Fleet News

Report shows firms are failing to respond to euro

NINE months after the launch of the euro - designed to increase competition and level prices significantly across Europe - new evidence suggests few companies have changed their marketing and pricing strategies in response. And with UK new car prices under the political and consumer microscope as the Competition Commission investigates, a report from consultant McKinsey suggests price discrepancies for other products are significantly wider than those for cars.

The report - 'The Euro: How to keep your prices up and your competitors down' - reveals that price differentials across European consumer goods markets for CDs is 50%, credit cards 48% and printers 40%, while cars come in at 30-40%. Similar figures for industrial goods reveal automotive spare parts prices vary by 50-100%, industrial pumps by 30-75%, pharmaceutical drugs by 50%, construction vehicles by 30-40%, newsprint by 11% and tractors by 10-20%.

McKinsey's report backs a similar survey by Ford compiled with the help of Lehman Brothers, which showed the price variance of some other commodities across Europe was significantly greater than that for cars. With vehicle manufacturers arguing that much of the focus on car prices is because vehicles are a high price commodity, Lehman Brothers' statistics revealed that excluding taxes, the price variance of cars could be as low as 10%, the price difference of computers was 15%, food and drink 20%, tyres more than 20% and the cost of running a bank account more than 50%.

While the report acknowledges that there has been some price convergence both before and since the launch of the euro in January it says 'prices still have a long way to move'. In warning customers not to expect rapid price falls, the report says that in some industries a price decline of 2-3% could translate into an operating income slump of 15-50%.Therefore, the report says: 'Companies must immediately review their pricing strategy by product and market.' And, it adds: 'They must even try to raise prices in lower price markets.'

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