Approaches to pricing in the global market

The world market is characterized by a multiplicity of prices.

As a rule, the price of the world market is taken as the price of large systematic and sustainable export and import transactions concluded in the main centers of international trade by exporters or importers of the goods concerned on the terms of payment in freely convertible currency (LEW).

World prices perform a number of functions:

indicative, which makes it possible to assess the economic situation at a particular time; communicative, through which the subjects of the world market are connected; distributive, allowing to distribute the income of market entities; stimulating, which contributes to the correction of export-import policies of international corporations and states; sanitizing, “cleansing” the world market from inefficiently functioning participants.

Among the world prices can be identified the price of the seller (exporter), the price of the buyer (importer), reference prices (catalog price, list price), exchange prices (forward transaction prices), foreign trade statistics prices, auction prices, prices of actual transactions and contracts.

Let’s note two main approaches to setting prices on the world market. The first is based on the law of value. In this case, the exchange of goods is carried out on the basis of the average world labor costs, that is, at international value, which is determined mainly by the production conditions of the main countries exporting this product in large quantities. The second approach involves taking into account in pricing the use value, rarity of the product, the phase of its life cycle, i.e. covers modern marketing tools.

A characteristic feature of the interaction of prices of domestic and world markets is the divergence of their levels. It is important to take into account that the prices of world trade have a greater impact on domestic prices than domestic prices on world prices. World trade prices affect, through imports, an increase in the supply of goods within the national market and act in the direction of lowering domestic prices. In turn, domestic prices affect the prices of world trade, primarily through the size of the commodity mass circulating on the world market, i.e. supply. In addition, the ratio of domestic prices to world trade prices is influenced by the direction, size and nature of tariff and non-tariff barriers, which vary from country to country.

Although the ratio of “domestic prices to world trade prices” is difficult to quantify, there is usually an excess of domestic prices over foreign trade prices for both exported and imported products.

The formation of foreign trade prices at a lower level compared to the prices of domestic markets is explained by many reasons. These include:

delivery to the world market by the most competitive companies, firms of importing countries with advanced technology, high technical level and organization of production, low costs; tougher competition than in domestic markets, acting in the direction of lower prices; wide use of discounts in foreign trade for increasing the number and volume of batches of goods sold; the use by countries of various forms of export promotion.

The Republic of Belarus actively participates in international trade. According to the Ministry of Statistics and Analysis, in the structure of Belarusian exports in 2001 the following had the largest share:

mineral products (18.2%); vehicles (13.0 per cent); machinery and equipment (12.1 per cent); chemical products (10.8%).

Exports of the Republic of Belarus in 2001 amounted to 7428.3 million US dollars, imports – 8048.9 million US dollars. The main foreign trade partners of Belarus:

Russia (59.4% of the total trade turnover); Germany (5.4%); Ukraine (4.5%); Latvia (3.4%); Poland (2.9%).

The concept of “service”. Features of services as an object of trade.

The process of the world economy in the second half of the twentieth century is inextricably linked with the development of the international division of labor, globalization and regionalization of the world economy. The maturity of the world market of goods, the degree of its saturation largely determined the growth in demand for services, which caused the intensive development of international trade in services, and also led to the formation of the world market for services.

Let’s turn to the disclosure of the essence of the concept of “service”?

It is known that many needs of people are satisfied not only through a thing, but also by the most expedient activity, due to its inherent certain useful character. Being consumed, as an activity, labor takes the form of a service. At any given moment, among the commodities that exist as commodities, there is a known number of commodities in the form of services. Thus, the total amount of commodities is always greater than what it was in the absence of usable services.”

Under the service it is customary to understand such an activity that may not be embodied in a material product, but is always manifested in some useful effect that the consumer receives.

It is important to note that the beneficial effect of a service does not exist separately from the process of its production, therefore, services, unlike goods, cannot be produced for the future and stored. The processes of production and consumption of the service coincide over time.

The specificity of economic relations regarding the purchase and sale of services lies in the direct connection between the producer and the consumer. The service satisfies the individual need for a given, certain type of work. Due to the fact that services are produced by a predetermined contingent of consumers, there can be no overproduction of services.

The result of the consumption of the service may be different – the student upon completion of studies at a higher educational institution becomes a highly qualified specialist; the impression of the music listened to can have an emotional impact on a person, his worldview, behavior and persist for life, the patient is cured, etc.

K. Marx noted: “A certain kind of service … are embodied in creatures, while other services, on the contrary, do not leave tangible results that exist separately from the performers of these services; in other words, the result of them is not a saleable product … But this does not change their economic character at all.” Consequently, services may or may not have a material form. In modern conditions, for example, a number of services are purchased on electronic media, that is, in a materialized form.

The quality of the service, in contrast to the quality of the goods, can be changeable and vary significantly depending on the conditions of its production and consumption, the time of production of the service, the level of qualification of the manufacturer, etc. So, an experienced hairdresser is likely to cut the client much better than a novice, young hairdresser will do. However, the first can cut in different ways, depending on his physical condition and the disposition of the spirit at the time of cutting. Consumers of services are often aware of this variation in quality and consult with other buyers when choosing a service provider.

To ensure the quality of services, companies allocate funds for training and attracting really good specialists. Airlines, banks and hotels, as evidenced by world practice, spend significant sums on training their employees in the art of providing good services. In addition, service providers monitor customer satisfaction through surveys, test purchases, etc. to identify cases of unsatisfactory service and rectify the situation.

International trade in services faces more different barriers than trade in goods; some types of services cannot be exported at all, for example, municipal or household.