The effect of change in prices of business products in San Joaquin Pasig City

Kim Obias

Rica Tibon

Cristina Tafalla

Mary Ann Nebran

Mary Jane Gamboa

Jaleah Mae Sanchez

Thrisha Joyce Gutierrez

Buting Senior High School

Practical Research 2

Mr. Felicitos Juanito Salvador

First Semester S.Y. 2017

 Chapter 1

The Problem and Its Background

Introduction

Why do consumers seem to dislike the price changes on products? Consumers

should use a product's price to determine if the product is affordable. However, consumers

also appear to use a product's price as a measure of the product's quality. This research

might be beneficial to all businessmen also to those people who are planning to establish a

business by knowing about how the change of prices affects the product. Who will adjust?

The people? Or the product?

According to many empirical studies (e.g., see reviews by Monroe 1973 and

Olson 1977) when consumers have some uncertainty concerning a product's quality, the

consumer often assumes that a higher product price indicates a higher level of quality.

Pricing is the beginning to a business success, it’s also difficult to demonstrate in

a way that guarantees profitability. In setting prices, the business will take into account the

price at which it could acquire the goods, the manufacturing cost, competition, brand and

the quality of the product. If the price increases for a good or service offered by small

business it will have an effect on the product that business sale.

 Price change has an effect on the measurement of the net income of the business.

The organization that is involved in the business production of goods and rendering of

services after answering the question what to produce, and who to produce for, the

costumer should have a potential to pay the good that the seller produced. The difficulty

about the change in price on the products has the profitability concern to business

enterprises. A business whether small or big, simple or complex, private or public is created

to provide competitive prices but they will be affected when there is change in price

happened.

What are the possible ways to overcome this situation? Is there any possibility

that it’ll work? So, this study will focus on how small businesses react and response to the

unexpected change in price on the products they are selling and how the consumers being

affected.

Background of the Study

The researchers conducted this study because price creates a big impact on

businesses. It is everywhere around us, mostly the owner of the business is the one who

dictate the price of their products. They have the rights to lower or higher the price

considering the factors that affecting the price, so the researchers became interested on how

the business is affected to the sudden changes of prices on their products.

 This study will be conducted to gathered information on the effect of unexpected

change of price to the business. It will also serves as guides to the aspiring businessman that

will help them to build their business.

Conceptual Framework

This figure presents the study on the effect of change in prices of business products

in San Joaquin Pasig City. Pricing a product is the reflection of what your business do.

Price communicates value and also confirms the value of your product. Thus, it is important

to be aware of the changes in price of the products being sold by the business.

Input Process Output

1. The profile of the 1. The study aims to
participants be determine the impact
described in terms of: of the price between
° Age the customer and
° Type of business owner of the
° Capital business.
Improvement in
2. Submit the 2. Statistical
changing prices of
permission letter that treatment
commodities and
is made by the
products.
researcher. 3. Check the
place/space of
3. Give them a copy business.
of the questionnaire
that they will going 4. Questionnaire.
to answer.
5. Analyse all the
data gathered from
the respondents
Insight

Conceptual framework is a way of representing how things work on your research

paper. This filter and select the appropriate research question and methods to be use in

collecting data. For this research, the study will focus on gathering data on how businesses

relate and solve problems like price changes. The study will give emphasis on identifying

the key resources of the company that enable them to cope up with the sudden price change

in products. For this study, the research will only have respondents from owners of small

businesses.

Statement of the Problem

Decision is a choice between alternatives, having all the necessary information

about the various alternatives available. Pricing decision is a decision that must be taken

carefully, because of its nature and its effect on the overall goals and objectives of the

organization, which is mainly profit maximization.

The issue of pricing decision and the cause of change in price is sensitive to the

both firms producing the homogenous consumer goods and the buyers of different

products. On the other branch of the business, it’s only the price that brings about the

revenue, such as slight change in cost, creating a lead to the price improvement on the

consumer hand, price is among the major determinant of buying a product or services. In

despite of the perceptivity of price, business organization wants to meets their pricing
decision. This evidence of some frequently organization review their prices. This has made

many firms on the consumer goods industry to close shop due to their inability to

effectively compete. The effect of price difference on the sales of consumer goods has cut

the attention of following business managers, consultants and scholars. As a researcher, we

sees the subject content of this research to be worthy.

Scope and Delimitation

The main focus of this project is to know the effect of change in prices of business

products in San Joaquin, Pasig City. This research will use survey questionnaire to know

the effect of rapidly change in prices in every business. This is only limited to the small

business owners in San Joaquin, Pasig City. This project can be used by the people who

are planning to start up a business so that they will know the taste and preference of the

people that surrounds them or the business that they are planning. This project will let the

researchers to interact with people who have small businesses.

Significance of the Study

Entrepreneurs have been seeking to find ways on how they will face the

unexpected change in prices on their products. With many businessmen and

businesswomen, it will be difficult for them to make decisions in pricing.

 For the students, this study will give them additional information about small

business, most especially those who are taking up business course.

For the teachers, this topic will make them informative about the business and

may share it to their students.

For the entrepreneurs, this study will give them more information and widen

their knowledge about their business and it will also give them more ideas about

unexpected changes

of prices on their products.

For the future researchers, this research may help them in their study and will

serve as their guides and can use to study more about this topic.

Definition of Terms

The purpose of this is for the better understanding and to clarify the unfamiliar

terms in this study.

Acquire- to have something

Aspiring- directing one’s hopes or ambitions toward becoming a specified type of person

Cons- an argument or vote against a proposal

Determinant- a thing that controls or influences what happens

Enterprise- a project or activity that involves many people and that is often difficult

Establish- to cause someone or something to be widely known and accepted

Firms- attached in a way that is not easily moved

Frequently- often; at short intervals

Homogenous- the same kind; alike

Perceptivity- having or showing keenness of insight

Potential- capable of becoming real

Profitability- producing good or helpful results or effects

Pros- face to face with toward, in addition to

Rapidly- happening in a short amount of time

Rendering- to cause someone or something to be in a specified condition

 Chapter II

Review of Related Literature and Studies

Foreign Literature

This chapter provides an overview of previous research on knowledge sharing. The

main purpose of the foreign literature review work was to survey previous studies. About

the effects of price changes in business products. This was in order to scope out the key

data collection requirements for the primary research to be conducted, and it formed part

of the emergent research design process. It will give us ideas and information in conducting

our study.

According to Statistics South Africa, as the price increases in urban it will also

increase in rural. But, rural prices are growing faster than urban prices. Rural populations

spend mostly of their income on foods compared to the urban populations. Food prices are

rising rapidly than the official price because it is one of the basic commodities. The lower

the income that they’ll get the lesser the food that they’ll have. And it is because of the

prices of the products. It is like a domino effect that’ll also the business owners will be

affected. If the price is too high, the demand will decrease. Prices can affect every

populations, and this is a really bad news for small businesses who are just starting up.

Higher food price means less income. They’ll tend to spend a higher proportion of their

income for food. Most of the small businesses under consideration are owned by people
who do not fall into the higher-income category. It will be a reduction of disposable income

for business owners and it means less income available for any other items. It is important

for small businesses because they finance their own savings. Reduction in disposable

income means less money is available for investing for something in a business. It prevents

the success and development of small businesses.

According to Business Blog, changes in commodity prices has a possible effect on

a business. For most businesses, the effects on commodity prices is on their operating cash.

On how they manipulate the flow of their income. Commodity price changes is important,

since large proportion of costs will be used from buying raw materials or whatever things

are used in business. They have the control over the price and they are exposed to changes

in commodity prices which can move up or down.

Insight

Pricing communicates specific messages to shoppers – likewise, pricing

modifications offer additional impactful cues to shoppers. But sometimes price has a

negative impact to consumers. If the price is too high, consumers will not be able to buy

that product. So, for every product, small businesses should be able to find the optimal

price that a customer is willing to pay.

Local Literature
 A local literature review surveys scholarly articles, books, dissertations, conference

proceedings and other resources that are relevant to our topic. This chapter presents the

related local literature or the studies done here in the Philippines that is related to our topic.

This will also present the synthesis of the art to fully understand the research to be done.

There are number of earlier literature which have analyzed the welfare impact of

price changes in the Philippines. Some researchers focused on the country-level impacts

while other looked at the household-level impacts. Furthermore, some researchers focused

on the different products of small businesses. It Is recognized that analyzing the economy-

wide impact of soaring prices is important precisely because a large increase in the prices

of products in small businesses may threaten macroeconomic stability, as well as the

overall growth of a country. In looking at the impact of price increases at the country level,

FAO (2208) focused on the impact in terms of products in small businesses. According to

Asian Development Bank (2008) they also evaluated the macroeconomic impacts of high

and rising prices and its impact to the owners and consumers. Applying the Oxford

Economics, global model, the study traced the impacts or fast climbing prices on

developing economies in Asia including the Philippines.

Insight

Pricing right is the fastest and most effective way for businesses to increase profits,

boost earnings, and business that starts now will be in a good position to profit fully from
the next upturn. But pricing a new product in either direction can have unexpected effects

on the market especially to those consumers that have a lower budget or income.

Foreign Studies

Price of the product is the first thing that a buyer will check and mostly, it is their

basis of buying a thing. Pricing a product can affect the external and also the internal

environment of a business.

According to a recent study co-authored by Baba Shiv, Sanwa Bank, Limited

Professor of Marketing at the strand for business school, how well a modification works

may be affected by how much it costs. “Price can have strong behavioral effects”, said

Shiv, who co-wrote the paper with Rebecca Waber, Ziv Carmon and Dan Ariely. It has

long been known that consumers’ beliefs and expectations influence their judgement of

products and services. Shiv and his coauthors said that even there is an apparent difference

in price. When the researchers study about painkillers, they applied an electrical shock to

the study, participant wrists before and after taking a placebo that they believed was a pain

pill. We have these general beliefs about the world for example, that inexpensive products

are of lower quality and they translate into set expectations about specific products, said

Shiv. The studies have huge implications for consumers. Moreover, it was clear from the

studies that people had no idea that price was actually affect their performance.
 According to studies, to compete business favorably with its peer in the same

industry, it must be able to meet the demand of the people, as well as set the right price for

the right product. Low cost and high-quality infrastructure service tends to improve price

competitiveness. In the same vein, Uzor noted that governmental policies should be

directed to overall production efficiency of the SMEs, which will in turn lower costs at the

same time increasing the power of the consumers, when the prices are reduced. According

to Monroe (2003:257) “Indeed, cost is probably the least important factor to consider when

setting product or services prices. Cardinaels et al (2004) observed that the more accurate

cost data means that participants with activity based costing would be more likely to detect

and filter competitor’s prices.

Insight

Price is always a factor to a person who is willing to buy things. They will only

check the quality of a thing after looking at the price of it. If the price suits the quality

he/she will buy it, then if not he/she will find another one that he/she think is affordable

and durable.

Local Study

Businesses spent some time to develop their small business. They need to well

manage their own business to avoid loses. By the help of everyone in and out the business

and their own innovative mind they will gain more profits than they usually do. And
Philippine small business owners keep pushing until the development leads to

achievement.

According to the study, the impact of increasing prices of different products vary

across different group of households. In fact, there are losers and gainers from the recent

increases in the prices. In response to higher prices, households adopted different coping

mechanisms, some of which are damaging and counter-productive in the medium and long

run. The Philippine Government has also responded by implementing programs that would

mitigate the negative impact of soaring prices. This would help reduce leakage of program

benefits to the non-poor as well as ensure that the poor benefit from these programs.

Insight

This studies will make small business owners more knowledgeable about pricing

their products in order for them to prevent losing disposable income but to gain more profits

not like the profits that they forecasted.

Synthesis

According to the data and information the researchers collected small businesses

only finance their cash flows and expansions from their own savings then if the price

changes, all of them will be affected including them, even the consumer. Having enough

knowledge about pricing can handle the business well. To make a wise pricing in business
can catch the business customers’ interest and curiosity. When there is a change in price of

selling products in their business, there are only two possible situation that might happen.

It’s either the customers might look for another supplier or they will stay loyal to you. It

can also be beneficial to all businessmen and to those people who are planning to establish

a business by knowing about how the change of prices affects the product.
 Chapter III

Research Methodology

This chapter presents the method of research, sampling technique, description of

respondents, research instrument, data gathering procedure and statistical treatments used.

Method of Research

In order to see the general picture of the impact of change in prices of business

products, causal-comparative design of research was used. It seeks to establish a cause-

effect relationship between two or more variables. It is a study in which the researchers

attempt to determine the cause or reason for pre-existing differences in groups of

individuals. The researcher’s goal is to determine whether the independent variable

affected the outcome or dependent variable by comparing two or more groups of

individuals. The researchers use this kind of research design because of its suitability to

the nature of the study.

Sampling Technique

We choose multistage sampling as our sampling technique. We might choose a bunch

of people from population in stage 1. Then in stage 2, there’s a possibility that we will use
simple random sampling to select a portion of people from each chosen batch for the final

sample.

Description of Respondents

The respondents of the study are the owner of small businesses in San Joaquin Pasig

City consisting of 20-30 members, male and female. We chose this respondents because

they are the ones who are knowledgeable person to answer our problems in the study and

the information the researchers need.

Research Instrument

The methods of collecting data for a causal-comparative research study do not differ

from any other method of research. Survey questionnaire was the research instrument that

we will used in conducting our study. The questions are made to know how consumers and

owners react and response to the sudden change in price of the business products in San

Joaquin Pasig City. We used this kind of research instrument because it’s easier than the

other methods. The survey questionnaire was for the consumers and owners of small

businesses in San Joaquin Pasig City.

Data-Gathering Procedure
 The researchers personally given the research instruments to the respondents. They

discussed the significance of the study to the respondents and also distributed the

instruments properly.

The respondents were given allotted time to finish the forms to prevent hasty

responses. The researchers went from one section to another on collecting the

accomplished questionnaires.

After the questionnaires have been accomplished, the results were tailed and

tabulated. These data became the bases of analysis and interpretation.

Statistical Treatment of Data

After collecting and gathering the data needed in the research, the researcher

organized and analyze the collected data with the use of statistical tools. To completely

understand the data, the researcher will use the following statistical treatment. The

percentage and the weighted mean are the tools that the researcher use to be able to interpret

the data.

1. PERCENTAGE
 This will use to determine the percentage and frequency of the respondents personal

related variables. This is usually use on profile data like age, gender, etc. The formula use

is:

%= f/n x 100

Where:

% is the percentage

F is the frequency

N is the total number of respondents

100 is a constant value

2. AVERAGE WEIGHTED MEAN

This will use to get average or central value. This determine the evaluation of the

respondents considering their personal profiles like level, extent, status, etc. The formula

use is:

X= Ex/N

Where:

X is the weighted mean

N is the number of cases

F is the frequency

x is the weight of each item

 Chapter IV

Presentation, Analysis and Interpretation of Data

This chapter presents and interprets the information that were collected by the

researchers from the research instrument that have used, which is the questionnaire

answered by respondents.

1. What is the demographic profile of the respondents in terms of Age?

Age
3%

18-25
24%
26-33

34-42
50%
42 and above

23%

: Out of 30 respondents, 3% were from 18-25 years old which is equivalent to 1 respondent,

24% were from 26-33 years old which is equivalent to 8 respondents, 23% were from 34-

42 years old which is equivalent to 6 respondents, and 50% were from 42 years old and

above which is equivalent to 15 respondents.

2. What is the demographic profile of the respondents in terms of Gender?

Gender

26.66%

Female

Male

73.33%

: Out of 30 respondents, 73.33% were female which is equivalent to 22 respondents and

26.66% were male which is equivalent to 8 respondents.

3. How long does your business operate?

Business
10%

Below 1 year

40%
1-2 years

3-4 years
36.66%
5 years and
above

13.33%

: Out of 30 respondents, 10% operated their business in less than a year which is equivalent

to 3 respondents, 36.66% operated their business from 1 to 2 years which is equivalent to

11 respondents, 13.33% operated their business in more than 3 years which is equivalent

to 4 respondents, and 40% operated their business in more than 5 years which is equivalent

to 12 respondents.
4. Can you see your small business getting bigger in the future?

Business in the Future

13.33%

3.33%
Yes

No

Maybe

83.33%

: Out of 30 respondents, 83.33% says yes that they see their business getting bigger in the

future which is equivalent to 25 respondents, 3.33% says no that they don’t see their

business getting bigger in the future which is equivalent to 1 respondents, and 13.33% says

maybe which is equivalent to 4 respondents.

5. What are the factors you consider in pricing a product?

Factors in pricing a product

20%
Raw Materials
30%

Consumer's
Preference
Competition

50%

: Out of 30 respondents, 20% says that the factor they consider in pricing a product is raw

materials which is equivalent to 6 respondents, 50% says that the factor they consider in

pricing a product is the consumer’s preference which is equivalent to 15 respondents, and

30% says that the factor they consider in pricing a product is their competitors which is

equivalent to 9 respondents.
6. What are usually the reaction of your customer when there is a sudden change in

price of your product?

Reaction of customer
Look for
alternative
23.33% product
Look for another
store
40%
No reactions

36.66%

: Out of 30 respondents, 40% of the customers looks for alternative product when there is

a sudden change in price which is equivalent to 12 respondents, 26.66% of the customers

looks for another store when there is a sudden change in price which is equivalent to 11

respondents, and 23.33% of the customers has no reactions which is equivalent to 7

respondents.
7. What are the advantages of having a knowledge in pricing your product/s?

Advantages
16.66% Able to attract
more customer

Return of
investment

Good money flow

20%

63.33%

: Out of 30 respondents, 63.33% says that the advantage of having a knowledge in pricing

a product is that they able to attract more customer which is equivalent to 19 respondents,

20% says that the advantage is that they can have a good return of investment which is

equivalent to 6 respondents, and 16.66% says that they can have a good flow of money

which is equivalent to 5 respondents.

8. How does the price influence your sales?

Price and Sales

13.33%
The higher the price, the
higher the sales
6.66%
The higher the price, the
lower the sales

The lower the price, the

higher the sales

80%

: Out of 30 respondents, 13.33% believes that the higher the price, the higher the sales

which is equivalent to 4 respondents, 6.66% believes that the higher the price, the lower

the sales which is equivalent to 2 respondents, and 80% believes that the lower the price,

the lower the sales which is equivalent to 24 respondents.

9. What kind of products usually buy even in higher prices?

Products
3.33 Rice
Snacks

26.66% Soft drinks

Cigarettes
Others

6.66%
53.33%

10%

: Out of 30 respondents, 26.66% of the product that people usually buy even in higher price

is rice which is equivalent to 8 respondents, 6.66% are snacks which is equivalent to 2

respondents, 10% are soft drinks which is equivalent to 3 respondents, 53.33% is cigarettes

which is equivalent to 16 respondents and 3.33% is other product which is equivalent to 1

respondent.
10. What likely is your first move or response when there is a sudden change in price

of your products?

Response when there is a sudden change in

price See what competitors
3.33% do
Change the product
26.66%
Increase/Decrease the
supply of the product
Others
50%

20%

: Out of 30 respondents, 26.66% says that the first move they will going to do when there

is a sudden change in price is to see what their competitors will do which is equivalent to

8 respondents, 20% says that they will going to change their product which is equivalent

to 6 respondents, and 50% says that they will going to increase or decrease the supply of

their product which is equivalent to 15 respondents, and 3.33% for other reason which is

equivalent to 1 respondent.
 Chapter V

Summary, Findings, Conclusions and Recommendations

This chapter summarizes the study by getting the main idea of the topic. The

conclusion given was collected from the result and observations on the outcomes of the

study which collected from the respondents in the effectiveness of changing the price of

business products. Moreover, recommendations were base from the findings and outcome

of the study.

Summary

This study was direct information from each respondents in our survey

questionnaire. The use of collected information was to know how price change of business

products affects the thirty respondents.

This research made use of causal-comparative method in collecting information

and used surveys to know the effect of answer to all business owners.

The study presents that most of the respondents are aware that change in price

of business products is the common reason why their sales become affected.

Findings
 Our study indicated the reaction and response of the sari-sari store owners in

the sudden changes of price. As we noticed on our study most of the sari-sari store owners

are females and majority of them are 42 years old and above.

According to the research, most of them have been operating for 5 years, they

based their prices on the customers’ preferences because most of their customers tend to

buy to another store if they doesn’t like the price of their product or if it is too expensive

for them. Sari-sari store owner study in how they price the product in able for them to

attract more customers. If there is a sudden change in price, they increase or decrease their

supply based on the price changes.

In addition, they said that even though cigarettes have a higher price customers

still buy it along with the rice.

Conclusion

Based on the data gathered and response accumulated, the researcher has come

up with the following conclusions:

The respondents were equally distributed to the sari-sari store owners on San

Joaquin Pasig City. Mostly of the respondents operated their business more than five years.

Almost of them see that their business will getting bigger in the future. Primarily, small

owners consider consumer’s preference as the factor in pricing a product. Usually, the
reaction of the customer when there is a sudden change in price of their product is to look

for another store that suit to their budget. Small business owners have an advantages of

having a knowledge in pricing their products in a way that they can be able to attract more

customer. They also say that the price influence their sales because the higher the price, the

higher the sales they can have. Usually the kind of product that consumer buy even in it

has a higher price is the rice. Almost all of the small businesses first move or response

when there is a change in the price is to see what their competitors will do. All small

business owners wants to improve their business and make it successful.

Recommendations

As a researchers in this study, we recommends the following for the people who

are involved in our study.

Entrepreneurs- The researcher recommend that businessmen should know the right way

of pricing their products. Having a great knowledge about pricing can help attract more

customers. Since the very first factor that customers consider in buying is the price of the

product, it can help your business increase sales and be more profitable.

Future researchers- The future research must continue and widen this study that the

current researcher have stated. They can find out more advantages and disadvantages of

pricing products. They can discover and answers question related to pricing business
products. They can improve their study by looking at other point of feedback system

through different references.