Non-price Strategies Research Articles

Strategic market power of firms in imperfect markets

Studies dealing with the market power of a firm depend on the elasticity of demand even when market imperfection is acknowledged. This study suggests that a firm derives its market power due to its interface with consumers on the market as well as its interaction with rival firms on the market. As a result, its market share and market power over a unit of sales in the industry require attention in the context of imperfect markets. Similarly, non-price strategies of firms offer some market power that should be incorporated in the definition. Thus the modified market power indices are a significant contribution to the theoretical results.

Provision of loans and credit by cocoa buyers under non-price competition: Cocoa beans market in Ghana

Abstract The introduction of partial liberalization into Ghana’s cocoa market in 1992/1993 encouraged competition among cocoa buyers. However, since the government determines prices of cocoa bean and thus prohibits price-based competition among Licensed Buying Companies (LBCs), LBCs rely on building relationships with cocoa farmers by providing incentives like credit and loans to cocoa farmers to encourage them to sell to them preferentially. These LBCs employ non-price strategies including the provision of loans and credit to cocoa farmers. This study analyzed the effects of non-price competition on loan and credit provision by cocoa LBCs. Descriptive analysis revealed that LBCs offer credit and loans to cocoa farmers, with 37.4 and 54.7% of cocoa farmers who received loan and credit respectively citing LBCs or purchasing clerks as their main source. Our regression analyses, however, did not fully support the standard intuition that competition promotes credit and loan provisions. This indicates the limited effectiveness of the use of credit and loan provisions as a non-price competition strategy among LBCs in Ghana’s cocoa market. Additional analyses offer valuable insights, suggesting that loans and credits may serve different functions when considered as means of competition for LBCs despite being essential forms of advanced payments.

How firms compete when they set identical prices: Nonprice strategies in the Indian biscuit industry

AbstractHow do firms compete when all firms in an industry set identical prices? Using Nielsen data on India's biscuit manufacturers, we document productivity‐based competition on nonprice strategies under industry‐wide uniform pricing. Products with one standard deviation higher quantity‐based productivity contain, on average, 13% more quantity per pack for the same price. Productivity also positively correlates with promotions on pack size, availability, and variety. A higher price (per pack size) sensitivity in rural markets combined with industry‐wide uniform pricing imposes a greater burden on rural consumers. Additional analyses show that firms can reduce this burden by selling different pack sizes in urban and rural areas.

Information asymmetry, attitudes toward risk, and macroeconomic performance

Every firm in differentiated oligopoly offers a product that is different from that of rival firms. Similarly, in general, a firm interfaces with consumers and interacts with rival firms on the market. As a result, both the firm and consumers experience information asymmetry. In practice, a firm is a risk taker in its dealings with rival firms and is a risk averter in its interface with consumers. However, firms utilize intangible investments (non-price strategies) to convey the value of their product to consumers and stabilize their market share. Note that consumers are risk averse and ignore such attempts by a firm once they recognize the intrinsic value of the product. These two features explain the frequency and depth of the supply fluctuations that have not been acknowledged so far. This study offers a fundamental explanation of this phenomenon along with the steady state behavior in a synthetic manner.“With uncertainty entirely absent, every individual being in possession of perfect knowledge of the situation, there would be no occasion for anything of the nature of responsible management or control of production activity.”- Knight (1957, p.267)

INNOVATIVE MARKETING OF INDUSTRIAL ENTERPRISES: THE PRE-WAR PERIOD AND UNDER THE CONDITIONS OF THE RUSSIAN-UKRAINIAN WAR

The article examines the structural elements of the management mechanism of innovative marketing of industrial enterprises. The theoretical aspects of innovative marketing at enterprises have been studied. Features of the modern world of innovative marketing in Ukraine are highlighted, which are divided into two periods: pre-war innovative marketing and innovative marketing in the conditions of the Russian-Ukrainian war. The existing limitations of innovative marketing during the war in terms of time are indicated, since the market response occurs instantly, taking into account the consumer attitude to innovations in the market. The features of innovative marketing in the pre-war period and innovative marketing under the conditions of the Russian-Ukrainian war are characterized. Changes in communication in the company’s marketing policy in wartime conditions, as well as the need to test effective communication channels in new conditions, as they may continue to simply not function or work less effectively than before, are explained. The competitiveness of the product is characterized as potential and its emergent properties, the key drivers of the emergence of the competitiveness of the product are indicated. The dominant forms and tools of promotion of goods and services in difficult war conditions and in the absence of sufficient financial support for innovative marketing at the enterprise are determined. It is substantiated that the competitiveness of the product is the potential and its emergent properties, the drivers of which are based on the combination of the efficiency of using all the resources of the enterprise and the reduction of the cost price; the ability of the enterprise to ensure relatively low prices and high quality of products and goods, concentration of efforts on the components of sustainable and stable development of enterprises in the long term. Features of the mechanism of innovative marketing are highlighted, which are characterized by the presence of strategic management based on price and non-price strategies. It was noted that modern innovative marketing of an industrial enterprise is an enterprise activity aimed at improving all production processes and influencing the market conditions of the enterprise. In wartime, it is characterized by immediacy and Ukrainianized, that is, it has characteristic accents of the Ukrainian language, culture and “Ukrainian DNA”, which before the war were weakly reflected in brands, communication, and marketing.

Exclusive content and platform competition in Latin America

Platforms often compete over non-price strategies such as the exclusive distribution of products. But these strategies are not always welfare-enhancing. Using rich data on audiovisuals distributed on platforms in Brazil, we find that non-exclusive distribution and availability of titles across platforms is more effective in deterring online piracy than in the single-homing case. Moreover, for the subset of domestic movies, it induces higher average investment in the quality of new titles upstream. We discuss options of copyright and competition policies in the light of these findings.

Deregulation, Entry, and Competition in Local Banking Markets

By applying the Bresnahan-Reiss empirical entry threshold model on Census data for the waves 1981 to 2011, we study the evolution of entry conditions in Italian local banking markets under a long-run perspective in order to capture the consequences of the removal of branching restrictions that occurred in the early 1990s. We do not find evidence of collusive behavior among local banks; instead, competition seems to have increased with respect to the number of banks and through the years—even if banks’ variable profits have risen over time. Overall, banks appear to have responded to the growing competition through the adoption of non-price strategies.

Transformation of the banking sector under the influence of FinTech: The experience of China vs the experience of Russia

Subject. This article discusses the areas of transformation of the banking sector under the influence of financial technologies, considering the People's Republic of China (PRC) as a case study, as well as techniques of competition between traditional banks and FinTech companies. Objectives. The article aims to identify the main patterns of modification of the PRC banking sector and assess the relevance of China's experience for Russian banks. Methods. For the study, we used a statistical data analysis and econometric panel data-based model building. Results. Based on the primary statistical analysis of the banking sector as a whole and groups of banks in China, the article presents indicators on operational efficiency, retail finance, cash and liquidity management (as opposed to lending business) of financial intermediaries. It reveals some evidences of price competition of banks in the deposit, credit, and intermediary businesses. Using the econometric model, the article confirms the dependence of the credit margin on the market positions of FinTech companies, and the initial margin on the market positions of asset managers. Relevance. The findings may be of interest to national mega-regulators in terms of tracking the main areas of transformation of the banking sector under the influence of financial technologies and analyzing the dumping policy applied by banks for a possible loss of their financial stability in the face of competition with new financial market participants. Commercial banks can adopt the principles of non-price strategies of Chinese banks in competing with IT companies for the client.

The Effect of Non-Price Policies on Household Tobacco Consumption Among the Filipino Youth in City of Manila

Tobacco consumption, including cigarette smoking, has a significant and increasing global public health burden. Despite recent declines in incidence, its adverse effects on human health increases the risk of several cancers. This study explained the non-price strategies that directly influence smokers' intake and initiation and the problem of long-term tobacco exposure by second-hand smokers and those affected by the media or their environment. Higher cigarette taxes and tighter regulations and enforcements, restricting who can purchase tobacco products, are prevention examples that equate to the cessation process. The research contributed to the area of study regarding the optimal control on tobacco use since it examined the findings of the performed survey to understand the influence of non-price strategies such as graphic health warnings on the young smoking intention. To substantiate the relationship between non-price policies and tobacco usage, it explores the purposively selected participants for the study, Filipino male or female youth smokers and non-smokers with an age qualification between 15 and 30 years old. The study illustrates that to promulgate awareness regarding the risks of vicious substance intake, the government must implement substantial compliance and aversion through specific indicators from this research model. Keywords: Youth, tobacco consumption, cessation, risk aversion, illness, health warnings, tobacco policies, smoking

Valuation of Products and Transient Market Power of Firms

Firms utilize non-price strategies to convey the value of their products to consumers. They may also take advantage of rivals market power reduces over time. This empirical study is an attempt to (a) verify whether strategies are developed to reveal the value of products, (b) estimate the transitory market power index, and (c) examine whether the transitory market power reduces over time.

Measuring the Market Power of Firms and their Strategies

It is well known that firms utilize non-price strategies to distinguish their products from those of rivals. However, there is no specification of the market power that such choices provide the firm let alone their integration to the firm level. This note provides a chronological rendering of such efforts being attempted in recent literature.

Diffusion of Innovative Water Atomization Technology to Conserve Water in Water Stress Countries

Clean water is a challenge in water stress semi-arid country like Botswana. All the perennial rivers are shared with river basins of neighbouring countries. Some of the ground water in aquifers are of fossil nature and remain without any recharge. The low rainfall and the increasing temperature increase further the scarcity of water. With the Adaptation at Scale in Semi-Arid Regions (ASSAR), the impact of climate change due to Global warming for Botswana, it is estimated that the Limpopo Catchment (runoff) would decrease 26%, 36%, 46% and 56% under the global warming 1.5° C, 2° C, 2.5° C, and 3° C respectively. Hence water management is imperative in Botswana In managing water, demand management with price and non-price strategies, is the most abundantly used approach. In this respect, a recently emerged strategy is the application of water atomization technology. This research investigates the effectiveness of using water atomization technology at Botho University, as a large size consumer in Botswana and envisage further to scale up to a macro level in Botswana. At Botho University, having studied this as a case study project, it was found that the application of water atomization technology at micro level enables us to save 75% of water that was previously consumed. The installation of technology is a simple process and the payback period is shorter. Further, it was found that the projection for the application of the technology at macro level reflects that there would be a saving of water by 36 million kilolitres. Hence, it was recommended to have a marketing strategy based on principles of persuasion for diffusion of innovative technology to attract adopters, within a budgeted period of ten years. These findings and recommendations are significant not only for micro level application but also macro level application in the country for fulfilling the pledge taken by the country and corporate citizens with SDG 06: Clean Water for all and Sanitation & SDG 12: Responsible Consumption of 2030 Agenda for 17 Sustainable Development Goals(SDGs). However, the study is subject to the limitation that assessing water savings expected from the water technology among various types of customers at macro level is dependent on high resolution water consumption data which is not publicly available.

Non-Price Strategies, Market Dominance and Market Power

Non-Price Strategies, Market Dominance and Market Power

Measuring the Market Power of Non-Price Strategies of Firms

Measuring the Market Power of Non-Price Strategies of Firms

Malaysia’s Palm Oil Export to India

India is the second-most populous country after China, with an overall population exceeding 1.3 billion. India is the fifth country in the world with the highest import and consumption of world oils and fats. Palm oil has become the main of oil and fats product that is being imported and consumed in India market. India is the major of Malaysia’s palm oil export destination. Malaysia’s palm oil exports to India market continually increases since the last ten years with an average of more than 2 million tonnes a year. This study attempts to analyse factors that influence the export demand of Malaysia’s palm oil to India market. The study applies the ARDL approach for data from the period 1975 – 2018. The study indicates that there are relationships between variables in the short run and long run for the demand of palm oil exports by India. The most significant determinant is attributed to soya bean prices (LPSBR) and population (LPOPI) in both short-run and long run. The export price of palm oil by Indonesia (LCPOPXIR) indicates a positive and significant relationship as Malaysia and Indonesia are competing to penetrate to India market in the long run. However, Malaysia’s export price of palm oil has a negative relationship but insignificant. Thus, the findings suggest for non-price strategies in order to increase exports to India market. Non-price strategies such as an increase of quality and the differentiation of product as well as trade deals are the strategies to increase competitiveness and preferences of Malaysia’s palm oil in India market.

Retail Market Power in a Shopping Basket Model of Supermarket Competition

Supermarket retailers typically operate with relatively low margins, suggesting a highly competitive retail environment. However, despite the fact that consumers purchase an entire shopping basket at a time from supermarkets, this evidence is largely based on models of retail competition with single-category purchases. In this paper, we develop and test an empirical model of retail price competition that explicitly accounts for the effect of demand complementarity among items in consumer shopping baskets. Relative to the case where consumers purchase products with independent demands, we demonstrate that equilibrium prices are higher for all items when retailers take demand-complementarity into account. Our findings indicate that non-price strategies intended to encourage complementarity, such as co-merchandising, strategic shelf-positioning, or featuring complementary goods tend to soften price competition, and lead to higher equilibrium prices.

Crowdfunding – the Interplay between Evolving Organization and Embedding Institutions

Abstract This paper explains the functioning of economic crowdfunding (equity- and loan-based). One of the angles from which crowdfunding can be analysed is institutional economics. Namely, it can be studied as a case where the spontaneous evolution of contractual forms is difficult and the need for legislative intervention arises. The paper explains the divergence of interests and risks of three groups of agents involved (platforms, fundraisers and funders). The radical asymmetry of power, to the advantage of the platform, is inherent in this type of business. The spontaneous development of strategies by the platforms (pricing and some non-price strategies relating to fundraisers) and recent developments in the direction of automatic decisions taken by the platform instead of funders, promotes the development of the crowdfunding business, but it does not ensure protection from risk of other parties. Still, the major source of risk for funders and partly also for fundraisers is the absence of liability of the platforms themselves. In these conditions, the spontaneous move towards the better alignment of the interests of parties seems unfeasible and external regulation is necessary.

Airline Economics: An Introductory Survey

This paper has surveyed the topics in the field of airline economics, including areas such as airline costs and production, airline demand and revenue management, airline financial issues, and airline profitability. The debates in these areas are explored from an economic perspective to help readers understand contemporary economic issues and challenges facing the airline industry, and to provide the airline management with an economic way of thinking in dealing with these issues. This paper also aims to serve a purpose for air transport researchers to consider some under-researched areas where definitive answers to some interesting issues are still lacking. These include, among others, effective ways of reducing fuel cost risks such as fuel hedging and the adoption of new technologies, development of non-price competition strategies that can be used by airlines to differentiate their products, establishing new marketing strategies, and redesigning airline networks when surface transportation modes (e.g., high-speed rail) become a threat.

Objectives, product choice, non-price instruments and firm-specific dominance in differentiated oligopoly

Every firm in differentiated oligopoly attempts dominance and growth by differentiating its actions from those of rival firms in the market. However, each of them has to be vigilant about the strategies of rivals who are close on their heels. Dominant choices, differentiating strategies, as well as defensive choices may manifest themselves concurrently. Any of these choices may be a result of the goals that a firm wishes to achieve, its product mix, and non-price strategies. This study attempts to setup an analytical procedure to identify the specific actions of each firm toward the attainment of their desired position. A detailed numerical example has been setup to illustrate the operation of this unique method.

The price sensitivity of mobile use among low income households in six countries of Asia

The private sector in developing countries is increasingly interested in extending mobile telephony services to low income and rural markets that were previously considered unprofitable. Determining the right price is a central challenge in this context. Despite known limitations, the Contingent Valuation (CV) method, which elicits information on the Willingness to Pay (WTP), is a useful guide to pricing decisions. The present study draws on data generated using the CV method to examine whether mobile use is sensitive to small declines in the current per-minute price of use for low income households in six countries of Asia: Bangladesh, India, Pakistan, Philippines, Sri Lanka, and Thailand. A Heckman model is used to correct for the sample selection problem arising from the study of mobile phone owners alone. We find that demographic criteria, including income, are not significant in explaining whether usage is responsive to price fall, although they appear important in determining mobile phone ownership. Instead, subscription to multiple service providers has an important association with the price sensitivity of use: Those with multiple SIM cards are likely to increase usage when price falls whereas those who report that they would not switch service providers are unlikely to do so. The study further finds that consumption would increase among those with a more diversified use of mobile services (to participate in competitions and to access government services) and among more ׳limited’ users (those who attach a greater importance to the emergency uses of the phone). Overall the findings suggest that there exists a latent demand for mobile minutes among low income households that can be tapped through a small reduction in price. However, given the relatively low profit margins in these markets and the ability of users to switch between service providers quickly and at low cost, competing on price could threaten the long term survival of firms. Non-price strategies would therefore be important for firm survival and sustainable service delivery.