The Impact of Product Price Changes on the Profitability of SMES in Nigeria
15 Pages Posted: 16 May 2010
Date Written: May 14, 2010
Pricing decision has been a crucial decision made by all business enterprises at all levels and has posed a great challenge for Small and Medium Enterprises in Nigeria. This research work treats the impact of pricing on the profitability of organizations, a study of small and medium enterprises in Nigeria. The methodology adopted was the survey and empirical approach, with the administration of questionnaires to some SMEs in Nigeria, evaluating the effect change in the product price has on profitability, thereby measuring the relationship that exists between the two variables. The financial report of a major sample company was also evaluated to measure the significant impact of pricing on profitability. The Pearson Correlation Coefficient statistical tool was used, as well as the student t-test, to measure the relationship that exists between the variables and how significant the relationship is. The profitability ratios were also used to measure the impact of change in price on the profitability of the sample company. The work found that there is a relationship between effective pricing and profitability and that any significant change in the price of a product will have its own effect on the turnover as well as the profit of the organization. It was also discovered that most small and medium enterprises in Nigeria do not keep proper accounting records, which forms a basis for poor pricing techniques adopted. Recommendations were made for the close monitoring of some SMEs by the various authority set up by the government to support them in the area of management and advisory supports. The work also recommended that small and medium enterprises should employ the service of price experts when making pricing decisions.
Keywords: Price Changes Profitability Small and Medium Enterprises
JEL Classification: D24, L11, P42
Suggested Citation: Suggested Citation