Nova workboard

a blog from young economists at Nova SBE

What is it like when you lead a price war? Win a customer or not?

Can you still hear on an action price offers? If someone writes “FREE”, do you have to have it? Long time ago, leaflets worked as an incentive for customers and traders were satisfied. But today, traders would prefer that actions with leaflets are completely canceled. Do you know why?

Today, in a time of economic crisis, traders pander to customers with the lowest price offer. You might think it’s good for customers; they will buy goods more cheaply. At first glance, you may be right, but there is another side of the coin. Traders are forced to reduce prices sometimes even to the point of the costs, so price offers in the action leaflets are the not good for most retailers.

Do you go to supermarkets to buy what is discounted or with free gifts and other goods disregard? By buying only goods of the action leaflets, you are helping only multinational companies and this situation will lead to closing of small shops and stores. If those stores gradually close, where you will work, or your family? Maybe you can work in that shop, have minimum wage, because you have only few customers? Is it possible, that you will sell in a week thirty TV’s, and on the one you have a gross profit of only five hundred crowns and a free service to the customer. At today’s prices of fuel, driver salary, vehicle amortization and transport costs, you will not earn so much.

Do you consider it incredible? Today it is quite common. There are even action leaflets where the trader sells goods at a lower price than purchased. You can think that it’s not my problem; most important thing is to buy goods for cheap price [1].

Price war affects all. What if you want to buy high quality goods that will have more than two years warranty? It also demands that the price must be as low as possible. Then the manufacturer chooses a compromise, due to the lower price he has also lower quality.

Do you behave similarly? By that you create the enormous pressure to the goal of having the lowest price. This position is supported by a price war, major chains, supermarkets, online stores. It’s like a fight with windmills.

What will happen, when small businesses and entrepreneurs will disappear, which are the only competition of multinational companies? Will you go twenty kilometers to the supermarket for small things for a few crowns?

In my opinion small businesses should be more protected by the state, while the state should watch out how many foreign companies business in the territory of the country and progressively take over small businesses. Also, customers should be careful to not purchase only in large supermarkets, where prices are not always the lowest.

 

 

Kateřina Čadinová

 

References:

[1] http://sackova.blog.idnes.cz/c/219425/Jake-to-je-kdyz-se-vede-cenova-valka-Vyhraje-zakaznik.html

http://www.investopedia.com/terms/p/price-war.asp

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Author: studentnovasbe

Master student in Nova Sbe

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