INTERNATIONAL PRICING STRATEGY FOR SMALL AND MEDIUM HANDICRAFT ENTERPRISES IN TANZANIA


            Pricing strategy of small and medium business handicraft industries can determine and establish the fate of the business. Entrepreneurs can expect profitable revenue and longevity in the market mainly by utilizing the correct pricing strategy.


            A lot of SME owners apply the approach of surveying the prices of competition and  pricing their products at a lower price they can manage against the competitor. However, having the lowest price will not win the business war especially when dealing internationally. Larger businesses with larger capitals and the capacity to produce at a much lower cost of operations will surely wipe out any SME that is trying to compete with it  on  pricing alone.


            Also, during the early stages of the business, it relies heavily on a hub of customers for repeat sales and advertising through word-of-mouth. Giving handicraft products  low prices in this stage might prove detrimental in the future when the owner realizes that no profit is being made and that prices must be raised. This might cause losing the core customers and might even be the cause of a negative image  due to negative word-of-mouth advertisement.


SME owners should avoid dealing in a price war but rather, the entrepreneur must start by researching and being knowledgeable about market demand. SME owners can examine market trend and demand by applying these factors: competitive analysis, ceiling price, and price elasticity.


            In competitive analysis, pricing is not just the source of competition. SME owners should also be aware of the total package their competitor is offering. They should know if their competitor if offering value-added services and to know what these services are. They should also be cognizant of the target market of their competitor. Is their competitor targeting the A and B brackets of the market, or the middle and lower market brackets?  It would be a real waste of profit if an SME owner who is targeting the middle and lower classes will vie with a competitor targeting the more affluent classes.


            The highest price of a handicraft commodity in the market is not necessarily the ceiling price. Rather, customers most of the times determine the ceiling price.  


            Less elastic demand on a handicraft product can mean a higher pricing limit for the product. Usually, these occur  if the buyer is familiar with the quality of the handicraft product, the buyer is not in the habit of canvassing for lowest prices, and if competition is limited.


            To capture the international market and avoiding price war which is disastrous to any business, these strategies are recommended.  First, create a handicraft product that is exclusively the company’s product in design and form. Second, handicraft products that are unprofitable due to large maintenance costs and low demand must be dropped from the company’s line of products. Third, look for unique value-added services that will be noticed in the market. Fourth, aim to develop a brand name. A strong brand name can withstand price war.     


To obtain the optimum pricing in countries abroad, SME owners should be knowledgeable on the following:  potential of each national market, size of each national market, elasticity in pricing per country, impenetrability of prices as reimbursement, taxes, duties, etc., price differential between parallel imports, and developments and fluctuations of exchange rates.


Tanzania Handcraft Association, better known as TanCraft, is an organization established in 2006 for artisans. It is based in Dar es Salaam but has more than two hundred members scattered nationwide.  It is a non-profit group that is member-based. It supports and sustains handicraft enterprises in the small and medium range through access to loans or grants, offer of assistance in exporting handicrafts, and trade fairs among others.  It aims to help families belonging to the middle and lower economic levels to create income and provide employment through the handicraft business. In so doing, it also contributes to the improvement of Tanzanian economy.


            Some major difficulties faced by its members are pricing calculations and strategies, planning business schemes, and even lack of skills and ideas in designing handicraft products.  TanCraft has partnered with other organizations to allow an exchange of business strategies and design patterns for the purpose of decreasing the difficulties encountered by its members.


           



Credit:ivythesis.typepad.com


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