Non-price competition

Tallinn University of Technology

School of Economics and Business Administration

 

Department of Finance and Economics

Chair of Economic Theory

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Petrov Nikita

NON-PRICE COMPETITON

Research paper I

 

 

 

Supervisor: Tatjana Polajeva

 

 

 

Tallinn 2014                                 

 

I declare I have written the research paper independently.

 

All works and major viewpoints of the other authors, data from other sources of literature and

elsewhere used for writing this paper have been referenced.

 

Tatjana Polajeva................................

Student’s code:

Student’s email address:pipaspb@gmail.com

Supervisor: Tatjana Polajeva

The paper conforms to the requirements set for the research papers

...................................................

(signature, date)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table of Contents

INTRODUCTION 4

1. The essence of non-price competition 6

1.2) Methods of Non-price competition 10

1.3) Forms of manifestation of non-price competition 15

2) NON-PRICE COMPETITION ON THE EXAMPLE OF “EXCLUSIVE”  COMPANY IN SAINT PETERSBURG 18

2.1) ISO9000 Certification 20

ConclusionS 23

REFFERENCES 24

 

 

 

 

 

 

 

 

 

INTRODUCTION

Relevance of the chosen problem is that the market through three mechanisms - competition, supply and demand, pricing - leads the economic system in motion and gives it incentives for further development. Market forces of economic entities to engage in a competitive relationship and constantly supports competition between them. Action market mechanism stimulates entrepreneurs continuously develop new products.

Through market pricing mechanism continuously provides business information on changes in the market, the emergence of new conditions, etc. It affects all market participants, forcing weak entrepreneurs and rewarding the strongest using various methods of competition. Competition is effective mechanisms for competition in the market. It acts as a coercive power, forcing entrepreneurs to fight for an increase in return on capital by seeking new forms and methods of production, use of new technologies, new ways of organizing, managing the provision of new services. The purpose of the study - to explore the essence of non-price competition.

More effective and more modern form of competition is to fight for the quality of goods offered in the market. Placing on the market of higher quality products or new use-value complicates the response by the competitor, because " shaping " the quality goes a long cycle, starting with the accumulation of economic, scientific and technical information. As an example, the fact that the well-known Japanese company "SONY" VCR has been developing simultaneously with 10 competing destinations.

Important role of pre-and after-sales service plays for the buyer, because manufacturers need a permanent presence in the area of customer service. Pre-delivery service includes meet the demands of the terms of delivery: reduced regularity, regular deliveries. After-sales service, the creation of various service centers for the product purchased, including the provision of spare parts, repairs, etc.

Due to the great influence on the public media, press advertising is the most important method of competitive struggle, because through advertising can be a certain way to form an opinion of consumers about a particular product both for the better and for the worse

But the main advantage of non-price competition - this is the minimum cost spent to improve product quality and to create high-quality advertising company requires fewer resources than maintaining exhausting " price war "

The aim of the course work was to study the methods of non-price competition. For this purpose, the disclosure of the following tasks:

1) Consider the theoretical foundations of non-price competition:

- The essence of non-price competition;

- Product differentiation, its improvement and diversity;

- Methods of price competition;

2) To study the features of advertising and packaging, as factors of non-price competition

- Features of advertising;

- The impact of advertising on sales of products;

- Features of the package;

- Empirical evidence

 

 

1. The essence of non-price competition

http://economics.csusb.edu/facultyStaff/nilsson/personal/Capitalism%20Text/10-Competition.pdf

http://www.referenceforbusiness.com/encyclopedia/Clo-Con/Competition.html#b

http://www.chinaacc.com/upload/html/2013/06/27/lixingcundf971924b1cf4234b6603286cfc9151e.pdf

 

Non-price competition - competition method, which is based on no price advantage over competitors, and achieve a higher quality, technical level of technological excellence, with greater reliability, longer life and other more sophisticated consumer properties. Mainly improving product quality and conditions for its sale holds Non-price competition.

Improved quality can be in two main areas

1) Improving the technical characteristics of the goods;

2) Improving the adaptability to the needs of consumer goods. (service)

Non-price competition by improving the quality of products is called competition for the product. This kind of competition is based on the desire to capture some of the industry market through the issuance of new products or service that are either fundamentally different from the old model, or represent its upgraded version. Competition based on improving quality, is contradictory. On the one hand, is a way to improve the quality of hidden price cuts and market expansion on the other - the "quality" - a subjective assessment, which opens up the possibility of falsification of quality through advertising and beautiful packaging.

Non-price competition by improving the marketing of products called competition in sales conditions. This kind of competition is based on improving the service of customer service. Here is the effect on the consumer through advertising improve trade the establishment of service benefits buyers after the purchase of the goods, that is, during its operation.

Non-price competition is conducted by reducing costs, improving product and service quality, reliability, better payment terms, warranty and service, improved marketing techniques.

The more unique product offering, from the point of view of consumers, the more marketing freedom in setting prices higher than those of competing products. Each of the companies acting in the market tends to at least maintain the market share, which it occupies. Basic techniques are required for this competition - the price, the technical level and other quality indicators of the goods, delivery terms payment terms, scope and timing guarantees, and quality of service advertising and other activities.

Currently, many companies prefer to improve consumer properties of their product while maintaining or even some increase sales prices. With appropriate advertising such "hidden" discount from the price of goods is usually a positive reaction from the modern consumer, which is so often associated with low price poor quality product.

Capturing market penetration using it based on the development of a new branded product or exclusion of competitors offering similar products also occurs in non-price competition. In the world of success is determined by price competition (especially in Europe, North America, South - East Asia) technical level, product quality and reliability, proven certification in conventional centers, level of service and after-sales service, rather than low prices.

One of the challenges of the modern theory and practice of organizing the competitive activities of the participants of the market process is to establish the causes and diagnosis of qualitative and quantitative transition conditions of price competition in non-price competition.

Non-price competition raises a range of important problems of the market. Among them interbranch mechanism of profits in the form of input-output problems, overcapacity, the impact on sales of non-price factors preferences and choices, competitiveness, cost of consumption.

Non-price competition - competition method, which is based on no price advantage over competitors, and achieve a higher quality, technical level of technological excellence, with greater reliability, longer life and other more sophisticated consumer properties.

Significant role in non-price competition play: design, packaging, subsequent maintenance, and advertising

Non-price competition minimizes price as a factor in consumer demand, allocating goods or services through the promotion packing, delivery, service, availability, and other marketing factors.

For example, the company is trying to attract more potential buyers beautiful packaging or offer the consumer more favorable compared to the competitor conditions. The most important element of price competition is advertising. Advertising can help the company increase its market share and attract consumers.

When price competition sellers move consumer demand curves, emphasizing the distinctive features of its products. This allows the company to increase sales at a given price or sell at the initial amount higher.

The risk in this case due to the fact that consumers cannot be regarded as a dealer better than the competition. In this case they will buy cheaper goods, which, in their view, similar to more expensive. Firm based on price competition should reduce prices to increase sales.

Competing products is an important means of implementing technical innovations and improvements to the product over time. The improvement of the product may be growing in two different senses. First, a successful product improvement of one firm or obliges competitors to imitate, if they can do it, surpass temporary market advantage from this company, otherwise they cannot avoid losses. Second, profits derived from the successful improvement of the product may be used to finance its further improvement. However, again there are significant criticisms of the product changes that may occur in conditions of monopolistic competition. Critics point out that many of the changes in the product are more apparent than real. They represent minor temporary changes in the product, which does not increase its durability, effectiveness or usefulness. More exotic container, packaging or bright " guidance shine " often constitute the main lines of product changes. It is also proved that, especially in the case of consumer durables goods and a limited period of use may be modified by the principle of " planned obsolescence " where firms improves, your product exactly to the extent necessary in order to make the average buyer to feel dissatisfaction with last year's model.

 

 

 

 

 

 

 

1.2) Methods of Non-price competition

 

http://dilettantee.wordpress.com/2012/02/23/business-tactics-and-secrets-ways-to-eliminate-or-undercut-your-competition/

http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1867&context=lcp

 

Non-price methods intended to change the properties of the product giving it a qualitatively new features, creating new products to meet the same needs, offer products that did not exist on the market, improving the range of services, related products (product demonstration, longer warranty repairs , etc.) . An important factor is price competition efficiency and minimize the delivery time, which can be observed in terms of delivery specified desired product quality in certain contractual terms of place and time, subject to the minimum total costs of transporting products. It is impossible not to allocate such a factor price competition as the creation of a powerful sales network and service personnel. To include non-price competitive group of methods of action.

The first group - methods to ensure a competitive advantage by changing the organization of the better characteristics of a variety of consumer goods and services, in order to increase customer value:

- The introduction of new products (product differentiation);

- The introduction of products that have new consumer properties, improved quality, more advanced design, more beautiful packaging (differentiation of consumer properties of goods)

The second kind of differentiation will apply when:

- The organization aims to expand its list of consumer properties of goods

- The organization is trying to expand the list of market segments of manufactured goods

- The organization intends to achieve recognition on a relatively small sector of the market due to the diversity of products offered

- Introduction of new forms of corrupt and after-sales service to attract new categories of consumers, encourage more frequent use of goods and one-time purchase more goods

The second group of methods of sales promotion. These short-term measures of monetary or material nature to encourage the purchase of goods.

Sales promotion is a multi-pronged focus. Target selection depends on the subject of the upcoming impact - the consumer or reseller.

The consumer has the greatest importance, and all the marketing policy is reduced to the effects on the consumer. The goal of stimulating in this case can be reduced to increase the number of customers or increase the quantity of goods purchased by the same buyer. By means of sales promotion for buyers include: samples per sample bonuses, lottery, markdowns, trade discount, coupons, sales, games and competitions, clubs consumers ' label event. " Reseller, as a natural link between producer and consumer, is a specific object of incentive in this case performs regulatory functions. In this case the goal of stimulating can be directed to:

- Give product a certain image, to make it easily recognizable;

- Increase the amount of goods entering the distribution network;

Means of sales promotion for resellers are premiums and gifts, shopping premiums, reimbursement of expenses for advertising, prizes, exhibition sales, souvenirs, and shopping brochure.

Organization should constantly compare and analyze alternatives sell his goods, to revise prices and discounts depending on changes in the market.

The third group of methods of advertising and public relations.

Advertising - is disseminated in any form by any means information about the natural or legal persons, goods, ideas and initiatives, which is designed for a specific group of people and is intended to form or maintain an interest in the natural or legal persons, goods, ideas and initiatives and facilitate sale of goods, ideas and initiatives.

Television advertising is the most massive and most expensive form of advertising. Currently in Russia and one advertising campaign will not be completed without advertising on TV.

Radio advertising is an essential part of our everyday life. However, its main difficulty lies in the fact that quite difficult to separate from the audience of potential buyers and get them to listen to exactly the program, under which is advertising. Can affect feelings with appropriate tunes noises and voices that portray exciting mental images. Radio uses three main instruments for transmitting messages:

- Voice helps listeners to imagine the characters;

- Music conducive to better memorization;

- Sound effects are used to transfer the situation in which the action takes place.

Success of advertising in newspapers and magazines is determined to do this edition, a good text, catchy design text , a good placement of text on the strip Publishing , correct timing and frequency of the publication . In order to choose the most appropriate publication is necessary to compile a list of all the newspapers and other periodicals, capable of achieving the desired group of potential buyers.

The main function of the outdoor advertising is reinforcement and the addition of advertising placed in other media.

In outdoor advertising plays a major role repetition factor so the budget must be drawn up on the basis of the need to purchase specially selected places that regularly come to the attention of many people.

Before engaging in planning advertising should identify consumers' demands and its relevance to the product evaluate the level of competition in the market, that is, to conduct market research. Modern marketing recommends complex and use different types of advertising media. Complexity must ensure maximum coverage of the selected segment. Each potential customer needs to provide the necessary information about buying the product. The resulting efficiency of the sales of goods indicates optimal saturation advertising. Saturation advertising - the volume of all promotional activities in a given period of time in the selected market sector. The value of this volume is estimated to cost promotions. Efficiency is defined by the ratio of sales of products (total requests for products to saturation promotional activities during the reporting period).

Each type of product in a particular market has its optimum saturation, ie the effectiveness of advertising has special laws. Change in volume of products (advertising effectiveness) is directly dependent on the substance and used advertising media. When insufficient saturation advertising costs are rising faster than effectiveness. Funds invested in promotional activities, are used most effectively when the saturation advertising reaches an optimal level.

A further increase in costs does not lead to the desired results: the effect of sales remains at an optimum level, the increase in advertising spending decreases expected profit. Too limited budget for advertising products are sold slowly, the company makes a loss, the effect of " anti-advertising ".

Analysis enables businesses to develop recommendations for the selection of the most profitable types of promotional activities and encourage advertising in accordance with a certain type of product and the specific market for a given period of time. These patterns for different kinds of goods are almost identical.

Thus, the income from the sale of a product is largely determined by advertising and its ability to convince the buyer to make a choice in favor of the proposed.

But along with the methods of good non-price competition, there are other, less legitimate methods of competition: The main methods are:

- Economic (industrial espionage)

- Forgery of competitors' products

- Bribery and blackmail

- Consumer fraud

- Manipulation of business reporting

- Currency manipulation

- Concealment of defects, etc.

 

 

 

 

 

1.3) Forms of manifestation of non-price competition

http://economics.csusb.edu/facultyStaff/nilsson/personal/Capitalism%20Text/10-Competition.pdf

http://smallbusiness.chron.com/advantages-disadvantages-nonprice-competition-10048.html

According to foreign scientists, products from producer to consumer makes its way, which can be represented by the following formula. Product distribution research project + salespeople + moving + advertising=sale. Thus, we see that the advertising process completes sale ability.

Leading role in shaping consumer demand plays advertising of any product. Advertising in a different form, and primarily on the product packaging, helps to achieve the main goal by persuading consumers to continue to use the product and test the product in a new application, as well as motivations of those who do not use the product, buy it .

When the firm produced a new product, or additional modified old advertising helps us in searching for and attracting new customers. At the same time she is trying to influence the existing customers that they continue to buy the products of the company. Advertising should be aimed at attracting customers and in order to replace those lost as a result of firm competition.

Advertising is customer activity in three ways: it can encourage them to direct action (the buyer asked to come in and buy immediately, send the order, etc.), an indirect action (constantly reminding and encouraging brand only buy this product) combination of the two types of asking the buyer to take a step in the direction of purchase, but do not require to do so immediately.

The ads use a few basic tools: television, radio, newspapers, magazines, as well as outdoor advertising media: signs, stands, showcases, neon signs. Special role-plays by advertising in the form of packaging, so the main burden carries advertising, of course packing.

The purpose of advertising firms operating under monopolistic competition, the firm hopes to increase its market share and increase customer loyalty towards it for its differentiated product. Translated into specific terms, this means that the firm hopes that advertising will move its demand curve to the right and at the same time reduce its price elasticity.

Advertising critics point to the fact that its main purpose - to persuade rather than inform. Not many would argue that television advertising of beer, which focuses on the dispute on the "less is poured - more sensations " tells consumers a lot of useful information. Competitive advertising is based on the often misleading and ridiculous statements that lead to confusion and often affect consumers rather than enlighten them. In fact, advertising may well be in some cases to convince consumers to pay high prices for much lauded, but the worst quality products, abandoning the best quality, but not advertising products sold at lower prices;