Critical Analysis

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  • Topic: Discounts and allowances, Pricing, Price
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Critical Analysis on Philippine Practices on
Trade, Cash Discounts,
Payroll and Online Banking

GROUP 5

I. DEFINITION OF TERMS

* Trade Discount – Deduction in price given by the wholesaler/manufacturer to the retailer at the list price or catalogue price. It is also called functional discounts, are payments to distribution channel members for performing some function. It is offered by a seller to a buyer for purposes of trade or reselling, rather than to an end user. ( Wikipedia )

* Cash Discounts - Reduction in price given by the creditor to the debitor is known as cash discount. This discount is intended to speed payment and thereby provide liquidity to the firm. (Wikipedia )

* Pay roll -  is the sum of all financial records of salaries for an employee, wages, bonuses and deductions. refers to the amount paid to employees for services they provided during a certain period of time. ( Wikipedia )

* Online Banking -  allows customers of a financial institution to conduct financial transactions on a secure website operated by the institution, which can be a retail or virtual bank, credit union or building society ( Wikipedia )

II. ETHICAL PRACTICES AND COMPARISON

A. TRADE DISCOUNT & CASH DISCOUNT & ETHICAL PRACTICES

Trade discounts have been a wide spread practice for a long time. It has a double positive effect on sales since part of the whole sale price reduction may be transferred to shelf price and part discount will be kept to the retailer as motivation in selling the product. (Bykadorov, “Trade discount policies in the differential games framework :preliminary result” 2010) The difference between trade discount and cash discount is simple. Cash discounts are given to motivate consumer into paying promptly while trade discount is discount given for bulk buying. Another would be in the financial aspect of recording; trade discount is not recorded while cash discount is recorded. In Philippines, many companies are practicing trade and cash discounts. You can find it in real estate, car manufacturing, department stores, market place, health care even in investments. Below are some of the practices done by Filipinos related to trade and cash discounts. SUKI SYSTEM & TAWAD SYSTEM

The word suki is a Filipino term which means "loyal customer. Also called a “market-exchange partnership where in one can develop into a regular costumer and supplier. In this system special privileges such as discount are given to the suki, in return the buyer will pledge loyalty to its supplier. The trust developed between consumer and seller even developed from an economic aspect to personal aspect as well. The tawad system on the other hand is defined as “haggling” or asking for price reduction is another common practice. In this system the buyer asks for more discounts for the goods. Usually the standard discount one might ask is around 20% to 50% depending of course on the product, location and amount you are buying.

REAL ESTATE
Sample would be the sale of SM Jazz Condominium in Makati with a list price of P2,038,628.. If you are going to pay them on spot cash you (trade discount ) you will only be required to pay P1,892,662.24. But if you opt to go through financing for 15 years it would cost you P3,438,988.44. A difference of almost half the original price.

Unlike Philippines, the United States doesn’t have the luxury of practicing trade discount suki and tawad system. It is not a generally wide accepted practice although some haggling and bargaining are happens in car dealerships, restaurants and even malls. But there is a growing culture of haggling in the USA, in fact in a business news from UPI.com , "Haggling is now a part of a lot more retailers," said Marshal Cohen, chief industry analyst at The NPD Group, USA Today. Statistic showed by SmarShop indicates that 40% consumers don’t haggle because they don’t want to look...
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