eBusiness Weekly
Dr Charles Dahwa
Episode 1: Patriotic entrepreneurship: The key for economic development.
Part 4:
In my previous articles (Part 2 & 3), I explained the importance of patriotic business motivation and patriotic production as the first and second of the nine key underpinnings that can drive patriotic entrepreneurship in our nation.
The remaining seven drivers are Patriotic Pricing, Patriotic People Management, Patriotic Marketing, Patriotic Market Behaviour, Patriotic Entrepreneurship Development, Patriotic Knowledge Creation, Patriotic National Narrative and Stakeholder Management. In this article I am explaining the roles of
Patriotic Pricing and Patriotic People Management.
Pricing is the strategy that directly sets what revenue or income a business should get from its products and services. Logically, pricing takes into account entire production/operations and administrative costs as well as other factors such as competition, regulation, industry trends and of course demand.
For any business to produce products and services, it has to incur expenses in procuring inputs required for processing into value added outputs. Inputs include raw materials, skills, knowledge, information, and finance amongst others while outputs are the value-added finished products and services.
Considering, from a classical economics perspective, business is an undertaking established to provide value added products and services to meet individual, organisational and societal needs at a profit, it therefore, charges a price for its products and services.
There are numerous ways of coming up with a price and the most common one is a mark-up, which simply mean that a business decides on a percentage proportion of the cost it incurs to produce a single unit of its products or services. In this regard, if it costs, for example, $20 000 to produce a desk or to buy a finished desk for reselling, a mark-up can be 10 percent, 25 percent, 43 percent, 65percent, 80 percent or even 100 percent.
While a business can come up with any mark-up it desires, however, it is restricted in settling for extreme low and high mark-ups. This is because extreme low mark-ups lead to very low revenue/income generation and even result in losses and thereby threaten its viability.
Similarly, extreme high mark-ups imply there is a price that the market or buyers are not willing to pay but switch over to competitor products that are more affordable. The net effect is that by charging extreme high mark-ups the business also threatens its viability in the long-term because without customers there can be no business. Consequently, coming up with a mark-up to set price is a very delicate process of incorporating the production/operations and administrative costs of the business as well as taking into account competitor and industry trends including buyers’ capability to pay.
Setting the price also takes greatest care to consider specific government and industry regulations regarding the pricing of products and services. Where such regulations are in place, for example, price controls, and a business chooses to ignore them, naturally, the business attracts penalties from the regulators and this eats into its profitability.
Besides this adverse effect on profitability, when a business gets fined by the regulators the negative effect is the denting or damaging of the business’ brand in the market. It is certainly not prudent to have your business always being caught on the wrong side of the law in as far as doing business legally, ethically and based on best practice is concerned.
Still, another very important factor that influences pricing is demand-supply changes in the market. Whenever global and industry trends are such that there are shortages in the supply chain, naturally, such shortages trigger higher demand in the market.
We are currently witnessing upwards price volatility owing to how Ukraine-Russia war is continuously disrupting global supply chains. The grand effect of supply chain shortages is that buyers’ needs are less satisfied as they chase fewer products and services. Logically, the resultant effect is that businesses get an incentive to increase their prices. Although this is logical, there are occasions where such supplier shortages do not trigger a rise in production costs; hence, increasing prices becomes unfair or unethical.
An even more telling example is a case where there are no shortages in the supplier chain but the demand side experiences significant change, for example, increase in population of buyers in need of particular products and services. Another example is the increase in purchasing power of buyers for instance upon getting salary increment.
What is quite surprising and indeed unethical is for business to proceed to increase prices simply because the greater need for products and services and the higher buying power have pushed up demand. This is both opportunistic and unethical because the production/operations and administrative costs for the business have remained the same, yet the business now demands a higher price.
There are also cases where business abandons best-practice in doing business inclusive of normative pricing and go on to adopt political motives to drive their business strategies. In this regard, some businesses begin to behave awkwardly especially during elections time and this is evidenced by unexplained shortages, erratic pricing, staff retrenchments and one wonders what is really going on.
Of course, to those businesses that have adopted such political motives, behaving awkwardly in this manner is their covert ways of influencing the politics of the economy. When this happens, we begin to witness a cat and mouse game in the market as the government rightfully steps in and reign in the unruly businesses. As I argued in my earlier articles, government intervention into the market driven by such market failures, for instance, this unjustified weaponisation of pricing is most welcome. No Government in the world will fold its arms under the pretext that the so called ‘invisible market forces’ shall regulate the market as prices unprecedented shoot the roof.
A close look at the evidence I have presented so far indicates that there is no argument against business coming up with pricing strategy for its products and services. In fact, considering the capitalist traditional view that business largely exist to make money, it makes perfect sense that price is the capitalist’s single most important strategy to generate such revenue/income. However, I hereby argue against not just our businesses in Zimbabwe but specifically our Zimbabwean businesses being exclusively capitalist driven.
Chokwadi mabhizinisi edu isu vana vevhu angabva asusikidzwawo zvakanyanyisa ne Capitalism here? Specifically, I bring to question the rationale of weaponising price to the detriment of the quality of life of the general public and the impediment of overarching national interests. Notably, price instability is of great concern not only to the buying public but also to the Government for it erodes market confidence and stifles the ease of doing business. To demonstrate unethical pricing, it is not a secret in our economy how very often prices just go up simply because it is salary period especially when civil servants get paid. Why should pricing strategy be linked to salary periods is question that begs for answers?
Therefore, instead of being dominantly capitalist driven, I suggest our Zimbabwean businesses should be strongly patriotic. From my previous explanations (Part 1-3), patriotism is not being partisan but being strongly passionate and positive about one’s country; doing all you can to contribute positively and significantly to the quality of life of the general public as well as to national interests.
Given this logic, we should witness more of patriotic pricing than capitalist pricing and championed by our Zimbabwean businesses. Patriotic pricing is all about setting price taking into account the long-term profitability and viability of the business while at the same time ensuring the general public still access products and services, enjoys value for money and overall considering national socioeconomic development and interests.
In sharp contrast, capitalist pricing thinks about the long-term profitability of the business and continuously enhancing shareholder value; doing all this even at the detriment of the quality of life of the general public and national socio-economic development.
To attest this, capitalist driven businesses do not hesitate to close shop and even exit the entire economy setting up else once determination is made to the effect that their profits and shareholder value are significantly threatened.
This is because capitalists are in business to make money: Period! Patriotism rarely features in their business approach, strategies and processes. It is, therefore, in this context that I am focusing on Zimbabwean businesses and not businesses operating in Zimbabwe whose founders/entrepreneurs are not Zimbabweans because they need not be patriotic about our economy and national well-being. Their primary interest is how they can repatriate profits to their home countries and economies.
A third key tenet to help us promote patriotic entrepreneurship in our nation is patriotic people management, where people management entails human resources management (HRM).
From economics and entrepreneurship studies we know that the four factors of production are land, labour, capital and entrepreneur/entrepreneurship. Without doubt the entrepreneur is credited with generating creative ideas, taking the risk in sourcing, financing, coordinating and configuring labour and land resources into production processes to produce value added products and services. Consequently, labour, which is people, is largely deemed a resource (human of course), which can be exploited and expensed like several other resources. Yet, because labour are people that are quite different from non-human resources, which for example, have no feelings, family, career and life goals, contemporary HRM predominantly treat employees as the single most important resource or asset of the business.
While prioritising employees in this regard is indeed quite commendable, the challenge is that it is not surprising to see this notion becoming just a rhetoric. Many businesses are very often guilty of a lack of decent work: limited meaningful work, constrained employee empowerment, scant employee involvement, poor occupational health and safety, deplorable employment relationships and uncompetitive remuneration/compensation. Ultimately, labour which is rhetorically deemed the single most important asset for the business in reality is actually dispensable! From a capitalist driven business, approaching HRM in this manner is usually the norm.
With the above in mind, I wish to therefore, argue and suggest that our Zimbabwean businesses can improve their HRM approaches by adopting all the key tenets of patriotic entrepreneurship. When the business motivation is fundamentally patriotic driven, patriotism informs all the business functions ( HRM, Marketing, Finance, Operations). Consequently, to a patriotic entrepreneur and business, when they engage and interact with employees, they have great potential to go beyond perceiving and treating employees simply as the single most important asset of the business.
Specifically, as argued in my previous articles (Part 1-3) patriots do not fake loving their nation and fellow country men and women.
This is not a lip service issue of one just labelling themselves patriot or patriotic when their policies and deeds demonstrate outright exploitative capitalism. Bonafide patriotic entrepreneurs deem their employees not just as citizens and workers with significant employment rights but fundamentally treats them as fellow patriots or citizens with great potential to become patriots.
As I explained in my previous articles, not every citizen is a patriot while all patriots being nationals with devout love for their country men and women and strongly passionate about their national interests are naturally also citizens. Importantly, while citizenship is legally acquired patriotism is not.
Given this explanation, it becomes absurd for a patriotic Zimbabwean entrepreneur/business to enslave their employees considering dominant love, passion and care for the uttermost good and wellbeing of their fellow Zimbabweans, men and women as well as Zimbabwean national interests drive their patriotic entrepreneurship. Yet for capitalist entrepreneurs/businesses operating in our country, this is not difficult at all to execute should they wish to do so, for example, employ exploitative HRM practices for the sole benefit of their businesses and enhancing their shareholder value.
It is in this context that we get alarmed to witness some of our Zimbabwean businesses whose HRM policies on talent acquisition and management are to get the best human capital (employees) at least cost; that is, remunerate as little and as competitive as possible for high value skilled manpower. Such HRM divisions go on to boast how they have made significant labour savings and thus contributed to the bottom line of their businesses courtesy of their stringent and mean recruitment and remuneration policies. Surely, this cannot be something to take pride of if such Zimbabwean businesses are genuinely patriotic.
So, there you are and food for thought! Examine yourself as a Zimbabwean entrepreneur and business and ascertain to what extent are you predominantly capitalist or dominantly patriotic? To what extent are your pricing and people management strategies predominantly capitalist or patriotic? Your input, comments and critique is most welcome. Next, I shall touch on Patriotic Marketing and Patriotic Market Behaviour.
Dr Charlie provides cutting edge consultancy in Research, Strategy, Entrepreneurship and SME Development, Marketing, HRM and Corporate Governance. He holds a PhD in Management from Manchester Metropolitan University, (UK) and is contactable on Email: [email protected] Mobile: +263 71 370 2933
