The role of price and non-price competition. Coursework: Price and non-price competition in economic strategies of Russian business

22.09.2019

The influence of competition on prices.

Thanks to competition, contradictions between supply and demand are temporarily eliminated, the ratio between which in each this moment influences the market price level.

In the conditions of the scientific and technological revolution, the competition between firms for super-profits takes on various forms.

Changes in forms and methods are influenced by both macroeconomic factors, in particular shifts in the structure of the total social product, and the actions of the firms themselves, for example, improving the policy of struggle for markets.

Inter-firm rivalry develops primarily in two main directions: inter-industry and intra-industry competition. What they have in common is the geographic scope of the company’s activities (global or regional), as well as the use of legal and illegal methods of competition in order to obtain excess profits.

At the same time, depending on the nature of the product, there may be differences in the forms of competition (price and non-price).

Manifests itself in the following forms:

1) Competition between sellers of homogeneous products, trying to sell goods at the lowest price to displace other sellers and secure the largest sales for themselves; this competition lowers the price of goods offered.

2) Competition between buyers in the same industry, which leads to increased prices for the goods offered. A comparison of the available price option with the losses that the buyer may incur as a result of unsatisfied needs, and the magnitude of this loss, determine the buyer’s willingness to increase the price for the desired product.

3) Competition between buyers and sellers; The former want to buy cheaper, the latter want to sell for more. The result of this competition depends on the balance of power of the competing parties.

4) Inter-industry competition - the creation of competing industries that produce goods - substitutes that cover the same needs of buyers. The development of such competition can cause both a decrease and an increase in prices in the market. The regulating element in this case is the price of the substitute product.

IN modern conditions Timely updating of the production range plays a major role in competition. Mastering the production of new products contributes to sales growth and an increase in the company’s profit margin.

An important aspect Both inter-industry and intra-industry competition in the market is not only the ability of a company to master the production of new goods, but also to cease production activities in markets that are considered, for one reason or another, unprofitable and unpromising.

Monopolistic competition begins already at the stage of capital mobilization. The second stage - the search for areas of application of capital is carried out by deploying scientific research, obtaining new scientific and technical information, market research. The third stage is the implementation of the idea, the production of goods, where production volume, product quality and costs are adjusted to the profit maximization program. At the same time, the monopoly is guided not only by the tasks of the current day, but also promising goals. The fourth stage is the sale of goods on the market, the struggle unfolds in conditions of price stability around the volume of products sold, the level of their quality, and services. The fifth stage is the use of accumulated profits. The flow of capital encounters obstacles created by the monopoly itself, but its movement nevertheless exists. It takes the form of the creation of competing industries, reconstruction and restructuring of consumer industries, the movement of excess capital accumulated by monopolies in search of more profitable uses, the movement of capital, rival monopolistic groups and, finally, the never-ending movement of medium and small capital. Rapid updating of the product range causes an increase in the cost of developing new products.

An important role in the mechanism for updating industrial products is played by the price, which should not only justify the costs of creating a new product, provide the company with an acceptable profit, but also create a certain reserve in case of possible losses during the transition to the next cycle of product renewal. Each monopoly has no confidence that by the time a new product appears on the market, its competitors will not release the same or similar product. That's why price policy, the purpose of which is to adapt to constantly changing demand, continues to be an important weapon in the struggle for markets.

The basic principle of the pricing policy for new goods is to maintain, even during the period of product and market development, profit at a certain level (principle of 2 costs plus a fixed markup percentage). The size of the premium (rate of profit) depends on the degree of concentration of production or the power of the company, as well as on the state of market conditions. For non-monopolized firms - from 8 to 15%, for large monopolies from 15 to 34%.

The pricing policy at various stages of production of a product of one generation changes mainly depending on the degree of market penetration by this product and its operational efficiency. When first-generation products appear on the market, companies have some free time in setting prices. This freedom is determined by the degree of “quality monopoly”, patent protection, the price of substitute products, the purchasing power of the consumer and the possibility of competitors acquiring the secret of design and production.

Thus, price dynamics are closely dependent not only on the degree of novelty, but also on the number of generations through which a given product has passed, from the appearance of a fundamentally new product in production to its withdrawal from production and its replacement with other fundamentally new products.

After a certain period of time, the product partially wears out, which allows for further price reductions.

1.6.2. “Non-price competition”.

Or quality competition. In the competition for markets, the winner is not the one who offers lower prices, but the one who offers more high quality.

A product of higher quality, despite its high price, is much more efficient in operation or consumption than a product of lower quality. But this does not mean that the role of price in determining the competitiveness of a product is small. These two factors are as inseparable as the two sides of labor, goods, obsolescence, price and all other phenomena and processes of commodity production.

Price is the factor that ensures profit.

In order to maximize profits, one important psychological canon is used, according to which the market price does not increase in proportion to the quality of the product, but as if ahead of the level and quality of the product relative to the generally accepted level, the price decreases more progressively compared to this level. This, however, does not fit into the classical system of pricing factors, but is the result of many years of market pricing practice.

Manufacturers producing products whose quality is above the world level receive monopoly high profits.

In an effort to survive the competition, firms are forced to constantly improve the consumer properties of the goods they produce and expand the range of terms of delivery and services, although all this in one form or another is taken into account in the price and is ultimately paid for by the consumer.

Therefore, it cannot be argued that at present, in the context of the rapid development of scientific and technological revolution, “price” competition has lost its importance.

If during the period of free competition with relative stability of prices, competition was expressed in discounts on prices, that is, in its reduction, then during the period of scientific and technological revolution in conditions of inflation, price competition is expressed in varying degrees of increase in prices for similar products of different quality.

There is a simultaneous and, as a rule, unequal increase in quality and prices (the increase in quality outpaces the increase in prices).

Thus, quality competition is just one form of price competition.

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Price competition occurs when competing firms use price policy as the main lever of competition. Moreover, it can be carried out directly, openly, by public statement about reducing prices for their products, and also hidden, when the price reduction threshold is not subject to publicity. IN Lately price competition is increasingly giving way to price competition due to changes in the nature of the vast majority of markets and their transformation into buyer's markets.

Price competition involves selling goods or services at prices lower than those of competitors, due to a temporary reduction in profits. Thus, in order to win or retain customers, firms can use various types of discounts compared to the list price for various categories buyers (for example, large firms that have a foothold in the market for some time may completely refuse to make a profit and, in order to block the invasion of new competitors, set so-called limiting prices on their products, i.e. prices below the minimum point of the curve of long-term average costs of potential competitor.

Price competition occupies an important place in the trade of perfumes and cosmetics. Companies strive to offer consumers prices that are not only acceptable to them, but also, if possible, lower, even if only slightly, than competitors’ prices for similar products.

Price competition involves selling goods at lower prices than competitors. A price reduction is theoretically possible either by reducing production costs or by reducing profits. Small and medium-sized companies often agree to small profits to stay in the market. Large monopolies can afford to give up making profits altogether for some time in order to ruin their competitors and force them out of the market with the help of cheap products.

Price competition involves selling goods and services at prices that are lower than those of a competitor. A price reduction is possible either by reducing costs or by reducing profits, which only large firms can afford.

Price competition plays a secondary role in the textbook market. First, unlike most markets, in in this case someone else chooses the product for the consumer.

Price competition comes in two forms.

Price competition can be started not only by a company with a dominant position in the market, but also by a small enterprise in order to survive in a competitive environment.

But price competition can also turn into price wars. By lowering the price slightly, one of the companies can attract the majority of buyers.

There is strong price competition among sellers.

Local small firms benefit from price competition, taking advantage of the fact that prices on the Norwegian market are 15 - 20% higher than in other European countries, provide customers different types discounts

An example of price competition (Bertrand competition) with power restrictions is illustrated in Fig. 7.3. In the figure, D(p) is the demand curve. The two vertical lines represent the capacity of each firm. The third vertical line k k2 reflects the total capacity in the industry.

Have you noticed that in different stores the prices for the same goods, albeit slightly, are still different? This is price competition. This move is used by almost all sellers: from single ones in markets to reputable stores and companies.

Of course, price competition today is significantly limited, since its size is minimal and sometimes amounts to a fraction of a percent. But not taking it into account would still be a mistake. In world practice, there are a lot of examples of cheapening goods, quickly and even on a large scale (electronic household equipment, semiconductors, ceramics, food, etc.).

Typically, a quick and cascading “reset” of prices is a rare, forced and economically damaging (unprofitable) event. It is more preferable, of course, to fix prices, i.e. keeping them unchanged. Significant price reductions are possible only in two cases: either the seller immediately “increases” the price (involves the product at a price significantly higher than the manufacturer’s price) and therefore can afford discounts on purchases (especially wholesale), or laws come into force. As for the second option, then this is understandable: obsolete products (especially electronic household equipment), not being sold cheaper today, will not be sold at all tomorrow, since demand for them will fall.

The emergence of new, more complex products leads to a transformation of the very concept of price as such. Here we are talking about a multi-element consumer price, reflecting the possible amount of expenses of the main buyer, which sellers are guided by and which is an indicator of the demand and full consumption of the product.

Prices with a basis that lie outside of value become the object of competition, which can be directly attributed to price.

As a result, the understanding of price as the basis (or as a center) around which consumer preferences should fluctuate is in some way transformed, giving way to seemingly non-price concepts such as quality, novelty, progressiveness, compliance with standards, design, efficiency in maintenance etc. Today it is these parameters that form new system values for the consumer and it is on them that price competition is primarily based. This applies to individual exporting firms and entire countries acting as exporters.

The expansion of the range of consumer requirements dictates more stringent requirements for the exporter and its competitiveness. This is a regularity: only a competitive company can produce, which, in turn, requires certain conditions characterized by the country’s competitiveness. As you can see, it’s an unbroken chain, a vicious circle.

This pattern has been noticed for a long time and has been studied for a long time. The European Forum on Problems in Management regularly conducts studies to assess the competitiveness of Western countries, and the concept of “competitiveness” includes the ability to design, manufacture and, of course, sell goods that, in terms of characteristics (both price and non-price), are most attractive to the average consumer.

In the struggle for the consumer (and therefore for profit), the main methods of competition are used - non-price competition and price competition.

Price competition is a natural struggle between sellers, based on reducing prices to a level lower than that of competitors. The result, by the way, is not always predictable (a decrease in profitability, or “pulling away” some consumers to their product and an increase in profits) and depends on the actions of competitors, who will either respond by lowering prices or leaving prices the same.

Competitors do not always respond by lowering their prices. Often it is non-price competition that wins, based on higher quality, higher reliability, more attractive design (you must admit that if you have enough money, you will give preference to a good Japanese car without even looking at the domestic one).

Price competition is based on the fulfillment of two conditions:

1) if price for the buyer is a decisive factor;
2) if the company has become a leader, “earned a name” and can afford to reduce prices, sometimes even to its detriment.

Only then is it possible to make a profit, even though other companies at the same prices suffer losses.

From this article you will learn:

What are the differences between price and non-price competition?

What are the advantages and disadvantages of using non-price competition?

In what forms can non-price competition take place?

What methods of non-price competition are used in modern market economy

WITH early years Each of us finds ourselves in the harsh circumstances of competition in various fields life. Competition in the economy can definitely be called one of the toughest types of struggle. Both wealth and luck are at stake here. In entrepreneurship, there are two types of competition – price and non-price. More often than not, low cost actually wins. And yet, non-price product competition helps achieve greater success.

What is non-price competition

Competition is the struggle of individuals in various areas of the life process. First of all, this refers to the economic sphere. Figuratively speaking, competitors are the owners of nearby shops who are trying to get as many visitors as possible. But it's not just the number of buyers that matters. It is also important to sell your goods and services on the most profitable terms. Scientists believe that it is competition that spurs the modern world to develop at such a rapid speed. And at the same time, it is the basis of the instability of the world economy.

Exist two ways of economic competition: price and non-price. The difference between price and non-price methods of competition is quite serious:

Price competition- This is a type of fight against rivals by reducing the cost of goods. Most often, this method is used where demand is greater than supply. Another option is when customer competition is strong enough. This option is also used when there are prerequisites for pure competition (many manufacturers offer the same type of product). This way of competing with competitors cannot be called the most effective. After all, competitors can suddenly set prices at the same level, or even lower. In this case, both the subject himself and his competitors lose their earnings. Despite all the shortcomings, this option is nevertheless widely used, especially in cases where it is necessary to introduce products to a new market. Such measures should be taken very carefully. You need to know for sure that a decrease in cost will actually result in an increase in profits, and not losses.
Non-price competition involves more progressive and modern techniques. Among them are the differentiation of their products from similar products from competitors, the introduction of special characteristics, expanding the range, improving quality, increasing advertising costs and warranty service. The use of non-price competition methods generates conditional monetary stability. Another significant benefit is that competitors often fail to retaliate immediately, giving their rival an advantage. If innovations turn out to be successful, all expenses for non-price competition options not only pay off, but also serve as a source of income.

In order to successfully apply methods of non-price competition, companies and organizations must be aware of the latest developments in their market and continuously develop, which leads the country’s economy along the path of progress.

Non-price competition is a type of competitive rivalry tactic. Various methods are used here, with the exception of reducing the cost of goods and services. Non-price competition involves the use of more advanced methods of competing for buyers, such as creative advertising or improving the quality characteristics of a product. Improving quality comes in two ways: by working on the technical characteristics of the product or by increasing its flexibility according to customer wishes.

Non-price competition allows you to focus on the path of progress and increase sales without price fluctuations. Non-price competition indicates a higher quality level of interaction in the market.

There are a number situations where non-price competition is used:

The value cannot be reduced due to the limits set by the market controller.
A punitive agreement has been signed that does not allow for a reduction in value. The purpose of such a document is to stabilize a specific level of profitability.
The company has invested so much money in producing goods for a new market that reducing the cost makes no sense from an economic point of view.
The costs of distributing goods are high.
In the market, demand exceeds supply, which means: the client will buy products at any price.
The company relies on improving the quality characteristics of manufactured goods - by improving the technical properties of products (so-called product competition).

Non-price competition is typical for those industries where the quality of the product, its uniqueness, packaging, appearance, brand style, additional service, non-market ways of influencing the buyer. All these points are not directly related to cost, or even have nothing to do with it at all. During the 80-90s, the first positions in the list of non-price criteria included:

reduced energy consumption and low metal consumption;
minimal harm to environment(or lack thereof);
the ability to hand over the product as a starting fee for a new one;
advertising;
high level of warranty service (as well as post-warranty service);
indicators of related offers.

Example non-price competition . At the start of global sales of its products in Russia, Sony encountered difficulties with regard to non-price competition. The problem was that, according to the company's current regulations, customers were only allowed to return broken products after five attempts to fix them. The law in our country, in turn, gives the client the right to return goods immediately after problems are identified. This condition is observed by all companies in the Russian Federation. To increase sales, Sony not only changed the warranty standards according to the local model, but also significantly reduced the warranty period, similar to the most popular models. As a result, the company strengthened its position in the non-price sphere of competitive rivalry.

What are the disadvantages and advantages of non-price competition?

Key Benefits non-price competition are as follows:

Price fights have a negative impact on all market participants. Bonuses go only to the buyer. Price competition can lead to monopoly and economic decline. The more powerful the company, the longer the period of time it can sell goods at a reduced cost. Medium and small companies will lose out in competition with leading brands.
Competent differentiation – more productive way competition rather than dumping. For the desired product, the client will pay the price set by the company.
If done correctly, non-price competition is less costly than price competition. A good advertising clip can be made for little money, the main thing is to find a creative and tempting idea. The same applies to product properties: even a minimal improvement in design can attract the attention of buyers.
With non-price competition, the company has a huge field for activity: it can gain superiority with the help of any successful find.

At the same time, there is also a number of disadvantages non-price competition:

The company is losing that group of buyers for whom cost comes first.
Dependence on the professionalism of managers and ordinary workers, because they must develop competent competition tactics and systematically monitor the compliance of the real state of affairs with plans.
Many companies use illegal ways non-price competition (poaching personnel, manufacturing counterfeit products, industrial espionage).
We need cash injections, often permanent.
Large expenses for trade marketing, advertising and PR.
Specificity in positioning, thoughtfulness of actions, and correct tactical moves are required.

What types of non-price competition can be used and which ones should not be used?

There are different types of non-price competition:

legal;
semi-legal;
deterring competitors using government regulation and support.

Legal methods of competition suggest:

product rivalry. In the course of working on the existing assortment, a new product appears that has a new price;
competition to provide services. It is especially relevant for the machinery and equipment market. The service package includes supplies promotional materials, transfer of technical papers (which simplify the use of products), training of employees of the client company, maintenance during the warranty period (and after it).

Semi-legal forms competitive rivalry means:

economic espionage;
bribes to officials in the government apparatus and in rival companies;
conducting illegal transactions;
activities to restrict competition. Here the company has at hand an extensive arsenal of methods, the use of which can lead to the dictatorship of a monopolist company in the market. These include, for example, activities to impose intra-brand standards, promoting convenient conditions for selling rights to trademarks or patents.

The most common forms of non-price competition

The most common forms and methods of non-price competition are:

1. Product differentiation

The purpose of product differentiation is to offer the buyer products of different types, styles, brands. This, of course, gives the buyer serious bonuses, expanding the possibilities of choice. However, pessimists caution that product differentiation is not an absolute good. Rapid growth The number of items of goods often leads to the fact that the buyer cannot make an informed choice, and the purchasing process takes a lot of time.

Product differentiation is a kind of reward for those negative phenomena that are characteristic of monopolistic competition.

Types of differentiation:

Product differentiation– production of goods of higher quality and attractive appearance than those of competitors. Regarding standardized products (petroleum products, metal), there is almost no possibility of product differentiation. In relation to fairly differentiated goods (electronics, motor vehicles), such tactics are a matter of course.
Service differentiation– consists of providing service more high class compared to competitors. This may include installation and after-sales service, speed and safety of deliveries, training and consultations for customers.
Personnel differentiation– the desire to ensure that the company’s employees do their job more productively than the employees of a competing company. Team members must have qualities such as friendliness, professionalism, and commitment.
Image differentiation consists of working on the appearance, style of the company and (or) its products in order to highlight them best sides compared to competitors and/or their offerings.

2. Improvement of manufactured products and offered services

Another method of non-price competition is for competitors to improve the goods and services they offer. Improving the quality characteristics or user parameters of products leads to increased sales. Competitors who don't care about improving their product step aside. This path of competition leads to favorable consequences, the main one of which is customer satisfaction. In addition, other firms also begin to take steps to offset the temporary success of their rival, and this contributes to scientific and technological progress.

Competing companies are looking for funds to improve their product or create a new position. All these measures make it possible to strengthen production and increase profits.

Some companies, instead of conducting fair competition, engage in imitation (imitative) activities. Most often, they stop at minor modernization of the product. We are talking about an external effect. Such companies pass off apparent changes in the product as real, and also introduce obsolescence into the improved product. This approach can lead to massive customer disappointment.

3. Advertising

According to foreign researchers, goods go from manufacturer to buyer along a path that can be illustrated by the formula:

product + distribution + scientific activity+ resellers + transport + advertising = sale

provides the client with information about products;
increases demand for products and forces them to increase the pace of their production. There are often cases when a manufacturer, having a small income, through advertising in non-price competition increases the level of sales several times, which leads to receiving a large income;
increases competition;
enables the media to be independent, bringing them a certain profit.

Advertising reduces sales costs. Firstly, advertising promotes faster turnover of goods. Secondly, it ensures that goods are different from similar ones. This allows buyers to track the cost of products in different stores and thereby restrain the arbitrariness of sellers in setting markups. Products that are smartly advertised will pass through distribution channels with minimal markup.

4. Other methods of non-price competition

The group of non-price methods includes: providing a wide range of services (including employee training), free service, delivery of a used product as an entry fee for a new one, supply of equipment on the terms of “finished products in hand.” Reduced metal consumption, absence negative influence on the environment, reduced energy consumption and other similar parameters have today become the main ones in the list of advantages of goods or services.

At the moment, many companies are conducting marketing research . They make it possible to find out the buyer’s desires and his opinion about various products. Possession of such information helps the manufacturer to design the market situation and reduce the likelihood of mistakes.

Methods of non-price competition: 3 main groups

Methods of non-price competition are divided into several groups.

First group– these are techniques aimed at achieving competitive advantage by improving various product parameters.

These include:

launch of new product items;
introduction of products that have new consumer characteristics, for example, higher quality, improved appearance, more attractive packaging (this process is called differentiation of consumer properties of goods).

Such techniques are used in cases where:

the company wants to improve the consumer characteristics of its products;
the company wants to increase market segment manufactured goods;
the company wants to become known through a wide range of manufactured products in a limited market sector;
the company is working on the timely introduction of new service conditions (sales and after-sales) in order to interest new groups of customers, force them to purchase products more often and pay at a time for larger number positions (most often with the help of large discounts and promotions).

Second group- These are methods of stimulating the buyer to buy. Most often these are short-term promotions, sales, etc. Incentive goals in this case, there is an increase in the number of clients or an increase in the number of goods purchased by the same client.

Sales promotion tools for consumers are:

drawings and lotteries, discounts, coupons, promotions;
trial samples (samples, testers, as well as tasting);
competitions and games;
sales;
various “label events”;
consumer clubs.

A sales agent is a link between the manufacturer and the buyer. It is necessary to stimulate the sales agent in order to create a bright image of the product, make it easily recognizable and widely known, and increase the number of positions in trading network. It is equally important to “stir up” the agent’s interest in large volumes sales of a certain brand.

Sales promotion means For sales agents There are various awards and gifts, all kinds of compensation for advertising expenses, exhibitions and sales, prizes, trade booklets, souvenirs, etc.

For the company to be successful, it is necessary to constantly look for alternative ways to sell products, as well as index the amount of discounts in accordance with the current situation on the market.

However, non-price competition works primarily through improving the quality characteristics of goods and production technology, modernization, patenting and branding, as well as competent “servicing” of sales. This type of competition is based on the desire to gain part of an industry market (or a significant segment of it) by producing new products or improving existing products.

In the global market, intense competition among product manufacturers constantly exists, but in order to compete foreign markets was as successful as possible, it is necessary to constantly improve the competitiveness of domestic products. Using competition from foreign sellers when importing allows you to achieve the most favorable purchasing conditions.

Competition concept

Competition (from the Latin “to collide”) is the struggle of economic entities that are absolutely independent from each other for limited economic resources. It is an economic process in which enterprises operating on the market enter into economic interaction with each other in order to provide the best opportunities for selling their products, while satisfying the most diverse needs of consumers.

The concept of competition is so comprehensive that it cannot be fit into one universal definition that clearly expresses its essence. This is both a method of management and the special existence of capital when one of them competes with another.

There are 5 components of business competition:

when potential market participants compete;
existing players or participants in the market;
market pressure from buyers to reduce prices;
competition between surrogates of services or goods (for example, sellers of leather and leatherette);
market pressure from suppliers to increase prices.

Competition as a catalyst for economic development

In competition there is a main distinguishing feature- a property of commodity production, as well as a method of development. In addition, competition plays the role of a spontaneous regulator of all social production of goods and services, and as an ultimate goal, competition leads, on the one hand, to an aggravation market relations, and on the other hand, to a constant increase in the efficiency of production and economic activity.

There are two types of market competition - price and non-price. Both of these types have their own goals and methods of implementation, which differ significantly from each other.

Non-price competition uses higher reliability of the product than its competitors, more modern and attractive design, and many others as methods to achieve such goals. For example, many buyers prefer to overpay for a well-proven foreign product rather than for an inexpensive one. favorable conditions buy locally produced analogue goods. Non-price methods of competition also include providing consumers with large packages of services, such as personnel training, payment of a down payment for the purchase of goods and others, for example, reduced metal consumption or the prevention of environmental pollution. One of the methods to realize this is advertising, the role of which is modern world cannot be underestimated.

Use of illegal methods

Non-price competition often uses illegal methods, such as industrial espionage, to achieve its goals. Sometimes they lure specialists from other companies, promising higher wages, in order to take possession of some production secrets in the field of technology.

Illegal methods of competition also include the release of counterfeit goods, which are similar in appearance to genuine ones, but are much worse in quality.

Price competition

In the global economy, competition is usually divided into price and non-price.

As a rule, price competition is based on artificially reducing prices for any type of product. In this case, the method of price discrimination is often used, which is effective only when a particular product is sold at different prices, and such price differences cannot be justified by differences in production costs.

Price discrimination, as one of the types of price competition, occurs under three conditions:

When the seller is a monopolist or has a certain degree of monopoly power.
The seller distributes buyers into groups that differ in purchasing abilities.
The original buyer does not have the opportunity to resell the product or service received.

In most cases, price discrimination is used in the service sector (cleaning, legal services, hotel business and others), when providing transportation services finished products; marketing of goods that cannot be redistributed from one market to another (this usually applies to perishable products).

Price competition strategies

Price competition comes from those distant times of market rivalry, when similar goods were sold at very different prices, and reducing their cost was the factor due to which the seller, as it were, distinguished his product from all those existing on the market, attracted the attention of the consumer to it and won the main market share as a result.

This does not mean that price competition does not apply in the market today. It certainly exists, but it always has various shapes. Open competition can only exist if the moment has not come when the company has not exhausted its reserves for reducing production and, accordingly, increasing profits.

But when a certain price equilibrium is established, any attempts by manufacturing firms to reduce prices entail a reduction in the cost of their products on the part of other manufacturers. Thus, some of them notice a gradual decline in production, which eventually leads to complete bankruptcy. And this, in turn, opens the way to the market for other companies.

Monopolies as an example of competition

In most cases, price competition as a method of competition itself is used by so-called outsider firms in their fight against monopolies, which they have neither the strength nor the ability to fight with other methods.

Price methods of competition are also used to penetrate markets with the offer of new, previously unproduced goods, which is often not neglected by monopolies in those areas where the advantage is not on their side.

An example of price competition is monopolies, which have the ability to control the production and sale of one or more varieties of goods or services. Such enterprises are endowed with a lot of privileges in the markets; they are structures in which there is no competition.

Thus, during direct price competition, manufacturing firms try by all available methods to communicate price reductions for new, as well as for services and goods already available on the market. It is important to understand that the modern consumer has a lot of choice.