Pricing objectives - tasks to be solved in the implementation of one or another variant of price behavior.
The main list of pricing tasks, as economic practice shows, is common for any modern state, but varies depending on the types and stages of economic development.
The following pricing tasks are considered to be the main ones:
- covering the costs of manufacturing products (or mediating in their sale) and ensuring a profit sufficient for the normal functioning of the manufacturer (intermediary);
- taking into account the interchangeability of products when setting prices;
- solving social issues;
- implementation of environmental policy;
- solution of foreign policy issues.
The first two tasks are facing not only modern society, they were also solved at the early stages of market development, a feature of which was horizontal ties between producers, intermediaries and consumers (Fig. 1).
Figure: 1. Diagram of the early stage of market development
Under these conditions, price is exclusively a market function.
First task - covering the costs of production and ensuring profit - the requirement of the seller-manufacturer and intermediary. The more favorable the market situation for the manufacturer, that is, the higher the price he can sell his products, the more profit he will receive.
Second task - taking into account the interchangeability of products - this is the main requirement of the consumer. He is not interested in how much was spent on the manufacture of this product. If the same product is offered on the market at different prices, the consumer will naturally prefer the one offered at a lower price. If a higher quality and lower quality product is offered at the same price, the consumer will prefer the product with a higher quality.
Other tasks emerged already at the present stage of pricing, it is especially important to solve them as the transition from an undeveloped, spontaneous market to a regulated market.
In a developed market, the balance of the economy is achieved not so much with the help of a spontaneous regulator, but through the implementation of state policy designed to express national interests. The developed market is shown in Fig. 2.
Figure: 2. Market development scheme
Under these conditions, price is a function of both the market and the state. Environmental, political, social issues, issues of stimulating scientific and technological progress are, in fact, national issues. Therefore, in the absence of a body representing national interests, they cannot be resolved.
The main price lever in the solution of foreign policy issues, the supply at preferential or purchase at inflated prices of products for the countries in respect of which the policy of favored is being pursued.
Social pricing policy in all countries, it manifests itself mainly in a freeze or a relative decrease (an increase in comparison with the prices of other goods to a much lesser extent) in the prices of goods of increased social importance (goods for children, medicines, essential food, etc.).
To stimulate the release of progressive (from a national standpoint) means of production, the state is considering a system of incentive prices (removing upper price restrictions, setting lower price limits to strengthen the competitiveness of manufacturers, etc.). In order to stimulate the early introduction of progressive means of production, the state is developing a preferential price system for consumers. The difference between relatively higher producer prices and lower consumer prices is often subsidized by the government.
An example of the use of price levers in the framework of environmental policy (the fourth task) is the solution with the help of prices to the problem of improving the processing of raw materials, recycling and waste disposal. In this case, the most important issues are the assessment of secondary resources, waste and products of their processing.
Definition of the term pricing
purpose pricing
Methods pricing
Theoretical aspects of enterprise pricing management
Concept, types of prices and their classification
Main factors affecting pricing
Interconnection prices and finance
Pricing management for enterprise
Pricing policy and process pricing for enterprise
Pricing methods for the company's products
Perfection process establishing prices for products
Pricing: Survival Strategies
Pricing Strategies in Market Analysis
Pricing Strategies: If You Can't Cheat, You Can't Sell
Definition of the term pricing
Pricing is setting prices, choosing the final price depending on the initial cost of products, competitors' prices, the ratio of supply and demand and other factors.
Pricing - setting prices, the process of choosing the final price depending on initial cost products, competitors' prices, demand and offers and other factors. Basic approaches to pricing:
Based on private trades, based on the expected bids of competitors;
Based on perceived value, based on customer perception of the value of the product;
Based on current price level based on competitors' current prices.
Purpose of pricing... Provide a motivated, timely and sufficient price response in order to maximize sales with minimal loss of margin.
You need to understand that the pricing of this or that goods always depends on the goals set by the organization. And the goals are very different:
Survival organization... Those. it is necessary to set such a price on productwhich will allow firms survive the competition. Obviously, such situations do not come from a good life;
Profit maximization;
Market expansion marketing;
Product positioning for a specific niche. For example, if it is a luxury one, then it may not always be justifiably overpriced for it, if we talk about the cost of its production;
Stimulation marketing;
Expansion of the market share;
These are not all goals. If desired, this list can be seriously expanded. After all, all companies have their own goals at one time or another.
Pricing methods... So, here are the main pricing methods:
1) Based on costs
This method is one of the most understandable and well-known. In this case, the price of the product is set depending on expenses for its production. Those. The cost of the product should cover the costs of producing the product and at the same time bring the organization a certain profit.
It is obvious that a serious advantage in such an advantage will be gained by the one that will be able to minimize its costs. Indeed, in this case, she will be able to set lower prices for her products or receive more profit... Finally, many believe that this method is fairly transparent and fair for the end consumers of products who do not pay for air.
Naturally, this method also has certain problems:
In some cases, it can be difficult to calculate the cost of producing a good in order to establish its value;
If competitors have lower costs, then the firm will be in serious trouble;
Costs may vary. Consequently, the price of the commodity will also jump;
2) Looking at competitors
In this case, the price of the product is set based on competitors' prices. One of the most popular methods is to set the average price for the industry, when the average price of a product is calculated between the most expensive and cheapest counterparts. Finally, the price can be set both higher than that of competitors and lower. It all depends on how the organization wants to position its product on marketwhat goals it pursues.
Of course, even using this pricing method, one should not forget about costs, so that a situation does not arise when the price of a product is simply set from the ceiling, while costs will not allow selling it at such a price. It will simply not be beneficial to the organization.
3) In order to position the goods
In this case, the price is set in such a way as to emphasize the advantages of the product, its positioning. For example, if the goal is to make a product expensive and position it as a luxury product, then a high price must be set. If the company, on the contrary, wants to position the product as available, it should set the lowest possible price.
4) Based on demand
Everything is logical here. If the demand for a product goes off scale, then the price can be raised. If there is no demand, then it must be omitted. Naturally, you can try to calculate all this in advance using marketing research.
You can also highlight non-basic methods, such as: costly method; market method of consumer appraisal; market method of following the leader; auction method; tender method; parametric method; method of specific indicators; method of structural analogy; aggregate method; scoring method; method of correlation and regression analysis.
Theoretical aspects of enterprise pricing management
Concept, types of prices and their classification.Specific pricing options largely determine a company's financial policy. Price is an object of vigorous competition, the results of which largely predetermine the financial results of market activity, which significantly increases the responsibility of the company's management for the quality of economic decisions, which in one way or another are directly or indirectly related to price management. As you know, the price is an economic category, meaning the amount of money for which it wants to sell, and buyer ready to buy a product. The price of a certain quantity of a product is its value, hence the price is the monetary value of the product.
According to N.L. Zaitsev, price is an economic category that allows to indirectly measure the socially necessary labor time spent on the production of a product. In commodity relations, the price acts as a link between the producer and the consumer, that is, it is a mechanism that ensures the balance between supply and demand, and therefore between price and value.
Price is a difficult economic category. It focuses on almost all the main economic relations in society. First of all, this applies to the production and sale of goods, the formation of their value, as well as to the creation, distribution and use of money savings. Price mediates all commodity-money relations.
Pricing is the process of setting prices for goods and services. There are two main pricing systems: market pricing, based on the interaction of demand and offers, and centralized government pricing - government pricing. At the same time, within the framework of cost pricing, the cost of production and circulation is the basis for the formation of prices.
The price system characterizes the relationship and relationship of various types of prices, consists of blocks, which are considered both specific prices and specific price groups.
The first and most important feature of the classification of prices is their in accordance with the serviced area of \u200b\u200bcommodity circulation.
Depending on this characteristic, prices are divided into the following main types:
1) wholesale prices for industrial products are divided into 2 subspecies: wholesale price of an enterprise - the price at which the manufactured products are sold to other enterprises; Wholesale price industry - the price at which the company pays for the products to supply and sales organizations;
2) prices for construction products. Construction products are priced according to three types of prices: estimated cost - the marginal amount of construction costs for each facility; list price - the average estimated cost of a unit of final product of a typical construction object; negotiated price - the price established by agreement between customers and contractors;
3) purchase prices for agricultural products - prices (wholesale) at which agricultural products are sold by farmers;
4) tariffs for freight and passenger transport - payment for the movement of goods and passengers, charged by transport organizations from consignors of goods and the population;
5) retail prices - prices at which trading firms sell products to the public;
6) tariffs for utilities and household services provided to the population;
Prices serving foreign trade turnover (export and import prices). A similar classification of prices depending on the turnover is distinguished by I.V. Sergeev. in the textbook "Enterprise Economics".
Zaitsev N.L. depending on the nature of the serviced turnover, there are three main types of prices for industrial products.
The wholesale price of an enterprise is a price that provides for reimbursement of current costs and profit. The wholesale price of an enterprise plays an important role in the economic activity of an industrial enterprise, because provides him with the reimbursement of current production costs and the receipt of standard net profit.
Tsopt. prev \u003d Cn (1 + Rcc),
where Cn is the complete planned original cost units of production of the enterprise, rub.
Rcc - the level of profitability, calculated at the initial cost, i.e. This is the amount of profit received from the sale of the annual volume of production per 1 ruble of annual operating costs, which can be determined by the formula:
Rcc \u003d (Rpr * PFsr) ёСпr,
where Rpr is the level of profitability of an industrial enterprise in unit shares;
PFcr is the average annual value of production assets, i.e. the amount of fixed and working capital;
Сr is the total planned initial cost of the annual volume of manufactured and sold products.
Wholesale price industry is formed on the basis of the wholesale price of the enterprise and the additional inclusion in the price of the item of trade, the profit of sales organizations and value added tax:
Tsopt.prom. \u003d Tsopt. prev. + (Tsop.p.- MZ) * VAT + PRsb + TZsb,
where MZ is the actual or planned initial cost of material costs of a unit of production;
Hidden price rebates are provided to buyers as free samples.
Choosing a pricing method.
Having passed all these stages, the company can begin to determine the price of the product. Optimally possible, the price should fully reimburse all costs of production, distribution and marketing of the product, as well as ensure a certain rate of return. There are 3 options for setting the price level: the minimum level determined by costs; the maximum level formed by demand; the best possible price level.
The final stage of pricing is setting the final price. Having chosen one of the pricing methods, it is necessary to make the pricing decision itself, to determine a specific price. It takes into account a number of aspects, such as psychological impact, the influence of various elements of marketing, adherence to the basic goals of pricing policy, analysis of the possible reaction to the assigned price. The role of psychological influence is determined by the fact that the price is for many consumers the main indicator of product quality. the prices that create the image are characteristic, first of all, for products that influence the consumer's consciousness. the purchaser may prefer a more expensive item if it seems to him more original and prestigious.
Pricing methods for the company's products. Every product has a price, but not every company is able to independently set the price at which it wants to sell its product. If the products are not differentiated and competitors are numerous, the enterprise does not have market power and must accept the market price. Depending on the characteristics of the product, the size and financial strength of the selling firm, the goals it sets, various methods can be used to calculate the price.
The most common methods of setting prices for goods are:
Based on production costs;
For the benefit of capital;
Demand oriented;
At the level of current prices.
Setting the price level in market conditions consists in finding such a price that would represent the optimal balance between what the buyer would like to pay for this product and the costs of the organization in its manufacture. Therefore, price determination should be based primarily on factors related to demand, that is, on an assessment of how much the buyer can and wants to pay for the product offered to him. The importance of costs in setting prices should not be exaggerated. In practice, as a rule, an organization first of all tries to establish at what price it could sell its product on the market based on the nature of demand, competition, quality product, and then already define their production, commercial and administrative costs corresponding to this price and varying depending on conjuncture market.
Methods based on the cost approach can be divided into the following groups:
Full cost method;
Minimum cost method;
Average cost method;
Standard production cost method
Target pricing method.
The essence of the method, based on the determination of total costs, is to sum the total costs [variable (direct) plus fixed (overhead) costs] and the profit that the company expects to receive.
The main advantage of this method is its simplicity and convenience, but it has two major drawbacks:
1. When setting the price, the existing demand for the product, competition in the market are not taken into account, therefore, a situation is possible when the product at a given price will not be in demand, and competitors' products may be of better quality and better known to the buyer through advertising.
2. Any method of attributing permanent invoices for goods costs (for example, rent), which are the costs of running an enterprise, and not costs for the production of a given product, is conditional. It distorts the true contribution of the product to the profit of the enterprise.
The method for determining the price by this method is:
where P is the price of the item of trade;
С - production consumption; advantagepan\u003e Rс - product profitability to costs,%.
The minimum cost method involves setting prices at a minimum level sufficient to cover the cost of producing a particular product, rather than by calculating total costs, which include fixed and variable costs of production and distribution. The marginal cost is usually defined at a level at which it would only be possible to recoup the amount of the minimum cost. Selling a product at a price calculated using this method is effective in the saturation stage, when there is no sales growth, and the company aims to keep sales at a certain level. This pricing policy is also rational for a new product launch campaign, when a significant increase in sales of the specified product is expected as a result of its offer at low prices.
The method of "average costs" is that when setting prices, the calculation includes not the full, but the average cost of producing a unit of output. Average costs are most often determined over the period of the economic cycle. The value of the average costs will be the less, the larger the volume of output, since the average fixed costs are inversely related to the volume of production.
In the “standard production cost” method, costs are calculated prior to the start of the production process. The calculation of the initial cost is based on the established standards for the costs of raw materials, fuel, materials, depreciation. The entire calculation is carried out in relation to the standard, or normal, volume (usually 85 - 90%).
Target pricing is used to calculate a price with no mark-up per unit of production, taking into account the sales volume that ensures the target profit. If the original cost is transformed due to a decrease or increase capacity utilization and sales volumes, use indicators of the degree of capacity utilization, taking into account the impact conjuncture and other factors, after which the selling price per unit of production is determined, which under these conditions would provide the target profit. But with this method, the price is calculated based on the interests of the seller and does not take into account the buyer's attitude to the calculated price. Hence, this method needs some adjustment to take into account whether prospective buyers will purchase the product at the estimated price or not.
The method of determining the selling price based on the analysis of the maximum peak of losses and profits allows you to determine the volume of production and sales corresponding to the case when the total amount of profits and the total amount of expenses are equal. This method is used when the company's goal is to identify the price that provides the opportunity to get the maximum profit.
Competitive pricing. When an organization has a monopoly position in the market, it is able to make the most profit. But in the conditions of market maturity, many firms appear that are actively entering it and developing competition through the implementation of a differentiation and diversification strategy. In such conditions, when determining the selling price, an effective method takes into account the competitive position of the organization and the given product or service, as well as the entire competitive market situation. In this case, the price of goods and services sold is determined by analyzing and comparing the capabilities of the goods of a given company in comparison with competing firms in a particular market, as well as by analyzing and comparing prices prevailing in the market. Here the method of price formation is used by following the prices of the leading firm in the given market; prestigious pricing method; and competitive pricing method.
Establishing prestigious prices. Recently, the expansion of the range of prestigious goods has been characteristic. They have a luxury level of quality. If these types of goods are sold at low prices, they will become readily available and lose their main attraction to the prestigious market. At the same time, it is realistic to expect a significant increase in sales volumes when selling prestigious goods at high prices, but slightly below the level prevailing on the market. It is advisable to set higher prices for such goods. This will serve as a powerful incentive for buyers looking for the demonstration effect of the product they buy, and will serve as the basis for even higher sales.
Market-based pricing methods
a) consumer appraisal method (demand orientation). This method is closely related to product differentiation and market differentiation. Provides an opportunity to implement a high price strategy.
b) the method of following the leader (focus on competition). With this method, the manufacturer is guided by the prices of the competitor, and accounting for its own costs and demand plays a subordinate role here. The manufacturer sets the price slightly higher or slightly lower than the nearest competitor. This is only possible in a market with homogeneous products. By relying on this method, the company gets rid of the risk associated with setting its own price and adapting it to the market.
c) the "sealed envelope" or tender pricing method.
It is used in cases where several companies are in serious competition for a certain contract. The winner is the one whose bid price provides the seller with the maximum profit.
d) a method for determining prices, focused on finding a balance between production costs and the state of the market.
Parametric methods
Organizations often feel the need to design and master the production of such products that do not replace the previously mastered, but supplement or expand the already existing parametric range of trade items.
The parametric series is understood as a set of structurally and (or) technologically homogeneous trade items intended to perform the same functions and differing from each other in the values \u200b\u200bof the main technical and economic parameters in accordance with the production operations performed
Parametric pricing methods include the unit rate method, which is used to justify prices for simple trade items that are in small groups with one main parameter. These parameters include productivity, power, content of useful components, capacity, etc. These indicators characterize the main consumer properties of the product and determine the general level of its initial cost and price. Specific indicators show what is the unit price of the main technical and economic parameter Ts, and are determined by the following formula:
where is the absolute value (level) of the price; — the value of the main parameter.
Knowing the value of the specific indicator, it is possible to determine the price of a new trade item by the formula
where is the value of the main parameter of the new trade item.
The disadvantage of the method of specific indicators is that it takes into account only one (even if the main) parameter. The bulk of products, especially modern complex types of products, are characterized by a set of technical and economic parameters. Therefore, the calculation of the price by one parameter is insufficient for the economic assessment of most types of products.
The regression analysis method is used to determine the dependence of price changes on changes in the technical and economic parameters of products related to a given series, and to build and align value relationships.
C \u003d f (X1, X2, ..., Xn),
where X1, X2, ..., Xn, are the parameters of the trade item.
In this case, various regression equations can be obtained: linear, power-law, parabolic, etc.
The scoring method consists in evaluating each separately technical and economic parameter with a certain number of points, the summation of which gives a comprehensive assessment of the consumer properties of the product. The product price is determined by multiplying the sum of points by the cost estimate of one point or by multiplying the price of the basic product by the ratio of the sums of the points of the new and basic products:
where is the price of the basic reference product; - the price of one point;
The sum of points, respectively, for new and basic products.
The aggregate method consists in summing the prices of individual structural parts of trade items included in the parametric series, with the addition of the cost of original units, assembly costs and standard profit.
Thus, the following conclusion can be drawn. The most flexible and significant instrument of the company's commercial policy is the price, the level of which has a different effect on all the main indicators characterizing the quantitative and qualitative results of the enterprise (profit, profitability, turnover, market share, image, etc.).
The correct method of setting prices, reasonable pricing tactics, consistent implementation of a deeply grounded pricing strategy are essential components of the successful operation of any commercial enterprise in the harsh conditions of market relations.
Improving the process of setting prices for products. One of the main factors in improving pricing for any enterprise is to reduce prices without extra charges.
The following main directions of reducing the initial cost of production at CJSC Confectionery Factory "Maikop" can be identified:
First, an increase in the technical level of production . This is the introduction of new, progressive technology, and the automation of production processes that will ease working conditions and raise productivity. So, for example, in many shops there is manual packing of sweets, and if this process is mechanized and automated, then the costs of producing a unit of production will be noticeably reduced due to salary payments (600 rubles per 1 ton of products) and charges for wages (200 rubles for 1 ton of products).
Improving the use and application of new types of raw materials and materials will lead to rational use and reorientation to domestic producers of raw materials. The widespread use of sweeteners such as Aspartame (1-methyl N-1-a-aspartyl-L-phenylanine), the relative degree of sweetness to sugar is 100 times, the price is much more expensive (350 rubles per kilogram). With this in mind, we can calculate that instead of 100 kg. Sahara, it is enough to use 1 kg. sweetener, which will reduce the specific weight of the cost sahara in raw material 100 times, and since the share of sugar in the cost structure is 26% on average, the expense will decrease by 10.8% or 250 rubles. for every kilogram of sugar substitute. The share of raw materials in the initial cost will be 38.2% on average against the existing 50%.
The use of scientific and technological advances and best practices will help to push back some competitors and increase market share.
A decrease in the initial cost can occur when creating automated control systems, using computers, improving and modernizing existing equipment and technology. Costs are also reduced as a result of the integrated use of raw materials, the use of economical substitutes, and the full use of waste in production. A large reserve is also fraught with the improvement of products, a decrease in its material consumption and labor intensity, a decrease in the weight of machinery and equipment, a decrease in overall dimensions, etc.
A decrease in prices without a margin can occur as a result of changes in the firm of production, with the development of specialization of production; improving production management and reducing costs for it; improving the use of fixed assets; improvement of material and technical supply; reduction of transport costs; other factors that raise the company's level of production.
Reducing current costs occurs as a result of improving the service of the main production, for example, the development of continuous production, streamlining of auxiliary technological work, improving the tool management, improving the quality control firm works and products. A significant reduction in the cost of living labor can occur with a reduction in the loss of working time, a decrease in the number of workers who do not fulfill the output standards. Additional savings arise when improving the management structure of the enterprise as a whole. It translates into reduced management costs and savings wages and charges for it in connection with the release of management personnel.
With an improvement in the use of fixed assets, a decrease in the initial cost occurs as a result of an increase in the reliability and durability of equipment; improving the system of scheduled preventive maintenance; centralization and implementation of industrial methods of repair, maintenance and operation of fixed assets.
The improvement of material and technical supply and the use of material resources is reflected in a decrease in the rates of consumption of raw materials and materials, a decrease in their initial cost by reducing procurement and storage costs. Establishing contacts with domestic manufacturers of etiquette, because currently used PVC-metallized labels of Turkish companies. Transportation costs are reduced as a result of lower costs for the delivery of raw materials and materials, for the transportation of finished products.
Certain reserves for reducing the initial cost are laid down in the elimination or reduction of costs that are not necessary in the normal company of the production process (excess consumption of raw materials, materials, fuel, energy, additional payments to workers for deviating from normal working conditions and overtime work, payments for recourse claims, etc.). This also includes such most common production losses as losses from marriage. Identifying these unnecessary costs requires special methods and the attention of the enterprise team. Eliminating these losses is a significant reserve for reducing prices without product markups.
The next factor affecting the initial cost of production is labor efficiency... It should be borne in mind that the decrease in the initial cost of production is largely determined by the correct ratio of the growth rates of labor efficiency and the growth of wages. The growth of labor efficiency must outpace the growth of wages, thereby ensuring a decrease in the initial cost of production.
Let us consider in what conditions, with an increase in labor efficiency at enterprises, labor consumption per unit of output is reduced. An increase in production output per worker can be achieved through the implementation of organizational and technical measures, due to which the production rates and, accordingly, the rates for the work performed are changed and due to overfulfillment of the established production standards without organizational and technical measures.
In the first case, the enterprise receives savings on the wages of workers. This is explained by the fact that in connection with a decrease in prices, the share of wages in the initial cost of a unit of production decreases. However, this does not lead to a decrease in the average wage of workers, since the organizational and technical measures carried out make it possible for workers to produce more products with the same labor costs.
In the second case, the value of expenses on wages of workers in prices without a unit margin does not decrease. But with an increase in labor efficiency, the volume of production increases, which leads to savings on other cost items, in particular, the costs of servicing production and management are reduced.
It is also important to reduce shop floor and general plant costs. This consists primarily in simplifying and reducing the cost of the administrative apparatus, in saving on administrative costs; and also in reducing the cost of wages of auxiliary and auxiliary workers.
A change in the volume and structure of products can lead to a relative decrease in conditionally fixed costs (except for depreciation), a change in the nomenclature and range of products, and an increase in its quality. With an increase in the volume of production, the number of conditionally fixed costs per unit of production decreases, which leads to a decrease in its initial cost.
Changes in the nomenclature and range of manufactured products is one of the important factors affecting the level of production costs. With different profitability of individual trade items (in relation to the initial cost), shifts in the composition of products associated with improving its structure and increasing production efficiency can lead to both a decrease and an increase in production costs.
Improving the use of natural resources. It takes into account: changes in the composition and quality of raw materials (intensive use of sugar substitutes, active additives); These factors reflect the influence of natural (natural) conditions on the value of variable costs.
Industry and other factors: commissioning and development of new shops, construction of a factory for processing cocoa beans will significantly reduce the cost of purchasing finished cocoa raw materials.
The impact on the initial cost of marketable products of changes in the location of production is analyzed when the same type of product is produced at several enterprises with unequal costs as a result of the use of different technological processes. At the same time, it is advisable to calculate the optimal placement of certain types of products at the enterprises of the merger of enterprises, taking into account the use of existing capacities, reducing production costs and on the basis of comparing the optimal option with the actual one to identify reserves.
If changes in the amount of expenses in the analyzed period were not reflected in the above factors, then they are referred to others: for example, a change in the size or termination of various kinds of mandatory payments included in the price without a product margin.
Estimation of production costs, justification and selection of a rational method of pricing. In order to work out a rational decision related to the establishment of the optimal price for AD200S-T400 1R-T, in addition to analyzing the conjuncture, assessing the competitiveness of products, it is necessary to analyze production costs. This will allow the heads of Electroagregat OJSC to determine how much the given price level for the unit is beneficial for the enterprise in terms of obtaining the necessary profit.
Enterprise costs are an important element in a pricing strategy. carefully monitors its costs, since if production costs exceed the costs of competitors for this type of product, then the company will have to increase the price of the product or agree to a lower profit while maintaining the same price. To successfully operate in market conditions, the production of competitive products must be established with the lowest costs. To analyze costs, it is necessary to study the dynamics, the relationship of costs with the volume of production and profit. This can be achieved based on a break-even analysis of the product under study.
To begin with, let's conduct a break-even analysis for the entire enterprise as a whole, using data for 2001. Structure and expenses for 1999-2001 presented in App. P.
You can determine the break-even point in value terms using formula (11), but to calculate it, you need about the size of variable and fixed costs, revenue, profit and gross margin. The company does not keep records according to the Direct-hosting system with separate accounting for fixed and variable costs, therefore it is impossible to determine the exact value of these indicators, it is possible to roughly estimate the share of fixed and variable costs by the structure of the initial cost.
The revenue for 2001 was 247,127 thousand rubles, the initial cost was 204,970 thousand rubles, the gross profit was 42,157 thousand rubles.
Fixed costs amounted to approximately 19% in prices without extra charge or 38,944 thousand rubles, variable costs - 81% in the original cost or 166,025 thousand rubles.
Price and pricing are fundamental elements of a market economy. In its most general form, the price is the amount of money that the buyer pays to the seller for the purchased product. It is important to note the following circumstances:
Prices are set by the owners of goods and are tested by the market, where, under the influence of market factors, their final level is determined;
Prices are under constant scrutiny from the government, which is constantly looking for ways to
impact on them in order to prevent a constant rise in prices;
Market relations determine specific approaches to pricing and methods of influencing prices.
Priceis one of the most difficult economic categories. For its correct understanding, it is necessary to have a clear idea of \u200b\u200bwhat constitutes the basis of the price, what objective laws affect the processes of pricing and price movements.
Pricingis the process of pricing goods and services. Traditionally, there are two opposite models: market pricing and centralized (state).
In a centralized economy, pricing is the prerogative of the production sector. Prices are set depending on the cost of producing a product or service. This is often done even before the start of the production process on a planned basis with the direct involvement of government agencies. As a result, the market does not play a significant role in pricing. It simply fixes demand at the level of predetermined prices, without affecting their further change.
The process of price formation in a market economy occurs in the field of product sales. Since it is on the market that there is a collision of supply and demand, the usefulness of the proposed product, the feasibility of its acquisition, quality and competitiveness are evaluated. The product created in the production sphere or its price is directly tested by the market, where the final price of the product or service is formed.
Market pricing is fundamentally different from centralized pricing in that prices in this case are set in accordance with supply and demand by the owner or manufacturer of the goods. Governments can only regulate prices for a limited range of goods. It becomes the prerogative of the state only to establish general "rules of the game" in the field of pricing. The list of goods sold at state prices is determined by legislation. State regulation of prices is carried out for the products of monopoly enterprises, goods and services that determine the scale of prices in the economy and ensure social protection of certain groups of the population.
There are two alternative approaches to pricing: cost and value.
A cost-effective pricing approachis a pricing method that uses the firm's actual costs of manufacturing and marketing to determine prices.
Value-based approach to pricingis intended to ensure that more profits are obtained by achieving a profitable value / cost ratio for the company, rather than by maximizing sales.
The most important pricing principles are:
Scientific validity of prices, i.e. the need to take into account objective economic laws in pricing;
Target orientation of prices;
Continuity of the pricing process;
Consistency in pricing and price enforcement.
In addition, five important functions:
1. accounting;
2. stimulating;
3. distribution;
4. balancing supply and demand;
5. a tool for the rational allocation of production.
In the process of setting the price of products, the enterprise (firm) must clearly define the goals that it wants to achieve. The clearer they are, the easier it is to set prices for new products. Possible goals of pricing policy include:
1. ensuring the survival of the company; This goal of the pricing policy becomes the main one in cases where there are too many manufacturers on the market and intense competition reigns or the policy of competitors changes dramatically. In addition, the firm may face the problem of overstocking of warehouses, which may arise as a result of imperfect organization of both production and sales. To keep things running, the firm is forced to charge low prices in the hope of a favorable consumer response. Surviving the market becomes more important than making a profit. To survive, troubled firms resort to extensive price-concession programs. The price will go down as long as its value can cover part of the fixed and variable costs of production.
2. maximizing current profit; A firm pursuing this goal evaluates demand and costs at different price levels and chooses a price that will maximize current income and cash flows and maximize cost recovery. In all such cases, the company's current financial performance is more important than long-term ones. To achieve this goal, she must know two main indicators - the demand for products and production costs - and on their basis to build their activities. As a result, the price will be set at the highest level that matches the demand for the product, and can significantly exceed production costs.
3. gaining leadership in terms of "market share"; In this case, the firm is of the opinion that if it has the largest market share, then it will have the lowest costs and the highest long-term profit. Seeking leadership in terms of "market share", it will reduce prices as much as possible. A variation of this goal is the pursuit of a specific increase in market share. For example, within one year, a firm wants to increase its market share by 20 or 30%.
4. winning leadership in terms of "product quality"; The company sets the maximum price for its products, explaining this by improving its quality. At the same time, sufficiently high prices should be really supported by the high quality of the products manufactured by the company. In parallel, it can create a prestigious demand for its products.
5. "skimming the cream" policy; The firm sets the maximum possible price for the goods, using a favorable situation in the market, for example, an unlimited rise in prices, an unstable exchange rate of the national currency, an economic crisis, a sharp jump in inflation, and a shortage of this product in the market. Realizing that such a situation will not last long, the firm makes a profit in a short time that is many times greater than the amount that is possible under normal market conditions. After a certain period of time, the company begins to gradually reduce the price, trying to attract additional consumers, or leaves the market when it is impossible to ensure further income.
6. short-term increase in sales of products. Taking advantage of the favorable market conditions, the company sets a very low price for its products and seeks to sell as much of it as possible, even in the short term. The firm must have reasonably low production costs, and buyers must be highly sensitive to price changes. At the same time, it should be noted that in a competitive environment, many business entities in the course of their entrepreneurial activities pose different and sometimes contradictory tasks. These include: increasing the volume of sales of goods, maximizing market share; conquering new markets; strengthening of market positions; leaving the market; optimization of the production process and improvement of technologies; cost reduction; profit maximization. As the tasks are solved, the prices of the products sold rise or fall.
Pricing strategy - This is the choice by the enterprise of a certain dynamics of the initial price of the goods, aimed at obtaining the greatest profit within the planning period.
Pricing is the formation of prices for goods and services. There are two pricing systems:
- market pricing based on the interaction of supply and demand,
- centralized government pricing - the formation of prices by government agencies.
At the same time, within the framework of cost pricing, the costs of production and circulation are laid as the basis for the formation of prices.
Pricing methods
The following options for price formation can be conditionally distinguished:
- on a full cost basis ("cost +");
- based on marginal costs (marginal costs, reduced cost, direct costs);
- based on turnover income;
- based on ROI;
- taking into account break-even;
- pricing focused on consumer demand;
- parametric pricing methods;
- method of comparison of specific indicators;
- aggregate method;
- setting current prices;
- the method of following the leader of the competition;
- tender method.
Full cost method implies that the basis of the price is based on all the costs of the enterprise for the production and sale of products (constant and variable), the total cost of goods is calculated, and the amount of profit is added to it. Since fixed costs are distributed among all types of products in proportion to some indicator, then with different methods of distribution, depending on the choice of the base, the level of the cost of the product also fluctuates. As a result, to the listed disadvantages of this method, another one is added - the actual cost of the product is distorted, and this leads to an understatement or overstatement of prices. In fact, many retailers also use this technique. More progressive and reasonable is the standard (normative) full cost method.
Its essence lies in the fact that prices are based not on actual, but on standard costs and constantly take into account the deviation of actual costs from the norms. This pricing method has several advantages over simply accounting for actual costs. It makes it possible to manage costs, since they calculate not just the total amount of deviation, but in the context of each article. Also, this method
- carries out factor analysis of cost items,
- reveals what caused the price deviation from the standard,
- provides the ability to continuously compare cost items with financial results, regardless of the capacity utilization.
This method directs manufacturers to reduce costs. The most difficult moment when introducing a system of normative (standard) costs is the definition of progressive and reasonable cost rates, which implies a detailed study of production methods, technical characteristics of products, etc.
Marginal cost method involves taking into account in the price of products only those costs that arise with the release of each additional unit of production in excess of the already mastered production. These costs in the economic literature are called differently: marginal, marginal, reduced, direct, and in practice they are considered to be variable costs. The application of this method is based on the principle of profit margin, which is used to recover fixed costs. The marginal cost method is more complex than the full cost method, as it focuses on a multi-factor approach to pricing. If used, the entity estimates the potential sales at each estimated price. It is used in various situations:
1. If the enterprise has free production capacity and fixed costs are already covered by the current production volume. In this case, in order to expand the volume of sales, the enterprise can go to the formation of prices taking into account only variable costs.
2. If an enterprise needs to gain market share and it intends to use a pricing strategy of market penetration, that is, the price of its product is set lower than the price of a similar product. In this case, it is taken into account that it is impossible to use this method for a long time, since in the end it is necessary to reimburse all costs and make a profit. The company must have the financial resources to keep the prices of products at this level, or this method is used only when determining the prices for several types of manufactured goods. It is most efficiently used when making management decisions:
- on the price of products with the available free production capacity;
- on accepting an order from the state or another enterprise with guaranteed sales;
- produce or purchase component parts;
- on the advisability of releasing one or another product with limited production capabilities.
Sales revenue based pricing method, also assumes accounting for the full costs of the enterprise. In addition, he must provide him with the planned (desired) amount of income from turnover. In trade, distribution costs will be recovered from gross income, and this must be taken into account when determining the size of the desired level of income from turnover. The calculations performed will help trade enterprises to justify prices based on their needs. The price determined by this method serves as a benchmark, allows you to compare the price level with the prices of competitors. If it is too high, then it is necessary to look for ways to reduce costs or new channels of commodity supply with lower purchase prices in order to ensure the desired level of income.
Method of return on investment (return on capital employed), is used when pricing new products, the production and sale of which require capital investment. This method is the only one that takes into account the payment of financial resources. In trade, it is used to determine the minimum price when using a loan to purchase a consignment of goods.
The calculations enable the retailer to compare the minimum and retail prices with the level of market prices for similar goods and determine whether the products will be in demand at that price and whether it makes sense to purchase them under such conditions. In addition, the use of this method allows you to make informed decisions about the amount of production or consignments of goods at known market prices, since the amount of payments for using a loan per unit of a product (goods) depends on the scale of the activity. In conditions of inflation, it is difficult to use this method due to the high level of interest rates and their uncertainty over time, as well as the difficulty of forecasting the level of market prices.
Break-even analysis and target profit determination methodcannot be called a price determination method. In fact, this is the calculation of various options for the volume of production or trading activity, allowing you to achieve break-even and get the target (planned) profit at certain costs and different prices. The calculations are based on the idea that with the achievement of a certain scale of production and trading activities, the enterprise covers all its costs (fixed and variable) and with a further increase in volume begins to make a profit. In the economic literature, this volume of production and trading activity is called:
- break-even point,
- the threshold of profitability,
- threshold sales volume,
- breaking point, etc.
At the break-even point, the proceeds from the sale of products cover the costs of the enterprise. The break-even point can be determined analytically or graphically. The break-even point depends on the value of costs (the ratio between fixed and variable) and the price: the higher the price, the lower the volume of production provides a break-even at constant costs. The break-even analysis is based on the search for the most profitable combinations between variable costs per unit of product, fixed costs, price and production volume.
To determine prices in order to achieve break-even production, an estimated sales volume is used, which itself depends on the price. The analysis of the break-even activity of the organization is specific - in trade and public catering, costs are covered by gross income, therefore, when calculating the break-even of trading activities, an indicator of the level of gross income is used, which depends on the turnover and the level of the trade margin. The break-even point of a trading company shows the volume of turnover at which the company covers costs. The level of gross income depends on the level of the trade markup, with different options for the trade markup, its size and the amount of gross income will fluctuate, respectively, the price and the volume of turnover required to achieve breakeven. Thus, operating with the planned data, it is possible to carry out interrelated calculations of the main indicators.
Consumer demand-driven pricing... Many experts believe that demand is the only factor that should be considered when justifying a price. Enterprises that are guided by this approach to pricing use the consumer assessment method, which is based on the consumer's perceived value of the product and the willingness to pay a certain amount of money for it, i.e. consumer assessment of the product to potential buyers and its price perception. With this approach, the enterprise proceeds from the assumption that the consumer himself determines the relationship between the value of the goods for him personally and its price, comparing with the prices of similar goods on the market.
The usefulness of a product (a set of useful properties of systemic quality) for a consumer predetermines his willingness to pay a given price, i.e. maintain the level of effective demand. The price change is made dependent on the change in the level of demand for the product in such a way that the price increases with an increase in demand and decreases with a decrease, and production (sales) costs are taken into account only as a limiting factor showing whether the product can bring the enterprise at a price determined by this method. profit. The use of this method is effective in the market for interchangeable goods, which allows the buyer to compare goods and choose the one that best suits his desires.
The objective of the company is to differentiate its products based on technical properties, design, packaging, after-sales service, etc. and to attract the attention of potential buyers to these qualities. Applying this method requires a good knowledge of your potential client, his requests, and competitors' products. Product differentiation also implies market differentiation: the company works with several segments of consumers, each of which evaluates differently the individual consumer properties of the product, which implies a wide range of prices.
Parametric pricing methods are based on determining the quantitative relationship between prices and the main consumer properties of the goods included in the parametric series. A parametric series is a group of products that are homogeneous in functionality, design, manufacturing technology, but have differences in consumer characteristics (for example, for refrigerators, these are power, dimensions, freezer volume, energy consumption, etc.).
These methods are used to justify the prices of new products, as well as to determine whether the level of the estimated price, calculated on the basis of production costs, corresponds to the prices prevailing in the market. Such pricing methods include the method of comparison of specific indicators, the method of scoring parametric estimates, the method of correlation regression analysis, the aggregate method.
Comparison method for specific indicators is used to calculate the price of goods, the consumer value of which is characterized by one main consumer parameter (power, productivity, weight, service life, etc.). This method is the simplest, and is applicable to such products, where one or two parameters matter, and other characteristics of the product are approximately the same.
Parametric scoring method... The product that the company intends to sell on the market is evaluated according to parameters that are important to consumers (material, design, accessories, fashion, etc.), and each parameter is assigned a rank number in terms of importance: 1, 2, etc.
Experts set a weight index (%) for each product, depending on the significance, with the total sum of the weight indexes equal to 100%, and evaluate their product and competitors' products using a 10-point system. Multiplying the score by the weight index, and dividing by 100, an estimate for each parameter is obtained, the sum of these parametric estimates gives an overall parametric score for the product. By choosing a product of any company as a reference (the product that is best sold on the market, which indicates the compliance of price and quality) and taking the overall score it received as 100%, the estimated percentage of other products is determined.
The essence method of "correlation regression analysis" consists in determining the dependence of price changes on changes in several basic quality parameters within the parametric range of goods. To construct a function, a parametric series is made, i.e. accumulate initial information about prices and quality characteristics (parameters) of goods. After statistical processing of the initial data by the method of correlation regression analysis, a quantitative relationship is found between the change in price and the change in parameters, and a regression relationship equation is constructed. The method can be successfully applied in a market economy, especially for complex products with a large parametric range, since it allows revealing the dependence of the price on many factors, i.e. a more reasonable approach to determining its level.
Aggregate method consists in summing the prices of individual structural parts of products included in the parametric range, with the addition of the cost of new parts and standard profit.
Method of setting current prices employ businesses that are solely competitive and charge slightly higher or lower than competitors, it is believed to reflect the collective wisdom of the industry. They use this method in a market where similar goods are sold in conditions of pure competition. Under these conditions, it is not possible to sell the goods at a higher price, at the same time, there is no need to set a lower price, since the goods can be sold at this acceptable market price.
A distinctive feature of enterprises applying this approach to pricing - they do not seek to maintain a constant relationship between prices and costs or the level of demand - the enterprise will change the price of the product only when competitors change their prices. The main task in these conditions is to control your own costs. This pricing can be used by enterprises that find it difficult to determine their own costs per unit of production and consider the average prices formed in the market as the basis for their own, so they get rid of the risk of setting a price that the market will not accept.
The method of following the leader of the competition it is used in the oligopolistic market, where a limited number of seller enterprises operate. As a rule, these enterprises tend to sell their goods at the same or similar price, because each of them is well aware of the prices of their competitors. The price level in this market is determined by the goals set by the dominant companies in the market, or by an unspoken agreement between the participants.
In these conditions, smaller enterprises follow the price leader, allowing themselves only small price discounts. In such a market, prices change from time to time following changes in production costs. In this case, one of the enterprises takes on the role of a leader, raising or lowering the prices of their goods, and everyone else does the same. This method is used when it is difficult for an entrepreneur to predict his own costs, demand, or the reaction of competitors - the most reasonable thing in such a situation is to follow the competitive leader.
Tender method, or closed bidding method, is specific and is used in the case of several enterprises fighting for the right to obtain a contract (for construction, development of natural resource deposits, supply of industrial and technical products, etc.). The goal of firms is to win contracts and drive out competitors. To implement it, it is necessary to take into account and identify competitors: the higher the price, the lower the probability of receiving an order, and vice versa. Thus, when offering a price, a firm proceeds from the prices that competitors can offer, and not from the level of its own costs or the amount of demand.
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The principles and methods of price formation in a centralized economy are based on the fact that they are determined at the enterprise, i.e. in production, and often before the start of production. This approach inevitably leads to the fact that production costs are taken as the price base. Hence - the dominance of the cost-based pricing method, which was criticized even in the planned economy. With this approach to building prices, the market has a very weak impact on the level and dynamics of prices. In the best case, it fixes the degree of demand for a product at an already established price.
The fundamental difference between market pricing and centralized pricing lies in the fact that the real process of price formation here does not take place in the sphere of production, not at the enterprise, but in the sphere of selling products, i.e. in the market, under the influence of supply and demand, commodity-money relations. The price of a product and its usefulness are tested by the market and finally formed on the market.
Therefore, our ideas about the value of a product (its formation) and price as economic categories of the market are radically changing. Since the public recognition of products as goods occurs only in the market, their value also receives public recognition through the price mechanism only in the market.
Until recently, this fundamental theoretical position has been almost completely ignored in our economic science and pricing practice. However, even now, the practice of pricing is often such that the costs of producing goods are considered socially necessary long before these goods appear on the market and are recognized as goods by buyers, i.e. long before the costs of their production are publicly recognized. This, in many respects, was facilitated by the constant and significant excess of demand over supply and monopoly of manufacturers of goods in recent years. It is obvious that this practice clearly contradicts modern concepts of economic theory about a market economy.
The main fundamental difference between market pricing and planned pricing is also that the initial prices for goods are determined (established) by their owners, business entities. Only in this case the alienation of commodity producers from the results of their labor is overcome.
With regard to the vast majority of goods produced by business entities, the state also determines general rules and principles of pricing, sometimes sets marginal levels of profitability or prices, and in this way exercises its management functions. However, government agencies do not set specific prices for the majority of goods for products manufactured by different owners.
Thus, enterprises or firms sell their goods and services, as a rule, at prices and tariffs established by them independently or on a contractual basis, and only in some cases provided for by legislative acts, at state prices. State regulation of prices is carried out for the products of enterprises holding a monopoly position in the market of goods, as well as for goods and services that determine the scale of prices in the economy and the social protection of certain categories of citizens.
Therefore, during the transition to a market, in a mixed (multi-structure) economy, the market pricing mechanism should not resist, but be flexibly combined with the mechanism of state regulation of prices for certain groups of goods. This combination allows the state, using prices, to determine and implement the goals and priorities of economic and social development and to form the appropriate proportions.
The mechanism of pricing in the conditions of market relations is manifested through prices, their dynamics. The dynamics of prices is formed under the influence of two most important factors - strategic and tactical.
The strategic factor is that prices are based on the value of goods. There are constant fluctuations in prices around value. This process is very complicated.
The tactical factor is manifested in the fact that prices for specific goods are formed under the influence of market conditions.
The first factor is the factor of long-term perspective action. The second one can change frequently (within days, hours), since the dynamics of conjunctural changes is very high; this requires a comprehensive study of these changes. Both the first and the second factors are very important in a market economy, they need to be perfectly mastered and learn to use skillfully. Otherwise, it makes no sense for an enterprise or firm to join the market economy - it is fraught with negative economic consequences for them.
The first of these factors puts in the most favorable conditions those firms that have modern technology, advanced technology, use perfect methods of organizing labor and production, etc. As a result, the company and the company with lower production costs receive the greatest gains. The second factor puts in the most favorable conditions those enterprises and firms that perfectly, quickly and flexibly know how to take advantage of market conditions. And in this case, flexibility, careful preparation of production and production infrastructure, as well as highly professional performers (personnel) are required. Those firms and enterprises that are able to skillfully use both factors receive the greatest confidence in success and gain in the market.
Consequently, in market conditions, price dynamics are formed in a completely different way and to a large extent unpredictable. But this is the nature of the market and its laws that cannot be ignored. On the contrary, it is necessary to deeply and comprehensively study all market factors and learn how to use them correctly.
It should be borne in mind, and this is confirmed by the experience of foreign countries, that the state can and should economically influence the market situation and price dynamics. However, the mechanism of state influence on the level and dynamics of prices in the context of the transition to a market is practically not established in our country, which, given a high degree of monopoly of manufacturers, leads to an increase in prices.
In this regard, a well-thought-out system of measures is required, which have already been tested in countries with market economies. These include: setting the price cap by government agencies; measures taken by governing bodies aimed at promoting competition; appropriate tax policy, etc. A large role in this matter should be assigned to local governments, and all activities organized in this area must be necessarily fixed by legislative acts in the center and in the localities.
Competition is an integral and very important element of the market. Only owners can be normal competitors. The variety of structures under one owner creates a monopoly, which gives rise to stagnation and conservation of backwardness in production.
The monopoly of state property is the main obstacle to the overflow of resources directly through enterprises under the influence of the mechanisms of the law of value and pricing. The situation is extremely complicated by the still existing equalizing system of resource allocation.
Therefore, there was an urgent need to change property relations, which must be done through legislation. It is necessary to introduce a variety of forms of ownership and recognition of their equality before the law. However, for market mechanisms to really work, there must be a real variety of forms of ownership at the enterprise level and their real legal equality.
Currently, state property dominates in many ways. In this regard, the most important problem is the conversion of state ownership into collective and private. The privatization of property, the transformation of workers into real owners at their enterprises, in production, overcoming their alienation from property are the mass socio-economic basis for the transfer of the economy and the whole society to market rails. Without the privatization of property, such a foundation cannot be created, it simply does not exist. Market, commodity-money relations cannot develop without privatization of property.
It should be noted that the market is a tough, uncompromising examiner of all its participants on their survival in the competition. The main condition for the viability of the market is a high level of production and high professionalism in its management. Already now many firms and enterprises, unable to withstand the competition, go bankrupt and become bankrupt. But the capacities of these enterprises do not disappear, they pass into other hands, they are technically improved, updated and included in the reproduction process on a new, more efficient basis. Therefore, the bankruptcy of a particular owner and entrepreneur often turns into an increase in the efficiency of the economy for society as a whole.
Competition is a powerful engine of the market economy. It is she who directs the economy forward, using such an effective mechanism as the law of value, the pricing mechanism. Competition is a kind of test for an entrepreneur for the perfection of his production, for his vitality and survival. But at the same time competition, and this is the main thing, is a mechanism for stimulating constant and all-round improvement of production, a mechanism for consolidating everything healthy in the economy and crowding out what is imperfect and lagging behind.
In the antitrust laws of Western countries, encroachment on fair competition is considered one of the most serious crimes. Fair competition is key; to create it is to create a market.
The foundations for competitive success are rooted in the state of production. The world practice of a market economy is based on flexible production. It possesses the properties to quickly, as new needs arise, to be reorganized to satisfy them, while dispensing with practically no increased costs for the development of new goods. If there is no flexible production, the lead time will be long. Without this production ability, it is impossible to compete with competitors in the market. Therefore, the transition to a market economy, in addition to the actual market transformations, requires a radical restructuring of production (technical, technological, organizational, etc.). This is a principled provision that is often forgotten and often deliberately ignored, most likely because such a restructuring is associated with significant capital expenditures (investments).
As already noted, our economy is dominated by the monopoly of state property. This monopoly is one of the main obstacles in the transition to a market economy. And vice versa, the variety of forms of ownership (cooperative, rental, joint-stock, personal, etc.) is the basis, the economic basis, on which market relations actually grow and develop.
The practice of foreign countries with developed market economies has developed a system of antimonopoly measures, enshrining them in legislation. This path awaits us too.
The Law "On Competition and Restriction of Monopolistic Activity in Commodity Markets" adopted in the Russian Federation is aimed at suppressing any type of monopoly in the national economy. It creates ample opportunities for the development of entrepreneurial activity in a competitive environment, a free struggle for the consumer with the manifestation of flexibility in prices, quality, terms, with increased attention to the buyer.
Competition inevitably puts an entrepreneur in a position where he is forced (if he wants to survive in the competition) to change a lot in the strategy and tactics of production, constantly work on improving it, improve the quality of his products, master new types of it, use the most advanced and flexible pricing methods. etc.
The market pricing mechanism should be such that it creates conditions for competition and the elimination of monopoly in industry and trade, and through this contribute to the optimization of their structure, as well as the structure of consumption.
An organic element of a planned economy is a system of directive pricing, which weakly takes into account the economic interests of producers of products and their consumers. To ensure the economic development of the national economy, it is necessary to monitor the real rise in price and reduction in the cost of elements of production costs and maintain a correspondence between the demand and supply of goods. However, directive prices cannot serve this purpose.
The effectiveness of the pricing method is primarily determined by how fully it takes into account demand, which determines the current market situation and forms the structure of investments and the economy itself. Guideline prices do little to signal changes in demand. This leads to a permanent shortage of goods and generates imbalances in production and consumption.
The absence of a market pricing mechanism does not prevent inflation in a planned economy. Its inherent hidden inflation is accompanied by a shortage of goods and services. When latent inflation turns into open one, prices rise sharply.
Thus, directive pricing causes a number of destabilizing contradictions in the economy, leading to a violation of the proportions of reproduction, a distortion of the interests of producers and consumers of products, and the separation of the economy from the final consumer.
The system of directive pricing cannot serve as a tool for harmonizing economic interests and is objectively a brake on economic development. This determines the inevitability of the transition from a system of directive prices to prices, the establishment of which is based on mutual agreement between the consumer of the product and its manufacturer.
Prices that are set in market conditions by agreement of the parties are called contractual (free) prices. The idea of \u200b\u200bnegotiated market pricing is to target the manufacturer to produce goods that are in demand, which should help eliminate the shortage. Flexibility and efficiency in setting market prices leads to the fact that the economy becomes more dynamic and oriented towards meeting social needs. Free (contractual) prices, which are established by agreement between producers and consumers of products, are an essential element in the coordination of economic interests in the national economy.
The impact of the free pricing system on the economy can be traced only in dynamics, in time. If, at the same time, at some point, a balance of supply and demand is achieved, then in the future it can be violated and, as a rule, is violated. In this regard, a systematic approach to free pricing in dynamics, the consideration of market prices as one of the constituent elements of the socio-economic system, plays a special role. Based on this, we can draw the following conclusion: free prices can function normally only in a complex, in a system with all the other elements that make up the market economy.
It should be said that free prices by themselves do not yet ensure economic growth, and in many cases, especially in conditions of deficit, lead to a rapid rise in the price level. The rise in prices in an unbalanced economy leads to a number of negative consequences for the country's economy.
The rapid rise in prices in an unsaturated and largely monopolized market for goods and services leads to the disorganization of production. At the same time, the reliability of planning at the level of an individual enterprise or firm falls, and the proportions of intra-industry and inter-industry connections are violated.
As a result, due to the fact that there is an easy opportunity to get additional profit, caused not by the growth of production, but by the rise in prices, incentives to increase production in kind are falling. In conditions of inflation, this provokes a further decline in production and prevents the economy from coming out of the crisis.
Therefore, the rapid and simultaneous spread of free pricing to the bulk of the national economy can and has led to a deepening economic crisis in Russia, the way out of which is very problematic. Thus, the simultaneous transition for all goods to free pricing is economically and politically unjustified due to immediate and long-term consequences - it would be necessary to carry out a gradual transition to free prices and control their growth by pursuing an active anti-inflationary policy.
In order for the process of transition to free prices to proceed normally, i.e. for the growth of free prices to be within acceptable limits and not lead, first of all, to a reduction in production, the following conditions are needed:
- 1) the real economic independence of enterprises that have the right to participate in the conclusion of price agreements;
- 2) the absence of a shortage of goods transferred for sale at free prices;
- 3) lack of monopoly of commodity producers;
- 4) restructuring of the economy, primarily of the basic sectors of the economy, and the conversion of the defense complex;
- 5) ensuring a single economic space within the state;
- 6) the legally enshrined right to free choice of suppliers and consumers.
In the absence of the listed conditions, one should either limit the scope of free prices, or, allowing their free movement, carry out state regulation. Therefore, in these conditions, it seems necessary to organize monitoring and control over free prices. Apparently, this is the most acceptable way to implement free pricing policy in the transition to the market. Such control is carried out in order to achieve an end to the decline in production, limit the rate of inflation, create incentives for commodity producers, and increase incomes through increased production, not prices.
In the context of rapidly changing economic conditions, as is the case in Russia, the study of market conditions and the development of a pricing strategy and tactics on this basis at each stage of economic development should begin with an analysis of the general economic situation in the country, i.e. from the analysis of macroeconomic processes.
With the transition of the economy to free pricing, the problem of bringing prices closer to cost, taking into account objective differences in regional costs and the demand that is formed in different markets, becomes acute. In this regard, the problem of territorial (regional) differentiation of value and prices in the market economy requires a deep theoretical development. In these conditions, it is necessary to proceed from the fact that for certain goods there are objective features of the formation of relations between producers and consumers, which determine the nature and area of \u200b\u200bsales markets, their division into a single one and into a system of regional (local) markets with their own price level. The price system formed in one regional market through direct and reverse links affects the price systems operating in other regional markets, as a result of which a single market and a price system adequate to this market are consistently and gradually formed. This process, including price confrontation and attempts by individual regions to solve their economic problems with prices at the expense of other regions, is likely to be rather painful.
Taking into account the ever-increasing importance of the development of world economic relations for our economy, the system of domestic prices should more and more reflect the movement and trends of world prices. This is inevitable if we really want to build a market economy and maximize the benefits from economic cooperation with the world community.
In the context of mutual economic dependence of the CIS countries, pricing issues are becoming more relevant. They are resolved through the conclusion by the CIS countries of intergovernmental agreements on the principles of trade and economic cooperation, which contain formulations on prices determined by the parties. Their essence lies in the fact that payments for the supply of products of enterprises of the Commonwealth countries in some cases are made at contractual prices, and in other cases for certain, most important, mutually agreed types of products, world prices are applied with recalculation in rubles at an agreed rate.
