How to respond to a competitor's price change
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In a homogeneous product market, if a competitor raises prices it may not be matched by other firms if it does not benefit the industry as a whole, and the leading firm may need to rollback the increase. For non-homogeneous markets, factors to consider include why the competitor changed prices, if it's permanent or temporary, and the impact on market share and profits if no response is made, as well as likely responses from competitors and other firms. There are three possible responses to low-cost competitors: further product differentiation, introducing a low-cost venture, or reinventing as a low-cost player.
How to respond to a competitor's price change
- 1. HOW TO RESPOND TO A COMPETITOR’S PRICE CHANGES?
- 2. When in case of a high product homogeneity: If a competitor raises its price in a homogeneous product market, other firms might not match it if the increasing will not benefit the industry as a whole. Then the leader will need to roll back the increase.
- 3. But in Non homogeneous society: It needs to consider a few issues like….
- 4. Why did the competitor change the price?
- 5. Does the competitor plan to make the price change permanent or temporary?
- 6. What will happen to the company’s market share and profits if it does not respond? Are other companies going to respond?
- 7. What are the competitor’s and other firms’ responses likely going to be to each possible reaction?
- 8. THERE ARE THREE POSSIBLE RESPONSES TO LOW-COST COMPETITORS #1 Further Differentiate the Product or Service
- 9. THERE ARE THREE POSSIBLE RESPONSES TO LOW-COST COMPETITORS #2 Introduce a low-cost venture
- 10. THERE ARE THREE POSSIBLE RESPONSES TO LOW-COST COMPETITORS #3 Re-invent a low-cost player.
- 11. And that about wraps it up.
- 12. THANK YOU . Created by Kunal Eapen, IIIT Allahabad During an internship under Prof Sameer Mathur, IIM Lucknow www.iiminternship.com