By
Bernard Bwoni
Zimbabwean
businesses have often thrived on well over 100% profiteering. RBZ Governor Dr Mangudya is right on
the money in calling for the reduction in prices of locally produced goods to
increase competitiveness and counter cheap imports. Businesses in Zimbabwe have
to start focusing on competitiveness first and profiteering second for the sake
of the economy at large. The adjustment from the Zimbabwe dollar to the US
dollar has been complex but people should start looking away from the
unrestrained 120% profits of yesteryear and realise normal profits as anywhere
else in the world. Zimbabwean products are of a high quality granted but pricing
is not competitive enough to undercut competition from cheap imports which have
flooded the market. Businesses have to find more innovative ways of marketing
locally produced goods and price them at levels where consumers do not find a
need to pay less for inferior products which are being imported into the country
at alarming levels. The Zimbabwean market currently is a fierce economic
battleground with cheap and inessential imports from around the world, mainly
China and South Africa dominating.
Locally produced goods at the present moment are
unable to compete with the mass imports from countries which benefit from far greater
economies of scale in production. There has to be some form of intervention
from government or the producers themselves. The government can intervene
through a number of strategies for example a period of infant industry
protection or price controls all of which may or may not necessarily be the
panacea to the current cheap import problems. The producers have to start
pricing intelligently to be able to compete in this cutthroat market. A good
example is the street sole-traders (shoe-makers) dotted around Harare and other
cities in Zimbabwe. They make quality robust handmade leather shoes which they
sell roughly between $35-$45 (you can always negotiate downwards of course)
whereas in the many flea-markets similar kind of shoes which are imported will
cost between $15 and $20. The imported shoe price is inclusive of duty and transport
costs but still priced less than the locally made shoe whose only costs are
production costs . Now that says a lot about pricing by the local producers and
with the cheap imports in our midst it is currently very much a consumers'
market. Domestic producers have to revisit their pricing strategies.
It is imperative that domestic producers have to
start looking at effective and sound pricing strategies for their businesses to
remain viable in the current harsh microeconomic environment. There are many
pricing strategies to consider but Zimbabwean producers can look at penetration
and economy pricing as starting points. With penetration pricing the producer
sets low prices for products for a specific time period whilst gaining market
share and enticing consumers away from the competition which in our case is the
cheap imports. The key word here is ‘cheap’ and domestic producers ought to
take a cue from that and price their products accordingly. Once the local producers
build a strong clientele base they can then increase their prices to levels
that enable them to be viable and make a reasonable profit. A good example is
at a barbershop where a good barber who takes his time and produces a very good
haircut will have more customers. People are prepared to queue for hours to get
a haircut from a product they trust. The barber can increase his price but his
clientele base always remain.
Domestic producers can also start by charging very
low prices for their products to undercut competition from the cheap imports.
So the strategy would be to charge at lower prices than the cheap imports but
then decrease their own production costs, reduce packaging ostentation or fancy
features, reduce costs of marketing and branding strategies. The idea is to
assign a very low price for locally produced goods and at the same time
reducing production costs and other promotional costs.
bernardbwoni.blogspot.com
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