Factors influencing tea pricing at the Mombasa tea auction

Abstract

Many firms have thrown up their hands with "strategies" like this "we determine our costs and take our industry's traditional margins" or "the markets sets the price, and we have to figure out how to cope with it" (Robert J. Dalan & Hermann Simon, 1997). A broad objective of this study was to establish the general pricing strategy for tea at the Mombasa Tea Auction while the specific objectives were: - • To establish factors that affect tea pricing and pricing strategy at the Mombasa tea auction. • To investigate the challenges faced by the wholesale auction system in pricing of tea. To do this a survey was conducted on the tea brokers found in the tea value chain that are members of the East African Tea Trade Association. To facilitate the survey, observation and a structured questionnaire having both closed and open-ended questions were used. The primary source of data was used with the researcher personally administering the questionnaire to the respondents. This study found that the Mombasa tea auction is a very important market for the commodity. The major determinants of the success of the tea auction are the pricing and a well executed pricing strategy. Everything revolves around pricing and competitiveness. The study also identified two broad factors that determine the

pricing strategies as the auction's internal and the external environment. All these come into play in determining the operations of the auction. The auction also is not there for tea only. It is there to create employment and to attract international buyers and thus make the auction a center of tea business in the region. The challenges faced by the tea auctioneers include some common mistakes and barriers for joining the auction and the market and environmental forces, which act in cohort to determine the price and the pricing strategy. The results of this study addressed the objectives of the study and it will be of importance to the government policy makers, researchers, those in academics, the members of the East African Tea Trade Association (EATTA) and other stakeholders.