Chapter 1 Blog: Increased Producer Prices

http://news.bbc.co.uk/2/hi/business/7348602.stm

Summary:
This article was published in April of 2008 discussing how the price of goods brought from the producers is rapidly increasing. Prices of goods purchased from consumers have rose by 1.1% in the month March 2008. The reason why producers are increasing the costs of their goods is because of the increased energy price. It is thought that such a large change in price of goods can greatly reduce company profits and can have a large economic effect. The prices from inflation generally appear earlier in the chain of production where the producers are before it affects the retailers and consumers. From April 2007 at the same time in the year producer prices of goods have collectively increased on a total average of 6.9%.

Connections
This article is quite closely related to Chapter 1, in the “Marketing Today” text book. The article mainly talks about the producers increasing the prices of their products due to increased energy price. It has a chain reaction on the channel of distribution because when the producers increase the prices of their products it affects everyone else in the chain of production after them. If the producer increases the prices in the products they sell to the wholesaler it will lead to the wholesaler increasing the prices they sell their goods to retailers to minimize the loss from buying products at an increased price. If the retailers purchase products at an increased price from the wholesaler they too will increase the prices of their products that they sell to us, the consumers.

Reflection
This snowball effect of which a very small increase in price from the producer can have on everyone is quite an interesting concept. Even if the producers increase the price of their products by one percent it can have a big snowball effect. Each step on in the channel of distribution will increase the price of its products a bit more to minimize losses from buying the products at an increased price. A small increase of price in the producer can have a snowball effect and affect us, the consumers greatly. I constantly hear on the channel 11 news how the stock market has crashed and how much inflation there has been in the recent years. I remember the time when a large bags of lays chips was $1.50 each. I'm now seeing the mini sized bag of chips sell for $1.50 and large bags selling for twice that amount at $3.00. It's quite shocking how even in my short lived life of 15 years I notice how there are such dramatic changes in prices of goods.