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Businesses ‘unfamiliar’ with slashing prices: expert
Commodity prices have been staying very high in comparison with people’s incomes. Businesses cannot sell commodities, but are determined not to slash sale prices to clear stocks and minimise losses. Vu Dinh Anh, Deputy Head of the Market and Price Research Institute under the Ministry of Finance, talked to VietNamNet about the behaviour of Vietnamese businesses in the context of the high commodity prices and slow sales.
Why do you think commodity prices remain high despite the sharp price falls of input materials?
I think there are four reasons. Firstly, there is problem in the way of thinking. Businesses only think of raising prices, they are not accustomed to cutting prices. The behaviour of petrol distributors is an example. They raised the petrol prices as soon as the world’s price increased, but they have been very slow in lowering domestic prices since the world’s price decreased.
Secondly, businesses have been trying to keep prices high in order to get more profit. Most businesses do not want to sacrifice profit to boost sales, though the economic conditions have changed, and the period of massive growth has been replaced by economic recession.
Thirdly, enterprises are now selling products made of materials they imported before at high prices.
Fourthly, as sales have been going slowly, businesses dare not cut sale prices as they fear a small sales volume would bring little profit. Meanwhile, experienced sellers do not seek profit from the gap between the purchase and sale prices, but from the volume of products sold.
What is your comment about the behaviour of the majority of businesses in the current conditions? Do you think that they are still puzzled and do not know what to do?
I have had the chance to work with many businesses. When the inflation rate was high, they complained that the input material price increases brought them losses, forcing them to raise sale prices. However, when input material prices go down, they say they cannot slash sale prices because they will incur losses. It is very dangerous for businesses if they do not know what to do.
In fact, businesses can earn profit not only when the economy performs well, they can also get money when the economy performs badly. It has been said that in doing business, it is necessary to have a crisis to earn money.
What do you think Vietnamese businesses need to do to survive difficulties and develop?
Vietnam has been heavily depending on the world, while the world’s prices fluctuate all the time. Therefore, businesses need to anticipate different things and set different scenarios which show what they need to do in every scenario.
More importantly, I think that every business should reconsider its capability. If they find themselves unable to compete with others, they should think of dissolving their businesses. Businesses should also consider if they really have market advantages. If they don’t, they should shift to other business fields. Only businesses which believe in their capability should think about how to increase productivity, human resources and improve management skills.
Businesses should realise that their sale prices are very high in comparison with people’s incomes. They should think of ways to clear stocks, and the simplest way to stimulate demand is to slash sale prices. They should not demand profit all the time. Sometimes, they have to accept loss, and use the profit from some periods to cover losses in other periods. They have to learn to stop losses.
What do you think prices will be like in 2009?
In these conditions, prices will go down. But I still worry about how the government’s demand stimulus plan is programmed. The pumping of money, if not well controlled, will not help reduce prices, but vice versa – it will lead to price increases.
Nguyen Nga
vietnamnet
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