Determinants of pricing objectives and price flexibility policies of pork-based agro-businesses in Mashonaland Central province, Zimbabwe

• Main Authors: Saul Ngarava, Abbyssinia Mushunje
• Format: Article
• Language: English
• Published: AOSIS 2018-04-01
• Series: South African Journal of Economic and Management Sciences
• Subjects: agri-business; pricing objectives; price flexibility; pork industry
• Online Access: https://sajems.org/index.php/sajems/article/view/2029

Background: The article focuses on the pricing strategies that are used in a dynamic institutional environment of land reform and indigenisation policies. Zimbabwe underwent a land reform incorporating new players in the pork agribusinesses, as well as indigenisation, altering agro-business decision-making structures. One such decision is effective pricing.   Aim: The objective of the study was to highlight the determinants of utilising a particular pricing objective and price flexibility policy in the Zimbabwean pork industry.   Setting: The study examined the pricing objectives and price flexibility policies of pig producers, pork abattoirs and butcheries in Mashonaland Central province, Zimbabwe.   Methods: The study used a cross-sectional, descriptive and quantitative survey of pig producers, pork abattoirs and pork butcheries. A structured precoded questionnaire-based interview of 166 pig producers, 6 pork abattoirs and 24 butchers was used as the data collection tool and method. A logit model was used for analysis, ascertaining determinants of a binary choice model.   Results: The study found that agribusinesses’ pricing objectives were determined by the product portfolio, margin, merchandise handled, distance the furthest buyer travels and consideration of other industry players’ pricing at the p < 0.01 level. Furthermore, factors such as seasonality in April to September sales, quality considerations (p < 0.05), frequency of retailers and size considerations (p < 0.1) were also significant determinants of pricing objectives. Also, the agribusinesses’ price flexibility policies were shown to be determined by agribusiness location, average weight of merchandise, frequency of individual customers, size consideration and consideration of other industry players’ pricing at the p < 0.01 level. In addition, margin, frequency of abattoir buyers (p < 0.05) as well as pork product portfolio (p < 0.1) were also observed to be major factors towards a flexible pricing policy.   Conclusion: The results suggest that pork industry players in Zimbabwe are myopic in their pricing strategies, having factors such as product portfolio, margin, merchandise handled and considerations of other industry players’ strategies as dualistically determining pricing objective and price flexibility policy utilised. The study recommends that pork industry players shift from myopic pricing objectives of profit and survival and devise new pricing strategies based on sales and competitive pricing. There is also need for less rigidity in flexible price policies to take advantage of the dynamic external environment.