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Bernard Bwoni
Zimbabwean businesses have often thrived on well over 100 percent profiteering. Reserve Bank of Zimbabwe Governor John 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 percent profits of yesteryear and realise normal profits as anywhere else in the world.
Zimbabwean products are of a high quality 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 cut throat 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 micro-economic 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 remains.
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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