中小企业建立有竞争力的价格的因素研究作业
09-13, 2014
中小企业建立有竞争力的价格的因素
本研究的目的是探讨在中小企业，尤其是在马来西亚市场建立具有竞争力的价格的各种重要的因素，以及建立有竞争力的价格对消费者和中小企业产业可能产生的影响。本文通过引用先前的研究人员的研究来采用辅助的方法。dissertation的目标是确定中小企业行业有竞争力的价格的决定因素,找出有竞争力的价格对消费者和市场有什么影响。假设打折的价格会影响竞争力。
引言
如今,大多数的产品和服务在市场上面临着各种挑战。由于他们需要与知名企业和行业中拥有巨额资本的企业的产品和服务竞争，这将会对中小企业的产品和服务产生巨大的影响。通常,中小企业是那些刚刚在他们关注的行业里开始业务的公司。在马来西亚经济的定义中, 中小企业(sme)可以分为三个类型：微型,小型或和中等型。
Factors In Establishing Competitive Price In SMEs Industries
The purpose of this study is to investigate various considerable factors in establish competitive prices in SMEs especially in Malaysia market and possible effect from the establishment of Competitive price to consumer and SMEs industries. This paper is using secondary method, by referring to previous study made by previous researchers. The objectives of doing this paper is to determine factors in establishing competitive price in SME industry and to find out how competitive price do influence on consumer and market. Assume, discounting of price will affect by competitive.
Nowadays, most of products and services in the market faced various challenges. There would be huge impact to products and services from small and medium enterprise, because they need to compete with product and services from well established firms and firms with huge capital in industry. Usually, small and medium firms were firm just starting up their business in industry their concern. Small and Medium Enterprise (SMEs) by way of definition in Malaysia economic, can be grouped into three categories, which is Micro, Small, or Medium. These grouping are decided based on the number of full-time employees and annual sales or revenue turnover. In general, SMEs in Malaysia can be summarized into two types, first are comprises manufacturing, and agro-based industries with number of full-time employees range from 51 to 150 employees and annual sales or revenue more than RM10 million and less than RM25 million. Second, it would be comprises primary agriculture, services sector and Information and Communications Technology (ICT) with fewer than 51 employees and less than RM10 million of annual sales or turnover (Chin, 2005). Sources from conferences at Libya, 2007, SMEs in Malaysia can be categorized based on the number of full-time employees and annual sales turnover.#p#分页标题#e#
If SMEs firms are not monopoly firm in their sector, competitive prices will much influence the pricing of their product or service. Price of product and services was created by market leader and this called "pricing standard" against which other product/service prices in the same market (Center of Business Plan). Competitive price can be definite by the price of homogeneous products or services were offered by firm nearest to their competitors’ price. Competitive price can be set up nearest the “standard price” and lower than “standard price” if you have the ability to lower it and profitable. The competitor normally will react to the strategy by also low the price of their product and services, since it shown has the potential of reducing their market share or impacting their influence in the industry.
Factors that contribute in determining competitive price are, cost, direct competition, region, demographical group and technology. Then, this paper will investigate what will happen to consumer and SMEs industry, when competitive price are establish.
2.1 Definition of Small and Medium Sized Enterprises (SMEs)
Small and medium enterprises (SMEs) are considered to be a key driver of economic growth for many developing countries and comprise over 90 percent of all businesses globally (Tang et al, 2007; Krake, 2005). Small and medium enterprises (SMEs) are playing important roles in Malaysian economy and to be the backbone of industrial development in the country, but would face several challenge in their development (Ali and Nelson, 2006). Hence SMEs influence many governments? economic and developmental strategies (Tang et al, 2007). SMEs industry can be described as one of the main strategies to overcome hardcore poverty (Rajesh and Suresh, 2010). Small and medium –sized enterprise have small financial fund, and limited geographic scope ( Barringer and Greening, 1998).
According to Hashim 2000, Gosh and Kwan, 1996, SMEs in Malaysia was encountered problem from internal and external environment, such as lack of capabilities and resources, low in technology, competition, socio-cultural, poor management and international factors. Besides that, SMEs also faced the problem in managed their cost properly, and shortage in workers. This became more worst during the economic crisis, which give huge challenge to the SMEs, because they find difficulty in assessing the financial assistance to overcome the shortage in their business.
2.2 Definition of Competitive Price
Firms would pursue increase in revenue aggressively and that will start price war between them (Jane and Paul, 2006). According to Raymond, 2001, even though the firm has the ability to exploit price in the market, it will be depend on the competitive response by the other firm in the market. He also describe, the response of competitive in price by the other firm, would be the measurement of market power.#p#分页标题#e#
If the firms, which is both of them have constant marginal cost, their strategies to capture more market will increase the competition, prices of their products will decreased to marginal costs and eliminate all profits ( Martin, Uri, Jacob and Rosemarie, 2006). They also describe competing firms would choose prices for a homogeneous goods or services produced and offered at zero costs simultaneously and independently.
Based on Dufwenberg and Gneezy, 2000, and Martin, Uri, Jacob and Rosemarie, 2006, they are agreed increase the number of competitors in market, will reduces the prices of goods and services.
Finding and Discussion
Factors in establishing competitive price
Cost
Cost is one of factor that needs to be considering in determining price yet competitive price. Small and medium sized cannot simply make decision on its product and goods, and also cannot simply increase and decrease the price in order to compete with its competitor. It is because, they need to justify its decision making based on cost that they incurred in processing products and goods, otherwise they will in trouble. Normally, goods or services in competitive market are quite similar to each other competitors. The variation of goods or services offered was given minor effect in the process to setup competitive price, but when the goods or services was having quite similar attributes, quality and function, there would affect much on setting up competitive price, in term of cost might be imposed in production and service rendered (Oswald, 2004). SMEs firm could impose a lot type of cost such as labor cost, material cost, overhead cost and cost of goods sold. Total cost of reactive power production (CRPP) in competitive electric market would become loss to the economics if this active power is not generated in electric power system, and this loss will be called opportunity cost (Rider and Paucar, 2004).
Opportunity cost as refer to definition in Investopedia Dictionary, is the cost due to taking another alternative that must be forgone in order to take another opportunity action which is more beneficial to us.
As above mention, cost might be considered in determine competitive price is overhead cost. Overhead costs or also known as indirect expenses such as general supplies, heating and lighting expenditures, depreciation, taxes, advertising, rental or leasing costs, transportation, employee discounts, damaged merchandise, business memberships, and insurance, but at certain percentage of employees will be in overhead cost too. Theoretically, firms can improve their profit and price setting for goods or services by differentiate in overhead costs as disclosure their costs statement report for various type of goods or services, with less obstacles from internal and external, such as distortion (Kaplan and Cooper, 1998). As SMEs firm, this overhead costs need to be consider, otherwise you cannot compete in the industry, but this not relevance for disclosure SMEs’ cost report that state details of cost might be incurred by SMEs firm in production or services rendered, because competitors can take advantage from that, and firms might not be survive in the long term period. Eddy, Fillip, Luk and Gustaaf, 2008, and Narayanan, 2003 disagree with that assumption that firms need to disclosure their cost report to public, since it was only reasonable for a monopolistic firm, but not for competitive market, because it encourage potential competitor to imitate this cost report.#p#分页标题#e#
Direct Competition
If a direct competitor is beating your prices and you cannot keep your current prices, you should end up in a price war. To avoid such a battle in the market, you need to produce or provide some extra quality of your goods or services and make some changes on your price accordingly. Direct competition was included competitors from the same industry, whereas provide homogeneous types of goods or services, quite nearest price offered and good quality. SMEs act as specialist suppliers of components, parts and sub-assemblies to larger companies, in manufacturing sector, because these items can be produced at a cheaper price compared to the price large companies must pay for in-house production of the same components. However, the input of poor quality products can adversely affect the competitiveness of these larger organizations (Rajesh, Suresh, and S.G, 2010). They also relate the price of agricultural products was cause of relatively small changes in supply and demand.
In the SMEs competitive market, price offered by firm would be vary depend on demand and supply. In the perfect competition, product offered was homogeneous, when the firms earn supernormal profit, whereas total revenue more than total cost, this will attract more supplier to enter this market. Then, when Supplier of goods or services increase in the market, firms will compete each other on the price of goods or services, by lower down the price of their product or services itself, in order to attract buyer, this would increase demand of their goods or services (Arlinah, Jamaliah, and Sabariah, 2009).
Region
World respectively believe, almost all goods and services will cost more in the developed region or location, thus the prices of goods and services also increase. Then, it is important to SMEs to use competitive local price instead follow the national standard prices as your guide.
For instance, huge company like Nike their produce their product in China and Indonesia which is its cost of production are lower and more sources of raw material and labor than their produced in its parent country. Liu, 2004 described SMEs development are interrelated to economic development. Even though, skills in SMEs in China vary between regions and the gaps that has been exists in the development across the country.
Process in determining competitive price, would be depend on the role of government in raising competitiveness. This includes factors such as macro-economic climate, including taxation or tariff regimes, the legal framework as the protection of the business in the future, the regulatory framework and the labor market in term of education or skills of that labor, the availability of transport and infrastructure surrounded the availability of communication technology and also the capital provided.#p#分页标题#e#
In China, town and village enterprise (TVEs) aimed to create capabilities to minimize cost rather than make short-term profit in order to survive in competition with well established international joint ventures and Chinese state-owned enterprise (SOEs). TVEs would reduce its operation costs by sourcing cheap material and replicating western product design. Thus most of TVEs products are cheap and competed on price rather than quality (Rajesh, Suresh and S.G, 2010)
Demographical Group
Most of SMEs industries have a price range based on the demographic group that they target. For example, if the firm wants to establish a restaurant which served their foods, beverage and services with lower price, thus this firm target market supposedly to lower and middle income level, such as students. Instead, targeted to higher income level, such as corporate people for higher prices of foods, beverage and services their rendered.
According to Yuxin, Chakravarthi and John Zhang, 2003, Price-matching guarantees between competitors are widely used in consumer and industrial markets. Price-matching guarantees have been adopted by a store, thus its rivals can no longer steal its customers by discounting its price, and then they would have little incentive to initiate price cuts. While a store with price-matching guarantees has no fear of losing customers to rivals' price cuts, it has every incentive to raise its own price to charge a higher price to its loyal consumers.
Goods or services need to be positioning carefully in competitive market, because of the price would be compared by the customer. Normally, customer will prefer to pay for goods or services with lower price rather than higher price. Based on Aaker and Shansby, 1982 described positioning of goods or services by following the consumer desired and selecting one or two more products attributes as the way to communicate those goods and services to target market would give benefits to the firm.
Technology
Technology is the tools or system that has been developed and being used by us so that more convenience in progression of our life. Technology has been evolved rapidly in many industries now, due to the higher demand of goods or as competitive advantage factor. New technologies such as Information and Communication Technology (ICT) has been evolved in especially manufacturing industry since 1990, and this have been affect rapid increase in competition and create a pressure on performance and efficiency of the company (Frantisek, 2010). According to Chin,2005, advancement in science and technology, also the rules by Asean Free Trade Area and World Trade Organization (WTO) had bring more opportunities and challenge to Malaysia market, mainly to manufacturing industries.
Previously, SMEs industry in Malaysia was not really affected by innovation of technology due to many constrains on that time, based on Chin, 2005 said this has been proven by empirical data or research done before, which is used 50 SMEs in Penang, major in electronic and electrical it was found 73 per cent had little or no basic ICT, such as used of computer in their business and rest 14 per cent represent for SMEs that provide formal training to their staff on the use of ICT (How, 2001). This constrains could be lack of skilled workers and technical know-how, lack or no innovations through research and development (R&D), limited sources in economic terms, high cost in process of installing new ICT, and difficulty to shift from traditional method of operation to new technologies. However, SMEs need to cope with new technologies in order to keep compete with their competitors, currently SMEs in Malaysia has been practice a lot of technology now days in their business. This would affect in setting competitive price in SMEs. Firms would accept innovation in technology which is concentrated to the industries where they are and with the limited price of installation and supplier price, and also demand of their goods or services would also considered (Hubert and Thomas, 1989).#p#分页标题#e#
3.2 Effect of Establishing Competitive Prices
Refer to factors that has been discussed above; I can derive many effects from the establishing competitive prices. This will affect to consumer and SMEs industry. In the consumer perspective, they will afford to pay for desired goods and services since it’s at lower prices. Consumers also have a lot of choice in making decision, since there are a lot of suppliers of goods or services that offered variety of homogeneous goods and services. Another that, in term of disadvantage to consumer are, they will be the prices victims, whereas firm will offered low prices goods and services, but at same time the quality of goods also reduced and make it not long lasting in order to compete in the market (Rajesh, Suresh and S.G, 2010)
As refer to article sponsored by Title Advantage Companies, was founded by Joe Willen in 1987, in term of competitive prices in housing industry, competitive prices will encourage seller to purchase another house after selling his or her previous house. Over 8 out of 10 repeat home buyers sold their current home before purchasing another. This shows the importance of competitive pricing for moving the house within a reasonable time to enable the seller to purchase another home. This article also mention competitive price will grow faster sale of house, since its lower priced.
Then, according to SMEs industry shows a lot of effect from established its. One of that is it will greater discipline on producers / suppliers to keep their cost down, because competitive price is always lower, so its need good decision making to prevent loss in the future. Improvement of the technology in the production of goods or services rendered, to compete with well technovation company. Besides that, SMEs will concern much on the quality of goods or services as well as the prices of those goods or services lower and similar to competitors, then consumer will prefer to pay for goods and services with quite better quality. Another that, this will encourage of new invention in the future, because of most of the SMEs firm are actually try to avoid competitive price, because they need to lower down its price of good and services, rather than making profit from that. Thus by new invention, they could be different from their competitors.
Conclusion
SMEs have no ability to make their price far form the competitive price, because of this SMEs market are no barriers to entry, whoever will enter this market since their saw this market has potential to growth in the future and make profit form it.
Malaysia SMEs industry need to cope with development of technology, so that their can compete to global competitor as well, otherwise their will remain undermine by global competitive. Increasing in using of technology will increase the quality of goods or services, thus some of the cost by run the operation in traditional method could be recovered.#p#分页标题#e#
Besides, competitive price are really affected by cost, thus SMEs need to be concern much in their cost of production and cost of services rendered, in the same time make profit from the competitive prices. Sometimes they need to sell their goods and services lower than cost incurred. Another that, SMEs also needs to focus on their product positioning, and target market of their products.
Recommendation
Suggestions for further research
In future, it should used statistical data to know more accurately on the effect of the competitive price in the SMEs industry.
Use of primary method, such as make a survey to SMEs firm manager regarding to the competitive price, and how the competitive price would effect their business. Beside that make survey to the consumer regarding to which one of their prefer when the price of goods or services are nearest and what kind of features that encourage them to select those goods or services.
Expand the scope of effect in competitive price in global world.
To investigate the variation in the effect of brand equity on performance along the SMEs categories (industry type) Trade, Agriculture and Small scale manufacturing.