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What elements does non-price competition include? Difference between price and non-price competition

From this article you will learn:
What are the differences between price and non-price competition
What are the advantages and disadvantages of using non-price competition?
In what forms can non-price competition take place?
What methods of non-price competition are used in a modern market economy

WITH early years Each of us finds ourselves in harsh circumstances of competition in various areas of life. Competition in the economy can definitely be called one of the toughest types of struggle. Both wealth and luck are at stake here. In entrepreneurship, there are two types of competition – price and non-price. More often than not, low cost actually wins. And yet, non-price product competition helps achieve greater success.

What is non-price competition

Competition is a struggle between individuals various areas life process. First of all, this refers to the economic sphere. Figuratively speaking, competitors are the owners of nearby shops who are trying to get as many visitors as possible. But it's not just the number of buyers that matters. It is also important to sell your goods and services on the most profitable terms. Scientists believe that it is competition that spurs the modern world to develop at such a rapid speed. And at the same time, it is the basis of the instability of the world economy.

Exist two ways of economic rivalry: price and non-price. The difference between price and non-price methods of competition is quite serious:

Price competition- This is a type of fight against rivals by reducing the cost of goods. Most often, this method is used where demand is greater than supply. Another option is when customer competition is strong enough. This option is also used when there are prerequisites for pure competition (many manufacturers offer the same type of product). This way of competing with competitors cannot be called the most effective. After all, competitors can suddenly set prices at the same level, or even lower. In this case, both the subject himself and his competitors lose their earnings. Despite all the shortcomings, this option is nevertheless widely used, especially in cases where it is necessary to introduce products into new market. Such measures should be taken very carefully. You need to know for sure that a decrease in cost will actually result in an increase in profits, and not losses.
Non-price competition involves more progressive and modern techniques. Among them are the differentiation of their products from similar products from competitors, the introduction of special characteristics, expanding the range, improving quality, increasing advertising costs and warranty service. The use of non-price competition methods generates conditional monetary stability. Essential positive thing also is that competitors often fail to retaliate immediately, giving the rival an advantage. If innovations turn out to be successful, all expenses for non-price competition options not only pay off, but also serve as a source of income.

What are the disadvantages and advantages of non-price competition?

Key Benefits non-price competition are as follows:

Price fights have a negative impact on all market participants. Bonuses go only to the buyer. Price competition can lead to monopoly and economic decline. The more powerful the company, the longer the period of time it can sell goods at a reduced cost. Medium and small companies will lose out in competition with leading brands.
Competent differentiation is a more productive way of competition than dumping. Behind the right product the customer will pay the price set by the company.
If done correctly, non-price competition is less costly than price competition. A good advertising clip can be made for little money, the main thing is to find a creative and tempting idea. The same applies to product properties: even a minimal improvement in design can attract the attention of buyers.
With non-price competition, the company has a huge field for activity: it can gain superiority with the help of any successful find.

At the same time, there is also a number of disadvantages non-price competition:

The company is losing that group of buyers for whom cost comes first.
Dependence on the professionalism of managers and ordinary workers, because they must develop competent competition tactics and systematically monitor the compliance of the real state of affairs with plans.
Many firms use illegal methods of non-price competition (poaching personnel, manufacturing counterfeit products, industrial espionage).
We need cash injections, often permanent.
Large expenses for trade marketing, advertising and PR.
Specificity in positioning, thoughtfulness of actions, and correct tactical moves are required.

What types of non-price competition can be used and which ones should not be used?

There are different types of non-price competition:

legal;
semi-legal;
deterring competitors using leverage government regulation and support.

Legal methods of competition suggest:

product rivalry. In the course of working on the existing assortment, a new product appears that has a new price;
competition to provide services. It is especially relevant for the machinery and equipment market. The service package includes supplies promotional materials, transfer of technical papers (which simplify the use of products), training of employees of the client company, maintenance during the warranty period (and after it).

Semi-legal forms competitive rivalry means:

economic espionage;
bribes to officials in the government apparatus and in rival companies;
conducting illegal transactions;
activities to restrict competition. Here the company has at hand an extensive arsenal of methods, the use of which can lead to the dictatorship of a monopolist company in the market. These include, for example, activities to impose intra-brand standards, promoting convenient conditions for selling rights to trade marks or patents.

The most common forms of non-price competition

The most common forms and methods of non-price competition are:

1. Product differentiation

The purpose of product differentiation is to offer the buyer products of different types, styles, brands. This, of course, gives the buyer serious bonuses, expanding the possibilities of choice. However, pessimists caution that product differentiation is not an absolute good. The rapid growth in the number of items of goods often leads to the fact that the buyer cannot make an informed choice, and the purchasing process takes a lot of time.

Product differentiation is a kind of reward for those negative phenomena that are characteristic of monopolistic competition.

Types of differentiation:

Product differentiation– production of goods of higher quality and attractive appearance than those of competitors. Regarding standardized products (petroleum products, metal), there is almost no possibility of product differentiation. In relation to fairly differentiated goods (electronics, motor vehicles), such tactics are a matter of course.
Service differentiation– consists of providing service more high class compared to competitors. This may include installation and after-sales service, speed and safety of deliveries, training and consultations for customers.
Personnel differentiation– the desire to ensure that the company’s employees do their job more productively than the employees of a competing company. Team members must have qualities such as friendliness, professionalism, and commitment.
Image differentiation consists of working on the appearance, style of the company and (or) its products in order to highlight them best sides compared to competitors and/or their offerings.

2. Improvement of manufactured products and offered services

Another method of non-price competition is for competitors to improve the goods and services they offer. Improving the quality characteristics or user parameters of products leads to increased sales. Competitors who don't care about improving their product step aside. This path of competition leads to favorable consequences, the main one of which is customer satisfaction. In addition, other firms also begin to take steps to offset the temporary success of their rivals, and this contributes to scientific and technological progress.

Competing companies are looking for funds to improve their product or create a new position. All these measures make it possible to strengthen production and increase profits.

Some companies, instead of conducting fair competition, engage in imitation (imitative) activities. Most often, they stop at minor modernization of the product. It's about about the external effect. Such companies pass off apparent changes in the product as real, and also introduce obsolescence into the improved product. This approach can lead to massive customer disappointment.

3. Advertising

According to foreign researchers, goods go from manufacturer to buyer along a path that can be illustrated by the formula:

product + distribution + scientific activity+ resellers + transport + advertising = sale

provides the client with information about products;
increases demand for products and forces them to increase the pace of their production. There are often cases when a manufacturer, having a small income, through advertising in non-price competition increases the level of sales several times, which leads to receiving a large income;
increases competition;
enables the media to be independent, bringing them a certain profit.

Advertising reduces sales costs. Firstly, advertising promotes faster turnover of goods. Secondly, it ensures that goods are different from similar ones. This allows buyers to track the cost of products in different stores and thereby restrain the arbitrariness of sellers in setting markups. Products that are smartly advertised will pass through distribution channels with minimal markup.

4. Other methods of non-price competition

The group of non-price methods includes: providing a wide range of services (including employee training), free service, handing over a used product as an entry fee for a new one, supplying equipment on the terms of “finished products in hand.” Reduced metal consumption, absence negative influence on environment, reduced energy consumption and other similar parameters have today become the main ones in the list of advantages of goods or services.

Currently, many companies are conducting marketing research. They make it possible to find out the buyer’s desires and his opinion about various products. Possession of such information helps the manufacturer to design the market situation and reduce the likelihood of mistakes.

Methods of non-price competition: 3 main groups

Methods of non-price competition are divided into several groups.

First group– these are techniques aimed at achieving competitive advantage by improving various product parameters.

These include:

launch of new product items;
introduction of products that have new consumer characteristics, for example, higher quality, improved appearance, more attractive packaging (this process is called differentiation of consumer properties of goods).

Such techniques are used in cases where:

the company wants to improve the consumer characteristics of its products;
the company wants to increase the market segment of its products;
the company wants to become known through a wide range of manufactured products in a limited market sector;
the company is working on the timely introduction of new service conditions (sales and after-sales) in order to interest new groups of customers, force them to purchase products more often and pay at a time for larger number positions (most often with the help of large discounts and promotions).

Second group- these are methods of stimulating the buyer to buy. Most often these are short-term promotions, sales, etc. Incentive goals V in this case is an increase in the number of clients or an increase in the number of goods purchased by the same client.

Sales promotion tools for consumers are:

sweepstakes and lotteries, discounts, coupons, promotions;
trial samples (samples, testers, as well as tasting);
competitions and games;
sales;
various “label events”;
consumer clubs.

A sales agent is a link between the manufacturer and the buyer. It is necessary to stimulate the sales agent in order to create a bright image of the product, make it easily recognizable and widely known, and increase the number of positions in trading network. It is equally important to “stir up” the agent’s own interest in large sales volumes of a particular brand.

Sales promotion means For sales agents there are various bonuses and gifts, all kinds of compensation for advertising expenses, exhibitions and sales, prizes, trade booklets, souvenirs, etc.

For the company to be successful, it is necessary to constantly look for alternative ways to sell products, as well as index the amount of discounts in accordance with the current situation on the market.

However, non-price competition works primarily through improving the quality characteristics of goods and production technology, modernization, patenting and branding, as well as competent “servicing” of sales. This type of competition is based on the desire to gain part of an industry market (or a significant segment of it) by producing new products or improving existing products.

The influence of competition on prices.

Thanks to competition, contradictions between supply and demand are temporarily eliminated, the relationship between which at any given moment affects the level of market prices.

In the conditions of the scientific and technological revolution, the competition between firms for super-profits takes on various forms.

Changes in forms and methods are influenced by both macroeconomic factors, in particular shifts in the structure of the total social product, as well as the actions of the companies themselves, for example, improving the policy of struggle for sales markets.

Inter-firm rivalry develops primarily in two main directions: inter-industry and intra-industry competition. What they have in common is the geographic scope of the company’s activities (global or regional), as well as the use of legal and illegal methods of competition in order to obtain excess profits.

At the same time, depending on the nature of the product, there may be differences in the forms of competition (price and non-price).

Manifests itself in the following forms:

1) Competition between sellers of homogeneous products, trying to sell goods at the lowest price to displace other sellers and secure the largest sales for themselves; this competition lowers the price of goods offered.

2) Competition between buyers in the same industry, which leads to increased prices for the goods offered. A comparison of the available price option with the losses that the buyer may incur as a result of unsatisfied needs, and the magnitude of this loss, determine the buyer’s willingness to increase the price for the desired product.

3) Competition between buyers and sellers; The former want to buy cheaper, the latter want to sell for more. The result of this competition depends on the balance of power of the competing parties.

4) Inter-industry competition - the creation of competing industries that produce goods - substitutes that cover the same needs of buyers. The development of such competition can cause both a decrease and an increase in prices in the market. The regulating element in this case is the price of the substitute product.

IN modern conditions Timely updating of the production range plays a major role in competition. Mastering the production of new products contributes to sales growth and an increase in the company’s profit margin.

An important aspect Both inter-industry and intra-industry competition in the market is not only the ability of a company to master the production of new goods, but also to cease production activities in markets that are considered, for one reason or another, unprofitable and unpromising.

Monopolistic competition begins already at the stage of capital mobilization. The second stage - the search for areas of application of capital is carried out through the deployment of scientific research, obtaining new scientific and technical information, and market research. The third stage is the implementation of the idea, the production of goods, where production volume, product quality and costs are adjusted to the profit maximization program. At the same time, the monopoly is guided not only by the tasks of the current day, but also by long-term goals. The fourth stage is the sale of goods on the market, the struggle unfolds in conditions of price stability around the volume of products sold, the level of their quality, and services. The fifth stage is the use of accumulated profits. The flow of capital encounters obstacles created by the monopoly itself, but its movement nevertheless exists. It takes the form of the creation of competing industries, reconstruction and restructuring of consumer industries, the movement of excess capital accumulated by monopolies in search of more profitable uses, the movement of capital, rival monopolistic groups and, finally, the never-ending movement of medium and small capital. Rapid updating of the product range causes an increase in the cost of developing new products.

Important role In the mechanism for updating industrial products, the price plays a role, which should not only justify the costs of creating a new product, provide the company with an acceptable profit, but also form a certain reserve in case of possible losses during the transition to the next cycle of product renewal. Each monopoly has no confidence that by the time a new product appears on the market, its competitors will not release the same or similar product. Therefore, pricing policy, the purpose of which is to adapt to constantly changing demand, continues to be an important weapon in the struggle for sales markets.

The basic principle of the pricing policy for new goods is to maintain, even during the period of product and market development, profit at a certain level (principle of 2 costs plus a fixed markup percentage). The size of the premium (rate of profit) depends on the degree of concentration of production or the power of the company, as well as on the state of market conditions. For non-monopolized firms - from 8 to 15%, for large monopolies from 15 to 34%.

The pricing policy at various stages of production of a product of one generation changes mainly depending on the degree of market penetration by this product and its operational efficiency. When first-generation products appear on the market, companies have some free time in setting prices. This freedom is determined by the degree of “quality monopoly”, patent protection, the price of substitute products, the purchasing power of the consumer and the possibility of competitors acquiring the secret of design and production.

Thus, price dynamics are closely dependent not only on the degree of novelty, but also on the number of generations through which a given product has passed, from the appearance of a fundamentally new product in production to its withdrawal from production and its replacement with other fundamentally new products.

After a certain period, the product partially wears out, which allows for further price reductions.

1.6.2. “Non-price competition.”

Or quality competition. In the competition for markets, the winner is not the one who offers lower prices, but the one who offers higher quality.

Better quality product, despite its high price, is much more efficient in operation or consumption than a lower quality one. But this does not mean that the role of price in determining the competitiveness of a product is small. These two factors are as inseparable as the two sides of labor, goods, obsolescence, price and all other phenomena and processes of commodity production.

Price is the factor that ensures profit.

In order to maximize profits, one important psychodogic canon is used, according to which market price does not increase in proportion to the quality of the product, but as if ahead of the level and quality of the product relative to the generally accepted level, the price decreases more progressively compared to this level. This, however, does not fit into the classical system pricing factors, but is the result of many years of market pricing practice.

Manufacturers producing products whose quality is above the world level receive monopoly high profits.

In an effort to survive the competition, firms are forced to constantly improve the consumer properties of the goods they produce and expand the range of terms of delivery and services, although all this in one form or another is taken into account in the price and is ultimately paid for by the consumer.

Therefore, it cannot be argued that at present, in the context of the rapid development of scientific and technological revolution, “price” competition has lost its importance.

If during the period of free competition with relative stability of prices, competition was expressed in discounts on prices, that is, in its reduction, then during the period of scientific and technological revolution in conditions of inflation, price competition is expressed in varying degrees of increase in prices for similar products of different quality.

There is a simultaneous and, as a rule, unequal increase in quality and prices (the increase in quality outpaces the increase in prices).

Thus, quality competition is just one form of price competition.

Have you noticed that in different stores the prices for the same goods, albeit slightly, are still different? This is price competition. This move is used by almost all sellers: from single ones in markets to reputable stores and companies.

Of course, price competition today is significantly limited, since its size is minimal and sometimes amounts to a fraction of a percent. But not taking it into account would still be a mistake. In world practice, there are a lot of examples of cheapening goods, quickly and even on a large scale (electronic household equipment, semiconductors, ceramics, food, etc.).

Usually, a quick and cascading “reset” of prices is a rare, forced and economically damaging (unprofitable) event. It is more preferable, of course, to fix prices, i.e. keeping them unchanged. Significant price reductions are only possible in two cases: either the seller immediately “increases” the price (involves the product at a price significantly higher than the manufacturer’s price) and therefore can afford discounts on purchases (especially wholesale), or laws come into force. As for the second option, then this is understandable: obsolete products (especially electronic household equipment), not being sold cheaper today, will not be sold at all tomorrow, since demand for them will fall.

The emergence of new, more complex products leads to a transformation of the very concept of price as such. Here we are talking about a multi-element consumer price, reflecting the possible amount of expenses of the main buyer, which sellers are guided by and which is an indicator of the demand and full consumption of the product.

Prices with a basis that lie outside of value become the object of competition, which can be directly attributed to price.

As a result, the understanding of price as the basis (or as a center) around which consumer preferences should fluctuate is in some way transformed, giving way to seemingly non-price concepts such as quality, novelty, progressiveness, compliance with standards, design, efficiency in maintenance etc. Today it is these parameters that form new system values for the consumer and it is on them that price competition is primarily based. This applies to individual exporting firms and entire countries acting as exporters.

The expansion of the range of consumer requirements dictates more stringent requirements for the exporter and its competitiveness. This is a regularity: only a competitive company can produce, which, in turn, requires certain conditions characterized by the country’s competitiveness. As you can see, it’s an unbroken chain, a vicious circle.

This pattern has been noticed for a long time and has been studied for a long time. The European Forum on Problems in Management regularly conducts studies to assess the competitiveness of Western countries, and the concept of “competitiveness” includes the ability to design, manufacture and, of course, sell goods that, in terms of characteristics (both price and non-price), are most attractive to the average consumer.

In the struggle for the consumer (and therefore for profit), the main methods of competition are used - non-price competition and price competition.

Price competition is a natural struggle between sellers, based on reducing prices to a level lower than that of competitors. The result, by the way, is not always predictable (a decrease in profitability, or “pulling away” some consumers to their product and an increase in profits) and depends on the actions of competitors, who will either respond by lowering prices or leaving prices the same.

Competitors do not always respond by lowering their prices. Often it is non-price competition that wins, based on higher quality, higher reliability, more attractive design (you must admit that if you have enough money, you will give preference to a good Japanese car without even looking at the domestic one).

Price competition is based on the fulfillment of two conditions:

1) if price for the buyer is a decisive factor;
2) if the company has become a leader, has “earned a name” and can afford to reduce prices, sometimes even to its detriment.

Only then is it possible to make a profit, even though other companies at the same prices suffer losses.

Price competition is competition by reducing prices to a lower level relative to competitors. At the same time, by improving the price/quality ratio from the consumer's point of view, the competitiveness of the product in the market increases. Depending on the reaction of other market participants (whether they respond with an adequate price reduction or not), either the company increases its sales, attracting part of their consumers to its product, or it decreases average profitability(and hence the investment attractiveness) of the industry. Competitors do not necessarily have to respond with similar price cuts. Each competitor's ability to reduce its price is limited by its total unit costs. Selling products at a price below them full cost called dumping. A commercial company may long time sell their products at a price below their full cost only if additional external financing is available. But since any commercial company is focused on making a profit, when dumping it either expects to recoup these losses in the future, or low prices for the product allow it to receive other benefits that are not obvious or inaccessible to other market participants now.

It is advisable to resort to price competition if two conditions are met. Firstly, if you are sure that price is the deciding factor for your potential consumer when choosing between competing products. Secondly, companies that have achieved industry leadership in costs usually resort to price competition - in this case, it is possible to make a profit even at such prices when all other players are already operating at a loss.

Types of price competition:

Direct price competition with widespread notification of price reductions;
hidden price competition when a new product with improved consumer properties with a relatively small increase in price.

The development of competition today is becoming a very urgent task for manufacturers. The problem of studying various types of competition raises the need to study the factors influencing the formation of competitive advantages of goods or services. Considering that the income level of potential consumers is quite low, but at the same time the principles of the Western lifestyle are actively being formed in society, at this stage of economic development one of the most important issues is the price of food. different kinds products of similar quality.

In conditions of development modern economy Competition issues are becoming particularly relevant. This is due to a number of different factors, among which we should especially highlight the rapid growth of information and communication technologies, which allow the consumer to have information about a large number of possible sellers; globalization of the world economy, making it possible to supply relatively inexpensive goods from remote regions, liberalization international trade. These factors determine the increase in the number and density of contacts between competing types of products in the same markets, and also, quite often, the weakening of the positions of local producers who are unable to compete in their markets with the products of transnational corporations and major manufacturers. The intensification of competition, the development of which can be predicted for the future, makes relevant the question of what forces an individual manufacturer can oppose to this, and how it should act in the current situation.

The answers to this and similar questions actualize the problem of studying various types of competition, as well as how one or another chosen strategy can affect the well-being and future development of the enterprise. Feature of most Russian markets is that the income level of potential consumers is often quite low, while the principles of the Western lifestyle, corresponding standards of consumption and product evaluation are actively being formed in society. Therefore, at this stage of economic development, one of the most important issues is the price of various types of products of similar quality. As is known, non-price competition involves offering a product more High Quality, fully complying with the standard or even exceeding it. Among the various non-price methods include all marketing methods of enterprise management.

In accordance with the stages of consumer decision-making to purchase a particular product, the following types of non-price competition can be distinguished:

1. Competing desires. There are a large number of alternative ways for potential buyers to invest their Money;

2. Functional competition. There are a large number of alternative ways to satisfy the same need;

3. Intercompany competition. Is a competition of the most effective ways to satisfy existing needs;

4. Interproduct competition. Is competition within the product line of the same company, usually acting with the aim of creating an imitation of significant consumer choice;

5. Illegal methods of non-price competition. These include: industrial espionage, poaching of specialists, production of counterfeit goods.

In a more condensed form, we can conclude that non-price competition is “a market approach in which the cost of production is minimized and other market factors are maximized.”

Price competition develops in the market in close connection with the conditions and practice of non-price competition, and acts in relation to the latter depending on the circumstances, the market situation and the policies pursued, both subordinate and dominant. This is a price based method. Price competition “goes back to the days of free market competition, when even similar goods were offered on the market at a wide variety of prices. Reducing the price was the basis by which the seller distinguished his product... and won the desired market share.”

In conditions modern market“price war” is one of the types of competitive struggle with a rival, and such price confrontation often becomes hidden. "Price war in open form is possible only until the company exhausts its product cost reserves. In general, open price competition leads to a decrease in profit margins and a deterioration in the financial condition of companies. Therefore, companies avoid conducting price competition in an open form. It is currently commonly used in following cases: by outsider firms in their fight against monopolies, with which outsiders have neither the strength nor the ability to compete with them in the sphere of non-price competition; to penetrate markets with new products; to strengthen positions in the event of a sudden aggravation of the sales problem.

With hidden price competition, firms introduce a new product with significantly improved consumer properties, and raise prices disproportionately little.” It should be noted that in the operating conditions of different markets, the degree of significance of price competition can vary significantly. As a general definition of price competition, the following can be given: “Competition based on attracting buyers by selling at more low prices goods similar in quality to competitors' products."

The framework limiting the possibilities of price competition is, on the one hand, the cost of production, and on the other hand, the institutional features of the market that determine the specific structure of sellers and buyers and, accordingly, supply and demand.

The selling price consists of the cost of production, indirect taxes included in the price, and the profit that the seller expects to receive. At the same time, the price level is set in the market by the ratio of supply and demand, which determines a particular level of profitability of assets and profitability of products produced by the enterprise.

This provision fully applies to the meat market. In the current situation, buyers react very painfully to any noticeable increase in the price of goods, which does not allow them to inflate prices, and competitors harshly respond to any attempt to change the existing proportions of sales, which makes another pricing strategy – “market penetration” – dangerous.

Speaking about the implementation of pricing measures within the framework of competition, it must be said that mainly pricing for Russian enterprises completely different bodies and persons are involved: director, accountant, economist, sales manager, supply manager, marketing department specialist, etc.

Unfortunately, there are still few precedents, at least in regional practice, of the use of professional analyst-consultants who have special skills and experience in competent pricing, capable of taking into account the entire range of factors affecting the price. Therefore, it is not uncommon for enterprises to go to extremes when building their pricing policy.

Here is a list of such extremes that you may encounter in practice:

– Almost all enterprises use only a price competitive strategy taking into account their cost - competition based on prices, but not quality. Accordingly, prices are set either at the level of the leading competitor in the market, or at the level of average prices among competitors, or at a level below all competitors.

– There are enterprises that thoughtlessly use the strategy of price dumping. In certain areas (for example, the provision of telecommunications data services), the latter method may be of predominant importance. Naturally, such “pricing” in a short period of time can lead an enterprise not only to fundamental changes in pricing policy, but also to fatal consequences.

– Some enterprises use only the “Cost +” method. Their prices have little correlation with the existing market level. The cost and margin that the entrepreneur would like to receive are taken into account.

Professional pricing consultants are approached by those entrepreneurs who want to optimize the efficiency of their investments and increase the likelihood of their payback in the shortest possible time. Large enterprises can introduce a special position into the staff and maintain a specialist on a permanent basis. This is justified when the enterprise a large assortment products and services, when their sales volume and prices depend on seasonal factors and other external factors.

For example, when the purchase of materials, services and the sale of finished products are made in different currencies. And we have to build a separate strategy for tracking rates and responding to their changes. Small and medium-sized enterprises, as a rule, need one-time services and resort to them from time to time.

Lastly, when choosing a specialist to build a pricing policy, you must comply with the following conditions:

1. The consultant must have proven technology for solving problems and the necessary professional skills.

2. The consultant must be independent from the enterprise: from the traditions existing in the organization, from the policies of the management apparatus.

Thus, it is advisable to solve issues of pricing management within the framework of price competition using professional staff. If it is impossible to maintain such employees, it is recommended to outsource this function.

Price competition

Competitors do not necessarily have to respond with similar price cuts. Each competitor's ability to reduce its price is limited by its total unit costs. Selling products at a price below their full cost is called dumping. A commercial company can sell its products for a long time at a price below their full cost only if there is additional external financing. But since any commercial company is focused on making a profit, when dumping it either expects to recoup these losses in the future, or low prices for the product allow it to receive other benefits that are not obvious or inaccessible to other market participants now.

There are:

direct price competition with widespread notification of price reductions;

hidden price competition, when a new product with improved consumer properties is released onto the market with a relatively small increase in price.

Price competition is realized in the desire of competing business entities to attract consumers by setting prices lower than those of their rivals. At the same time, they race to reduce the consumer's costs for purchasing goods, thereby increasing his profit from the purchase and increasing the margin of competitiveness of their products. As a result of such competition, prices are set that correspond to the real costs of production, and the efficiency of resource allocation on the market increases by removing from it inefficient producers with high production costs. Downside price competition among commodity producers is the process of price competition among consumers, who, by their decisions, influence the behavior of commodity producers. The price choice of consumers determines the level of demand, changes in which affect the volume of supply of competitive producers.

The motives for price competition are ensuring survival, maximizing current profits, maintaining and ensuring liquidity, gaining a large market share, and gaining market leadership. Foreign large and super-large corporations in most cases are content with about 10% return on equity capital, which ensures their survival. Ensuring survival is the main motive of an economic entity in cases where there are too many producers on the market and there is intense competition or the needs of customers change dramatically. Pricing for the purpose of survival is determined by the attempt of the commodity producer to withstand or slightly reduce price competition. In this case, prices are set at a level that ensures break-even business. This policy is short-term in nature and is an attempt to “buy” time until the producer is able to reduce costs sufficiently to make a profit, or the market situation leads to higher prices. Maximizing current profits leads to an increase in profitability and expansion of the reproductive capabilities of an economic entity. In market conditions, maintaining and ensuring liquidity is always important, since persistent insolvency threatens the entrepreneur with bankruptcy. Therefore, he seeks to determine the conditions and prerequisites that ensure stable solvency.

Expanding market share involves striving for market leadership, which makes it possible to have the lowest costs and the highest long-term profits. To achieve this goal, the business entity goes to the maximum possible price reduction. Price leadership reflects the position of an economic entity in the market as one of the most active in establishing general price levels for certain types products. Achieving this goal presupposes that the business entity has sufficient potential.

Price competition develops in the market in close connection with the conditions and practice of non-price competition, and acts in relation to the latter depending on the circumstances, the market situation and the policies pursued, both subordinate and dominant. This is a price based method. Price competition “goes back to the times of free market competition, when even homogeneous goods were offered on the market at a wide variety of prices. Reducing prices was the basis with which the seller distinguished his product..., won the desired market share” Rumyantseva E.E. New Economic Encyclopedia. - M.: INFRA-M, 2005. - P. 219.

In the modern market, a “price war” is one of the types of competitive struggle with a rival, and such price confrontation often becomes hidden. An open price war is possible only until the company exhausts its product cost reserves. In general, open price competition leads to a decrease in profit margins and a deterioration in the financial condition of companies. Therefore, companies avoid conducting price competition in an open form. It is currently usually used in the following cases: by outsider firms in their fight against monopolies, with which outsiders have neither the strength nor the capabilities to compete with them in the field of non-price competition; to penetrate markets with new products; to strengthen positions in the event of a sudden aggravation of the sales problem. With hidden price competition, firms introduce a new product with significantly improved consumer properties, and raise prices disproportionately little. It should be noted that in the operating conditions of different markets, the degree of significance of price competition can vary significantly. As a general definition of price competition, the following can be cited: “Competition based on attracting buyers by selling at lower prices goods that are similar in quality to competitors’ products.” Large Economic Dictionary / Edited by A.N. Azriliyana. - 5th ed. add. and processed - M.: Institute of New Economics, 2002. Cited. via: http: //yas. yuna.ru/.

Today, the most common pricing strategy, chosen by about 80% of companies, is “following the market.” Enterprises that use it set prices for their products based on a certain average price list. However, it is difficult to call this a conscious choice. Most often, it is simply impossible to act differently. As a rule, those who work in mass markets, where competition is very high, have to “be like everyone else.” This provision fully applies to the meat market. In the current situation, buyers react very painfully to any noticeable increase in the price of goods, which does not allow them to inflate prices, and competitors harshly respond to any attempt to change the existing proportions of sales, which makes another pricing strategy - “market introduction” - dangerous.

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