Despite rising expenditure Companies unable to hike prices

By SiliconIndia   |   Tuesday, 28 September 2010, 10:25 Hrs   |    2 Comments
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Despite rising expenditure Companies unable to hike prices
Bangalore: U.S. companies are reluctant to raise prices on their frugal customers, even though commodity prices and other corporate costs are headed higher, but many consumers refuse to pay more for products. According to the U.S. Producer Price Index data released recently, the cost of "crude materials" inputs for the products made by U.S. companies' rose 2.7 percent from June to July and another 2.3 percent from July to August. The Dow Jones-UBS Commodity Index is up 12 percent since July 1, reports Ben Steverman from The Bloomberg Businessweek.

Airlines are cutting prices despite the higher fuel costs. Domestic airfares fell 2.1 percent from June to July and 1.8 percent from July to August. The cost of jet fuel is up 10.8 percent since July 1 in New York trading.

The movie industry has in effect raised prices by charging an extra $3 or more for tickets to 3D movies. Wal-Mart, the world's largest retailer, has cut prices on detergent, cereal, and other items, but the price-cutting hasn't produced the sales or traffic the company had expected.

The consumer is very smart and in most products has figured out where they can get the best deal. Companies can only charge more if they offer a unique, higher-quality product, says Thomas Stemberg, the Founder and former Chief Executive of Staples.

Despite higher costs, many executives say they can't raise prices. Commodity prices aren't the only worry for cost-conscious corporations. New government rules are pushing costs higher in certain industries. Federal legislation reforming the health-care and financial systems could push up prices in those sectors.

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