Текст книги "Marketing and Pricing"

THEME 13. PRICES IN ECONOMICS OF BUSINESS

The production value is generated based on the cost of production, profits, and all kinds of taxes, the quality of consumer goods and property market conditions. Prices and taxes, which are economic tools of economic management, are closely interrelated. Rates of various taxes in the budget and allocations to budget funds both directly and indirectly, affect the level of prices. The direct effect is that logs and non-tax payments directly reflected in the price, as are its constituent elements. At the same time, providing deterrence-down or a stimulating effect on the production, they are able to change the ratio of supply and demand, that is, indirectly affect the price.

The tax system of the Republic of Belarus requires a differentiated approach to the inclusion of tax and non-tax payments to the price. One portion of taxes is direct, that is levied on the assets of enterprises and their incomes. These taxes and non-tax payments are elements max price, the cost price (tax on the use of natural resources, land payments, social payments, contributions to the innovation funds) and profit (property tax, income tax and – profits, other taxes paid out of profits). The other part relates to an indirect tax, which stand as independent elements of price, increase its size.

Substantiation rates begin by defining the planned cost of production and sales in accordance with the provisions of regulation on the composition of the expenses included in the cost.

Determination of the amount of profit in the price of goods is carried out with the help of legitimate enterprise rate of return. In Belarus, the largest spread received the margins, estimated to cost of production and wages. Rate of return on to the ratio of wages is preferable for businesses where the one-temporarily made products with different cost structures.

Excise. Excise taxes are included in the price of goods that have on the specific of their properties monopolistically high prices and strong demand. The following products: alcohol technical, solutions containing alcohol, alcohol (drinking alcohol, vodka, liquor, cognac, wine), beer, tobacco products, crude oil, diesel fuel, jewelry, cars, micro-bus are imposed by excise taxes.

Excise tax rates can be set fixed (specific) that is in euros or rubles per physical unit and ad valorem (percentage). If operates fixed rate in euros, the amount of excise duty shall be determined by exchange at the rate of Euro to USD.

Wholesale prices are formed by all wholesale intermediary. In this case, the selling price will include the intermediary selling price of the manufacturer or importer and wholesale allowance. Regulations on the formation of prices and tariffs, approved by the Ministry of Economy of the Republic of Belarus of 10.09.08, the number 183 there are restrictions on the size of the wholesale mark, totaling no more than 20% of the selling price authorized by the manufacturer or importer, regardless of the number of resellers involved in goods movement except for goods placed in the application number 1 to this Decision.

Retail price is based on the manufacturer or the selling of the first wholesale buyer (importer) in charge of importation of goods in the Republic, with the addition of wholesale and trade (or only trade if it comes-pitch to retailers, bypassing intermediaries) allowances. The above provisions shall provide limitations on the size of the trade allowances totaling no more than 30%, taking into account the wholesale mark regardless of the number of participating intermediaries.

Flexible pricing policy of the company may be in some cases to justify prices, allowing the company to the full implementation of reproductive processes under steady or limited demand. In this case, a costly method with sequential calculation of the rates of all the elements is used. Market pricing suggests the possibility of adjustment to the original price calculated by applying the various supplements thereto or rebates based on market conditions, scope of supply, seasonality of demand and other factors.

Despite the relative ease of calculation, the scope of cost-method is limited, since the pricing cost method does not take into account market conditions, the quality of goods. When the market prices of many products are determined primarily by market factors such enterprises must be flexible in making decisions on prices. In this case, targeting only the costs does not allow implementing fully all the possibilities for goods provided by the market.

The use of «reverse calculation» gives you the chance to figure out product’s future on the basis of expediency, dictated by the market. The scheme of computation is based on the identification of market conditions and the impact of the tax system on business profits and revenue from the sale of goods at free market prices.

Trading margin is part of the retail price and price-fighting services for the sale of goods in wholesale, retail, and other intermediary trading and purchasing organizations.

Business firms in their pricing policies should take into account a number of features of the circulation. The main limitation of trading prices of services retail prices are the final consumers of goods with the demand, the level of competition in the market. The price level of trading services has the effect of the sale of any particular need of one commodity, and the assortment of goods with a view to increasing trade, the quality of customer service, the possibility of rapid price response to changing market conditions.

Trade margins in terms of value are determined on the basis of a trade premiums or discounts as a percentage. The sum for the implementation of all products trading company generates its gross income. Trade margins are set in % of the selling price of the goods (or the price of the importer who imported goods for the domestic market), not including VAT.

Trade discounts are defined as % of retail price. Trade discounts are more consistent with market conditions, as characterized by a finite fraction of the market price determined by market conditions, the remaining trading firm. In domestic practice, shopping discounts apply only in cases where public authorities set fixed prices on certain products.

The composition of trade margin. Like any price, margin trading is composed of several distinct elements: the costs of circulation of trade organization taking into account the costs for the use of bank credit, income taxes and tax payments provided by law, the deduction for to replenish working capital. Distribution costs of trade organizations include the cost of freight, sales staff salaries, the cost of maintenance of buildings, depreciation, deductions and maintenance costs of fixed assets, the cost of storing, sorting and packaging of goods, trade advertising, loss of goods in transit, the cost of packaging, deductions for social-real needs, taxes and non-tax payments are reflected in the costs.

Profit in trade margins is determined by the funds for social enterprises and the development of material and technical basis of trade, payment of taxes due to the profit contribution to the creation of investment funds.

The formation of the prices of imported goods has several features based on the specific requirements of the law.

Selling prices of foreign-made goods, intended for resale in the territory of the Republic of Belarus, are formed on the domestic market entities (importers) in accordance with the Regulations on the procedure for the formation and application of prices and tariffs, approved by the Ministry of Economy of the Republic of Belarus of 10.09.2008 №183 (hereinafter – Instruction number 183).

Currently a single procedure for the formation of organizations selling prices for importers was established, i.e., the mechanism of formation of selling prices of imported goods does not depend on the purposes for which they will be implemented buyers. The only exceptions are the items included in Annex 1 to the Regulations under number 183, selling prices which are formed based on market conditions. When assigning the goods to specify in Annex 1 to the number 183 Instructions products or product groups used the list of goods included in the aggregated commodity groups recognized in the state statistical reporting.

Thus, in forming the price with limited wholesale premium directly into the selling price only certain expenses are included, and wholesale mark is directed on wholesale activities, payment of fee to the national fund to support producers of agricultural products, food and agricultural science, as well as making a profit. In addition, the selling price of the product is permitted to increase the amount of expenses to finalize the product.

THEME 14. PRICING IN MARKETING COMPANY

Pricing policy is primarily determined by its own capacity, technical resources, the availability of adequate capital, skilled personnel, organization of production, not only by the state of supply and demand in the market.

That process involves the incorporation of pricing into itself the following interrelated steps:

1. Market research

2. Selection of the goals and objectives of the enterprise pricing

3. Demand analysis

4. Analysis of the costs

5. Study competitors’ prices

6. The choice of method of pricing

7. Consideration of psychological factors and the final pricing.

To generalize and group information necessary for the new solutions, one can use the following program of data collection.

The market as a whole: the type of market, product, quality, innovation, market segments, market participants, market size, market prospects, the interaction of market segments.

Competition: competitive products, substitute products, current and potential competitors, their share of the market, the financial position of competitors, the strengths and weaknesses of competitors (in terms of excellence of goods latitude range), the reputation of the competition among buyers.

Prices: prices of competing products, the price of high-end goods, proportions between prices and sales volumes of goods on the market, used by the system of tiered pricing (discounts, assortment pricing), a reflection of the quality of the goods, their novelty in prices, commodity prices, being at different stages of the life cycle.

Government economic policy: the extent and form of government regulation of the economy in the country, state influence on the economy of individual enterprises, tariff and non-tariff regulation of foreign trade enterprises.

Production and costs: the level and dynamics of production companies, stocks of finished products, the use of production capacity of the enterprise, the technical level of production, costs, corresponding to the volume of production and inventory cost structure for the whole company and for individual commodities, areas of possible cost savings, semi-fixed costs and the possibility of their reduction, promotion expense and effectiveness.

Revenue from sales and profits: the structure of sales proceeds (share in costs, profits and taxes), the dependence of revenues and profits from the changes of the volume of production, profitability of sales of different products.

Buyers may interpret differently the price changes.

Buyers’ response to price changes depends on the ratio of costs to acquire the goods and the general budget of the buyer. Buyers, as a rule, are more sensitive to an increase or decrease in the prices of such products, the purchase of which holds a significant share of their expenditure and acquired continuously or in high demand. However, they hardly notice the higher (or lower) prices for goods that are purchased by them rare.

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