Question

In 200 words or more What are the various responses to a competitor's price change?

Answer 1

A competitor may change price due to various reasons and forces in the market. But cutting down the price of a product by a company will not only affect it but affect all its competitors selling the same product in the market. In such a case how the competitors should respond to this price change is important. There are various ways in which the competitors can respond to the price change by any one of them. They can simply not react and not adjust their price or product with the changes. This may happen if the reduction in price will affect the profits immensely or the market share of the product will be affected adversely.

Another way is by keeping the price same as before but adding value to the product. This may cost more to the organization but will still be profitable than earning profits at a low margin. Also lowering the prices to match the change with the competitor's prices is an option for competitors. They do this because with a lower price from the competition they will face a decrease in sales and less volume of manufacturing will help them to lower costs and if they don't do so then they might lose the market share in a market that is price sensitive.

Another way of responding is to increase the price as well as the quality of the product by introducing a new product in the brand and distracting the customer from the low prices of the competitors. And the last way to fight this competition is by creating a new brand that can be priced low and stand strong in the competition.