Among the basic concepts that define financial literacy, any modern man is useful to know that such dumping.Let us follow the story of a little determination.This concept is rooted in the last decades of the nineteenth century and early twentieth.It was then, during the first monopolization of the European and American markets, it was born the concept of dumping.The very definition of the English word derived from the dumping, ie reset.What is dumping prices?Accordingly, the decrease of the requested compensation for the goods sold.Moreover, it is a deliberate operation sell-side.Price dumping involves deliberate understatement of prices in comparison with the prices of the same product from the competition.At first glance, it may seem absurd.Why would anyone voluntarily give up the profits?However, on closer examination, dumping prices is a very effective tool in competing for markets.And useful to note that a hundred years ago, and now it is mainly used by large players in the commodity market, having a solid financial capacity.This is logical, because only with such a margin, you can work without receiving profit, or even at a loss.Such operations are performed for several reasons.
Firstly, it is the penetration of new markets with low price to attract customers.Quite often this is accompanied by the concurrent loss of competition from small and medium businesses, who lose their customer base and are unable to stay afloat any significant amount of time because they do not have the financial foundation such as large corporations.Actually, the last thesis mainly demonstrates that such dumping.Thus, if the mark-up on goods is very small, a new player in the market gets its income is not so much due to mark-up, but rather because of a large number of units sold.If the company operated at a loss, after a certain period of promotion prices return to the level needed to ensure profits.This literally habituated consumer audience retains its tastes, and the exodus does not happen.That is dumping is widely used not only for the promotion of new brands, but also certain product innovations.
Talking about what is dumping, it should also mention the fact that in some cases it is extremely detrimental to the national economies of many countries.For the natural reason that stifling competition in the economy contributes to the inhibition of its development.In this regard, the Code of the World Trade Organization has a ban on the dumping price policy, adopted at the International Conference in 1967.Then, in the mid-sixties, it was caused by a problem filling the European markets with cheap Japanese and Korean cars and electronics.However, this issue is relevant today.Only the Far Eastern tigers place today occupied China.
