Pricing Strategies of SMEs in South Africa: Investigating Antecedents and Moderators
Date
2023
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of the Witwatersrand, Johannesburg
Abstract
Small and medium enterprises (SMEs) performance may be influenced by several factors, including price strategy. However, there is limited empirical research on the pricing strategies of SMEs especially in emerging economies such as South Africa. The purpose of this research is to assess the antecedents, moderators and consequences of the pricing strategy of SMEs. The study also sought to explain the extent to which the size and the age of SMEs influence the effect of pricing strategies on the long-term viability. Five hundred and forty-two (542) SMEs from the Gauteng Province, South Africa were surveyed for this study. Using a partial least square structuring equation modelling (PLS-SEM) the study analyses its hypothesized model to offer some useful insight for both theory and practice. Multiplicative as well as subgroup moderation analysis were performed as part of the moderation analysis to examine the effects of SME age, size, pricing objectives and pricing capabilities. The findings indicate that some pricing conditions which are in the form of competitor relatedness, customer relatedness and corporate and market related explains pricing strategic choices of SMEs. While their significant effects vary per condition, pricing strategies were largely found to be driven by these factors. The study also found that pricing strategies in the form of value-based, competitor-based and cost-based strategies have varying effect on SME performance which were expressed in the form of market-share growth, sales growth and profitability over the past three years. The most significant
effect of the pricing strategies on SME performance was found in value-based pricing, cost-based had minimal effect, while competitor-based strategy had no effect. However, with pricing objective and capability as moderators, while the effect of value-based remains significant, the effect of cost-based and competitor based become significant on some of the key performance measures. Firm characteristics such as age and size did not explain the effect of pricing strategies on firm performance as some strategic scholars have proposed even in the face of moderators. A key contribution of this study is that while the effect of pricing strategies may not offer significant direct effect of SME performance, in the face of a clear pricing objective and adequate pricing capability, these pricing strategies can bring beneficial effect to SMEs. The study also shows that, in empirical terms, SME size or age may not explain the performance differential effect of pricing strategies even with a clear pricing objective or significant pricing capability.
Description
Thesis Submitted in fulfillment of the requirements for the degree Doctorate of Philosophy (Management) In the Faculty of Commerce, Law and Management,
University of Witwatersrand, Johannesburg, South Africa, 2023
Keywords
Pricing antecedents, Pricing strategies, SME performance, South Africa, UCTD
Citation
Fathima, Asma. (2023). Pricing Strategies of SMEs in South Africa: Investigating Antecedents and Moderators [PhD thesis, University of the Witwatersrand, Johannesburg]. WireDSpace.https://hdl.handle.net/10539/40078