot afford them, and yet they are loyal customers of the products from the company. Selling a pair of shoe at $30 is outrageous, especially if school kids are supposed to wear them, yet they should be buying school supplies. Besides, it is also insensitive to release such a price as the country is struggling to deal with unemployment issues. The action of Nike shows that the company is not concerned with the uncertainty of the economy.
Being sensitive to the cash strapped-buyers entails making another version of the shoe, to accommodate all the consumers. The product line of any company should always consider the economic viability of the pricing strategies that they implore, and Nike is not an exception. As much as the company wants to increase its margins, it is crucial to look into the reactions of the consumers concerning the prices that they put on their products. The consumers are an essential aspect of the company, as they promote sales. Therefore, if the company shows them that it is not concerned about them, the consumers will also do the same.
Customers are crucial stakeholders of the company, and therefore it is imperative to be sensitive towards them. As much as the company seeks to reduce the prices of the shoes by creating a lower version, most of the features in the original version should be present in the more economical version. Thus, the lower version should not be sub-standard. All the customers will be considered, both the ones who can afford the original shoes and the ones who will not be able to afford them.
Why Credit swaps are the fastest growing forms of swaps in recent days
Credit swaps have grown faster in recent days. After all, they allow the users to control credit risks because they isolate these risks from the underlying financial assets. Besides, there is no incidence of any cash flow, apart from exchanging the premium. It is an advantage because there will be no exchange of cash until the credit event that was stipulated takes place at the agreed time of contract negotiation. Therefore, people are confident enough to acknowledge that they are safe when they use the credit swap. People who enter into the credit swap contract will not encounter any risk, and they always recommend other people to enter into the contract.
Credit swaps grow faster because people believe in them, and they are sure that they can enter into credit swap contracts without facing any risk. Apart from the premium that people have to pay in the contracts, credit swaps generate financial flows only if a credit event concerned with the underlying entity takes place. Therefore, these contracts operate as either insurance or an option, and people have the freedom of choosing whatever it is that suits them the most. For this reason, many people love it because of the flexibility that it presents. These contracts are also traded over-the-counter, and there is no organized market, making people loyal to them.