RESPONDING TO COMPETITORS’PRICE CHANGE

-KARTIK BHARGAVA

FACTORS TO CONSIDER

•Product’s stage in life cycle

•Its importance in company’s portfolio

•The competitor’s intention and resources

•The market’s price and quality sensitivity

•The behaviour of costs with volume

•The company’s alternative opportunities

HOMOGENOUS MARKET

•Find a way to enhance the augmented product or meet the price reductions

•Price increased only if it benefits the industry as a whole

NON-HOMOGENOUS MARKET

Why did the competitor change the price ?

Does the competitor plan to make the price change temporary or permanent?

What will happen to the company’s market and profits if it does not respond?

What are the competitors’ and other firms’ responses likely to be to each possible reaction?

Reaction to low-cost competitors

•Further differentiate the product or service

•Introduce a low-cost venture

•Reinvent as a low-cost layer