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fundamental bases of pricing

One of main bases of successful functioning of commercial undertakings is the competent price policy who bases on knowledge of essence of a market price, and also of laws of its behaviour and change.

At the same time for acceptance of true decisions concerning used price company strategies the availability of the most complete information on the market, competitors, products is necessary.

Pricing questions always remain actual, but approaches to the analysis of price strategy undergo changes, adapting to new economic events.

The prices as a market element are under the influence of a supply and demand, define production structure, regulate accumulation of material stocks, influence well-being domohozjajstv and the companies.

The prices are used as active tools of economic relations, reflecting processes of production, an exchange, distribution, consumption, accumulation.

According to economists, most the general definition of the price is reduced to term of money of cost товара.63 In turn various economic schools have different sights at the cost theory. Addressing to the economists standing at sources of an economic science, it is possible to allocate three basic sights at cost and its definition.

Representatives of classical political economy (U.Petti,

A. Cмит, D Pикардo, K Mаркс) adhered to the labour theory of cost

63 G.A.Gorins Pricing: the manual, it JUNITI-IS given, with 4.

Also considered, that blessing cost depends on socially necessary working hours, i.e. working hours which should be expended the worker for goods manufacturing «at cash socially normal conditions of production and at an average in the given company level of skill and intensity of work» 64).

K.Marx has entered concept «socially necessary expenses of work».

He understood those expenses for goods production as them (i.e. on use value creation) which it is necessary to suffer under normal conditions productions and at the average output of the work which has developed in company. However in the late works K.Marx noticed, that the knowledge of quantity of work is not enough for definition of cost of the goods as work expenses cannot characterise its results to the full.

Theorists of the labour theory of cost have not been offer an objective measuring instrument of work, and also the exhaustive answer to a question on how it is possible to correlate expenses simple and a complicated labour which is necessary by production продукции.65 is not given

Marzhinalisty (U.Dzhevons, K.Menger, E.Bem-Baverk) mathematical methods, entering in economic analysis used in the works limiting sizes and causing cost of economic good limiting utility for the consumer which is its value judgment and decreases at consumption of additional unit.

Representatives of the given school did not correlate cost with costs the work, necessary for its production as considered, that the consumer, making an economic choice, thinks of satisfaction of the requirements, that is evaluates utility of the acquired blessing.

64 Marx K.Kapital. Т.1.

– M: Publishing house of the political literature, 1988. With. 47.

65 G.A.Gorin, Pricing: the manual. M - it JUNITI-IS given. With. 5.

However theorists-marzhinalisty as well as could not offer classics a method for measurement of utility of the blessing for the consumer.

Thus, both economic schools stated a unilateral estimation concerning the price nature, not to the full covering its quantitative and qualitative bases.

The founder of a neoclassical direction of an economic science A.Marshall has made cardinal changes to the cost and price theory, leaning on ideas of the classical theory and marzhinalizma and explaining price formation as costs, and utility of the blessing. The production factor which is understood as production costs participates in its formation at A.Marshalla, and subjective (utility), connected with tastes and preferences of consumers also. In A.Marshall's main product wrote: «to Argue on, whether value is defined by utility or production costs, we can with the same success as about, whether the top or bottom edge of pair scissors cuts a piece

Papers ».66

Limiting utility of economic goods at A.Marshalla co-ordinated with demand and underlay a demand price, and production costs – with the offer and underlay an ask price. Proceeding from it, A.Marshall suggested «… to study laws for - mirovanija and interactions of a supply and demand and on this basis to form the price theory». Thus the price «… is defined by interaction of a supply and demand, which, in turn,

Depend on the prices ».67

A.Marshall marked the equivalent contribution of a supply and demand to price definition. According to A.Marshalla, there is a perfect competitiveness, i.e. the competitiveness which has been "not spoilt" interference gosu -

66 A.Marshall. Principles of an economic science. M – Progress, 1993.

67 R.M.Gusejnov, JU.V.Gorbachev, V.M.Ryabtsev. History of economic doctrines, M – Nsk, – Infra Th, Siberian agreement, 2000.

darstva, monopoly. In these conditions as the economist confirmed, there is a direct dependence between the price and offer size, and return between the price and demand size. A.Marshall's this position illustrated graphically, representing so-called "marshalliansky" a cross.

The equilibrium market price is established in a point of equality of sizes of a supply and demand, its fluctuations are caused by their change, and special significance is received elasticity of the supply and demand, by dependences of volume of consumption/production reflecting degree and the price.

Thus Marshall did not identify the price and value of the goods, noticing, that «… original value of things for the person is not measured by that price which he pays for them …».68

The further development of the theory of the price which founder is A.Marshall, is connected with names of J. Keynes, E.Chamberlin, J. Clark, etc.

The price nature is dual also it is proved by the objective economic laws underlying production of any economic good – the cost and law law potrebitelnoj to cost. The essence of the first law consists in economy of time, dynamics of decrease in expenses, and the second – in development of the productive forces, reduced to increase of labour efficiency and growth potrebitelnoj costs

Per unit of expenses of the worker времени.69

Modern economist-expert in marketing F.Kotler defines the price as

«… not industrial, but the exchange relation, an amount of money for which the goods in the act of purchase and sale».70 According to Russian economist V.S.Vojtinskogo are alienated by a starting point of the theory of the price is

68 A.Marshall. Principles of an economic science. M – Progress, 1993.

69 G.A.Gorin, Pricing: the manual. M - it JUNITI-IS given. With. 5.

70 F.Kotler. Marketing bases. M, - Progress, 1991.

The motivation which basis is made by utility economic блага.71 Representatives of foreign economic school are solidary with the American economist, the Nobel prize winner on P.Samuelsonom's economy which considered, that the economic good price is established as a result of supply and demand interaction, however during too time is subject to influence of production costs.

Price and pricing questions are studied not only economists - by theorists, representatives of fundamental economic schools. In the modern world the price policy of the companies concerns marketing activity of the enterprise.

Time when the cost-saving and appointment of is minimum possible price was an enterprise main objective, concerns the first stage of development of marketing concepts – to beginning HH in – an epoch of mass perfection of production. By 30th years HH century occurs consumer demand saturation in the developed countries of Europe and the USA that puts businessmen before a new call – now it is necessary to make not simply production with minimum costs, but also to supply satisfaction of increasing expectations of the consumer concerning its quality. Since the middle of XX century the general culture of consumption raises, preferences of consumers become more diverse and are individual, the differentiation of economic goods amplifies. V.V. Gerasimenko underlines, that now

«… the price takes special position in number of tools of a marketing policy of firm», and described above change «… do not mean, that the price as the tool of marketing fades into the background».72 Given item is confirmed H.Simona's with research which results speak about

71 V.S.Vojtinsky, the market and the prices: the theory of consumption, the market and market prices. SPb., 1906

72 V.V. Gerasimenko, TSenooborazovanie. M: Infra Th, 2005. With. 6

The volume, that a pricing question is the major for management of firm and its influence will increase only.

By end HH century the attention to the price policy amplifies, pricing methods are improved. It is connected with competitiveness strengthening on commodity markets and services, glut of the markets and the decreasing potential of growth of incomes and attraction of new clients. Consumers start to correlate more and more utility of economic good to its price at decision-making on bargain fulfilment that leads to strengthening of a policy of the companies on granting of discounts. The companies at a choice of price strategy evaluate subjective perceptions of the consumer, the attention to psychological features of clients amplifies. The increase in a market share of the company not always directly corresponds with price cut, more important is orientation to an indicator "price-quality".

V.V. Gerasimenko defines the price as «the sum of all costs of the buyer expressly or by implication connected with acquisition of a product». Thus it is offered «… to distinguish the positive and negative making prices which during a consumer cycle develop and form a uniform price, effective for the consumer».73 G.A.Gorins define the price as «».74 I.V.Lipsits notice the difficult economic category arisen and generated in the course of a public division of labour, development of a commodity production and an exchange of the goods, that the price is «… the tool of a commercial policy of firm», and «… any discussion of methods and pricing rules acquires sense only in the event that we represent, that the firm, actually, wishes to achieve, establishing the prices for the products and services».75

73 In the same place, с.11

74 G.A.Gorin, Pricing: the manual, M: it JUNITI-IS given. C. 4.

75 I.V.Lipsits, pricing, the uchebno-practical allowance, M:, JUrajt, 2011. С.18

For forming of competent price strategy and an establishment economically reasonable prices the company should consider tsenoobrazujushchie the factors influencing level, dynamics and a parity of the prices.

First of all the production cost accounting, that is a cost estimate of expenses for production is necessary. For profit taking it is necessary for companies to include constants and variable costs in the price of the realised goods or service. Special significance receives concept of incremental costs (a gain of the general costs in reply to increase in issue per unit of). Definition of incremental costs gives the chance floor price establishments on which the additional volume of issue can be sold. In the conditions of electronic trade and production of the information blessings, the role of the given factor essentially decreases because of other cost structure of production in comparison with material benefits.

Other important tsenoobrazujushchim the factor is value of the goods or service which is defined as «the price of best of the alternative goods accessible to the buyer (the indifference price) plus value for it those properties of the given goods which distinguish it from this best alternative».76

As a rule, value appraisement of the goods and a resistance barrier buyers,

It is subjective. About it wrote also A.Marshall, doing «… the conclusion, that satisfaction in cost in 1 f.st. (The Bus: the pound sterling) for the ordinary poor man means much more, than satisfaction in cost in 1 f.st. For the ordinary rich person».77

On fig. № 1 it is possible to see from what there is a price and value of the goods. Two given indicators differ on «a consumer prize». In

76 G.A.Gorin, Pricing: the manual, M: it JUNITI-IS given. With. 12

77 A.Marshall. Principles of an economic science. M – Progress, 1993.

The given case a pricing problem is that as it is possible the large part of this difference has got to firm as profit, and the consumer prize has thus decreased to a minimum.

Drawing № 1. A value and price parity.

Consumer prize

TS

E N N

TS firm Profit About

E WITH

N T

AND

Firm costs

Source: I.V.Lipsits, Pricing, the uchebno-practical allowance, M:, JUrajt, 2011. С.18

The concept of value of the goods allows the companies to realise various competitive strategy. For example, if the company purpose consists in a gain of the market and increase in a market share probably or to reduce the price for production, having fixed value level or to increase value (having improved separate parametres of production, having added new consumer properties, etc.), having kept the price at former level. For increase in a market share at the expense of a gain of less supplied and less exacting part of consumers, the company can fly lower both the prices, and values of the goods (as an example it is possible to result the decision of company Apple on the beginning of production of "budgetary" model IPhone – Iphone 5C). The most undesirable to the company is the situation, when

Value of production decreases, and the price remains former. It means loss in competition when contenders have supplied more a high level of satisfaction of consumers by improvement of manufactured production and its realisation under the former prices. Thus, there are the various strategy directed on change of the price and value of production, however possibilities of their application are limited to level and a production cost structure, and also action of competitors. In the conditions of electronic trade and realisation of the non-material blessings value becomes the essential factor, analyzing which the companies make the decision on level of the quoted prices and on realised price strategy.

The third tsenoobrazujushchim the factor is demand, that is solvent desire of consumers to acquire these or those goods for a determined price. Demand depends on variety of factors (incomes of consumers, their tastes and preferences, the prices on vzaimozamenjajushchie and the complementary goods, etc.) and very hardly influences a policy of the company in price-fixing. Sensitivity of size of demand in reply to price change is defined by price elasticity of demand. From that, or not elastic demand is how much elastic, the decision of the company on prices reconsideration – after all in case of highly elastic demand under the price will depend, its small increase can lead to essential falling of a sales volume and gain decrease. However the return is true also – small discount will mean growth of quantity of the sold blessings and a company earning.

Besides, at appointment of the prices it is necessary to understand a measure of reaction of a sales volume on the prices vzaimozamenjajushchih and the complementary blessings for what the indicator of cross elasticity is used.

Thus, availability at the company of the information on the consumer

Demand, and also about degree of its elasticity (including and cross)

It is necessary for competent pricing and successful competition. Electronic trade gives to economists and experts in marketing the big possibilities concerning modelling of functions of demand and an estimation of degree of their elasticity because of simplification of process of data collection and the process of change of the prices.

Activity of any company (with rare exception in the form of the monopolies making completely an exclusive product) it is connected with competition. It is logical, that the competitiveness is the fourth tsenoobrazujushchim the factor.

In the conditions of a price competition (competition by change of the prices) the company for sales volume increase aspires to establish the price for production at lower level, than it is done by contenders. In case of impossibility to support so a low price, the part of the companies will be compelled to leave from the market. However further in process of financial circumstances improvement on the market again there can be enterprises, and price war will be continued. The similar competitiveness under the prices will be successful in case of constantly improved production and a cost-saving. Otherwise it will mean essential falling of rate of return of the companies and care from the market.

The non-price competition means production perfection, improvement of its consumer qualities, appearance, packing, related services. Similar improvements allow to raise loyalty of consumers and, with other things being equal, will promote growth of sales.

Undoubtedly, price policy of the companies will depend on that, how much konkurenten the market.

In case of a perfect competitiveness the firm is "prajstejkerom", the company cannot carry out independent price to the policy and

Agrees to the price, established by the market.

In the market of a monopolistically competitiveness of the company in bolshej degrees are participants of not price competition. The differentiation of production means a variety of commodity weight at the expense of qualitative distinctions. Different consumer characteristics supply wide enough trading range.

Oligopolija generates strategic behaviour of the companies both under the price, and on issue volume. The small amount of the companies in the market forces them to watch steadfastly actions one another and cautiously concerns decision-making on change of the prices. Price fall can be the reason of the beginning of price war (which in case of model Bertrana will lead to price cut to level of incremental costs) that will be unprofitable to all market participants. And recovery of price for income increase can become result of failure of consumers from acquisition of production and care to competitors, that or will force to revise again the prices towards decrease, or will reduce market to a firm dale.

In the market of pure monopoly of the price can be high in the conditions of low elasticity of demand under the price, uniqueness of the goods, market segmentation. However in case of the state monopoly and absence at possibility consumers to pay the heavy price for socially significant blessings, the situation and directive price-fixing on a low level, even not not covering costs is possible. For the competitiveness protection which absence can lead to essential overestimate of the prices, in all countries there is an anti-trust legislation.

Thus, level of a competitiveness of the market essentially influences price strategy chosen by the company. In terms of sale of material benefits and the dirty information blessings when electronic trade is considered as one of channels of sale of goods, in a competitiveness Internet shops and traditional shops enter.

The Internet gives the chance comparisons of the prices and decrease transaktsionnyh

Costs, doing the markets more competitive. However it does not mean, that through the Internet the goods exclusive, oligopolnyh and other structures cannot be sold.

In the conditions of formation of the electronic markets of the pure information blessings, it is possible to speak about direct degree of a competitiveness on them and about essential possibilities on its increase.

To the fifth tsenoobrazujushchim the factor state regulation degree is last. The state can make indirect impact by the tax, customs, credit policy. Direct regulation can consist in an establishment of price limits, a profitability marginal level and so forth For the Russian electronic trade strengthening the last years the control from the state, first of all for the purpose of a conclusion of taxable base from a shade about what it was spoken in chapter 1 is characteristic.

Thus, studying of the nature of the price, principles of its formation interests economists not the first century. Pricing questions are object of research of economists-theorists, experts in marketing. Despite firmness of fundamental bases on which the concept bases

"Price", strategy of its establishment are in continuous development and represent special interest for studying.

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A source: SIGAREV ALEXANDER VIKTOROVICH. PRICE STRATEGY of FIRMS In the conditions of ELECTRONIC TRADE. The dissertation on competition of a scientific degree of a Cand.Econ.Sci. Moscow-2014g. 2014

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